The Federal Trade Commission and Department of Justice Antitrust Division kicked off a process to rewrite merger guidelines for businesses on Tuesday, signaling a tougher stance toward large deals.
The nation’s two federal antitrust enforcers announced they are seeking public comment on how to “modernize enforcement of the antitrust laws regarding mergers.” Their questions to the public shed light on where they may seek to strengthen the guidelines and in what areas they could take a more forceful approach to antitrust enforcement.
That focus could suggest additional scrutiny for large deals in the future, especially big tech deals, which have already been the target of increased scrutiny over the past few years. Microsoft’s $68.7 billion deal to buy video game-maker Activision, announced earlier Tuesday, could be just one example of the type of transaction that will gain a closer look given its scope and industry.
The agencies said they are “particularly interested” in learning about where the earlier guidelines “may underemphasize or neglect” important aspects of competition. They list labor market effects and elements of competition that aren’t tied to prices, like innovation and quality, as examples of such aspects.
The request for comment contains an entire section of questions devoted to digital markets, asking whether the guidelines should differ in for such markets, how they should take into account the ways data can help firms amass power and how enforcers should assess two-sided markets, like when platforms serve both advertisers and consumers.
During a press conference Tuesday, John Kwoka, chief economist to the FTC chair, said that several of the issues associated with digital markets like data aggregation were not “fully addressed” in the agency’s horizontal merger guidelines issued in 2010.
A growing contingent of antitrust scholars, including progressive FTC Chair Lina Khan, have argued that enforcing antitrust laws in digital markets requires a different lens than what’s traditionally applied to deals and competitive conduct. That’s in part, they argue, because such businesses may be able to use data and network effects to concentrate their power and bar competition, even if prices for consumers appear low or even free in return.
Enforcers have already been quick to review large tech deals by internet giants. The DOJ reportedly continued probing Google’s acquisition of Fitbit even after it closed last year, according to Reuters, and the agency also requested extra information about Salesforce’s deal for Slack before it closed in 2021.
The FTC’s ongoing lawsuit against Facebook includes claims that it acquired Instagram and WhatsApp to illegally maintain its dominance in the personal social networking space, a claim Facebook-owner Meta has denied.
Tuesday’s announcement follows the FTC’s vote last year to withdraw the joint agency vertical merger guidelines instated during the Trump administration. At the time, DOJ’s antitrust chief Jonathan Kanter had not yet been confirmed and the acting head of the division said the guidelines would remain in place, though the division would continue to collaborate with the FTC to assess their effectiveness. The two Republican FTC commissioners who voted against rescinding the guidelines lamented the uncertainty that pulling the guidelines could add to businesses seeking to merge.
Now, with both Kanter and Khan in place, the agencies are embarking on a potential overhaul of existing guidelines for businesses seeking to close deals. It comes amid a surge in mergers that has overwhelmed the under-resourced agencies and led the FTC to take unusual steps, like warning some businesses that it will continue to look into their deals after the period of time the parties are required to wait to close.
Kanter made clear that the two agencies are aligned in their approach.
“Way too much has been made of the purported divergence between the DOJ and the FTC on the treatment of vertical mergers,” Kanter said. “The Antitrust Division shares the FTC’s substantive concerns regarding the vertical merger guidelines. Those guidelines overstate the potential efficiencies of vertical mergers and fail to identify important but relevant theories of harm.”
While ultimately any deals the agencies choose to challenge will be up to a court to decide whether to block or allow to close, increased deal scrutiny has the potential to ward off some deals that businesses simply feel are more trouble than they’re worth. Some deals come with hefty breakup fees should they not close, for example, which some businesses may be more hesitant to take on should the risks to closing on time pile up. Still, some antitrust experts believe businesses are likely to continue to push ahead with deals they feel are truly strategic.
Kanter said the agencies aim to finish their revision process this year, which will include a chance for public feedback on a draft version of the guidelines after they review the initial responses to their questions which are due by March 21.