Open Markets and Allies Reject Proposed Guidelines for Vertical Mergers as Bad Law and Bad Policy
February 26, 2020
Washington — The Open Markets Institute, the American Economic Liberties Project, and antitrust scholars Frank Pasquale and Maurice Stucke filed a comment on Tuesday evening with the Federal Trade Commission (FTC) and the Department of Justice (DOJ) sharply criticizing their proposal to rewrite the Clayton Act and encourage vertical mergers that unnecessarily – and sometimes dangerously – blur the line between supplier and customer.
The Open Markets Institute and our allies agree there is a pressing need for new vertical merger guidelines. The existing guidelines were fundamentally flawed when they were first introduced by the Reagan Administration in 1984. These shortcomings have become only more evident in the era of immense online platforms such as Google, Facebook, and Amazon, which operate in multiple markets simultaneously.
As the comment explains, vertical mergers allow the combined corporation to threaten competitive market structures in multiple ways. Vertically integrated corporations can abuse their market power by squeezing competitors both downstream and upstream in the supply chain. Vertical mergers can also eliminate the very downstream or upstream firms that would be the most likely to expand internally and compete in the future with the acquiring firm. Until the Reagan – era changes, the U.S. generally outlawed efforts by any supplier of a vital service to enter a line of business that put it into competition with its own customers.
OMI and its allies call on the FTC and the DOJ to draft new guidelines that are consistent with the text and purpose of the Clayton Act. As a model, enforcers should turn to the DOJ’s 1968 Merger Guidelines, which establish clear, easy-to-understand market share thresholds. The 1968 guidelines also explicitly reject the argument that an otherwise illegal vertical merger should be allowed on the grounds that it would create productive efficiencies.
Congress intended the Clayton Act to stop mergers that threaten competitive market structures or tend to create a monopoly. “The government should draft new vertical merger guidelines that are faithful to this statute, instead of this proposed effort to rewrite the statute for the benefit of powerful corporations and to the detriment of consumers, business, workers, and the general public,” said Open Markets Legal Director Sandeep Vaheesan.