Introduction

On December 18, 2023, the U.S. Department of Justice and Federal Trade Commission (“the Agencies”) issued Merger Guidelines (“2023 Merger Guidelines”)¹U.S. Dep’t of Just. & Fed. Trade Comm’n, Merger Guidelines (2023) [hereinafter 2023 Merger Guidelines]. that “identify the procedures and enforcement practices [the Agencies] most often use to investigate whether mergers violate the antitrust laws.”²Id. § 1, at 1. The 2023 Merger Guidelines supersede two earlier guidelines, the 2010 Horizontal Merger Guidelines³U.S. Dep’t of Just. & Fed. Trade Comm’n, Horizontal Merger Guidelines (2010) [hereinafter 2010 Horizontal Merger Guidelines]. and the 2020 Vertical Merger Guidelines,⁴U.S. Dep’t of Just. & Fed. Trade Comm’n, Vertical Merger Guidelines (2020) [hereinafter 2020 Vertical Merger Guidelines]. which in turn were part of a succession of merger guidelines stretching back more than half a century, starting with 1968 Merger Guidelines⁵U.S. Dep’t of Just., 1968 Merger Guidelines (1968). and followed by updated Guidelines in 1982, 1984, 1992, and 1997.⁶U.S. Dep’t of Just., https://perma.cc/JQ3K-5FYB (listing prior versions of the Guidelines at the bottom of the webpage).

This Article addresses some key issues important to a prospective assessment of the 2023 Merger Guidelines’ possible effects on merger formation and enforcement. A full treatment is beyond the scope of this Article, which takes as starting point remarks by five distinguished antitrust scholars who participated in a panel on the 2023 Merger Guidelines as part of the 27th Annual Antitrust Symposium of the George Mason Law Review, held on February 23, 2024. In alphabetic order, the panelists were Professors Dennis W. Carlton, Aviv Nevo, Eric A. Posner, Howard Shelanski, and Valerie Suslow.⁷Carlton is the David McDaniel Keller Professor of Economics Emeritus, The University of Chicago Booth School of Business. Nevo is the George A. Weiss and Lydia Bravo Weiss University Professor, University of Pennsylvania Wharton School of Business, on leave at the time of the Symposium serving as Director of the Bureau of Economics of the Federal Trade Commission (disclaimer: Nevo’s remarks should not be attributed as the views of the Commission or any individual Commissioner). Posner is the Kirkland & Ellis Distinguished Service Professor of Law and Arthur and Esther Kane Research Chair, The University of Chicago Law School. Shelanski is the Joseph and Marilyn Sheehy Chair in Antitrust Law and Trade Regulation and Professor of Law, Georgetown University Law Center. Suslow is a Professor of Economics, Johns Hopkins Carey Business School. See generally Margaret C. Levenstein & Valerie Y. Suslow, The 2023 Merger Guidelines and Coordinated Effects: Recommendations for Robust Protection of Competition, 31 Geo. Mason L. Rev. (forthcoming Nov. 2024) for a discussion of the 2023 Merger Guidelines’ impact on coordinated effects. The views expressed below are mine, however, except where specifically attributed to a panelist.

The 2023 Merger Guidelines differ from previous merger guidelines in several respects. First, rather than a single encompassing set of guidelines, eleven individual guidelines are called out. As discussed in Part I, Guidelines 1–6, each of which applies to a different set of facts, could individually form the basis for a merger challenge. Guidelines 7–11 describe factors that the Agencies may consider in their merger analysis for Guidelines 1–6. Nevo argued in the panel that delineating separate sets of circumstances that can give rise to a violation provides the Agencies with greater analytic flexibility than the Agencies previously had.⁸Aviv Nevo, Dir., Fed. Trade Comm’n Bureau of Econ., Remarks at the 27th Annual George Mason Law Review Antitrust Symposium, Panel One: The FTC and DOJ’s Draft Merger Guidelines (Feb. 23, 2024) (transcript on file with the George Mason Law Review).

Second, Nevo also pointed out that the 2023 Merger Guidelines emphasize how a merger “could,” not “would,” violate the antitrust laws.⁹Id. Nevo’s statement was in the context of evaluating a vertical merger, but the point holds more broadly. Guidelines 2–6 each begin with the words “Mergers Can Violate the Law When . . .” followed by a set of circumstances.¹⁰2023 Merger Guidelines, supra note 1, § 1, at 2–3 (emphasis added). Guideline 1, which involves a structural presumption of illegality, uses different wording. Previous merger guidelines had focused on whether a merger would (not just could) cause competitive harm. For example, the 2010 Horizontal Merger Guidelines state that “[m]ost merger analysis is necessarily predictive, requiring an assessment of what will likely happen if a merger proceeds as compared to what will likely happen if it does not.”¹¹2010 Horizontal Merger Guidelines, supra note 3, § 1, at 1. The 2010 Horizontal Merger Guidelines further note that requiring certainty would be inconsistent with the incipiency standard. By contrast, the 2023 Merger Guidelines state that “the Agencies do not attempt to predict the future . . . [but] examine the totality of the evidence available to assess the risk the merger presents.”¹²2023 Merger Guidelines, supra note 1, § 1, at 1–2 (emphasis added). The term “risk,” in the context of a risk to competition or of competitive harm, appears forty-eight times in the 2023 Merger Guidelines. Yet, although the Agencies repeatedly point to a risk standard of merger enforcement, such a standard begs the question: How small a risk would suffice to trigger an enforcement action? The 2023 Merger Guidelines use the term “substantially” or its cognates 114 times. These instances are exclusively in the context of a recitation of the statutory language, “may be substantially to lessen competition,” in § 7 of the Clayton Act.¹³15 U.S.C. § 18. The Agencies emphasize “may be,” however, not “substantially.”¹⁴2023 Merger Guidelines, supra note 1, § 1, at 1.

Third, as Carlton pointed out in his panel remarks, the 2023 Merger Guidelines cite to a large number of legal precedents.¹⁵Dennis W. Carlton, David McDaniel Keller Professor of Econ. Emeritus, Univ. of Chi., Remarks at the 27th Annual George Mason Law Review Antitrust Symposium, Panel One: The FTC and DOJ’s Draft Merger Guidelines (Feb. 23, 2024) (transcript on file with the George Mason Law Review). For a more extensive critique, see Dennis W. Carlton, The 2023 Merger Guidelines: A Critical Assessment, 65 Rev. Indus. Org. 129 (2024). Legal precedents are cited eighty-five times in these Guidelines. For all previous merger guidelines—the 1968, 1982, 1984, 1992, 1997, 2010, and 2020 iterations—the corresponding number of direct references to legal precedent is zero.¹⁶Previous merger guidelines have, however, routinely cited antitrust statutes, principally Section 7 of the Clayton Act (15 U.S.C. § 18), Sections 1 and 2 of the Sherman Act (15 U.S.C. §§ 1, 2), and Section 5 of the Federal Trade Commission Act (15 U.S.C. § 45). See, e.g., 2010 Horizontal Merger Guidelines, supra note 3, § 1, at 1; 2020 Vertical Merger Guidelines, supra note 4, § 1, at 1. Indeed, the 2010 Horizontal Merger Guidelines specify that “[t]hese Guidelines are not intended to describe how the Agencies will conduct the litigation of cases they decide to bring”¹⁷2010 Horizontal Merger Guidelines, supra note 3, § 1, at 1 n.2. but rather “reflect the ongoing accumulation of experience at the Agencies.”¹⁸Id. n.1. Moreover, the “Guidelines may be revised from time to time as necessary to reflect . . . new learning.”¹⁹Id. Accumulating experience and new learning have informed the succession of prior merger guidelines, as emerging facts and relevant economic theory have coevolved.

Textual references in the 2023 Merger Guidelines to case law—almost all many decades old—appear to have substituted for economic analysis undertaken in the light of new learning that has accumulated over the succeeding decades.²⁰In his panel remarks, Carlton said he would have preferred these Guidelines stick to describing economic analyses the Agencies may apply, in line with the Agencies’ previous merger guidelines, and relegate any discussion of legal precedents to a separate document describing the Agencies’ policies in litigation. See Carlton, supra note 15. This runs counter to the Supreme Court’s treatment of accumulated economic learning as fundamental to properly interpreting and reassessing the dynamic meaning of the antitrust laws, as discussed in Part III below.

The Supreme Court precedents cited in the 2023 Merger Guidelines remain valid, as Posner emphasized.²¹Eric A. Posner, Kirkland & Ellis Distinguished Serv. Professor of L., Arthur and Esther Kane Rsch. Chair, Univ. of Chi., Remarks at the 27th Annual George Mason Law Review Antitrust Symposium, Panel One: The FTC and DOJ’s Draft Merger Guidelines (Feb. 23, 2024) (transcript on file with the George Mason Law Review). They have, however, been frozen in amber. From 1903 through 1974, Section 2 of the Antitrust Expediting Act specified that appeals from district court rulings in civil antitrust suits go directly to the Supreme Court.²²Expediting Act, Ch. 544, § 2, 32 Stat. 823, 823 (1903) (codified at 15 U.S.C. § 29), repealed by Antitrust Procedures and Penalties Act of 1974, Pub. L. No. 93-528, § 5, 88 Stat. 1707, 1709. There were several such appeals during the Act’s tenure, yielding Supreme Court rulings that the 2023 Merger Guidelines repeatedly refer to. Since the Act’s repeal in 1974, however, merging parties are typically unwilling to undergo the years-long appellate process that would be required to bring a current merger challenge to the Supreme Court. The cases cited in the 2023 Merger Guidelines are thus unlikely to be revisited by the Supreme Court in the foreseeable future.

Finally, the treatment of efficiencies in the 2023 Merger Guidelines appears to be more dismissive and hostile than in recent guidelines. The discussion begins with a peremptory statement that “possible economies [from a merger] cannot be used as a defense to illegality.”²³2023 Merger Guidelines, supra note 1, § 3.3, at 32 (citing United States v. Phila. Nat’l Bank, 374 U.S. 321, 371 (1963)) (alteration in original). But rather than a defense against a finding of lessened competition, efficiencies are part of determining whether competition has been lessened. See Alexander Raskovich, Bruce H. Kobayashi, Abbott B. Lipsky, Joshua D. Wright & John M. Yun, Efficiencies in Merger Review: Global Antitrust Institute Comment on the DOJ-FTC Request for Information on Merger Enforcement 2 (Geo. Mason Univ. L. & Econ. Rsch. Paper Series, Paper No. 22-18, 2022), https://perma.cc/U9Y3-Q38W. The 2010 Horizontal Merger Guidelines state that “a primary benefit of mergers to the economy is their potential to generate significant efficiencies and thus enhance the merged firm’s ability and incentive to compete.”²⁴2010 Horizontal Merger Guidelines, supra note 3, § 10, at 29. Further, “[t]he Agencies seek to identify and challenge competitively harmful mergers while avoiding unnecessary interference with mergers that are either competitively beneficial or neutral.”²⁵Id. § 1, at 1. In contrast, the 2023 Merger Guidelines offer no indication that mergers can have an upside.

The remainder of this Article treats the foregoing areas of difference in greater depth. Part I discusses the multiplicity of guidelines within the 2023 Merger Guidelines and whether this feature realistically affords the Agencies greater flexibility to analyze mergers. Part II deals with the Agencies’ apparent retreat from predicting the consequences of mergers relative to the but-for world. The 2023 Merger Guidelines shift away from the proof standard in earlier merger guidelines, which turns on whether a merger would harm competition with reasonable probability, to a lower standard of whether a merger merely could harm competition. Part III discusses the 2023 Merger Guidelines’ heavy reliance on decades-old merger case law as an analytic tool and whether this is a reasonable substitute for modern economic tools of analysis.

I.      From One Merger Guidelines to Many

The six individual Guidelines (or “analytical frameworks”) within the 2023 Merger Guidelines that describe ways “Mergers Can Violate the Law” are, in order: (1) a structural presumption of illegality based on market shares and concentration; (2) eliminating competition between the merging parties (unilateral effects); (3) facilitating collusion (coordinated effects); (4) eliminating a potential entrant to a concentrated market; (5) vertical foreclosure of rivals; and (6) entrenching or extending a dominant position.²⁶2023 Merger Guidelines, supra note 1, § 1, at 2–3. The 2023 Merger Guidelines state that any one of the foregoing six individual Guidelines, standing alone, could provide the basis for a merger challenge.²⁷Id. In the panel, Nevo pointed to this standalone feature as giving greater flexibility to the Agencies in bringing merger challenges, as compared with earlier guidelines that lacked this feature.²⁸Nevo, supra note 8.

A.      Merger Challenges Based Solely on a Structural Presumption?

One way this greater flexibility might manifest would be for an agency to bring a case on a structural presumption of illegality (Guideline 1) based purely on market shares or concentration and without any further explanation of the merger’s competitive effects of concern. This standalone feature, together with a new, much more stringent aspect of the presumption, merits discussion at length both because the presumption takes pride of place as the first topic raised in these Guidelines, as Carlton noted,²⁹Carlton, supra note 15. and because a broadened and standalone presumption tends to displace competitive effects analysis. Despite considerable discussion of economic factors in § 2 and § 4 of the 2023 Merger Guidelines, one could argue that deemphasizing economic analysis is the intended outcome of the new structural presumption, as Posner seemed to suggest in his panel remarks on the importance of practical indicia to the courts.³⁰Posner, supra note 21.

It is unclear how courts might adjudicate a merger challenge based solely on a structural presumption. Courts typically require an agency to establish a prima facie case based on market structure, but the presumption is rebuttable, and defendants typically have an opportunity to rebut not only an agency’s market definition and measurement of market shares, but also elements of the agency’s particular theory of competitive harm. If an agency were to refrain from forwarding any explicit theory of harm, would it have adequately stated a claim? In any case, Nevo does not consider this scenario to be plausible;³¹Private communication with the author. this is not the flexibility to which he refers.³²Nevo, supra note 8.

B.      Changing Presumption Thresholds

The Agencies have long measured concentration by the Herfindahl-Hirschman Index (“HHI”),³³At least since 1982. U.S. Dep’t of Just., 1982 Merger Guidelines § III(A), at 7 (1982); see Toby Roberts, When Bigger Is Better: A Critique of the Herfindahl-Hirschman Index’s Use to Evaluate Mergers in Network Industries, 34 Pace L. Rev. 894, 894 (2014). which takes a value between zero (for atomistic firms) and ten thousand (for a monopolist with one hundred percent market share).³⁴2010 Horizontal Merger Guidelines, supra note 3, § 5.3 n.9, at 18. The premerger HHI is the sum of squared percentage market shares of market participants using premerger shares. The change in HHI compares the premerger HHI to what it would be if the shares of the merging firms were summed together. Between 1982 and 1997, the Merger Guidelines treated a market with a premerger HHI of more than eighteen hundred as “highly concentrated,” such that a post-merger change in HHI of more than one hundred would likely trigger a merger challenge by the Agencies, absent countervailing evidence.³⁵U.S. Dep’t of Just., 1997 Merger Guidelines § 1.51(c), at 15 (1997).

Prior to 1992, however, the 1982 and 1984 U.S. Department of Justice (“DOJ”) Merger Guidelines did not refer to any legal presumption of harm when these thresholds are exceeded, but described only how DOJ might deliberate in deciding whether to challenge a proposed merger in court.³⁶See, e.g., U.S. Dep’t of Just., 1984 Merger Guidelines § 3.11, at 14, 15 (1984) (“[M]arket share and concentration data provide only the starting point for analyzing the competitive impact of a merger. . . . However, if the increase in the HHI exceeds 100 and the post-merger HHI substantially exceeds 1800, only in extraordinary cases will such [analytic] factors establish that the merger is not likely substantially to lessen competition.”). This began to change with the 1992 Merger Guidelines, which first introduced language that “it will be presumed that mergers” exceeding the 1,800/100 thresholds “are likely to create or enhance market power or facilitate its exercise.”³⁷U.S. Dep’t of Just. & Fed. Trade Comm’n, 1992 Merger Guidelines § 1.51(c), at 15–16 (emphasis added). But the 1992 Merger Guidelines nonetheless emphasized:

[T]he Guidelines do not attempt to assign the burden of proof, or the burden of coming forward with evidence, on any particular issue. Nor do the Guidelines attempt to adjust or reapportion burdens of proof or burdens of coming forward as those standards have been established by the courts. Instead, the Guidelines set forth a methodology for analyzing issues once the necessary facts are available.³⁸Id. § 0.1, at 1, 2 (footnote omitted).

The 1997 Merger Guidelines kept the “it will be presumed” language from 1992 for the 1,800/100 thresholds,³⁹U.S. Dep’t of Just., 1997 Horizontal Merger Guidelines § 1.51(c), at 15 (1997). but no longer had a caveat about not assigning burdens of proof or burdens of coming forward with evidence.⁴⁰The 1997 Merger Guidelines quite rightly specified that the merging parties bear the burden to provide the Agencies with support for their efficiency claims, being best positioned in this regard. Moreover, the parties must show that their efficiency claims are verifiable, merger-specific, and do not flow from anticompetitive effects. See id. § 4, at 28.

With the advent of the 2010 Horizontal Merger Guidelines, the concentration thresholds for a presumption of harm increased from 1,800/100 to 2,500/200, the proffered reason being that the higher thresholds better comported with the Agencies’ accumulated experience in merger investigations. The 2023 Merger Guidelines revert to the older 1,800/100 thresholds, presumably in line with recent concerns about underenforcement,⁴¹But see Carl Shapiro & Howard Shelanski, Judicial Response to the 2010 Horizontal Merger Guidelines, 58 Rev. Indus. Org. 51, 51 (2021) (“We do not detect any effect on decided cases of the higher concentration thresholds found in the 2010 Guidelines. Both the average pre-merger level of market concentration and the average increase in market concentration alleged by the government in litigated cases to date declined after 2010.”). but with a new twist to the presumption. An added threshold in the 2023 Merger Guidelines involves the shares of the merging parties alone, regardless of the structure of the remainder of the market. By this threshold, a merger is presumptively illegal essentially if the combined share of the merging parties exceeds thirty percent.

Unlike the 1,800/100 thresholds, the thirty percent combined-share threshold in the 2023 Merger Guidelines has no historical precedent within the past four decades. If accepted by the judiciary, this change would likely have a profound impact on merger activity and enforcement, as a large proportion of filings actively investigated by the Agencies have involved merging parties whose combined share in a relevant antitrust market would exceed thirty percent. An open question is how courts might react to the Agencies’ proposal of such a categorical change in the Agencies’ presumption of illegality. At trial, merging parties could raise questions about the conceptual basis for a combined-share threshold at such a level. Concerns over the merger facilitating collusion seem unlikely to be a convincing rationale for such a threshold, absent information on the structure of the market associated with non-merging firms who could be potential partners in collusion. Unilateral effects concerns appear more plausible as a possible rationale,⁴²See Volker Nocke & Michael D. Whinston, Concentration Thresholds for Horizontal Mergers, 112 Am. Econ. Rev. 1915, 1915–19, 1939 (2022) (using merger simulations under various oligopoly models of competition to show that the change in HHI—related to the merging parties’ market shares—is more informative of predicted merger effects than the postmerger HHI level). given that the market shares of the merging parties can be a useful proxy for the intensity of competitive diversion between the parties that is internalized through their merger.

The Agencies’ rationale for the 2023 Merger Guidelines’ presumption of illegality for mergers whose combined share exceeds thirty percent may, however, have less to do with economics than with a hearkening back to a legal precedent six decades old—United States v. Philadelphia National Bank,⁴³374 U.S. 321 (1963). in which the Supreme Court enunciated such a threshold.⁴⁴Id. at 364. Nevertheless, U.S. district courts (and lower courts of appeals) have generally adopted the structural presumptions in the Agencies’ previous merger guidelines, rather than adhere to the thirty percent combined-share threshold in Philadelphia National Bank.⁴⁵There are surely merger cases the Agencies have brought and lost which might have been won on a thirty percent threshold. To cite one recent example, in the FTC’s failed bid to block Microsoft’s acquisition of Activision, the merging parties likely had more than 30 percent share in a market for multi-game content library subscription services. See Fed. Trade Comm’n v. Microsoft Corp., 681 F. Supp. 3d 1069 (N.D. Cal. 2023); 2023 Merger Guidelines, supra note 1, § 2.1, at 6 n.15 (listing cases). If the Agencies seek to convince the judiciary to adopt a combined-share threshold, arguments grounded in an economic analysis of competitive effects⁴⁶See Nocke & Whinston, supra note 42, for an example of such analysis. would seem more likely to gain purchase than a simple recitation of Philadelphia National Bank, in which the Supreme Court offered no explanation whatsoever of the reasoning underlying the threshold.

C.      Flexibility from Not Needing a Structural Presumption?

The flipside to the flexibility of having the option to use a structural presumption as the sole basis for a merger challenge (Guideline 1) is that Guidelines 2–6 can likewise each provide a standalone basis for a merger challenge without the need to also establish a structural presumption. This is the flexibility that Nevo referred to in his panel remarks.⁴⁷Nevo, supra note 8. This feature, Nevo noted, represents a point of continuity between the 2023 Merger Guidelines and the 2010 Horizontal Merger Guidelines, the latter of which downplayed market concentration and described how the potential for unilateral effects harm could be obtained directly through evidence on sales diversion between the merging parties.⁴⁸Id.; see 2010 Horizontal Merger Guidelines, supra note 3, § 5.3, at 19 (“The purpose of these [concentration] thresholds is not to provide a rigid screen to separate competitively benign mergers from anticompetitive ones . . . . Rather, they provide one way to identify some mergers unlikely to raise competitive concerns and some others for which it is particularly important to examine whether other competitive factors confirm, reinforce, or counteract the potentially harmful effects of increases concentration.”) (emphasis added); 2010 Horizontal Merger Guidelines, supra note 3, § 6.1, at 21 (“Diagnosing unilateral price effects based on the value of diverted sales need not rely on market definition or the calculation of market shares and concentration.”).

Direct evidence for competitive effects—obtained through careful economic analysis of relevant facts—can be reasonably informative of a merger’s likely impact through unilateral effects and, in this regard, would tend to be superior to relying on indirect and coarser concentration proxies. Relying solely on such direct evidence, however, could exacerbate the practical problem of communicating nuanced, complex economic analysis to a non-specialist judge. The concepts of market definition, calculating market shares, and concentration—superficially simple though often subject to similarly complex economic analysis—may be more palatable for judges. This potential is especially apparent given the long history of merger case law that has relied on such analyses.

To sum up the discussion of flexibility thus far, an agency seeking to chart new waters by challenging a merger based on a market concentration or share-based presumption of illegality, without a compelling competitive effects theory of harm, would likely get a cold reception from the judiciary. The same is also likely true if the agency were to base a merger challenge entirely on direct evidence of anticompetitive effects, without market definition or a structural presumption.

D.      Flexibility Through New Sources of Harm and New Ways of Assessing Old Harms

Flexibility can also come from identifying new sources of competitive harm or describing new ways of assessing previously known sources of harm. In the latter category, Guideline 4 on the elimination of a potential entrant, which was discussed in the 2010 Horizontal Merger Guidelines,⁴⁹2010 Horizontal Merger Guidelines, supra note 3, § 5.3, at 18. Guideline 6, on entrenching or extending a dominant position, covers much the same ground as Guideline 4. appears in the 2023 Merger Guidelines to be assessed according to a new standard: “The more concentrated the market, the greater the magnitude of harm to competition from any lost potential entry. . . . [Thus,] the higher the market concentration, the lower the probability of entry that gives rise to concern.”⁵⁰2023 Merger Guidelines, supra note 1, § 2.4, at 10. This is an expected harm standard (i.e., the magnitude of potential harm is multiplied by the likelihood of the harm occurring). If the resulting expectation of harm surpasses some threshold, the Agencies will challenge the acquisition of the potential entrant.

If the Agencies consider the acquiring incumbent to have a dominant or monopoly position, and the potential entrant has some chance of eventually rendering the market a duopoly, the gains to competition from entry could be huge, justifying an agency challenge to the acquisition even if the entrant’s chance of success is small. Setting aside the problem of assessing the likelihood of so successful an entry in a remote future, an expected-harm standard would impermissibly combine the two separate and distinct requirements of Clayton § 7, that the posited harm be both reasonably probable and substantial.

Guideline 5 on vertical foreclosure hews fairly closely to the superseded 2020 Vertical Merger Guidelines, but with the addition of a structural presumption. After the Agencies define a “related market” (e.g., for an input that is important to rivals’ ability to compete in the relevant product market), “[t]he Agencies will generally infer, in the absence of countervailing evidence, that the merging firm has or is approaching monopoly power in the related product if it has a share greater than 50% of the related product market.”⁵¹Id. § 2.5.A.2., at 15–16 n.30. These “factors alone are a sufficient basis” to challenge the merger.⁵²Id. § 2.5.A.2., at 16. Shelanski expressed concern with this structural threshold as not being well-rooted in economics. Vertical foreclosure occurs only if it is profitable to the firm contemplating the tactic. The 2023 Merger Guidelines offer no explanation for why a market share of 50 percent in a related market is a reliable indicator of such profitability.⁵³See Howard Shelanski, Joseph and Marilyn Sheehy Chair in Antitrust L. & Trade Regul. and Professor of L., Georgetown Univ. L. Center, Remarks at the 27th Annual George Mason Law Review Antitrust Symposium, Panel One: The FTC and DOJ’s Draft Merger Guidelines (Feb. 23, 2024) (transcript on file with the George Mason Law Review).

Guideline 9 on multi-sided platforms helpfully introduces a new fact pattern within which mergers may cause harm. Especially helpful (though brief) is the discussion of network effects that define platforms: “The value for groups of participants on one side [of a platform] may depend on the number of participants either on the same side (direct network effects) or on the other side(s) (indirect network effects).”⁵⁴2023 Merger Guidelines, supra note 1, § 2.9, at 24.

The very next sentence, however true, raises a question about enforcement policy: “Network effects can create a tendency toward concentration in platform industries.”⁵⁵Id. Consider a merger of platforms in a market where consumers prefer to single-home (i.e., participate on just one platform). Would the Agencies challenge such a merger? The platform merger would tend to increase market concentration but would also tend to improve the realization of network effects, to the benefit of consumers participating on the merged platform, as well as drawing new consumers to the merged platform. All else equal, such a merger could sharpen competition. Platform rivals to the merged platform would have enhanced incentives to offer their participants lower prices or higher quality services lest their participants leave for the merged platform. Higher concentration can benefit consumers when the source of the increased concentration is the growth of firms that are more efficient than their rivals in delivering benefits to market participants through network effects or by other means.⁵⁶See Harold Demsetz, Industry Structure, Market Rivalry, and Public Policy, 16 J.L. & Econ. 1, 1–3 (1973). This does not deny that platform mergers can have anticompetitive effects, but a competitive-effects analysis is needed to settle the question.

II.      From Would to Could

The Agencies’ merger guidelines have traditionally served a dual role, as expressed in the 2010 Horizontal Merger Guidelines:

These Guidelines are intended to assist the business community and antitrust practitioners by increasing the transparency of the analytical process underlying the Agencies’ enforcement decisions. They may also assist the courts in developing an appropriate framework for interpreting and applying the antitrust laws in the horizontal merger context.⁵⁷2010 Horizontal Merger Guidelines, supra note 3, § 1, at 1.

Suggestive of a break with the past, there is no comparable statement about the value of transparency or court guidance in the 2023 Merger Guidelines.

Transparency in merger enforcement policy is important to informing business decisions on what mergers to propose. The informativeness of merger guidelines derives from the Agencies’ public commitment to adhere to them. Therein lies a tradeoff. The more clearly the Agencies express the commitment, the more restricted the Agencies’ scope for discretion tends to be. That is all to the good when limiting discretion is in the service of clarity and integrity, but could become problematic if new theories of harm or new fact patterns crop up that were not anticipated at the time of the guidelines’ issuance.

Reducing uncertainty about the Agencies’ enforcement posture economizes on business resources in proposing mergers but may complicate the Agencies’ ability to challenge a harmful merger that appears in a new, unanticipated setting. If so, the optimal degree of guidelines clarity would involve a tradeoff between realizing business resource savings, on the one hand, and retaining flexibility to adapt to future contingencies on the other. The balance struck between the two would depend on the weight the Agencies place on the opposing considerations.

Insofar as the balance has shifted toward greater flexibility in the 2023 Merger Guidelines, there is a concomitant loss in transparency. In his panel remarks, Shelanski concluded that these Guidelines are a policy document, not a guidelines document, given the much greater uncertainty about how the Agencies will treat proposed mergers.⁵⁸Shelanski, supra note 53.

Perhaps the most substantial proposed expansion of flexibility in the 2023 Merger Guidelines is the shift in language from a likelihood of competitive harm standard in previous merger guidelines to a risk of illegality standard, with a focus on circumstances where mergers “[c]an [v]iolate the [l]aw,” but with little explication of how high a risk of illegality would trigger an agency challenge.⁵⁹2023 Merger Guidelines, supra note 1, § 1, at 2–3 (Guidelines 2 through 6 titles) (emphasis added). Put succinctly, the standard has become “could,” not “would.”⁶⁰Nevo, supra note 8.

The justification for this apparent shift in standard appears to be the Agencies’ emphasis on “may be” in the Clayton § 7’s “may be to substantially lessen competition.”⁶¹2023 Merger Guidelines, supra note 1, § 1, at 1 (quoting California v. Am. Stores Co., 495 U.S. 271, 284 (1990)). But it has been understood for nearly a century, beginning with International Shoe Co. v. Federal Trade Commission⁶²280 U.S. 291 (1930). in 1930, that “may be” in Clayton § 7 refers to a “reasonable probability” that the merger would lessen competition (or tend to create a monopoly).⁶³Id. at 293, 298. “Reasonable probability” appears several times in the 2023 Merger Guidelines,  but in the context of whether a firm outside a market is likely to enter so that being acquired by an incumbent may lessen competition. 2023 Merger Guidelines, supra note 1, § 1, §2.4.A., at 1, 11–12. And it is generally understood that a reasonable probability is considerably greater than zero—it is not a “mere possibility.”⁶⁴Int’l Shoe Co. v. Fed. Trade Comm’n, 29 F.2d 518, 519–20 (1st Cir. 1928), rev’d, 280 U.S. 291 (1930). To the extent the Agencies seek to be faithful to the statutory text as interpreted by the Supreme Court, an agency challenge to a merger is justifiable only if the merger’s “risk” of lessening competition rises to the level of a reasonable probability—to would, not merely could.

Further, the very next word after Clayton § 7’s “may be” is “substantially.”⁶⁵15 U.S.C. § 18. Specifying a substantial lessening of competition can only be reasonably understood as requiring an assessment of the magnitude of competition potentially lessened. It is hard to see how such a quantitative assessment could be undertaken without recourse to an economic analysis of competitive effects. The analysis need not result in a precise quantification, but some quantification is clearly required by the statutory text—sufficient to determine whether the merger’s lessening of competition would be substantial.

If the 2023 Merger Guidelines’ repeated references to competitive risks and how mergers “can” violate the law are intended to afford the Agencies greater flexibility in bringing merger challenges, that aspiration is circumscribed by Clayton § 7’s requirement that the posited lessening of competition be both reasonably probable and substantial.⁶⁶Id.; 2023 Merger Guidelines, supra note 1, § 1, at 1.

III.      From Economic Analysis to Legal Analysis?

As discussed in Part II, economic analysis is the means by which to quantify, however imprecisely, whether a lessening of competition through merger is reasonably likely and would be of substantial magnitude, as required by Clayton § 7. In his panel remarks, Posner stated that although economic analysis can be helpful, the antitrust statutes as interpreted by the Supreme Court are controlling in merger enforcement.⁶⁷See Posner, supra note 21. He further stated that Clayton § 7 is about more than just economic efficiency; it also reflects concerns about corporate consolidation. Yet an extensive and thorough analysis of antitrust rulings by the Supreme Court shows that only competition matters in the Court’s rule-of-reason analysis.⁶⁸See Gregory J. Werden, Antitrust’s Rule of Reason: Only Competition Matters, 79 Antitrust L.J. 713, 713–14 (2014) (explaining that “demonstrating that the impact of a challenged restraint on competitive process is the only issue the Court considers under the rule of reason”); see also Phillip Areeda, The Rule of Reason—A Catechism on Competition, 55 Antitrust L.J. 571, 572–73, 580 (1986). Moreover, the realization of efficiencies typically spurs sharper competition, and competition spurs the pursuit and realization of efficiencies—a virtuous cycle that tends to benefit counterparties in trade.⁶⁹See Raskovich et al., supra note 23, at 3.

Economics is not an alien appendage tacked onto antitrust law but the integral means by which the content of antitrust law is determined and reappraised over time. Although Kimble v. Marvel Entertainment, LLC⁷⁰576 U.S. 446 (2015). is not an antitrust case, Justice Elena Kagan’s majority opinion described, as an aside, the integral role an evolving understanding of economics plays in interpreting the Sherman Act’s prohibition on “restraint of trade”:

This Court has viewed stare decisis as having less-than-usual force in cases involving the Sherman Act. Congress, we have explained, intended that law’s reference to “restraint of trade” to have “changing content,” and authorized courts to oversee the term’s “dynamic potential.” We have therefore felt relatively free to revise our legal analysis as economic understanding evolves and . . . to reverse antitrust precedents that misperceived a practice’s competitive consequences. Moreover, because the question in those cases was whether the challenged activity restrained trade, the Court’s rulings necessarily turned on its understanding of economics.⁷¹Id. at 461–62 (emphasis added) (internal citations omitted).

The logic of the foregoing statement also applies to Clayton § 7’s “lessen competition or tend to create a monopoly.” To the extent the Agencies have sought to retreat from economic analysis in favor of a return to fidelity to the antitrust statutes and merger case law, they appear to have misconstrued the fundamental role of economics in informing the meaning of the antitrust statutes.

Conclusion

Through speeches and policy statements, the Agencies’ current leadership has expressed concerns that recent merger enforcement has been lax. The changes from earlier merger guidelines in the 2023 Merger Guidelines were motivated to address these concerns. An initial question is whether and to what extent the changes in these Guidelines are fit for the purpose. Were the superseded guidelines not flexible enough to accommodate a more aggressive enforcement posture? The greater flexibility in these Guidelines is a departure from Clayton § 7, which requires the posited harm from a merger to be both reasonably probable and substantial. Would a court be amenable to a departure and weakening in the standard of proof to mere “risk” of competitive harm?

Further, the apparent shift away from economics toward reliance on pull-quotes from old case law as tools of merger analysis does not, in fact, reflect fidelity to case law. Supreme Court dicta indicate that a court’s understanding of economics invests the antitrust laws with their “dynamic meaning.” Finally, how sustainable will the 2023 Merger Guidelines turn out to be? Would a future administration with different enforcement policies find these Guidelines workable or see a need for substantial revision? The 2023 Merger Guidelines reflect some continuity but also much conflict with the previous four decades of progress on “The Guidelines Project.” The Agencies have embarked on a voyage amidst rough seas, with shoals threatening on all sides. One hopes the Guidelines Project will survive if this ship goes down.