While the last two years have been one of the most rapid and dramatic shifts in U.S. antitrust merger enforcement that we have seen, the Agencies’ record is mixed. In the last two years, the Agencies have released new merger guidelines, issued dramatic proposed changes to the Hart-Scott-Rodino Act (HSR) process, and undertaken a radical transformation of FTC policy. But we have also seen the lowest number of federal merger enforcement investigations and actions in the last 20 years. The resignation of both Republican FTC commissioners and the reported unprecedentedly low morale within the FTC may have contributed to these record low challenges.

High-profile merger challenges in the tech sector by the Agencies have occupied much of the Agencies’ focus and resources. The Agencies (especially the FTC) have suffered major defeats and setbacks in this sector and others. While certainly unsuccessful in some respects, the DOJ and FTC’s greatest impact on mergers over the last few years may have been in derailing deals – intentionally or not – as a result of lengthy and burdensome investigations. 2023 was no exception.

But despite numerous setbacks, agency leaders, especially Chair Khan, have continued to signal their intent to stem the tide of mergers that they claim has resulted in over-consolidation across a range of industries. With a general election looming, expect the DOJ and the FTC to do what they can in 2024 to make their mark.

HSR proposed rule changes

Looking back – 2023: In June 2023, the Agencies announced their proposed plans to expand and reorganize the HSR Form and Instructions as well as the premerger notification rules implementing the HSR Act. The proposed changes are detailed in a 133-page Notice of Proposed Rulemaking, which explains the Agencies’ conclusion that the current HSR Form and process yield insufficient information to evaluate the potential competitive impact of a deal. The key proposals, detailed further here, include:

• Dramatically expanding the scope of documents that would need to be filed with the form to include a duty to share drafts, ordinary course business documents, and documents prepared by “supervisory deal leads”;
• An obligation to provide detailed descriptions of the businesses of the filers, including with respect to any existing business relationships between the parties;
• An obligation to provide a detailed description of the transaction’s rationale, with documentary support;
• A new requirement to provide detailed employee information, as well as a disclosure of any labor penalties or findings by a federal agency;
• An overhaul of revenue reporting that will place an additional burden on filers’ businesses;
• A duty to report all acquisitions of any size going back 10 years; and
• Requesting additional information regarding the ultimate parent entity, the structure of all entities and associates involved, and specific details involving the transaction, agreements, and deal timeline.

Looking forward – 2024: We expect the proposed changes, if implemented, to take effect no sooner than the second half of 2024. As currently drafted, these changes will dramatically increase the burden on filing parties, as well as agency lawyers, in conducting initial HSR reviews. In addition, the proposed expansion of the HSR Form will likely lead to a much more tedious and time-intensive process for the parties leading up to filing. In particular, the new HSR Form may take an additional two to three months to complete, and parties contemplating a transaction should include antitrust counsel from deal inception to accommodate a longer and more intensive HSR review process.

Additionally, the early termination option under the HSR Act for mergers and acquisitions, which was temporarily suspended in February 2021, remains generally¹ unavailable for filing parties going into 2024. This option was previously available to quickly close transactions that posed no danger to competition. In the FY 2022 Annual Report (2022 Annual Report), the Agencies only reported granting five of 1,345 requests for early termination during the first full year without the early termination program. For HSR-reportable transactions, parties filing in 2024 should expect to observe the full applicable waiting period before closing can occur (generally, 30 days for most transactions and 15 days for cash tender offers or bankruptcies).

In addition, parties subject to investigations through second requests from the agencies following an HSR filing should expect more burdensome and lengthy investigations with an increase in the volume of documents and data sought. Parties should likewise expect an increase in the number of second requests issued, as well as an increase in instances where the Agencies seek more information about the transaction during the initial 30-day waiting period.

Merger Guidelines

Looking back – 2023: On July 19, 2023, the Agencies jointly released a draft update of the Merger Guidelines (Draft Guidelines). After months of public comments, on December 18, 2023, the FTC and DOJ collectively issued the final version of the 2023 Merger Guidelines (2023 Guidelines), which describe the Agencies’ review process of potential mergers to determine compliance with federal antitrust laws. While the 2023 Guidelines in final form contain a few changes from the Draft Guidelines, the substance is largely unchanged. The 2023 Guidelines, which officially replace the 2010 Horizontal Merger Guidelines and 2020 Vertical Merger Guidelines, provide 11 principles that the Agencies will rely on to answer the question: How do firms in this industry compete, and does the merger threaten to substantially lessen competition or tend to create a monopoly?

The 2023 Guidelines further highlight characteristics of certain mergers that the Agencies will more heavily scrutinize, such as mergers that increase the risk of coordination, mergers in highly concentrated markets, and mergers that would further entrench a firm’s dominant position. The 2023 Guidelines also call special attention to mergers in certain types of industries. Namely, Guideline 10, which focuses on mergers in the labor market, states that “[w]here a merger between employers may substantially lessen competition for workers, that reduction in labor market competition may lower wages or slow wage growth, worsen benefits or working conditions, or result in other degradations of workplace quality.” Despite repeated losses by the FTC in wage-fixing and no-poach cases in 2023, the FTC will continue to aggressively enforce mergers in the labor market. Additionally, Guideline 8 has an eye toward roll-up acquisitions by private equity firms by stating that a firm that engages in “an anticompetitive pattern or strategy of multiple acquisitions in the same or related business lines” may violate antitrust laws. Further, Guideline 6 addresses whether a merger may entrench or extend an already dominant position and emphasizes the FTC’s interest in transactions between a dominant firm and a “nascent competitor,” defined as “a firm that could grow into a significant rival, facilitate other rivals’ growth, or otherwise lead to a reduction in its power.” It is clear that the FTC is focused on nascent competitors in the context of technology mergers by highlighting key factors such as “network effects, scale economies, or switching costs” and stating that nascent threats are “particularly likely to emerge during technological transitions.”

The 2023 Guidelines also significantly alter the review of horizontal mergers by treating transactions between horizontal competitors with a combined market share of 30% or more as presumptively unlawful at the investigative stage, which is a major change from the 2010 Guidelines. The 2023 Guidelines also take a more modern approach to the analysis of vertical mergers by evaluating the “ability and incentive” of the merged firm to foreclose rivals from necessary inputs, which reflects the Agencies’ interest in pursuing theories of competitive harm based on vertical relationships. The main takeaway from the 2023 Guidelines, and the 11 principles therein, is that the Agencies have historically expanded the scope of merger enforcement in the United States.

Looking forward – 2024: With the 2023 Guidelines in place, the Agencies are likely to bring a number of test cases in 2024 to establish the 2023 Guidelines’ legitimacy before the courts. It is imperative for parties to certain mergers to understand how the 2023 Guidelines impact their transactions and the industry at large. Likewise, parties to mergers in certain industries, such as the private equity or labor market, should engage antitrust counsel early to fully evaluate the substantive antitrust risk of the transaction. Additionally, parties to horizontal mergers that will result in a combined market share of 30% or more should also engage antitrust counsel at the outset to assess the implications of the new presumption contained in the 2023 Guidelines.

FTC Section 5’s part in increased merger enforcement

Looking back – 2023: Section 5 of the FTC Act made headlines in 2023 due to an FTC Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the FTC Act (Policy Statement), issued on November 10, 2022, which penalizes “unfair methods of competition.” In the Policy Statement, the FTC altered its decades-long approach to analyzing Section 5 cases by taking the position that Section 5 was designed to address competitive ills not reached by the Sherman Act or Clayton Act. It also abandoned the consumer welfare standard and rule of reason analysis, the touchstone of previous Section 5 analyses, allowing the FTC to bring Section 5 cases without alleging a relevant product market or market power.

Looking forward – 2024: In 2024, the FTC will likely pursue merger cases under Section 5 when the facts do not rise to a violation of the more rigorous standards of Section 7 of the Clayton Act. Merging parties, particularly in private equity and the health care industry, should consider evaluating conduct and transactions by viewing “unfair” competition from a wider perspective, looking at the broader impact of policies such as “roll-up acquisitions,” collaborations with competitors, and information sharing.

Agency collaboration efforts fit into increased merger enforcement

Looking back – 2023: In 2023, the Agencies focused efforts on combatting unlawful information sharing and implementing reforms in health care policy that may affect transactions in the coming year. In February 2023, the DOJ withdrew three antitrust policy statements related to enforcement in the health care industry: Department of Justice and FTC Antitrust Enforcement Policy Statements in the Health Care Area (September 15, 1993); Statements of Antitrust Enforcement Policy in Health Care (August 1, 1996); and Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program (October 20, 2011). In July 2023, the FTC voted to withdraw from the same statements. The now defunct policy statements provided antitrust “safety zones” for certain transactions by health care entities, shielding them from agency scrutiny for certain hospital mergers and joint ventures.

The Antitrust Division described the statements as “outdated” and “overly permissive” on subjects such as information sharing between competitors, which may occur in pre-transaction due diligence. The Agencies noted that a “case-by-case approach” would better lead evaluation of transactions in health care markets and would more accurately “reflect modern market realities.”

The Agencies’ collaboration efforts in merger policy go beyond the information sharing and health care spheres. Notably, the DOJ is utilizing collaborative efforts to target anticompetitive behavior, such as filing amicus briefs in the FTC’s civil suits under the Sherman Act. Further, the FTC and Department of Labor (DOL) signed a Memorandum of Understanding detailing coordination between the two agencies (and sometimes the DOJ), to investigate unfair labor practices that may have an effect on competition. This period of interagency referrals means that, when the agencies learn of possible rule violations through merger filings, they may refer the criminal or civil violations to another agency better equipped to deal with such matters.

The DOJ additionally recently announced a new Mergers & Acquisitions Safe Harbor Policy (Safe Harbor Policy) in October 2023. The policy protects acquiring companies that voluntarily and timely disclose criminal misconduct discovered during due diligence at an acquired company. If the acquiring company promptly discloses the criminal misconduct, fully cooperates in the investigation, and provides remediation, restitution, and disgorgement of ill-gotten gains, the Safe Harbor Policy will apply to provide a presumption of declination from DOJ prosecution.

Looking forward – 2024: In 2024, health care and technology companies in particular must evaluate antitrust risk using previous enforcement actions and cases, while carefully considering the procompetitive benefits and potential anticompetitive effects of future mergers and conduct. Companies may also need to reconsider current operations or ventures that may have been developed in reliance on the former policy statements. Further, the policy statement withdrawal may impact industries outside of the health care sector, as other agency guidance such as the agencies’ Antitrust Guidelines for Collaborations Among Competitors and Antitrust Guidance for Human Resource Professionals rely on the now withdrawn policy statements. Based on the agencies’ recent enforcement in other areas regarding information sharing, such as challenging interlocking directorates and information exchanges, companies should expect increased scrutiny into conduct implicating potential sharing of competitively sensitive information. Increased referrals and collaboration between the DOJ, FTC, and DOL demonstrate that the agencies are willing to look beyond their own rules at conduct implicating other regulatory schemes, meaning that unlawful conduct discovered during merger investigations is fair game, even if seemingly unrelated to the merger itself. Additionally, transacting companies should engage in thorough due diligence with the newfound protection from the DOJ’s Safe Harbor Policy.

How to manage the 2024 merger enforcement landscape

Merging parties can do several things in planning and implementing their merger plans in response to the changed, and still changing, merger enforcement landscape. These steps include:

First, plan ahead. Between the anticipated revised HSR rules and the changed investigations landscape, it will be even more important for parties expecting to be before the antitrust agencies this year to get a head start on regulatory planning. This will need to include beginning early to gather the additional information that will likely be required under the new HSR rules, and developing a realistic strategy for responding to a potentially long and burdensome investigation.

Second, do not overreact to the significant changes in policy, reflected in the new merger guidelines and elsewhere. Policy is not the law, and the agencies are still accountable to the courts and existing merger law.

Third, part of being realistic about the prospect of a potentially lengthy, expensive, and otherwise burdensome investigation should include addressing risks realistically when negotiating the deal documents. For example, a longer investigation may raise greater costs and risks for the seller; this may need to be taken into account when considering, for example, break-up fees.

Fourth, being realistic may also require an upfront assessment of whether a challenge by one of the agencies is likely, and whether the parties are willing to litigate. The agencies’ judicial bite has not at all matched their enforcement bark, and a willingness to litigate may ultimately be the parties’ greatest leverage. It can be helpful to assess early in the process how far the parties are prepared to go to preserve their deal.

Overall for 2024, we expect the Agencies to continue to aggressively pursue mergers under various novel theories of competitive harm, particularly those in the private equity, big tech, and labor industries. At the same time, the Agencies will likely struggle to achieve their most ambitious enforcement plans as they stretch limited resources, particularly once the HSR rule changes increase burdens on staff charged with reviewing inflated submissions. The Agencies also may encounter roadblocks if parties to mergers wait to pursue a transaction until after the 2024 election in hopes that a new administration might halt the Agencies’ antitrust initiatives. With many changes behind us but still some looming ahead, 2024 promises to be a crucial turning point for U.S. merger enforcement.

1. On March 12, 2021, the Agencies clarified that the early termination suspension does not apply in two circumstances, each involving a grant of early termination after the investigating agency has issued a second request. Specifically, the Agencies can grant early termination where the reviewing agency has resolved its competitive concerns through an investigation or where the parties enter into a consent agreement.

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