The Democrat-controlled Federal Trade Commission on Wednesday revoked the Trump administration's guidelines on vertical mergers, or deals between two companies that aren't direct competitors, a move likely to result in greater antitrust scrutiny of mergers in the coming months.
In a 3-2 vote, the FTC's Democratic commissioners, led by Biden-appointed Chairwoman Lina Khan, said the vertical merger guidelines adopted in 2020 had problems and weren't tough enough.
This action could affect major ongoing vertical mergers such as Amazon's bid for MGM Studios and biotechnology giant Illumina's acquisition of cancer startup Grail.
The two agencies in charge of policing companies for anti-competitive conduct, the FTC and the Justice Department, will work on creating a stronger version of the vertical merger guidelines, Khan said during an FTC open meeting on Wednesday.
The Justice Department, in a separate statement, said Wednesday that it would work on writing new guidelines with the FTC but would continue to use Trump-era guidelines for the time being.
The two Republican commissioners at the agency criticized the decision to revoke the previous guidelines without replacing them and suggested the Trump-era guidelines were fair.
Republican Commissioner Christine Wilson said the old guidelines reflected “accepted economic analysis” and “do not shield vertical deals from antitrust enforcement,” highlighting that in some instances vertical mergers can have pro-competitive benefits and therefore are not illegal.
Republican Noah Phillips said the Democrats at the trade commission who revoked the guidelines are “pulling the rug out from under honest businesses.”
He added that the lack of certainty regarding vertical mergers would “sow uncertainty in the market.”
Democratic Commissioner Rebecca Kelly Slaughter also expressed hesitation to withdraw the guidelines without a replacement because before last year they had not been updated since 1984. Nevertheless, she voted in favor of revoking the guidelines.
Democrats say the old vertical merger guidelines were misleading companies trying to merge and leading to unfair and anti-competitive acquisitions.
Democratic Commissioner Rohit Chopra said the previous guidelines relied on a “series of unproven or disproven assumptions,” which gave a “blueprint to companies seeking to engage in an illegal vertical merger.”
He added that the old guidelines “may have been worse than doing nothing at all.”
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