Cornerstone Research Staff and Affiliated Experts Submit Comments on the Joint FTC-DOJ Draft Merger Guidelines


The Federal Trade Commission and the Department of Justice’s Antitrust Division launched a joint public inquiry to solicit comments from the public on the draft updated merger guidelines.

The Federal Trade Commission and the Department of Justice’s Antitrust Division (the “agencies”) launched a joint public inquiry to solicit comments from the public on the draft updated merger guidelines (the “draft guidelines”). The goal of the update is to better reflect how the agencies determine a merger’s effect on competition in the modern economy and evaluate proposed mergers under the law. The comment period gives the public a chance to review the draft guidelines and provide feedback before the guidelines are final.

Cornerstone Research staff and affiliated experts submitted several comments during the inquiry period, which ran from July to September 2023.

These comments include:

Overall economic considerations
Ana McDowall, Lorenzo Michelozzi, and Andrew Sfekas of Cornerstone Research

The authors outline changes to the structure and focus of the draft guidelines as compared to prior guidelines issued by the agencies. They opine that the new approach of mixing legal and economic principles in a single document has significant drawbacks: it reduces the clarity of the economics; may lead to situations in which different guidelines conflict with one another, without providing guidance on how to resolve such conflicts; and could result in the document being regularly rescinded when enforcement priorities change. They recommend a clearer separation of economics and legal principles, as well as specific changes to the proposed guidelines that could clarify the underlying economics.

Conflicts of interest and platforms
Avigail Kifer of Cornerstone Research and Jeffrey Prince of Indiana University

Among other significant updates, the draft guidelines document new thinking on digital markets, and multi-sided platforms in particular, but appear to single out tech firms by attributing anticompetitive incentive to behavior otherwise common—and procompetitive—in many economic sectors. The authors focus on the draft guidelines’ statement that platform operators that are also platform participants have conflicts of interest, and explain when and why this is not always the case.

Labor market definition
Justin McCrary of Columbia University and Kavan Kucko, Bryan Ricchetti, and Rainer Schwabe of Cornerstone Research

This comment focuses on three aspects that the draft guidelines should consider as relevant to labor market definition—first, how traditional concepts in market definition such as the hypothetical monopolist test can be adapted to labor markets; second, how both wage and non-wage compensation and non-pecuniary characteristics of jobs are important to consider when defining labor markets; and third, how various types of evidence often available in merger review and litigation can be brought to bear on labor market definition.

Competing buyers in antitrust labor markets
Justin McCrary of Columbia University and Bryan Ricchetti of Cornerstone Research

The authors discuss non-compete clauses, no-poach agreements, and empirical analyses of labor market power, which serve to address aspects of labor markets that may be important for merger enforcement to consider. These labor market–specific aspects include matching prospective employees to open positions, mutual long-term investment between employers and employees, and the vertical nature of the employment relationship.

Innovation in the pharmaceutical Industry
John Asker of University of California, Los Angeles, Margaret Kyle of MINES ParisTech, Ariel Pakes of Harvard University, and Sarah Abraham, Avigail Kifer, and Celeste Saravia of Cornerstone Research

This comment discusses the implications of the draft guidelines on mergers in the pharmaceutical sector, a sector shaped by legislation and government regulation. The authors note that the draft guidelines could lead to challenges of procompetitive, innovation-enhancing mergers in the pharmaceutical industry. They discuss the economic evidence that suggests that over-enforcement could lead to reduced future investment and innovation.

Implications for the healthcare industry
Benjamin Handel of the University of California, Berkeley, and Dina Older Aguilar, Nikhil Gupta, and Christopher Lau of Cornerstone Research

This comment outlines key informational asymmetries within the healthcare industry and explains why their presence causes market failures such that competition alone can be insufficient to discipline high-priced or low-quality firms. Addressing these market failures, which enhances efficiency, can require firms to integrate and achieve scale. The authors discuss four examples of common healthcare transactions and explain why healthcare-specific guidelines would provide clarity for healthcare industry participants by reducing uncertainty that could otherwise deter procompetitive transactions.

Coordinated effects
Nathan Miller of Georgetown University and Joseph Podwol of Cornerstone Research

The authors review how the agencies propose to analyze coordinated effects with the goal of bringing the merger guidelines in line with modern thinking. The comment explains that the guidelines should do more to emphasize that mergers can impact the effectiveness of coordination, not just the likelihood of coordination. The authors point to the recent literature studying mergers in markets where coordination is ongoing and suggest additional evidence and methods that the merger guidelines could incorporate to put the enforcement of coordinated effects on a more solid evidentiary basis.

Economic analysis of horizontal merger efficiencies
John Asker of University of California, Los Angeles, and Julia Gonzalez, Craig Malam, and Russell Molter of Cornerstone Research

The authors address changes in the evaluation of horizontal merger efficiencies introduced by the draft guidelines. They identify less guidance for the economic analysis of merger efficiencies and an increased skepticism toward a successful efficiencies defense. The authors note that the draft guidelines do not discuss separately the distinctive features of the efficiencies analysis in different types of mergers. The comment discusses the implications of these changes for the applicability of the guidelines and their alignment with well-accepted economic principles.

Production approach to estimating labor markdowns
Rainer Schwabe of Cornerstone Research and Arshia Hashemi of the University of Chicago

The authors outline an article that proposes an econometric methodology that can aid the agencies in determining whether a merger between competing employers lessens competition for labor, resulting in lower wages and other harms to workers. They detail five ways in which the article is relevant to the application of Guideline 11 of the draft guidelines put forth by the agencies.