Antitrust Alert: FTC Releases Data on Industry Mergers Being Investigated
The U.S. Federal Trade Commission released new data on its horizontal merger investigations from the past four years, providing deeper insight into the types of mergers between competitors that are likely to draw antitrust scrutiny. The new report depicts, industry-by-industry, the levels of market concentration for proposed mergers that have triggered an FTC investigation or enforcement action, illuminating how the FTC may apply greater scrutiny to mergers in certain industries, such as oil.
The new report (which updates a 2008 version) shows that, from 1996 to 2011, the FTC issued a second request and investigated 264 mergers, where the staff principally focused on a horizontal theory of anticompetitive harm. For those 264 investigations, which involved 1372 separate markets, the report provides data on market concentration, the number of significant competitors, the existence of hot documents, the existence of customer complaints, and ease of entry.
Two points stand out:
FTC challenged the mergers that most increased market concentration.The data confirm that most FTC investigations and enforcement actions involved mergers with market concentration levels exceeding the highest threshold set forth in the Horizontal Merger Guidelines (2010). The Guidelines state that mergers that create "highly concentrated markets" – markets with a "Herfindahl-Hirschman Index" (HHI) of 2500 or more – and that involve an increase in HHI of more than 200 points "will be presumed to be likely to enhance market power." The new report shows that the overwhelming majority of FTC mergers reviewed exceed these criterion, with the exception of mergers in the oil industry. Similarly, the FTC’s subsequent decision to bring enforcement actions correlate with the post-merger HHIs of the markets involved. In markets with post-merger HHIs between 2400 and 3999, the FTC sought enforcement in 72 percent of cases reviewed; and, in markets with post-merger HHIs of 4000 or greater, the FTC sought enforcement in 93 percent of cases it reviewed.
Some industries get more action than others. The report highlights the fact that the FTC has treated some industries differently. In FTC investigations of proposed mergers in the oil industry, 71 percent of the markets involved had post-merger HHIs of less than 2400. By contrast, in FTC investigations of proposed mergers in other industries, the post-merger HHIs were rarely below 2400 (e.g., 11 percent for grocery markets, 10 percent for branded consumer goods markets, and 2 percent for pharmaceutical markets).
Such different treatment across industries is even more visible with respect to enforcement decisions. For instance, after investigating proposed mergers in pharmaceuticals, the FTC sought enforcement in 119 out of 122 markets; and, after investigating proposed mergers in chemicals, the FTC sought enforcement in 90 out of 103 markets. By contrast, after investigating proposed mergers, the FTC only sought enforcement in 8 out of 20 hospital markets, 15 out of 26 electronically-controlled devices and systems markets, and 21 out of 40 branded consumer goods markets.
Of course each merger is unique, and the data further show how the existence of hot documents, credible customer complaints, or easy entry conditions can affect enforcement decisions. However, the data shown in this report highlight trends that are useful for businesses in analyzing the potential enforcement challenges presented by a merger between competing companies.
For more information, please contact your principal Jones Day representative or either of the lawyers listed below.
Kathryn M. Fenton
Kenneth W. Field
Michael H. Knight
David P. Wales
Thomas J. Forr, an associate in the Washington Office, assisted in the preparation of this Alert.
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