Dive Brief:

• Federal officials said they will review the need to update laws aimed at averting anti-competitive mergers and acquisitions, noting that structural changes in industries such as technology may call for an overhaul of antitrust policy.
• The inquiry by the Federal Trade Commission (FTC) and Department of Justice (DOJ) seeks “to ensure that our merger guidelines accurately reflect modern realities and equip us to forcefully enforce the law against unlawful deals,” FTC chair Lina Khan said Tuesday.     
• The regulators seek public comment on the competitive landscape of several sectors, flagging the “unique characteristics of digital markets” such as “zero-priced products, multi-sided markets and data aggregation that the current [M&A] guidelines do not address in detail,” according to an FTC announcement.

Dive Insight:

CFOs and their C-suite colleagues pushed M&A to a new high in 2021 as the economy rebounded from a pandemic shock and record monetary and fiscal stimulus pumped up liquidity. Many CFOs sought through acquisitions to help their companies recover from months of lockdowns and persistent supply chain disruptions.

The announced value of deals worldwide surged 64% last year to $5.9 trillion compared with $3.6 trillion in 2020, according to Refinitiv. Merger filings with the FTC and DOJ more than doubled during the period, the FTC said.

A widespread labor shortage, abundant investment capital and low interest rates will probably further boost dealmaking this year, according to a recent survey of 345 corporate dealmakers in the U.S. by KPMG. One-third of survey respondents said they want to use M&A to acquire talent.

President Joe Biden has made antitrust a key initiative in his effort to halt a trend in industry consolidation and what he says is an erosion of competition that harms workers, small businesses and consumers.

Federal regulators and lawmakers from both parties have called for a crackdown on companies that dominate their markets. They accuse several large technology companies — including Amazon, Apple, Facebook and Google — of anticompetitive practices and seek to curb their market power.

“While the current merger boom has delivered massive fees for investment banks, evidence suggests that many Americans historically have lost out, with diminished opportunity, higher prices, lower wages and lagging innovation,” Khan said.

“Just as we must revise our theories and models to fit new facts and evidence, we must ensure our merger guidelines accurately reflect the realities of the modern economy,” she said. Major changes in technology and the economy “have led to shifts in how businesses compete and grow, creating new interconnections and dynamics across multiple dimensions."

The DOJ and FTC have updated M&A rules several times since 1968, when the DOJ first published guidelines to provide transparency on the standards for federal review of transactions.

Current guidelines distinguish between transactions that are horizontal (within the same market) or vertical (within the same supply chain.)

DOJ and FTC seek public comment during the next 60 days “on whether distinctions between horizontal and vertical transactions reflected in the guidelines should be revisited in light of trends in the modern economy,” the FTC said.