FTC and DOJ Challenged Fewest Merger Transactions Since 2009, According to First Annual Merger Enforcement Report by Cornerstone Research

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Strongest enforcement focus on pharmaceuticals, manufacturing, and information sectors

In fiscal year 2014, U.S. government agencies challenged only 33 merger transactions, the fewest since 2009, according to a new report published by Cornerstone Research. The report, Trends in Merger Investigations and Enforcement at the U.S. Antitrust Agencies: FY 2005–2014, provides a unique 10-year perspective on merger enforcement activity based on data from the joint FTC/DOJ annual reports to Congress pursuant to the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976.

In FY 2014, the number of merger transactions went up for the first time in three years. The 1,618 reported merger transactions were the highest since FY 2008, and a 26 percent increase from 1,286 in FY 2013.

The report also provides a valuable framework for evaluating possible outcomes as mergers proceed through the regulatory process. Of the FY 2014 transactions, 274 mergers (17 percent) were cleared for an initial investigation by either the FTC or DOJ for potential anticompetitive effects. The agencies issued a second request for additional information in 51 of these transactions, or 19 percent of the mergers that the agencies initially cleared for investigation.

“Historically, the FTC has received almost twice as many clearances to investigate mergers as the DOJ,” said Kostis Hatzitaskos, a principal of Cornerstone Research. “However, the DOJ has been converting a substantially larger fraction of these clearances into second requests.”

Of the 33 enforcement actions in FY 2014, most challenges (over 60 percent) were settled. In more than a third, the parties abandoned or restructured their transactions. The government initiated court proceedings in just one matter.

The report introduces a new statistic: the Enforcement Focus Indicator (EFI), which measures the share of second requests in an industry sector relative to its portion of total transactions. The Pharmaceuticals, Manufacturing, and Information sectors had the strongest enforcement focus in FY 2014. Pharmaceuticals was the only sector to have received more than its proportionate share of second requests in each of the last 10 fiscal years.

In FY 2014, almost 50 percent of the agencies’ second requests were issued in merger transactions exceeding $1 billion. The share of agency second requests for merger transactions under $100 million has remained generally stable since FY 2012, accounting for 6 percent of all second requests in FY 2014.

About Cornerstone Research

Cornerstone Research provides economic and financial consulting and expert testimony in all phases of complex litigation and regulatory proceedings. The firm works with an extensive network of prominent faculty and industry practitioners to identify the best-qualified expert for each assignment. Cornerstone Research has earned a reputation for consistent high quality and effectiveness by delivering rigorous, state-of-the-art analysis for over 25 years. The firm has 600 staff and offices in Boston, Chicago, London, Los Angeles, New York, San Francisco, Silicon Valley, and Washington.

Please visit Cornerstone Research’s website for more information about the firm’s capabilities in economic and financial consulting and expert testimony.

http://www.cornerstone.com
Twitter: @Cornerstone_Res

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