New Merger Guidelines Cap Off a Year of Hostility to Employers — 2023 Closes With Antitrust Agencies’ Most Radical Foray Yet

Antitrust and Trade Regulation   |   Labor & Employment   |   December 19, 2023

The year in antitrust began apace on January 5 with the release of the Federal Trade Commission’s proposed rule banning all employer-employee noncompete agreements. At mid-year, the FTC and the Antitrust Division of the Department of Justice issued a proposal that, when finalized, will dramatically increase merging parties’ filing requirements, and expense, under the Hart-Scott-Rodino Act. At year’s end, the federal antitrust agencies have issued their most radical refocus of enforcement authority of all, through their newly published Merger Guidelines.

A common thread in these initiatives is hostility to big business generally, and large employers more specifically. The proposed ban on all noncompete agreements — regardless of the benefits exchanged for the noncompete, or the need for one — is the most brazen example. But the most revolutionary, and misguided, takes the form of the tenth of the eleven new merger guidelines. While the first two initiatives noted (re: noncompetes and the Hart-Scott-Rodino Act) have not yet completed their journey through the rulemaking process, the merger guidelines became effective upon publication earlier this week.

That means that newly merging parties will be the guinea pigs in the agencies’ now formal, and at least partial, abandonment of antitrust law’s venerable “consumer welfare” standard. The consensus position in the broader antitrust community — enforcers, academics, private attorneys, and the judiciary alike — has for decades been that antitrust laws should be enforced and interpreted to protect and advance the welfare of consumers. Other interests — be they worker rights, corporate profits, the environment, or the nation’s evolving retail landscape — were deemed best left to other government departments, the market, or the political process.

While enforcers over those decades have differed in how aggressively they wielded the tools of enforcement in favor of consumers, there has at least been wide agreement about the principle animating their exercise. The consumer welfare benchmark has provided a key element of an effective regulatory regime: a shared understanding of the regulator’s goals.

The Merger Guidelines, while not binding, are issued to afford insight into “the factors and frameworks the Agencies consider when investigating mergers.” In the long-awaited update to those guidelines, Guideline 10 provides:

When a Merger Involves Competing Buyers, the Agencies Examine Whether It May Substantially Lessen Competition for Workers, Creators, Suppliers, or Other Providers.

The explanation for this guideline begins inauspiciously, correctly observing that “[a] merger between competing buyers may harm sellers just as a merger between competing sellers may harm buyers.” Antitrust law has always been concerned with cartel activity or monopolization of the buy-side, albeit with less fanfare than with seller cartels or the classic sell-side monopolist, like Bell Telephone or Standard Oil. But the guideline flies off the rails quickly into, from an antitrust perspective, the great unknown. The agencies explain further:

Labor markets are important buyer markets. The same general concerns as in other markets apply to labor markets where employers are the buyers of labor and workers are the sellers. The Agencies will consider whether workers face a risk that the merger may substantially lessen competition for their labor.

A common side effect of mergers is headcount reduction, as redundancy in personnel, in the merger context, can be inevitable. That reduction, though harsh, is part of the efficiency of the combination and is almost invariably taken for procompetitive reasons, particularly cost reduction. A reduction in variable costs, like labor, should lead to a reduction in prices, advancing consumer welfare. A focus on the other side of this dynamic comes inevitably at the expense of consumers. Indeed, a focus on a merger’s impact on anything but consumer welfare comes at consumers’ expense, in the same way that a homeowners association that tries to balance safety and sociability is likely to be less safe, or less social, than an HOA that is single-focused on one goal or the other.

Had the agencies made a merger’s impact on workers (and “creators” and others) one factor that can weigh against a merger in which the likely impact on consumers was ambiguous, Guideline 10 would be less misguided. But the guidelines close the door to that weighing, making clear that the reduction in competition in the labor markets in which the merged firms’ compete cannot be “offset by purported benefits in a separate downstream product market.” That means that even mergers that present crystal-clear benefits to consumer welfare (in the “downstream product market”) can be challenged under Guideline 10’s logic if they also cause a reduction in competition for the services of the merged firms’ workers, or workers like them.

While the health of the labor economy is a laudable interest, it has not heretofore been a focus of merger review, as it does not speak to a merger’s impact on the combination’s prices or quality. One way to think about this reorientation is to ask, “What’s next?” There are 11 new guidelines, but nothing stops future enforcers from issuing additional guidelines that mandate consideration of a merger’s impact on, e.g., the environment, income equality, or crime — important social issues, but ones antitrust enforcers are ill-suited to address. Nor is there a backstop, once moving off a consumer welfare benchmark is normalized, to the inclusion of less laudable or more politically contentious considerations in merger review. Such shifts in focus would come, inevitably, at the expense of the one constituency all agree the agencies are in place to protect: the nation’s consumers.

If you would like to discuss how the federal antitrust agencies’ latest initiatives may impact your business, please contact the author of this article.

©2024 Carlton Fields, P.A. Carlton Fields practices law in California through Carlton Fields, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.

Subscribe to Publications


The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.