
Kenneth J. Hollenbeck
Partner
201-896-4100 khollenbeck@sh-law.comFirm Insights
Authors: Kenneth J. Hollenbeck, Charles H. Friedrich, III
Date: January 20, 2020
Partner
201-896-4100 khollenbeck@sh-law.comThe Federal Trade Commission (FTC) and the Department of Justice’s (DOJ) Antitrust Division recently published draft 2020 Vertical Merger Guidelines for public comment. According to the agencies, the new guidelines outline their analytical techniques, practices, and enforcement policy for vertical mergers that raise antitrust concerns.
“While many vertical mergers are competitively beneficial or neutral, both the Department and the Federal Trade Commission have recognized for over 25 years that some vertical transactions can raise serious concern,” said Assistant Attorney General Makan Delrahim of DOJ’s Antitrust Division. He added that “[T]he revised draft guidelines are based on new economic understandings and the agencies’ experience over the past several decades and better reflect the agencies’ actual practice in evaluating proposed vertical mergers”.
Mergers can help companies attain a number of strategic goals, including diversification, growth acceleration, improved performance, development of new skills/technology, and elimination of competition. Mergers can also take a number of different forms. In a horizontal merger, one company merges or takes over another company that may offer similar products and/or services to the public. In certain cases, the two businesses may be direct competitors, i.e. one ice cream manufacturer taking over another one.
By comparison, a vertical merger combines two companies that are in the same industry but operate at different levels or stages of the supply chain. For example, an ice cream shop may merge with an ice cream manufacturer. In describing a vertical relationship, the level or stage closer to final consumers (such as a distributor, retailer, or finished goods manufacturer) is referred to as “downstream,” while the stage farther from final consumers (such as a supplier, wholesaler, or input manufacturer) is referred to as “upstream.”
Because vertical mergers and acquisitions (M&A) can directly impact competition, the DOJ and the FTC regularly review proposed or consummated transactions. The agencies can prohibit anticompetitive transactions under a number of antitrust laws, including the Clayton Act, the Sherman Act, and the Federal Trade Commission Act. For example, Section 7 of the Clayton Act prohibits mergers if “in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.”
According to the DOJ and FTC, the Draft Vertical Merger Guidelines (Guidelines) were drafted in response to requests for enforcement guidance. “Many comments received from the FTC’s Hearings on Competition and Consumer Protection in the 21st Century called for additional and updated guidance on analysis of vertical mergers, as have reports from the American Bar Association’s Antitrust Section and the Antitrust Modernization Commission,” they said in a joint press statement.
Thus, the Guidelines are intended to assist the business community by explaining the rationale underlying the agencies’ enforcement decisions. According to the Guidelines, they “may also assist the courts in developing an appropriate framework for interpreting and applying the antitrust laws in the vertical merger context.”
The agencies advise that the Guidelines should be read in conjunction with the Horizontal Merger Guidelines because “[t}he principles and analytical frameworks used to assess horizontal mergers apply to vertical mergers.” By way of example, “Section 1 of the Horizontal Merger Guidelines—describing in general terms the purpose and limitations of the Horizontal Merger Guidelines and the goals of merger enforcement—is also relevant to the consideration of vertical mergers.”
The Guidelines also address issues that are unique to vertical mergers. As described by the FTC and DOJ, the Guidelines:
Mergers and acquisitions are among the most complex business transactions. They are also often subject to regulatory scrutiny. To help navigate these sophisticated transactions, New Jersey companies should seek the assistance of business lawyers experienced in mergers and acquisitions. They can often structure a deal to minimize regulatory scrutiny while still meeting the needs of the parties.
If you have any questions or if you would like to discuss the matter further, we encourage you to contact us at 201-806-3364 or visit Scarinci Hollenbeck’s Mergers & Acquisitions page to learn more about our attorneys and their experience.
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
The bankruptcy legal landscape presents both challenges and opportunities for businesses navigating financial distress. Understanding current bankruptcy trends can help businesses make more informed and strategic decisions. Corporate Bankruptcy Filings Trending Upwards Bankruptcy filings continued to trend upwards in 2024. According to statistics released by the Administrative Office of the U.S. Courts, personal and business […]
Author: Brian D. Spector
In December, the U.S. Securities and Exchange Commission (SEC) announced charges against two privately held companies for failing to file a Form D notice, which is generally utilized for exempt securities offerings. Here, the SEC’s enforcement sends a strong message: compliance with regulatory requirements is not optional and failure to comply can have significant consequences. […]
Author: Kenneth C. Oh
On February 14, 2025, the Office of General Counsel (OGC) of the National Labor Relations Board (NLRB) under Acting General Counsel William B. Cowen issued Memorandum 25-05, “New Process for More Efficient, Effective, Accessible and Transparent Case handling.” The Memorandum rescinds nearly all of the Memoranda issued by his direct predecessor, Jennifer Abruzzo, setting the […]
Author: Matthew F. Mimnaugh
If you purchase real property from a foreign person or entity, you may be required to withhold taxes from your payment to the seller under the Foreign Investment in Real Property Tax Act (FIRPTA). The federal tax law is designed to ensure that foreign sellers pay any applicable capital gains tax on profits realized from […]
Author: Jesse M. Dimitro
Your home is likely your greatest asset, which is why it is so important to adequately protect it. Homeowners insurance protects you from the financial costs of unforeseen losses, such as theft, fire, and natural disasters, by helping you rebuild and replace possessions that were lost While the definition of “adequate” coverage depends upon a […]
Author: Jesse M. Dimitro
Making a non-contingent offer can dramatically increase your chances of securing a real estate transaction, particularly in competitive markets like New York City. However, buyers should understand that waiving contingencies, including those related to financing, or appraisals, also comes with significant risks. Determining your best strategy requires careful analysis of the property, the market, and […]
Author: Jesse M. Dimitro
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!