FTC and DOJ lay out new rules for merger review to reflect a digital economy
The Federal Trade Commission and the Department of Justice Antitrust Division announced on Wednesday new long-awaited guidelines on how they will enforce merger law.
The new guidelines, currently in draft form, encapsulate the agencies’ push to keep pace with the digital age and a changing market. The proposed rules apply to both vertical and horizontal mergers. Almost two years ago, the FTC voted to withdraw the previous version of the vertical merger guidelines released in 2020, citing flaws.
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A vertical merger is a transaction between two businesses that are often in different parts of the supply chain in an industry, according to the FTC. Horizontal mergers, by contrast, involve companies that compete or are in a similar part of the market.
Microsoft’s proposed $68.7 billion purchase of Activision Blizzard is an example of a vertical merger, because Microsoft distributes games through its Xbox consoles and streaming services, while Activision creates the games. The FTC challenged that deal, arguing that it was anticompetitive, but a court last week declined to grant the regulator’s request to stop it.
The FTC, under Chair Lina Khan, has been more aggressive in attempting to block Big Tech companies from expanding further, while the DOJ Antitrust Division, led by Assistant Attorney General Jonathan Kanter, has also stepped up its activity.
Both agencies have stressed the importance of updating enforcement efforts to reflect a modernized economy even if that means losing more cases.
In the new guidelines, they outlined 13 points they will use to evaluate whether a merger should be blocked:
1. Mergers should not significantly increase concentration in highly concentrated markets.
2. Mergers should not eliminate substantial competition between firms.
3. Mergers should not increase the risk of coordination.
4. Mergers should not eliminate a potential entrant in a concentrated market.
5. Mergers should not substantially lessen competition by creating a firm that controls products or services that its rivals may use to compete.
6. Vertical mergers should not create market structures that foreclose competition.
7. Mergers should not entrench or extend a dominant position.
8. Mergers should not further a trend toward concentration.
9. When a merger is part of a series of multiple acquisitions, the agencies may examine the whole series.
10. When a merger involves a multi-sided platform, the agencies examine competition between platforms, on a platform, or to displace a platform.
11. When a merger involves competing buyers, the agencies examine whether it may substantially lessen competition for workers or other sellers.
12. When an acquisition involves partial ownership or minority interests, the agencies examine its impact on competition.
13. Mergers should not otherwise substantially lessen competition or tend to create a monopoly.
The 2020 guidelines did not explicitly discuss the impact on competition for workers. The new language also appears to address issues related to multi-sided platforms like Amazon that serve consumers and businesses.
The agencies may broaden the types of deals they review, potentially looking at a series of deals rather than a single merger. The FTC has already started down that path, suing Facebook parent Meta in 2020 based on a number of acquisitions of small rivals like Instagram and WhatsApp as a strategy to maintain its alleged monopoly power.
A senior FTC official told reporters in a briefing on Tuesday that the guidelines should give judges the clarity they’ve requested in the past when it comes to merger law, a matter of particular importance to judges who rarely encounter antitrust cases.
The FTC said in 2021 that it would work on new guidelines with the DOJ, after voting to withdraw the most recent iteration. The then-Democratic majority said the 2020 guidelines “adopted a particularly flawed economic theory regarding purported pro-competitive benefits of mergers, despite having no basis of support in the law or market reality,” according to a press release at the time.
In the nearly two years since those guidelines were scrapped, agency staffers have faced frequent questions about when a new set of rules would be available.
On the call with reporters, the FTC official and a senior DOJ official said the guidelines reflect their updated approach to enforcing merger law, emphasizing the law itself has not changed. They said the agencies assessed the more than 5,000 comments they received when embarking on the project.
The public has until Sept. 18 to submit comment on the draft guidelines. The agencies will then review those comments as they consider revisions ahead of final publication.
Once they’re finalized, the longevity of the new guidelines could depend on political power dynamics after the next presidential election in 2024. After all, the FTC voted to withdraw the last version of the guidelines just over a year after they were officially released.
WATCH: FTC court ruling shows why vertical deals are hard to challenge
Google chief executive Sundar Pichai speaks during the tech titan’s annual I/O developers conference on May 14, 2024, in Mountain View, California.
Glenn Chapman | Afp | Getty Images
Google will start using artificial intelligence to determine whether users are age appropriate for its products, the company said Wednesday.
Google announced the new technique for determining users’ ages as part of a blog focused on “New digital protections for kids, teens and parents.” The automation will be used across Google products, including YouTube, a spokesperson confirmed. Google has billions of users across its properties and users designated as under the age of 18 have restrictions to some Google services.
“This year we’ll begin testing a machine learning-based age estimation model in the U.S.,” wrote Jenn Fitzpatrick, SVP of Google’s “Core” Technology team, in the blog post. The Core unit is responsible for building the technical foundation behind the company’s flagship products and for protecting users’ online safety.
“This model helps us estimate whether a user is over or under 18 so that we can apply protections to help provide more age-appropriate experiences,” Fitzpatrick wrote.
The latest AI move also comes as lawmakers pressure online platforms to create more provisions around child safety. The company said it will bring its AI-based age estimations to more countries over time. Meta rolled out similar features that uses AI to determine that someone may be lying about their age in September.
Google, and others within the tech industry, have been ramping their reliance on AI for various tasks and products. Using AI for age-related content represents the latest AI front for Google.
The new initiative by Google’s “Core” team comes despite the company reorganization that unit last year, laying off hundreds of employees and moving some roles to India and Mexico, CNBC reported at the time.
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