Antitrust Enforcement of Small Acquisitions

Nathaniel L. Asker is counsel in the Antitrust and Competition practice at Fried, Frank, Harris, Shriver & Jacobson LLP. This post is based on a Fried Frank publication by Mr. Asker, Barry A. Nigro Jr., and Aleksandr B. Livshits.

Last month, the Federal Trade Commission challenged a $5 million acquisition in the pharmaceutical industry. The FTC’s challenge serves as a reminder that no deal is too small to generate scrutiny from the U.S. antitrust agencies. During the Obama administration, the FTC and Department of Justice have devoted significant resources to investigating and challenging transactions that are not subject to the reporting requirements of the Hart-Scott-Rodino Act, including consummated transactions. [1] The FTC’s latest challenge shows that a low purchase price or the lack of an HSR filing obligation does not exempt a transaction from antitrust scrutiny.

In 2014, Boehringer Ingelheim entered into a series of transactions transferring its U.S. generic injectable pharmaceuticals business to Hikma Pharmaceuticals PLC. [2] In the last of these transactions, Hikma agreed to acquire 49 abbreviated new drug applications (ANDAs) for approximately $5 million. [3] Due to issues at its manufacturing facilities, Boehringer had discontinued sale of the drugs covered by the ANDAs in 2013. Nevertheless, the FTC objected to the acquisition of five ANDAs, each of which covered drugs Hikma either currently supplied or was allegedly poised to offer soon. The FTC alleged that absent the sale to Hikma, Boehringer would have the incentive to sell the ANDAs to a buyer that did not compete in these markets. In addition, the FTC noted that difficulties in the production of sterile liquid drugs had already contributed to price increases and supply disruptions for several of these drugs. To resolve the FTC’s concerns, Hikma agreed to divest all five ANDAs to a third party shortly after closing the acquisition.

The FTC’s challenge in Hikma continues a trend of aggressive antitrust scrutiny of small transactions during the Obama administration. The FTC and DOJ have obtained divestitures or other remedies in a number of other small deals, including a 2013 challenge to an $8.7 million software acquisition, a 2011 challenge to an approximately $3 million acquisition of a chicken processing plant, and a 2010 challenge to a $5 million merger of voting equipment systems providers. In addition, larger transactions that were exempt from filing requirements under the HSR Act have also been challenged, including DOJ litigation unwinding a $168 million acquisition in the technology sector in 2014.

Transacting parties should consider potential antitrust issues in all strategic acquisitions, including small deals or those that are otherwise exempt under the HSR Act. In HSR-exempt acquisitions that pose antitrust risk, buyers should assess whether review of the transaction by other governmental agencies, complaints from customers or competitors, or media coverage may invite antitrust scrutiny before or after closing. Serial buyers should be mindful that statements in documents filed with the antitrust agencies in connection with HSR-reportable transactions may be relevant to the antitrust review of other acquisitions, even previously consummated or potential future acquisitions that are not subject to the HSR Act. Where multiple acquisitions in the same industry are anticipated, buyers should carefully consider the sequencing of these transactions. [4]

The Hikma challenge shows that the U.S. antitrust agencies devote significant resources to investigating small deals, even during periods when M&A activity is high and multi-billion dollar transactions are common.


[1] In general, the HSR Act requires parties to notify the antitrust agencies and observe a 30-day waiting period prior to closing acquisitions valued in excess of $78.2 million. Certain provisions of the HSR Act can exempt much larger transactions.
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[2] On May 28, 2014, Boehringer entered into an agreement to sell certain assets of its Ben Venue Laboratories, Inc. subsidiary to Hikma for up to $300 million. The transaction was reportable under the HSR Act and the FTC granted early termination of the HSR waiting period on June 26, 2014. After closing, Hikma entered into an agreement to acquire manufacturing facilities held by Ben Venue for no incremental consideration and closed this transaction on September 17, 2014.
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[3] NDAs are filed with the U.S. Food and Drug Administration to obtain approval to offer generic pharmaceuticals.
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[4] The HSR rules require that certain transactions involving the same parties be aggregated for purposes of determining whether the filing thresholds are met; transacting parties should consult with counsel as these rules are complex.
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