Four members of the Federal Trade Commission (FTC) issued a statement on July 13, 2015, disputing claims by a fellow commissioner that the 2010 Horizontal Merger Guidelines include a “safe harbor” that is available in unilateral effects merger investigations. Commissioner Joshua Wright’s comments about the potential safe harbor arose in the context of the Commission’s investigation into Dollar Tree’s proposed acquisition of Family Dollar Stores, Inc. The FTC has accepted a proposed settlement to resolve the alleged anticompetitive effects of that transaction.

The dispute involves a Gross Upward Pricing Pressure Index (GUPPI) analysis. The GUPPI analysis permits the federal antitrust enforcement agencies to assess whether a merger involving differentiated products is likely to result in unilateral anticompetitive effects. Such effects can arise where the merged entity can profit from diverted sales. The GUPPI measures the value of diverted sales that would be gained by the second firm measured in proportion to the revenues that would be lost by the first firm.

The 2010 Horizontal Merger Guidelines anticipate the use of such an analysis in certain cases. Indeed, according to the guidelines, “[i]f the value of diverted sales is proportionately small, significant unilateral price effects are unlikely.” Commissioner Joshua Wright pointed to this language, and statements by one of the principal drafters of the 2010 Guidelines, to argue that the Department of Justice had already publicly announced a safe harbor where the GUPPI is less than five percent. Commissioner Wright argued that there was a strong legal, economic and policy case in favor of such a safe harbor, and urged the FTC to “adopt a GUPPI-based safe harbor in unilateral effects investigations where the data are available.”

Wright’s fellow commissioners firmly disagreed that any safe harbor has previously been identified, or that such a safe harbor is appropriate. In their statement, Chairman Ramirez and Commissioners Brill, Ohlhausen and McSweeney explained that the GUPPI analysis serves “as a useful initial screen to flag those markets where the transaction might likely harm competition and those where it might pose little or no risk to competition.” They emphasized that the GUPPI analysis is “only a starting point” in a merger investigation. The commissioners further claimed that Commissioner Wright’s remarks ignored “the reality that merger analysis is inherently fact-specific” and that “[t]the manner in which GUPPI analysis is used will vary depending on the factual circumstances, the available data, and the other evidence gathered during an investigation.” The commissioners concluded that “accumulated experience and economic learning” do not provide an adequate basis for recognizing a GUPPI safe harbor. The Commission will continue to “use GUPPIs flexibly and as merely one tool of analysis in the Commission’s assessment of unilateral anticompetitive effects.”