US Antitrust Agencies Overhaul Merger Guidelines, Subjecting Far More Transactions to Scrutiny and Potential Challenges

On July 19, 2023, the FTC and DOJ released updated draft Merger Guidelines that reflect the antitrust Agencies’ aggressive approach to merger enforcement and could result in significantly more transactions being subject to challenge.

Some of the most significant changes in the Guidelines include:

• For horizontal mergers (mergers between actual or potential competitors), the Guidelines lower the market concentration threshold at which mergers will be presumed to be anticompetitive. In addition, any merger resulting in a firm with a 30 percent market share will almost always trigger the presumption. Alternatively, any merger that eliminates “substantial competition between firms” or increases “the risk of coordination” is subject to challenge, regardless of market concentration.
• For mergers between firms that compete in labor markets, competitive concerns may arise at even lower concentrations.
• For vertical mergers (mergers between firms at different levels of the supply chain), the Guidelines create a presumption that the merger may substantially lessen competition where the merged firm controls a 50 percent share or more of a product or service that its rivals use.
• The Guidelines are particularly tough on dominant firms (defined very broadly as firms with at least 30 percent market share or the ability to raise price or reduce quality compared to the competitive level). Any merger by a dominant firm is subject to challenge if the agencies determine it may increase barriers to entry or switching costs, deprive rivals of scale, eliminate nascent competitive threats, or otherwise “entrench [the firm’s] dominant position.”
• The Agencies will scrutinize patterns of acquisitions, including both industry-wide trends towards consolidation and serial acquisitions by a single firm. Minority investments are likewise subject to enhanced scrutiny.

The Guidelines are not the law. While many courts have found past Merger Guidelines to be persuasive authority and have cited them in their decisions, it remains to be seen whether courts will find the more-aggressive Guidelines to be persuasive, or even whether subsequent administrations retain and follow these Guidelines. But at the very least, the Guidelines reflect the active merger enforcement stance of the Agencies under the current administration, and possibly portend even more in-depth merger investigations and court challenges going forward.

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This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Julia Schiller, an O'Melveny partner licensed to practice law in the District of Columbia, New Jersey, and New York, Sergei Zaslavsky, an O'Melveny partner licensed to practice law in the District of Columbia and Maryland, Jason Yan, an O'Melveny counsel licensed to practice law in the District of Columbia and Virginia, Ellie Hylton, an O'Melveny associate licensed to practice law in the District of Columbia, and Marc A. Petrine, an O'Melveny associate licensed to practice law in the District of Columbia and Virginia, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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