Vertical Merger Guidelines Overlook Health Care Co. Issues


The authors discuss how the agencies’ Vertical Merger Guidelines analyze non-horizontal mergers, specifically in the healthcare industry.

Note: On June 30, 2020, the Department of Justice and Federal Trade Commission issued revised Vertical Merger Guidelines (VMGs). Many of the comments and suggestions raised below were reflected in the 2020 VMGs. For example, the importance of incentive and ability were recognized and used as the foundation for an economically sound set of safe harbors in vertical cases

On September 15, 2021, the FTC voted to withdraw from these guidelines. The majority statement in that decision took issue with separate sections of the 2020 VMGs related to elimination of double markup and efficiencies while endorsing the advances made through this comment process on the core sections: “The 2020 VMGs represent a substantial improvement over the 1984 guidelines that they replaced and address important principles such as raising rivals’ costs, foreclosure, and misuse of competitively sensitive information.”

With the Vertical Merger Guidelines released on June 30, 2020, the DOJ and FTC offer expanded guidance on an important and wide-ranging set of business combinations. Though comprehensive in scope, the Guidelines lack specificity that would be helpful in analyzing many non-horizontal mergers. For instance, they do not consider how information asymmetries, distorted incentives, a reliance on platforms and other intermediaries, and prices set through bargaining affect antitrust analysis. Moreover, the Guidelines’ generality differs from real-world practices.

The healthcare sector, which has been the subject of much antitrust scrutiny, has many such complex interactions. Antitrust analysis of healthcare markets can be challenging, as experts must take into account several defining features. In this article, authors Dina Older Aguilar, Avigail Kifer, Andrew Sfekas, and Gautam Gowrisankaran outline these features of healthcare mergers, such as moral hazard, information asymmetry, two-stage competition, and price negotiation. The authors also demonstrate how these features require careful analysis to marry complex economic theory and empirics with the Guidelines’ general framework.

This article was originally published by Law360 in August 2020.

The views expressed herein do not necessarily represent the views of Cornerstone Research.

Vertical Merger Guidelines Overlook Health Care Co. Issues


Gautam Gowrisankaran

Professor of Economics,
Columbia University;
Senior Advisor, Cornerstone Research

  • San Francisco

Dina Older Aguilar

Vice President

  • San Francisco

Avigail Kifer


  • Washington

Andrew Sfekas

Senior Manager