ICLE Finds that FTC & DOJ Misconstrue the Role of Merger Guidelines

PORTLAND, Ore. (April 22, 2022)— The Federal Trade Commission (FTC) and U.S. Justice Department’s (DOJ) request for information (RFI) on whether and how to update the antitrust agencies’ merger-enforcement guidelines is based on several faulty premises and appears to presuppose a preferred outcome, according to a response to the RFI filed by the International Center for Law & Economics (ICLE).

Written by ICLE President Geoffrey Manne, Director of Competition Policy Dirk Auer, Chief Economist Brian Albrecht, and Seniors Scholars Eric Fruits and Lazar Radic, ICLE’s comments observe that the RFI misconstrues the role of merger guidelines, which is to reflect the state of the art in a certain area of antitrust. The RFI instead seeks information to support a broad invigoration of merger enforcement, the scholars argue.

“The RFI telegraphs an attempt by the agencies to pronounce as settled what are hotly disputed, sometimes stubbornly unresolved issues among experts, all to fit a preconceived political agenda,” the ICLE scholars write. “This not only overreaches the FTC’s and DOJ’s powers, but it also risks galvanizing opposition from the courts, thereby undermining the utility of adopting guidelines in the first place.”

Among the most pressing and problematic substantive questions raised in the RFI are:

  • An uncritical acceptance of the contentious narrative that lax antitrust enforcement has caused increased concentration in U.S. markets, when empirical data demonstrates that concentration is decreasing in local markets and that increased national-level concentration has been caused by productivity advances;
  • An interpretation that existing merger-control tools, such as the Herfindahl-Hirschman Index (HHI), allow too many anticompetitive mergers to slip through the cracks, without grappling with the role that such tools play in the overall antitrust framework to reduce total error costs and the cost of administration;
  • An eagerness to welcome new guidelines for mergers that affect labor markets and “monopsony” markets more broadly, despite little scholarly analysis of the fundamental complexity involved in applying merger-control rules to monopsony markets, where output is the relevant consideration;
  • An unwarranted presumption of a negative relationship between market concentration and innovation, or between market concentration and investment, when the opposite is often true;
  • A tendency to blur the longstanding demarcation between vertical and horizontal mergers, in ways that are likely to have chilling effects on procompetitive vertical mergers;
  • An inclination to treat firms’ possession of data as a special factor in merger rules, rather than as any other intangible asset; and
  • A premature desire to apply the notion of “attention markets” in a merger-control context, despite a lack of scholarship offering objective, let alone quantifiable, criteria to identify firms that are unique competitors for user attention.

To schedule an interview about the DOJ/FTC merger guidelines with Geoffrey Manne or any of the other ICLE competition scholars, contact ICLE Editor-in-Chief R.J. Lehmann at [email protected] or 908-265-5272.