By: Sean Heather (U.S. Chamber of Commerce/NERA)
The Federal Trade Commission and the Antitrust Division of the Department of Justice have embarked on the process of updating its merger guidelines and that process is expected to conclude in the very near future. Guidelines do not change the law, nor do they have the force of regulation, but they are an attempt to influence the thinking of the courts. However, they will be implemented to challenge and condition mergers that agencies don’t like, forcing merging parties to either litigate or walk away.
The current leadership at the Federal Trade Commission and the Department of Justice, following the direction of President Biden’s executive order on competition, have made it clear that they believe that previous administrations’ approach to merger review had been too acquiescent, suggesting that far more mergers should have been challenged that weren’t. As a result, they believe that this lax approach to merger enforcement has created excessive concentration levels in our economy, harmed innovation, and has led to inflation.
In Depth: Read the FULL STUDY Here
This narrative is deeply flawed. Generalizations are always dangerous, and each merger is unique and should be evaluated on its merits. Some may present competition concerns, but the vast majority do not. Taking a sweeping view of merger enforcement to suggest that merger policy for decades has been deeply flawed, is a thesis that is empirically without foundation.
Merger activity has not led to excessive levels of concentration in our economy.
In March 2022, the U.S. Chamber released its first study conducted by NERA Economic Consulting which found that industrial concentration in the United States is declining. It has in fact declined in several sectors where merger activity was cited to have been problematic. That study also found that rising industrial concentration in some sectors is often a sign of increasing market competition and associated with positive outcomes such as output growth, job creation, and higher employee compensation. In short, the study on concentration laid bare the reality that concentration has not reached new heights, is not persistent in the economy, and is not a reliable measure for determining the state of competition in a given market…