By Mark Engstrom, J.D.
A new FTC report released today—The FTC’s Merger Remedies 2006-2012: A Report of the Bureaus of Competition and Economics—concluded that the agency’s process for maintaining competition when companies merge was generally effective. "The report demonstrates that in the vast majority of cases the Commission’s remedies protect or restore competition," said Maureen K. Ohlhausen, Acting Chairman of the FTC. "Divestitures of ongoing businesses are particularly successful. The study also provides valuable insight on how to improve the divestiture process."
FTC staff conducted a broad study of every merger order that the agency issued between 2006 and 2012, including orders that required divestitures, as well as non-structural relief, to address anticompetitive effects. The study expanded on a divestiture study that the FTC had completed in 1999. The staff report summarized the study’s findings and provided best practices that reflected the study’s results.
Staff members used three methods to conduct the study. First, they examined 50 orders using a case study method that was similar to the method that the agency had used in its 1999 study. Their findings were then supplemented by interviews with additional market participants and seven years of relevant sales data from significant competitors. Second, staff evaluated 15 orders that affected supermarkets, drug stores, funeral homes, dialysis clinics, and other health care facilities. The evaluation involved the examination of responses to questionnaires that were directed to the Commission-approved divestiture buyers in the relevant transactions. Third, staff evaluated 24 orders that affected the pharmaceutical industry, using both internal information and publicly available data.
In analyzing the success of the 50 merger orders in the case-study component, FTC staff considered whether the remedy had maintained or restored competition in the relevant market, and found that all of the divestitures involving an ongoing business had succeeded. Most divestitures of limited packages of assets also succeeded, but they fared less well. Remedies addressing vertical mergers also achieved their remedial goals.
The study also examined the remedy process more generally, and the results confirmed that the FTC’s process of designing and implementing merger remedies was generally effective. However, they also identified areas of improvement. Based on those findings, the FTC developed best practices for the merger remedy process.
The best practices described what respondents and proposed buyers could expect during the remedy process. While not exhaustive, they specifically responded to concerns that were raised during the study, and they incorporated suggestions that were made by buyers, respondents, and monitors. The best practices did not reflect significant changes to the FTC’s current practice, the report explained; they simply refined the agency’s approach to remedies and the remedy process.
"Some mergers raise competitive concerns in only a subset of the markets in which the merging parties operate," the agency observed in a news release. "Consent decrees could often resolve those concerns by requiring companies to divest certain assets and take other action to protect competition."
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