The Merger Guidelines Memoranda: An Opening Blunder by the Trump Administration
In the first major antitrust policy move by the new Trump administration, the DOJ and FTC issued memoranda to staff stating that the Biden administration’s flawed 2023 Merger Guidelines—issued in large part due to misplaced concerns about increased concentration—would remain in effect and serve as the framework for the agencies’ merger analysis. In the FTC memorandum, Chairman Andrew Ferguson justified the decision to retain the 2023 Merger Guidelines by arguing, “I think the clear lesson of history is that we should prize stability and disfavor wholesale rescission.” However, not only have the DOJ and FTC misunderstood the rationale for merger guidelines, but they have taken the first steps toward turning the failed merger policies of the Biden administration into a bipartisan consensus.
The DOJ and FTC memoranda include a brief history of merger guidelines, from which FTC Chairman Ferguson concludes that “[s]tability across administrations of both parties has thus been the name of the game.” However, every administration since Reagan issued new merger guidelines except for Bush II, which instead produced de facto Section 2 guidelines. What’s more, a new administration quickly withdrawing the prior administration’s guidelines isn’t uncommon: Not only did the Obama administration withdraw the Section 2 Report before it reached its first birthday, but the Biden FTC withdrew the Vertical Merger Guidelines issued by the first Trump administration that had been in effect just a little over a year—and well before the 2023 Merger Guidelines were in place.
As such, the 2023 Merger Guidelines might themselves be seen as part and parcel of a “recriminatory cycle of partisan recissions” that the new Trump administration would be condoning by keeping them in place. To be sure, while it is true that “stability is also good for the enforcement agencies” and that “constant turnover undermines agency credibility,” retaining the 2023 Merger Guidelines puts the cart well before the horse. As former FTC Chairman Muris explained decades ago, merger guidelines that take an “intellectual sound approach to antitrust policy” are those that ultimately come to have staying power both for the antitrust enforcement community and the courts. In other words, it is not stability that makes guidelines good, but good guidelines that create real stability.
Of course, Chairman Ferguson does appear to believe that the 2023 Merger Guidelines aren’t actually all that bad, writing that “[b]y and large, the 2023 Merger Guidelines are a restatement of prior iterations of the guidelines and a reflection of what can be found in case law.” In reality, the 2023 Merger Guidelines didn’t come close: Their claim that the new concentration thresholds—the most important part of merger guidelines—are "based on experience and evidence developed since” the 2010 Guidelines to "better reflect both the law and risks of competitive harm” has no basis in fact. Courts regularly cited the 2010 Guidelines as strong persuasive authority. With respect to economics, as Chief Antitrust Economist in the Clinton and Obama administrations Carl Shapiro has said, not only is “the peer-reviewed literature not precise enough to support this change,” but the 2023 Merger Guidelines’ new single-firm structural presumption is devoid of “economic reasoning or empirical evidence.”
Without question, as former Chairman Muris also made clear, in addition to “ensur[ing] that current practice reflects the best possible understanding of economics and law,” transparency, or “having public antitrust authorities clearly state their enforcement intentions” is another key purpose served by merger guidelines. While such concerns are clearly top of mind for Chairman Ferguson, who notes to FTC staff the possibility of “ambiguity” as to the “the standards which should guide your review of transactions,”he seems to here again have the causality backward: The 2023 Merger Guidelines are not the solution, but the cause, of the current climate of uncertainty in merger enforcement. In particular, the 2023 Merger Guidelines resurrected broad conglomerate and serial acquisition theories that had been abandoned since the 1968 Guidelines, creating a huge specter of potential liability based on theories of harm that lack any coherent economic basis.
Moreover, even if removing uncertainty and promoting transparency were treated as the summum bonum, there was no need for the DOJ and FTC to endorse the 2023 Merger Guidelines. Instead, the FTC and DOJ could have issued statements to the effect that agency staff, the private bar, and the business community can continue to rely on the robust legal precedent that exists evaluating whether a merger is anticompetitive, as well as anticipate new and improved guidelines to be issued as soon as practicable after the new DOJ AAG and FTC Commissioner are confirmed. Doing so would have provided the needed certainty and transparency, allowed the agencies to develop guidelines that actually reflect sound law and economics, and set the Trump administration on a course toward a sensible merger policy.
That this straightforward outcome did not materialize suggests a troubling conclusion: The Trump administration will not be able to achieve a consensus to replace the 2023 Merger Guidelines with something better. Indeed, in testimony given during her recent confirmation hearing and which was quoted in the memorandum issued to DOJ staff, Antitrust Division AAG nominee Gail Slater stated that she agreed with Chairman Ferguson “that much of what is in the current merger guidelines simply restates longstanding law.” Moreover, the nominee for the open spot on the Federal Trade Commission, Mark Meador, has also been reported as being sympathetic to the 2023 Merger Guidelines, which suggests that he too might not vote to repeal and replace them.
The possibility of a new bipartisan consensus based on the Biden administration’s faulty merger policies should be as concerning for Senate Republicans as it has proved to be a wonderful surprise for the neo-Brandeisians who assumed that a second Trump administration would treat their merger guidelines the way they treated the first Trump administration’s—a speedy withdrawal followed by new guidelines. Indeed, in what other area would Senate Republicans rubberstamp nominees who agreed with the Biden administration on a critical failed policy initiative? At bottom, with neither Slater nor Meador confirmed, Senate Republicans must carefully consider whether the future of antitrust law will be a continuation of the Biden-era antitrust policies or a vision aimed at driving innovation, lower prices, and U.S. competitiveness against China.
