Scrutiny of Mergers Certain to Intensify Under Obama
In a new paper NERA’s Dr. Timothy Daniel takes a look at how antitrust policy might change under the Obama administration.
He notes that both FTC Assistant Attorney General Christine Varney and Deputy Assistant AG Carl Shapiro have hinted that they might have challenged the Whirlpool/Maytag and XM/Sirius mergers that were cleared by the Bush Antitrust Division.
Excerpts from Whither Merger Review? Looking Forward While Looking Back
The installation of President Obama’s antitrust team promises to bring change to antitrust enforcement in the merger area, particularly at the Antitrust Division. AAG Varney has criticized the Antitrust Division’s recent merger enforcement record; one commentator noted that during her confirmation hearings AAG Varney stated that the Bush Administration’s reliance on the Chicago School approach to merger enforcement “had created a reluctance for the government to go forward and attempt to block mergers in the marketplace.”
DAAG Shapiro also has been critical of the Antitrust Division’s merger enforcement record, pointing in particular to the low level of merger enforcement during the Bush Administration measured either against other time periods or against the FTC’s merger enforcement actions during the same time period.
While some commentators have risen to the defense of the Bush Administration Antitrust Division’s merger enforcement record, the selection of these senior officials makes it virtually certain that the Obama Administration will increase the intensity of merger review.
AAG Varney and DAAG Shapiro have been understandably vague regarding what they would have done had they held their current positions during the Bush Administration, so it is unclear how the merger enforcement statistics reported above might have been different had these new officials been making the decisions. Still, both Varney and Shapiro have hinted that they might have challenged the Whirlpool/Maytag and XM/Sirius mergers that were cleared by the Antitrust Division.
Interestingly, both of these high profile mergers conform to the recent Bush Administration’s merger enforcement record in one respect—post-transaction concentration levels would have been well above the Horizontal Merger Guidelines’ thresholds under market definitions that would have supported a challenge. Where these two cleared transactions differ from those typically challenged during the final two years of the Bush Administration is their size and reach—both Whirlpool/Maytag and XM/Sirius involved sizable transactions in large, national markets.
While the ultimate merger enforcement agenda of the newly appointed antitrust officials will only become clear with time, these officials have pledged to be more aggressive than their immediate predecessors. Our review of the last two years of the Bush Administration merger enforcement record indicates that the agencies’ recent focus has been on transactions in national industries that traditionally fall to one agency or the other (pharmaceutical mergers to the FTC, “smokestack” mergers to the Antitrust Division) and on transactions where the competitive issues arise in narrow markets, from a product and/or geographic market perspective, with relatively high post-transaction share and concentration levels.
With regard to merger settlements, the extent to which share and concentration levels typically have exceeded the benchmarks contained in the Horizontal Merger Guidelines by such a wide margin is quite striking.
One possible path to reinvigorating merger enforcement would entail FTC Chairman Jon Leibowitz and Assistant Attorney General Varney instructing their merger staffs to consider challenging transactions in larger markets, even if they involve lower concentration levels.
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