In a sharp departure from longstanding precedent, the Federal Trade Commission (FTC) and Department of Justice (DOJ) have proposed substantial changes to the existing guidelines and rules for antitrust enforcement. The set of proposals – specifically, the revised 2023 Draft Merger Guidelines and the new rules for premerger disclosures and review – represent a drastic shift in U.S. competition policy and would directly undermine the life sciences ecosystem responsible for groundbreaking cures and treatments if finalized.
There is broad recognition among legal, policy and antitrust experts that life sciences mergers and acquisitions (M&A) allow companies of all sizes to leverage the resources, expertise and infrastructure necessary to develop and deliver new treatments and cures for patients. Now, with these proposed merger guidelines, the FTC and DOJ are poised to cast aside decades of balanced and bipartisan competition policy in favor of an increasingly hostile environment for M&A.
If finalized, the guidelines would significantly reduce the threshold for these agencies to interpose themselves in life science M&A deals, regardless of projected effects on the market. As part of the latest comment period on these proposed guidelines, we’ve included a roundup of comments from leaders across industries and backgrounds that underscore the broad-reaching impact these proposed reforms would have on consumers. Highlights are included below:
“The proposed guidelines cast a large and perilous shadow upon the future of our ecosystem and threaten to shatter the unity of purpose built within the biopharmaceutical ecosystem. It is through these collaborations and alliances that the burdens of research, the challenges of clinical trials, and the increasing demands of health regulators are shared, and thus the weight of scientific progress made bearable…So far this year, the Commission’s assertive stance towards biopharmaceutical dealmaking has precipitated a downturn in deal activity for small companies…A charged regulatory environment sows seeds of uncertainty that spur a cascade of negative effects…”
— Biotechnology Innovation Organization (BIO)
“Rather than use the revisions to build upon the constructive bipartisan guidance that has evolved over the past forty years, with each new version incorporating the latest legal and economic thinking, the agencies instead are attempting to use the Draft Guidelines to replace the law with their current leadership’s ideological preferences…As a result, antitrust enforcement could become a ‘political football’ that changes possession and direction every few years, undermining predictability, and certainty for the business community, and ultimately reducing investment and innovation.”
— U.S. Chamber of Commerce
“Conspicuously absent from this discussion is any recognition of how mergers can facilitate innovation, including by enhancing the ability for appropriation, increasing scope and scale, and supporting investment in R&D.”
— Innovation Technology and Innovation Forum (ITIF)
“Startups frequently lack capacity and experience to bring technologies to market at scale. And it is often more efficient for incumbent companies to acquire a startup to gain a complementary asset rather than develop it from scratch in-house. These efficiencies have created an ecosystem where it is common for larger firms to acquire innovative startups…The Draft Merger Guidelines risk destroying the symbiotic relationship between the startup community and more established firms. This will necessarily chill investment in venture capital backed startups that have been a main driver of innovation in the U.S. economy over the last several decades.”
— National Venture Capital Association
“The draft Merger Guidelines fail to explain the evaluation criteria, and thus threaten certain industries in which mergers and acquisitions are common, specifically the technology and pharmaceutical sectors.”
— Frederick Ashton, Competition Economics Policy Analyst, American Action Forum
“The 13 new guidelines proposed in this draft willfully disregard decades of economic analysis and court precedents, representing a shift away from an enforcement standard based on the welfare of consumers…Instead of laying rational groundwork for how merger compliance should work under current antitrust law, the draft guidelines establish a radically new and broad set of assumptions for which mergers and acquisitions may be subject to legal challenge…These presumptions of harm further tilt the burden of proof such that a far greater number of mergers and acquisitions than before will be effectively viewed as guilty of violating antitrust laws until proven innocent.”
— R Street
“The Guidelines combine a disregard for efficiency with a superstition that concentration is detrimental to competitiveness… To presume that increased concentration is happening and is de facto detrimental to competitiveness is imprudent if not outrightly wrong…The Draft Merger Guidelines are flawed with a presumption of harm directed at too many mergers, a lack of rigorous economic analysis, an absence of concern for consumer welfare, and an incomplete picture of case law.”
— Competitive Enterprise Institute
“Given the critical role startups play as the principal source of disruptive innovation, productivity growth, economic growth, policymakers must remain vigilant to avoid policies that would undermine new business formation, survival, and growth…For fragile startups, there are three principal outcomes: fail, go public, or be acquired. Failure is the most common outcome… Acquisition, therefore, is by far the most likely avenue for entrepreneurs and their employees to realize the value of what they have created through years of hard work and sacrifice.”
— Center for American Entrepreneurship
“The Draft Guidelines are an attempt to rewrite the antitrust law as it has developed under both Democratic and Republican administrations and in the courts over the last 40 years. Indeed, 75% of the decisions cited in the Draft Guidelines are more than 40 years old.”
— American Investment Council
“The lowering of the existing thresholds by the Draft Guidelines has the potential to harm the U.S. economy by constricting economically beneficial merger activity. Despite this risk, the Draft Guidelines are unaccompanied by any economic analysis.”
— Committee on Capital Markets Regulation
As a partnership of entities devoted to a common goal, we urge the agencies to preserve the balanced approach to M&A that patients count on to help life sciences companies of all sizes deliver new treatments and cures more effectively and efficiently.