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US mergers doubled in 2021 so FTC and DoJ seek new guidelines to stop illegal ones

The US Federal Trade Commission (FTC) and Department of Justice (DoJ) Antitrust Division are launching a joint public inquiry as a first step to modernising merger guidelines and preventing anticompetitive deals.

“Times have changed because the advent of the digital economy has transformed industry,” said the DoJ’s assistant attorney general, Jonathan Kanter, in a press conference on Tuesday. “The digital revolution has not only impacted new markets like tech, but markets across our economy, many of which have been rebuilt from the inside out.”

FTC chair Lina Khan said it was time for a merger review because the number of global deals reached in 2021 was the highest ever recorded – at a whopping $5.8 trillion –  with the DoJ receiving twice the number of merger filings as in 2020.

The body said its hope was that the new merger guidelines would help it to better detect and prevent anticompetitive deals.

David Lawrence, counsel to the assistant attorney general, said the increased filings had put a strain on the department processing them, which is likely an added incentive to get the these guidelines sorted.

According to Khan, a lack of competition in some market segments had made them less resilient, and the current merger boom mostly benefited investment banks while harming everyday citizens through diminished opportunity, higher prices, lower wages, and lagging innovation.

“Hearing from a broad set of market participants, especially those who have experienced first-hand the effects of mergers and acquisitions, will be critical to our efforts,” said Khan.

The Request for Information (RFI) seeks comments that can inform the DOJ and FTC of effective ways to strengthen the guidelines for a more forceful antitrust policy.

The DoJ and FTC said the agencies are “particularly interested in aspects of competition the guidelines may underemphasize or neglect, such as labor market effects and non-price elements of competition like innovation, quality, potential competition,” as well as “specific examples of mergers that have harmed competition.”

Within the details of the RFI is an entire section on digital markets. The last overhaul of merger guidelines happened in 2010, and before that in 1984. At the press conference, chief economist to the FTC chair John Kwoka explained these industries weren’t as relevant and therefore not addressed 12 years ago.

Many of the companies thriving in the new digital economy, like those offering free services or much of Big Tech, take on a business model that flies under the radar of regulators, clearly using the inability to categorize, identify and measure their antics to their advantage.

A recent University College London (UCL) study on Big Tech SEC-10k forms concluded that the regulatory body’s inability to account for a business model reliant on free services obscures of a company’s business outlook and any abuses of market power.

“Public investors, regulators and competitors simply do not know how exactly Big Tech creates and extracts value from the ecosystems that it has come to dominate,” said the researchers.

Government entities have indeed struggled to effectively regulate Big Tech, but that hasn’t stopped them from trying. An overhaul of the merger guidelines likely signals a further crackdown on the industry.

Replies to the RFI have already begun rolling in, and range from outrage that the comment period of 60 days is too long and gives a chance for a misinformation campaign to take hold, to concerns about the freshly announced acquisition of Activision Blizzard by Microsoft.

Microsoft paid $68.7bn for the gaming company, the purchase presumably including the transference of the headache of Activision’s current legal woes.

The FTC and DoJ panel at the press conference declined to comment about Activision Blizzard, nor any other specific merger. ®