Department of Justice And Federal Trade Commission Issue New Vertical Merger Guidelines

The Department of Justice and Federal Trade Commission issued new Vertical Merger Guidelines that outline how the federal antitrust agencies evaluate the likely competitive impact of mergers and whether those mergers comply with US antitrust law. These new Vertical Merger Guidelines mark the first time the Department of Justice and the FTC have issued joint guidelines on vertical mergers, and represent the first major revision to guidance on vertical mergers since the Department’s 1984 Non-Horizontal Merger Guidelines, which the DoJ withdrew in January 2020. The new Vertical Merger Guidelines reflect the agencies’ analysis of vertical mergers. The revised guidelines:

• Explain that mergers often present both horizontal and vertical elements, and the agencies may apply both the Horizontal Merger Guidelines and the Vertical Merger Guidelines in their evaluation of a transaction, as part of a fact-specific process that involves a variety of tools to determine whether a merger may substantially lessen competition.
• Clarify that its analytical techniques, practices, and enforcement policies apply to a range of non-horizontal transactions, including strictly vertical mergers, “diagonal” mergers, and vertical issues that can arise in mergers of complement.
• Clarify that when the agencies identify a potential competitive concern in a relevant market, they will also specify one or more related products. A related product is a product or service that is supplied or controlled by the merged firm and is positioned vertically or is complementary to the products and services in the relevant market.
• Provide detailed discussions, including multiple diverse examples, of the “raising rivals’ costs” and “foreclosure” theories of harm. In recent decades, these theories of harm have been the principle theories investigated in merger reviews.
• Identify conditions under which a vertical merger would not require an extensive investigation, because the merger does not create or enhance the merged firm’s incentive or ability to harm rivals.
• Emphasize that analyzing efficiencies is an important part of reviewing vertical mergers.
• Explain in detail the analysis of the elimination of double marginalization (“EDM”), which economists emphasize is a frequent procompetitive result of vertical transactions.