Biden administration lays out plan to squeeze mergers

President Joe Biden’s efforts to slow a tide of corporate mergers is getting a boost Wednesday through an elaborate plan his top antitrust enforcers say will preserve competition.

In a highly detailed 51-page joint document, the Federal Trade Commission and Justice Department outline 13 “guidelines” they will follow when reviewing deals — and hope the courts play along.

An array of pending mergers are approaching decision points at both agencies, including Broadcom’s takeover of software company VMware, the tie-up between grocery giants Kroger and Albertsons and Amazon’s purchase of robot vacuum maker iRobot. And although the agencies go to great pains to avoid citing specific industries or businesses, the guidance is designed to add scrutiny to a host of mergers in the tech sector, acquisitions by private equity firms and companies across the economy.

“Promoting competition to lower costs and support business and entrepreneurs is a central part of Bidenomics. When the president took office, concentration had increased in over three quarters of U.S. industries,” a senior administration official said at a White House briefing. That stemmed from 40 years of not adequately enforcing the antitrust laws, said the official, who was granted anonymity as part of the ground rules for the briefing.

Both the DOJ and the FTC have already begun implementing the guidance issued Wednesday, according to officials who spoke on a separate briefing by the agencies. The administration’s legal philosophy is grounded in an inherent skepticism toward mergers and aims to prevent an array of potential harms beyond high prices, such as reduced innovation, anemic labor markets, and weakened supply chains.

However, since taking their respective jobs — Jonathan Kanter at the Justice Department and Lina Khan at the FTC — the agencies have had a decidedly mixed track record.

The FTC just last week lost a case to block Microsoft’s takeover of video game giant Activision Blizzard, and earlier this year its challenge to Meta’s acquisition of a virtual reality app fell through. Both interventions involved seldom-tested legal theories now articulated in the guidelines around how the agencies evaluate mergers in rapidly evolving markets around technology, particularly burgeoning markets like virtual reality.

The DOJ’s efforts under Kanter have had more success, blocking a joint venture between JetBlue and American Airlines. And the new guidelines also cement another legal tactic deployed by the agency: that the potential harm to workers from mergers is a legitimate reason to slow corporate consolidation.

When DOJ stopped Penguin Random House’s acquisition of fellow book giant Simon & Schuster, it focused on the financial injuries authors might suffer from losing a buyer for their books, a novel theory centered on labor more than the competition for selling books.

But DOJ has also lost its share in court, including a case against UnitedHealthcare’s purchase of a data analytics company, a so-called vertical merger between companies that don’t directly compete. The target company, Change Health, is used by United’s competitors, a fact that the new guidelines view with great skepticism.

Still, the new proposal is an indicator that both the DOJ and FTC are taking their lumps and pressing ahead.

And despite the losses in court, the administration believes its policies are acting as a deterrent against mergers.

Tim Wu, who previously advised Biden on competition policy until early this year, has said the guidelines are critical to the administration “institutionalizing” its progressive competition policy agenda.

The new guidelines have more than 100 footnotes and are based almost entirely on past legal precedents involving merger cases. The agencies have been issuing merger guidelines since the 1960s, but the new guidance ends the distinction between vertical and so-called horizontal mergers, deals between direct competitors, for the first time.

The DOJ and FTC are soliciting public comments over the next two months, before releasing a final version. In addition to the guidelines, the agencies also recently proposed expansive changes to the form companies fill out when submitting their mergers for review. If finalized, companies will be required to submit substantially more information, including about how they view competitive dynamics in their industry and the business justification for their merger.

The most recent guidelines for horizontal mergers are from 2010, while those for vertical ones were last issued in 2020, at the final year of the Trump administration. Those proved controversial, and were withdrawn by the FTC after Biden took office, with the agency saying they were too permissive.

According to the officials on the agency briefing, the administration is relying heavily on legal precedent to win over judges. But the relatively rapid-fire issuance of new guidelines could make the new document a tough sell if it’s perceived as political exercise on the whims of each administration.