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Updated Federal Merger Guidelines Shine Light on Labor Effects

On December 18, 2023, the Federal Trade Commission and Department of Justice and Antitrust Division (together, “the Agencies”),  jointly unveiled a substantial overhaul and expansion of the federal Merger Guidelines (the “Guidelines”), the cornerstone document delineating how the Agencies scrutinize mergers for potential antitrust implications. The revisions encompass several alterations, previously discussed, notably a presumption against mergers that yield a market share surpassing 30%. However, of paramount importance for readers of this blog is a novel guideline that — for the first time — integrates the assessment of labor impacts into federal antitrust merger evaluations.

The updated Merger Guidelines elucidate that, akin to businesses vying in the market for the sale of goods or services, businesses similarly compete for the acquisition of labor: “The Agencies safeguard this competition in all its facets.” Consequently, the revised Guidelines expound, “The same—or comparable—methods employed to evaluate the ramifications of a merger of sellers can be applied to scrutinize the repercussions of a merger of buyers, including employers as purchasers of labor.”

In scrutinizing a merger’s potential repercussions on labor, the Agencies will examine whether the merger might precipitate diminished wages, reduced benefits, inferior working conditions, or, as per the Guideline’s ambiguous delineation, “other deteriorations of workplace quality.” Significantly, the Agencies will evaluate not only whether a merger will result in absolute reductions in wages or benefits (i.e., if post-merger remuneration will be inferior to pre-merger compensation) but will also consider the trajectory of future wages and benefits. For instance, if the Agencies ascertain that post-merger wages will rise by 10% but that, in a hypothetical scenario sans the merger, wages would naturally escalate by 15%, then the Agencies may infer that a curtailment in the future escalation of wages (the difference between 15% and 10%) constitutes adequate competitive harm to warrant challenging the merger.

The updated Merger Guidelines epitomize a fundamental philosophical shift from prior Agency directives. Formerly, labor impacts typically only featured in merger analysis to the extent that efficiencies from a merger were discerned, such as when the amalgamated entity could eradicate redundant administrative positions and thus channel the savings to consumers. However, the revised Guidelines now mandate businesses to exercise caution in prognosticating administrative savings from proposed mergers — even if those savings might otherwise render the combined company a more formidable competitor in the market. As articulated in the revised Merger Guidelines, “a merger’s detriment to competition among buyers is not offset by advantages to competition among sellers.”

For a company contemplating a potential merger, DC Employment Lawyers impress that collaborating with seasoned antitrust counsel assumes paramount significance. Counsel can elucidate the implications of the revised Merger Guidelines, including discerning the demarcations between a potentially pro-competitive “efficiency” and a potentially anti-competitive deterioration in compensation or working conditions.

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