FTC and DOJ Release Annual HSR Report

June 13, 2012. The Federal Trade Commission (FTC) and the Department of Justice's (DOJ) Antitrust Division released a report [46 pages in PDF] titled "Hart Scott Rodino Annual Report Fiscal Year 2011". See also, FTC release.

This report covers the time period of October 1, 2010 through September 30, 2011.

The total number of covered transactions rose for the second straight year in FY2011, after declining from a peak in FY2007. There were 1,450 transactions in FY2011, up from 1,166 in FY2010, and 716 in FY2009. (See, Table 1, below.)

The percentage of transactions in which either the DOJ or FTC made a second request has been steady at about 4 percent during the Obama administration. This is higher than during the Bush administration.

The FTC made 17 challenges in FY2011, and the DOJ made 20, for a total of 37, or about 2.6%. There were 41 challenges in FY2010, or about 3.5%, and 31 challenges in FY2009. The percentage of transactions that are challenged is way up from the Bush Administration.

There were 1,157 early termination requests (ETRs) in FY2011. 888 were granted, or about 76.8% of all transactions involving ETRs. This is up from 73.9% in FY2010.

The 2011 report also discloses that in 8.1% of transactions in FY2011 the acquired entity was in the information technology sector. IT accounted for 9.0% in FY2010. IT accounted for 8.2% in FY2009.

This article also examines the granular industry sector data contained in the tables attached to these annual report to display HSR trends in information and communications technology (ICT) sectors. Unforetunately, the reporting categories used in these annual reports has changed. For example, while these reports long had a category titled "Communications", these report did not begin to break down data by internet sectors until FY2003. Also, while these reports long had a huge category titled "Industrial and Commercial Machinery and Computer Equipment", these reports did not add a category for "Computer and Electronic Product Manufacturing" until FY2007.

The following Table 1 summarizes key overall trends.

Table 1.
HSR Trends: 2005-2011
  Total
Trans- actions
2nd
Requests
Challenges ETRs Granted IT
2005 1,675 50 3.1% 18 1.1% 72.0% 8.6%
2006 1,768 45 2.6% 32 1.8% 74.8% 3.8%
2007 2,201 63 3.0% 34 1.5% 76.2% 4.0%
2008 1,726 41 2.5% 37 2.1% 73.7% 6.9%
2009 716 31 4.5% 31 4.3% 68.9% 8.2%
2010 1,166 46 4.1% 41 3.5% 73.9% 9.0%
2011 1,450 58 4.1% 37 2.6% 76.8% 8.1%

For the years of the dot com boom, these reports contain sector data for "Communications" and "Motion Pictures". These reports did not begin to break out data for internet related service sectors until the FY2003 report. These report are not helpful in measuring the number of transactions in the ICT equipment sectors until FY2007.

However, it is possible to state that overall for ICT services sectors, transactions are way down from the heady days of the dot com boom. The FY1998 report states that there were 344 communications transactions. The FY1999 report states that there were 370 communications transactions. The FY2000 report states that there were 446 communications transactions. The FY2001 report states that there were 149 communications transactions.

ICT services transactions then declined to a low of 70 in FY2003. Total ICT services sector transactions then rose to over 100 per year, and remained steady, for FY2004 through FY2007. ICT services transactions then declined with the economic downturn of 2008, and reached a low of 35 in FY2009. ICT services sector transactions have been rising since, to 67 in FY2010, and to 84 in FY2011.

These reports only disclose computer equipment data for the years FY2007 through FY2011. There were 45 computer equipment transactions in FY2011, down slightly from 47 in FY2010, but up from 27 in FY2009.

Total ICT transactions, including services sectors and computer equipment, rose to 129 in FY2011, from 114 in FY2010, and 62 in FY2009.

The FY 2011 report states that 8.1% of all transactions were "Information Technology". However, the report does not disclose how the FTC calculated this figure. TLJ Table 2, below, lists a total of 129 ICT transactions in FY 2011, which is 8.9% of total transactions, 1,450.

Table 2.
HSR ICT Sector Transactions: 2002-2011
  02 03 04 05 06 07 08 09 10 11
Motion Pictures (Category 512) 14 5 14 4 15          
Motion Pictures and Sound Recording Industries (512)           10 8 3 3 4
Online Services (514)   20 24 24 8          
Information Services and Data Processing Services (514)                 1 1
Broadcasting (except Internet) (515)         24 12 8 5 10 10
Internet Publishing and Broadcasting (516)         2 4 7   4 2
Communications (513) 79 45 74 82 23          
Telecommunications (517)       2 37 44 42 20 32 38
Internet Service Providers, Web Search Portals, and Data Processing (518)       2 12 34 10 4 16 21
Other Information Services (519)           3 3 3 1 8
  Subtotal: ICT Services 93 70 112 114 121 107 78 35 67 84
Computer and Electronic Product Manufacturing (334)           56 52 27 47 45
Total ICT           163 130 62 114 129

Background. The Hart Scott Rodino Antitrust Improvements Act of 1976, which is codified at 15 U.S.C. 18a, established the premerger notification regime, jointly administered by the DOJ and the FTC.

The HSR Act, as amended, sets minimum reporting thresholds. Then, the reporting parties may not close their transaction until either the waiting period outlined in the HSR Act has passed, or the DOJ or FTC has granted early termination of the waiting period.

It should be noted too that one factor that affects the total number of HSR transactions is changes to the reporting threshholds.

The Federal Communications Commission (FCC), which conducts redundant merger reviews involving ICT companies, does not comply with the requirements of the HSR Act.

On June 13, the FTC published a notice in the Federal Register that lists the early terminations granted by the FTC and DOJ during the month of May. See, FR, Vol. 77, No. 114, Wednesday, June 13, 2012, at Pages 35387-35389.

See also, story titled "HSR Report Shows Increased Antitrust Scrutiny in Obama Administration" in TLJ Daily E-Mail Alert No. 2,139, October 5, 2010.

Data Sources. The data in Table 1 is based upon the just released report, as well as annual reports from prior years. See, FY2005 report [47 pages in PDF], FY2006 report [51 pages in PDF], FY2007 report [52 pages in PDF], FY2008 report [46 pages in PDF], FY2009 report [43 pages in PDF], and FY2010 report [45 pages in PDF].)

The data in Table 1 in the column titled "Total Transactions" is taken from the FY 2011 report, Table 1, page 1.

The percentage data in the column titled "2nd Requests" is taken from the FY 2011 report, Figure 2, page 5. Appendix A lists second requests for each year of the FTC and the DOJ. TLJ summed this two figures to produce the total number of second requests for the above table. If one divides the total number of second requests by the total number of transactions, this produces a percentage, which is not listed in the above table, which is slightly different from the report calculated percentage. A footnote in the 2011 report attributes this to "rounding". For example, TLJ would calculate second requests as a percentage of total transactions as 4.0%, rather than the 4.1% reported by the just released report.

The data in the column titled "Challenges" is TLJ calculations based upon data taken from the FY 2005 through 2011 reports. The reports state the number of FTC challenges, and DOJ challenges. TLJ summed the two numbers, and then divided this sum by the total number of transactions, for each year.

The data in the column titled "Early Termination Requests Granted" contains TLJ calculations that a based on data contained in Appendix A of the FY2011 report. TLJ divided the number of early termination requests (ETRs) granted by the number of transactions involving ETRs.

The data in Table 1 in the column titled "IT" is taken from Figure 3 of each annual report.

The data in Table 2 is taken from Table X of the annual reports for FY 2002 through 2011. TLJ calculated totals.