Federal Agencies Announce Revised Horizontal Merger Guidelines

Federal Agencies Announce Revised Horizontal Merger Guidelines

On April 20, 2010, the Federal Trade Commission ("FTC") and the Department of Justice ("DOJ") (collectively the "Agencies") released a proposed updated version of the Horizontal Merger Guidelines ("Guidelines").  The Guidelines are a set of internal rules that set out the analytical framework and standards used by the Agencies to assess the impact on competition of a proposed merger and guide businesses that are considering a merger.  The Guidelines do not have the force of law, but often reflect current economic thought and are relied upon extensively in litigation by parties and the courts. 

Merger Guidelines were first issued in 1968. They were issued again in 1982 and then revised in 1984, 1992 and 1997.  The Proposed Guidelines, according to the Agencies, are intended to "more accurately reflect the way the FTC and DOJ currently conduct merger reviews" and "to assist the business community and antitrust practitioners by increasing the transparency of the analytical process underlying the Agencies' enforcement decisions."

While many feel that the existing Guidelines are long overdue for a revision, critics see some of the proposals as a response by the Agencies to recent high profile set backs to merger challenges. For example, the Agencies could not stop the Whole Foods/Wild Oats merger due in part to their inability to demonstrate harm to competition in a relevant market.  Under the Proposed Guidelines, "market definition" is deemphasized and described as "not an end in itself: it is one of the tools that the agencies use to assess whether a merger is likely to lessen competition." This position may not initially meet with much success in litigation however, since many courts, including the Supreme Court, have come to expect the Agencies to establish the relevant market as a preliminary matter. Other elements in the merger analysis have been updated as well, e.g., the approach to "unilateral effects". 

Overall, the Proposed Guidelines appear to be an effort by the Agencies to move away from the formalistic step-by-step approach that characterizes the current Guidelines. The public comment period ends May 20.