On 19 August 2010, the US Federal Trade Commission (FTC) and the Antitrust Division of the US Department of Justice (DOJ) issued the final version of the revised Horizontal Merger Guidelines. The Guidelines give detailed guidance on the wide array of factors that influence the agencies’ determination as to whether a horizontal merger may substantially lessen competition and should therefore be challenged. This is a major step in US merger enforcement because it aligns the agencies’ published guidance with their current practice.
Important developments reflected in the new Guidelines include:
- a reduced emphasis on market definition. The agencies will not always begin their analysis by defining the relevant market – in contrast to the practice under the previous, 1992, guidelines. Market definition will remain an important analytical tool, but will be used less rigidly and in conjunction with other economic analysis;
- a significantly expanded unilateral effects section, which embodies a number of the economic concepts developed over the past 10-15 years, including the use of ‘diversion ratios’, the ‘upward pricing pressure test’ and ‘critical loss’ analysis;
- a reworked co-ordinated effects section, which emphasises the importance of market concentration (in contrast to a unilateral effects case); and
- a new section on power buyers (which underlines that, although they may act as a constraint on the parties, power buyers are not a complete defence to anti-competitive concerns).
The Guidelines indicate that the agencies will consider each transaction holistically to determine which tools are most appropriate, moving away from the more linear approach of the 1992 guidelines.
As well as providing transparency for businesses and practitioners, the Guidelines seek to educate the judiciary in the application of antitrust laws to horizontal mergers. The Guidelines are a statement of agency enforcement policy and do not bind the courts. However, they are persuasive authority and previous versions have in practice been relied on fairly heavily by the courts. There is uncertainty over how the courts will use the 2010 Guidelines in the face of precedent based on the 1992 guidelines.
On a practical note, the FTC is proposing to modify the pre-merger notification form that companies must file when their transactions meet the thresholds under the Hart-Scott-Rodino Act. The changes are designed to streamline and focus the form by eliminating the requirement for unnecessary information, although the new form will also require additional information that may increase the burden on filing parties. The public comment period for these proposed amendments closed on 18 October 2010. We anticipate that the FTC will publish the final amendments to the rules early this year.
Read our briefing US antitrust authorities release new Horizontal Merger Guidelines.
Read our briefing US proposes new Horizontal Merger Guidelines.