Last week, the Federal Trade Commission challenged a $5 million acquisition in the pharmaceutical industry. The FTC’s challenge serves as a reminder that no deal is too small to generate scrutiny from the U.S. antitrust agencies. During the Obama administration, the FTC and Department of Justice have devoted significant resources to investigating and challenging transactions that are not subject to the reporting requirements of the Hart-Scott-Rodino Act, including consummated transactions.1 The FTC’s latest challenge serves as a reminder that a low purchase price or the lack of an HSR filing obligation does not exempt a transaction from antitrust scrutiny.

In 2014, Boehringer Ingelheim entered into a series of transactions transferring its U.S. generic injectable pharmaceuticals business to Hikma Pharmaceuticals PLC.2 In the last of these transactions, Hikma agreed to acquire 49 abbreviated new drug applications (ANDAs) for approximately $5 million.3 Due to issues at its manufacturing facilities, Boehringer had discontinued sale of the drugs covered by the ANDAs in 2013. Nevertheless, the FTC objected to the acquisition of five ANDAs, each of which covered drugs Hikma either currently supplied or was allegedly poised to offer soon. The FTC alleged that absent the sale to Hikma, Boehringer would have the incentive to sell the ANDAs to a buyer that did not compete in these markets. In addition, the FTC noted that difficulties in the production of sterile liquid drugs had already contributed to price increases and supply disruptions for several of these drugs. To resolve the FTC’s concerns, Hikma agreed to divest all five ANDAs to a third party  shortly after closing the acquisition.

The FTC’s challenge in Hikma continues a trend of aggressive antitrust scrutiny of small transactions during the Obama administration. The FTC and DOJ have obtained divestitures or other remedies in a number of other small deals, including a 2013 challenge to an $8.7 million software acquisition, a 2011 challenge to an approximately $3 million acquisition of a chicken processing plant, and a 2010 challenge to a $5 million merger of voting equipment systems providers. In addition, larger transactions that were exempt from filing requirements under the HSR Act have also been challenged, including DOJ litigation unwinding a $168 million acquisition in the technology sector in 2014.

Transacting parties should consider potential antitrust issues in all strategic acquisitions, including small deals or those that are otherwise exempt under the HSR Act.  In HSR-exempt acquisitions that pose antitrust risk, buyers should assess whether review of the transaction by other governmental agencies, complaints from customers or competitors, or media coverage may invite antitrust scrutiny before or after closing. Serial buyers should be mindful that statements in documents filed with the antitrust agencies in connection with HSR-reportable transactions may be relevant to the antitrust review of other acquisitions, even previously consummated or potential future acquisitions that are not subject to the HSR Act. Where multiple acquisitions in the same industry are anticipated, buyers should carefully consider the sequencing of these transactions.4

The Hikma challenge shows that the U.S. antitrust agencies devote significant resources to investigating small deals, even during periods when M&A activity is high and multi-billion dollar transactions are common.