Chairman Leibowitz in his Fordham speech last month stated “From my perspective, the current Guidelines do not explain clearly enough to businesses how the agencies review transactions.” Won’t that always be the case? In a specialized area of complex regulatory law, there is whatever guidelines an agency (or in our case agencies) will promulgate and then small group of insider lawyers who will have enough repeat business to really understand the meaning of the guidelines via their agency contacts. For others, the guidelines will remain unclear unless you create a 600 page set of merger guidelines – not a good idea.
Maybe the lack of clarity is a problem, particularly with judges. After all, judges play a role in enforcing the law. The Guidelines cover this aspect fairly early on in Section .01. However, who is the end user of the Guidelines? Is it the firms practicing before the agencies or for judges to use? If the Guidelines have a purpose for judges, there is an important institutional issue at play as we have not had a merger case before the Supreme Court for many years. This leads to a meta-question — Is the law Section 7 or is it the Guidelines as defined by the agencies at any given time?
I do have three points as to the substance of the Guidelines:
1. The Guidelines have only a brief mention of R&D (Section 4), in which they state that even if synergies are substantial, they “are generally less susceptible to verification and may be the result of anticompetitive output reductions.” This treatment seems incomplete. After all, the rise of the new economy and of a greater role for IP suggests that there should be more guidance with regard to R&D efficiencies.
2. Let us start using HHIs that have some remote relationship to actual enforcement decisions. Although HHIs are only rough preliminary screens, and other factors make the real difference, the agencies ignore the HHI thresholds in the Guidelines in making enforcement decisions. The rub is that the agencies then cite the HHIs in district court to show how bad the violation is.
3. The treatment of unilateral effects needs to be revisited. The concept as used in practice needs to be better reflected in the Guidelines.