Revising the Merger Guidelines: Second Request Screens and the Agencies' Empirical Approach to Competitive Effects
9 November 2009
By Dr. Lawrence Wu with former NERA economist Greg Leonard
The US Department of Justice (DOJ) and Federal Trade Commission (FTC) solicited public comments and held joint public workshops to explore the possibility of updating the Horizontal Merger Guidelines that are used by both agencies to evaluate the potential competitive effects of mergers and acquisitions. The goal of the workshops were to determine whether the Horizontal Merger Guidelines accurately reflect the current practice of merger review at the DOJ and the FTC as well as to take into account legal and economic developments that have occurred since the last significant Guidelines revision in 1992. Experts from NERA's Global Antitrust and Competition Policy Practice submitted comments on 9 November 2009. Their suggestions for how the Merger Guidelines could be revised are based on the idea that the Guidelines would provide more information and guidance if they were revised to reflect the actual practice and analytical process that the Agencies employ in evaluating the potential competitive impact of a proposed merger.
First, the Merger Guidelines do not provide guidance on how the Agencies determine whether or not they will issue a Request for Additional Information and Documentary Material (i.e., a "Second Request.). Yet, for many merging parties, guidance on how the Agencies make this initial decision is critical because the receipt of a Second Request implies substantial costs, a lengthier investigation, and delays that could jeopardize the financing of the transaction itself. Thus, a revision that gives greater clarity on the types of evidence and screens that are used in this stage of the investigation will help merging parties and their counsel make more informed decisions as they contemplate the antitrust risk associated with a particular transaction.
Second, the Merger Guidelines offer little guidance regarding the types of empirical evidence and analyses that the Agencies rely upon to determine the likely competitive effects of a proposed transaction. Yet Second Requests typically ask for substantial amounts of data, and, in the authors' experience, the Agencies routinely seek to use these data to implement analyses designed to shed light on the competitive effects of the proposed transaction. Thus, a revision to the Merger Guidelines that provides guidance on the types of empirical analyses that may be undertaken by the Agencies will help the merging parties and the antitrust bar appreciate (a) why the Agencies ask for substantial amounts of data in the Second Request and (b) the variety of empirical questions that the Agencies may ask when evaluating the competitive impact of a proposed transaction.
For more information regarding the Horizontal Merger Guidelines Review Project, please visit the FTC website.
