On December 1, 2021, Crowell & Moring and the George Washington University Competition Law Center co-hosted our third annual Antitrust & Tech conference. This year’s (virtual) conference focused on factors motivating a reassessment of merger enforcement approaches and revisions to US merger guidelines that may be considered by agencies. In two panel discussions followed by a fireside conversation, thought leaders representing diverse perspectives from academia, industry and antitrust think tanks discussed the issues facing policymakers. law enforcement and lawmakers as they assess concerns about the state of merger enforcement and what companies across industries should expect regarding proposed reforms. We have provided a brief summary of each session below. Video recording of the roundtables and the fireside chat is available here (please register first to access video recordings).
1. Panel 1: What prompted the emphasis on reviewing the merger guidelines
The first roundtable led the way in identifying the factors that have sparked current criticism of merger law enforcement in the United States. Hosted by Shawn Johnson, Andy Gavil and Bill Kovacic, it included Robert Mahini (Senior Competition Advisor, Google), Diana Moss (President, American Antitrust Institute) and former FTC Commissioner Josh Wright (Executive Director of Global Antitrust Institute; Professor, Department of Economics, George Mason Antonin Scalia School of Law).
Supporters of a more aggressive application of mergers cited several supporting factors. One is data that purports to show increasing concentration and shrinking consumer choice in many sectors of the US economy. Other factors, based on academic papers and other sources, included concerns that merger enforcement is now hampered by too high standards of evidence for government officials, poorly reasoned court decisions ( e.g. Sprint / T-Mobile), unsuccessful remedies (e.g. Safeway / Albertsons), failure of merged companies to achieve the efficiencies offered, and flawed approaches to two-sided market analysis (e.g. , Saber / Farelogix).
Advocates of continuing the current approach to enforcement (and against sweeping changes) pointed to the offsetting factors. One of these factors is that concentration data frequently used in reports and articles does not accurately reflect competitive conditions in actual antitrust markets. On the contrary, they highlighted data indicating that local markets have become less concentrated over time. It has also been argued that the increase in margins is not due to the exercise of market power, but to the decrease in marginal costs, which is to be welcomed.
Additionally, those who oppose a sweeping overhaul of the antitrust law noted that the government still wins a high percentage of merger cases, indicating that courts are not particularly hostile to challenges and apply legal standards and presumptions. appropriate. It has further been suggested that while some degree of enhanced enforcement is warranted, the evidence does not justify a drastic change from the current approach to merger analysis which might harm, not benefit. , competition and consumers. Another suggestion was that the focus on the tech sector is shifted as it continues to exhibit vigorous competition, including continuous innovation and new entries.
2. Panel 2: Questions to consider in the new merger guidelines
The second roundtable focused on the perspectives and options for reforming the Vertical and Horizontal Merger Guidelines. Moderated by Jeane Thomas, Andy Gavil and Bill Kovacic, the panel included Sandeep Vaheesan (legal director, Open Markets Institute), Steve Salop (professor of economics and law, Georgetown; senior partner, Charles River Associates) and Elizabeth Bailey (speaker at the Wharton School, University of Pennsylvania; vice-president, Charles River Associates).
Supporters of more aggressive reform pointed to the precedent of older Supreme Court cases, including Brown shoe, Von grocery store, and National Bank of Philadelphia, which were never rescinded and which they believe more closely reflect the intent of Congress in passing the 1950 Amendments to the Clayton Act. These cases emphasized the use of structural presumptions, including those based on four-firm concentration ratios and combined market shares. They would also make it possible to trigger presumptions at what would be relatively low thresholds by contemporary standards to stop further concentration of the industry at its origin, which is considered suspect for reasons other than mere competition. And older cases reduce, if not eliminate, the effects-based approach associated with the consumer welfare model, which many critics of the current regime argue is difficult to reconcile with the standard of incivility of the consumer. Clayton Law. Perhaps most aggressive was the suggestion that the new guidelines eliminate any efficiency “defense” or competitive effects analysis, leaving the failing firm’s defense as the only way to overcome the structural presumption. The touchstone of this analytical approach is the 1968 Merger Guidelines, which can be consulted here.
Other panelists, however, argued for a more modest approach to guideline revisions. For example, one view expressed is that the current Guidelines were not designed for the characteristics of technology markets. Instead, they work well with markets characterized by static competition, relying on metrics like market shares, HHIs, GUPPIs, and more. These types of metrics, it has been argued, may be less effective in predicting competitive effects over time in dynamic markets.
Other panelists expressed concerns about a return to a heavy reliance on structural presumptions to the exclusion of other measures of competitive effects, and the abandonment of the core principles of the consumer welfare model and its economic basis. They argued that clear line testing may be more of a brute force approach that misses important factual context. They also noted that this approach would put more emphasis on the imprecise science of market definition and likely lead to over-application and over-deterrence of desirable mergers. The best approach, they argued, would be to use rebuttable presumptions that help agencies prove a prima facie case while leaving room for examining the factual background of each industry.
3. Fireside chat with Professors Shapiro and Farrell
The final segment was a fireside chat led by Andy Gavil and Bill Kovacic with two of the main writers of the Horizontal Merger Guidelines (2010): former FTC Bureau of Economics Director Joseph Farrell (Professor, Department of economics at University of California at Berkeley; associate, Bates White Economic Consulting) and former DOJ Economic DAAG Carl Shapiro (professor emeritus, Haas School of Business and Department of Economics at University of California at Berkeley; senior consultant , Charles River Associates). They reflected on the previous two roundtables and provided information on how their work leading up to the 2010 Guidelines could inform the next round of guideline revisions.
The two former chief economists, while expressing their support for increased application of mergers and for updating the Guidelines in some respects, also underscored their view that any review should be principled and based on a learning economics, which continue to evolve. Some feared that the arguments about huge increases in corporate concentration as the cause of economic inequality and slow growth would be supported by strong empirical evidence and that sweeping revisions of national merger policies based on flawed assumptions could be detrimental to the economy.
When asked which provisions of the current Guidelines should be retained and which should be considered for possible revisions, panelists focused on several factors. Among the points worth preserving, speakers suggested, include increased transparency and clarity for judges and the business community, an explanation of how economic evidence is used to analyze competitive effects and specificity. market definition tools.
Regarding efficiency gains, it was suggested that they should continue to be considered, but perhaps with more skepticism than they have been in the past. The suggestion was also made for a more detailed explanation of coordinated effects, which has been difficult for agencies to prove in the absence of direct evidence of prior coordination.
It was also suggested that the Guidelines could be updated with regard to monopsony effects, including those on labor markets, and the role of innovation in competitive analysis. The speakers concluded by encouraging a more empirical analysis of mergers, including retrospectives, and by continuing to focus on the economic effects of proposed mergers.