Enforcers are taking longer to review fewer deals

11 October 2017

Enforcers are taking longer to review fewer deals

Federal Trade Commission

The US antitrust agencies took 20% longer to conduct deal investigations in the past year, despite investigating fewer mergers compared to 2016, according to a law firm’s report for the third quarter of 2017.

Released on Monday, the Dechert Antitrust Merger Investigation Timing Tracker report stated that the average duration of a significant merger review has ballooned from 7.1 months in 2011-2013, to over 11 months in 2017 – continuing a six-year trend of increasing investigation times at the Federal Trade Commission and the Department of Justice’s antitrust division.

Dechert defines “significant” merger investigations as investigations of proposed Hart-Scott-Rodino reportable deals resulting in a closing statement, consent order, complaint challenging a transaction, or transaction abandonment for which the agency releases a statement.

The report noted that 2017 produced the Walgreens/Rite Aid, Abbott/Alere and DaVita/Renal Ventures investigations, which are the three longest significant investigations it has tracked since 2011. But the trend toward longer investigations goes beyond even these three anomalies, with 50% of the significant investigations in 2017 persisting for 10.3 months, the report stated.

“The exact cause of this continued upward trend is unclear, though it could be some combination of delays caused by the transition in administrations, a policy shift of the Trump administration, or some other systemic change,” the report stated.

Makan Delrahim won Senate approval to lead the DOJ’s antitrust division in September after months of delay; meanwhile three FTC commissioner slots remain vacant.

Dechert partner Michael Weiner suggested on Tuesday that the transition in the agencies’ front offices may be the cause for the delay in 2017. He also noted the trend could also signify a decline in aggressive enforcement or perhaps past enforcement has made companies recognise the limitations in their proposed deals.

“I think it’s just too early to tell,” Weiner said. “Certainly the trend is there and you cannot dispute the facts but without knowing the specific facts of every deal that has been announced or every deal that has been contemplated, but not done, we just cannot answer that question at this point.”

Under the new Republican administration, it’s possible the review time will quicken, Weiner said, as Republicans tend to avoid over-regulation. But he noted these aren’t really “conventional times”.

“With Republicans now running the show, it will be interesting to see if there’s a change in the trend,” Weiner said.

Despite an increase in deal activity, the FTC and the DOJ conducted only 27 significant investigations from October 2016 through September 2017 – 25% fewer compared to the 36 conducted in the prior 12 months, the report found. It also noted only one lawsuit filed against a HSR reportable deal in the recent 12-month period – down 80% from the previous year.

Rani Habash, Dechert associate and the report’s co-author, said when the law firm started its tracker, he thought the antitrust agencies may be bogged down with the sheer number of investigations. He suggested that perhaps the delay was due to strained resources.

“But as the number [of investigations] has come down and we are still continuing to see the long duration, I guess it’s hard for us to say it’s based on the resources of the agency,” Habash said.

Habash noted the antitrust agencies are finishing the investigations started under President Barack Obama’s administration and the true impact the Trump administration’s policies has on mergers won’t be apparent until possibly the beginning of 2018.

Additionally, the report stated that investigations ending with consents requiring upfront buyers lasted about two months longer than those with consents allowing the companies to find a divestiture buyer after their deal is consummated. 

Dechert releases quarterly reports on the antitrust agencies’ investigation times, which it began tracking in 2015.

A DOJ spokesman said on Tuesday the agency strives to enhance efficiency and effectiveness when conducting merger investigations.  

“The Antitrust Division must look at every merger and acquisition carefully and thoroughly in its continued effort to protect the American consumer,” he said.

The FTC declined to comment by presstime.