DOJ and FTC Issue Final Vertical Merger Guidelines

On June 30, 2020, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) finalized their much-anticipated Vertical Merger Guidelines. The new Guidelines, which were last updated in 1984, seek to increase transparency around the analytical techniques, practices, and enforcement policies that U.S. antitrust authorities use to regulate mergers between firms at different stages of the supply chain (e.g., a furniture maker that acquires a producer of timber). Vertical mergers generally raise fewer anticompetitive concerns than horizontal mergers between direct competitors. This, in part, is because consolidation along the supply chain tends to result in lower prices, as distributors and finished goods manufacturers can source inputs at cost rather than at the markup they would pay to a third-party supplier. But, as the Guidelines make clear, vertical mergers “are not invariably innocuous”: a merged firm could raise the price for – and even withhold – a necessary input from its rivals or exploit sensitive business information about rivals that it obtains as part of the merger. These so-called unilateral effects threaten harm to competition in the relevant market if rivals wind up abandoning the market, leaving consumers with higher prices and less innovation as a result. Per the Guidelines,...