Why Premerger Review Needed Reform, and Still Does
Howell, Andrew G., William and Mary Law Review
In 1976, Congress devised the Hart-Scott-Rodino Act (1) (HSR) to improve the enforcement of existing U.S. antitrust law. (2) One of the key elements of the scheme was a requirement that transacting parties notify enforcement agencies before launching certain major mergers and acquisitions. (3) This premerger notification, according to advocates, would enhance policing of a small number of transactions, about 150 per year, possessing particular potential to be problematic. (4)
During the twenty-five years since HSR's inception, this originally modest reporting program has grown in a manner not only dramatic, but unintended. (5) By the year 2000, federal antitrust agencies were examining the majority of U.S. merger and acquisition activity (6) and dedicating an ever-expanding portion of their resources to the program. (7) As a result, practitioners and enforcement officials grew concerned that the program was weakening the effectiveness of the enforcement agencies, (8) if not wreaking substantive change in antitrust law, (9) and there were calls for its revision. (10)
On December 21, 2000, President Clinton signed the Fiscal Year (FY) 2001 Commerce-Justice-State Appropriations Bill. (11) At first glance, this legislation appears to answer the calls for revision of HSR's premerger notification program. Buried in this 320-page omnibus bill are four pages (12) of language amending (13) the program. Most notably, the amendment institutes inflation adjustment in an attempt to slow or stop the growth of premerger notification required under the program. (14)
Although it is too early to measure the full impact of the recent amendment, (15) it is not too soon to consider whether this change truly answers cries for reform, or merely mutes them. This Note asserts that the 2000 amendment does not adequately revamp the program because, although the inflation adjustment should greatly slow the growth of the program, the amendment does not reverse the substantive change induced by twenty-five years of HSR growth. Finally, this Note proposes reforms that would help restore balance to antitrust law: a return to a more limited review system and a switch to a less surrogate-based jurisdiction test. (16)
This Note considers premerger notification in five sections. The first section opens the examination with a brief review of U.S. antitrust law prior to HSR and premerger notification. (17) This section discusses the statutory nature of U.S. antitrust law as first established, then it reviews the development of the field and the delicate balance achieved between agency regulation and statutory/judicial guidance.
Section two discusses the creation of the Hart-Scott-Rodino Act as a means of providing understanding of the Act's goals. (18) The section outlines the perceived problems leading to HSR's passage and summarizes the premerger notification provisions. Consideration of the legislative history reveals that Congress sought to cause only procedural changes, to encompass only the very largest of mergers, and to minimize the burden placed on commerce.
The third section addresses the dramatic growth of reporting under the Act and outlines the causes of this growth. (19) It then considers the impact of this growth, particularly with regard to the burdens HSR creates and the substantive changes it has wrought in antitrust law. Next, the section considers how the problems with premerger notification are a product of the surrogate, i.e., dollar-based, definition of the jurisdiction test. This analysis illuminates the need for change in the jurisdiction test.
With this understanding of the preamendment situation, section four examines potential solutions to the jurisdiction test problem. (20) The search for an alternative begins with discussion of the premerger notification programs of other countries. This review reveals no valuable new model, however, because all functional systems use a surrogate definition. …