On Wednesday morning, the FTC and DOJ released a draft of the agencies’ updated merger guidelines, which could dramatically limit companies’ ability to innovate and grow. As yet another example of the agencies’ regulatory overreach, the drastic changes taken by the FTC and DOJ fundamentally misunderstand the nature of mergers and merger enforcement for several reasons:

— Mergers inject resources that help companies and industries grow

— Merger guidelines are meant to help companies comply with existing laws, not to shift goalposts and change the law

— Changes to merger guidelines should be based on evidence, not politics

Here’s what you need to know about the new merger guidelines and the issues they pose to businesses and consumers.

Mergers Inject Resources That Help Companies And Industries Grow 

International Center for Law & Economics President Geoffrey Manne notes that the new guidelines are meant “to deter merger activity as a whole, regardless of the risk posed to competition.” “The overbroad guidelines are clearly designed to deter merger activity as a whole, regardless of the risk posed to competition. In so doing, the FTC and DOJ have reduced the utility of the guidelines to courts and frustrated the very coordination benefits that guidelines have historically sought to create.”

According to Axios, the new guidelines threaten long-used practices that have helped businesses succeed. “Many of these guidelines take aim at pretty widespread business approaches to growing a company’s operations, profits and success.”

Information Technology and Innovation Foundation (ITIF) President Robert D. Atkinson points out that if these proposed guidelines are adopted, “U.S. economic growth, innovation, and global competitiveness will suffer.” “Since taking office, the Biden administration has embraced a neo-Brandeisian view of antitrust that holds that ‘big is bad’—the ideal economy should have more small and medium-sized firms. These proposed merger guidelines reflect that ideological predilection. Make no mistake, if these guidelines are adopted, U.S. economic growth, innovation, and global competitiveness will suffer.”

Former Treasury Secretary Larry Summers said on Bloomberg Television’s “Wall Street Week” that these guidelines “are a substantial risk” in “moving away from an emphasis on lower prices for consumers.” “These guidelines — by moving away from an emphasis on lower prices for consumers to broader abstractions — are a substantial risk. I wish that this stepping back and offering merger guidelines had been taken as an opportunity to rationalize the policy.”

— Summers continued: “Right now, where I think where you’re moving away from low consumer prices as a standard, you’re mostly moving into problematic territory. There’s been a lot of that in the last several years, and it sure seems like they’re pushing forward harder, rather than backing off.”

CCIA President Matt Schruers notes that the new guidelines “risk chilling valuable transactions.” “As technology and AI infuse more sectors of the economy, creating a special set of regulations that apply only to specific companies doesn’t make good legal or economic sense. Without appropriate revision, these guidelines risk chilling valuable transactions in ways that would weaken U.S. exporters’ ability to compete globally.”

Small Business and Entrepreneurship Council President & CEO Karen Kerrigan warns that it is hard to see how “any small business or startup will have the opportunity to merge or be acquired given these proposed set of guidelines.” “Competition is flourishing and many new businesses and entrepreneurs have big dreams to vastly scale and take their innovations national or global. These startups and innovative businesses often partner and merge with larger companies to connect with the capital, resources and talent they need to scale and bring their innovations to the mass marketplace. It is hard to see how any, any small business or startup will have the opportunity to merge or be acquired given these proposed set of guidelines.”

U.S. Chamber of Commerce Executive Vice President and Chief Policy Officer Neil Bradley underscores that the new guidelines would “deny smaller companies access to the capital and expertise they need.” “These guidelines are designed to chill merger activity, which will deny smaller companies access to the capital and expertise they need to grow and place U.S. businesses at a disadvantage with their global competitors. Congress and the courts should continue to reject the agencies’ efforts to undo the consumer welfare standard and decades of antitrust precedent that has served the U.S. economy and consumers so well.”

A statement from The App Association notes “that success for startups and small businesses can be optimally realized through strategic acquisitions.” “We believe that success for startups and small businesses can be optimally realized through strategic acquisitions and by maintaining a focus on thorough economic analysis during merger reviews. This approach not only benefits business owners but also promotes the interests of consumers and ensures a healthy and competitive market landscape.”

Merger Guidelines Are Meant To Help Companies Comply With Existing Laws, Not To Shift Goalposts And Change The Law

CCIA Vice President of Global Competition and Regulatory Policy Krisztian Katona explains that the guidelines should “reflect actual merger review practice”  instead of “attempting to create new concepts.” “It is important to periodically review and reexamine merger guidelines to make sure they reflect current practices, market realities, and economic learning. However, a key question is how durable any revision will be and how courts will treat the new concepts and significant changes proposed in the guidelines. Guidelines should reflect actual merger review practice versus attempting to create new concepts.”

ICLE President Geoffrey Manne points out that the new guidance ignores decades of precedent—”[t]he average year of cases cited in the draft Merger Guidelines is 1982. The average year *weighted by number of cites* is 1975!”

The U.S. Chamber of Commerce’s Neil Bradley adds that “less than 3% of transactions raise any competitive concerns” “Mergers and acquisitions play an important role in shaping a competitive U.S. business environment. Typically, less than 3% of transactions raise any competitive concerns. Yet, the current leadership at the FTC and DOJ have taken every step possible to create uncertainty and increase the burden around the entire merger process.”

Douglas Holtz-Eakin, President of the American Action Forum, underscores that these guidelines are just “a framework” and that they “are non-binding and do not have the force of law.” “Recall that these guidelines provide a framework for the public, businesses, practitioners, and courts to understand what the DOJ and FTC consider when investigating mergers. But they are just that – a framework. They are non-binding and do not have the force of law. Bluntly, the courts are free to conclude: “Interesting way to think about it. You’re wrong.”

Changes To Merger Guidelines Should Be Based On Evidence, Not Politics

NetChoice Vice President & General Counsel Carl Szabo calls out the guidelines as a
politically motivated move.” “Politically motivated moves like this further deteriorate the credibility, independence and expertise of the FTC and DOJ.”

According to Politico, former Special Assistant to the President for Technology and Competition Policy Tim Wu cited the guidelines as being critical to “institutionalizing” the administration’s policy agenda. “Tim Wu, who previously advised Biden on competition policy until early this year, has said the guidelines are critical to the administration ‘institutionalizing’ its progressive competition policy agenda.”

— The article adds: “But the relatively rapid-fire issuance of new guidelines could make the new document a tough sell if it’s perceived as political exercise on the whims of each administration.”

ICLE Chief Economist Brian Albrecht notes this process “was not really about ‘updating’ the guidelines for the times based on new evidence or law,” but rather “it was about wish-casting the state of antitrust law” in the image of the FTC’s and DOJ’s leadership. “The 14 month long process was not really about ‘updating’ the guidelines for the times based on new evidence or law. Rather, it was about wish-casting the state of antitrust law in Chair Khan and AAG Kanter’s image. While FTC and DOJ are striving to present these new guidelines as a tool geared at ‘strengthening enforcement,’ the details articulate a different message: that they are committed to blocking as many mergers as possible.”

Former FTC General Counsel Alden Abbott emphasizes the guidelines “ignore economic learning.” “The draft merger guidelines issued by the FTC and the Justice Department are an anti-merger manifesto. They ignore economic learning regarding the benefits of vertical integration and the limitations of economic concentration numbers.”

— Abbott adds: “The rule of law will be undermined – and the economy will be harmed – to the extent the draft merger guidelines’ faulty legal and economic ‘guidance’ precludes welfare-enhancing mergers from going forward.”

Antitrust legal scholar Douglas Melamed points out that the new guidelines fail to “engage seriously with the recent cases.” “If they want to persuade judges and others of the soundness of their new approach, the way to do it is to engage seriously with the recent cases. Citing only supportive material is like writing a brief and ignoring the other side’s arguments.”