New DOJ and FTC antitrust officials plan to overhaul M&A review (one day) – Ad Exchange

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The Justice Department and the Federal Trade Commission on Tuesday announced a joint effort to rewrite U.S. antitrust law to handle mergers and acquisitions.

Don’t hold your breath, though

Both agencies are opening a 60-day public comment period for individuals, companies and organizations to submit concerns about mergers and acquisitions and antitrust regulation. This material will then be digested and the two agencies will publish a joint document which will also be released for a public comment period. The final version may still need to be tested in court.

But the process has to start somewhere and it’s an “opportune and ripe” time for an overhaul of antitrust prosecutions based on mergers and acquisitions, FTC Chair Lina Khan said in a press release.

Merger lawsuits more than doubled from 2020 to 2021, she said. And the pace of mergers and acquisitions continues to accelerate this year.

Why new merger guidelines?

A lot has happened in the 12 years since the current merger guidelines were issued.

For example, John Kwoka, an economist consulted by the FTC on merger cases, explained that issues such as impacts on labor markets and monopsomy cases – when a single buyer controls demand in a category and can thus control its own prices (looking at you, Amazon) – have not been offered for public comment or discussed under the current guidelines.

Khan also cited “moat building, data aggregation strategies, and private equity stacking games” as examples of corporate M&A priorities that current antitrust guidelines are not well equipped to address. .

New guidelines could deter a private equity buyer if their goal or the outcome of their acquisition is to cut costs through job cuts.

Historically, antitrust enforcement in the United States – that is, the way it is done today – has focused on cases where large corporations control or influence prices for consumers or business competitors.

Data-driven online advertising giants like Google and Facebook have been able to make big acquisitions (YouTube and Instagram, for example) in part because free service regulators can’t quote prices. to higher consumption.

“It’s quite clear that this goal is too narrow,” Kwoka said.

New merger guidelines would likely take into account the impact of a merger on labor markets or prioritize “innovation” in a category in cases where parameters such as consumer prices do not do not apply to free services.

The vertical rabbit hole

Another stumbling block for US regulators is narrow antitrust enforcement for vertical mergers.

Horizontal mergers occur when a company buys a direct competitor, thereby eliminating a market player. These transactions are subject to much more scrutiny than vertical mergers, when a company enters a new market, which are treated relatively loosely.

Amazon acquired Whole Foods as a big break in the brick-and-mortar business and had no problems. But now that it’s a category player, a much smaller deal for a regional grocery chain could be stalled as a horizontal acquisition.

Limiting lawsuits to horizontal mergers ignores the “multidimensional” markets that exist today, said Assistant Attorney General Jonathan Kanter, who heads the DOJ’s antitrust division.

Every time someone checks the weather forecast or orders coffee online, a network of interconnected services, sometimes dozens of businesses, operate in the background, he said. And that rarely happens with consumer knowledge.

Khan said “a multitude of new studies” on this topic have emerged in recent years. She became a regulatory figurehead after a 2017 Yale Law Review article titled “Amazon’s Antitrust Paradox.”

Kanter is another young antitrust lawyer who made a name for himself by burning down big tech companies.

But the cogs of regulation move slowly. Even as DOJ and FTC leaders prepare to challenge more merger deals, they need new guidelines that can support their cases — and they need to convince lawmakers and judges to play by the rules.

This is why it will take several periods of public consultation and months or years before a final document can be published. Regulators must identify consumers and small businesses who complain of real harm.

“Our message to the American people is…please share your views,” Kanter said.

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