Testimony: Comments of the Free State Foundation Regarding the Draft Vertical Merger Guidelines

On February 26, 2020, Dr. Ted Bolema, Executive Director of the Institute for the Study of Economic Growth (ISEG), produced a regulatory filing titled “Comments of the Free State Foundation Regarding the Draft Vertical Merger Guidelines” before the Federal Trade Commission and Department of Justice Antitrust Division. Dr. Bolema co-authored the filing with Free State Foundation President Randolph J. May. Excerpt: “The Draft Vertical Merger Guidelines (Draft Guidelines) released on January 10, 2020, by the Department of Justice (DOJ) and the Federal Trade Commission (FTC) are the first updated vertical merger guidelines by the agencies since the 1984 Non-Horizontal Merger Guidelines (1984 Guidelines). As such, the 1984 Guidelines did not reflect current economic analysis, particularly regarding “unilateral effects” theories of harm.

In that regard, the Draft Guidelines explain how the agencies will assess unilateral concerns, including foreclosure and raising rivals’ costs. Incorporating these theories into enforcement guidelines is positive development and generally done well in the Draft Guidelines, but could be improved with some additional clarification. Even more importantly, the authors of the Draft Guidelines wisely did not succumb to calls for more interventionist enforcement based on structural factors and, instead, generally retained case-by-case enforcement. Retaining case-by-case enforcement is appropriate because even though the 1984 Guidelines may not have reflected current economic analysis, there is little or no evidence that vertical merger enforcement has not been aggressive enough or has systematically allowed anticompetitive vertical mergers to occur.” Read the whole filing at the FTC.