Agencies appear poised to target tech, life sciences and private equity transactions
U.S. Federal Trade Commission (“FTC”) Chair Lina Khan and the head of the U.S. Department of Justice (“DOJ”), Antitrust Division, Assistant Attorney General (“AAG”) Jonathan Kanter — both well-known critics of various aspects of technology-related industries — announced on January 18, 2022 a joint public inquiry aimed at revising the Merger Guidelines. The agencies use these joint guidelines as the analytical framework for determining whether M&A transactions are likely to result in anticompetitive effects and, thus, whether the agencies will insist on remedies, such as divestitures, or ultimately seek to block such transactions.
The agencies’ announcement of a joint inquiry follows prior calls by officials in the Biden administration to reconsider the current Horizontal Merger Guidelines, which were issued in 2010. In a July 2021 joint statement with then Acting AAG Richard Power, Chair Khan announced that the guidelines deserve a “hard look” to determine whether they are “overly permissive” of merger activity. In Tuesday’s announcement, Chair Khan stated, “[t]his inquiry launched by the FTC and DOJ is designed to ensure that our merger guidelines accurately reflect modern market realities and equip us to forcefully enforce the law against unlawful deals.”
In the accompanying Request for Information, the FTC and DOJ seek public comment on how the agencies can “reflect current learning about competition” while “faithfully track[ing]” established antitrust statutory and case law. The agencies highlight specific topics on which they seek the public’s input, including how the merger guidelines should be updated to reflect “developments in the modern economy and new evidence of mergers’ effects on competition to inform potential revisions to the guidelines.” The initiative follows a similar public inquiry last year focused expressly on life sciences transactions.
The issues listed in the Request for Information leave little doubt that the agencies are focused on private equity, tech, and life sciences transactions. For example, among other general topics, the agencies seek comments regarding issues common in transactions involving:
- Do the guidelines reflect any additional competitive concerns reflected in the statute’s prohibition against mergers that “may … tend to create a monopoly”? Is this statutory language directed at preventing monopolies in their incipiency such as through serial acquisitions, including rollups?
- How should the guidelines analyze whether there is a “trend toward concentration in the industry,” and what impact should such a trend have on the analysis of an individual transaction?
- How, if at all, should the guidelines’ analysis of mergers in digital markets differ from mergers in other markets?
- Common ownership: is the guidelines’ approach to common ownership and horizontal stockholding adequate?
Tech and Life Sciences
- How should the guidelines analyze innovation in markets with high failure rates?
- Should the guidelines use a different approach to market definition when considering innovation as compared to price effects?
- To what extent does a focus on product market overlaps fail to identify broader concerns about incentives to innovate, particularly given that innovation may involve the creation of new product or service categories?
- What approaches can the guidelines use to determine whether technologies subject to a license or acquisition either compete with or complement the licensee’s or acquirer’s own technologies?
- How do those approaches perform in circumstances where parties own or license many patents related to the same categories of products?
- Where technology-by-technology analysis is impractical, what alternative methods of analysis could be used to identify anticompetitive concerns in merger cases involving intellectual property?
- How should the guidelines analyze mergers in markets subject to tipping toward oligopoly or monopoly, such as may result from significant network effects?
- How should the guidelines approach market definition in zero-price markets, negative-price markets, or markets without explicit prices?
- How should the guidelines evaluate mergers in two-sided simultaneous transaction platform markets?
- How should the guidelines analyze mergers involving data aggregation as an important motive and/or effect?
Given the prior statements from Biden administration officials and the tenor of this most recent announcement, it will come as no surprise if the agencies ultimately adopt guidelines that provide an analytical framework justifying more aggressive merger enforcement. We will provide an update when the agencies act further on this initiative and revise the Merger Guidelines.
For more information on these revised Merger Guidelines, please contact a member of the Goodwin Antitrust practice.
Andrew LacyPartnerCo-Chair, Antitrust + Competition
Arman OrucPartnerCo-Chair, Antitrust + Competition
Paul S. JinPartner