A New Approach to Merger Review?

At the first annual DOJ and FTC Spring Enforcers Summit held on 4 April 2022, DOJ Assistant Attorney General (“AAG”) Jonathan Kanter said that the Division “has taken important steps to reject risky settlements” to resolve merger cases, and that the agency is “more committed than ever to litigating” when enforcers believe a violation has taken place.  To support this increased focus on litigation, Kanter said that he has designated two Deputy Assistant Attorneys General to oversee the Division’s litigation docket to ensure that the agency is “prepared to try cases to verdict.”  Kanter also said that the Division has a preference for litigation over “flimsy” and “risky” settlements that “often fail.”¹

At the ABA Spring Meeting on 6 April 2022, Principal Deputy Assistant Attorney General (DAAG) Doha Mekki reiterated AAG Kanter’s statements that the Division is disinclined to accept settlements in merger cases, and instead is only “in the business of considering remedies” that “fully address the competition lost” as a result of a consummated merger.  Mekki also said that the Division prefers “clean remedies,” with a preference for structural relief over behavioral relief.  Mekki also echoed Kanter’s commitment to increased litigation of merger cases, promising that parties will see “faster access to courts” and that the Division will be prepared to file a complaint even before parties have certified substantial compliance.²

Holly Vedova, Director of the FTC’s Bureau of Competition, also warned that the FTC is “not in the business of accepting weak or uncertain settlements” and will be taking a “new approach to merger review” in response to the recent increase in merger filings.  As part of this new approach, Vedova said that the FTC will prioritize “matters that have the biggest impact and reach,” and advised parties to “propose meaningful structural relief” instead of behavioral remedies.  In addition, Vedova warned that the FTC’s merger review process should not be viewed as a “concierge service” provided by the agency to allow parties to close deals on time, and that the FTC will not sacrifice thoroughness for expediency.  Accordingly, Vedova said that it is unlikely that early termination will resume unless Congress provides the FTC with significantly more resources.³

FTC Chair Lina Khan said that the agency is looking for ways to deter parties from proposing unlawful deals, and as part of this effort, will be returning to the practice of using prior approvals in merger settlements.  Chair Khan also said that the FTC intends to look at how “monopolization and unlawful deals” affect a broad array of market participants, including workers, and said the FTC will investigate a proposed transaction’s effect on the labor market as part of its merger review analysis.  Chair Khan also expressed an interest in potentially revising the Hart-Scott-Rodino (HSR) merger notification form to collect more information “on the front end” when a deal is initially notified to the agency to allow enforcers to conduct a more “timely and efficient investigation.” ⁴

Revised Federal Merger Guidelines: What to Expect

With respect to the FTC and DOJ’s ongoing process of revising the federal merger review guidelines,⁵ DAAG Mekki expressed a commitment to creating guidelines that are written in plain language and can be understood by the general public.  Mekki said that the agencies intend to engage in a “transparent and inclusive” ⁶ revision process, citing as an example of this effort a series of joint FTC/DOJ listening sessions being held throughout the spring to allow the agencies to “hear from those who have experienced firsthand the effects of mergers and acquisitions” in the food and agriculture, health care, media and entertainment, and technology markets. ⁷

Chair Khan said that the revised guidelines should create greater predictability, clarity and consistency with respect to how the agencies review mergers.⁸ She said that among the topics being considered in the review process are the use of presumptions, nascent competition, the role of direct evidence in market definition, how to update the conceptual framework of the guidelines to account for digital markets, and the administrability of standards.⁹

FTC Commissioner Rebecca Slaughter said that, in her view, the revised guidelines should move away from treating horizontal and vertical mergers as totally distinct, and should place less emphasis on the procompetitive benefits and efficiencies in vertical style transactions.  Commissioner Slaughter said that she thinks the “use of presumptions is really valuable,” and that, to be effective, the guidelines should provide clarity, reliability, and transparency.  Commissioner Slaughter also said that she would like to see the revised guidelines have a “strong deterrent effect,” noting that the use of presumptions may be helpful by allowing parties to predict more reliably which mergers are likely to cause competitive harm.  Slaughter also expressed a preference for one set of guidelines covering both horizontal and vertical transactions since it is rare to see transactions—especially non-horizontal transactions—that are exclusively vertical and do not involve a related market or additional horizontal component. ¹⁰

FTC Commissioner Christine Wilson disagreed that the guidelines should discount efficiencies, and said that “consumer welfare and competition” need to be the focus of the agencies’ merger review process, not “protecting less efficient rivals.”  Commissioner Wilson also advocated for consensus in publishing guidelines that “reflect the best thinking in economics and legal precedent.”¹¹

Conclusion

While DOJ and FTC leaders have not given any indication of when the revised merger guidelines will be released, it is clear that changes to the agencies’ merger review process are already afoot.  Moreover, the agencies clearly are trying to move away from the longstanding practice of settling merger investigations with negotiated remedies (either structural or behavioral) when the agencies identify a cognizable harm to competition.  Merging parties should recognize that enforcers increasingly have an eye towards litigating merger challenges and are unlikely to engage in traditional settlement negotiations.  This shift could have several consequences, including (1) building more time into the long-stop date in the merger agreement for possible litigation and (2) considering whether the parties should adopt a “fix it first” divestiture before submitting their HSR filings on the main transaction.