New Report by Cornerstone Research: FTC and DOJ Merger Challenges Up 27 Percent in FY 2015

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Strongest enforcement focus on transportation, retail and pharmaceutical sectors

U.S. government agencies challenged 42 mergers in fiscal year 2015, up 27 percent from the 33 challenges in the previous fiscal year, according to an annual report by Cornerstone Research. The second edition of this report covers 10 years of investigation and enforcement data through FY 2015.

As noted in Trends in Merger Investigations and Enforcement at the U.S. Antitrust Agencies: FY 2006–FY 2015, the increase in challenges coincided with a rise in reported merger transactions. The 1,754 mergers in FY 2015 was the second-highest total in the past 10 fiscal years and 136 more than in FY 2014. Since mergers and challenges increased at approximately the same rate, however, the percentage of challenges by the FTC and DOJ in FY 2015 remained at the historical average of 2.2 percent (FY 2006 through FY 2014).

“Enforcement activity remained relatively consistent with the overall level of previous years,” said Cagatay Koç, a principal of Cornerstone Research and coauthor of the report. “Where we did see a significant jump was in mergers valued over $1 billion. These transactions accounted for two-thirds of second requests. This is the only time their share of second requests was over 50 percent in the last 10 fiscal years.”

Cornerstone Research’s proprietary Enforcement Focus Indicator (EFI) provides insight into industry trends by reporting on the share of second requests in a specific sector relative to its share of transactions. The transportation, retail and pharmaceutical sectors saw the strongest enforcement focus in FY 2015.

Key Findings

  •     The last three fiscal years have seen a steady increase in reported merger transactions from 1,286 in FY 2013 to 1,754 in FY 2015.
  •     The number of transactions cleared to the FTC or DOJ for further investigation declined from 274 in FY 2014 to 258 in FY 2015.
  •     The number of second requests went from 51 in FY 2014 to 47 in FY 2015, decreasing from 18.6 percent to 18.2 percent of cleared transactions.
  •     In FY 2015, 60 percent of challenges were resolved by consent orders/decrees. The parties abandoned or restructured their transactions in 33 percent, and court proceedings were initiated in 7 percent.
  •     Consistent with the historical average over the previous nine fiscal years, the FTC received more clearances for investigation than the DOJ in FY 2015, but the DOJ continued to be more likely to issue second requests and to challenge mergers.

About the Report
The report, Trends in Merger Investigations and Enforcement at the U.S. Antitrust Agencies, provides a 10-year perspective on merger enforcement activity based on data from the joint annual reports issued by the Federal Trade Commission and the U.S. Department of Justice to Congress pursuant to the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976.

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 700 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.
Twitter: @Cornerstone_Res

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