DOJ and FTC Announce Draft Vertical Merger Guidelines for Public Comment

The Department of Justice withdrew the 1984 DOJ Non-Horizontal Merger Guidelines, and, together with the Federal Trade Commission, released new draft 2020 Vertical Merger Guidelines and seek public comment. The draft guidelines, open to comment for 30 days, describe how the federal antitrust agencies review vertical mergers to evaluate whether the mergers violate antitrust law. Vertical mergers combine two or more companies that operate at different levels in the same supply chain. The draft guidelines outline the agencies’ principal analytical techniques, practices, and enforcement policy for vertical mergers. The draft guidelines adopt the principles and analytical frameworks in the agencies’ Horizontal Merger Guidelines, including market definition, the analytic framework for evaluating entry considerations, the treatment of the acquisition of a failing firm or its assets, and the acquisition of a partial ownership interest. The draft guidelines describe the analytical and enforcement considerations that are specific to vertical mergers.

The draft guidelines:

• describe potential anticompetitive effects resulting from vertical mergers, which may include both unilateral and coordinated effects;
• identify foreclosure and raising rivals’ costs and access to competitively sensitive information as potential elements of antitrust harm under unilateral effects;
• describe an analytic framework for analyzing potential anticompetitive effects of foreclosure and raising rivals’ costs;
• discuss how the elimination of double marginalization may mitigate or completely neutralize the potential anticompetitive effects of vertical mergers;
• discuss cognizable merger efficiencies that are specific to vertical mergers;
• provide a number of examples to provide more clarity about the agencies’ analytical methods in evaluating vertical mergers.

The agencies will review and consider the public comments before issuing final Vertical Merger Guidelines. The agencies cooperated closely in preparing the draft guidelines, which reflect the agencies’ significant experience in analyzing vertical mergers. The guidelines are intended to assist the business community and antitrust practitioners by providing transparency about the agencies’ antitrust enforcement policy with respect to vertical mergers.