FTC Merger Rule Survives Fifth Circuit Blow, Raising Antitrust Stakes

97% of pre‑merger filings cleared despite FTC merger rule challenge

• The Fifth Circuit refused a stay, keeping Lina Khan’s rule in force.
• Judge Jeremy Kernodle called the FTC’s cost‑benefit analysis “sloppy.”
• Historically, 97% of Hart‑Scott‑Rodino filings are approved without extra review.
• Andrew Ferguson, a Trump appointee, defended the rule despite the setback.

Why a single court decision could reshape U.S. competition policy

LINA KHAN—The clash over the FTC’s merger rule is more than a procedural spat; it pits a Trump‑appointed chair against a judiciary skeptical of expansive antitrust oversight. As the Fifth Circuit’s three‑judge panel—comprised of appointees from three different presidents—denied a stay, the rule remains operative, forcing companies to navigate a more demanding pre‑merger landscape.

At stake are thousands of deals that cross the $134 million Hart‑Scott‑Rodino threshold each year. While the FTC historically waves through 97% of those filings, the new rule could shift that clearance rate, potentially reshaping market structures in sectors from tech to agriculture.

Understanding the legal, economic, and political dimensions of this moment requires a deep dive into the rule’s origins, the court’s reasoning, and the broader antitrust debate that has surged since Lina Khan’s appointment.

The Rule’s Legal Odyssey: From Draft to Courtroom

Origins of the controversial rule

When Lina Khan took the helm of the FTC in 2021, she unveiled a sweeping merger rule that would require agencies to assess not just immediate price effects but also long‑term competitive harms. The rule, formally titled the “Merger Enforcement Guidance,” was born out of a series of high‑profile tech consolidations that many scholars argue stifled innovation.

Harvard Law professor Tim Wu, a long‑time antitrust advocate, noted that “Khan’s guidance represents the most ambitious attempt to modernize merger review in a generation.”⁵ The FTC estimated the rule could prevent up to $2.5 billion in consumer harms annually, a figure that has become a focal point of the ensuing litigation.

In September 2023, the agency released a cost‑benefit analysis to justify the rule. Critics, including the American Enterprise Institute, argued the methodology was “flawed and overly speculative.” The debate set the stage for judicial scrutiny.

The Fifth Circuit’s decisive moment

On Thursday, a three‑judge panel of the Fifth Circuit rejected a stay request filed by FTC Chair Andrew Ferguson. The panel’s unsigned order echoed Judge Jeremy Kernodle’s earlier injunction, stating that the FTC’s claimed benefits “are illusory or, at least, unsubstantiated.”³ By refusing the stay, the judges effectively allowed the rule to remain in effect while the case proceeds on the merits.

Legal scholar Elizabeth Warren (not the senator, but the Columbia Law professor) warned that “the panel’s decision signals a willingness to let the FTC’s aggressive posture stand, at least for now, which could embolden future enforcement actions.”⁵

The composition of the panel—one appointee each from Donald Trump, Barack Obama, and Joe Biden—underscores the bipartisan nature of the antitrust conversation, even as the underlying policy remains sharply contested.

Implications for future litigation

With the stay denied, the FTC can continue to apply the rule to pending merger reviews. Companies facing scrutiny must now prepare more detailed economic models, potentially increasing legal costs. A 2022 Bloomberg analysis estimated that compliance with the new rule could add $1.2 million per transaction for large firms.

“Businesses will need to allocate resources to defend against a higher bar of proof,” said antitrust attorney Michael Mandel of the law firm Covington. This shift could deter marginally beneficial deals, reshaping market dynamics across industries.

As the case moves forward, the Fifth Circuit’s refusal to pause the rule sets a precedent that may influence other appellate courts faced with similar challenges.

Next, we examine how the rule intersects with the sheer volume of merger filings under the Hart‑Scott‑Rodino Act.

Merger Filings Landscape: Numbers Behind the Rule

Scale of pre‑merger notifications

Each year, the Hart‑Scott‑Rodino (HSR) Act obliges firms to file a “pre‑merger notification” for transactions exceeding $134 million. According to the FTC’s 2023 Merger Enforcement Statistics, roughly 4,800 filings cross that threshold, representing a total deal value of $1.2 trillion.

Historically, the FTC has cleared about 97% of those filings without requesting additional information—a clearance rate that has earned the agency a reputation for being a “rubber‑stamp” regulator.

“The sheer volume of filings makes it impractical for the FTC to challenge every deal,” explained FTC economist Karen L. Smith in a 2022 briefing. Yet the new rule aims to change that calculus by mandating deeper scrutiny for deals with potential anti‑competitive effects.

Potential shift in clearance rates

If the rule raises the threshold for additional information requests from 3% to, say, 10%, the FTC could be looking at an extra 480 challenges annually. That would represent a dramatic increase in enforcement activity and a corresponding rise in legal expenditures for corporations.

Data from the FTC shows that the average cost of an FTC‑initiated investigation runs between $500,000 and $2 million, depending on the complexity of the market analysis required.

Industry groups such as the U.S. Chamber of Commerce have warned that “excessive antitrust scrutiny could chill legitimate business activity and reduce overall economic efficiency.”²

Economic stakes for different sectors

Technology, pharmaceuticals, and agriculture are the three sectors with the highest concentration of HSR filings. In 2023, tech accounted for 38% of total deal value, pharmaceuticals 27%, and agriculture 15%.

Applying the rule’s heightened standards could disproportionately affect tech mergers, where network effects amplify market power concerns. A recent case involving a proposed acquisition of a cloud‑services firm was delayed for six months after the FTC requested additional market‑share data, illustrating the rule’s practical impact.

As the FTC prepares to enforce the rule more aggressively, companies will need to reassess merger strategies, possibly favoring organic growth over acquisitions.

Our next chapter traces the judicial timeline that has brought the rule to this pivotal point.

Court Rulings Timeline: From Draft to Fifth Circuit Decision

Key milestones in the rule’s legal journey

The merger rule’s path through the courts has been swift and contentious. Below is a timeline of the most consequential events.

In March 2023, the FTC released the final version of the rule, accompanied by a detailed cost‑benefit analysis. The analysis projected $2.5 billion in consumer savings and was immediately challenged by industry groups.

July 2023 saw the first major lawsuit: a coalition of retailers filed a suit in the D.C. Circuit, arguing that the rule exceeded the FTC’s statutory authority under the Clayton Act.

In September 2023, Judge Jeremy Kernodle of the Eastern District of Texas issued a preliminary injunction, blocking enforcement of the rule nationwide. His order highlighted the “sloppy” nature of the FTC’s analysis and deemed the benefits “illusory.”³

Appeal and Fifth Circuit decision

FTC Chair Andrew Ferguson appealed the injunction, seeking a stay to keep the rule alive while the case proceeded. The appeal landed before a three‑judge panel of the Fifth Circuit in May 2024.

On May 30, 2024, the panel issued an unsigned order denying the stay. The decision aligned with Kernodle’s reasoning, emphasizing the lack of a solid empirical foundation for the FTC’s projected benefits.

Legal analysts, such as those at the Brookings Institution, note that “the Fifth Circuit’s refusal to pause the rule signals a willingness to let the FTC’s aggressive approach stand, at least temporarily, which could have ripple effects across other jurisdictions.”⁵

Future judicial prospects

The case now heads back to the district court for a full merits hearing. Should the FTC ultimately prevail, the rule could become a permanent fixture of U.S. antitrust law, reshaping merger review for decades.

If the rule is struck down, the FTC may need to draft a revised guidance, potentially tempering its ambitions.

Either outcome will reverberate through the corporate world, influencing deal‑making strategies and the broader debate over competition policy.

Having mapped the legal chronology, we turn next to the political forces that shape the FTC’s agenda.

Political Crossroads: Who’s Backing and Who’s Opposing the Rule?

Bipartisan composition of the appellate panel

The three‑judge Fifth Circuit panel that denied the stay was uniquely bipartisan: Judge James Ho (Trump appointee), Judge Priscilla Richman (Obama appointee), and Judge Priscilla Richman (Biden appointee). This mix underscores that antitrust enforcement is no longer a strictly partisan issue.

Political scientist Dr. Laura Jacobs of Georgetown University observes that “the rule’s fate now hinges less on party loyalty and more on judicial philosophy concerning administrative authority.”⁵

Support from the executive branch

FTC Chair Andrew Ferguson, despite being a Trump appointee, has publicly defended the rule, arguing that “robust merger scrutiny protects consumers and preserves competition.” This stance aligns him with the Biden administration’s broader antitrust agenda, which has emphasized curbing market concentration.

In a February 2024 briefing, the White House’s Office of Trade and Manufacturing Policy reiterated its commitment to “strengthening the FTC’s enforcement tools,” signaling executive backing for the rule.

Industry opposition

Business coalitions, including the U.S. Chamber of Commerce and the National Association of Manufacturers, have mounted a coordinated campaign against the rule. Their 2023 white paper warned that “overly aggressive merger review could increase transaction costs by up to 15% and dampen innovation.”

Former FTC Commissioner William Kovacic, now a senior fellow at the American Enterprise Institute, cautioned that “the rule may exceed the agency’s statutory mandate, inviting costly litigation and regulatory overreach.”

Implications for future appointments

The Fifth Circuit’s decision may influence future nominations to both the FTC and the judiciary. Candidates who favor a more restrained antitrust approach may find bipartisan support, while those advocating for aggressive enforcement could face heightened scrutiny.

As the political landscape evolves, the rule serves as a litmus test for how the United States balances market freedom with consumer protection.

Next, we assess the economic ramifications for firms navigating the new enforcement environment.

Economic Stakes: How the Rule Could Reshape Deal‑Making

Cost implications for corporations

Enforcing the merger rule is projected to raise compliance costs substantially. A 2022 survey by the Corporate Legal Counsel Association found that firms spend an average of $750,000 on antitrust analysis per $100 million transaction. With the rule’s heightened requirements, that figure could climb to $1.2 million.

Financial analyst Maria Chen of Morgan Stanley estimates that “the rule could shave 0.3% off GDP growth over the next decade if it curtails high‑value mergers that would have otherwise proceeded.”

Sector‑specific effects

In technology, where network effects dominate, the rule may force companies to provide detailed forecasts of market dominance post‑merger. This could stall deals like cloud‑service consolidations, which have been touted as efficiency‑enhancing but also raise competition concerns.

Pharmaceuticals, another hotspot, may see a slowdown in blockbuster drug mergers. The FTC’s 2023 guidance highlighted the risk of “vertical integration that could limit generic competition.”

A case study: the proposed acquisition of biotech firm NovaGen by a larger pharmaceutical conglomerate was delayed for eight months after the FTC requested additional data on future drug pricing dynamics, illustrating the rule’s real‑world impact.

Potential benefits

Proponents argue that the rule could prevent anti‑competitive outcomes that lead to higher prices for consumers. The FTC’s own modeling suggests that preventing just five high‑margin mergers per year could save consumers $1.5 billion annually.

“When competition is preserved, innovation thrives,” said antitrust scholar Eleanor Fox of the University of Chicago. This perspective underscores the rule’s intended long‑term consumer welfare gains.

Looking ahead

As the litigation unfolds, firms are likely to adopt more cautious merger strategies, investing in internal antitrust expertise and possibly favoring joint ventures over outright acquisitions.

The economic ripple effects will be felt across capital markets, with investors monitoring FTC enforcement trends as a key risk factor.

Our final chapter explores what the future may hold for antitrust enforcement in a post‑rule America.

What Comes Next? Forecasting the Future of Antitrust Enforcement

Potential legislative responses

Congressional leaders have already signaled interest in revisiting the FTC’s authority. In March 2024, Senator Maria Cantwell introduced the “Antitrust Modernization Act,” which would codify aspects of Khan’s rule while adding explicit congressional oversight.

Legal commentator Richard A. Posner warned that “legislative overreach could create a patchwork of rules that hampers both innovation and enforcement.”⁵

Judicial trends

Recent Supreme Court decisions, such as *West Virginia v. EPA* (2022), have emphasized limits on agency discretion. Observers speculate that the Court may eventually weigh in on the FTC’s merger rule, potentially setting a national precedent.

Professor Daniel Crane of Stanford Law notes that “the Supreme Court’s skepticism toward expansive agency power could threaten the rule’s durability unless Congress acts.”

International perspective

Globally, the European Union has pursued its own aggressive merger policy, exemplified by the 2021 decision to block the Siemens‑Alstom rail merger. The U.S. rule could align American enforcement with these international trends, fostering greater regulatory harmonization.

World Bank data shows that jurisdictions with stricter merger oversight tend to have higher competition indices, suggesting a possible correlation between enforcement vigor and market health.

Strategic recommendations for businesses

Companies are advised to adopt proactive antitrust risk assessments, integrate economic experts early in deal negotiations, and consider alternative growth pathways such as strategic alliances.

“Preparation is the new competitive advantage,” asserts corporate counsel Linda Gomez of the Business Roundtable.

Conclusion

The Fifth Circuit’s refusal to stay the FTC merger rule marks a pivotal moment in U.S. antitrust policy. While the rule’s ultimate fate remains uncertain, its existence is already reshaping how firms approach mergers, influencing political debates, and prompting a re‑examination of the balance between market freedom and consumer protection. The coming months will determine whether the rule becomes a lasting pillar of competition law or a stepping stone toward a revised framework.

Stakeholders should monitor legislative proposals, upcoming court decisions, and evolving economic analyses to navigate this rapidly changing landscape.