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U.S. Releases Draft Guidelines That Could Significantly Impact Vertical Merger Review

January 14, 2020

On January 10, 2020, the U.S. Federal Trade Commission (FTC) and Department of Justice’s Antitrust Division (DOJ) released Draft Vertical Merger Guidelines (Draft Guidelines) for public comment by February 11, 2020. The Draft Guidelines would be the first official guidance from the FTC and DOJ on vertical mergers since the Non-Horizontal Merger Guidelines released in 1984 (1984 Guidelines).


  • The Draft Guidelines set out the FTC and DOJ’s analytical approach for assessing the potential anticompetitive and procompetitive effects of vertical mergers.
  • Once finalized, the Draft Guidelines could significantly impact merger reviews involving Canadian businesses that are vertically integrated in the U.S. and could have an important influence on how the Canadian Competition Bureau (Bureau) assesses vertical mergers.
  • The Draft Guidelines are more consistent with the approach to vertical mergers set out in the Bureau’s Merger Enforcement Guidelines (MEGs) than the 1984 Guidelines.
  • However, there are also some key differences between the Draft Guidelines and the Bureau’s MEGs relating to market definition, safe harbour thresholds and efficiencies that could have important implications for the review of certain vertical mergers.


Vertical mergers involve a combination of firms or assets operating at different stages of the same supply chain, such as the acquisition by an upstream manufacturer of a downstream retailer that resells its products. They raise unique competition law issues. For example, a vertical merger could create an opportunity for an upstream firm to withhold supply to competitors of its downstream business, or vice versa. On the other hand, vertical mergers can have procompetitive effects, including incentives to lower prices for consumers and unique efficiencies.


The Draft Guidelines adopt the FTC and DOJ’s Horizontal Merger Guidelines and discuss additional considerations that apply to vertical mergers by:

  • Describing the FTC and DOJ’s analytical approach for assessing the potential anticompetitive effects resulting from vertical mergers
  • Explaining how the elimination of double marginalization (EDM) may mitigate or neutralize the potential anticompetitive effects of vertical mergers by creating incentives for an integrated business to lower prices to customers
  • Discussing efficiencies that are specific to vertical mergers, such as the combination of complementary business operations and the removal of contractual complications


The FTC and DOJ have made the Draft Guidelines more consistent with the approach to vertical mergers set out in the Bureau’s MEGs than the 1984 Guidelines:

  • The 1984 Guidelines place a significant focus on theoretical concerns that vertical mergers could create potential barriers to entry, which are not a focus of the Draft Guidelines or the Bureau’s MEGs.
  • Unlike the 1984 Guidelines, both the Draft Guidelines and the Bureau’s MEGs clearly recognize the potential for vertical mergers to create anticompetitive effects from attempts to harm rivals by raising their costs or withholding their access to necessary inputs or customers.
  • The Draft Guidelines and Canadian MEGs also recognize the potential procompetitive effects of vertical mergers from incentives to lower prices for consumers, which the 1984 Guidelines ignore.

However, there are also several important differences between the Draft Guidelines and the MEGs:

  • Market Definition: The MEGs assume an analysis of two relevant markets—one upstream and one downstream—when analyzing a vertical merger. By contrast, the Draft Guidelines introduce a new approach of defining one relevant market and identifying a “related product” of the upstream or downstream firm that is used in the relevant market. This could increase the perceived competitive significance of the “related product” in circumstances where its relevant market would be broader than just the “related product” itself.
  • Safe Harbour: The Draft Guidelines create a safe harbour threshold where the share of both the relevant market and “related product” is under 20 per cent, in which case a vertical merger would be considered unlikely to raise concerns. The MEGs do not adopt a safe harbour threshold specific to vertical mergers, but generally note that a merger will not be challenged where the market share of the merged firm would be below 35 per cent.
  • Efficiencies: The Draft Guidelines discuss unique efficiencies created by vertical mergers from the combination of complementary business operations and the removal of contractual complications. The MEGs do not explicitly recognize these types of efficiencies, but also do not rule them out and note that vertical mergers frequently create significant efficiencies.

If you would like to submit comments on the Draft Guidelines or have any questions, please do not hesitate to contact your usual Blakes contact or any member of the Blakes Competition, Antitrust & Foreign Investment group.