Section 7 of the Clayton Act prohibits mergers and acquisitions “where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.” Mergers or agreements to merge can also violate the prohibitions on restraints of trade, monopolization, or unfair methods of competition. Despite these laws, over the past several decades the country has seen increasing levels of consolidation across the economy, much of it via merger, and a reduction in new firm formation. That consolidation has led to a corresponding lessening of competition reflected in growing mark-ups and shrinking wages.
In light of these developments, the Federal Trade Commission and the Department of Justice are reviewing their approach to enforcing the antitrust laws’ prohibition of anticompetitive mergers. As an immediate step, the FTC is withdrawing its approval of the Vertical Merger Guidelines issued in 2020 (“2020 VMGs”) to prevent further industry or judicial reliance on certain flawed provisions. In particular, the 2020 VMGs’ flawed discussion of the purported procompetitive benefits (i.e., efficiencies) of vertical mergers, especially its treatment of the elimination of double marginalization (“EDM”), could become difficult to correct if relied on by courts.