The Department of Justice (DOJ) and Federal Trade Commission (FTC) are increasingly challenging vertical mergers which occur between companies that are not competitors but rather in different parts of the supple chain. While vertical mergers should not be immune from regulatory review, they are typically procompetitive. This should lead to a high burden of proof, and lower prioritization for regulators. Unfortunately, the FTC and DOJ seem to disagree, spending increasing amounts of time and taxpayer money challenging mergers with limited chances of consumer harm.
One example is the DOJ’s recent inquiry regarding the acquisition of doctor’s offices by Optum – a branch of UnitedHealth. While this is still only an inquiry, the DOJ previously tried, and failed, to block UnitedHealth’s acquisition of the healthcare technology company Change Healthcare and is also investigating UnitedHealth’s interest in buying a home healthcare company named Amedisys.
In 2023 both the DOJ and FTC adopted new guidelines on vertical mergers, including increased scrutiny on “vertical and non-horizontal mergers.”
Fortunately for consumers, courts have so far been reluctant to agree with the federal agencies’ expanded interpretation of their own powers. In the case of UnitedHealth’s acquisition of Change Healthcare the judge found that the DOJ’s argument was based on speculation as opposed to evidence.
The judge’s ruling matches the bulk of the economic evidence, which largely finds that vertical mergers increase efficiency. There is only limited empirical evidence that vertical mergers are anti-competitive, while the majority of evidence shows they streamline production of goods and services as well as increase consumer welfare. Studies show that while there are theoretical situations in which vertical mergers would be anticompetitive, vertical mergers are typically pro-consumer or neutral.
Read the full Real Clear Markets article here.
Justin Leventhal is a senior policy analyst for the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow us on Twitter @ConsumerPal.