Under current law, any US companies considering a merger or acquisition that is above $125 million in size must first report it to the government. The most recent data for 2023 says that 1,805 such transactions were reported in 2023, which was a relatively low number for recent years. In 2021 and 2022, for example, more than 3,000 proposed transactions were reported.
Government antitrust enforcers at the Federal Trade Comission and the Antitrust Division of the US Department of Justice don’t have the time or people to scrutinize all of these proposed transactions deeply. In 2023, for example, the FTC challenged 16 deals and the DoJ challenged another 12; in total, that’s less than 2% of the proposed transactions. It’s appropriate that this number be relatively low: after all, the role of the government authorities isn’t to decide whether the transaction is likely to be profitable (we can assume the firms involved have analyzed that question), nor whether it is “socially desireable” in some broad and nebulous sense (it’s a fairly free-market economy, after all), but only whether the transaction is likely to reduce competition in the economy.
Going back to 1968, the antitrust authorities at the FTC and the DoJ have published a set of Merger Guidelines to describe which transactions are likely to get closest scrutiny, and then updated these guidelines once or twice a decade. It’s important to recognize that these Guidelines are not legally binding; actual antitrust law is the legislation passed by Congress and the case law established by court precedents. Thus, the evolving Merger Guidelines have always been a combination of summarizing what the laws and the courts actually say, and what the enforcement agencies think the courts should say.
When President Biden took office in 2021, he appointed people to the key antitrust policy-making positions at FTC and DoJ who were strongly on the record that the Merger Guidelines of 1968 were largely correct, but that the updates starting in 1982 were on the wrong track, and continued on the wrong track with the updates of 1984, 1992, 1997, 2010, and 2020. As you might expect, those who had been involved in the updates of Merger Guidelines through the Reagan, Bush, Clinton, Obama, and Trump presidencies were mostly unimpressed.
A new set of Merger Guidelines was published in December 2023. I won’t try to summarize all the pros and cons here. But as a rough summary, the prevailing bipartisan perspective had been that the purpose of competition is to make sure that consumers benefit. From this view, the goal of antitrust authorities was to evaluate if a given merger would benefit consumers through lower prices and/or quality improvements. The critics of this position in the Biden administration argued that the law required preservation of “competition” itself–which could involve blocking mergers and acquisitions just because they increased the size of existing firms. One justification for this view is that it takes a longer view of competition: if smaller firms are not absorbed into larger ones, some of them later develop into full-fledged competitors. Another justification is large firms (and their rich owners) should be viewed as politically dangerous because of their power to influence government.
Here, I’ll just add three additional thoughts to the situation.
First, one possibility was that the 2023 Merger Guidelines would turn out to be extremely short-lived, because they would be overturned by the incoming Trump administration. However, Andrew N. Ferguson, the new head of the Federal Trade Commission, has written a “Memorandum” saying that the 2023 Merger Guidelines will remain in place. Ferguson notes:
Insofar as there is any ambiguity, let me be clear: the FTC’s and DOJ’s joint 2023 Merger Guidelines are in effect and are the framework for this agency’s merger review analysis. … Stability across administrations of both parties has thus been the name of the game. President Clinton retained the 1992 Guidelines promulgated by the George H.W. Bush Administration until 1997. President George W. Bush retained the 1997 Guidelines unchanged. And President Trump retained unchanged the 2010 Guidelines issued by the Obama Administration. … I think the clear lesson of history is that we should prize stability and disfavor wholesale rescission. … A recriminatory cycle of partisan rescissions will not help the economy. If merger guidelines change with every new administration, they will become largely worthless to businesses and the courts. No business can plan for the future on the basis of guidelines they know are one election away from rescission, and no court will rely on guidance that is so obviously partisan.
Stability is also good for the enforcement agencies. The wholesale rescission and reworking of guidelines is time consuming and expensive. We should undertake this process sparingly. We have limited resources to patrol the beat and constant turnover undermines agency credibility. By and large, the 2023 Merger Guidelines are a restatement of prior iterations of the guidelines, and a reflection of what can be found in case law. That is good reason to retain them. That is not to say that the 2023 Merger Guidelines are perfect. No guidelines are perfect. If experience teaches that revisions are appropriate, then the agencies can consider revisions as they have done in the past. This iterative and transparent revision process promotes the stability that the guidelines need to succeed. For the foreseeable future, and until any such revisions are adopted, the FTC will use the 2023 Merger Guidelines as the framework to do our important merger-enforcement work.
The second question is whether or to what extent the Biden antitrust authorities have “won” in overturning the earlier doctrines and transforming merger guidelines back to their version of the good old days. The answer here is unclear. The Winter 2025 issue of the Journal of Economic Perspectives (where I work as Managing Editor) has a three-paper symposium on “The 2023 Merger Guidelines and Beyond.”
I’ll focus here on the essay by Francis. He sketches the evolution of the merger guidelines over time. He points out that the Biden antitrust appointees argued vehemently that they intended to overturn the existing guidelines, with comments like “the era of lax enforcement is over, and the new era of vigorous and effective antitrust law enforcement has begun” and promised to reverse “decades of lax . . .
enforcement” and “broad government inaction.” They strongly criticized the idea that antitrust decisions should focus on consumer welfare, saying that while consumer harm “might matter in some contexts,” “to say it always matters, and is indeed the lodestone of the law, is . . . unsupportable and can . . . border on the ridiculous.”
Francis argues that the “draft” version of the 2023 Merger Guidelines released in June 2023 was fairly radical. It eliminated language from earlier guidelines about whether firms had “market power” to raise wages and the importance of consumer welfare. Instead, it focused on a set of 13 rules phrased in terms of “Mergers Should Not…” For example, as Francis notes, mergers should not “significantly increase concentration in highly concentrated markets,” “eliminate a potential entrant in a
concentrated market,” or “entrench or extend a dominant position.” None of these 13 rules in the draft version mentioned whether the actions by a firm might benefit consumers or not.
The draft Merger Guidelines received 3,000 public comments. Many of them focused on the issue of whether antitrust should focus on consumer welfare: some in favor, some against. Francis writes:
Above all, the post-draft debate centered on the draft’s relationship with
welfarism. The draft had sketched a merger policy that, to a significant extent,
would diverge from modern welfarist antitrust. Some commenters demanded that
the agencies go further and entirely reject the welfarist paradigm; others demanded
a clear recommitment to it. The agencies were at a crossroads. … On my reading, the final document effectively declines to make the choice between welfarism and non-welfarism that commenters had demanded. Instead, it opts for ambiguity: it can plausibly bear both a welfarist and a non-welfarist reading. Like a Rorschach test, the meaning of the 2023 Merger Guidelines depends upon what one expects, hopes, or fears to find there. Above all, it invites, but does not answer, a basic question: Is a tendency to harm consumers (or other trading partners) necessary for condemnation under the 2023 guidelines?
Thus, Francis argues that the meaning of the new guidelines will only become apparent as they are asserted by government antitrust authorities and as those arguments are accepted or rejected by courts.
Francis makes the interesting point that in the 2023 Merger Guidelines and indeed going back more than a century in antitrust laws, “competition” has served as a term of compromise, because it allows alternative interpretations. Most American favor “competition” between firms as a general concept, rather than monopoly. But imagine that a town starts with a bunch of locally-owned restaurants, grocery stores, and drug stores. Then a bunch of national chains and superstores move in. A number of local customers turn to the new options, where prices are often lower, and some of the locally-owned stores go out of business. Is this a reduction in competition, because competitors have been driven out of business? Or an increase in competition that benefits the consumers who choose the new options? What about if online firms with home delivery drive local merchants and malls into financial distress? What if online streaming of movies and shows drives movie theaters into financial distress? Many people are in favor of competition when it offers them new options, but if and when some of the competitors lose out, they become dubious.
I would add that Americans have a similar ambivalence about large firms. On one hand, many people look back with some fondness on the days when giant American firms making cars or steel or chemicals had a dominant role in the US and global economy. The US political system becomes seriously concerned if US producers in a certain industry don’t seem dominant enough, and there is often political support for putting tariffs on foreign producers and subsidizing domestic firms (as in semiconductors) to close the gap. But in the areas where the US does in fact have the dominant firms, like many of its big tech companies, along with firms like Walmart, ExxonMobil, and CVS Health, we then are concerned that their size should be a public concern and antitrust authorities should take a close look. In short, lack of large and dominant US firms in certain industries is a public concern needing a policy response, and the presence of large and dominant US firms in certain industries is also a public concern needing a policy response.
Finally, for those who would like a range of expert opinions about the 2023 Merger Guidelines, a useful starting point is the 11-paper symposium organized by the Review of Industrial Organization and published in its August 2024 issue.
I’ve commented on this blog from time to time about the Biden antitrust team, the new merger guidelines, some current antitrust cases, and the historical changes in merger law over time. Some of these posts include:
- “Structure-Conduct-Performance: An Earlier Generation of Antitrust” (February 11, 2025)
- “The Generic Drugs Antitrust Case” (March 15, 2024)
- “Initial Reactions to the Amazon Antitrust Case” (September 27, 2023).
- “Antitrust and the Consumer Welfare Goal” (July 31, 2023)
- “Complexifying Antitrust” (January 3, 2023)
- “Antitrust: Dilatancy Before the Earthquake?” (June 8, 2023)
- “Initial Reactions to the Amazon Antitrust Case” (September 27, 2023)
- “Did Antitrust Really Used to Be So Tough?” (February 19, 2022)
- “The AT&T Merger with Time Warner: Another Follow-up” (May 3, 2023)
- “After that Big Merger, What Happened?” (April 12, 2023)
- “Antitrust in the Digital Economy” (July 19, 2019)
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