Labor Day approaches with most of us looking forward to a long weekend off, but there’s much in competition world looming on the horizon. As I am looking forward to a couple of days off, I’ll offer more of an annotated bibliography than analysis. But also a bit of discussion, because I am what I am.
Earlier this week, the Federal Trade Commission (FTC) and U.S. Justice Department’s (DOJ) Antitrust Division announced a series of workshops “aimed at promoting a dynamic discussion about the draft [merger] guidelines to complement the comments currently being submitted to the agencies by the public.” The first of these workshops is slated for Sept. 5, the day after Labor Day. Workshops two and three have yet to be announced. The timing is tight, given that the deadline for submitting public comments on the guidelines is Sept. 18. There might indeed be a dynamic discussion, even if the agenda for the first workshop doesn’t promise a balanced one.
Comments posted at regulations.gov thus far number nearly 1,200, with many more expected by the deadline. I did a quick take in a prior roundup titled “The Joint FTC/DOJ Guidelines to Nowhere (or Nowhere Good).” And here’s no sort of spoiler alert: I’m not a fan.
It’s a bit of an exaggeration to say that there are no fans. Scan the submitted comments and you’ll find a number of them. And, indeed, there are fans currently employed at the FTC and DOJ, if not nearly all of those currently employed at the FTC and DOJ. Still, it’s no exaggeration to say that the large majority of established experts in antitrust law and economics–nearly everyone across the political and interventionist spectra besides the “new Brandesians” or self-styled “progressives” running the agencies–think that the draft guidelines need a good deal of work, if not a trip to the circular file. Examples are myriad.
I cited some short pieces in my prior roundup, like these from Dan Crane, these from Doug Melamed, and these from ICLE’s Brian Albrecht, among others. I’ll point people to some more, including some more substantial pieces of criticism. Luke Froeb, Danny Sokol, and Liad Wagman capture the zeitgeist nicely with the title of their forthcoming article: “Cost-Benefit Analysis Without the Benefits or the Analysis: How Not to Draft Merger Guidelines.” (All three are distinguished scholars: Luke, not incidentally, has been both director of the FTC’s Bureau of Economics and the Antitrust Division’s chief economist, albeit not simultaneously; and Liad was senior economic and technology advisor in the FTC’s Office of Policy Planning).
Carl Shapiro–another distinguished academic, chief economist at the Antitrust Division during the Obama administration and, during that same administration, a member of the President’s Council of Economic Advisors–is also critical, arguing “Why Dropping Market Power from the Merger Guidelines Matters” in a contribution to a ProMarket symposium on the draft guidelines. Dennis Carlton of the University of Chicago–yet another former Antitrust Division chief economist–is even more critical in asking (and answering) “Have the Draft Guidelines Abandoned Economics?” He says, among other things, that:
[T]he draft Guidelines focus less on economics and read more as a legal brief, written in an apparent attempt to convince readers, perhaps judges, that many old cases, often decided prior to 1970, justify the dramatically more aggressive antitrust posture of the current enforcement Agencies (the Department of Justice and Federal Trade Commission). Worse yet, the draft Guidelines fail to mention that more contemporary court decisions, including several in cases filed recently by the Agencies, have rejected this more aggressive antitrust posture.”
Bilal Sayyed, former director of the FTC’s Office of Policy Planning (where I worked for 16 years) provides a clear critique in “The Draft Guidelines Abandon the Persuasiveness of their Predecessors.” He notes (accurately) that “they abandon without explanation the unifying principle of all post-1968 Merger Guidelines,” in favor of structure-based presumptions that have been repudiated by economic research and the courts for a good many years.
Herbert Hovenkamp–co-author with the late Phillip Areeda of the magisterial “Antitrust Law: An Analysis of Antitrust Principles and Their Application”–suggests that established merger enforcement underdeters competitive harm. He also argues that “[a]n enforcement policy should identify the harms it seeks to control,” but that the draft guidelines are “unclear about the harm.”
For short pieces, there’s Daniel Crane of the University of Michigan on “Law over Economics in the 2023 Draft Merger Guidelines” in the Network Law Review. He doesn’t think they have the law right either.
And there’s Carl Shapiro again, this time joined by Jason Fuhrman, who served as President Barack Obama’s top economic advisor through the eight years of his administration and, from 2013-2017, as chairman of the Council of Economic Advisors. They offer a critical if corrective essay in the Wall Street Journal, noting among other things (one wouldn’t think controversially) that “not all mergers are bad.” Also in the WSJ are my ICLE colleagues Gus Hurwitz and Geoffrey Manne, reflecting on “antitrust regulation by intimidation” and suggesting that “Lina Khan’s new merger guidelines won’t convince judges, but they may scare companies into inaction.”
Last but by no means least are the formal comments submitted to the agencies by Gregory Werden, the Antitrust Division’s former chief counsel for economics. As noted by Alden Abbott here on Truth on the Market, Werden:
…is the leading expert on the history and technical analysis of modern merger guidelines, having worked on the 1982, 1984, 1992, 1997, and 2010 versions as a senior DOJ antitrust economist. He has authored numerous scholarly articles assessing the competitive analysis of mergers and explaining the content of prior guidelines.
The critiques are many, and serious, if not all uniform. Some would save a baby or two before disposing of the bathwater, while some wish they were so lucky as to have bathwater. Here are some common themes.
- First, as Carlton, Froeb, et al., and others note, there’s not a limiting principle to be found anywhere in the draft Guidelines. That is, not only is there no safe harbor, nor any useful description of mergers “unlikely to raise competitive concerns,” there’s simply no guidance at all as to which mergers–if any–might be permissible. And that’s not good, because some mergers are indeed procompetitive and pro-consumer. And lawful. There’s really no acceptable method of statutory construction according to which the Clayton Act prohibits all mergers. As a practical matter, even FTC Chair Khan acknowledges that 98% of all mergers reported to the agencies do not justify a “second request,” much less issuance of a complaint, which, itself, would fall short of legal sanction.
- Second, there’s an unjustified emphasis on crude structural features of markets, notwithstanding decades of progress in industrial organization economics and, specifically, agency merger scrutiny. One might sometimes look to concentration measures, such as the Herfindahl–Hirschman index (HHI), not to identify presumptions of illegality, but as preliminary signals of potential concern. But even so, one would use different numbers than those provided in the draft guidelines: higher levels of concentration, and greater changes in HHI.
- Third, beyond the crude structural markers, there are many and diverse declared grounds for competitive concerns, but really no clear account of how the agencies will analyze the facts and circumstances presented by specific mergers to determine whether, in fact, a given merger (proposed or consummated) violates the antitrust laws. That is, the draft guidelines don’t offer much in the way of guidance. Not for parties considering mergers or, for that matter, for agency staff.
- Fourth, as noted by many (among others, see Crane and, for a very detailed look, Carlton), the draft guidelines read too much like a legal brief (instead of guidance), and an unconvincing one at that. Just as Gus Hurwitz and I noted of the FTC’s unfair methods of competition (UMC) policy statement in an ICLE issue brief, the numerous citations to the case law skew old–quite a bit old. And rather than deal with more recent decisions at odds with their approach, the guidelines simply ignore those. Indeed, even citations to hoary cases such as Brown Shoe rely too much on dicta and worse, in many instances, are simply inapt: old citations on behalf of outmoded standards. Back to the past, and a distorted past at that.
Finally, as identified in draft Guideline 11–and consonant with the FTC’s proposed noncompete rule and its UMC policy statement–there’s a heightened concern with labor markets and the potential impact of mergers on workers. The application of antitrust law to labor-competition issues is not entirely new or baseless. The problem, rather, is the emphasis–and what’s been signaled about the approach. Some of it seems just odd. To take another agency proposal–the FTC’s (with DOJ concurrence) proposed revisions to the Hart-Scott-Rodino premerger filing rules–the agencies would require both acquiring firms and targets to file substantial information on their workers that’s not obviously pertinent to any sort of antitrust analysis. For example (and just one example), both would be required:
…to identify, for the five years immediately preceding the filing …any penalties or findings issued against the filing person by the U.S. Department of Labor’s Wage and Hour Division (WHD), the National Labor Relations Board (NLRB), or the Occupational Safety and Health Administration (OSHA) in the last five years and/or any pending WHD, NLRB, or OSHA matters.
The FTC observes that : “[i]f a firm has a history of labor law violations, it may be indicative of a concentrated labor market where workers do not have the ability to easily find another job.”
But as I noted in another roundup, “Well, I suppose it ‘may be.’ Or not. How good a signal is this, really? Any OSHA finding? Seriously?” Not for nothing, but the leading Occupational Safety and Health Administration (OSHA) claims are dominated by the construction industry, which is notoriously unconcentrated, even by the draft guidelines’ standards. To the best of my knowledge, there is no research at all, nor case law, nor enforcement experience, suggesting that these sorts of findings are significantly correlated with anticompetitive mergers or even competition concerns more generally.
For more on the HSR proposal, see my colleague Gus Hurwitz, here.
The new emphasis on labor issues in merger review raises many complications: for parties filing HSR forms, and for the staff that has to review them. That’s the tip of the iceberg, but the rest will have to wait for another column. Happy Labor Day.