Merger Guidelines & HSR rule: What Happens Next? Competition Corner

Issue #36

G’day,

In its first months, the Trump administration 2.0 has come in like a wrecking ball with a slate of executive orders unwinding the Biden presidency’s legacies on AI overregulation and in other fields. The rapid rise of the Elon Musk-led DOGE has also led to major cuts in the federal workforce and various programs like USAID.

Competition fans who wanted to see a similarly seismic shift after four years of hipster-populist leadership at the FTC and DOJ antitrust division may be a bit disappointed (as our senior scholar Alden Abbott recently argued in an interview for Yahoo! Finance). Let’s focus on two recent developments regarding merger policy – the status of the merger guidelines and pre-merger notification.

Merger Guidelines

After having been pitched as more permissive towards merger enforcement than his predecessor, new FTC chairman Ferguson announced this week that the Biden-era FTC-DOJ joint merger guidelines would remain in force. He echoes the sentiment of the Trump nominee to head the DOJ Antitrust Division, Gail Slater.

The guidelines are widely criticized by legal scholars and economists for (in the words of Herbert Hovenkamp) ignoring “ ‘new learning’ that has been expressed in lower court decisions and economic analysis over the last 60 years since the Supreme Court largely withdrew from the substantive analysis of mergers”; for failing to link showings of increased concentration to actual anticompetitive effects; for ignoring the potential of many mergers to create efficiencies that benefit consumers; and for failing in their basic function of giving parties clarity about what kinds of mergers the agencies would prosecute or permit.

Predictably, the Biden-era competition agencies saw victories in merger court mainly based on conventional theories of anti-competitive harm from previous iterations of the merger guidelines, rather than under the novel, aspirational theories advanced by the 2023 joint guidelines.

Chairman Ferguson’s stated desire for maintaining the 2023 merger guidelines is to preserve stability and continuity between administrations, to give businesses certainty, and to ensure that judges don’t perceive the guidelines as “partisan,” which would increase the chances that courts will disregard these non-binding statements rather than looking to them for guidance. Those are fine and understandable desiderata.

However, by failing to provide clarity to parties or to accurately reflect current economic thinking regarding mergers, the 2023 guidelines already stand against stability and certainty for businesses. Revising and refining the guidelines to remedy their flaws while temporarily deferring to the previous 2010 merger guidelines would subject businesses to a standard they had complied with for years prior to the new guidelines. The 2010 guidelines were notably introduced under the Obama administration. It’s hard to understand why reverting to these would raise concerns about partisanship. Even if the Trump FTC and DOJ revised the 2010 guidelines to reflect recent precedent and technological developments as well as any areas of anticompetitive concern that align with their policy priorities, it would hardly be a partisan exercise that flags the concern of courts.

Nevertheless, it is clear that the new FTC and DOJ leadership will not reinstate the 2010 guidelines or amend or rewrite the 2023 guidelines – at least for the time being. The agencies certainly must carry out their major enfocement responsibilitires subject to tight resource constraints. We do, however, have a small (if immodest) recommendation for the Administration about a relatively low-cost way to prepare the way for merger guidelines reform given these realities.

Chairman Ferguson and Assistant Attorney General Slater (once she is confirmed) could convene a special bipartisan task force of experts (we hate that word, but believe it would be appropriate in this case) to recommend targeted changes to the 2023 guidelines. The experts would have extensive experience in law and economics and include leading former leaders of the antitrust agencies. They would be hired as special government employees (like Elon Musk). Prior to beginning their work, they would be given general direction by Ferguson and Slater about the enforcement priorities of the Trump Administration. They would have a fixed timeframe (say 90 days or 120 days) to meet and agree on a recommended set of guidelines amendments, consistent with general guidance. The recommendations would be presented to the DOJ and FTC leadership and made public.

Arriving at consensus recommendations would require some hashing out of diverse views, of course, but hopefully the experts would be up to the task. (Dissenting experts could, of course, leave the task force.) The agencies’ leadership would be free to fully or partially accept, or reject, the recommended edits. In the interest of openness, the agencies might give the public 30 or 60 days to comment on the recommendations prior to making a determination (this would not, however, be required). This timetable could allow new, amended guidelines to be released by mid-summer, if not earlier.

Whom would we recommend should be asked to serve on the bipartisan task force? We have a few suggestions, but caution our readership that the individuals named here are totally unaware of our proposal, and may, of course, decline to serve. (That would be too bad, in our view.)

Our desired 9-member task force would include (drumroll please): former Assistant Attorneys General Christine Varney (who oversaw the 2010 guidelines) and Makan Delrahim; former FTC Chairs Edith Ramirez, Maureen Ohlhausen, and Joseph Simons; Professor Herbert Hovenkamp, University of Pennsylvania (much-cited author of the leading antitrust treatise); Professor Carl Shapiro, University of California at Berkeley (who worked on the 2010 guidelines while at DOJ); Brian Albrecht (chief economist at the International Center for Law and Economics); and Professor Daniel Crane, University of Michigan Law School. If any of these experts could not serve, alternates might include former FTC Chair Jonathan Leibowitz (Chair when the 2010 guidelines were adopted), Scalia Law Professor John Yun, and University of Pennsylvania Professor Christopher Yoo. (Yet other highly qualified individuals could also be named.) We would tap Professor Hovenkamp as task force chairman. This list is, of course, merely suggestive. We merely intend to float a [great?] idea, which could be adapted by the new antitrust agency leaders as they saw fit.

Pre-Merger Notification Rule

Chairman Ferguson has also expressed his support for the FTC’s new Hart-Scott-Rodino (HSR) pre-merger notification (HSR) rule, which took effect this month and significantly expands the scope of disclosures that merging parties must make to the agency. This not only increases the time and costs entailed in executing deals (which could likely lead to the abandonment of many pro-competitive mergers), it is also likely to strain limited agency resources and budgets in document review. These are resources that could be put towards tackling anticompetitive conduct and mergers that are in danger of ‘slipping through the cracks.’ For instance, we’ve previously noted that the Biden FTC’s enforcement prioritization strategy may have resulted in several anticompetitive hospital mergers coming to pass.

There is a case for broadening the scope of pre-merger disclosures. The pre-merger rule was last amended in the 1970s and technological and market developments since then have expanded the range of potential anticompetitive harms that could arise from a merger. However, the new HSR rule goes much further. For instance, the new HSR rule requires parties to self-identify vertical relationships and competitive overlaps, which “introduces an element of subjectivity that heretofore has been largely absent from HSR filings.” This also creates grounds for current or future FTC commissioners to sue parties for making false disclosures should they disagree with the self-assessments provided. This would be in tension with Chairman Ferguson’s advocacy for limiting the arbitrary overreach of the bureaucratic state, even if he and other Republican commissioners personally don’t intend to use the rule in this way.

Might the new FTC and DOJ leadership consider pulling and appropriately revising the rule once a new Republican majority is in place (following the expected confirmation of Mark Meador)? Could targeted changes be achieved without a major resource expenditure? What do you think should happen? Send thoughts and comments our way.

Satya on Fighting ‘Big Tech’ & High Drug Prices

Satya recently wrote for The Hill about how the Trump antitrust agencies can keep America innovative while avoiding inadvertent harms to consumers and “little tech” as they pursue tech giants in court. He also wrote an explainer on the role of Pharmaceutical Benefit Managers (PBMs) in drug price competition for DC Journal, and on the likely impact of proposed regulations that target them.

Alden Abbott on Competition, Innovation & Executive Overreach

Writing for Forbes, Alden Abbott recently argued that innovator-led competition, not regulations led by an overpowered bureaucratic state, will be key to ensuring US leadership in artificial intelligence. In a similar vein, he argues that new National Institute of Health (NIH) guidelines imperil US leadership in the life sciences. By contrast, recent executive orders subjecting independent government agencies to oversight of the White House could spur competition by removing unjustified regulatory barriers. Alden also argues that cases inherited by the current antitrust agencies that stand to harm American consumers should be dropped before they can cause more damage.

See you next month!

- Satya Marar
Visiting Postgraduate Fellow – Competition, Innovation & Governance
Mercatus Center at George Mason University

Alden Abbott
Senior Research Fellow
Mercatus Center at George Mason University