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Mid-1960s Supreme Court decisions undermined the rule of law by giving the government unbridled discretion in enforcing Section 7 of the Clayton Act. Since 1968, the government has promoted the rule of law through guidelines limiting discretion. The Vertical Merger Guidelines, however, place no meaningful limits on agency discretion. They articulate theories under which mergers can be harmful but neither specific nor general standards. They set out no principles for determining when a merger harms competition, rather than a competitor, and no criteria for determining when harm to competition is likely, rather than merely possible. Nor do they convey the agencies' general attitude toward vertical mergers.

The thesis of this article is that the gap left by the abandoned Vertical Merger Guidelines ( VMGs) is small, and that the gap should not be filled until a sound foundation for guidelines is built. The VMGs operated with a narrow scaffolding in a vast space of real-world decisions and a continuum of organizational forms. The illustrations in the VMGs were based on pricing models that show that anticompetitive exclusion may result from vertical mergers. But these models are incapable of generalization, and they do not account for investments, market uncertainty, contracting problems, information asymmetries, and governance issues. Perplexingly, the VMGs ignored research that considers such factors and illuminates a broad range of empirically verifiable efficiencies. The requisite foundation for effective vertical guidelines is not in place. Until it is developed, replacements will fail to screen vertical mergers that do not raise concerns and will not be of assistance when mergers are challenged. Antitrust scholars could advance the foundational work by developing authoritative briefs on topics such as anticompetitive exclusion, asset-specific investments, incomplete contracts and opportunistic behavior, information asymmetries and principal–agent problems, the purposes and effects of restrictive contracts, and the implications of network economies for the scope of firms.

In 2020, the Department of Justice and the Federal Trade Commission (FTC) published their Vertical Merger Guidelines (VM Guidelines). The Guidelines were intended to reveal the principal analytical techniques, practices, and enforcement policies employed by the two Agencies, but they were short-lived at the FTC. In 2021, the VM Guidelines were rescinded by the FTC. Even before they were rescinded, their general language and some of the illustrative examples were not fully specified, which made them misleading. As work begins on reconstructing the VM Guidelines, we illustrate some of the weaknesses of the 2020 version and offer some suggestions for their revision. In this article, we will demonstrate why the incomplete specification can lead to some analytical difficulties. In addition, we will offer some clarifications and corrections. Our goal is to suggest refinements to the 2020 VM Guidelines so that they will be more useful in developing future guidelines for antitrust enforcement policy.

The Department of Justice (DOJ)/Federal Trade Commission (FTC) Vertical Merger Guidelines (VMGs) were adopted by the FTC in June 2020 by a party-line 3-2 party line over the dissent of the Acting Chair. They were withdrawn by the FTC in September 2021. Withdrawal was appropriate because the VMGs are both incomplete and overly permissible. At this writing, the Guidelines are currently under revision, This draft is designed to aid that process and act as a supplement to the Guidelines that are adopted.