FTC, Department of Justice to rewrite merger guidance

The Federal Trade Commission and the Department of Justice's antitrust division announced Tuesday plans to rewrite their guidance for mergers, a move that could mean tougher antitrust enforcement for Big Tech companies such as Amazon, Apple, Facebook, Google and Microsoft. 

The two agencies, both of which have authority over antitrust enforcement, said they'll take public comment for the next 60 days to help "modernize enforcement of the antitrust laws regarding mergers." The agencies said in a joint statement that they're updating their guidance because US industries had become concentrated in recent years and a surge in merger filings in 2020 and 2021 threatened to worsen the situation. 

FTC Chair Lina Khan said in a statement that to prevent price increases and to keep companies from pushing down worker wages, the agencies need to look at how they evaluate these deals to determine whether they're legal. 

"Illegal mergers can inflict a host of harms, from higher prices and lower wages to diminished opportunity, reduced innovation and less resiliency," Khan said in a statement. 

Jonathan Kanter, head of the Justice Department's Antitrust Division, said it's important for the agencies to update their guidance to reflect how industries have changed in recent years. 

"We need to understand why so many industries have too few competitors, and to think carefully about how to ensure our merger enforcement tools are fit for purpose in the modern economy," he added in a statement.

Increased scrutiny for Big Tech

The questions that the agencies are asking as part of their review suggest that they will likely be taking a closer look at mergers involving tech companies, such as the $68.7 billion deal Microsoft announced earlier on Tuesday to buy video game maker Activision. The agencies said they want to understand whether earlier guidelines "may underemphasize or neglect" important aspects of competition. They list labor market effects and elements of competition that aren't tied to prices, like innovation and quality, as examples.

Specifically, the agencies have indicated they want to know whether guidelines should differ for digital markets as opposed to other markets. They also want to know if they should take into account the ways data can help firms amass power and how enforcers should assess two-sided markets, like when platforms serve both advertisers and consumers.

During a press conference Tuesday, John Kwoka, chief economist to the FTC chair, said that guidelines spelled out in 2010 to evaluate certain mergers didn't consider things like data aggregation, which is foundational to how digital markets operate. 

Khan, who has been heralded by progressives, has led a movement among antitrust scholars that's argued enforcing antitrust laws in digital markets requires a different lens than what's traditionally been used to assess whether deals are anticompetitive or harmful. She and others have argued that digital platforms use data and network effects to concentrate power and squeeze out smaller competitors. But because prices may appear lower for consumers, the deals often aren't viewed as harmful or anticompetitive. Khan and others have argued that even in spite of lower prices for consumers, there are negative, anti-competitive consequences. 

All of this comes as the FTC and DOJ have gotten tougher in antitrust enforcement of Big Tech companies. In 2020, the FTC sued Facebook, alleging that the social media company has violated antitrust law. A judge dismissed the complaint, saying the agency hadn't provided enough evidence that Facebook has monopoly power in personal social networking. But the FTC amended the suit in August, alleging that Facebook unlawfully maintains its dominance by acquiring or eliminating companies its sees as competitive threats. Earlier this month, a judge rejected Facebook's request to dismiss that lawsuit.

Republicans and Democrats in Congress have also been working together in a rare display of bipartisanship to craft legislation to rein in the power of Big Tech companies. Last summer, the Democrat-controlled House, with wide support from Republicans, moved forward a package of bills that aim to drastically change antitrust law. This followed the release of a scathing report in October from the House Judiciary subcommittee on antitrust, which concluded after its 18-month investigation that the companies use their monopoly power to stifle competition. 

FTC and DOJ on same page

Last year, the FTC had voted to withdraw from joint guidance by the two agencies on vertical mergers, which had been established during the Trump administration. At the time, Kanter hadn't yet been confirmed as head of the DOJ's antitrust division, and his predecessor had said the Justice Department would continue to follow the Trump administration's guidelines. Republicans on the FTC, who voted against rescinding the Trump guidance, said at the time of the FTC vote that this sent a mixed and confusing message to businesses. 

Now, with Kanter and Khan both installed in their positions, the two agencies are making clear they're on the same page in terms of antitrust enforcement. 

"Way too much has been made of the purported divergence between the DOJ and the FTC on the treatment of vertical mergers," Kanter said during the press conference. "The antitrust division shares the FTC's substantive concerns regarding the vertical merger guidelines. Those guidelines overstate the potential efficiencies of vertical mergers and fail to identify important but relevant theories of harm."

While courts have the ultimate say when it comes to the legality of mergers, how the DOJ and FTC review deals and the scrutiny they place on certain mergers could be taken into account by companies considering deals. Signals from the agencies could cause some companies to give up on deals if they're viewed as likely to be challenged in court, while other companies may be willing to take on the risk of litigation.