On Sept. 13, Assistant Attorney General Jonathan Kanter delivered remarks at the Georgetown Antitrust Law Symposium, largely focusing on merger control enforcement at the Department of Justice (DOJ) under his leadership. After touting the Antitrust Division’s increased appetite for merger control litigation in the 10 months since his appointment, delivering on a promise that negotiated divestitures should be “the exception, not the rule,” Kanter offered a preview of DOJ’s thoughts as it collaborates with the Federal Trade Commission (FTC) on updating their joint Horizontal Merger Guidelines and Vertical Merger Guidelines. President Biden instructed the agencies to review the merger guidelines in his 2021 Executive Order on Promoting Competition in the American Economy.
Two themes emerged from Kanter’s remarks, which indicate likely objectives for the new merger guidelines: that speculative theories of harm are sufficient to block a deal under the Clayton Act and that, at times, direct evidence of competition dynamics can supplant a structural analysis of concentration in a fastidiously defined market.
First, Kanter maintained that the regulators have interpreted the antitrust statutes too narrowly. According to his critique, the agencies have erred when they have “treated the test for illegality as essentially a rule of reason balancing framework,” as though a challenge may only be successful if the regulators can “concretely predict the precise effects of a merger on prices.” The result, he argued, “leaves underenforced a statute that was meant to be a prophylactic.” Instead, Kanter maintained that the statute is not limited to mergers where regulators may show a precise, concrete harm to the market. Quoting the Supreme Court’s 1990 decision in California v. American Stores, Kanter maintained that Section 7 offers “a relatively expansive definition of antitrust liability,” under which the regulator “need only prove that its effect may be substantially to lessen competition.” Kanter specially noted that the Court italicized the words “may be” to emphasize that speculative theories of harm should suffice to block a deal under the Clayton Act.
Second, Kanter indicated that the agencies should embrace direct evidence as an alternative to analyses of concentration in a relevant market. He was clear that increased concentration in a highly concentrated market should still give rise to the familiar “structural presumption” that “always indicates a prima facie risk of oligopoly behavior.” That said, Kanter was emphatic that the regulators “obsess about market definition” and argued that they need not “focus on the structure of the market” to make out their case against a merger. In some cases, Kanter would rather have the regulators look to direct evidence of head-to-head competition, which “will often be more useful than a market definition exercise.” In so doing, he argued, DOJ and the FTC will “adapt” their analytical framework to meet different varietals of competition that present themselves in different transactions. It remains to be seen how this “adaptive” approach may be distilled into generalized guidelines that offer genuine transparency and predictability to the business community.
Kanter’s brief remarks could not touch on every issue likely to be addressed in the updated guidelines. Notably, he did not address how vertical merger analysis may change; since September 2021, the FTC has withdrawn its approval of the Vertical Merger Guidelines, rejecting their treatment of efficiencies generally and the elimination of double marginalization particularly. (DOJ has not withdrawn its approval of the Vertical Merger Guidelines, and the Horizontal Merger Guidelines remain in force at DOJ and the FTC as the agencies work through their revisions.)
Still, businesses can expect the updated guidelines to reach more deals than their predecessors did. DOJ has already reviewed the 5,000 public comments it solicited and received earlier this year, and staff members of both agencies are preparing a draft of the new guidelines, which will eventually be published for further public comment before the guidelines are finalized. But even before that draft is published, businesses will notice the “prophylactic” effect of this new regime on a deal-by-deal basis. Companies proposing transactions that may be subject to scrutiny by DOJ should be mindful of its expressed preference for litigation rather than negotiated remedies. While this approach could mean less enforcement overall, as DOJ chooses which matters to litigate and which to “let go,” it may also mean that quick, efficient resolutions are few and far between. Parties may wish to consider this dynamic when drafting transaction agreements and allocating risks associated with merger clearance.
By: Joshua J. Jowdy and Thomas E. Hogan
 “President Biden’s Executive Order: A Revolution in Antitrust Enforcement?” (July 14, 2021)
 “Federal Trade Commission Withdraws Vertical Merger Guidelines and Commentary” (Sept. 15, 2021)