This expert forum, cosponsored by Cornerstone Research and Georgetown University, featured opening remarks from Senator Amy Klobuchar, Ranking Member of the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights.
At this webinar panel, cosponsored by Cornerstone Research and Georgetown University, prominent attorneys, regulators, and antitrust economists discussed the new Vertical Merger Guidelines (VMGs), which the Department of Justice (DOJ) and Federal Trade Commission (FTC) released at the end of June.
Below are key takeaways from Senator Amy Klobuchar’s opening remarks and the panel discussion that followed. Senator Klobuchar outlined her views on the need for a major revival of antitrust enforcement. Two of the main points she discussed are:
- The new Guidelines released by the DOJ and FTC are welcome, but their emphasis on procompetitive effects, such as Elimination of Double Marginalization, could create additional roadblocks for merger enforcement.
- Antitrust enforcement must be revitalized through legislative reform to the antitrust laws, through increased resourcing of the antitrust agencies, and through the appointment of judges that have an in-depth understanding of the history of antitrust.
Key takeaways from the panel discussion include:
- The Guidelines do not freeze antitrust policy in its current form.
The Guidelines’ purpose is to provide transparency on current practice by the agencies and to crystallize the areas of debate. Theories and tools for the assessment of vertical merger effects will continue to evolve, both through the agencies’ practice and through the empirical findings of academics and practitioners.
- The Guidelines should be neutral, but not everyone agrees on what “neutral” means.
Panelists agreed that the Guidelines should not presume vertical mergers are pro- or anticompetitive, given the wide variety of effects and outcomes that are possible for vertical mergers. But there was less agreement as to whether they are neutral. Some expressed concerns that the Guidelines overemphasize efficiencies, in a way that may create additional hurdles for agencies in merger challenges. There were further concerns that a focus on one type of efficiency or competitive effect might compromise the future evolution of legal and economic thinking.
- The Guidelines do not (and should not) provide clarity on which mergers will face scrutiny.
Panelists agreed that, although the Guidelines’ contents are familiar to experienced practitioners, they do provide businesses (and perhaps courts) visibility into the process by which the agencies evaluate vertical mergers. However, there was a sense that the guidelines do not and should not provide clarity about what transactions are more or less likely to face scrutiny. That assessment should be based on the particular facts of each case. No rule of thumb could shortcut this process.
- The Guidelines may focus too narrowly on foreclosure.
Some on the panel expressed concern that the Guidelines’ narrow focus on foreclosure effects could make it harder for the government to bring cases where other anticompetitive effects were relevant, noting in particular the absence of mention of regulatory evasion as a theory of harm. However, the agencies should proceed cautiously on pursuing new theories of harm, because a negative case outcome could push policy in the opposite direction to that intended. Such a cautious approach can be placed in the context of the July 29 congressional hearings on the tech industry, where novel types of harm were frequently suggested.
- The agencies need to think carefully about finding a consistent approach to harms and efficiencies.
The agencies will need to develop a consistent approach to balance different potential harms and efficiencies. Harms and efficiencies in vertical mergers often involve large changes in behavior, rather than small changes on the margin. This means that different economic assumptions can swing the balance substantially. Where an efficiency and harm are both theoretically possible but cannot both materialize together, the agencies will need a standard for how to determine which outcome is more likely.