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The FTC wants to turn back the clock on antitrust

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Illustration: Natalie Peeples/Axios

The Federal Trade Commission wants to return antitrust enforcement to a time when it was about protecting small businesses from large ones, a source close to the FTC says.

Why it matters: The debate over whether the FTC challenges or approves the combination of Kroger and Albertsons has been based on legal precedents set since the 1970s.

Flashback: Those precedents — which focus antitrust enforcement on consumer welfare and economic modeling — were influenced by legal scholar and former appeals court judge Robert Bork.

Yes, but: The FTC wants to argue that using economic modeling to judge mergers' impact on consumers has failed to preserve competition, the source says.

  • Along those lines, the Department of Justice and FTC recently proposed new merger guidelines, with officials at those agencies claiming they are based on statutes and case law.

Of note: Under the aegis of chair Lina Khan, the FTC has become more aggressive in challenging companies on antitrust concerns.

Brian Albrecht, chief economist at the International Center for Law & Economics, predicts the FTC will challenge the deal in court, but it will be approved based on precedents.

  • Precedents suggest the transaction would be assessed through the lens of traditional market definitions, competition within local markets, and which retailers are or are not considered competitors.

Between the lines: While industry watchers like Albrecht predict the transaction gets completed, the source close to the FTC says that view disregards considerations like protecting small businesses.

  • A second source close to the merger says these concerns are evident in the merger guidelines.
  • "We see strands of that in the new merger guidelines from case law from before we were born — but that doesn't mean they're not valid," the source says.
  • However, the source notes, merger cases don't tend to make it to the Supreme Court because termination dates typically will precede them.

Be smart: The FTC "has a hard row to hoe" to convince the courts that a deal such as this hurts small businesses, subsequently reversing decades of precedents, the second source says.

  • The new merger guidelines may be considered transitory and thus could be moot if and when President Biden leaves office, the source explains.
  • The guidelines have to be viewed as a permanent shift, the source adds, noting that previous changes such as one in 2010 had buy-in from both parties.

The bottom line: As Albrecht previously told Axios, the new guidelines are not law and the courts will ultimately decide whether to accept them.

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