A Suggested Revision of the 2020 Vertical Merger Guidelines (Version: April 30, 2022)

AuthorSteven C. Salop
DOIhttp://doi.org/10.1177/0003603X221103110
Published date01 September 2022
Date01 September 2022
https://doi.org/10.1177/0003603X221103110
The Antitrust Bulletin
2022, Vol. 67(3) 371 –389
© The Author(s) 2022
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DOI: 10.1177/0003603X221103110
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Article
A Suggested Revision of the 2020
Vertical Merger Guidelines
(Version: April 30, 2022)
Steven C. Salop*
Abstract
The Department of Justice (DOJ)/Federal Trade Commission (FTC) Vertical Merger Guidelines
(VMGs) were adopted by the FTC in June 2020 by a party-line 3-2 party line over the dissent of the
Acting Chair. They were withdrawn by the FTC in September 2021. Withdrawal was appropriate
because the VMGs are both incomplete and overly permissible. At this writing, the Guidelines are
currently under revision, This draft is designed to aid that process and act as a supplement to the
Guidelines that are adopted.
Keywords
antitrust, mergers, vertical mergers, FTC, DOJ
Introduction
The Department of Justice (DOJ)/Federal Trade Commission (FTC) Vertical Merger Guidelines (VMGs)
were adopted by the FTC in June 2020 by a party-line 3-2 party line over the dissent of the Acting Chair.
The VMGs were withdrawn in September 2021. Withdrawal was appropriate because the VMGs are
both incomplete and overly permissive.1 At this writing, the Guidelines are currently under revision,
This draft is designed to aid that process and act as a supplement to the Guidelines that are adopted.
The current VMGs contain specific language that would stand in the way of effective enforcement
in court.2 However, the problems with the current VMGs cannot be corrected simply by changing some
words here and there. It is necessary to begin with a clean sheet, which is the approach taken here. This
Revision has been formulated with an eye toward the problems with the current VMGs and to provide
a clear contrast with that approach.
These Revised VMGs include descriptions of a greater range of anticompetitive concerns than are
included in the 2020 VMGs and additional examples to clarify the concepts for practitioners and the
business community. These Revised VMGs take a more rigorous approach to the parties’ required
*Georgetown University Law Center, Washington, DC, USA
Corresponding Author:
Steven C. Salop, Georgetown University Law Center, 600 New Jersey Ave NW, Washington, DC 20001, USA.
Email: salop@law.georgetown.edu
1103110ABXXXX10.1177/0003603X221103110The Antitrust BulletinSalop
research-article2022
1. Steven C. Salop, The FTC Was Correct to Withdraw the Vertical Merger Guidelines, Promarket (Nov. 22, 2021), https://
promarket.org/2021/11/22/ftc-vertical-merger-guidelines-economics-withdrawn-lina-khan-salop/.
2. See, e.g., Steven C. Salop, Getting Your Deal Done Under the Vertical Merger Guidelines, antitrust source (Oct. 2020).
372 The Antitrust Bulletin 67(3)
burden to establish pass-on of elimination of double marginalization (EDM). Pass-on of EDM should
not be taken as automatic, just as other efficiencies required evidence of cognizability. These Revised
VMGs also include a number of proposed anticompetitive presumptions to address vertical mergers
that lead to heightened anticompetitive concerns.
These Suggested VMGs are intended to lead to more enforcement than has occurred in the past or is
signaled by the 2020 VMGs. These revisions are based on the modern theoretical and empirical economic
evidence.3 This includes the fact that including concerns that common statistical tests applied to econo-
metric evidence are focused solely on avoiding false positive (Type I errors) and do not place weight on
avoiding false negatives (Type II errors).4 At the same time, these Revised VMGs are intended to be sensi-
tive to conservative concerns about over-enforcement that this author does not share.
My hope is that these Suggested VMGs will be helpful to the drafters of revised VMGs. In addition,
this version might serve as a useful substitute for practitioners evaluating proposed vertical mergers
during the interim.
The Suggested VMGs follow.
Suggested Vertical Merger Guidelines (Version: December 31, 2021)
Table of Contents
1. Overview 3
2. Market Definition and Related Products 4
3. Market Participants, Shares, and Concentration 5
4. Harms from Unilateral Effects 6
4.1. Foreclosure 6
4.1.1. Input Foreclosure 6
4.1.2. Input Foreclosure in Negotiation Markets 9
4.1.3. Customer Foreclosure 10
4.2. Reduction or Elimination of Potential Competition 11
4.3. Exclusionary Misuse of Competitively Sensitive Information 11
4.4. Evasion of Regulation or Long-Term Private Contracts 12
5. Harms from Coordinated Effects 12
5.1. Weakening a Non-Merging Disruptive Competitor 13
5.2. Eliminating the Merged Firm’s Incentives to Disrupt Coordination 13
3. See, e.g., Yongmin Chen, On Vertical Mergers and Their Competitive Effects, 32 rand J. econ. 667–68 (2001); Volker
Nocke & Lucy White, Do Vertical Mergers Facilitate Upstream Collusion?, 97 american econ. rev. 1321 (2007); Michael
H. Riordan, Competitive Effects of Vertical Integration, in Handbook of antitrust economics 145 (Paolo Buccirossi ed.,
2008); Hans-Theo Normann, Vertical Integration, Raising Rivals’ Costs and Upstream Collusion, 53 euroPean econ.
rev. 461 (2009); Serge Moresi & Steven C. Salop, vGUPPI: Scoring Unilateral Pricing Incentives in Vertical Mergers,
79 antitrust L.J. 185 (2013); Markus Reisinger & Emanuele Tarantino, Vertical Integration, Foreclosure, and Productive
Efficiency, 46 rand J. econ. 461 (2015); Jonathan B. Baker, Taking the Error Out of “Error Cost” Analysis: What’s Wrong
with Antitrust’s Right, 80 antitrust L.J. 1 (2015); Steven C. Salop, Invigorating Vertical Merger Enforcement, 127 YaLe
L.J. 1962 (2018); Gregory S. Crawford, Robin S. Lee, Michael D. Whinston & Ali Yurukoglu, The Welfare Effects of
Vertical Integration in Multichannel Television Markets, 86 econometrica, 891(2018).Jonathan B. Baker, Nancy L. Rose,
Steven C. Salop & Fiona Scott Morton, Five Principles for Vertical Merger Enforcement Policy, antitrust, (Summer
2019); Steven C. Salop, Analyzing Vertical Mergers to Avoid False Negatives: Three Recent Case Studies, antitrust,
(Summer 2019); John Kwoka & Margaret Slade, Second Thoughts on Double Marginalization, 34 antitrust 51 (2020);
Gopal Das Varma & Martino De Stefano, Equilibrium Analysis of Vertical Mergers, 65 antitrust buLLetin 455 (2020);
Marissa Beck & Fiona Scott Morton, Evaluating the Evidence on Vertical Mergers, 59 rev. ind. org. 273–302 (2021);
Serge Moresi and Steven C. Salop, When Vertical is Horizontal: How Vertical Mergers Lead to Increases in “Effective
Concentration,” 59 rev. ind. org. 177–204 (2021). See also the references cited in these various articles.
4. Phillip Johnson, Edward Leamer & Jeffrey Leitzinger, Statistical Significance and Statistical Error in Antitrust Analysis, 81
antitrust L.J. 641 (2017); Ronald L. Wasserstein & Nicole A. Lazar, The ASA Statement on p-Values: Context, Process,
and Purpose, 70 am. statistician 129 (2016).

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