July 19, 2023: The Federal Trade Commission (FTC) and the Department of Justice (DOJ) have announced updated guidelines for evaluating mergers in the digital economy. The new rules aim to reflect the changing market and keep pace with the digital age. The guidelines cover both vertical and horizontal mergers.
Vertical mergers involve two businesses operating in different parts of the supply chain within an industry. On the other hand, horizontal mergers involve companies that compete or operate in similar market segments. An example of a vertical merger is Microsoft’s proposed $68.7 billion acquisition of Activision Blizzard, where Microsoft distributes games through Xbox consoles and streaming services while Activision creates the games.
The FTC challenged Microsoft’s deal, arguing that it would harm competition, but a court recently declined to halt the merger. Under the leadership of Chair Lina Khan, the FTC has been more proactive in blocking Big Tech companies’ expansion. The DOJ Antitrust Division, led by Assistant Attorney General Jonathan Kanter, has also increased its enforcement efforts.
The updated guidelines now explicitly consider the impact of mergers on competition for workers. They also address issues related to multi-sided platforms like Amazon, which serve consumers and businesses. The agencies may broaden the types of deals they review, focusing on individual mergers and a series of acquisitions. The FTC has already adopted this approach in its lawsuit against Meta, the parent company of Facebook, based on a series of acquisitions that allegedly maintained its monopoly power.
The new guidelines aim to provide clarity to judges who rarely encounter antitrust cases, addressing their previous requests for more evident merger law standards. The agencies emphasize the importance of updating enforcement efforts to align with the modernized economy, even if it means facing more legal challenges.
The public has until September 18 to provide comments on the draft guidelines, after which the agencies will review the feedback and consider revisions before finalizing the guidelines. The longevity of the guidelines may depend on future political power dynamics following the next presidential election in 2024, as the previous version was withdrawn about a year after its release.
Overall, the FTC and DOJ’s new guidelines aim to ensure that merger reviews consider the impact on competition for workers and adapt to the evolving digital economy. The agencies aim to protect competition and maintain a level playing field in the market by addressing concerns about vertical mergers, multi-sided platforms, and acquisitions.