New draft competition guidelines released last week need revision

See How Biden Can Get Antitrust Right by Jason Furman and Carl Shapiro. Excerpts:

"a draft released last week focuses on outdated legal precedents and a presumption that growth by large and successful firms is undesirable. Regulators should revise the draft to focus more on economic analysis that is consistent with case law and the goal of protecting consumers and workers."

"[mergers] can also reduce prices, benefit workers and accelerate innovation by allowing companies to replace weak managers and exploit economies of scale and scope. Mergers can advance competition by ensuring that smaller competitors are viable or enabling firms that are successful in one market to inject more competition into related markets." 

"Merger guidelines aren’t enforceable regulations. They have also never attempted to be a legal brief or offered an interpretation of the case law. Instead they have described widely accepted economic principles that the Justice Department and the FTC use to analyze mergers. As a result, the guidelines have commanded widespread respect and bipartisan support. Amazingly, for at least 25 years, when regulators have challenged mergers in court, the merging firms themselves have accepted the framework articulated in the guidelines.

The new draft guidelines depart sharply from previous iterations by elevating regulators’ interpretation of case law over widely accepted economic principles."

"Regulators say the guidelines are out of date and need to be updated to reflect the modern economy. Yet their draft draws heavily on Brown Shoe Co. v. U.S. (1962), a widely criticized Supreme Court case."

"other parts of the draft lack an adequate economic foundation. They contain a structural presumption against many vertical mergers unsupported by theory or evidence. The proposed guideline on acquisitions of products or services that rivals may use to compete includes legal wishful thinking about how commitments made by the merging parties are treated, as the recent court rebuke of the FTC’s attempt to block Microsoft’s acquisition of Activision illustrates.

Likewise, a new guideline states that “mergers should not entrench or extend a dominant position,” where a “dominant position” means a market share of at least 30%. As we read this guideline, many nonhorizontal deals that enable the acquiring firm to become more efficient, and thus gain market share or compete more effectively in adjacent markets, would be considered illegal even if they benefit consumers and workers. If this isn’t the intention, revisions are needed."

"we are troubled by the draft guidelines’ claim that efficiencies won’t be counted, even if they benefit consumers and workers, for a merger that furthers a trend toward horizontal concentration or vertical integration. Imagine if regulators had applied such a rule to the automobile industry in the 1910s."

"Preventing harm to the public should be regulators’ North Star as they revise their merger guidelines. They should rely less on the belief that mergers are bad—and less on old case law—and instead focus on how mergers affect people’s economic lives."