Federal antitrust officers released new design guidelines for reviewing anti-competitive mergers on Wednesday, doubling down on their aggressive scrutiny of digital markets.
The rules, proposed by the Department of Justice and the Federal Trade Commission, direct enforcers to investigate online platform mergers more broadly than ever before. The proposal doesn’t explicitly name technology companies like Amazon, Meta or Google, but many of the rules imply parts of their merger and corporate strategies.
“We are updating our enforcement manual to reflect the reality of how companies do business in the modern economy,” FTC Chair Lina Khan said in a statement Wednesday.
In particular, the rules put a new focus on “versatile” platforms, or online companies that offer different products or services that “could benefit from each other’s participation”. This includes companies that run a platform but also use it to sell their own products, such as Amazon Basics.
The rules also include a more comprehensive evaluation of large digital companies that could choose to buy nascent competitors as a means of entrenching their market dominance. In 2020, the FTC sued Meta on similar grounds, accusing the Facebook owner of buying up smaller companies like Instagram and WhatsApp to quell the competitive threat they posed to his company. The lawsuit in that case is still pending.
“As markets and commercial realities change, it is vital that we adapt our law enforcement tools to keep pace so that we can protect the competition”
While the rules aren’t binding and don’t change current law, they would serve as a framework for antitrust enforcement officers investigating proposed mergers. The public has until September 18 to comment on the proposal before the agencies finalize the rules.
“As markets and commercial realities change, it is vital that we adapt our law enforcement tools to keep pace so that we can protect competition in a way that reflects the intricacies of our modern economy. Simply put, the competition looks different today than it did 50 — or even 15 — years ago,” Deputy Attorney General for Antitrust Jonathan Kanter said in a statement Wednesday.
The original merger guidelines were published in 1968 and have since been updated and revised several times. In 2021, Biden’s FTC voted in favor repeal the vertical merger guidelines for 2020 made under former President Donald Trump, saying it rested on “flawed economic theory” regarding the competitive advantages of such mergers.
Historically, antitrust enforcers have taken a softer stance on vertical mergers, but under the new draft rules, some of these deals could harm consumers. A merger is considered “vertical” when it combines companies operating in different parts of the same supply chain. A recent example is Microsoft’s proposed purchase of Activision Blizzard, which the FTC was unable to block earlier this month.
The FTC and DOJ have long evaluated mergers based on how they affect prices, or consumer welfare standard. By targeting digital markets, where services often cost little or nothing in the first place, the rules could signal a change in approach away from the long-running norm. It is still unknown how courts will accept this shift in strategy. Last week, Republicans on the House Judiciary Committee accused Khan of taking losing cases to force Congress to change the antitrust law.
Technology lobbies and trade groups have already criticized the proposal to include language directly aimed at digital platforms, saying it could force US companies abroad.
“As technology and AI permeate more sectors of the economy, it does not make legal or economic sense to create a special set of rules that only apply to specific companies,” said Matt Schruers, president of the Computer and Communications Industry Association , in a statement Wednesday. .
Progressives have supported similar antitrust rule changes in the past. In a statement Wednesday, Sen. Elizabeth Warren (D-MA) said, “Giant corporations and their armies of lobbyists will weep at the prospect of more competition, but this move by the Biden administration is welcome news for American small businesses, workers, and consumers. .”
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