A Record-Breaking Year of Mergers and Acquisitions
On February 10, 2023, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) released the 44th Hart-Scott-Rodino Annual Report, which surveys fiscal data and trends in the agencies' jointly administered premerger program for Fiscal Year 2021 (October 1, 2020 through September 30, 2021).
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act), requires the parties to proposed mergers or acquisitions of voting securities, non-corporate interests, or assets that meet certain thresholds to submit premerger notification forms to the FTC and the DOJ and observe a statutory waiting period before closing the transaction. If either agency determines that further review is necessary, it may issue a request for additional information or a "second request." If, after additional review, the reviewing agency believes that a proposed transaction may be anticompetitive, it may seek an injunction in federal court or challenge the transaction in an administrative proceeding.
The Report includes statistics on filings submitted under the HSR Act, the issuance of second requests, and the agencies' enforcement activity. The Report emphasizes the significant increase in the agencies' merger workload: More than twice the number of transactions were reported in Fiscal Year 2021 as in Fiscal Year 2020.
A Record-Breaking Year
In Fiscal Year 2021, more than 3,520 transactions were reported under the HSR Act. That figure marks a 115% increase over the 1,637 transactions reported in Fiscal Year 2020, and a 265% increase from 2013, when only 1,326 transactions were reported.
The 3,520 transactions spanned a wide range of industry groups, led by consumer goods and services (32.4%), manufacturing (9.9%), banking and insurance (9.7%), and information technology (9.1%).f
Transaction Boom Outpaced Increased Enforcement
While the FTC and DOJ issued more second requests in Fiscal Year 2021 than in Fiscal Year 2020, the proportion of filings receiving second requests decreased from to 3.0% to 1.9%.
Together, the agencies issued 65 second requests for transactions filed in Fiscal Year 2021, 17 more second requests than in Fiscal Year 2020. The FTC issued second requests for 1.3% of total reported transactions, compared to 1.2% in Fiscal Year 2020. The DOJ issued second requests for .7% of total reported transactions, compared to 1.6% in Fiscal Year 2020.
The Report also demonstrates that the larger the transaction size or the sales or assets of the acquiring entity, the more likely a transaction will be subject to a second request. Transactions valued at $500 million or more accounted for 69.2% of second requests issued, but only 45.8% of the total reported HSR transactions.
Of the 18 merger enforcement challenges the FTC brought in Fiscal Year 2021, five resulted in final consent orders after a public comment period; seven of the transactions were restructured or set aside; and six culminated in administrative or federal court litigation.
Of the 14 merger enforcement challenges brought by the DOJ Antitrust Division, two resulted in federal court litigation to block the transactions; nine resulted in a consent decree filed in federal court; and three transactions were restructured to address the Division's concerns.
All four of the FTC's commissioners weighed in on the Report's findings, highlighting the divergent policies and priorities between Democratic and Republican appointees. A joint statement by Chairwoman Lina M. Khan, Commissioner Rebecca K. Slaughter, and Commissioner Alvaro M. Bedoya called for Congress to increase enforcement funding and extend the statutory window for the FTC and DOJ to review HSR filings, calling the current 30-day limit inadequate in the face of the growing magnitude and complexity of the information and data produced by applicants. A separate statement from Commissioner Christine S. Wilson criticized FTC leadership for failing to abide by the 30-day statutory timeline and authorizing investigations based on theories of harm that would not support a successful merger challenge in federal court. The sole Commissioner appointed by a Republican administration, Commissioner Wilson, announced her resignation on February 14, 2023, leaving two vacancies on the panel. FTC commissioners are appointed by the President but must be confirmed by the Senate. The FTC can continue to function with three commissioners, the maximum for any one political party.
The FTC and DOJ's enforcement activities are funded by federal appropriations and HSR filing fees, which Congress voted to raise in December 2022. The Congressional Budget Office estimates that the higher fees will raise more than $1.4 billion of additional revenue for FTC and DOJ antitrust enforcement actions over the next five years, which will substantially increase the federal government's antitrust enforcement resources.
For more information on the revised HSR filing fees and thresholds, see our January 2023 Advisory: FTC Announced 2023 HSR Merger Filing Threshold and Fees.