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30 January 2020
On 10 January 2020 the Department of Justice Antitrust Division (DOJ) and the Federal Trade Commission (FTC) announced the release of the 2020 Draft Vertical Merger Guidelines (VMG) for a 30-day comment period. During this period, the DOJ and the FTC will accept comments and suggestions on the draft. Once finalised, the VMG will supersede the 1984 Non-horizontal Merger Guidelines, which have not been updated since they were first introduced. As with any guidelines issued by the agencies, the finalised VMG will be instructive for the agencies' review of vertical mergers and will be persuasive but not binding on the courts should a contested merger enter litigation.
As per the 2020 Draft VMG, 'vertical mergers' combine firms or assets that operate at different stages of the same distribution chain. In describing a vertical relationship, the stage closer to final consumers is termed 'downstream' and the stage further away from final consumers is termed 'upstream'. By contrast, 'horizontal mergers' are transactions that take place between direct competitors.
The 2020 Draft VMG rely heavily on the legal and economic theories and analytical framework set out in the 2010 Horizontal Merger Guidelines (HMG) and are explicitly intended to be read in conjunction with the 2010 HMG. The 2020 Draft VMG state that horizontal considerations are also relevant to the evaluation of the competitive effects of vertical mergers. Such considerations include:
Addressing the issues specific to vertical transactions, the 2020 Draft VMG include modern approaches such as:
Some of the highlights of the 2020 Draft VMG include:
In her concurrent statement regarding the commission's decision to publish the draft guidelines, Commissioner Christine Wilson specifically requested the public's feedback on certain topics raised in the 2020 Draft VMG, including the below:
While all of the FTC commissioners agreed that the 1984 Non-horizontal Merger Guidelines should be withdrawn, Commissioners Rebecca Slaughter and Rohit Chopra abstained from voting on whether to publish the 2020 Draft VMG. Commissioner Slaughter expressed concerns about the current proposed guidelines as creating too high a standard of review for proposed transactions and not clarifying the agencies' various investigatory and enforcement powers.(4) In a separate statement, Chopra argued that the draft 2020 VMG do not take into account modern threats to competition or consider whether prior enforcement was effective.
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(1) US Department of Justice and Federal Trade Commission, Draft Vertical Merger Guidelines (2020) p3.
(2) Id, p7.
(3) Id, pp6-7.
(4) Federal Trade Commission, Statement of Commissioner Rebecca Kelly Slaughter, FTC-DOJ Draft Vertical Merger Guidelines (10 January 2020), pp3-4.
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