August 12, 2020

Volume X, Number 225

August 11, 2020

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August 10, 2020

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A New Antitrust “Safety Zone” for Vertical Mergers

The U.S. Department of Justice and the Federal Trade Commission (collectively, “Agencies”) recently released for public comment their much-anticipated draft Vertical Merger Guidelines (“Guidelines”) that purport to “outline the principal analytical techniques, practices and enforcement policy of the [Agencies] with respect to vertical mergers and acquisitions … under the federal antitrust laws.” According to the Guidelines, the Agencies prepared this tool to “assist the business community and antitrust practitioners by increasing the transparency of the analytical process underlying the Agencies’ enforcement decisions.”

Although these Guidelines break little new ground, one unique aspect is the announcement of a new antitrust “safety zone” for vertical mergers. According to the Guidelines, in analyzing any vertical merger, the Agencies will identify both a “relevant market” and a “related product or service” market, such as “an input, a means of distribution, or access to a set of customers.” The Guidelines go on to state that “[t]he Agencies are unlikely to challenge a vertical merger where the parties to the merger have a share in the relevant market of less than 20 percent, and the related product [or service] is used in less than 20 percent of the relevant market.” For example, the acquisition by a hospital with an inpatient market share of less than 20 percent, of a physician practice with less than a 20 percent market share in any specialty, would conceivably fall within this new safety zone. This, of course, would not dispense with the need to address any horizontal issues that might also be present.

It is important to remember that as with all of the antitrust safety zones, this safety zone threshold is purposely conservative. The Guidelines make clear that market shares above 20 percent do not, on their own, “support an inference that the vertical merger is likely to substantially lessen competition.”

©2020 Epstein Becker & Green, P.C. All rights reserved.National Law Review, Volume X, Number 30


About this Author

John Steren, Epstein Becker Law Firm, Health Care Litigation Attorney

E. John Steren is a Member of the Firm in the Health Care & Life Sciences and Litigation & Business Disputes practices, in the Washington, DC, office of Epstein Becker Green. Mr. Steren devotes a significant portion of his practice to helping health care organizations manage the antitrust risks of joint ventures and other business arrangements. He also focuses his practice on other complex commercial and civil litigation matters.

Patricia M. Wagner, Epstein becker green, health care, life sciences

PATRICIA M. WAGNER is a Member of the Firm in the Health Care and Life Sciences and Litigation practices, in the firm's Washington, DC, office. In 2014, Ms. Wagner was selected to the Washington DC Super Lawyers list in the area of Health Care.

Ms. Wagner's experience includes the following:

Advising clients on a variety of matters related to federal and state antitrust issues 

Representing clients in antitrust matters in front of the Federal Trade Commission and the United States Department of Justice, and state antitrust authorities 

Advising clients on issues related HIPAA Privacy and security

Advising clients on issues related to state licensure and regulatory requirements