August 7, 2019

Antitrust: Tech Tops Target List for 2019 Merger Investigations

The WSJ recently reported that the FTC’s ongoing probe of Facebook is focusing on its M&A activities and whether it used acquisitions to eliminate potential competitors. If it’s any consolation to the beleaguered social media titan, Dechert’s latest report on antitrust merger investigations says that it’s far from the only tech company under the antitrust microscope.  In fact, deals involving tech companies accounted for 40% of new U.S. investigations during the first half of 2019 – and that’s a marked departure from historic trends:

The Healthcare & Pharmaceuticals industry has kept the U.S. antitrust agencies the busiest since 2011, accounting for about 28% of U.S. significant investigations. The Retail & Consumer Products and Technology industries are tied for second at 14% of significant investigations, followed closely by Industrial Products & Services at 13%.

Significant investigation levels by industry have been relatively consistent over time. In comparing the first half of the period tracked by DAMITT(2011-2014) with the second half (2015-H1 2019), DAMITT observes that only one industry (Chemicals) has seen a change in relative frequency of more than 3 percentage points between the two time periods.

However, the Technology industry has seen a much more significant spike this year, accounting for about 40% of significant U.S. merger investigations in H1 2019 after remaining below 15% in each of the six prior calendar years.

The report says that U.S. antitrust regulators concluded 20 “significant investigations” during the past 12 months, down from 28 for the prior comparable period. These  investigations took an average of 11.4 months from announcement to completion, compared to 9.9 months during the prior 12 months. A quarter of all significant investigations during the period involved vertical aspects, up from 18%.

According to the report, DOJ has been more successful than the FTC in picking up the pace of significant investigations. More than 80% of DOJ’s H1 2019 significant investigations lasted fewer than 10 months, while only one of the FTC’s investigations lasted fewer than 10 months.

John Jenkins