WHY HAS CALIFORNIA WAITED SO LONG TO ENACT ITS OWN MERGER REVIEW LAW?
By Abiel Garcia1
While there is debate whether mergers and acquisitions ("M&A") benefit or harm the ultimate consumers, M&A activities are common practice in today’s world.2 On the one hand, they can offer businesses the opportunity to expand their operations, achieve economies of scale, and increase productivity through technological and "back-office" synergies, which in theory results in lower prices and better products to consumers. On the other, M&A activities can negatively impact an economy by reducing competition in the marketplaceâthereby raising prices on existing products or slowing innovationâor by eliminating jobs when streamlining a merged entity’s operations.
Over the past decade, mergers and acquisitions have exploded, both through traditional horizontal and vertical mergers, as well as private equity firm acquisitions.3 The Federal Trade Commission ("FTC") and Department of Justice ("DOJ") (together the "Antitrust Agencies") reported that in 2021, more than 3,520 M&A transactions were reported pursuant to the Hart-Scott-Rodino Act ("HSR") guidelines,4 almost 67% higher than the next highest year in the past decade.5 This does not account for the additional thousands of non-HSR reportable mergers and acquisitions that take place each year.6
As of today, the Antitrust Agencies are the only two U.S. competition entities that consistently receive and review premerger notifications and filings under the federal HSR guidelines.7 But it is no secret that the Antitrust Agencies are understaffed and are scratching the surface of potentially problematic mergers.8 Out of the 3,520 HSR-reported transactions documented in 2021, the Antitrust Agencies investigated less than 2% of them.9 This could be due to a variety of reasons such as resource constraints, political agendas, or the growing complexity and size of transactions that require scrutiny. Regardless of the reason, the Antitrust Agencies are limited in their ability to review a majority of the HSR-reported mergers.