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FTC rescinds vertical merger guidelines, raises concerns

The FTC recently rescinded its 2020 guidance for vertical mergers. Meanwhile, Pres. Joe Biden plans to nominate a new commissioner to the FTC board.

The FTC wants guidelines that are more skeptical of mergers, but they are getting pushback from industry groups and the board's two Republicans.

In a 3-2 vote, the FTC rescinded its 2020 vertical merger guidelines during its open meeting Wednesday -- guidelines issued jointly by the FTC and Department of Justice that outlined a framework for reviewing vertical mergers, which are a union of two or more companies within the same industry that operate at different stages of the supply chain. It was the first update to vertical merger guidance since 1984. The FTC's guidelines can give the government a basis for challenging a merger. 

The FTC is facing mounting pressure to get ahead of potentially anti-competitive mergers and acquisitions as the momentum against large, powerful data and technology companies and their merger and acquisition activity grows. Earlier this year, President Joe Biden issued an executive order requesting the FTC assess its current processes for handling mergers.

However, the FTC's most recent merger policy move and others this year have caused organizations like the Consumer Technology Association to raise concerns. CTA is a standards and trade organization representing more than 2,200 tech companies.

In a letter to the FTC before its latest policy change, the CTA cautioned against rescinding the 2020 vertical merger guidelines.

"American businesses need and deserve to operate in an environment of legal certainty," according to the letter. "Withdrawal of the guidelines … would re-introduce uncertainty that was addressed by the adoption of the guidelines in 2020." 

Rescinding guidelines raises concerns

While FTC Chair Lina Khan said the 2020 guidelines took some positive steps toward updating the FTC's approach to merger reviews, they suffered from "serious deficiencies."

The current guidelines are "improperly suggesting that efficiencies, or pro-competitive effects, may rescue an otherwise unlawful transaction," Khan said during the meeting.

Khan said the FTC will work with the DOJ to pursue a comprehensive review of merger guidelines that no longer fit the market reality. Indeed, the DOJ issued a statement after the guidelines were rescinded noting that the organization will be reviewing both vertical merger guidelines and horizontal merger guidelines to "ensure they are appropriately skeptical of harmful mergers."

FTC Commissioner Christine Wilson, who voted against rescinding the vertical merger guidelines, said withdrawing the guidelines leaves businesses in the lurch with no current legal framework or guidance to follow.

"Once again, we are withdrawing a sound policy based on economic analysis, agency experience and substantial public input unilaterally with little notice to the public and with no opportunity for public input," she said.

In July, the FTC voted 3-2 to rescind a 1995 policy statement on prior approval and prior notice requirements for mergers -- something Wilson and FTC Commissioner Noah Phillips voted against. Both are Republicans; the other three commissioners are Democrats.

Businesses want to do the right thing, they want to do the legal thing, but they need to know what the law is.
Michael PetriconeSenior vice president, CTA

Rapid changes being made by the FTC board are leaving businesses in a world of "legal uncertainty," said Michael Petricone, CTA's senior vice president of government and regulatory affairs. By rescinding the 2020 vertical merger guidelines, Petricone said businesses will now have to fall back to outdated 1984 standards.

"Businesses want to do the right thing, they want to do the legal thing, but they need to know what the law is," he said. "Quickly removing a legal standard that was put in process with a great deal of input and consideration and leaving nothing there in its place really puts American businesses who want to follow the law in a very uncertain position."

Along with concerns about the loss of the 2020 vertical merger guidelines, Petricone said he is also uneasy about the FTC's current process of rescinding past polices without seeking public input.

"These are important decisions for American companies, and these are huge decisions for the American economy and U.S. competitiveness," Petricone said. "They need to be done with input and consideration, not hastily." 

Also this week

  • The White House plans to nominate Alvaro Bedoya to a seat on the Federal Trade Commission. Bedoya has served as the founding director of the Center on Privacy and Technology at Georgetown University since 2014. At the FTC, he would be charged with enforcing U.S. antitrust and consumer protection laws.
  • C. Attorney General Karl Racine broadened the antitrust lawsuit against Amazon filed in May, which alleges that Amazon maintains monopoly power through its contracts with third-party sellers on the platform. The amended lawsuit takes aim at Amazon's relationship with its own vendors, or first-party sellers, alleging the vendors' deals with Amazon incentivize them to raise their prices on platforms outside of Amazon.
  • The Irish Data Protection Commission has launched investigations into video-streaming platform TikTok. The investigations focus on how TikTok handles children's data, as well as how TikTok transfers personal data to China, to determine whether the practices are in violation of the General Data Protection Regulation.

Elsewhere

  • The Korea Fair Trade Commission, South Korea's antitrust regulator, fined Google $177 million for stopping device makers from making customized versions of the Android operating system, according to Reuters. The regulator said Google's practice hinders competition in the OS market and is an abuse of its dominant market position.

Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.

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