The second Trump administration has been signaling a move away from the Biden administration’s policy of actively discouraging mergers. This change in direction could benefit the U.S. economy. But some merger uncertainty remains, rooted in the administration’s decision to retain 2023 merger guidelines. Targeted revisions to those guidelines—or, at the very least, public pronouncements designed to clear up confusion about the antitrust agencies’ assessment of proposed mergers—might prove helpful in spurring beneficial mergers.
Bipartisan M&A Guidelines
There had been a bipartisan consensus on federal antitrust review of mergers from the 1980s up until the start of the Biden administration. The U.S. Justice Department (DOJ) and Federal Trade Commission’s (FTC) joint merger guidelines cemented this consensus. The joint guidelines were first issued in 1982 and were revised in 1984, 1992, 1997, and 2010 to reflect new economic learning. (The DOJ had previously issued guidelines in 1968 using a simplistic approach that was abandoned in later guidelines.) New guidelines issued during the Biden administration in December 2023, however, departed significantly from that consensus.
Drawing on economic analysis applied by agency economists, the pre-Biden provided key information for the private sector on how the DOJ and FTC would assess potential mergers in applying Section 7 of the Clayton Antitrust Act. Section 7 prohibits mergers whose effects “may be substantially to lessen competition, or to tend to create a monopoly.” The guidelines viewed this language as aimed at preventing transactions that would enhance market power.
The 2010 guidelines echoed prior versions in stating that the agencies would “seek to identify and challenge competitively harmful mergers while avoiding unnecessary interference with mergers that are either competitively beneficial or neutral.” This statement reflected an understanding that M&A activity substantially benefits the economy, and should not be interfered with except in cases of likely competitive harm—a point underscored in enforcement agency speeches over the years.
2023 Merger Guidelines
Rejecting four decades of bipartisan understanding, the Biden-era antitrust agencies adopted an inherently skeptical approach toward mergers. As Satya Marar recently put it, the agencies:
…undertook long merger reviews, burdened merging parties with expensive yet questionable ‘second requests’ [for additional information on proposed mergers], and bragged about deal proposals that never left the boardroom.
Speeches by DOJ and FTC leaders embodied an anti-merger philosophy that “created a chilling effect” for merger transactions. This merger skepticism permeated the 2023 merger guidelines. For example, they detailed six different theories of anticompetitive harm that could generate a merger challenge—unlike earlier guidelines, which provided a single integrated approach for analyzing mergers.
Dennis Carlton of the University of Chicago emphasized that the new guidelines also reduce practical economic guidance for the private sector and appear to be hostile to mergers and efficiencies. Notably:
- The 2023 guidelines abandon prior language that enforcers only want to stop anticompetitive mergers, not to discourage mergers that raise no substantial competitive problems.
- They cite dated 1960s and 1970s U.S. Supreme Court holdings critical of mergers. Those holdings are out-of-step with subsequent Court decisions that focus on consumer-welfare promotion and economic analysis as central to antitrust.
In addition, the 2023 guidelines:
- Abandon language present in prior guidelines underscoring that enforcers only want to stop anticompetitive mergers, rather than discouraging others.
- Downplay the role of mergers in creating efficiencies.
- Lower the market-concentration thresholds that trigger a presumption of anticompetitive effects, potentially subjecting more mergers to challenge.
- Suggest a possible merger challenge based solely on a merger that creates a market share of 30% or more—a long-abandoned purely “structural” approach that ignores actual market-specific economic effects.
- Introduce novel theories of competitive harm.
- Appear to reduce the risk level needed to trigger a merger challenge.
The last point is particularly significant, as retired DOJ antitrust economist Alexander Raskovich points out:
Perhaps the most substantial proposed expansion of flexibility in the 2023 Merger Guidelines is the shift in language from a likelihood of competitive harm standard in previous merger guidelines to a risk of illegality standard, with a focus on circumstances where mergers “[c]an [v]iolate the [l]aw,” but with little explication of how high a risk of illegality would trigger an agency challenge. Put succinctly, the standard has become “could,” not “would.”
Taken together, compared with merger guidelines from the pre-Biden era, the 2023 changes ushered in a tougher approach to merger enforcement and an increase in business uncertainty about merger risks—factors that could have discouraged beneficial merger activity.
Trump Administration and the 2023 Guidelines
While various Trump administration officials have declared their dedication to rejecting the Biden anti-merger perspective and providing more “fairness and predictability” to merger review, the administration’s retention of the 2023 guidelines in their entirety could complicate that task.
Antitrust enforcers are resource-constrained and drafting new guidelines is a time-consuming task. But targeted changes could be made to the guidelines’ language to reduce unwarranted business risk. Simple tweaks could, for example:
- Restoring traditional language that the guidelines’ aim is not to interfere with mergers that do not pose a serious competitive threat.
- Declaring that market concentration will not be the sole determinant of a decision to challenge a merger; rather, economic assessment of market-specific facts will also be given weight.
- The agencies could clarify that they will concern themselves with whether a merger likely would violate the law, and not base challenges on the mere possibility that it could violate the law.
- The agencies could commit to take into account merger-specific procompetitive efficiencies when deciding whether a transaction is likely to substantially reduce competition.
If the FTC and the DOJ prefer not to make any guidelines revisions at this time, agency leaders could instead issue major speeches on how the guidelines will be applied. The speeches could underscore the administration’s desire to reduce business uncertainty, citing factors such as the “tweaks” highlighted above (plus any other factors that could reduce business risk).
The administration may want to keep in mind that, while merger guidelines are not legally binding, they may have a significant influence on boardroom decisions. Clarifying the antitrust agencies’ merger policy could provide major dividends for the U.S. economy.
