The Federal Trade Commission (FTC) and Department of Justice (DOJ) have issued a draft of new merger guidelines that, if adopted after a 60-day public comment period, would establish more than a dozen standards that would be applied to all proposed mergers and acquisitions.
"The goal of this update is to better reflect how the agencies determine a merger’s effect on competition in the modern economy and evaluate proposed mergers under the law," the FTC and DOJ said in an accompanying statement.
The new guidelines are:
1. Mergers should not significantly increase concentration in highly concentrated markets;
2. Mergers should not eliminate substantial competition between firms;
3. Mergers should not increase the risk of coordination;
4. Mergers should not eliminate a potential entrant in a concentrated market;
5. Mergers should not substantially lessen competition by creating a firm that controls products or services that its rivals may use to compete;
6. Vertical mergers should not create market structures that foreclose competition;
7. Mergers should not entrench or extend a dominant position;
8. Mergers should not further a trend toward concentration;
9. When a merger is part of a series of multiple acquisitions, the agencies may examine the whole series;
10. When a merger involves a multi-sided platform, the agencies examine competition between platforms, on a platform, or to displace a platform;
11. When a merger involves competing buyers, the agencies examine whether it may substantially lessen competition for workers or other sellers;
12. When an acquisition involves partial ownership or minority interests, the agencies examine its impact on competition; and
13. Mergers should not otherwise substantially lessen competition or tend to create a monopoly.
“Open, competitive, resilient markets have been a bedrock of America’s economic success and dynamism throughout our nation’s history. Faithful and vigorous enforcement of the antitrust laws is key to maintaining that success,” said FTC Chair Lina M. Khan in a prepared statement. “With these draft Merger Guidelines, we are updating our enforcement manual to reflect the realities of how firms do business in the modern economy. Informed by thousands of public comments — spanning healthcare workers, farmers, patient advocates, musicians, and entrepreneurs — these guidelines contain critical updates while ensuring fidelity to the mandate Congress has given us and the legal precedent on the books.”
“Unchecked consolidation threatens the free and fair markets upon which our economy is based,” added Attorney General Merrick B. Garland. “These updated Merger Guidelines respond to modern market realities and will enable the Justice Department to transparently and effectively protect the American people from the damage that anticompetitive mergers cause.”
- KC's View:
The new guidelines may not be adopted for another few months, but it is hard to imagine that the FTC won't be keeping them in mind as it considers what decision to make in the proposed acquisition of Albertsons by Kroger.
I'm not a lawyer nor an antitrust expert, but it certainly looks to me like the Kroger-Albertsons deal runs afoul of numbers eight and nine by entrenching and extending a dominant position as well as furthering a trend toward concentration.
As I've said here before, there is no question in my mind that the Kroger-Albertsons deal will allow the combined company to compete more effectively with Walmart, Amazon and Costco. The questions that need to be answered is whether this concentration of retailing power in just a few companies is going to be bad for shoppers long-term and make it much harder, perhaps impossible, for companies downstream to compete.
In a statement released after the FTC/DOJ draft guidelines were issued, Chris Jones, Senior Vice President of Government Relations and Counsel at the National Grocers Association (NGA) put it this way: "Following decades of consolidation, the current grocery landscape is dominated by a few national chains who wield so much economic influence they can undercut competitors simply by demanding preferable treatment from suppliers. This pattern has resulted in anticompetitive economic discrimination against independent grocers and their customer base. The revised Merger Guidelines released today signifies a major course correction in antitrust enforcement that recognizes the competitive dangers of buyer power.”
Which is true. But even if the FTC tries to block the Kroger-Albertsons deal, those companies still will be able to use the courts to challenge that decision. It all depends on how the guidelines line up with what courts define as established law.