NRPLUS MEMBER ARTICLE {T} he latest merger guidelines published by the Federal Trade Commission (FTC) and the Department of Justice (DOJ) mark yet another step in the agencies’ departure from long-standing bipartisan, evidence-based competition policy. Congress and the courts have a crucial role in constraining the two agencies as they seek to act beyond their statutory remit and fundamentally reshape American antitrust law.

A closer look at merger and acquisition activities clarifies why permissive competition policies are essential for a thriving digital economy. As erstwhile start-ups grow, they often tend to lose their earlier innovativeness. Acquiring new start-ups can help larger companies develop new business models and technologies and remain on the cutting edge despite their larger size. Furthermore, while some start-up founders dream of creating the next Google or Facebook, the goal for many is to grow their company, sell it at a high price, and then launch new ventures. In a permissive regulatory environment, competing bids from tech companies and venture-capital firms drive up the valuation of start-ups. This lucrative exit option attracts more entrepreneurs, contributing to the creation of new start-ups and a more dynamic tech ecosystem.

There are, of course, instances where specific mergers or acquisitions might be predatory or contravene antitrust laws. That is why U.S. regulators and the judiciary have relied on economic analysis and the consumer-welfare standard in recent decades to provide a more objective, predictable basis for antitrust decisions.

However, under its new leadership, the FTC appears to be moving away from this economics-focused analysis in favor of a more ideological and increasingly arbitrary approach. Despite a series of legal defeats, the commission now seeks to reshape U.S. competition policy by issuing new merger guidelines in collaboration with the DOJ.

As Josh Withrow of the R Street Institute points out, merger guidelines — like the ones issued in 2010 under President Obama — typically provide detailed guidance to help companies understand how they should achieve regulatory compliance with existing laws. In lieu of providing such clarification, the new guidelines seek to upend well-established antitrust practices and legal assumptions and create new competition rules.

For example, the seventh and eighth rules of the merger guidelines stipulate that mergers “should not entrench or extend a dominant position” and “should not further a trend toward concentration.” Such broad provisions mean that any merger activity by a sufficiently large firm could be declared illegal by the FTC without consideration of how it would affect market structure, competition, and consumer welfare. Likewise, under the first rule, firms with as little as 30 percent market share could come under the commission’s regulatory crosshairs for mergers or acquisitions of any size.

This overbroad scope of the guidelines — combined with the absence of detailed guidance for firms — means that they will be of limited value to companies seeking to comply with existing antitrust statutes. Instead, the guidelines appear designed to grant regulators the power to block any potential merger or acquisition regardless of economic evidence. The FTC and the DOJ have even started asking companies about labor and personnel policy — issues that have little to do with competition policy, as the U.S. Chamber of Commerce notes.

At a time when global mergers and acquisitions activities are at their lowest level in a decade, the new merger guidelines risk further weakening investor appetite and reducing exit options for start-ups.

Meanwhile, the FTC’s increasingly radical approach risks diminishing its reputation as a nonpartisan, neutral arbiter of rules — which would be all the more troubling if Congress were to grant the agency more enforcement responsibilities under future privacy and technology-related legislation.

Ideally, the FTC should recognize its role as a neutral enforcer of antitrust statutes enacted by Congress — a role that it fulfilled, albeit imperfectly, under the Obama and Trump administrations but now appears to have abandoned under its increasingly doctrinaire leadership.

That is why Congress and the courts must hold the FTC and the DOJ accountable. Thankfully, the proposed guidelines have little weight as a matter of law. Earlier this year, the courts rightly restricted, through several rulings, the FTC’s efforts to act beyond the remit of its statutory authority. As the two agencies attempt to rewrite the nation’s antitrust laws, the judiciary must clarify that only Congress — not the executive branch — can legislate on such matters.

Ultimately, Congress might need to step in and introduce legislation that imposes clear limits on the FTC’s and DOJ’s legal authority and ensure their accountability as politically neutral enforcers of existing competition laws. Absent such measures, the innovation engine of the U.S. digital economy and the global reputation of U.S. regulators remain at stake.