FTC Pledges Crackdown on Anticompetitive Mergers and Acquisitions

Commission wants to slam the door to “buying frenzy”.

Prior consent is back to normal. The Federal Trade Commission has revived its long-dormant policy of routinely restricting anti-competitive mergers, “alerting the industry” to the need to reassign prior approval “to aggressive buyers” before completing any future transaction affecting any relevant market for that there is a violation “. supposedly for at least 10 years. “

“Restoring the longstanding previous approval policy is forcing acquiring firms to think twice before embarking on a buying spree because the FTC can simply say no,” said Holly Vedova, director of the competition bureau.

The Commission overturned a 1995 policy statement that it said it had launched more than 25 years of consolidation in the industry by preventing the agency from doing its job of restricting mergers that would damage fair competition harm in the market. The FTC demonstrated its “new sheriff in town” resolution by imposing “tough limits” on Utah-based kidney dialysis company DaVita, Inc. for a decade that the commission says have demonstrated a “history of willingness to work.”

The vote was 3-2 and split along the party lines. Chair Lina M. Khan, Commissioner Rebecca Kelly Slaughter and then-outgoing Commissioner Rohit Chopra formed the democratic majority who voted in favor of politics. Republican Commissioners Noah Joshua Phillips and Christine S. Wilson voted against.

Applying the Prior Approval Statement of Principles will usher in tougher action by the FTC and significantly raise the bar for completing anti-competitive acquisitions. “Parties entering into an anticompetitive deal with a consent warrant need the approval of the Commission to complete any further acquisition in an affected market, and sometimes broader markets depending on the circumstances, for at least ten years,” says the FTC.

Key factors

When examining transactions, the Commission will consider factors such as:

• The type of transaction.

• The degree of market concentration.

• The extent to which the transaction increases market concentration.

• The degree of market power prior to the merger.

• The acquisition history of the parties.

• Evidence of Anti-Competitive Market Dynamics.

The commission says it can get prior approvals even if parties abandon a transaction.

The prior approval tool will help prevent “seemingly anti-competitive deals”, including those that “should have died in the boardroom” because the parties would otherwise be willing to do a deal with minimal disposals.

It also saves the Commission’s resources that would otherwise be used to challenge mergers through litigation or settlements. The Commission says it will now be able to detect anti-competitive transactions that fall below the Hart-Scott-Rodino (HSR) reporting thresholds. Without prior approval, the Commission learns of these deals too late to prevent them or to mitigate their effects.

Dissidents predict damage to economic growth

In their dissent, Commissioners Phillips and Wilson wrote that Commissioners Khan and Slaughter had partnered with a “zombie vote” by then Commissioner Rohit Chopra, a President Trump-appointed Democrat who was appointed Director of Consumer Finance Protection by President Biden’s Bureau (CFPB) and took office on October 12th. The dissenting commissioners, both appointed by Trump, described the action as “another broadside in the corporate control market in the United States” and wrote that the prior approval requirement “imposes significant obligations on the merger.” Parties and innocent sale buyers not with regard to currently pending mergers, but with regard to future business. “

They said the majority’s action:

• Will discourage pro-competitive transactions and stifle economic growth.

• Is more aggressive than the pre-1995 status quo.

• Is an attempt to abolish the HSR process.

• Overestimates the advantages and underestimates the disadvantages of the new directive.

• Denied the public the opportunity to enter.

The FTC and the Justice Department’s Antitrust Division are also responsible for examining mergers and acquisitions and enforcing federal civil antitrust laws. Although the authorities share responsibility, as part of their inter-agency clearance process on each matter, they coordinate to determine which authority will conduct the review.

Published by Tom Hagy for MoginRubin LLP.