The Federal Trade Commission ("FTC") and Department of Justice ("DOJ") have released their annual Hart-Scott-Rodino ("HSR") Report, which details the agencies' merger review and enforcement for fiscal year 2014, which runs from October 1, 2013, to September 30, 2014. This provides data and useful insights into the agencies' pre-merger review program.
Merger filings continue to grow, approaching pre-recession levels. During the 2014 fiscal year, 1,663 transactions were reported to the federal antitrust agencies through the HSR premerger notification program. This is a 25% increase over fiscal year 2013 and is the highest number of filings since 2008.
"Mega-mergers" increase. The percentage of reportable merger transactions valued at more than $500 million also has increased over the past three years. During the 2014 fiscal year, nearly one-third of HSR-reportable mergers were valued at over $500 million.
Second Requests flat. Despite fluctuations in the number of HSR-reportable transactions, the percentage of transactions resulting in a request for additional information (known as a Second Request) has not varied substantially, ranging from 2.5% to 4.5% for both agencies combined. During the 2014 fiscal year, the agencies issued Second Requests in 51 merger investigations, representing 3.2% of all filings.
Government challenged more than 30 transactions. The agencies together challenged 33 transactions during the fiscal year. The FTC brought 17 challenges, including 13 in which it accepted consent orders for public comment, all of which resulted in final orders, three in which the transactions were abandoned or restructured in the face of FTC's antitrust concerns, and one in which administrative litigation was initiated. The DOJ challenged 16 transactions; in seven, the DOJ filed settlement papers simultaneously with the complaint. Of the remaining nine transactions in which the DOJ did not file a complaint, the parties abandoned the transaction in four instances and restructured the transaction to resolve the DOJ's concerns in five instances.
Focus on markets where consumer spending is high, including healthcare. Nearly one-third of notified transactions during the 2014 fiscal year involved the purchase of a company in the consumer goods and services sector. Therefore it is no surprise that several of the agencies' enforcement actions also fell into this category. For example, the DOJ challenged Tyson Foods's proposed acquisition of The Hillshire Brands Co. The companies compete in the procurement of sows from U.S. farmers for slaughter and processing into pork sausage. A proposed consent decree was filed simultaneously with the complaint and required Tyson to divest its sow purchasing business to avoid a challenge to the acquisition.
Healthcare and pharmaceuticals sectors continue to be areas of focus for the agencies. Although healthcare and pharmaceuticals comprised only 4.1% of reported transactions, these sectors resulted in some of the antitrust agencies' most high profile enforcement actions. For example, in April 2015, the FTC concluded its challenge of St. Luke's Health System's acquisition of Saltzer Medical Group, which combined Idaho's largest health system and its largest independent, multi-specialty physician practice group. The FTC and the Idaho Attorney General challenged the transaction in federal court. The U.S. District Court for the District of Idaho found that the acquisition violated Section 7 of the Clayton Act and the Idaho Competition Act, permanently enjoined the consummated acquisition, and ordered St. Luke's to divest Saltzer's physicians and assets. The Ninth Circuit affirmed.
These data show that, as the volume of transactions approaches pre-recession levels, the FTC and DOJ continue to enforce the antitrust laws aggressively. In particular, the agencies will look most closely at cases involving consumer goods and health care because those industries most directly implicate consumer spending.
The HSR Report can be found on the FTC's website.