On Jan. 21, 2021, President Biden designated Rebecca Kelly Slaughter, a Commissioner at the Federal Trade Commission since 2018, to serve as the Acting Chair of the FTC. The designation of Slaughter, who has advocated for more aggressive antitrust enforcement by the FTC since joining the Commission, signifies the Administration's increased focus on competition issues and concern with threats to competition. One area where Acting Chairwoman Slaughter seemingly intends to sharply increase the FTC's focus and efforts is in its treatment of vertical merger transactions, identifying the evaluation and enforcement of such transactions as an area where the Commission should break with historical approaches and adopt a more aggressive posture. Acting Chairwoman Slaughter dissented from, and calls for revisions to, the Commission's 2020 Vertical Merger Guidelines, criticizes the way in which the FTC has historically evaluated such transactions and expresses skepticism at the presumption that such transactions are generally procompetitive. In March, the Commission demonstrated its willingness to police such transactions more aggressively, voting 4-0 to challenge the acquisition of Grail, Inc. by Illumina, Inc. Merging parties should take heed and consider any vertical interlocks between them, as well as whether a proposed transaction may lead to any change of incentives that could foster competitive harms.

The Vertical Merger Guidelines

On June 30, 2020, the FTC and the Department of Justice (the agencies) jointly issued Vertical Merger Guidelines. These guidelines replaced the DOJ's Non-Horizontal Merger Guidelines which had been adopted in 1984, and remained unchanged since. The Vertical Merger Guidelines provide an overview of the analytical approaches that the agencies apply to their evaluation of vertical transactions. The Guidelines adopt the position that vertical mergers are often procompetitive and beneficial to consumers. Nonetheless, the Guidelines identify numerous potential harms to competition that vertical transactions may raise. Among these harms are the risk that a merged firm could foreclose rivals' access to, or raise costs for, necessary products (i.e., inputs). See U.S. DOJ and FTC, Vertical Merger Guidelines (June 30, 2020). The Guidelines indicate that the agencies will review both the ability as well as the incentive of a merged firm to foreclose rivals. The ability element will not be satisfied where competitors of the merged firm could easily switch to alternatives to, or alternative suppliers of, the related products without negative effects on their competitive strength. Id. The incentive element will not be satisfied if a merged firm would not benefit from reduced competition with the users of its related product in the relevant market. Id. Furthermore, the Guidelines indicate that, even in mergers where the incentive and ability elements are both satisfied, the agencies' review will consider the merger's net effect on competition and any efficiencies created by the deal. Id.