Dive Brief:

• Democrats at the Federal Trade Commission called on Congress to consider revising the statutory time limit imposed on the agency’s merger reviews, citing an “unprecedented” wave of transactions in 2021.

• A record 3,520 transactions were reported to both the FTC and U.S. Department of Justice in fiscal 2021, more than twice the number that were reported the year before, according to a report released by the FTC on Friday.

• The agencies also reported a 35% increase in cases where they issued a “second request” subpoena asking the parties for more details about the transaction.

Dive Insight:

FTC Chair Lina Khan and her two Democratic colleagues, Rebecca Slaughter and Alvaro Bedoya, said the report reflects the “unprecedented” challenges the agency faces in conducting effective merger reviews in the modern economy. In light of such challenges, statutory merger review timelines under the federal Hart-Scott-Rodino Act are no longer adequate, the commissioners wrote in a joint statement, led by Slaughter.

“Since the HSR Act was passed in 1976, the volume and complexity of information and data produced by merging parties have increased by several orders of magnitude,” they said.

The commissioners also called for increased resources as part of the FTC’s annual appropriations.

The commission approved the report with a vote of 4-0, though lone Republican Christine Wilson issued her own statement that took issue with Democrats’ recommendations. The five-seat panel currently has one Republican vacancy.

“I urge my colleagues on the Commission to look inward and acknowledge the damage the current administration has caused to the HSR process,” Wilson said. “For decades the timelines did not create problems for the agencies. Parties routinely entered timing agreements with staff that provided adequate time for investigations. But, early in the current administration, the Commission flouted a negotiated timing agreement after the parties voluntarily extended the review period several times.”

She said the current commission also “took affirmative steps to increase the burden, heighten the risk, and increase the uncertainty attendant to the HSR process.”

Under the HSR Act, companies planning a covered transaction must file a pre-merger notification with the FTC and DOJ and wait for a government review before closing the deal. Typically, companies must wait for at least 30 days.

The parties are normally free to close their deal once the waiting period expires or is terminated. However, if the reviewing agency determines that it needs more information, it may issue a second request, which extends the waiting period and prevents the companies from completing the transaction until they have "substantially complied” with the request.

Typically, once both companies have substantially complied with the second request, the agency has an additional 30 days to review the materials and take action, if necessary. 

The agencies issued 65 second requests in fiscal 2021, up from 48 the year before, according to the FTC’s report, which covers the period from Oct. 1, 2020 through Sept. 30, 2021.

The commission in particular brought 18 merger enforcement challenges in various sectors, including consumer goods and services, pharmaceuticals, agriculture, healthcare, high tech and industrial goods, and energy.

The agency issued consent orders after a public comment period in five of those cases and initiated administrative or federal court litigation in six of them. In seven cases, the transaction was abandoned or restructured as a result of antitrust concerns raised during the investigation.

Khan and her fellow Democrats said the FTC routinely resorts to voluntary agreements with merging parties to allow adequate time for staff to review deals, which is “further evidence of the inadequacy of the enabling statutory timelines.”

“We should not have to rely on permission from merging parties to have enough time to do the work required by law,” they said.

In addition, the report shows the need for increased funding is “more acute than ever,” the commissioners wrote. While the FTC and DOJ are expected soon to get increased resources for antitrust enforcement in the form of higher merger filing fees for large deals, additional funding will be needed in light of the “substantial increase in the volume, size and complexity of HSR filings and in expert costs in recent years,” they said.

Wilson suggested that calls for both HSR reform and increased funding were unnecessary.

“If the Commission were operating productively, bringing enforcement actions supported by learned staff and targeted at significant consumer harms, additional resources might be warranted,” she said. “But the rampant mismanagement shown by Commission leadership is concerning and warrants caution before throwing more resources at the problem.”

The total value of mergers and acquisitions in the U.S. and Canada dropped to about $1.5 trillion in 2022, down 41.4% from record levels in 2021, as rising interest rates and a slowing economy dissuaded companies from expanding, according to an analysis released last month by S&P Global Market Intelligence.