2024 Antitrust Enforcement Storm is Coming

The Federal Trade Commission (FTC) and the Department of Justice (DOJ) have taken robust steps to bolster antitrust enforcement as 2023 draws to a close.

FTC has launched a series of initiatives pulled from a progressive antitrust playbook, reflecting a shift in antitrust enforcement ideology and an expanded focus on labor, racial equity, and environmental sustainability. FTC plans to rely on its rule-making authority to curb certain business practices viewed as harmful.

DOJ, under the leadership of Jonathan Kanter, has committed to increasing resources for vigorous antitrust enforcement, with tech and labor markets as key areas of focus.

The new guidelines issued by the FTC and DOJ contain many changes that alternative funders should be aware of. Here are some key ones:

1. Lowered Bar for Presumed Illegality: The guidelines significantly lower the bar for when a merger is considered presumptively illegal. For instance, if a merger significantly increases market concentration and the combined entity's market share is greater than 30%, the merger could be deemed to eliminate substantial competition and increase coordination among the remaining competitors post-merger.

2. Aggressive Substantive Overhaul: The guidelines have undergone a significant overhaul from the previous versions, with a shift in language from "Mergers Should Not [Do X]" to "Mergers Can Violate the Law When They [Do X]." It's important for alternative funders to understand these new guiding principles.

3. Prevention of Anticompetitive Practices: The guidelines emphasize preventing harm to competition while mergers are in their formative stage. This suggests a more proactive regulatory approach that could affect alternative funders' merger and acquisition strategies.

4. Expanded Analysis of Potential Competition: The guidelines provide an expanded treatment of the effects of mergers with potential competitors. They warn that the acquisition of a nascent competitor could violate antitrust laws, particularly during periods of technological transition or when barriers to entry for new market entrants are reduced.

5. Consideration of Effects on Labor Market: The guidelines now consider the impact of a deal on labor markets, stating that any loss of competition in the labor market that could result in lowered wages, slowed wage growth, worsened benefits, or other deteriorations of workplace quality is not offset by purported benefits in a separate downstream product market.

6. Guidance on Rollup Strategies and Multi-Sided Platforms: The guidelines also address mergers involving multi-sided platforms and rollup strategies, providing guidance on how such transactions will be evaluated. This could affect the strategies of alternative funders involved in such deals or planning to be.

Remember, these guidelines are not legally binding, but they do provide insight into the thinking of the regulatory agencies and can influence court decisions. It's crucial for alternative funders to stay updated on these guidelines and consult with legal advisors to understand their implications fully.

Our Opinion:

The new merger guidelines issued by U.S. antitrust agencies could create a more egalitarian marketplace. By scrutinizing mergers more carefully, they may prevent large players from monopolizing the market and stifling competition. This is particularly relevant in the alternative financing industry, where few big players often dominate. In issuing these guidelines, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) recognize the potential for market concentration and its detrimental effects on competition and consumers. This could be especially burdensome for small and medium-sized enterprises in the alternative financing industry, prohibiting them from achieving economies of scale and efficiency that could benefit both the businesses and consumers.

Both supporters and critics of these guidelines make compelling arguments. It is crucial for alternative lenders to understand and navigate these new guidelines effectively, to continue their growth while ensuring healthy market competition and consumer protection.

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