Federal Trade Commission
Withdraws Vertical Merger Guidelines and Commentary
2020 guidance withdrawn to prevent industry and
judicial reliance on unsound economic theories; FTC to work with DOJ to update
merger guidance
The Federal Trade Commission voted to withdraw
its approval of the Vertical Merger Guidelines, issued jointly with the
Department of Justice (DOJ), and the FTC’s Vertical Merger Commentary. The guidance
documents, which were published in 2020, include unsound economic theories that
are unsupported by the law or market realities. The FTC is withdrawing its
approval in order to prevent industry or judicial
reliance on a flawed approach. In voting to withdraw, the FTC reaffirmed its
commitment to working closely with the DOJ to review and update the agencies’
merger guidance.
The withdrawn Vertical
Merger Guidelines set out analytical techniques and enforcement
policies for non-horizontal mergers, while the associated commentary had
summarized a selection of prior investigations that largely utilized that
framework. The guidelines noted several ways vertical mergers can harm
competition, which the statement by the FTC majority recognizes provided
valuable analysis.
The statement by the FTC majority, however,
notes that the 2020 Vertical Merger Guidelines had improperly contravened the
Clayton Act’s language with its approach to efficiencies, which are not
recognized by the statute as a defense to an unlawful merger. The majority
statement explains that the guidelines adopted a particularly flawed economic
theory regarding purported pro-competitive benefits of mergers, despite
having no basis of support in the law or market reality. The majority noted
that because the Vertical Merger Guidelines were adopted in 2020, they had yet
to have a significant impact and that acting swiftly was paramount to
preventing judicial reliance on this flawed discussion.
Going forward, the FTC will work with the DOJ to
update merger guidance to better-reflect market realities. The FTC majority
statement lays out several areas for consideration in that review. First,
the FTC intends to explore ways to provide clear guidance on the
characteristics of transactions that are likely unlawful. Second, the FTC will
look at ways to provide guidance on ineffective remedies, based on an
evaluation of past remedy practices and any evidence that past remedies may not
have fully restored competition. Finally, the agency will look to expand on the
harms identified in the 2020 Vertical Merger Guidelines to consider various
features of modern firms, including in digital markets, and impacts of mergers
on labor markets.
The Commission vote to rescind the policy
statement was 3-2, with the
majority issuing a separate statement and Commissioners Noah
Joshua Phillips and Christine S. Wilson issuing
a separate dissenting statement.
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