As discussed in my prior report, the FTC, in April of this year, released for comment proposed revisions to the Horizontal Merger Guidelines.  See  Proposed Revisions To The Horizontal Merger Guidelines Released.  After months of public comment and discussion, the FTC and DOJ have now released the revised Horizontal Merger Guidelines.  Horizontal Merger Guidelines.  As noted by Chairman Leibowitz in his accompanying statement, the Guidelines have been improved in large and small ways.  Among other things, “the Guidelines emphasize the competitive effects of a deal over the more rigid, formulaic approach imposed by some interpretations of the 1992 Guidelines.”   Under the Guidelines, market definitions and economic theory, while important, are only part of the story of competitive effects.

In an accompanying statement, Commissioner Rosch provided his own thoughts regarding the final version of the Guidelines, finding some agreement with Commissioner Leibowitz’s assessment.

“These Guidelines properly consider competitive effects first, and market definition second, thereby making clear that while market definition is important to assessing competitive effects and that the market must be defined at some point in the process, ultimately merger analysis must rest on competitive effects of a transaction.”

Commissioner Rosch rejected the notion of many that under the 1992 version of the Guidelines, market shares and structure were “gating items,” or necessary predicates for considering the competitive effects of the merger.  Under the revised Guidelines, according to Commissioner Rosch, the competitive effects is given more appropriate consideration.

The Merger Guidelines no doubt provide greater clarity on a number of issues.  For example, the Guidelines contain a section dealing with Powerful Buyers and lists the types of evidence to be considered when looking at the competitive effects of a merger, including the impact on innovation and the potential elimination of a “maverick” firm.  The two year guidance for entry has been eliminated and the threshold numbers for the Herfindahl-Hirschman Index have been increased, as expected.

For Commissioner Rosch, though, the changes fall short of what is required.  For example, Commissioner Rosch notes that the Guidelines say little about non-price competitive effects and do not provide a “clear framework for analyzing non-price considerations” (i.e. how do you factor in a loss of innovation?).  According to Commissioner Rosch, economic theory should be, at best, a secondary consideration with empirical inferences to be in the forefront.

“The antitrust defense bar and its clients do not need safe harbors. That bar (including the many who are members of the Antitrust Section) are among the best and brightest lawyers in the world.  What that bar and their clients deserve is what these Guidelines promise at the outset  — namely, that they will be a complete and accurate description of what our enforcement staff considers in merger investigations and that they will be a helpful guide to courts.  These Guidelines are neither.”

Essentially, Commissioner Rosch found fault with the heavy emphasis of economist and the antitrust defense bar in the revision process which “inevitably led to overemphasis on economic formulae and models based on price theory.”

Perhaps the tension identified by Commissioner Rosch emanates from the fact that heavy reliance on “empirical inference” rather than economic theory and analysis potentially leads to greater subjectivity and would be less help than more to the courts.  The courts have required more in terms of evidence in the past and the Guidelines’ apparent move away from market definition is certainly a significant departure from the prior guidelines and indeed inconsistent with judicial precedent.  What impact the Merger Guidelines will have in the courts in the future remains to be seen.