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Horizontal merger analysis under the DOJ/FTC guidelines

Hart-Scott-Rodino Antitrust Improvement Act (1976):

Reporting thresholds: firms must inform the DOJ and FTC of planned acquisitions above threshold size (2026 figures)

  • All transactions above $535.5 million must be reported
  • Size of party test: Transactions from $133.9 million to $535.5 million are reported if
    • One party’s sales or net assets exceeds $267.8 million AND
    • The other party’s sales or assets exceeds $25.3 million (easy to satisfy)

Process:​

  • (1) Filing: firms falling under statutory guidelines have to file with authorities
  • (2) Clearance (case assigned to an agency): case is assigned to the FTC or DOJ; most are not cleared, but are left to expire, which is implicit approval from FTC and DOJ
  • (3) Second request: made when agencies decide there is an anticompetitive effect

Outcomes (2024 figures):​

  • (1) Lapse of 30 days after initial filing/early termination (of review): agency doesn’t do anything
  • (2) Termination (of review) following second request (30 FTC/29 DOJ): interrogatories and documentary requests (confidential)
    • These are also often left to expire
  • (3) Enforcement actions (20 FTC/14 DOJ)
    • Abandonment (by parties) (12 FTC/14 DOJ): covers most investigated mergers, this is why mergers are considered more administrative than legal
    • Negotiation/settlement/consent decree (2 FTC)
    • Litigation/complaint/preliminary injunction (6 FTC)
  • HSR reporting data

Number of transactions per year, 2015-2024:​

  • Doesn’t appear to track the business cycle
  • Ironic note on Biden: business leaders accused FTC/Khan of blocking transactions, but 2021 had more transaction than the previous 15 years

Mergers by industry:​

  • No industry jumps out as being massively overrepresented relative to its size

Summary of transactions by fiscal year​

  • There are severe resource constraints on agencies’ ability to investigate mergers: note the small percentage that goes to special request
  • Don’t grant requests for early termination – just let requests expire to save administrative resources
  • Main point: using antitrust law to protect “mom and pop” businesses just isn’t practical, the agencies don’t have enough resources to review all the relevant transactions

Acquisitions by size​

  • Most transactions that reach second request are very large
  • Merger guidelines:
  • Published by the FTC/DOJ: reflect what agencies think,
  • Courts are not required to follow the merger guidelines (although many followed the last set of guidelines from 2010)

Intended to outline:​

  • Analytical techniques: analytical, economic, and evidentiary tools
    • Sources of evidence: what do agencies look at to determine whether there should be a second request or enforcement?
      • Merging parties; customers, workers, industry participants, observers; econometric analysis and economic modeling; transaction terms
    • Evaluating competition among firms: the particular data and conceptual frameworks agencies use to think about mergers
      • Strategic decisions; entry and exit; customer substitution; impact on rivals; effect of diminished competition

Contents​