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The new rules for mergers in highly-concentrated industries

On Behalf of | Mar 15, 2024 | BUSINESS & COMMERCIAL LAW - Mergers & Acquisitions

Every few years, federal regulatory authorities update various crucial business statutes. For example, the Justice Department recently announced new rules for mergers. Business transactions where two companies enter an agreement to combine or merge their operations can have a major impact on the economy. In some cases, regulatory officials may even take action to prevent a merger from occurring.

The Justice Department cooperates with the Federal Trade Commission to help enforce federal antitrust laws. They may take assertive action to ensure a fair and free economy, including taking companies to court to prevent the completion of a merger. The new rules about mergers primarily focus on highly-concentrated industries. Some business mergers might be subject to more scrutiny and a higher chance of federal opposition due to changing standards.

What is a highly-concentrated industry?

There are some sectors of the economy where a few businesses play an outside role. For example, the information technology sector has a few major players who have a disproportionate degree of control. A few major players also dominate online retail.

Previously, regulatory authorities did not have the power to challenge moves by the major players in these concentrated markets. The new guidelines may allow for regulatory intervention when a merger might result in an already powerful business further dominating a particular industry. The greater the potential impact a merger may have on a market, the more likely it is to violate antitrust standards.

Companies preparing for mergers or acquisitions may require assistance when conducting reviews to validate the likelihood of a successful transaction. Understanding how changing regulations may affect a proposed business transaction a benefit those who own or help operate successful companies.