This week the Department of Justice and the Federal Trade Commission released draft guidelines relating to permissible mergers, that is mergers that they will not challenge and attempt to prevent.  The guidelines are substantially different from, and materially less favorable than, guidelines they propose to erase and harken back to policies from the ’60s and 70’s.  Indeed, the guidelines make specific citation to older court cases, likely because more recent cases are more permissive in not challenging mergers.

What is going on?  One could conclude that the guidelines are an attack on size per se, but that is not sufficiently nuanced an observation.  Specific policy considerations are apparent in some of the extremely complex details:

First, you can no longer sell a merger on the basis that it will reduce costs to consumers, a presumed touchstone.  Now the impact on workers, and their ability to obtain employment, must be considered.

Second, given the trend in acquisitions to try to tie up supply of critical components, there will be an examination to make sure that a vertical acquisition will not so tie up critical supplies as to harm business with which the acquirer competes.

Third, the general trigger for focus on an acquisition, previously articulated as probably creating adverse effect, is now keyed to the risk of negative effect (a lesser standard).

Fourth, if a company is doing a series of acquisitions which in the aggregate have anti-competitive effect, the ability to go back and examine the whole chain of acquisitions is expressly reserved.

‘Fifth, the safe harbors of the old guidelines are eliminated; there is no statement of what will NOT be deemed an undesirable acquisition.

There is included a long list of core concepts, an analysis of which is beyond the scope of this post.  If you are thinking about acquiring a supplier or a competitor, in many cases the first thing you will need to acquire is a lawyer.

Note that this is a draft, open for public comment into September.  If adopted these are guidelines for actions to be taken by the government, but do not constitute a law; courts over the last decades have been more permissive about acquisitions and while they may be influenced by guidelines they are free not to follow them.  But whatever is adopted foretells a longer period to navigate through getting government approval in many circumstances, itself likely a dynamic which will somewhat limit the urge to merge.