economics

April 30, 2010

* APRIL 21, 2010 U.S. Changes Guidelines for Merger Scrutiny

Filed under: Uncategorized — ktetaichinh @ 4:05 am
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By THOMAS CATAN And BRENT KENDALL

WASHINGTON—U.S. antitrust regulators on Tuesday unveiled new guidelines explaining how they scrutinize proposed mergers between competing companies, in a move that could make it easier for them to block such deals in court.

On their face, the proposed guidelines merely spell out current practice at the Justice Department and the Federal Trade Commission, which share responsibility for antitrust enforcement. But they could give regulators a stronger hand when challenging merger deals in court by making it harder for companies to argue that the agencies failed to follow their own procedures to the letter.

The new guidelines allow for more flexibility in analyzing the potential anticompetitive effects of a merger than the 18-year-old set they replace, which laid out a sequence of steps that regulators were supposed to follow.

They also give regulators new tools to test whether a merger will result in higher prices or market dominance that could hurt consumers.

The FTC and the Justice Department are currently reviewing a number of high-profile deals, including Comcast Corp.’s proposed acquisition of General Electric Co.’s NBC Universal and Google Inc.’s purchase of mobile-advertising company AdMob Inc. The new guidelines won’t directly affect whether the agencies approve or reject those deals, but could help the government in cases that go to court.

The revisions cheered proponents of more aggressive antitrust enforcement. They return “the antitrust cop to the merger beat,” said David Balto, a former FTC official who is now at the Center for American Progress, a left-leaning think tank.

The changes clarify that the guidelines are “not a cookbook” that courts can follow to determine whether a merger harms competition, Mr. Balto said. “Just because one or two ingredients are missing, it doesn’t mean a merger is not anticompetitive.”

But some antitrust lawyers feel the changes give the government too much latitude. For example, regulators wouldn’t necessarily have to define the relevant market as a first step in deciding whether a merger would reduce competition.

That was an issue not long ago in the FTC’s challenge to the merger of Whole Foods Market Inc. and Wild Oats Markets Inc. The FTC had to first establish that the deal would harm competition in a market it identified as “premium natural and organic supermarkets.”

The agency’s challenge initially foundered in part because Whole Foods and Wild Oats argued that they competed in a much broader arena that included large grocery chains. The parties eventually settled the dispute in 2009.

The proposed changes try “to stake out the position that you don’t really have to define a market, which simply isn’t going to work,” said Paul Denis, an antitrust lawyer at Dechert LLP who helped draft the previous guidelines while in government and later represented Whole Foods in its case.

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