The corporate landscape could experience a seismic shift in the face of new rules on how businesses do mergers and acquisitions with news guidelines introduced by the Biden administration. The proposal, devised by the Justice Department and Federal Trade Commission, redefines market parameters and broadens the considerations that regulators can assess when greenlighting or denying deals.
Jonathan Kanter, Assistant Attorney General, emphasizes the need for adaptable enforcement tools in light of rapidly evolving markets and commercial realities. With this change, the administration seeks to address the stark differences between the competition landscape today and that of 15 or even 50 years ago.
This revised approach represents an update to the original merger guidelines rolled out in 1968, albeit with modifications introduced since then. The Biden administration's revisions have been a work in progress for a few years.
The alterations form part of a broader initiative to champion competition and curtail excessive consolidation, with Biden signaling his intent to curb monopolies through strategic appointments, such as Kanter at the Department of Justice and FTC Chair Lina Khan. Both individuals have leveraged strategic lawsuits against corporations to limit their market power.
The administration has faced both victories and defeats in its stringent approach. Notable cases include a broad lawsuit against Google for allegedly monopolizing ad revenue and an ongoing assessment of a proposed $25 billion merger between Albertsons and Kroger, the country's two largest supermarket chains. However, the FTC failed to block the $69 billion acquisition of Activision Blizzard by Microsoft and lost a lawsuit against Facebook parent Meta concerning its acquisition of Within Unlimited.
In a bid to offer judges a clearer interpretation of the law, the updated guidelines will incorporate actual case citations. The document does not constitute new law, but instead clarifies existing case law.
The revised guidelines also address unprecedented challenges, focusing on tech platforms competition and the everyday impact of mergers and power concentration on consumers and workers. They scrutinize mergers that wouldn't typically raise eyebrows due to the absence of direct or indirect rivalry but could nonetheless fortify a competitor's dominance.
Merrick Garland, Attorney General, warns against unchecked consolidation, stating that the updated guidelines reflect modern market conditions. In celebration of the anniversary of the Promoting Competition executive order, the administration will convene a meeting of the president's "competition council".
As yet, the Justice Department and FTC's new guidelines on mergers are pending implementation. Following a 60-day public comment period ending on September 18, the agencies will review and revise the draft before finalizing it.
The new merger guidelines could spell stricter scrutiny of future deals involving major tech companies, particularly regarding multi-sided platforms like Amazon and Google. Potential conflicts of interest when a platform operator also participates in the platform have been highlighted, as such situations could give their products and services an unfair advantage over competitors.
While the new merger guidelines are unlikely to affect ongoing mergers, such as Microsoft's $69 billion deal to acquire Activision Blizzard, they are expected to significantly influence future deals within the tech industry. This move aligns with President Biden's call for preventing harmful mergers leading to mass layoffs, inflated prices, and reduced options for workers and consumers alike.
Despite the mixed results of the Biden administration's tougher stance on mergers, new draft guidelines lay the foundation for increased scrutiny of future deals by tech giants such as Amazon and Google. However, the guidelines' acceptance by judges hearing merger challenges remains uncertain as they don't reflect recent court decisions on contested mergers. Critics and supporters alike are eager to see the final impact of these guidelines on corporate monopolies.
The guidelines will be open for comment for 60 days before they are finalized. The corporate world, particularly the tech sector, eagerly awaits the outcome.
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