Federal Trade Commission
FTC, DOJ Issue Annual HSR Report; Khan Argues Rising Deal Activity Justifies Reforms
Mon 11/08/2021 14:29 PM
Relevant Documents:
HSR Annual Report FY2020
Chair Khan and Commissioner Slaughter Statement
Commissioners Phillips and Wilson Statement
The FTC and the Antitrust Division of the DOJ released the 43rd annual Hart-Scott-Rodino Report today, providing a summary of antitrust enforcement during the federal government’s fiscal year 2020. The report notes that 1,637 transactions were reported under the HSR Act during the reporting period. This represents a 21.6% decrease from the 2,089 transactions reported in fiscal year 2019, the last full fiscal year prior to the Covid-19 pandemic.
Merging parties request early termination of the waiting period in the majority of transactions. The report notes that “in fiscal year 2020, early termination was requested in 71.7%, or 1,133, of the adjusted transactions reported. In fiscal year 2019, early termination was requested in 74.2%, or 1,500, of the transactions reported. The percentage of requests granted out of the total requested decreased from 78% in fiscal year 2019 to 76% in fiscal year 2020.”
The agencies issued 48 second requests in fiscal year 2020 - 23 by the FTC and 25 by the Antitrust Division.
During fiscal year 2020, the FTC brought 28 merger enforcement challenges - the highest number of enforcement actions in a single fiscal year since 2001. In 10 of these matters the parties settled with the agency; in 11 matters the parties abandoned or restructured their transaction after antitrust concerns were raised. The FTC initiated administrative or federal court litigation in the other seven cases.
The DOJ challenged 15 mergers, eight of which were resolved by settlement. Of the remaining seven challenges, four transactions were abandoned, and the parties addressed and resolved the division’s concerns in the remaining three.
In a statement accompanying the HSR report, FTC Chair Lina Khan, joined by Commissioner Rebecca Slaughter, expressed concern that the agency is faced with an “explosion in deal volume coupled with serious resource constraints that are overburdening our ability to investigate carefully mergers that may prove unlawful.” Khan noted that by September 2021, the number of HSR filings this year had already exceeded the total number of filings received in each of the past 10 years, and that agency resources “have not kept up.” Additionally, Khan said that the statutory timelines laid out in the HSR Act “add a further strain” to the agency’s staff and resources.
Khan said that to address these concerns, the agency has started to issue pre-consummation warning letters that notify parties that the agency’s investigation remains open despite the expiration of the waiting period. Khan defended the practice as consistent with the HSR Act, arguing that “the statute expressly states that any lack of agency action during HSR review does not preclude any subsequent proceeding, establishing the HSR process as an opportunity for premerger review rather than the basis for a final determination on the legality of a merger.”
Khan also suggested that “legislative updates that reflect these new market realities would also help ensure that the core purpose of premerger review - to equip antitrust enforcers to identify and challenge unlawful mergers prior to consummation.”
Lastly, Khan argued that by returning to the practice of requiring prior approval provisions in merger settlements, the FTC is now in closer alignment with the DOJ.
Separately, Commissioners Noah Phillips and Christine Wilson issued a statement arguing that recent reforms spearheaded by Khan “increase uncertainty, impose delays, and raise the costs of all mergers, legal and illegal alike,” without making merger enforcement “more efficient, effective or fair.”
They expressed skepticism at Khan’s reference to the surge in HSR filings in justifying policy reforms, noting that the DOJ’s Antitrust Division also faced an increase in HSR filings but has not made similar changes. Further, Phillips and Wilson argue that recent policy changes “distort almost beyond recognition the merger review framework that Congress legislated.”
HSR Annual Report FY2020
Chair Khan and Commissioner Slaughter Statement
Commissioners Phillips and Wilson Statement
- The FTC and the Antitrust Division of the DOJ released the 43rd annual Hart-Scott-Rodino Report today, providing a summary of antitrust enforcement during the federal government’s fiscal year 2020.
- According to the report, the FTC brought 28 merger challenges in 2020. The DOJ challenged 15 deals over the same period.
- In a separate statement, FTC Chair Lina Khan cited the surge of HSR filings in 2021 as a justification for recent reforms to the agency’s merger review process. Commissioners Noah Phillips and Christine Wilson argued that such reforms increase uncertainty and impose delays.
The FTC and the Antitrust Division of the DOJ released the 43rd annual Hart-Scott-Rodino Report today, providing a summary of antitrust enforcement during the federal government’s fiscal year 2020. The report notes that 1,637 transactions were reported under the HSR Act during the reporting period. This represents a 21.6% decrease from the 2,089 transactions reported in fiscal year 2019, the last full fiscal year prior to the Covid-19 pandemic.
Source: 2020 Hart-Scott-Rodino Premerger Notification Report
Merging parties request early termination of the waiting period in the majority of transactions. The report notes that “in fiscal year 2020, early termination was requested in 71.7%, or 1,133, of the adjusted transactions reported. In fiscal year 2019, early termination was requested in 74.2%, or 1,500, of the transactions reported. The percentage of requests granted out of the total requested decreased from 78% in fiscal year 2019 to 76% in fiscal year 2020.”
The agencies issued 48 second requests in fiscal year 2020 - 23 by the FTC and 25 by the Antitrust Division.
Source: 2020 Hart-Scott-Rodino Premerger Notification Report
During fiscal year 2020, the FTC brought 28 merger enforcement challenges - the highest number of enforcement actions in a single fiscal year since 2001. In 10 of these matters the parties settled with the agency; in 11 matters the parties abandoned or restructured their transaction after antitrust concerns were raised. The FTC initiated administrative or federal court litigation in the other seven cases.
The DOJ challenged 15 mergers, eight of which were resolved by settlement. Of the remaining seven challenges, four transactions were abandoned, and the parties addressed and resolved the division’s concerns in the remaining three.
In a statement accompanying the HSR report, FTC Chair Lina Khan, joined by Commissioner Rebecca Slaughter, expressed concern that the agency is faced with an “explosion in deal volume coupled with serious resource constraints that are overburdening our ability to investigate carefully mergers that may prove unlawful.” Khan noted that by September 2021, the number of HSR filings this year had already exceeded the total number of filings received in each of the past 10 years, and that agency resources “have not kept up.” Additionally, Khan said that the statutory timelines laid out in the HSR Act “add a further strain” to the agency’s staff and resources.
Khan said that to address these concerns, the agency has started to issue pre-consummation warning letters that notify parties that the agency’s investigation remains open despite the expiration of the waiting period. Khan defended the practice as consistent with the HSR Act, arguing that “the statute expressly states that any lack of agency action during HSR review does not preclude any subsequent proceeding, establishing the HSR process as an opportunity for premerger review rather than the basis for a final determination on the legality of a merger.”
Khan also suggested that “legislative updates that reflect these new market realities would also help ensure that the core purpose of premerger review - to equip antitrust enforcers to identify and challenge unlawful mergers prior to consummation.”
Lastly, Khan argued that by returning to the practice of requiring prior approval provisions in merger settlements, the FTC is now in closer alignment with the DOJ.
Separately, Commissioners Noah Phillips and Christine Wilson issued a statement arguing that recent reforms spearheaded by Khan “increase uncertainty, impose delays, and raise the costs of all mergers, legal and illegal alike,” without making merger enforcement “more efficient, effective or fair.”
They expressed skepticism at Khan’s reference to the surge in HSR filings in justifying policy reforms, noting that the DOJ’s Antitrust Division also faced an increase in HSR filings but has not made similar changes. Further, Phillips and Wilson argue that recent policy changes “distort almost beyond recognition the merger review framework that Congress legislated.”
This article is an example of the content you may receive if you subscribe to a product of Reorg Research, Inc. or one of its affiliates (collectively, “Reorg”). The information contained herein should not be construed as legal, investment, accounting or other professional services advice on any subject. Reorg, its affiliates, officers, directors, partners and employees expressly disclaim all liability in respect to actions taken or not taken based on any or all the contents of this publication. Copyright © 2024 Reorg Research, Inc. All rights reserved.