New Merger Guidelines Undercut Competitiveness

Merger review has long enjoyed widespread bipartisan consensus with a view toward driving investment, reducing costs, and encouraging the development of new products and services.  In the past few weeks, the Biden administration shattered that consensus with new guidelines that express an open hostility to mergers and a proposed reporting form that would make it more difficult for U.S. companies to raise capital and to compete. The Federal Trade Commission and Department of Justice are likely to use these guidelines and form to grant themselves discretion to reject more mergers without regard for what the evidence shows.  

Unfortunately, this is just the most recent action in a longstanding pattern from the FTC and DOJ that undermines America’s economic competitiveness. Under the current administration, these agencies have repeatedly utilized every available tactic to chill, delay, block, and unwind U.S. mergers—irrespective of any evidence that those mergers would harm consumers. In fact, it has now been more than two years since the agencies announced a suspension of grants of early termination—a process that quickly cleared mergers raising no competitive concerns.   

Unwarranted scrutiny

Even more concerning, the FTC and DOJ have started to ask merging parties about topics that have nothing to do with competition, such as labor policy. They have sent “close at your own risk” letters to merging parties, in violation of statutory processes, and inserted questionable language into merger consent agreements that require companies to seek pre-approval for future deals. The FTC recently lost a challenge to a small tech acquisition—overruling the career staff in the process—and, perhaps most egregiously, in other merger cases improperly collaborated with foreign competition agencies to avoid going to court and defend their position under U.S. law. 

Now, despite a series of court losses, they are attempting to rewrite substantive antitrust law entirely. With these new merger guidelines, the FTC and DOJ are largely repudiating prior guidance that was issued in 2010 on a bipartisan basis under President Obama. Under the revised guidelines, the agencies can ignore objective criteria—like market definition or the need to show an impact on price competition—and instead adopt presumptions that favor the government and speculative theories of harm not grounded in economics.  These updated guidelines also rely heavily on cases from the 1960s and early 1970s, effectively ignoring a half-century of economic learning and guidance from the Supreme Court. 

Damaging our economy

An entire library of empirical economic papers and case studies attests to the benefits of mergers and acquisitions in increasing efficiency, improving capital flows, and allowing companies to bring new and better products to consumers. If followed, the new form and guidelines would do serious damage to our nation’s economic dynamism.  

Instead of rewriting antitrust law to suit their policy preferences, the FTC and DOJ should abide by decades of judicial precedent, which allows them to block a merger only when there is sound analytical basis to conclude that it would harm consumers. By continuing this framework, and rejecting the FTC and DOJ’s power grab, we can ensure that the U.S. continues to have the most dynamic and innovative economy in the world. 

About the authors

Sean Heather

Sean Heather is Senior Vice President for International Regulatory Affairs and Antitrust.

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