Diving into the data in the HSR Report

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Today the FTC and DOJ released the Hart-Scott-Rodino Annual Report for Fiscal Year 2016. The Report is the 39th accounting of the agencies’ premerger notification program under the HSR Act, and it covers all premerger notification and merger enforcement activity initiated between October 1, 2015 and September 30, 2016. Here is a data-driven summary of the Report.

1,832 transactions reported under the HSR Act. This represents a slight increase from the 1,801 transactions reported the year before and the largest number of transactions reported since FY 2007.

1,772 “adjusted transactions” or transactions for which the agencies were authorized to request additional information. Adjusted transactions exclude transactions that are not subject to antitrust review under the HSR Act because: (1) the notification filing was incomplete or withdrawn before the start of the initial waiting period; or (2) the transaction reported was subject to review by another federal agency or later determined to be not reportable.

238 adjusted transactions cleared to an agency for review. Initially all HSR filings are reviewed by both agencies. If review of a filing suggests that a transaction may have an adverse competitive effect, the agencies will determine through a clearance process which one of them will investigate the transaction. Until clearance is received, agency staff may not contact the parties or any third parties to gather more information. As reflected in Table III of the Report, 238 adjusted transactions—about 13% of the total—raised competitive concerns that warranted reaching out to collect information beyond what is contained in the HSR Form. This means that roughly 87% of transactions did not result in a clearance request and thus completed the HSR process without either agency initiating a preliminary investigation. The rate of transactions cleared for additional review over the last decade has ranged from 13.4% (in FY 2016) to 22.5% (in FY 2009).

54 second requests issued by the agencies. This is the number of transactions that presented competitive concerns warranting an in-depth investigation, including the collection of additional business documents and data from the parties to the transaction. Issuing a second request prevents the parties from completing their transaction until they have substantially complied with the second request and observed a second waiting period. In FY 2016, similar to years past, a small fraction—roughly 3%—of adjusted transactions were subject to a second request investigation by the agencies.

47 merger enforcement actions brought by the agencies. This number includes not only challenges to transactions that were reported to the agencies under the HSR Act but also challenges to non-reportable mergers. As in prior years, most enforcement actions were resolved by consent order in which the parties agreed to divestitures or other remedies in order to complete their transaction without a government challenge.

9 merger cases filed in federal court seeking a permanent or preliminary injunction. The agencies may seek to enjoin a merger if no settlement has been reached and the parties have not indicated that they are abandoning the transaction. In FY 2016, DOJ filed six injunction actions in federal court to prevent problematic mergers. The parties abandoned the transaction post-complaint in three cases and DOJ successfully enjoined two. In DOJ’s third filed case, the parties abandoned the transaction shortly before the start of trial. On the FTC side, the agency authorized staff to seek a preliminary injunction in five merger cases. In three cases, Staples/Office Depot, Penn State Hershey/Pinnacle, and Advocate/NorthShore, the FTC prevailed and the parties abandoned their plans shortly thereafter. In Superior/Canexus, the parties abandoned the transaction before staff filed its injunction motion. In the Cabell/St. Mary's hospital merger, FTC staff did not seek a preliminary injunction and the Commission withdrew its administrative complaint after the West Virginia legislature passed a law relating to certain cooperative agreements between hospitals in that state.

3 civil enforcement actions for violations of the HSR Act or Rules, resulting in $12.1 million in civil penalties. Enforcement of the premerger notification requirements ensures consistent application of the Act and Rules, and deters would-be violators from ignoring their reporting obligations.

The HSR Annual Report makes the agencies’ merger review process more transparent by providing a statistical summary of each fiscal year’s HSR filings, second requests, and merger enforcement actions. The news from the FY 2016 Report is that not much is new: the agencies’ merger review process continues to be consistent, with no appreciable change in the percentage of transactions subject to initial investigation, second request investigation, or merger enforcement action. Indeed, FY 2016’s Report confirms the conclusions drawn from years past: that early termination is granted or the waiting period expires in the majority of transactions, a very small percentage of transactions are the subject of a second request investigation, and only a handful of mergers are challenged on antitrust grounds. The Report also confirms that most merger enforcement actions are resolved by settlement, which allows the non-problematic parts of the deal to proceed as planned, while only a small number are blocked each fiscal year on antitrust grounds.

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