Since the beginning of the Trump Administration, the Antitrust Division of the Department of Justice (DOJ) has captured headlines for its aggressive public stance regarding merger enforcement. Actions attracting attention include the DOJ's challenge of AT&T's proposed acquisition of Time Warner and repeated declarations from antitrust leadership raising objections to behavioral remedies for anticompetitive mergers, even in vertical transactions.
The Federal Trade Commission (FTC), which shares with the DOJ responsibility for enforcing the federal antitrust laws, has taken a more "speak softly and carry a big stick" approach to merger enforcement. Indeed, although it has not received nearly as much press attention as the DOJ, since January 2017, the FTC has brought nearly twice as many merger enforcement actions: 30 versus 16 for the DOJ. The FTC also continues to win in court. For instance, just last month, a federal district court granted the FTC's request for a preliminary injunction against Tronox's proposed acquisition of Cristal.1
These data, and statements by FTC officials, show that companies in industries for which the FTC has primary enforcement responsibilityincluding pharmaceuticals, supermarkets, medical devices, semiconductors, energy and othersmust be aware that the FTC is not necessarily a more hospitable forum for deal reviews. As to vertical mergers, for example, the FTC has stated that it strongly favors structural relief and that behavioral remedies may only be accepted in exceptional cases.
This alert summarizes key FTC merger enforcement actions and statements made by FTC leadership since January 2017 and identifies some key implications for future transactions.
FTC Merger Enforcement in the Trump Administration: Highlights
Since January 2017, the FTC has brought enforcement actions in a wide variety of industries, including oil pipelines, gas stations, grocery products, chemicals, rocket and missile systems, fantasy sports, and software. In addition, the FTC continues to have a particular interest in pharmaceuticals and healthcare transactions, as indicated by the 10 enforcement actions in these areas, including a recent merger challenge to Grifols S.A.'s acquisition of Biotest US.2
In recent speeches, the director of the Bureau of Competition, Bruce Hoffman, highlighted a handful of particularly significant merger enforcement actions. Those cases demonstrate the FTC's focus on innovation and nascent competition, its tendency to define narrow markets around products that compete especially closely in a broader sector, and its skepticism that buyer power could ever rebut an overwhelming presumption that a merger to duopoly or monopoly will lessen competition.
CDK and Auto/Mate. CDK and Auto/Mate supply dealer management systems (DMS) software to car dealerships. Car dealerships use DMS software to manage nearly every aspect of their business.3 The top two DMS software providers, CDK and Reynolds, had about a 70% share of the DMS software market. Dealertrack, Autosoft and Auto/Mate also had competitive DMS offerings. The FTC challenged CDK's proposed acquisition of Auto/Mate even though Auto/Mate had only a 6% share of the DMS software market.4 According to the FTC, "Auto/Mate appeared to be on the cusp of becoming a much more important and vibrant competitor."5 The FTC viewed the...