What’s Happening and Why It Matters: The Federal Trade Commission (FTC) and the Justice Department’s Antitrust Division, which share jurisdiction over antitrust enforcement, are proposing new Merger Guidelines. The draft guidelines represent a significant shift in policy from the current guidelines. If implemented, the proposed guidelines would help stop harmful mergers that concentrate power in too few hands. This would protect consumers; create a fairer playing field for small businesses, farmers, and workers; bring new vitality to communities and industries; and protect our democracy from outsized corporate power.
What are the Merger Guidelines: The antitrust laws enacted by Congress charge the Federal Trade Commission (FTC) and the Justice Department (DOJ) with blocking mergers where the effect “may be substantially to lessen competition, or to tend to create a monopoly.” The agencies’ Merger Guidelines outline the standards the agencies use to review a merger and determine whether the deal is illegal and should be blocked.
The Agencies Need to Hear Your Stories: This is a draft proposal. How strong the final guidelines are will depend on the feedback the agencies receive. We strongly encourage you to share your story by submitting a brief comment that expresses support for strong merger guidelines. Is a monopoly crushing your business? Did an acquisition mean someone in your family lost their job? Has your internet service gotten worse and more expensive? Are you living in a food desert? The agencies want to hear your stories and are accepting public comment — at this link — on their draft guidelines through September 18, 2023.
Sources & Further Reading: Sources for the information in this explainer and more details on the history, practice, and impact of merger law and enforcement policy can be found in ILSR’s 2022 report Rolling Back Corporate Concentration: How New Federal Antimerger Guidelines Can Restore Competition and Build Local Power, the comment letter ILSR submitted in response to the FTC’s request for input on merger policy, and our op-ed in Project Syndicate.
In 1950, by a wide majority in both houses, Congress passed the Antimerger Act. The act amended the 1914 Clayton Act with the aim of outlawing a wide array of mergers. To this end, Congress banned any merger where the effect “may be substantially to lessen competition… in any line of commerce.” As the law’s legislative history makes clear, lawmakers believed corporate concentration was both an economic and political danger — a reality that we are facing today. Concentrated corporate power threatened small businesses, workers, and the ability of people to control their lives and communities. To prevent these harms, Congress passed a law designed to head-off industry consolidation “in its incipiency” — long before it even gets started.
While the original 1968 Merger Guidelines adhered to the law, in 1982 the DOJ issued new Merger Guidelines that turned the law on its head. Fueled by the philosophy of Robert Bork and the “consumer welfare standard,” the 1982 Guidelines explicitly welcomed consolidation, declaring that mergers “play an important role in a free enterprise economy.” This was a calculated bid by the Reagan Administration to gut the antitrust laws without involving Congress. This drastic shift in policy was embraced by subsequent Democratic and Republican administrations. The most recent revision to the guidelines, made in 2010, further weakened enforcement by removing a large swath of mergers from scrutiny.
The DOJ and FTC are now proposing to bring merger enforcement policy back into alignment with the antitrust statutes enacted by Congress.
Mergers have caused debilitating problems across the country. Mergers in the food industry have led to lower incomes of farmers and food workers, while raising grocery prices. Mergers among manufacturers of everything from appliances to beer cans have led to the shuttering of plants, costing communities thousands of jobs. Hospital mergers have sent health care costs soaring, while leaving many rural places without hospitals. Meanwhile, Amazon, Facebook, and Google have used acquisitions to thwart potential competition and lock in their dominance.
Lacking meaningful competition, dominant corporations have stripped many industries of their productive capacity. They’ve shuttered facilities, curtailed research and investment, cut jobs and wages, muscled out small businesses, and stifled startups. All of this has made the U.S. economy weaker and more brittle.
Today the case for erring on the side of blocking mergers is overwhelming. We need to reinvigorate anti-monopoly policies to bring about a more egalitarian, democratic society — one in which economic power and prosperity are broadly distributed, communities can thrive and determine their own future, and American liberties are safeguarded from concentrated corporate power.
Through their blind embrace of the supposed benefits of ever-increasing corporate scale, the current merger guidelines have left the DOJ and FTC unable to effectively identify and stop problematic mergers, notably vertical mergers, serial acquisitions, and “buy and bury” deals in the tech sector. The new guidelines give enforcers a more effective lens for evaluating proposed mergers, including by directing enforcers to focus on the structure and long-term competitive health of markets.
The 1982 Merger Guidelines have significantly influenced how the courts approach antitrust cases. Law scholar Hillary Greene found that, since the mid 1980s, the guidelines were mentioned in more than half of all judicial decisions on merger cases, and that “the guidelines were a far more significant part of the antitrust legal development process than their technical status as mere nonbinding guides for agency prosecutorial discretion would suggest.” Their influence was not limited to merger cases. The guidelines’ deference to narrow economic theories and disregard of questions of power and democracy have shaped how judges interpret and apply the antitrust laws broadly.
These new guidelines will not only provide a roadmap for the FTC and DOJ to determine which mergers should be blocked, but they will help judges better understand and apply the antitrust laws. They will help get antitrust enforcement back on track.
Strong merger enforcement would create a fairer playing field for small businesses and allow more startups to gain a toehold, deconcentrating industries over time. This would have two major benefits: It would help industries weakened by too little competition and innovation recover their dynamism. And it would bring new businesses and vitality to many struggling rural and urban communities, including places ravaged by factory closures, shuttered stores, and the other consequences of the rampant mergers of the last four decades.
This is in fact exactly what happened in the decades after Congress passed the antimerger legislation of 1950. As a 1978 Congressional study concluded, strong merger enforcement “prevented merger-induced increases in market concentration in many industries,” which “open[ed] opportunities for deconcentration to occur.” The study highlighted examples of industries that had become less concentrated as a result of the law and its enforcement, including particular manufacturing and food processing sectors.
You can read a summary of the agencies’ 13 proposed guidelines here and the full draft here. The new guidelines reorient merger reviews and enforcement policy in several important ways:
This draft heralds an overdue end to the dangerous approach of the last four decades, ILSR's Stacy Mitchell ILSR's Stacy Mitchell says in the statement
In the Project Syndicate, Stacy Mitchell and Ron Knox write how the FTC's merger guidelines, if adopted, would stop corporate consolidation and preserve US democracy.
FTC and DOJ's announced new merger guidelines set the stage for a new era in antitrust regulation, restoring competition and building local power.
ILSR submitted an in-depth comment letter applauding the FTC and DOJ for the significant changes contained in the agencies’ Draft Merger Guidelines and suggesting ways...