Alert August 24, 2010

FTC and DOJ Issue Revised Horizontal Merger Guidelines But Bank Merger Competitive Review Guidelines are Left Unchanged

The Federal Trade Commission and the Department of Justice (the “Agencies”) issued major revisions to their Horizontal Merger Guidelines (the “Guidelines”), which replace the Horizontal Merger Guidelines originally issued in 1992 and modified in 1997.  The Commentary on the Horizontal Merger Guidelines issued in 2006 remains a supplement to the newly revised Guidelines.  The Bank Merger Competitive Review guidelines, which the federal banking agencies and the Department of Justice developed in 1995 to facilitate the competitive review of bank mergers, remain unchanged.

The Guidelines outline the principal analytical techniques, practices and the enforcement policy of the Agencies regarding horizontal mergers and acquisitions.  Several examples of the evaluation of the different factors that are considered are provided.  The Guidelines are intended to better reflect the Agencies’ actual practices and increase the transparency of the analytical process underlying enforcement decisions and to assist the courts in developing an appropriate framework for interpreting and applying antitrust laws.  They are not intended to represent a change in the direction of merger review policy.

The Agencies have noted that, in contrast to the 1992 guidelines, the revised Guidelines:

  • clarify that merger analysis does not use a single methodology, but is a fact-specific process through which the Agencies use a variety of tools to analyze the evidence to determine whether a merger may substantially lessen competition;
  • introduce a new section on “Evidence of Adverse Competitive Effects,” which discusses several categories and sources of evidence that the Agencies, in their experience, have found informative in predicting the likely competitive effects of mergers;
  • explain that market definition is not an end itself or a necessary starting point of merger analysis, and market concentration is a tool that is useful to the extent it illuminates the merger’s likely competitive effects;
  • provide an updated explanation of the hypothetical monopolist test used to define relevant antitrust markets and how the Agencies implement that test in practice;
  • update the concentration thresholds that determine whether a transaction warrants further scrutiny by the Agencies;
  • provide an expanded discussion of how the Agencies evaluate unilateral competitive effects, including effects on innovation;
  • provide an updated section on coordinated effects and clarify that coordinated effects, like unilateral effects, include conduct not otherwise condemned by the antitrust laws;
  • provide a simplified discussion of how the Agencies evaluate whether entry into the relevant market is so easy that a merger is not likely to enhance market power; and
  • add new sections on powerful buyers, mergers between competing buyers, and partial acquisitions.