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1 1 (July 21, 2020)

handle is hein.crs/govdazn0001 and id is 1 raw text is: ~* or 101 ' Researh Set-wkc Antitrust Regulators Release New Vertical Merger Guidelines July 21, 2020 On June 30, the Department of Justice (DOJ) and Federal Trade Commission (FTC) finalized new Vbrtical Merger Guidelines (VMG) outlining their approach to mergers and acquisitions between firms at different stages of a supply chain. The revised guidelines are timely: vertical integration is growing increasingly economically significant and politically fraught. As large firms in major industries- including health care, telecommunications, agriculture, and information technology-make prominent vertical deals, some lawmakers and economists have cast a critical eye toward a phenomenon that was once viewed as largely benign. This Legal Sidebar provides a general overview of vertical merger enforcement and discusses the implications of the new VMG. A companion CRS Insight analyzes competition issues raised by vertical integration in digital markets-a topic that the revised guidelines do not explicitly address. Vertical Merger Enforcement Section 7 of the Clayton Antitrust Act prohibits mergers and acquisitions that may substantially lessen competition. The statute applies to both horizontal mergers between competitors (i.e., rivalwidget manufacturers) and vertical deals between firms at different stages of a supply chain (i.e., a widget manufacturer and a widget retailer). While horizontal mergers can harm competition by allowing firms to directly absorb rivals, the potential harms of vertical transactions are more indirect. Verticalmergers most often raise antitrust concerns when an integrated firm would have the ability and incentive to foreclose rivals from supplies or customers. For example, if a large widget manufacturer acquires a widget retailer, the vertically integrated firm may charge high r prices to competing retailers or withhold widgets from those rivals altogether. And these tactics can harm competition by diminishing the ability of other retailers to challenge the vertically integrated firm. Similarly, if a large widget retailer acquires a widget manufacturer, the vertically integrated firm may refuse to purchase widgets from rival manufacturers, harming their competitive prospects. But vertical mergers can also generate efficiencies. Because vertically integrated firms acquire inputs at cost while unintegrated companies typically pay a markup, integrated firms can theoretically pass cost Congressional Re search Service https://crsreports.congress.gov LSB10521 CRS Lega i&sebar Prepa red.r Memn bersand C o m m ; .. e e s o f Cen go loC o ---------------.. -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------..........