On January 10, 2020, the Federal Trade Commission (FTC) and Department of Justice Antitrust Division (DOJ) released for public comment draft Vertical Merger Guidelines. Vertical mergers are those that combine companies operating at different stages of the supply chain. These guidelines would replace DOJ’s Non-Horizontal Merger Guidelines from 1984. The draft Vertical Merger Guidelines state that they are meant to “outline the principal analytical techniques, practices and enforcement policy” of the FTC and DOJ with regard to vertical mergers. According to the draft guidelines, they are intended to “increas[e] the transparency of the analytical process underlying the Agencies’ enforcement decisions” and thereby assist the business community and antitrust practitioners.
The draft Vertical Merger Guidelines state that they are to be read in conjunction with the FTC’s and DOJ’s 2010 Horizontal Merger Guidelines, and note that the principles and analytical frameworks that the agencies use in assessing horizontal mergers apply as well to vertical mergers. Such principles from the 2010 Horizontal Merger Guidelines include market definition, the analytical framework for evaluating entry considerations, the treatment of acquiring a failing firm, and acquisitions of partial ownership. The draft Vertical Merger Guidelines note, though, that vertical mergers raise “distinct considerations” addressed in the draft Vertical Merger Guidelines.
Among the points addressed in the draft guidelines are:
One topic that is not addressed in these draft guidelines is the agencies’ approach to remedies in vertical mergers (e.g., when conduct remedies may be appropriate). This is an important issue for the business community and antitrust practitioners.
While these draft guidelines were jointly issued by the FTC and DOJ, the FTC’s two Democratic commissioners abstained from the FTC’s vote to issue these guidelines. These two commissioners each issued a separate statement agreeing that the 1984 Non-Horizontal Merger Guidelines should be rescinded but raising concerns about the draft guidelines as proposed.
These draft guidelines are subject to a 30-day public comment period. Accordingly, the FTC and DOJ may revise these draft guidelines following the receipt of input from this comment period.