In a recent memo to staff of the Federal Trade Commission (FTC), Chairman Andrew Ferguson explained that they should continue using the merger guidelines that the FTC and U.S. Justice Department Antitrust Division adopted jointly in 2023.
Ferguson’s memo noted that “the clear lesson of history is that we should prize stability” in merger policy. Gail Slater, President Donald Trump’s nominee to become assistant U.S. attorney general in charge of the DOJ Antitrust Division, echoed this sentiment during her confirmation hearing.
The argument seems compelling on the surface; regulatory certainty has value. But we need to think carefully about what we’re trying to stabilize.
In many respects, the 2023 guidelines represented a regressive step away from decades of reform, reversing core elements of modern antitrust analysis—including the 2010 horizontal-merger guidelines—without a sound economic or legal foundation. The International Center for Law & Economics’ (ICLE) Geoffrey Manne was correct that treating these guidelines as gospel simply to avoid a “partisan rescission” would be a mistake: “True continuity would mean upholding sound economic principles and protecting consumers, not embracing a document designed to dismantle them.”?
This post is meant as a reminder of some of the document’s major flaws. The guidelines misrepresent existing case law; elevate outdated 1960s-era factors (like the Brown Shoe “practical indicia”) over rigorous economic tests; and could lead enforcers down a path detached from economic reality.
Ignoring a Half-Century of Antitrust Law
One of the most troubling aspects of the 2023 guidelines was how they selectively rely on antiquated case law, while ignoring or downplaying the past half-century of antitrust jurisprudence. Herbert Hovenkamp of the University of Pennsylvania Law School has been especially critical on this front. He observes that the new guidelines are “excessively nostalgic for a past era” and display an “excessive reliance on one decision, Brown Shoe, [which] is unfortunate, particularly since that decision has been so often repudiated, even by the Supreme Court itself.”
In 1962’s Brown Shoe Co. v. United States, the U.S. Supreme Court outlined a set of “practical indicia” (such as distinct submarkets, product peculiarities, and so on) to identify antitrust markets and incipient harms. The 2023 guidelines leaned heavily on those 1960s concepts, repeatedly citing Brown Shoe as if it were the last word on merger law.
The problem is that antitrust law didn’t freeze in 1962. In the decades since Brown Shoe, courts have developed far more economically grounded approaches, and even the Supreme Court has pulled back from Brown Shoe’s more extreme dicta. As Hovenkamp has noted elsewhere, the guidelines “overlook that the Supreme Court itself subsequently corrected many of Brown Shoe’s errors.”
For example, later cases recognized that high market concentration alone isn’t illegal absent evidence of likely harm to competition (e.g., higher prices, reduced output or innovation). Modern merger analysis—reflected in cases like 1974’s United States v. General Dynamics or the U.S. Circuit Court for the D.C. Circuit’s 1990 decision in U.S. v. Baker Hughes—places weight on competitive effects and rebuttal evidence, not just structural indicia.
The 2023 guidelines largely ignored this evolution. They treat incipient concentration itself as the evil, with barely a nod to the actual competitive performance outcomes that concern the antitrust laws. As Hovenkamp succinctly put it, Brown Shoe “distorted” the legislative history by “emphasizing concentration but largely ignoring competitive performance”?—and the new guidelines double down on that distortion.
By anchoring themselves in 60-year-old precedents (and even there, cherry picking the most aggressive language from those cases), the guidelines misrepresent the state of antitrust law. They blithely omit the many court decisions that introduced economic rigor to merger analysis, as well as skepticism of purely structural arguments.
It is little surprise, then, that the FTC (under prior leadership) struggled when trying to apply these theories in court; judges know the difference between what current law requires and what the agencies wish it did. As I have noted previously, clarity and stability in enforcement are important, but not if they’re grounded in a false caricature of precedent.
A Return to Structuralism Without Proper Justification
Modern antitrust practice has long recognized that market structure alone doesn’t automatically translate into consumer harm. The 2010 horizontal-merger guidelines integrated decades of research indicating that static concentration thresholds only paint part of the competitive picture. While structural presumptions can serve as a useful starting point, courts and economists alike have emphasized the importance of real-world competitive effects, such as evidence that a merger would likely result in higher prices, reduced innovation, or decreased quality.
The reversion to a purely structural approach isn’t merely rhetorical. The 2023 guidelines also reset the numerical thresholds for concentration in a way that contradicts the developments seen in prior guidelines, particularly the 2010 horizontal-merger guidelines. Those 2010 guidelines set clear and relatively conservative Herfindahl–Hirschman Index (HHI) thresholds. They recognized that mergers that create moderate or even high concentration aren’t necessarily illegal, as many dynamic forces (entry, innovation, cost efficiencies) could offset or prevent harm.
The 2023 guidelines, however, lowered the thresholds in a manner that overstated the significance of moderate increases in market concentration. Yet the agencies have offered scant new economic evidence to justify pulling those thresholds lower. Before joining the FTC, former Bureau of Economics Director Aviv Nevo (and colleagues) argued against such a change, writing:
Our view is that this would not be the most productive route for the agencies to pursue to successfully prevent harmful mergers, and could backfire by putting even further emphasis on market definition and structural presumptions.
If the agencies were to substantially change the presumption thresholds, they would also need to persuade courts that the new thresholds were at the right level. Is the evidence there to do so? The existing body of research on this question is, today, thin and mostly based on individual case studies in a handful of industries. Our reading of the literature is that it is not clear and persuasive enough, at this point in time, to support a substantially different threshold that will be applied across the board to all industries and market conditions. [Emphasis added.]
If it were merely a matter of updating the guidelines to reflect new empirical findings or cases on the margin, one could at least see the rationale. Instead, the 2023 guidelines marked a wholesale expansion of the government’s authority to challenge mergers, based on an unproven assumption that higher concentration is presumptively bad—even in an economy that has demonstrated how market dynamics can shift quickly.
Perhaps the biggest departure in the 2023 guidelines—one that should continue to worry businesses, consumers, and antitrust practitioners alike—was the broad presumption of illegality that suffused the document. Rather than starting with a neutral framework for analyzing whether a merger is likely to harm competition, the guidelines read as if their central goal was to block as many mergers as possible. This is not how any prior iteration of the guidelines functioned—not even the older versions the FTC and DOJ claimed to be “reflecting.”
Previous guidelines (and court decisions) made clear that even highly concentrated mergers could be lawful if the facts showed no likely harm—e.g., because of ease of entry, strong efficiencies, or dynamic competition. The 2023 guidelines not only omitted the traditional “efficiencies defense” language, but they exuded skepticism that efficiencies or any procompetitive benefits should matter at all.
This was another break from precedent—courts do consider efficiencies, and the 2010 guidelines explicitly recognized efficiencies can rebut a prima facie case. By writing off efficiencies, the 2023 guidelines could condemn mergers that would help consumers (through cost reductions or innovation)—a stance inconsistent with the Clayton Act’s aim to prevent anticompetitive mergers, not to block mergers for their own sake.
Brown Shoe Indicia vs Economic Tests
Perhaps nothing illustrates the tension between the 2023 guidelines and modern antitrust analysis better than the clash of Brown Shoe’s “practical indicia” and the economic Hypothetical Monopolist Test (HMT) used in recent decades. The Brown Shoe decision listed factors for defining relevant markets or “submarkets”—things like distinct customers, unique product characteristics, specialized vendors, and industry recognition. The 2023 guidelines heavily emphasized these qualitative factors, harkening back to an era when simply carving out a narrow submarket with stable market shares could doom a merger.
Modern antitrust, however, largely replaced that approach with the HMT, which asks a more straightforward economic question: if one firm (a “hypothetical monopolist”) controlled the candidate market, could it profitably impose a small but significant price increase? If the answer is yes, then the market definition is sound; if it is no (because customers would switch to other products or new competitors would emerge), then the market definition is too narrow. The HMT focuses on actual competitive constraints and the ability to raise prices—which is directly tied to the harms that antitrust cares about.
Notably, the HMT was introduced in the DOJ and FTC’s 1982 guidelines and has been a mainstay of merger analysis ever since—widely accepted by courts. Yet in the 2023 guidelines, the HMT was given surprisingly short shrift. The document described the test in passing, but it appears secondary to the laundry list of Brown Shoe indicia for defining markets and competitive effects.
This is a step backward. As Hovenkamp explains, Brown Shoe’s factors were formulated “long before the HMT was developed,” and frankly, “[s]everal of those factors are just plain wrong.” For example, Brown Shoe suggested that having “unique production facilities” or “specialized vendors” could delineate a market. In reality, however, those features often do not correlate with the boundaries of competition. A firm might have unique facilities yet compete directly with firms using different facilities; a “specialized” retailer might sell complementary products rather than substitutes?.
The 2023 guidelines’ reliance on the Brown Shoe indicia is arguably simply a way to bring more cases. In a trivial sense, that’s certainly true—adding more standards inherently creates more potential points of challenge. But that doesn’t mean they are winnable cases, as the FTC’s loss in Tempur Sealy makes clear. The mere existence of a standard isn’t enough; it must be applied thoughtfully and consistently with legal and economic reality—something the FTC struggled to demonstrate in that case.
If the goal isn’t to simply bring cases but to bring cases that help consumers, the HMT is much more reliable. As Hovenkamp bluntly concludes:
In virtually every way, the HMT relevant market test is superior to Brown Shoe. Further, the factors that the Supreme Court mentioned [in Brown Shoe] are not stated in the statute, and there is no reason to think [the Court] was doing anything more than summarizing fact findings for that particular case.
One might accept, purely for historical interest, that some older enforcement ideas could still hold relevance. The 2023 guidelines, however, barely engaged with intervening developments—the wave of economic research from the 1970s onward that refined antitrust thinking. Economists across the political spectrum have agreed that it’s not enough to show concentration or changed market structure; the agency must demonstrate a link to anticompetitive effects, such as price hikes or the foreclosure of competition.
We can certainly grant Ferguson’s point that having some continuity in enforcement guidelines is preferable to issuing an entirely new set every time there’s a change in leadership. But the 2023 guidelines are not simply a benign update. They represent a radical reversion to an era when structural analysis ruled the day, decades of economic insights were absent, and the presumption of illegality was far stronger. It’s one thing to avoid swinging the enforcement pendulum too wildly with every new administration; it’s quite another to cement in place a flawed document that turns back the clock on merger analysis.
