The Department of Justice's Antitrust Division and the Federal Trade Commission today released final horizontal merger guidelines - and triggered a biting critique from FTC Commissioner J. Thomas Rosch.
"What [the antitrust] bar and their clients deserve is what these guidelines promise at the outset — namely, that they will be a complete and accurate description of what our enforcement staff considers in merger investigations and that they will be a helpful guide to courts,” wrote Rosch, a Republican and former partner at Latham & Watkins.”These guidelines are neither.”
“I had hoped that this would be an instance in which the commission would lead, not be led by, the staff. Lamentably, that did not happen,” he continued, calling the final guidelines “flawed” even as he concurred with their issuance.
The joint agency project got underway in September 2009 and a draft version of the guidelines was released in April. The agencies held a series of workshops around the country and received 31 comments on the draft version from lawyers, trade groups, economists, and public interest groups.
The new guidelines differ from the old in a number of respects, including a new section on evidence of adverse competitive effects, a de-emphasis on market definition, a revised explanation of the hypothetical monopolist test, and an update on the concentration thresholds that determine whether a transaction warrants further scrutiny.
DOJ Antitrust Chief Christine Varney in a statement said the guidelines “better reflect the agencies’actual practices,” while FTC Chairman Jon Leibowitz praised their “clarity and predictability.”
As for Rosch, known for his interest in behavioral economics antitrust theory, his critique is lengthy. He complained that “the perspectives of all stakeholders were not considered equally,” and that economists “initiated and largely managed this project.”
As for the input from the workshops, he said, the participants “were mostly members of the defense bar, academics, and other kindred souls, and the comments apparently given the most serious attention by the project’s architects (and incorporated in these guidelines) largely reflected those same perspectives.”
“This process inevitably led to overemphasis on economic formulae and models based on price theory,” Rosch wrote. He took particular objection to economic models relying largely on margins. And he noted the guidelines “incorporate the concepts, if not the exact models, that two of the architects of the project have proposed in economic papers and articles.”
His conclusion: “These guidelines do not describe the way that the Bureau of Competition and enforcement staff at the commission proceed today. They also do not reflect the way that the courts proceed.”
Former FTC policy director David Balto said he was not shocked by Rosch’s comments. “Rosch speaks based on four decades of litigation experience and his view carries a lot of weight,” Balto said. “Economics may be informative but it plays a limited role especially when the FTC goes to court.”