Dechert Provides Comments to the Antitrust Agencies on the Draft Vertical Merger Guidelines

The antitrust/competition group submitted comments today to the U.S. Department of Justice and the Federal Trade Commission on their Draft Vertical Merger Guidelines. The purpose of the agencies’ Draft Guidelines is to describe how they review vertical mergers – i.e., mergers between companies at different levels in the same supply chain.

We applaud the agencies for providing greater clarity regarding their current enforcement practices. Reducing uncertainty in the evaluation of vertical mergers is critically important given the dearth of case law over the last 40 years, the limited number of enforcement actions by the agencies, and the fact that the agencies have not had any working vertical merger guidelines in many years. 

Guidance is particularly helpful because vertical merger investigations often take longer than horizontal merger reviews and are more burdensome on businesses. Data from the Dechert Antitrust Merger Investigation Timing Tracker (DAMITT) indicates that from 2018-2019 significant vertical merger investigations averaged 13.7 months from deal announcement to the conclusion of the investigation—3.0 months longer than those without vertical aspects. During this same period, 60 percent of the significant investigations that lasted more than 18 months involved vertical aspects, even though such reviews accounted for only a fraction (16 percent) of all significant investigations.

Dechert’s comments are based on its attorneys’ extensive experience representing merging companies in more than one third of all significant merger investigations involving vertical issues since 2017. In particular we noted that there were opportunities to provide additional guidance to businesses and the legal community beyond the general analytical framework laid out in the current draft. Our recommendations, if implemented in the final Vertical Merger Guidelines, will provide additional clarity on the following: 

• The role of market concentration in the analysis.
• How the agencies should analyze the likelihood that the merger will foreclose rivals from inputs they need to compete effectively. 
• The role of business records in the analysis.
• How firewalls can resolve concerns about the exchange of competitively sensitive information.
• The role of merger retrospectives.