Top FTC Economist Defends Merger Process Amid Scrutiny

The agency is going to evaluate public comments and make changes, said Nevo during an American Enterprise Institute event. “The final guidelines are not going to be identical to the draft,” he said. “It’s truly an open process that even our leadership doesn’t know at this point” what the final document will look like: “We are really coming to this with an open mind.”

Former FTC Commissioner Noah Phillips said the rhetoric from the Biden administration suggests there could be a “dramatic” shift in the opposite direction when a Republican administration takes over. Phillips said the more “variation” introduced, the more chance for more dramatic “swings" and uncertainty for industry. Phillips, who joined Cravath after resigning from the agency (see 2210140048), noted the 2010 horizontal merger guidelines were kept in place by the Trump administration. He cast doubt that an update from this administration will survive scrutiny from the opposing party.

The Biden administration is focusing too much attention on market concentration and not enough on the consumer, said Tim Muris, FTC chair during the George W. Bush administration and now a fellow at AEI. He questioned the “self-proclaimed revolution” from President Joe Biden, FTC Chair Lina Khan and DOJ Antitrust Division Chief Jonathan Kanter. If the guidelines are subject to litigation, they will be received very differently by courts, said Phillips. Brookings Institution fellow Bill Baer, who was FTC Competition Bureau director during the Clinton administration, defended the draft document, saying it was “heavily vetted” by career staff throughout the process.

Antitrust law is intended to “change over time” as enforcers learn more about economics, said Public Knowledge Vice President Charlotte Slaiman. The agencies are responsible for “guiding the law to slowly improve over time,” she said, but Congress is needed to spur the Biden administration’s “revolution.”

DOJ and the FTC should lower their thresholds for determining when acquisitions are “presumptively” illegal, Sen. Elizabeth Warren, D-Mass., and Democrats told the agency in comments posted Tuesday. The agencies closed public comment Monday on their draft merger guidelines.

Warren signed her comments with Sens. Bernie Sanders, I-Vt.; Peter Welch, D-Vt.; and Mazie Hirono, D-Hawaii; and several others, including Reps. Pramila Jayapal, D-Wash.; and Joe Neguse, D-Colo. They noted the guidelines say a transaction is presumptively illegal if the “merged firm’s market share is greater than 30 percent for horizontal mergers or 50 percent for vertical mergers.” They credited the agencies for trying to establish clear thresholds but said 30% and 50% are “too high” because companies with lower market share can “exert incredible market power.”

DOJ’s 1968 guidelines “limited the size of any producer to 25 percent of a market, prohibited horizontal mergers that would result in fewer than five market producers, and limited vertical mergers involving suppliers that controlled 10 percent of a market," they said. The threshold should sometimes be even lower, they said, noting the U.S. Supreme Court in 1966 blocked a merger between grocery store chains “that would have resulted in a single entity controlling 7.5 percent of the regional grocery market.”

CTA in its comments accused the agencies of embracing a “reflexive anti-merger bent that prioritizes unwarranted skepticism of transactions by companies of all sizes, while giving short shrift to entrepreneurial companies that benefit from a healthy transactional market and consumers who benefit from an innovative economy.” CTA raised concerns about the guidelines’ “sharp departure” from the consumer welfare standard and the agencies’ dismissal of “broad economic consensus that mergers lead to procompetitive benefits and efficiency gains.” Slaiman said the draft document “more accurately” reflects “our modern understanding of the economics of industrial organizations” than prior guidelines. “The new guidelines can streamline enforcement against anti-competitive mergers and improve the courts’ and the public’s understanding and decision-making.” she said.