Mergers and Acquisitions

Recent years have seen high levels of merger and acquisition activity
in the technology sector,1 which have generated substantial antitrust
scrutiny and a number of notable enforcement actions. The antitrust
analysis of mergers in technology industries implicates a number of
issues discussed elsewhere in this handbook, including the importance of
innovation and nonprice competition, the role of network effects and
“tipping points,” and the challenges associated with market definition.
While many of these issues may not be unique to technology industries,
they arise with great frequency and intensity in mergers involving these
This chapter discusses the merger review process in the United
States and a number of other jurisdictions that frequently analyze
technology mergers. It then reviews how enforcement authorities and
courts have analyzed the horizontal and vertical issues raised by mergers
in technology industries.
A. General Background
Technology companies are frequently active on a global basis, and
mergers involving such companies are often reviewed in multiple
jurisdictions. The United States, Europe, China, Japan, and Korea are
particularly important, both because so many leading technology
companies are based in these places and because they constitute such a
large share of the demand for technology products and services.
1. Rolfe Winkler & Anne Steele, Technology Busiest Sector in Merger
Deals This Year, WALL ST. J. (June 16, 2016), available at
196 Handbook on Antitrust in Technology Industries
1. Merger Review in the United States
The principal federal law governing the antitrust legality of
acquisitions and mergers in the United States is Section 7 of the Clayton
Act.2 Section 7 prohibits acquisitions if “in any line of commerce or in
any activity affecting commerce in any section of the country, the effect
of such acquisition may be substantially to lessen competition, or to tend
to create a monopoly.”3 The law applies to a wide variety of transactions,
including mergers, consolidations and joint ventures, as well as complete
or partial acquisitions of stock or assets (including, of particular
importance here, intellectual property assets). An acquisition can also
potentially implicate Sections 1 and 2 of the Sherman Act,4 and/or
Section 5 of the Federal Trade Commission Act,5 although the
substantive analysis applied by the enforcement agencies and the courts
tends to follow Section 7 jurisprudence. Notably, Section 7 requires only
a reasonable likelihood of anticompetitive effect; consequently,
evaluation of a transaction necessitates assessing probabilities of future
events and market conditions. This task is especially complicated in
technology industries given the rapid changes in products, competitors,
and markets typical of such industries.
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR
Act)6 establishes procedures for the review of certain transactions that
meet its jurisdictional thresholds regarding the size of the transaction,
size of the parties involved, and extent of U.S. contacts. Parties must
report to the Federal Trade Commission (FTC) and Department of
Justice (DOJ) all acquisitions that meet these thresholds and do not
qualify for an exemption, and observe a mandatory waiting period (and
potentially an additional waiting period) before they may complete the
transaction. This process allows the antitrust enforcement agencies to
review proposed acquisitions and take appropriate action—including
bringing an action to enjoin the transaction—before they are
consummated, and provides a mechanism for the agencies to obtain
information relevant to such review. As noted below, however, the
agencies frequently review on their own initiative transactions that, while
not reportable under the HSR Act, raise potential antitrust concerns.
2. 15 U.S.C. §18 (2012).
3. Id.
4. 15 U.S.C. §§1, 2.
5. 15 U.S.C. §45.
6. 15 U.S.C. §18a.
Mergers and Acquisitions 197
The initial waiting period for most transactions under the HSR Act is
thirty days following submission of the parties’ notification.7 (The
exceptions being in the case of a cash tender offer or a bankruptcy sale
covered by 11 U.S.C. §363(b), where the initial waiting period is fifteen
days.) Either agency can extend trigger a second waiting period by
issuing within the initial thirty (or fifteen) days a request for additional
information,8 commonly referred to as a “second request.” A complete
response to a second request can take several months. Once both
companies have “substantially complied” with the second request, which
involves both extensive document production and detailed interrogatory
answers,9 they still may not close. The agency then has thirty days (ten
days if a cash tender offer) to complete its investigation or challenge the
transaction.10 Any further extension may be ordered only by a federal
district court in response to the agency’s motion to compel substantial
compliance with the second request.11 As a practical matter, however,
after issuance of a second request, the merging parties and the agency
often agree to a period in which the parties will not close for longer than
the thirty day statutory waiting period that follows substantial
The DOJ and FTC share jurisdiction over the review of transactions
subject to the HSR Act.12 The agencies have, to some extent, developed
complementary expertise so that one agency will likely review the vast
majority of transactions in a particular industry.13 The complex nature
and constant evolution of technology often blurs these traditional lines of
expertise or presents markets and issues for which each agency can claim
substantial experience. In recent years, the DOJ has taken greater
responsibility for software-related transactions and the FTC has taken
greater responsibility for hardware-related transactions, but the
boundaries are malleable and have shifted (and likely will continue to
shift) over time. Consequently, the DOJ and FTC have shared equal
importance in establishing the current procedural and substantive
approaches used in technology industry acquisitions.
7. Id. § 18a(b)(1).
8. Id. § 18a(e).
9. Id. § 18a(e)(2).
10. Id.
11. Id. § 18a.
12. Fed. Trade Comm’n, The Enforcers, available at
13. Id.

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