FTC Will Put New Merger Guidelines to Work in 2024
"I expect that they will be looking for opportunities to apply all of the elements of the guidelines in merger cases -- to some extent, they’ve already been doing that,” said former FTC Chair William Kovacic.
The Federal Trade Commission’s (FTC’s) aggressive agenda targeting big tech and other corporate mergers that could harm competition or the labor market is expected to continue into the new year, antitrust experts said.
A priority for the FTC and the Department of Justice’s (DOJ’s) Antitrust Division will be to start applying their new merger guidelines in court, because the guidelines’ impact will be determined by how readily judges accept them, said former FTC Chair William Kovacic.
In December, the FTC and the Antitrust Division finalized the guidelines, reflecting the agencies’ aggressive approach toward corporate mergers and applying greater focus to how mergers affect the labor market.
“A big task ahead is to start bringing cases and applying them, to litigate them, and to gain judicial opinions that say this is a good framework for analysis,” Kovacic said. “But I expect that they will be looking for opportunities to apply all of the elements of the guidelines in merger cases—to some extent, they’ve already been doing that.”
Still, Kovacic said, the agencies must promulgate their proposed changes to the Hart-Scott-Rodino (HSR) form, which merging companies must complete, because the document is essential for gathering early information in the merger process.
In 2023, the FTC and DOJ proposed changes to the HSR form that would mandate additional information from companies, including more details on the merger’s impact on the labor market.
“It’s been an extremely active year for antitrust,” said Joshua Goodman, a partner at Morgan Lewis and a former deputy assistant director of the FTC and counsel to the director of the commission’s Bureau of Competition.
“Two signature developments over the past year are the proposed changes to the HSR form and the new merger guidelines,” Goodman said. “I think those initiatives are also likely to lead to some of the most significant developments in 2024.” The agencies have yet to finalize the proposed HSR changes.
In addition, the Biden Administration has called on the FTC to address artificial intelligence (AI). Goodman said it will be interesting to see whether the FTC’s interest in AI involves enforcement actions or rulemaking in 2024.
“It’s always a challenge for everyone to deal with a new technology, but they clearly have indicated this is an area that they want to stay focused on,” Goodman said.
Regarding enforcement, Kovacic said the FTC has a slew of cases it is working on, including the Amazon litigation in which the agency claims the company illegally maintained a monopoly. The FTC also has a significant decision on whether the merger between grocery giants Kroger and Albertson’s is unlawful and harms the labor market.
“They’ve got to queue a merger matter, with Albertson’s perhaps being the most important to apply the new guidelines and to litigate the new guidelines in court,” Kovacic said.
Randall Hack, a partner at Locke Lord, said he is “skeptical” about the FTC’s examination of how mergers impact the labor market, because it is difficult to establish what the optimal level of employment should be in any particular industry before or after a merger.
Hack said he is interested in seeing whether courts will accept prohibiting a merger due to the impact on a labor market. “I’m very skeptical that it will gain traction,” Hack said.
In addition, the FTC is seeking to ban non-compete agreements amid criticism from some sectors that a prohibition could harm intellectual property.
Banning non-competes needs to be “more limited,” Hack said. “A one-size-fits-all rule treats everybody alike, and I think that the agency, I hope, concludes that that can’t be the rule.”
Another trend of cases that could increase this year is the right to repair, said Bradley Weber, partner at Locke Lord. In an Illinois case, farmers claim that machinery maker John Deere has unlawfully restricted their ability to repair products such as tractors unless they use a Deere service adviser.
“The theory of the lawsuit is that owners can’t do their own repairs or they can’t take their tractor to a local body shop or repair shop because they don’t have access to this service adviser,” Weber said, adding that similar case theories are happening with motorcycle maker Harley-Davidson and car manufacturer Tesla.
Weber said the FTC is investigating the right-to-repair theory and that it will be a focus area in 2024, as even more cases might be filed. Kovacic said he believes the FTC will continue to press ahead and not weaken its agenda even as the 2024 presidential election approaches. The Democrat-led FTC is expected to add two Republicans who are awaiting Senate confirmation to the commission: Andrew Ferguson and Melissa Holyoak.
“I think the commission has greater persuasiveness in court when you have the politically diverse board acting in unison,” Kovacic said.
“If you can formulate positions that command the consent of all of them, that’s a signal to the courts that ‘this is a serious matter that we all agreed on,’” he added. “So the presence of the two Republican appointees will change the culture of the place [and] it will change the decision-making process.”
From: National Law Journal