Don’t Panic: What Transacting Parties Should Know and Do About New U.S. Antitrust Merger Guidelines

The U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC) have finalized their revamped Merger Guidelines. The 2023 iteration reflects hostility and skepticism toward M&A. Its impact on enforcement, however, is likely to be limited.

• The paradigm the guidelines reflect is not new and actually has been in effect for several years. Despite that more aggressive posture, more than 98% of deals reported to the agencies clear without challenge or extended investigations.
• For the fewer than 2% of deals the agencies challenge, the new guidelines are unlikely to alter how courts decide cases. Unlike prior updates, the new guidelines do not reflect the consensus of antitrust lawyers on the evolution of the law. Instead, they represent an attempt by political leadership at FTC and DOJ, self-styled antitrust reformers, to overhaul the law.
• Recent agency wins do not portend otherwise. These cases applied the common law framework in place for years, not the short cuts proposed in the new guidelines. Antitrust merger analysis remains case-specific and fact-intensive, requiring enforcers to prove their case with evidence, not theory.
• Transacting parties, nonetheless, must adapt to the new paradigm. They should seek antitrust advice earlier in the dealmaking process and on a wider variety of transactions to manage risks effectively.

The New Guidelines Differ from Prior Updates

The guidelines are the latest in a series of merger guidelines dating to 1968. Yet, they differ markedly from prior updates in at least two respects.

• Not a Useful Diagnostic Tool: Prior guidelines were written to “assist the business community” to better understand merger analysis. They offered a step-by-step analytical framework companies could apply to “improve the predictability” of enforcement decisions. By contrast, the new guidelines eschew that analytical approach in favor of describing a menu of 11 options the reviewing agency might use to conclude a deal violates antitrust law.
• Not a Consensus View: Prior updates reflected a consensus view on how law and practice had evolved based on advances in agency experience and economic understanding. In contrast, the new guidelines read more like a manifesto written by antitrust reformers seeking to fix what they believe is broken law. With heavy citations to decades-old cases, the 2023 guidelines signal an intent to return to a pre-1970s era in which deals were blocked by easily triggered presumptions instead of case-specific evidence and economic analysis.

Antitrust Risk to Transactions Has Not Increased Substantially

Public commentary on the 2023 guidelines has raised alarms about chilling effects on dealmaking and, in some cases, trumpeted an antitrust revolution. The impact is likely to be more finite in practice.

• Not Entirely New: The new guidelines describe an expanded range of theories the agencies might investigate when reviewing a deal. This, however, is not a new development. The scope of investigations has been expanding since before the Biden administration. With respect to the scope of investigations, the guidelines reflect the status quo, not a revolution.
• Enforcement Trends are Steady: While the current paradigm counsels transacting parties to take deliberate steps to prepare for investigations in transactions that carry risk, antitrust lawyers have successfully navigated this environment for years. Contrary to the popular narrative, the overwhelming majority of deals (98+%) reported to the agencies are reviewed without an extended investigation. The FTC recently recognized this consistent enforcement trend. Indeed, when the FTC’s Chair reported in December the “highest level of enforcement activity in 20 years,” she cited the FTC’s 24 cases that year instead of the ten-year average of 22.
• Not Likely to Influence Courts: In addition to memorializing novel ways in which current agency leadership believes transactions may violate antitrust law, the guidelines attempt to lower the bar for establishing presumptions of illegality. The guidelines, however, are not law. Unlike the instant version, prior iterations were influential to courts because they set out a consensus view of antitrust lawyers. The 2023 guidelines, in contrast, were proposed and finalized by an FTC that lacked any Republican-appointed commissioners and by agency leadership who view their mandate as reforming law that they believe has been too permissive of M&A. Despite claims of a “robust public process,” the final 2023 guidelines adopt very few substantive changes or meaningful responses to critiques of the draft. The 2010 horizontal merger guidelines had a shelf life that spanned multiple Democratic and Republican administrations. The new guidelines are unlikely to withstand a change in administration.
• Recent Agency Wins Reflect Neither a Sea Change nor Courts’ Stamp of Approval: Following a string of high-profile losses – rare in prior administrations – the agencies scored a few wins in December. Some have suggested these victories, coinciding with the release of guidelines, reflect a turning of the tide in favor of more extensive enforcement. Courts deciding these cases, (Illumina/Grail and IQVIA/Propel Media), however, did not apply the new guidelines’ proposed short cuts or novel theories of harm. Instead, federal judges engaged in the same fact-intensive analyses of market definition, concentration and competitive dynamics that have prevailed under the common law for decades.

Managing Risks in the New Paradigm: 3 Strategies Transacting Parties Should Consider

Parties contemplating transactions should proactively manage risks.

1. Seek antitrust advice on all deals: The new guidelines set out 11 ways the agencies believe a deal might violate antitrust law. Certain theories extend beyond transactions between current competitors, and several apply regardless of high market share. Agencies will not limit concerns to impacts on consumers. They also will consider impacts on suppliers, employees and competitors.
   • Implications: Do not neglect antitrust risk just because the counterparty is not a competitor or because market shares are low. With antitrust counsel, prepare to answer questions investigating an expanded range of concerns and explain how your deal benefits all stakeholders, not just consumers. Understand how broader, longer investigations impact how risks are allocated in purchase agreements.
2. Seek antitrust advice beyond specific deals: The new guidelines reflect the agencies’ interest in a buyer’s broader pattern of dealmaking over time, the parties’ competitive conduct beyond the deal context and the history of antitrust violations and consolidation trends in the industry.
   • Implications: Do not neglect antitrust risk on smaller or non-reportable deals. Seek advice on how the agencies may view your history of dealmaking and antitrust compliance. Focus on why your deal and your business model are procompetitive.
3. Manage industry-specific risks: Several theories of harm in the new guidelines are more likely to apply to certain industries, such as digital platforms, life sciences, healthcare, private equity and sectors characterized by leap-frogging or emerging technologies.
   • Implications: Seek advice at the pipeline stage as to what unique concerns the agencies are likely to have with respect to your industry and how consolidation impacts competition in that industry.

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Seek advice from experienced antitrust counsel on how to manage the actual risks you face in the new paradigm. Do not be deterred by guidelines whose ultimate impact is likely to be modest.