Increased Merger Review Activity by US Department of Justice May Signal Increased Vigilance by Obama Administration

Originally published June 16, 2011

Keywords: merger review activity, DOJ, Antitrust division, antitrust enforcement, Section 7, Clayton Act

The start of the Obama administration in 2009 brought with it predictions of stepped-up antitrust enforcement activity by the Department of Justice's (DOJ) Antitrust Division, particularly in the area of mergers. To the surprise of many observers, those predictions proved largely overstated. While the US Federal Trade Commission (FTC) continued to be very aggressive in its antitrust enforcement, and the DOJ vigorously pursued cartels in the United States and around the world (as it has for the last two decades), civil non-merger challenges and merger enforcement have barely increased over the last two years. Instead, the DOJ's enforcement actions typically involved settlements—particularly in the vertical area— and consummated mergers.

However, a recent spate of actual and threatened court actions by the DOJ to block and undo mergers may signal a reversal of this trend and could be an indication that the DOJ is finally becoming more aggressive in merger review. This, combined with the joint DOJ-FTC promulgation of new horizontal merger guidelines in August 2010, puts the spotlight back on the antitrust aspects of mergers at a time when economic activity appears to be picking up steam. Businesses that are considering mergers, acquisitions or other combinations—particularly in concentrated markets—would do well to pay close attention to this emerging trend.

Below we discuss five actions brought by the DOJ, and the lessons that can be learned from each. While the enforcement trend may be a new development, the theories offered by the DOJ in these cases are very conventional:

The mergers challenged were all horizontal and involved straightforward application of traditional antitrust principles; Assuming the government's proposed market definition was accepted, the challenged transactions generally would have resulted in large market shares for the post-merger firm; The government relied on evidence that the DOJ typically finds persuasive, including business documents analyzing the transaction; and The industries in which the mergers occurred—including agriculture, financial markets and high-tech industries—are ones that have historically received scrutiny from the government. H&R Block/2SS Holdings

On May 23, 2011, the DOJ sued under Section 7 of the Clayton Act to enjoin the proposed merger of H&R Block...