Letter From the Editors
On May 23, 2024, the Federal Trade Commission (FTC) and Department of Justice, Antitrust Division (DOJ) launched a public inquiry to "identify serial acquisitions and roll-up strategies throughout the economy that have led to consolidation that has harmed competition."1 In their Request for Information (RFI), the FTC and DOJ (together, the Agencies) define "serial acquisitions" as "corporate consolidation strategies that occur when a company becomes larger — and potentially dominant — by buying several smaller firms in the same or related business sectors or industries."2 So-called "serial acquisitions" have been a growing concern for the Agencies, with FTC Chair Lina M. Khan stating, "[f]irms can use serial acquisitions to roll up markets, consolidate power, and undermine fair competition, all while jacking up prices and degrading quality."3 The Agencies have made it clear that once they identify "serial acquisition strategies" that they believe are anticompetitive, they are "committed to using the full scope of their statutory authorities to protect free and fair competition and prevent undue consolidation."
Antitrust Agencies' Focus on "Serial Acquisitions"
Although the RFI itself is intended to identify "serial
acquisition strategies," the Agencies have already taken
action to address such alleged conduct. On April 22, 2024, the FTC
sued to block Tapestry, Inc.'s US$8.5 billion acquisition of
Capri Holdings Limited, a deal that, according to the FTC, would
allegedly combine three close competitors — Coach (Tapestry),
Kate Spade (Tapestry), and Michael Kors (Capri) in the so-called
"accessible luxury" space.4 Specifically, FTC
asserted that Tapestry's pattern of serial acquisitions prior
to and including the Capri deal would "further entrench
Tapestry's stronghold, making it harder for new brands to both
enter the market and have a meaningful presence."5
The FTC's complaint describes a "deliberative, decade-long
M&A strategy by Tapestry" and characterizes the Capri
acquisition as "just one in a string of acquisitions for
Tapestry to achieve its goal to become the major American fashion
conglomerate[.]"6 The FTC also noted that
"documents produced by Tapestry indicate that it has no plans
to stop acquisitions even after this proposed
merger."7
The FTC's administrative complaint in the Tapestry/Capri
transaction repeatedly cites to Guideline 8 of the Agencies'
2023 Merger Guidelines for the proposition that "a firm that
engages in an anticompetitive pattern or strategy of multiple
acquisitions in the same or related business lines may violate
Section 7" of the Clayton Act.8 Guideline 8 in the
2023 Merger Guidelines outlines that the Agencies may
"evaluate the overall pattern or strategy of serial
acquisitions by the acquiring firm collectively" and that they
"will consider individual acquisitions in light of the
cumulative effect of related patterns or business
strategies."9 The inclusion of Guideline 8 and the
2023 Merger Guidelines more generally marked a change from prior
versions of the Agencies' merger guidelines, which focused on
analysis of a particular transaction before the Agencies and
evaluated a merger's potential competitive impact without
examining prior transactions.
In addition to enforcement actions and the 2023 Merger Guidelines,
the Agencies' 2023 Notice of Proposed Rulemaking proposing
dramatic changes to the Hart-Scott-Rodino (HSR) Act premerger
notification form includes changes focused on learning about
companies' prior transactions. The proposed changes to the HSR
form are sweeping and will greatly increase the burden of an
already time-consuming task. A detailed description of the proposed
changes can be found in our July 2023 Advisory. Specifically with respect
to prior acquisitions, the changes would require reporting
companies to provide additional detail on past deals. For example,
prior acquisition information from both the acquiring person as
well as the target will be required going forward (where today,
only the acquiring person is required to provide such information).
In addition, the rules would expand the time period covered from
five years to 10 years, eliminate the minimum US$10 million in
"total assets or revenue" threshold for reporting prior
acquisitions, and add the identification of transactions involving
substantially all of the assets of a business.
The Agencies' Request for Information
In their joint RFI, the Agencies seek information from the public on "serial acquisitions" and "roll-up strategies" in all sectors and industries in the U.S. economy. Specifically, the RFI seeks written responses to a number of questions asking for examples of "serial acquisitions" and their impact on competition, employees, suppliers, and others. The RFIs also ask for examples in which businesses that implemented a "serial acquisition" strategy have engaged in potentially anticompetitive conduct. Finally, the RFI asks for information on potential business objectives or justifications for "serial acquisitions" and the involvement of private equity investors.
Takeaways
Given the Agencies' focus on so-called "serial acquisitions," companies that engage in frequent transactions should be mindful of the potential for increased scrutiny. Multiple acquisitions in a given industry can often be procompetitive, but the Agencies may explore the rationale for a firm's strategy, as well as the cumulative effect of the deals. The Agencies have said that documents and testimony reflecting a company's "plans and strategic incentives both for the individual acquisition and for its position in the industry more broadly"10 will be considered when assessing a series of acquisitions for their impact on competition. Therefore, it is likely that document and information requests, particularly in the event of a Second Request, will seek detailed information about prior transactions and such requests could increase the burden associated with a company's response. As a result, companies should both consider how they characterize their acquisition strategies internally as well as have a plan for engagement, should the Agencies launch an inquiry.
Additional Agency Updates
FTC Staffing Updates
- FTC Announces Appointment of a Third Administrative Law Judge. On April 23, 2024, the FTC announced the appointment of Dania L. Ayoubi to serve as an Administrative Law Judge. Ayoubi joins Chief Administrative Law Judge D. Michael Chappell and Administrative Law Judge Jay L. Himes. The expansion in number of administrative law judges is intended to help the FTC handle an increased workload from rulemakings and enforcement matters.
FTC Cases and Proceedings
- FTC Sues to Block Tapestry's Acquisition of Capri. On April 22, 2024, the FTC sued to block Tapestry Inc.'s US$8.5 billion acquisition of Capri Holdings Limited. According to the FTC, this deal seeks to combine three close competitors — Tapestry's Coach and Kate Spade brands with Capri's Michael Kors brand. The FTC claims in its complaint that the deal would provide Tapestry a dominant share of the "accessible luxury" handbag market.
- FTC Bans Former Pioneer CEO From Exxon Board Seat. On May 2, 2024, the FTC approved a consent order that prevents founder and former Pioneer Natural Resourced CEO, Scott Sheffield, from gaining a seat on Exxon Mobil's board of directors and from serving in an advisory capacity at Exxon once it acquires Pioneer. The consent order seeks to prevent Sheffield from engaging in collusive activity that may potentially raise crude oil prices. On May 28, 2024, however, Mr. Sheffield filed a comment with the FTC requesting the agency withdraw its Complaint and vacate the proposed consent order.
- FTC Issues Statement on Amendment to Global Partners, Gulf Oil Acquisition. In response to antitrust concerns raised by the FTC and the Office of the Maine Attorney General, Global Partners amended its transaction agreement with Gulf Oil to abandon its proposed acquisition of Gulf Oil's petroleum terminal in South Portland, Maine.
- FTC Comments on Termination of Altus Group's Proposed Acquisition of Situs Group. On May 21, 2024, FTC Deputy Director of the Bureau of Competition, Kyle Mach, issued a statement regarding Altus Group's termination of its acquisition of Situs Group's commercial real estate valuation and advisory services business. Mach welcomed Altus' decision to terminate the acquisition efforts and emphasized the importance of competition among independent valuation management service providers.
DOJ Cases and Proceedings
- Two Warner Bros. Discovery Directors Resign Following DOJ Antitrust Concerns. On April 1, 2024, the DOJ announced the resignation of two Warner Bros. Discovery Inc. (WBD) directors from the WBD board after the Antitrust Division expressed concerns over their positions on both the WBD and Charter Communications Inc. boards as potential violations of the Clayton Act. Section 8 of the Clayton Act prohibits the same person from serving simultaneously as an officer or director of competing corporations, with limited exceptions.
- U.S. Court of Appeals Upholds DOJ's Authority To Investigate Potentially Anticompetitive Conduct by the National Association of Realtors. On April 5, 2024, the U.S. Court of Appeals for the District of Columbia Circuit lifted restrictions previously imposed by a lower court that had prevented the DOJ from investigating potentially anticompetitive conduct by the National Association of Realtors.
- Former Contractor Executive Pleads Guilty To Conspiring To Monopolize, Rigging Bids, and Allocating Territories for Wildlife Services. On May 8, 2024, following a judicially authorized wiretap investigation, a former owner of contractor companies that provided fuel truck services to the U.S. Forest Service's wildfire fighters pleaded guilty to conspiring to monopolize, rigging bids, and allocating territories in violation of the Sherman Antitrust Act.
- Former Sports Equipment Sales Professional Pleads Guilty To Bid Rigging Schemes and Conspiring to Defraud Public Schools. On May 13, 2024, a former sales employee of an unnamed manufacturer and distributor of sports equipment pleaded guilty for his role in bid rigging and conspiracy to commit wire fraud. At least 100 Mississippi schools were allegedly impacted by this conduct.
- DOJ Sues Live Nation and Ticketmaster for Alleged Antitrust Violations. On May 23, 2024, the DOJ and attorneys general from 29 states and the District of Columbia filed a civil antitrust lawsuit against Live Nation Entertainment Inc. and its wholly-owned subsidiary, Ticketmaster LLC, for monopolizing markets and other unlawful conduct that harms competition across the live entertainment industry.
- DOJ Files Proposed Consent Decree To Restore Competition for NCAA Division I Athletes. On May 30, 2024, the DOJ filed a proposed consent decree to prohibit the National Collegiate Athletic Association (NCAA) from enforcing various rules that limit the transfer eligibility of Division I college athletes.
- Four Additional States Join DOJ's Suit Against Apple. On June 11, 2024, the Attorneys General of Indiana, Massachusetts, Nevada, and Washington joined the DOJ's civil antitrust lawsuit against Apple for allegedly monopolizing multiple smartphone markets in violation of Section 2 of the Sherman Act.
- TopBuild Abandons Proposed Acquisition of SPI Following Antitrust Concerns Expressed by DOJ. On April 22, 2024, TopBuild Corp. announced its abandonment of its proposed US$960 million acquisition of its rival, SPI Parent Holding Company. This decision came after the DOJ expressed antitrust concerns over the deal, which allegedly proposed to combine two of the largest providers of building insulation products.
Joint FTC and DOJ Policy
- FTC and DOJ Host Spring Enforcers Summit. On April 8, 2024, the FTC and DOJ cohosted the third annual Spring Enforcers Summit, which gathers senior staff from both agencies, along with other federal regulators and international competition enforcers, to discuss enforcement priorities and strategies.
- FTC and DOJ Hold Joint Technology Competition Policy Dialogue With EU Commission. On April 11, 2024, the FTC and DOJ met with EU Commission leaders for the fourth meeting of the EU-U.S. Joint Technology Competition Policy Dialogue. The dialogue focused on rapidly-evolving technologies in the digital sector, including artificial intelligence and cloud computing. The three authorities agreed on the importance of continued collaboration to ensure fair competition in the evolving technology sector.
- FTC, DOJ, and Department of Health and Human Services Launch Online Portal for Public Reporting of Anticompetitive Practices in Health Care. On April 18, 2024, the FTC, DOJ, and Department of Health and Human Services (HHS) launched a publicly accessible online portal that allows individuals to report unfair or anticompetitive practices in the health care sector. Submissions will first undergo review by the FTC and DOJ, and if a complaint raises sufficient concerns, it will be selected for further investigation by the appropriate agency.
- FTC and DOJ Submit Joint Statement To FERC, Urging It
To Consider Competition Risks in Public Utilities
Industry. On April 25, 2024, the FTC and DOJ jointly
submitted a comment to the Federal Energy Regulatory Commission
(FERC), as it reviews its current policy on financial investment
company ownership of electric utilities. The comment warned FERC to
consider the risks of common ownership when assessing acquisitions
involving less than a controlling interest in competing
firms.
- FTC and DOJ Launch Public Inquiry To Identify Serial Acquisitions and Roll-Up Strategies Across U.S. Economy. On May 23, 2024, the FTC and DOJ jointly launched a public inquiry to identify serial acquisitions and roll-up strategies throughout the economy that have ultimately harmed competition. The Agencies are particularly seeking more information on corporate consolidation strategies involving companies acquiring smaller firms in the same or related industries. The RFI seeks information from all business sectors and industries, including but not limited to housing, defense, cybersecurity, agriculture, construction, and professional services.
- FTC Releases Statement Regarding TikTok Complaint Referral To DOJ. On June 18, 2024, the FTC released a public statement regarding its referral to the DOJ of a complaint against TikTok and its parent company ByteDance Ltd. In its statement, the FTC stated that the commission had reason to believe that TikTok and ByteDance are "violating or about to violate the law and that a proceeding is in the public interest."
- FTC, DOJ, and HHS Extend Comment Period on Public Inquiry for Impact of Corporate Involvement Health Care. On May 1, 2024, the FTC, DOJ, and HHS extended the period for the public to comment on a tri-agency RFI examining corporate control over health care markets. The RFI seeks to understand how certain health care market transactions may increase consolidation and generate profits for firms while threatening patient care and affordability.
FTC Policy
- FTC Issues Report to Congress Detailing Collaboration With State Attorneys General. On April 10, 2024, the FTC issued a report to Congress on the agency's law enforcement cooperation with state attorneys general nationwide. The report makes legislative recommendations that would enhance collaboration efforts, including reinstating the FTC's authority to seek money for defrauded consumers and providing it with the independent authority to seek civil penalties.
- FTC Announces Rule to Ban Non-Competes. On
April 23, 2024, the FTC announced a rule providing that it is an
unfair method of competition, and therefore a violation of Section
5 of the FTC Act, for employers to enter into noncompete agreements
with workers and to enforce certain noncompete agreements. Several
plaintiffs challenged the rule in the Northern District of Texas,
and a court issued a preliminary injunction enjoining the rule on
July 3, 2024.
- Read the FTC Press Release
- Read the FTC Fact Sheet on Proposed Final Noncompete Rule
- Read Commissioner Bedoya's Statement Regarding the Rule
- Read Commissioner Slaughter's Statement Regarding the Rule
- Read Commissioner Holyoak's Statement Regarding the Rule
- Read Commissioner Ferguson's Statement Regarding the Rule
- Read the Court's Opinion and Order
- FTC Releases Fiscal Year 2023 Annual Report. On May 15, 2024, the FTC released its Fiscal Year 2023 Annual report outlining the agency's work to protect consumers and promote competition.
DOJ Policy
- DOJ Announces Four New National Law Enforcement Partners to the Procurement Collusion Strike Force. On April 12, 2024, the DOJ announced four new national partners to the Procurement Collusion Strike Force, a joint law enforcement group to combat antitrust crimes and related fraudulent schemes that impact government procurement, grant, and program funding. The new partners include U.S. Attorney S. Lane Tucker for the District of Alaska, U.S. Attorney Duane A. Evans for the Eastern District of Louisiana, U.S. Attorney Philip R. Sellinger for the District of New Jersey, and the Department of Commerce Office of Inspector General.
- DOJ Files Comments With FCC Related To Incarcerated Individuals' Communication Services. On April 29, 2024, the DOJ filed comments with the Federal Communications Commission (FCC) related to communications services for incarcerated individuals.
- DOJ Announces Task Force on Health Care Monopolies and Collusion. On May 9, 2024, the DOJ announced the formation of the Task Force on Health Care Monopolies and Collusion (HCMC), as an effort to guide enforcement strategy and policy in the health care sector. The HCMC will consider issues such as payer-provider consolidation, serial acquisitions, labor and quality of care, medical billing and more.
- DOJ and Stanford Announce Plans to Cohost Workshop on Competition in AI. On May 21, 2024, the DOJ and Stanford University announced an upcoming public workshop to discuss the state of competition across the artificial intelligence technology industry.
FTC Speeches
- Chair Khan Delivers Remarks at White House Event on Lowering Health Care Costs. On April 3, 2024, Chair Khan delivered remarks at the White House regarding shared efforts to lower health care costs for Americans. She shared that one of the commission's top priorities is ensuring Americans "get access to the affordable healthcare that they deserve."
- Bureau of Competition Director Henry Liu Delivers Remarks on the Importance of Direct Indicators of Competition in Merger Review. On April 11, 2024, Bureau of Competition Director, Henry Liu, delivered remarks at the Crowell & Moring and Bates White 13th Annual Luncheon on the new 2023 Merger Guidelines. Liu focused on Guideline 2 and emphasized the importance of direct indicators of competition between merging parties.
- Commissioner Bedoya Delivers Remarks at 24th Annual Loyola Antitrust Colloquium. On April 26, 2024, Commissioner Alvaro M. Bedoya delivered remarks at the 24th Annual Loyola Antitrust Colloquium, discussing the importance of antitrust enforcement and action.
- Chair Khan Presents Opening Statement at House Committee on Appropriations, Subcommittee on Financial Services and General Government. On May 15, 2024, Chair Khan presented an opening statement to the House Committee on Appropriations and Subcommittee on Financial Services and General Government. Chair Khan highlighted some of the Commission's work from the past year and presented the budget request for fiscal year 2025.
- Chair Khan Delivers Remarks at the 2024 American Economic Liberties Project Anti-Monopoly Summit. On May 21, 2024, Chair Khan delivered remarks at the 2024 American Economic Liberties Project (AELP) Anti-Monopoly Summit, highlighting some of the commission's priorities this past year including the new noncompete rule and efforts to lower pharmaceutical costs.
DOJ Speeches
- Assistant Attorney General Kanter Delivers Remarks at the 2024 American Economic Liberties Project Anti-Monopoly Summit. On May 21, 2024, Assistant Attorney General Jonathan Kanter delivered remarks at the 2024 AELP Anti-Monopoly Summit, highlighting some of the enforcement actions the Antitrust Division has taken the past year.
- Assistant Attorney General Kanter Delivers Remarks at the Promoting Competition in Artificial Intelligence Workshop. On May 30, 2024, Assistant Attorney General Jonathan Kanter delivered remarks at the Promoting Competition in Artificial Intelligence Workshop co-hosted by the Stanford Institute for Economic Policy Research and the Stanford Graduate School of Business.
- Deputy Assistant Attorney General Forman Delivers Remarks at the 2024 Hal White Antitrust Conference. On June 3, 2024, Deputy Assistant Attorney General Andrew Forman delivered remarks at the 2024 Hal White Antitrust Conference where he discussed the Antitrust Division's Expert Analysis Group, the nature of antitrust litigation, and "platformization" across the economy.
*Kendal Hill contributed to this Advisory. Ms. Hill is a summer associate in the firm's New York office and will graduate in 2025 from Syracuse University College of Law. She is not admitted to the practice of law.
Footnotes
1 Press Release, Fed. Trade Comm'n, "FTC and DOJ Seek Info on Serial Acquisitions, Roll-Up Strategies Across U.S. Economy" (May 23, 2024).
2 Id.
3 Press Release, Fed. Trade Comm'n, " Justice Department and Federal Trade Commission Seek Information on Serial Acquisitions, Roll-Up Strategies Across U.S. Economy" (May 23, 2024).
4 The FTC challenged another series of acquisitions in September of 2023 when it sued U.S. Anesthesia Partners and its private equity owner, alleging a multi-year strategy to consolidate anesthesiology practices in Texas. Press Release, Fed Trade Comm'n, "FTC Challenges Private Equity Firm's Scheme to Suppress Competition in Anesthesiology Practices Across Texas" (Sept. 21, 2023).
5 Press Release, Fed. Trade Comm'n, "FTC Moves to Block Tapestry's Acquisition of Capri" (Apr. 22, 2024); Complaint, Tapestry, Inc., FTC Matter No. 231 0133, FTC (June 11, 2024) at ¶ 72.
6 Complaint, Tapestry, Inc., FTC Matter No. 231 0133, FTC (June 11, 2024) at ¶ 13.
7 Id.
8 Id., ¶ 13.
9 Id., ¶ 71.
10 U.S. Dep't of Just. & Fed. Trade Comm'n, Merger Guidelines, § 2.8 (2023).
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