Part One: Merger Enforcement Developments in 2002

Wednesday, January 1st, 2003 at 12:00 am by Barbara Anthony, James J. Calder, Susan Gelles, Richard S. Julie, Abid Qureshi, Susan Raitt
Barbara Anthony, James J. Calder, Susan Gelles, Richard S. Julie, Abid Qureshi, Susan Raitt, Part One: Merger Enforcement Developments in 2002, 2003 Colum. Bus. L. Rev. 452

One recent and particularly provocative criticism of the merger review process, from within the ftc itself, is that the agencies tend to place too much emphasis and reliance on empirical evidence to demonstrate likely anticompetitive effects of proposed mergers, to the exclusion of evidence such as economic modeling that is arguably more reliable. A more common and frequent criticism, heard during this year’s Milton Handler address, is that the statutory framework under the hsr Act results in the vast majority of challenged transactions being settled by consent agreement in a non-public process between the parties and the agencies. The result is a dearth of judge-made law in this area. In the last several years, the agencies have responded to this criticism by bringing more cases, including successful challenges, to the merger of office supply superstores Staples and Office Depot, which addressed important issues of market definition; the merger of baby-food makers Heinz and Beech-Nut, which addressed the role of efficiencies in the analysis of mergers in concentrated markets, and, the sale of the loose leaf tobacco business of Swedish Match to its competitor National Tobacco Company, which addressed issues of market definition, concentration, and efficiencies.

Some in the business community have long been critical of the Second Request process under the hsr Act, because it can result in enormous costs and lengthy delays for the parties. Some believe it forces many companies to abandon transactions despite the strength of their legal positions. It is not unusual for the expense of complying with a Second Request alone to run into the millions of dollars on top of the very significant cost of litigation in the event the agencies seek to enjoin the transaction. If these costs alone are not prohibitive, in a number of instances the delay caused by the filing of a court action can be decisive in killing a deal, particularly where the parties to the merger are publicly traded companies. As the following review of significant developments in 2002 demonstrates, the agencies are recognizing and responding to some of these procedural concerns. In addition, the past year of merger enforcement, though not marked by any groundbreaking or dramatic legal developments, also reveals important nuances in the substantive legal analysis applied by the federal agencies and the courts in reviewing mergers.

Author Information

Anthony (Regional Director, Northeast Region, FTC), Calder (N/A), Gelles (Attorney, FTC), Julie (N/A), Qureshi (N/A), Raitt (Attorney, FTC)