The Federal Trade Commission announced that it is restoring its long-established practice of routinely restricting future acquisitions for merging parties that pursue anticompetitive mergers. The Prior Approval Policy Statement issued today puts industry on notice that the FTC’s merger enforcement orders will once again require acquisitive firms to obtain prior approval from the agency before closing any future transaction affecting each relevant market for which a violation was alleged, for a minimum of ten years. In July 2021, the Commission rescinded a 1995 policy statement that for decades had fueled consolidation by preventing the agency from imposing these merger restrictions.
“The FTC should not have to waste valuable time and resources investigating clearly anticompetitive deals that should have died in the boardroom,” said Holly Vedova, Director of the Bureau of Competition. “Restoring the long-standing prior approval policy forces acquisitive firms to think twice before going on a buying binge because the FTC can simply say no.”
The application of the Prior Approval Policy Statement will protect consumers and deter merging parties from pursuing anticompetitive deals. The consequences of attempting an anticompetitive deal will be more severe and the bar for consummating further anticompetitive acquisitions will be higher. Parties settling an anticompetitive deal with a consent order will need the Commission’s permission to close any further acquisition in an affected market, and sometimes in broader markets depending on the circumstances, for at least ten years. The FTC will weigh a number of factors in determining the scope of a prior approval provision, including the nature of the transaction, the level of market concentration and degree to which the transaction increases market concentration, the degree of pre-merger market power, the parties’ history of acquisitiveness, and evidence of anticompetitive market dynamics. And the Commission may seek prior approvals even when parties abandon a transaction.
The Commission has already implemented this policy in the proposed order imposing strict limits on future acquisitions by DaVita, Inc. following DaVita’s acquisition of the University of Utah Health’s dialysis clinics. Notably, given DaVita’s history of acquisitiveness, the DaVita order extends the coverage of the prior approval beyond the markets directly impacted by the transaction, requiring DaVita to receive prior approval from the FTC before acquiring any new ownership interest in a dialysis clinic anywhere in Utah for a period of ten years.
The FTC and the Antitrust Division of the Department of Justice have concurrent jurisdiction to review mergers and acquisitions and enforce the federal civil antitrust laws. Although the agencies share jurisdiction, in the interest of good government and to avoid duplicative review, the agencies coordinate on each matter to determine which agency will conduct the review – this is referred to as the “clearance” process. Nothing in the FTC’s 2021 Statement is intended to change or override the agencies’ long-standing clearance process.
The Commission approved the issuance of the policy statement by a vote of 3-2. Commissioners Noah Joshua Phillips and Christine S. Wilson issued a dissenting statement.