On December 18, 2023, the Department of Justice (DOJ) and Federal Trade Commission (FTC) published new Merger Guidelines, 13 years after their last revision. While the 2023 Merger Guidelines have proven to be controversial among critics, so far courts have largely adopted them. Here, we look at how courts have considered the Guidelines over the past year.
While the agencies have previously had separate guidelines for vertical and horizontal mergers, the 2023 Merger Guidelines offered a unified vision of merger review. This vision aligns with Supreme Court precedent from the 1960s by promising stricter merger review. However, over the last 60 years, antitrust precedent had developed in different directions in the lower courts, with the consumer welfare standard and economic efficiency taking a primary role in evaluating harms from mergers. In contrast to those developments, the 2023 Merger Guidelines often ignored more recent precedent and relied on earlier case law to support a structural presumption that a merged firm with more than a 30% market share would be anticompetitive and set forth more rigid guidance for how mergers would be evaluated.
The Guidelines, though, are not self-enforcing. While the agencies may explain how they will evaluate mergers and bring challenges based on the Guidelines, it is up to the courts to determine whether they are reasonable and should be followed. Although the Guidelines are not binding on courts, courts have found past guidelines persuasive and have generally accepted them as an accurate statement of the law. We examined how courts have evaluated the 2023 Merger Guidelines since they were issued, and found that only two cases have substantively engaged with them.
Most recently, Judge Adrienne Nelson relied on the 2023 Merger Guidelines in determining which Herfindahl-Hirschman Index (HHI) standard to apply in FTC v. Kroger Company when evaluating the Kroger/Albertsons merger. The 2023 Merger Guidelines presume a merger will lessen competition when it creates or further consolidates a market with an HHI greater than 1,800 and involves an increase in HHI greater than 100. In contrast, the 2010 Horizontal Merger Guidelines had used a threshold of 2,500 and an increase of more than 200 to determine whether a merger will presumably lessen competition. The FTC's expert used the new 2023 Guidelines while the defendants' expert used the 2010 Guidelines, with defendants arguing that the 2023 Guidelines' thresholds were unreasonably low and had not been adopted by any courts. Judge Nelson rejected both of the defendants' arguments, noting that the 2023 Guideline thresholds were in line with historical practice and multiple courts had cited them as persuasive authority.
Kroger was also the first case where a court has analyzed, albeit briefly, the 2023 Merger Guidelines' inclusion of labor markets as a relevant antitrust market. The defendants had argued that the labor market was not a proper antitrust market and, if it were one, it should be exempt under an implicit antitrust exemption for labor activity, arguments which Judge Nelson rejected. She declined, though, to pursue the FTC's labor market theory given that it was relatively new and less developed than those concerning other anticompetitive harms and because she had already enjoined the merger on the downstream market issue. In dicta, though, she stated that she found the labor market theory "compelling and logical," words which the FTC will likely cite to in future cases.
The other case to discuss the 2023 Merger Guidelines was FTC v. Tapestry, which was the Tapestry/Capri handbag case. There, the defendants also alleged that no other court had relied on the 2023 Merger Guidelines and the court should not. But Judge Jennifer Rochon found three earlier cases that had relied upon the 2023 Guidelines. She also questioned whether it was reasonable to expect courts to have weighed in on the Guidelines at that point, as they were less than a year old. Rejecting the defendants' pleas to the contrary, she adopted the 2023 Merger Guidelines' approach to HHI and found the merger, which would have resulted in a merger-induced change of 1,449 in HHI, was likely to have anticompetitive effects.
Other courts, including the cases cited by Judges Rochon and Nelson, have engaged with the Guidelines in limited fashions such as by citing them for a statement on what HHI or SSNIP tests are or to note they did not diverge from earlier guidelines. A handful of opinions noted that the Guidelines either came out after briefing or neither party had relied on them.
Despite the fact that only a few courts have tried to interpret the Guidelines, it is notable that every case thus far that has examined them has relied on them. Even though critics had framed the Guidelines as returning to cases from the 1960s that had been undermined by subsequent precedent, the courts thus far have still found them convincing. This may partially be a function of what questions the courts have focused on so far in the Guidelines. The two cases to have examined them have focused on HHI thresholds, where the Guidelines were actually a return to the HHI analysis for every prior guideline except the 2010 Guidelines. Judge Nelson's embrace of the labor theory, though, does signal that courts may be open to expansions of antitrust enforcement to novel areas.
Although they appear to be accepted by the courts, the 2023 Merger Guidelines may not survive under the Trump administration. The Guidelines were adopted before any Republican commissioners had joined the FTC and Commissioner Melissa Holyoak has said that she would like to rescind or revise them. While in some ways the Trump administration will continue the Biden administration's antitrust populism, the 2023 Merger Guidelines' high standards may be too much for the business-friendly wing of the Republican party. Incoming-President Trump's Department of Justice Antitrust Division and Federal Trade Commission leadership nominations signal a middle ground between these two paths.
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