On December 18, 2023, the Federal Trade Commission and Department of Justice, Antitrust Division (together, "the Agencies") jointly released a significant revision and expansion to the federal Merger Guidelines (the "Guidelines"), the document that lays out the framework for how the Agencies analyze mergers for potential antitrust concerns. The revisions include a number of changes that we have discussed before, including a presumption against mergers that create a market share above 30%. But the change that matters most for readers of this blog is a new guideline that — for the very first time — incorporates the analysis of labor impacts into federal antitrust merger reviews.
The revised Merger Guidelines explain that, just as businesses compete in the marketplace for the sale of goods or services, so too do businesses compete in the marketplace for the purchase of labor: "The Agencies protect this competition in all its forms." Therefore, the revised Guidelines explain, "The same—or analogous—tools used to assess the effects of a merger of sellers can be used to analyze the effects of a merger of buyers, including employers as buyers of labor."
When evaluating a merger's potential impacts on labor, the Agencies will consider whether the merger may result in decreased wages, diminished benefits, worse working conditions, or, in the Guideline's nebulous description, "other degradations of workplace quality." Notably, the Agencies will consider not only whether a merger will result in absolute decreases in wages or benefits (i.e., if post-merger compensation will be lower than pre-merger compensation) but will also consider the future trajectory of wages and benefits. For example, if the Agencies determine that post-merger wages will increase by 10% but that, in a "but-for" world without the merger, wages would naturally increase by 15%, then the Agencies may conclude that a reduction in the future growth in wages (the difference between 15% and 10%) is enough of a competitive harm to justify challenging the merger.
The revised Merger Guidelines represent a fundamental change in philosophy from past Agency guidance. Until recently, labor impacts typically only factored into merger analysis to the extent that there were efficiencies from a merger, such as when the combined firm could eliminate duplicative administrative roles and thereby pass the savings along to consumers. Now, however, the revised Guidelines require businesses to be guarded about predicting administrative savings from proposed mergers — even if those savings might otherwise make the combined company a more effective competitor in the marketplace. As the revised Merger Guidelines put it, "a merger's harm to competition among buyers is not saved by benefits to competition among sellers."
For a company that may be considering a potential merger, it will be important to work with experienced antitrust counsel. Counsel can help explain the ramifications of the revised Merger Guidelines, including understanding the lines between a potentially pro-competitive "efficiency" and a potentially anti-competitive degradation in compensation or working conditions.
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