A glance at headlines regarding competition law could easily give the impression that U.S. antitrust agencies have embarked on a record number of merger challenges in recent years. But the numbers tell a different story: in the first two years of the current Administration, the rate of merger-related federal enforcement actions has actually decreased. While the agencies are attempting to deter transactions, they are doing so through strident rhetoric and procedural changes that increase both the cost of deal making and the uncertainty of agency decision making, rather than through increased adjudicative enforcement activity.
Observers of the U.S. antitrust landscape could be forgiven for missing this phenomenon if they simply read the media coverage in recent months. Commentators and advocates continue to characterize the current status of merger enforcement actions as substantial; one attorney with the American Economic Liberties Project argued the agencies “have successfully blocked a record number of deals in the last two years,” while another antitrust commentator stated “[t]he Antitrust Division is filing a record number of cases” in recent years. In the same vein, Bloomberg claimed “US enforcers have roughly doubled their efforts to block mergers under the Biden administration.”
This view of the agencies’ conduct comes amid tougher rhetoric from the current Administration on competition law, including a July 2021 executive order urging federal agencies to plan for “the revitalization of merger oversight.” Moreover, in recent months, the Department of Justice’s Antitrust Division (“DOJ”) and the Federal Trade Commission (“FTC”) have drawn widespread attention with a few high-profile merger challenges, including DOJ’s March 2023 challenge to the proposed JetBlue/Spirit merger; the FTC’s recent challenge to Amgen’s proposed acquisition of Horizon Therapeutics under a novel and untested theory of harm filed in May 2023; and, of course, the FTC’s lawsuit seeking to block Microsoft’s proposed acquisition of Activision in December 2022.
But zooming out from the handful of headline-grabbing court challenges to look at the aggregate level of enforcement activity by the federal antitrust agencies, the picture becomes more complicated. In terms of both absolute numbers and as a percentage of the total number of transactions filed with the agencies, the number of mergers that the agencies challenged during the first two-plus years of the current Administration decreased compared to similar time periods in prior administrations.
Comparing the first two calendar years of the two most recent administrations shows the change in the number of enforcement actions, as well as the enforcement rate, as shown in the following two graphs:
As these figures show, the absolute number of enforcement actions was slightly lower in the first two years of the Biden Administration (50) than it was in the first two years of the Trump Administration (53). The decrease in enforcement activity becomes clearer when you look at the enforcement rate (i.e., the number of enforcement actions divided by the number of transactions reported to the agencies). As the figure on the right shows, the enforcement rate during the first two years of the Biden Administration (0.76%) was nearly 40 percent lower than the enforcement rate during the first two years of the Trump administration (1.24%).
The drop-off is even more stark when comparing the first two years of the Biden Administration to the last year of the Trump Administration, as shown in the two charts immediately below.
In 2020, the FTC and DOJ challenged 36 transactions, representing 1.9 percent of reported transactions. But in 2021, the agencies challenged just 28 transactions, accounting for 0.7 percent of reported transactions—less than half the rate of 2020. The enforcement rate has crept up since 2021, but as of the first quarter of 2023, it was still less than half of the agencies’ enforcement rate in 2020.
These numbers contradict the narrative presented in recent commentary from legal news observers: the rate of merger enforcement has actually decreased under the new leadership at the FTC and DOJ. However, concluding from the 2021 and 2022 metrics that the antitrust agencies are pro-merger would be ill-advised.
Despite initiating fewer formal enforcement actions, the antitrust agencies have sought to make deal making more difficult using other mechanisms that are not reviewable by courts. Former FTC Commissioner Noah Phillips described this counterintuitive reality in April 2022, commenting that “[a]ntitrust enforcement over the last fifteen months has been anything but vigorous—indeed, it has been sclerotic.” And yet, as Phillips observed, the FTC has engaged in “gratuitously taxing M&A” through various tactics, including:
- Suspending the early termination of the initial Hart-Scott-Rodino Act waiting period for all transactions;
- Increasing the number of Second Requests issued and expanding the scope and burden of those full-phase investigations;
- Adopting a general aversion to consent agreements;
- For those consent agreements that the FTC enters, imposing a new requirement that the merged entity must obtain the agency’s prior approval to engage in future transactions in certain specified industries;
- Sending a large volume of pre-consummation warning letters.
It appears that the agencies are pursuing a goal of general deterrence of transactions through broad application of these tactics rather than by increasing the number of merger enforcement actions.
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Companies considering deal making activity should be aware that full-phase investigations can take longer than under previous administrations, but that ultimately the agencies are not challenging as many transactions as they have in the past. This atmosphere of uncertainty requires a significant amount of planning and careful strategic thinking well in advance of entering into a merger agreement.