The Department of Justice Antitrust Division and Federal Trade Commission released their completed version of the new 2023 Merger Guidelines. Susan Athey, Chief Economist for the DOJ Antitrust Division, and Aviv Nevo, Director of  the FTC’s Bureau of Economics, explain how the revised document addresses the comments they received on the Draft Merger Guidelines that were expressed in ProMarket and elsewhere.

On December 18, 2023, the Department of Justice Antitrust Division and the Federal Trade Commission (the Agencies) released the 2023 Merger Guidelines. These guidelines replace the 2010 Horizontal Merger Guidelines (2010 HMG) and the 2020 Vertical Merger Guidelines (2020 VMG), jointly referred to as the “previous Guidelines.” The 2023 Merger Guidelines are the result of an extensive comment and consultation period that lasted almost two years, including multiple rounds of comments both from the public and from economists and attorneys at the Agencies. The public process included a Request for Information on Merger Enforcement and the release for public comment of Draft Merger Guidelines in July 2023.  After receiving and reviewing thousands of comments on the DMG, including hundreds of in-depth comments, and participating in numerous conferences, panels, and small-group discussions, the Agencies carried out a revision process culminating in the December 18 release.    

Over the last several months, the antitrust community came together for an incredibly thoughtful discussion on the details of merger review. We are extremely grateful to the commentators and participants in various conferences who devoted their time and energy to help the Agencies in the revision process. We personally have learned a great deal from the feedback and have benefited enormously from this extensive interaction, and it greatly improved the 2023 Merger Guidelines.  

In this article, we share our thoughts on some of the notable revisions included in the 2023 Merger Guidelines and how the revisions incorporate the feedback the Agencies received on the Draft Merger Guidelines, including the commentary posted on ProMarket over the past few months. We do not aspire to describe all of the revisions here; we look forward to sharing more detailed thoughts in future publications, as the discussion over the Agencies’ approaches to merger review continues.    

The Main Goals and Themes of the 2023 Merger Guidelines    

To set the stage for our discussion, we start by reviewing the Agencies’ goals in revising the previous Guidelines and the main themes of the 2023 Merger Guidelines. The primary goal was to update the Guidelines to reflect the evolution of market realities the Agencies face in merger investigations and the corresponding advances in how the Agencies analyze these mergers. Achieving this goal involved looking back and reflecting on where merger analysis has faced challenges in the past, as well as looking forward and asking what new challenges may lie ahead. To meet these challenges, the 2023 Merger Guidelines sharpen and expand the tools, methods, and analyses that the Agencies use to evaluate mergers, describing in more detail how they apply in a range of scenarios that have become increasingly common in the modern economy. 

To do this well, it was critical for the revision process to be informed by the accumulation of the Agencies’ experience as well as by advances in economic tools and evidence. 

Two themes that run throughout the document contribute to achieving its overarching goal: the 2023 Merger Guidelines aim to be comprehensive in coverage, and they recognize that analysis is designed to assess the risk that the proposed merger substantially harms competition. 

First, the 2023 Merger Guidelines are more comprehensive than the previous Guidelines. They now cover, in one document, the most common theories of harm analyzed by the Agencies. The 2023 Merger Guidelines therefore include not only theories of harm that were previously discussed in the 2010 HMG and the 2020 VMG, but also theories and applications that were only briefly discussed or not discussed at all in previous guidelines. This expanded discussion addresses topics such as potential competition, entrenchment, serial acquisitions, multi-sided platforms, and labor markets.   

The 2023 Merger Guidelines are also more comprehensive in the forms and dimensions of competition the Agencies protect. For example, they consider competition for, on, or to displace platforms. Addressing competition in its many forms is especially important in modern markets, where new business models are constantly reshaping the dimensions along which firms compete. Furthermore, the 2023 Merger Guidelines broaden the lens by discussing dimensions of competition beyond price. For example, they explicitly discuss dimensions relevant to labor market competition, such as wages or working conditions, and they broaden the familiar Small but Significant and Non-transitory Increase in Price (SSNIP) concept used for market definition to explicitly incorporate non-price changes in terms, newly named as “Small but Significant and Non-transitory Increase in Price or other Worsening of Terms (SSNIPT)”. While the 2010 HMG noted that its principles applied to non-price competition and competition among buyers, the 2023 Merger Guidelines describe principles generally, which we hope will facilitate the application of these principles in a wide range of circumstances.

The structure of the 2023 Merger Guidelines is designed to implement this comprehensive approach. The Guidelines lay out various frameworks the Agencies use for merger review (Guidelines 1-6), then describe their applications to important situations (Guidelines 7-11), such as mergers involving platforms, or mergers of competing employers. Broadly applicable rebuttal considerations and evidentiary, economic, and analytical tools each get their own section as resources for applying any of the Guidelines. 

Consistent with the approach of comprehensively describing different pathways the Agencies explore, the 2023 Merger Guidelines limit the use of sometimes-unhelpful and often-confusing labels like “horizontal,” “vertical” or “non-horizontal.” Removing these labels allows for greater focus on the effects and potential for a risk of a lessening of competition that a merger poses. The upfront labeling is especially unhelpful if combined with a view that different mergers require a different process, a view that is difficult to operationalize when evaluating mergers that raise concerns that are both “horizontal” and “non-horizontal” in nature, as is increasingly common in the modern economy. Furthermore, examining all mergers using a single set of guidelines allows the Agencies to use a unified toolkit as well as a unified approach, where the Agencies first evaluate the theories of harm and then consider if there are mitigating factors that rebut or disprove the proposition that competition is threatened by the merger.   

A second cross-cutting theme in the 2023 Merger Guidelines is the framing of the analysis as an input to a decision made under uncertainty. They stress that a merger investigation is an exercise in probabilities not certainties, consistent with Section 7 of the Clayton Act, which states that a merger is illegal if its effect “may be substantially to lessen competition, or to tend to a create a monopoly.”

Viewing the analysis as an input to a decision made under uncertainty aligns, in our view, with how most academic economists interpret the role of economic models and empirical evidence. An economist’s assessment of the extent of competition between merging firms as well as the risk that competition will be harmed by the merger can be informed by an economic model, especially if applied using parameters consistent with, or estimated from, observed data. Economic models can help ground and discipline an analysis. 

However, economic modeling, especially modeling based on empirical analysis, inherently entails uncertainty, which can be due to, among other things, statistical sampling, measurement error, or modeling assumptions. Furthermore, when attempting to draw inferences about one setting using data from another there is typically uncertainty about what is sometimes called the “external validity” of this exercise. For example, there may have been changes in the industry or macroeconomic environment since the data were collected. 

Therefore, highlighting that the economic analysis of a merger is an input to a decision under uncertainty makes it easier to reconcile economic analyses, which may rely on simplified models or generate a range of predictions across different modeling assumptions or datasets, with the answer to a question about the risk of harm to competition from a proposed merger. 

Treating merger analysis as an input to decision under uncertainty also facilitates a more comprehensive approach to theories of harm to competition, particularly theories of harm that are difficult to quantify with any degree of certainty, such as the dynamic or long-term effects of a merger. For example, a merger that creates barriers to entry or dampens incentives for innovation may lead to substantial harm, harm that can be clearly described with frameworks from modern economic theory. However, it may be difficult to specify precisely which firms or products would enter in the future. Acknowledging that considering these harms contributes to the analysis of a merger despite the inherent uncertainty about specific outcomes enables economists and other experts to incorporate modern economic thinking, and consider the impact on future competition, not just today’s competition, even when doing so is inherently uncertain.     

We leave to future publications a more complete discussion of the various ways in which the 2023 Merger Guidelines adapt the Agencies’ toolkit for the modern economy. Instead, we now turn to describe some of the ways the 2023 Merger Guidelines have, and have not, changed relative to the Draft Merger Guidelines.

Notable Changes Relative to the Draft Merger Guidelines

Several of the advances put forward in the Draft Merger Guidelines received strong support from many commenters and relatively little critical feedback. Although fewer changes were implemented in these areas, the comments were nonetheless helpful in clarifying how readers interpreted the material and in prioritizing the Agencies’ work on the revisions. For example, in the Draft Merger Guidelines, the economic tools from the 2010 HMG that focused on assessing competition between merging firms and on economic approaches to market definition were carried forward, expanded, updated, and refined in line with the goals of the revision process.  Commenters largely expressed support for the updates, and the 2023 Merger Guidelines include relatively modest revisions to the Draft Merger Guidelines in most places (see below for some exceptions). Some topics included in the Draft Merger Guidelines contained substantial new material, such as platforms, labor market competition, and serial acquisitions. Many commenters expressed appreciation for these additions, and the associated text in guidelines received only modest revisions.

Turning now to the more significant changes, we consider how the 2023 Merger Guidelines address a number of specific comments made during the commentary period.

1. Organization and Purpose of Guidelines and Rebuttals 

The 2023 Merger Guidelines feature 11 guidelines, while the Draft Merger Guidelines had 13. As we discuss below, the previous Guideline 6 has been combined with other guidelines. The material that was previously in Guideline 13 is still in the text (page 29) but not listed as a separate guideline. At the same time, many commenters weighed in that the phrasing of Guidelines 1-6 in terms of what mergers “should not” do set an overly prescriptive tone. Each of these has now been revised to describe ways that “mergers can violate the law.”   

The document’s overview now more clearly describes the purpose of the guidelines and how they are meant to be used, and it clarifies that all the guidelines can be rebutted or disproved:

When companies propose a merger that raises concerns under one or more Guidelines, the Agencies closely examine the evidence to determine if the facts are sufficient to infer that the effect of the merger may be to substantially lessen competition or to tend to create a monopoly (sometimes referred to as a “prima facie case”). Section 2 describes how the Agencies apply these Guidelines. Specifically, Guidelines 1-6 describe distinct frameworks the Agencies use to identify that a merger raises prima facie concerns and Guidelines 7-11 explain how to apply those frameworks in several specific settings. In all of these situations, the Agencies will also examine relevant evidence to determine if it disproves or rebuts the prima facie case and shows that the merger does not in fact threaten to substantially lessen competition or tend to create a monopoly.

In addition, and as described below, the 2023 Merger Guidelines add content throughout that provides more clarity on the nature of applicable rebuttal evidence. 

2. Presentation of Economic Tools and Balance with Legal References

Comments on the substance of the economic tools were generally positive. However, some commentators were concerned that putting the economic tools in the appendices was a signal that the tools, and economic analysis more generally, are less important. This was never the intention, but rather was a way to address the fact that the more comprehensive approach required the application of similar tools when evaluating harm to competition, as well as rebuttals, for a variety of different pathways. Gathering the common tools in a single place was intended to improve readability and ensure consistency. 

To clarify that the economic tools are an integral part of the document, the 2023 Merger Guidelines continue to collect generally applicable analytical, economic, and evidentiary tools in a separate section (Section 4), but it is no longer designated as an appendix. Instead, Section 4 includes the material previously described in the appendices as well as the overview of market definition from Section 3 of the Draft Merger Guidelines. The 2023 Merger Guidelines also place the discussion of market definition, including the hypothetical monopolist test and its implementation, in a single unified section.

A number of economists also commented that there were too many legal references and that these references were intermingled with economic analysis in a way that detracted from the effectiveness of the document; other commenters supported the inclusion of the legal citations as a way to bridge the economic analysis with the legal context in which it must be applied. In the revision, the drafting team took a close look at every reference with this feedback in mind and considered ways to best blend the legal and analytical discussions within each section. Combined with expanding and reorganizing the economic tools, we are hopeful that this yields an appropriate balance of the legal and economic principles relevant to merger enforcement decisions and makes the document more effective overall.   

3. Clarifying “A Lessening of Competition” 

Several comments underscored the need to more clearly state at the outset what is meant by a lessening of competition as the term is used in the document. The second paragraph of the 2023 Merger Guidelines now provides a description of competition and what happens when mergers lessen it:

 Competition is a process of rivalry that incentivizes businesses to offer lower prices, improve wages and working conditions, enhance quality and resiliency, innovate, and expand choice, among many other benefits. Mergers that substantially lessen competition or tend to create a monopoly increase, extend, or entrench market power and deprive the public of these benefits. Mergers can lessen competition when they diminish competitive constraints, reduce the number or attractiveness of alternatives available to trading partners, or reduce the intensity with which market participants compete.

Our hope is that by stating upfront what is meant by competition—and by drawing out the connection between a lessening of competition, harm, and an increase in market power—the uses of these terms throughout the 2023 Merger Guidelines will be clearer.  

4. The Role of Market Structure

Relatedly, commenters raised concerns that the Draft Merger Guidelines were unclear about the role of market structure in the analysis and raised concerns that the Draft Merger Guidelines rely more on “structure” than previous Guidelines. The first concern raised with structure concerns Guideline 1, which lays out concentration thresholds. Mergers that exceed these thresholds are presumed to lessen competition.  

Market structure can be, and often is, a useful indicator of the risk of harm to competition in merger cases. This captures an intuitive idea: what merger creates a greater threat to competition, one that takes the industry from 10 to 9 firms or one that takes it from 3 to 2? Presumably the latter. The thresholds in Guideline 1 try to capture this idea and are meant to capture risk of harm to competition based on both unilateral and coordinated effects. 

The 2023 Merger Guidelines clarify this point and state that “[m]arket concentration and the change in concentration due to the merger are often useful indicators of a merger’s risk of substantially lessening competition.”  They also clarify that “[t]his presumption of illegality can be rebutted or disproved. The higher the concentration metrics over these thresholds, the greater the risk to competition suggested by this market structure analysis and the stronger the evidence needed to rebut or disprove it.”

The 2023 Merger Guidelines take similar care to connect structure to competition throughout the document whenever structural measures are used.  For example, in the entrenchment guideline, the former 30% market-share threshold has been replaced with an explicit reference to “durable market power” as the trigger for an entrenchment concern. In Guideline 5, the use of market structure in the analysis of foreclosure is now explicitly tied to “monopoly power.” In the discussion of efficiencies, a prohibition on considering those competitive benefits that supported a trend toward concentration was struck.  

5. Limiting Access to Products Rivals Use to Compete

In response to the written comments and many interactions with panelists in a variety of conferences, Guideline 5 was revised in several ways in order to sharpen its key concepts. At a high level, this guideline states that a merger can raise concerns “if the merged firm can limit access to a product, service, or route to market that its rivals may use to compete.” The harm to competition can occur through a weakening of the rivals (in a variety of ways), through the firms gaining access to sensitive information, or from deterring rivals, current and potential, from investing. 

The weakening of rivals can be analyzed by examining the ability and incentive to foreclose rivals (defined broadly). The Agencies examine this ability and incentive by looking at four elements: (i) the availability of substitutes for the related product, (ii) the competitive significance of the related product, (iii) the importance of the firms that might be foreclosed for competition in the relevant market and (iv) the competition between the merged firm and the firms that might be foreclosed. 

The Agencies may sometimes rely on factors related to market structure to make the determination “that a merger may substantially lessen competition by allowing the merged firm to limit access to a related product.” Market structure in both the related and relevant markets can be a useful indicator for this determination. This analysis replaces the market share presumption and industry factors analysis that was present in Guideline 6 in the Draft Merger Guidelines, which is no longer a separate guideline.

This guideline also incorporates other revisions that address comments received. For example, there is a discussion of the elimination of double marginalization (EDM) and how the Agencies evaluate it using the rebuttal framework of the 2023 Merger Guidelines. Several factors used to evaluate EDM are highlighted, including for example the merger specificity of this effect.

6. Trends Towards Consolidation

In further response to comments, other parts of the previous Guideline 6 have been combined with what was Guideline 8 in the Draft Merger Guidelines to form the new Guideline 7. The prior Guideline 8 had set up structural thresholds for challenging a merger that advances a trend toward concentration. The 2023 Merger Guidelines frame Guideline 7 as a “plus factor” when analytically appropriate, and not a basis for a challenge on its own or a separate structural presumption.  As revised, this guideline captures an intuitive idea: “[t]he recent history and likely trajectory of an industry can be an important consideration when assessing whether a merger presents a threat to competition.” This guideline clarifies that the Agencies will “closely examine industry consolidation trends in applying the frameworks” in Guidelines 1-6.  

7. Entrenchment

Guideline 6 in the 2023 Merger Guidelines (Guideline 7 in the Draft Merger Guidelines) was revised in several ways. Some commenters questioned whether this Guideline was needed, since many of the theories it covers are captured by Guideline 5. Indeed, the two guidelines are not mutually exclusive, something that is also true for other Guidelines. However, Guideline 6 focuses on the case when one of the merging parties already has a dominant position. In that case, competition typically benefits if competitive pressures emerge or strengthen over time.  

Many of the critical comments focused on the use of a 30% share threshold in Guideline 6 as a trigger for when the Agencies might consider the entrenchment of a dominant position. The revised Guideline 6 no longer has a strict threshold and instead states: 

“To undertake this analysis, the Agencies first assess whether one of the merging firms has a dominant position based on direct evidence or market shares showing durable market power. For example, the persistence of market power can indicate that entry barriers exist, that further entrenchment may tend to create a monopoly, and that there would be substantial benefits from the emergence of new competitive constraints or disruptions.”

Other comments critical of Guideline 6 expressed uncertainty as to whether it would be used to challenge procompetitive mergers.  The revised Guideline 6 now more directly invokes the familiar standards for sorting beneficial from harmful effects in exclusion cases: 

“At the same time, the Agencies distinguish anticompetitive entrenchment from growth or development as a consequence of increased competitive capabilities or incentives. The Agencies therefore seek to prevent those mergers that would entrench or extend a dominant position through exclusionary conduct, weakening competitive constraints, or otherwise harming the competitive process.”

Meanwhile, many supportive comments underscored the importance of this guideline as a means of better understanding mergers that threaten to entrench market power, including the long-run competitive dynamics and “ecosystem” considerations that are more and more frequently arising in merger cases. Other revisions to Guideline 6 expand on this learning in light of the useful feedback of experts in this area. For example, although the term “ecosystem” does not have a single definition in the antitrust literature, it is incorporated in Guideline 6 in the context of a discussion of nascent threats, as follows:

“…the success and independence of the nascent threat may both provide for a direct threat of competition by the niche or nascent firm and may facilitate competition or encourage entry by other, potentially complementary providers that may provide a partial competitive constraint. In this way, the nascent threat supports what may be referred to as “ecosystem” competition… [which] refers to a situation where an incumbent firm that offers a wide array of products and services may be partially constrained by other combinations of products and services from one or more providers…”

8. Market Definition and Market Shares

The Agencies sometimes face practical challenges in defining a market in the context of litigation. One potential challenge results from confusion about how market definition works in more complex scenarios. For that reason, the Draft Merger Guidelines included a discussion of one-stop-shop markets and markets where some firms sell bundles of distinct products at a discount. The Draft Merger Guidelines also clarified how the Agencies may aggregate markets into “cluster markets” for analytical convenience. Commenters appreciated this clarity, and the content carries over into the 2023 Merger Guidelines. 

One of the most significant changes in the Draft Merger Guidelines was the recognition that the question of whether a market is valid is distinct from whether the shares in that market are informative. As the 2023 Merger Guidelines explain, structural measures can provide insight into the market power of firms as well as into the extent to which they compete. Although any market that is properly identified using the methods in Section 4.3 is valid, the extent to which structural measures calculated in that market are probative in any given context depends on a number of considerations, as described in Section 4.4.

One place this arises is in considering the analysis under Guidelines 1 and 2. The challenge when using Guideline 1 is to identify a group of products that is broad enough that a loss of competition in the market would be harmful, but not so broad that market shares are diluted and unhelpful indications of a merger’s effects on competition.  

The analysis under Guideline 2, in contrast, can be used regardless of whether the market has been defined broadly, because it generally does not depend on market share analysis. Guideline 2 states that a merger raises concern when it eliminates substantial competition between firms. When applying Guideline 2, the Agencies can define a market that is clearly broad enough without worrying about whether market shares and concentration measures are helpful. This can be useful because it gives the Agencies the option to focus on the loss of competition between the parties rather than fight over how narrowly a market could be properly defined.

We expect that in many cases Guideline 1 and 2 will be used together. In many ways this is consistent with how mergers were evaluated under the 2010 HMG. However, in cases where drawing boundaries around the market is difficult—increasingly the case in modern markets, where firms often offer very different and differentiated ways of meeting a consumer need—the Agencies might rely on Guideline 2 alone. 

The 2023 Merger Guidelines thus provide a flexible approach to market definition, presenting three ways to define a market: direct evidence, analysis of Brown Shoe’s “practical indicia,” and the hypothetical monopolist test. This approach ensures that there are pathways that don’t require fighting over market definition. For example, the Agencies may define a relatively broad market using practical indicia, and then analyze the harm to competition using Guideline 2. This flexible approach instead relies on the idea that the Agencies may evaluate a merger in any relevant market, as the statute clearly states. 

In closing, we reiterate our gratitude to the many commentators who devoted time and effort to participate in the commenting process.  We look forward to continuing the discussion in the coming months and years.

Authors’ Disclosure and Note: Susan Athey is the Chief Economist, Antitrust Division, U.S. Department of Justice. Aviv Nevo is the Director of the Bureau of Economics at the U.S. Federal Trade Commission. We would like to thank David Lawrence, Ken Merber, and Alison Oldale as well as Ron Drennan, Danielle Drory, Malika Krishna, Rohan Pai, Kelly Signs, Shaoul Sussman, and Tor Winston for insightful comments on this note and for their tireless work on drafting the 2023 Merger Guidelines. The views expressed in this note are our own and do not necessarily represent the views of the Antitrust Division, Federal Trade Commission, or any individual commissioner.  The 2023 Merger Guidelines are a non-binding statement that provides transparency on aspects of the deliberations the Agencies undertake in individual cases under the antitrust laws. The Agencies will continue to make decisions in particular matters based on the law and the facts applicable to each case.

Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.