M. Sean Royall, Featured Expert Contributor, Antitrust & Competition Policy — Federal Trade Commission

By M. Sean Royall and Richard H. Cunningham, Partners, and Chris Wilson and Chris Kopp, Associates, Gibson, Dunn & Crutcher LLP

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The Federal Trade Commission (FTC) and Department of Justice’s Antitrust Division (DOJ) promulgated the standing guidance relating to vertical and conglomerate mergers—the Non-Horizontal Merger Guidelines—in 1984.  Relative to the Horizontal Merger Guidelines, which were updated in 2010, this guidance is long in the tooth.

That may soon change.  On March 29, 2019, at the ABA Antitrust Spring Meeting, DOJ Antitrust Division Assistant Attorney General Makan Delrahim noted that the agency has been working to update its vertical merger guidance.  The announcement comes in the wake of several notable enforcement actions involving the combination of businesses that do not compete, but instead operate at different levels of the supply chain, including Comcast/NBCU, AT&T/Time Warner, CVS/Aetna, and Staples/Essendant.

The analytical approach applied to these and other FTC and DOJ vertical merger matters has not been transparent or consistent, and AAG Delrahim acknowledged that the business community would benefit from “knowing where we stand from an enforcement standpoint.”  FTC Chairman Joe Simons generally agreed with this sentiment, but he also cited the challenges in finding a consensus on the appropriate framework for analyzing vertical mergers between the agencies and within the agencies themselves.  The FTC commissioners have split 3-2 along party lines in two recent vertical mergers—Staples/Essendant and Fresenius/NxStage—highlighting the ongoing debate within the FTC.