CaseMark Analyzing Anti Trust Risk
Evaluates competition law exposure with market definition, HHI analysis, and remedy estimation for proposed transactions.
When To Use
- Assessing merger or acquisition clearance risk before signing or announcement
- Preparing or reviewing HSR (Hart-Scott-Rodino) filing strategy and timing
- Evaluating whether a bolt-on acquisition triggers size-of-transaction or size-of-person thresholds [VERIFY: current HSR thresholds adjust annually]
- Analyzing market concentration impact for board presentations or investment committee memos
- Screening a target portfolio for divestitures likely required as merger remedies
- Supporting second-request preparation or response strategy
Inputs To Gather
- Transaction details: deal structure (stock vs. asset), purchase price, combined entity post-close
- Party financials: total assets and annual net sales for both buyer and target (for HSR threshold analysis)
- Relevant product/service markets: descriptions of overlapping business lines, substitutes, and complements
- Geographic scope: national, regional, or local market definitions as applicable
- Market share data: revenue or unit-based shares for each party and top competitors in each relevant market
- Customer and supplier concentration: key accounts, switching costs, and contractual lock-in periods
- Prior agency interactions: any previous DOJ/FTC investigations, consent decrees, or clearance history involving either party
- Comparable transactions: recent deals in the same sector and their regulatory outcomes
Workflow
Determine HSR applicability
- Calculate size-of-transaction and size-of-person tests against current thresholds [VERIFY: thresholds update each February]
- Identify whether any exemptions apply (e.g., acquisitions of non-voting securities, certain real estate transactions)
- Flag if foreign antitrust filings are also required (EU merger regulation, CMA, SAMR, etc.) [VERIFY: jurisdiction-specific thresholds]
Define relevant markets
- Identify candidate product markets using the hypothetical monopolist (SSNIP) framework
- Delineate geographic markets based on customer purchasing patterns, transportation costs, and regulatory boundaries
- Document alternative reasonable market definitions and note how each affects concentration metrics
Calculate market concentration (HHI)
- Compute pre-merger HHI for each relevant market
- Compute post-merger HHI and the delta (change in HHI)
- Apply DOJ/FTC Horizontal Merger Guidelines thresholds:
- Post-merger HHI < 1,500: unconcentrated — unlikely to raise concerns
- Post-merger HHI 1,500–2,500: moderately concentrated — delta > 100 warrants scrutiny
- Post-merger HHI > 2,500: highly concentrated — delta > 200 presumptively raises concerns [VERIFY: confirm current Guidelines thresholds]
Assess competitive effects
- Unilateral effects: evaluate whether the merged firm could profitably raise prices due to elimination of close substitutes; assess diversion ratios where data permits
- Coordinated effects: evaluate whether the merger increases likelihood of tacit coordination among remaining competitors (market transparency, product homogeneity, history of coordination)
- Vertical effects: if the deal has a vertical dimension, assess foreclosure risk to rivals or customers
- Buyer power / countervailing factors: consider whether large buyers or low barriers to entry offset concentration concerns
Evaluate likely remedies and timing risk
- Identify product lines or geographies most likely to require divestiture
- Estimate the value and operational feasibility of potential divestitures
- Assess whether behavioral remedies (firewalls, licensing) might be accepted as alternatives
- Project regulatory timeline: initial waiting period, likelihood of second request, estimated time to clearance or litigation
Assign overall risk rating
- Low: unconcentrated markets, no significant overlap, clean filing expected
- Moderate: moderately concentrated markets or delta in sensitive range; second request possible but clearance likely with limited remedies
- High: highly concentrated markets with significant delta; second request expected; material divestitures or deal restructuring likely required
- Prohibitive: agency challenge highly probable; litigation risk or deal abandonment should be modeled
Output
The deliverable should include:
- Executive summary: one-paragraph risk assessment with overall rating (Low / Moderate / High / Prohibitive)
- HSR filing analysis: threshold calculations, filing fee estimate, and timing implications
- Market-by-market concentration table: relevant market, parties' shares, pre/post HHI, delta, and risk flag
- Competitive effects narrative: concise analysis of unilateral, coordinated, and vertical theories of harm
- Remedy scenario matrix: potential divestitures or conditions mapped to affected markets, with estimated impact on deal value
- Timeline and process overview: expected regulatory milestones from filing through clearance
- Key assumptions and data gaps: explicit list of inputs assumed or unavailable, each flagged with [VERIFY] where appropriate
Quality Checks
- HHI calculations verified against stated market shares (shares should sum to approximately 100%)
- HSR threshold figures cross-referenced against the most recent annual adjustment [VERIFY]
- Market definitions are internally consistent — product and geographic boundaries align with the data used for share calculations
- Risk rating is consistent with the quantitative concentration analysis and qualitative competitive effects discussion
- Remedy estimates are grounded in precedent from comparable transactions, not speculative
- All jurisdiction-dependent figures, thresholds, and filing requirements are marked [VERIFY]
- Analysis distinguishes between confirmed data and estimates/assumptions throughout