Federal Trade Commission Continues Quest to Stem the Merger Tide

The Federal Trade Commission (FTC) has reimplemented a policy of requiring all merger enforcement orders to embody the requirement that acquisitive companies acquire prior approval from the FTC earlier than closing any future transaction in the related market. The brand new coverage, authorized by a 3-2 vote over the dissent of each Republican appointees, follows the prior rescission of the FTC’s 1995 coverage assertion that rejected prior approval necessities due partly to the excessive price imposed on firms topic to such orders, the effectiveness of the notification necessities of the Hart-Scott-Rodino Antitrust Enhancements Act, and the hurt attributable to disparate enforcement software made doable by the prior approval necessities.

The brand new coverage goes additional than the pre-1995 coverage in its effort to deter mergers. For instance, the FTC now:

  • will think about searching for prior approval necessities in transactions which can be deserted after litigation commences however earlier than trial;

  • might, in “situations where stronger relief is needed,” search prior approval that covers merchandise and geographic markets past simply the related markets affected by the merger at challenge; and

  • would require consumers of divested property to agree to prior approvals of any future sale of these divested property for at least 10 years.

In dissenting from the issuance of this new coverage, Commissioners Christine Wilson and Noah Phillips summarized their views as follows:

The 2021 Coverage Assertion represents one more daft try by a partisan majority of commissioners to use bureaucratic purple tape to weight down all transactions—not simply probably anticompetitive ones—and to chill M&A exercise in the United States. Notably, the majority goes far past the established order that existed earlier than the FTC adopted its 1995 Coverage Assertion on Prior Discover and Prior Approval.  Right now’s motion constitutes one more end-run round the Hart-Scott-Rodino pre-merger notification framework that Congress established in 1976.  In making an attempt to justify its actions, the majority oversells the advantages of its actions and considerably undersells the harms, together with additional divergence from the Antitrust Division of the Division of Justice with respect to merger evaluation insurance policies. And as soon as once more, the majority that ostensibly seeks to “democratize” the FTC has denied the public the alternative to present discover and touch upon an essential coverage challenge.

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