Now that the Justice Department and the Federal Trade Commission are nearly done revising their so-called horizontal guidelines for mergers between rivals, should regulators take a look at the 34-year-old guidelines for vertical deals?
That question was put to a panel at a conference Wednesday hosted by Main Justice and O’Melveny & Myers LLP at the Hotel Monaco in Washington, D.C., moderated by Richard Parker, co-chair of O’Melveny’s antitrust and competition practice.
Economist Steven C. Salop, who teaches at Georgetown University Law Center, argued the agencies should revisit the 1984 guidelines for assessing such deals. A so-called vertical merger occurs when companies that make different pieces of the same product want to join forces, or when a company buys its customer or a key supplier.
There has been a long debate about the circumstances under which a vertical merger might be considered anti-competitive. Salop, who is the author of an influential 1995 paper on the topic, believes such tie-ups have the potential to harm competition and should bear careful scrutiny.
“The 1984 guidelines are horrible,” Salop said. “Those guidelines were not designed to bring cases, they were designed to not bring cases.”
The Reagan-era guidelines don’t actually help staff analyze a vertical transaction and don’t outline how to build a case against a vertical deal, Salop argued.
The vertical guidelines, Salop suggested, needed revising more so than the horizontal guidelines did.
“The staff has no idea to evaluate a vertical merger,” he said.
But Richard Feinstein, who heads the competition bureau at the FTC, suggested such revisions were unlikely to come anytime soon. “It’s not worth updating guidelines in an area where there are relatively few challenges and we can provide guidance on a case by case basis,” Feinstein said.
Instead, defense lawyers said, Salop’s 1995 paper serves as a better roadmap to assess vertical deals than the agencies’ guidelines. “Quite honestly, I pull out Steve’s article and use that to advise clients more than the ‘84 guidelines,” said panelist Joseph Krauss, who is a partner at Hogan Lovells.
Enforcers agreed. “Another reason we don’t need to update the guidelines is because we have Steve’s article,” Feinstein said.
View video of the exchange below.
A Discussion On Updating Vertical Merger Guidelines from Main Justice on Vimeo.