On July 19, 2023, the U.S. Department of Justice and the Federal Trade Commission released a draft of the new Merger Guidelines. The Guidelines announce the enforcement priorities of the antitrust agencies as they confront mergers and give guidance to private parties as they make choices about whether or not to consider merging. The agencies have broad, but presumably not unlimited, discretion in making enforcement choices. But the Guidelines are also a pitch by the agencies to the court system (and perhaps Congress) as the agencies hope to persuade the courts—where agency enforcement decisions are ultimately litigated—of their vision of how U.S. antitrust laws should function. And, as the Guidelines note, the most relevant antitrust law here is Section 7 of the Clayton Act.

The new document sets out thirteen guidelines. Some of the guidelines address possible mergers among firms that currently compete with each other—traditional horizontal mergers—while others step outside that class of situations. I want to focus here on Guideline 4: “Mergers Should Not Eliminate a Potential Entrant in a Concentrated Market.” The closing phrase there, concentrated market, is a term of art, but to simplify, think of it as a market midway between an unconcentrated market and one that is highly concentrated. The defense of Guideline 4 starts with what is set forth as a core principle of U.S. antitrust law:

The antitrust laws reflect a preference for internal growth over acquisition. In contrast to internal growth, merging a current and a potential market participant eliminates the possibility that the potential entrant would have entered on its own.

Read more at ProMarket