August 2, 2021

Volume XI, Number 214

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August 02, 2021

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Why the Heartburn Over an Antitrust Safety Zone?

When released in draft form for public comment on January 10, 2020, the Vertical Merger Guidelines (“Vertical Guidelines”) included a safety zone indicating that “[t]he Agencies [i.e., the U.S. Department of Justice and the Federal Trade Commission] 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 is used in less than 20 percent of the relevant market.” The Vertical Guidelines, in draft form, went on to clarify that “[t]he purpose of these thresholds is not to provide a rigid screen to separate competitively benign mergers from anticompetitive ones. Rather, they provide one way to identify some mergers unlikely to raise competitive concerns and some others for which it is particularly important to examine other competitive factors to arrive at a determination of likely competitive effects.”

However, and as we indicated in our last Antitrust Byte, the safety zone for vertical mergers was conspicuously omitted from the final version of the Vertical Guidelines, issued on June 30, 2020. But why? A 20 percent threshold is clearly conservative, and consistent with safety zone thresholds contained in the Statements of Antitrust Enforcement Policy in Health Care. The Agencies’ Horizontal Merger Guidelines also provide useful markers indicating, among other things, that “[m]ergers involving an increase in the [Herfindahl-Hirschman Index] of less than 100 points are unlikely to have adverse competitive effects and ordinarily require no further analysis.” Furthermore, the 20 percent figure is far below thresholds deemed judicially necessary for liability in relevant cases challenging vertical transactions, such as exclusive dealing arrangements.

The lack of any economic or judicial rationale for the omission of this safety zone will blunt the effectiveness of the final Vertical Guidelines as a counseling tool, particularly for the health care industry, where vertical integration has become so prevalent. Equally as concerning is whether other antitrust safety zones are being eyed for elimination.

©2021 Epstein Becker & Green, P.C. All rights reserved.National Law Review, Volume X, Number 205
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About this Author

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

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.

202-861-1825
Patricia M. Wagner, Epstein becker green, health care, life sciences
Member

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...

202-861-4182
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