The Fall of Structural Evidence in FTC and DOJ Merger Review
With the collapse of the AT&T/T-Mobile merger, the FTC’s investigation of the $34 billion merger of Express Scripts and Medco Health Solutions became the biggest story last year in antitrust merger enforcement. Opponents, largely competitors, lobbied and litigated against the deal based on large market shares and other structural evidence of market concentration in the pharmacy benefit management (PBM) business. Yet when the FTC cleared the deal, the Commission’s detailed closing statement made scant mention of market share, market concentration, or other traditional structural evidence.
The near omission of structural evidence from the Express Scripts/Medco closing statement was not an oversight. FTC staff remarks and our own experience representing Medco in the transaction show that the closing statement accurately reflects the course of the investigation. Very little time was spent on structural issues. The FTC’s decision on Express Scripts/Medco represents a significant, visible sign that structural evidence no longer plays the role it once did in agency merger analysis.
The agencies are now brushing past structural evidence in merger investigations. The FTC’s approach in Express Scripts/Medco contrasts with the DOJ’s approach to Oracle/PeopleSoft, a merger that was challenged following similar 3-to-2 complaints. The agencies’ closing statements on other recent scrutinized mergers confirm the declining significance of structural evidence. Competitive effects analysis—not inferences from market structure—is the primary rationale for the agencies’ decision to clear visible, heavily investigated transactions. Likewise, the DOJ and FTC merger guidelines over time have deemphasized market structure and increased the emphasis on competitive effects analysis, particularly the form of analysis that drove the FTC to close Express Scripts/Medco. Market structure evidence remains a screening tool during the initial Hart-Scott-Rodino Act waiting period and continues to be the focal point in agency merger litigation. But even in merger litigation, competitive effects analysis is growing in stature. To keep reading, download full article.