The U.S. Justice Department and the Federal Trade Commission last month launched a joint public inquiry on new guidelines “aimed at strengthening enforcement against illegal mergers.” In other words, the authorities, which last updated the guidelines in 2010, want much tougher antitrust rules.
“It’s a sea change,” says Jamillia Ferris, a partner at Freshfields Bruckhaus Deringer who specializes in antitrust. “The agencies are trying to push the boundaries.” They want guidelines that are not reflective of case law, but advance the progressive ideology of the Biden administration.
According to FTC chair Lina Khan’s statement in launching it, the inquiry “is designed to ensure that our merger guidelines accurately reflect modern market realities and equip us to forcefully enforce the law against unlawful deals.”
Assistant attorney general Jonathan Kanter, who heads antitrust at the Justice Department and is himself an alumnus of the FTC, echoed those remarks. Both policymakers are exponents of the New Brandeis movement, anchoring antimonopoly enforcement in long-term economic structures rather than short-term price effects.
There is not likely to be any legislation, says Ferris, given the partisan division in Congress, but the administration is “fully behind antitrust enforcement.” Even if the new guidelines are challenged in court and perhaps overturned, they are already having a chilling effect on mergers and acquisitions.
“It’s very difficult to hold transactions together through litigation,” says Ferris. “Aligning parties on the scope of the risk is not easy.” Deal negotiations can take longer now and potential merger partners are increasingly seeking guarantees for indemnity.
Smaller firms will be reluctant to get into a prolonged litigation, she says. “It’s harder on smaller deals.”
The good news for potential mergers is that antitrust authorities are losing more often in court. “You still see parties willing to go to court,” Ferris says. “It used to be the agencies usually win. That’s not the case anymore.”
For all the noise that European authorities make about anticompetitive mergers, they can actually be easier to deal with. “Agencies there are more open to remedies,” Ferris says, so that deals can be fixed ahead of time. “U.S. agencies are loath to agree to remedies. They are very focused and skeptical of combinations.”
The big emphasis for U.S. antitrust agencies, of course, is on tech, and deals in that sector are getting greater scrutiny. “Not every deal will capture the attention of the agencies,” says Ferris, “but agriculture is on the radar, healthcare is on the radar, things that are consumer-focused.”
For example, she cites the acquisition of the Albertsons grocery chains by Kroger, which was announced in October. The $25 billion combination has been subject to a couple of inquiries from FTC with significant concerns about antitrust. The two companies said they expect to close in early 2024, but analysts are saying regulatory approval could further delay it. A consumer lawsuit to block the merger was recently filed.
Challenges remain ahead. “It’s clear, though,” says Ferris, “that deal flow will slow down.”
–Darrell Delamaide
