The U.S. Federal Trade Commission (FTC) and the U.S. Department of Justice’s Antitrust Division (DOJ) recently issued their Hart-Scott-Rodino Annual Report for Fiscal Year 2013 (the Report). 1 The key takeaways from the Report are:
- More than 80% of notified transactions are not subject to initial investigation by the antitrust agencies;
- Less than 5% of notified transactions are subject to detailed Second Request investigations;
- Approximately 80% of early termination requests are granted; and
- Remedies are required in most transactions where a Second Request is issued.
1 Fiscal year 2013 covers the period of October 1, 2012 through September 30, 2013.
Total HSR filings down 7%
According to the Report, in FY 2013, a total of 1,326 transactions were notified under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act).2 This represents a 7.2% decrease from the 1,429 transactions notified during the previous fiscal year (see Figure 1 below).
More than 80% of transactions receive no further scrutiny from the antitrust agencies
Through a process known as “clearance,” representatives of both the FTC and DOJ meet to assign transactions raising potential competition concerns to either agency for the purpose of conducting an initial investigation. Clearance to conduct an initial investigation was granted to the FTC or DOJ in only 217 out of 1,286 cases (16.9%). Clearance was granted to the FTC in 145 transactions and to the DOJ in 72 transactions. All other transactions (83.1%) completed the HSR process without either agency initiating a preliminary investigation. These figures are broadly comparable to prior years. In FY 2012, 206 out of 1,400 reviewed transactions (14.7%) were cleared to one of the agencies for investigation; 135 transactions were cleared to the FTC and 71 to the DOJ. In FY 2011, 257 out of 1,414 transactions (18.2%) were cleared for investigation; 163 were cleared to the FTC and 94 to the DOJ.
Level of Second Requests issued remains constant
Of the transactions for which one of the agencies conducted an initial investigation, approximately 22% (47 out of 217) were subject to a detailed Second Request investigation; 25 Second Requests were issued by the FTC (17.2% of the FTC’s 145 investigated transactions) and 22 were issued by the DOJ (30.6% of the DOJ’s 72 investigated transactions). In FY 2012, a total of 49 Second Requests were issued. The overall percentage of Second Requests issued each year out of the total number of transactions has remained relatively constant, although the percentage of transactions receiving a Second Request has been slightly higher during the Obama administration than under the Bush administration as evidenced by Figure 1 below.
- Of the total number of notified transactions, 1,286 were subject to HSR review. Notified transactions that are not subject to HSR review include: (i) incomplete notifications, (ii) exempt transactions (e.g., which are reviewable by another federal agency but are still subject to filing with the FTC and DOJ),
(iii) non-reportable transactions and (iv) withdrawn transactions.
HSR Merger Transactions Reported and Percentage of Transactions Resulting in Second Requests Fiscal Years 2004–2013
3.7% 3.9% 3.5% 3.7%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Majority of early termination requests are granted
Early termination of the HSR waiting period was requested in a total of 990 transactions and granted in 797 of those transactions. The percentage of early termination requests granted out of the total requests made decreased slightly from 82% during FY 2012 to 80.5% in FY 2013.
Agencies remain active in challenging mergers
A total of 38 merger enforcement actions3 were brought in FY 2013—23 by the FTC and 15 by the DOJ. 4 The number of merger challenges brought by each of the FTC and DOJ in FY 2013 exceeds the average number of challenges brought on an annual basis by each respective agency over a 10-year period (FY 2004–2013).5 The number of enforcement actions brought by the DOJ in FY 2013 only slightly exceeds its 10-year annualized average, while the number of enforcement actions brought by the FTC in FY 2013 is the second highest number of actions brought by the agency during the last 10 years. Most
- Enforcement actions brought by the agencies include instances where (1) the parties settled with the agencies, (2) the transaction was abandoned or restructured due to concerns raised during the investigation and (3) the agencies filed a complaint in federal court or initiated an administrative proceeding.
- The FY 2013 merger enforcement actions identified in the Report are not limited to HSR reportable transactions and include both new actions and actions related to litigation initiated in prior fiscal years.
- The average number of merger challenges brought by the FTC from FY 2004 through FY 2013 is 19.4 and the average number brought by the DOJ during this period is 14.2.
enforcement actions are resolved through consent decrees, where the parties agree to divestitures and other remedies as a condition of clearance.
About the HSR Act
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The HSR Act requires parties to certain mergers and acquisitions to file a notification with the FTC and DOJ prior to consummating the proposed transaction. Upon filing, a 30-day waiting period (15 days in the case of a cash tender offer or bankruptcy sale) begins during which the parties may not close the transaction. During this window, the antitrust agencies assess whether the transaction is likely to have any anticompetitive effects. If deemed necessary, the FTC and DOJ are authorized to extend the waiting period by issuing a Second Request for additional information and documents. If after the Second Request review there are still concerns at the agencies, the FTC and DOJ may seek a consent order from the parties or bring a court action challenging the merger.