Trump administration offers a new guide to vertical mergers
The Trump administration is telling companies what they're up against with the Justice Department and Federal Trade Commission if they embark on a merger similar to the AT&T-Time Warner deal, under new draft guidelines for so-called vertical mergers proposed Friday.
Why it matters: These new guidelines seek, for the first time since 1984, to formally lay out how regulators consider whether a vertical merger will hurt competition and should therefore be blocked.
- The agencies have lengthy standards for reviewing horizontal mergers, in which a company buys a direct competitor.
- The rules covering vertical mergers, where a company buys a supplier — such as a pay-TV provider buying a network — are shorter and haven't been updated in decades.
Details: Under the guidelines, a would-be vertical merger could be deemed harmful if there's evidence that it would help the buyer raise costs for competitors, shut rivals out of markets or access sensitive information that would give it a competitive edge.
Yes, but: The standards that the agencies are looking to codify with the new guidelines include some of the very factors the Justice Department used in trying to block the merger between distributor AT&T and content provider Time Warner. That case failed to convince a federal judge, and the companies closed their deal.
What they're saying: The FTC's two Democratic commissioners both said they're in favor of updating the vertical merger guidelines, but couldn't support the proposal as written.
- Commissioner Rebecca Kelly Slaughter said in a statement that her "biggest concern" involves a note in the guidelines that regulators are unlikely to challenge mergers proposed by companies that control less than 20% of the market in which they operate.
- Fellow Democrat Rohit Chopra said the proposed rules "clearly fall short" and should have included more metrics for weighing if a merger will hurt competition.
Between the lines: The cooperation between the two agencies comes at a time of some tension over the antitrust investigations of the major tech platforms and the Justice Department's weighing in against the FTC's case against Qualcomm.
What’s next: The agencies are taking comments on the guidelines until Feb. 11. After that, they can move toward finalizing and adopting them.