United States:
Commission Wants To Slam Door On “Buying Binges.”
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Prior approval is once again standard practice. The Federal
Trade Commission has resuscitated its long-dormant policy of
routinely restricting anticompetitive mergers, putting
“industry on notice” that it will once again require
aggressive acquirers to obtain prior approval “before
closing any future transaction affecting each
relevant market for which a violation was alleged, for a minimum of
10 years.”
“Restoring the long-standing prior approval policy forces
acquisitive firms to think twice before going on a buying binge
because the FTC can simply say no,” said Bureau of Competition
Director Holly Vedova.
The Commission rescinded a 1995 policy statement which it says
kicked off more than 25 years of industry consolidation by
preventing the agency from doing its job, that is, restricting
mergers that harm fair market competition. Demonstrating its
“new sheriff in town” resolution, the FTC imposed 10
years’ worth of “strict limits” on Utah-based kidney
dialysis company DaVita, Inc., which the Commission says has
demonstrated a “history of acquisitiveness.”
The vote was 3-2, splitting along party lines. Chairwoman Lina
M. Khan, Commissioner Rebecca Kelly Slaughter, and then-outgoing
Commissioner Rohit Chopra comprised the Democratic majority voting
in favor of the policy. Republican Commissioners Noah Joshua
Phillips and Christine S. Wilson voted against.
Application of the Prior Approval Policy Statement will
usher in more severe action by the FTC and significantly raise the
bar for consummating anticompetitive acquisitions. “Parties
settling an anticompetitive deal with a consent order will need the
Commission’s permission to close any further acquisition in an
affected market, and sometimes in broader markets depending on the
circumstances, for at least ten years,” the FTC says.
Key Factors
The Commission will weigh factors including the following in
reviewing deals:
- The nature of the transaction.
- The level of market concentration.
- The degree to which the transaction increases market
concentration. - The degree of pre-merger market power.
- The parties’ history of acquisitiveness.
- Evidence of anticompetitive market dynamics.
The Commission says it may seek prior approvals even when
parties abandon a transaction.
The prior approval tool will help prevent
“facially anticompetitive deals,” including those that
“should have died in the boardroom” because the parties
would otherwise be willing to risk consummating a deal with minimal
divestitures.
It will also preserve Commission resources otherwise diverted to
challenge mergers via litigation or settlement. The Commission says
it will now be able to detect anticompetitive deals that fall below
the Hart-Scott-Rodino (HSR) reporting thresholds. Without prior
approval, the Commission says it learns about these deals too late
to do anything to prevent them or mitigate their impact.
Dissenters Predict Harm to Economic Growth
In their dissent, Commissioners Phillips and Wilson wrote
that Commissioners Khan and Slaughter joined forces with a
“zombie vote” cast by then-Commissioner Rohit Chopra, a
Democrat appointed by President Trump, who was appointed by
President Biden as Director of the Consumer Financial Protection
Bureau (CFPB) and took office Oct. 12. Calling the action “yet
another broadside at the market for corporate control in the United
States,” the dissenting commissioners, both Trump appointees,
wrote that the prior approval requirement “imposes significant
obligations on merging parties and innocent divestiture buyers not
with respect to currently pending mergers, but instead with respect
to future deals.”
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 effort to abrogate the HSR process.
- Overstates the benefits and undersells the harms of its new
policy. - Denies the public the opportunity for input.
The FTC and the Antitrust Division of the Department of Justice
have concurrent jurisdiction to review mergers and acquisitions and
enforce the federal civil antitrust laws. Although the
agencies share jurisdiction, through their interagency clearance
process they coordinate on each matter to determine which agency
will conduct the review.
Edited by Tom Hagy for MoginRubin LLP.
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