On July 19, 2023, the Federal Trade Commission (FTC) and Department of Justice (DOJ) released for comment proposed joint merger guidelines which seek to replace the agencies’ vertical merger guidelines released in 2020 and horizontal merger guidelines released in 2010.  The proposals introduce significant changes to both the ways in which the agencies define markets and competition, and the evidence and metrics they would use to assess a merger’s competitive effects.

Among the more significant proposed changes are the following:

They would materially change how relevant geographic and product markets are defined, and when to consider those markets “highly concentrated.”

Market definition:  The proposals would significantly change how product and geographic markets within which competitive effects of a merger would be defined.  Under current law, to define the boundaries of relevant product and geographic markets, the agencies apply the “hypothetical monopolist test,” in which firms or products that would prevent the merged firm from increasing price by a small but significant and non-transitory amount are considered to be within the “relevant market.”  The agencies propose to include in this calculus not only price but other “terms” such as “quality, service, capacity investment, choice of product variety or features, or innovative effort,” raising the possibility that the agencies may exclude from the market rivals who could discipline overt attempts to increase price but not more opaque reductions in service, quality, or R&D efforts, to which consumers may be much less sensitive. 

Market concentration:  The current guidelines recognize that the anticompetitive effects of a merger generally increase in more concentrated markets in which fewer significant firms compete.  The proposed guidelines would lower the standard for a “highly concentrated market” (a trigger for a presumption of a merger’s illegality) to a level that the current guidelines consider to be only a “moderately concentrated market.”  In addition, the proposals would introduce a market share-based test as a trigger for raising an “impermissible threat of undue concentration,” when the merged firm’s market share will exceed 30 percent and concentration would increase modestly.Continue Reading DOJ and FTC Propose Draft Revised Merger Guidelines