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The time it takes antitrust regulators to review tie-ups is “largely” in the hands of the merging parties, the Federal Trade Commission’s top antitrust official told Bloomberg BNA.
Tad Lipsky, the FTC’s acting competition bureau chief, was responding to statements from the business community that merger reviews are too often being held up by the government’s slow process.
Antitrust attorneys are counseling merging parties to expect lengthy reviews from federal agencies, which is raising alarms in the business community. At the same time, both the FTC and the Justice Department will lose staff if President Donald Trump’s fiscal 2018 budget request goes through, meaning more work on increasingly complicated mergers with fewer people.
The process is particularly slow for complex mega-mergers. A deal between paint makers Sherwin-Williams Co.’s and Valspar Corp. was cleared by the FTC in late May, more than a year after it was proposed. And, the Justice Department’s antitrust division has yet to reach a decision on a deal between DuPont Co. and the Dow Chemical Co. that was announced in December 2015. That merger has already cleared the European Union, India, Brazil, and Australia, with conditions.
But Lipsky said much of the merger review process is actually being driven by the companies, starting with the filing of a pre-merger notification under the Hart-Scott-Rodino (HSR) Act.
“Often the receipt of an HSR filing occurs weeks after” a deal is announced, Lipsky said in an e-mail. “The parties may delay filing to speak to us in advance. They may pull and refile as well.”
The situation is being closely monitored by the U.S. Chamber of Commerce.
“What the FTC says isn’t untrue, but it doesn’t change the fact that it becomes increasingly difficult for an agency to explain why it takes more than a year to review a transaction that under U.S. law is presumed to be legal,” Sean Heather, director of antitrust policy at the U.S. Chamber of Commerce, told Bloomberg BNA.
While merging parties do have significant control over timing of filings, Heather said much of their actions are taken in deference to the agency. He said companies may be concerned about the appearance of “rushing” the process, for example.
The vast majority of mergers filed with the government are approved. But some lead to antitrust investigations, which can ultimately result in a settlement or a decision to block the deal. The agencies typically don’t confirm pending investigations unless they have already been disclosed by the merging parties.
Significant merger cases — ones in which a public enforcement action such as a settlement order was taken by the government — lasted an average of 9.9 months in 2016, compared with 7.1 months in 2011, according to an analysis of by Dechert LLP.
“Looking at the universe of significant merger investigations in the U.S., there is no getting around the fact that they take longer than they used to take,” Paul Denis, an antitrust partner at Dechert’s Washington office, told Bloomberg BNA. “It is a critical counseling point that deal makers ignore at their peril.”
Lipsky said the commission is open to suggestions for reducing the burdens of review. However, he said it’s hard to draw conclusions about the problem by looking at a few dozen transactions each year on an aggregated basis.
“The best source of potential improvements in efficiency is not always apparent,” he said.
Lipsky didn’t cast the blame entirely on the merging parties. For example, he acknowledged that, beginning in the 1980s, the FTC and many other antitrust agencies adopted an economics approach that generally results in more data and more complex analysis than in prior eras.
He acknowledged that need for transaction approval in foreign jurisdictions — possibly dozens in some cases — may also pose coordination or management challenges that affect timing.
“This reality places special responsibility on the world’s antitrust agencies to find innovative ways to ensure that multiple reviews do not stifle pro-competitive or competitively neutral transactions through the sheer weight of the collective regulatory burden that has become typical for significant transactions worldwide,” Lipsky added.
Makan Delrahim, who is waiting for Senate confirmation to head the Justice Department’s antitrust division, has made similar comments. He told senators at his confirmation hearing that he wanted to assign a deputy to helping coordinate international antitrust reviews. Acting FTC Chairman Maureen Ohlhausen has also said she wants to streamline the review process within her agency.
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