Vertical mergers traditionally haven’t been subject to the same regulatory scrutiny as those involving direct competitors. A recent Jenner & Block memo suggests that recent FTC decisions involving merger challenges, as well as the FTC’s hearings on competition & consumer protection in the 21st century indicate that the climate is changing. Here’s an excerpt:
Traditionally, the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) have reviewed vertical mergers with more leniency than horizontal mergers. With the Division’s challenge of the AT&T-Time Warner deal and the FTC’s settlement decree in the Staples-Essendant merger, some wonder if the traditional approach may be undergoing a change.
The FTC’s decision earlier this year by the set of all new commissioners on the Staples-Essendant merger, reflected its first bipartisan split. Although the majority decision emphasized the FTC’s continued commitment to mainstream antitrust policy, statements by the Commissioners, especially the dissenting Democratic Commissioners, indicated a possible divergence away from that policy and that vertical mergers may be facing heavier scrutiny going forward.
On April 12, 2019, in the FTC’s 13th hearing of a series of 14 on Competition and Consumer Protection in the 21st Century, FTC commissioners further opined on the benefits of heavier scrutiny, this time on both sides of the political aisle.
In a potentially ominous development, the memo also notes that several Commissioners extolled the potential benefits of “merger retrospectives” – which involve reviewing the effects of a transaction on competition following the closing, and potentially initiating post-closing challenges to the deal.
The memo also points out that the FTC remains relatively friendly to vertical mergers in comparison to the DOJ. So far, the FTC’s enforcement actions against non-horizontal mergers have been limited to behavioral remedies, while the DOJ has required structural remedies such as divestitures in some recent vertical mergers.
– John Jenkins, DealLawyers.com, May 13, 2019
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