On June 30, the Federal Trade Commission (FTC) and Department of Justice Antitrust Division (DOJ) released their first jointly issued Vertical Merger Guidelines. These Guidelines replace DOJ’s Non-Horizontal Merger Guidelines from 1984. Those 1984 guidelines were outdated, did not reflect current agency practices and were withdrawn by DOJ in January 2020. The new Guidelines are intended to describe how the agencies currently analyze non-horizontal transactions and to increase “the transparency of the analytical process underlying the Agencies’ enforcement decisions.”
Vertical mergers combine companies operating at different stages within a supply chain. The most common form of vertical merger is a firm’s combination with an upstream supplier or downstream customer, although the new Guidelines also reference, and apply to, “diagonal” mergers, reflecting the acquisition of a firm within a competing supply chain, and mergers involving “complements” within a supply chain.
The Vertical Merger Guidelines incorporate by reference many of the principles set forth in the agencies’ 2010 Horizontal Merger Guidelines, including methodologies for evaluating relevant market definition, market shares and industry concentration, as well as the appropriate sources of evidence to evaluate these issues.
As to the potential anticompetitive effects of vertical mergers, the new Guidelines do not state or imply any significant policy shift. The agencies continue to be concerned with the potential for unilateral effects in the form of foreclosure of competitors, raising rivals costs and the exchange of competitively sensitive information, and coordinated effects. In this regard, the new Guidelines reflect current agency practice and are not groundbreaking.
We note a few interesting points regarding the new Guidelines that could be relevant in responding to agency investigations or challenges of vertical mergers:
While the FTC and DOJ jointly issued these new Vertical Merger Guidelines, the two FTC Democratic commissioners voted against issuing the Guidelines.
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