Massachusetts Attorney General Raises Antitrust Concerns With a Real Estate Transaction, Requires Divestitures

The Massachusetts Attorney General has announced a settlement to resolve antitrust concerns arising from a proposed $51 billion merger of equals between two real estate investment trusts that build, own, and operate multifamily housing throughout the state and elsewhere.[1] The Massachusetts AG alleged that the proposed merger would have resulted in the combined company having a greater than 50% share in the market for "mid-rise and high-rise multifamily rental housing in Downtown Boston."[2] To settle the antitrust concerns, the Massachusetts AG required the parties to divest two multifamily rental buildings in downtown Boston and to make a $500,000 commitment to the City of Quincy Affordable Housing Trust.[3]

Real estate and real estate adjacent businesses have been facing increased antitrust scrutiny, and this enforcement action is a good reminder of several important issues:

• Antitrust laws apply even when an HSR filing is not required. Most real estate transactions are exempt from Hart-Scott-Rodino ("HSR") Act filing requirements, which require reporting transactions valued above $133.9 million to the DOJ Antitrust Division and the Federal Trade Commission unless an exemption applies. This real estate transaction, despite having a value in the tens of billions, was exempt from HSR filing. The Massachusetts AG investigation and subsequent settlement serve as a reminder that even non-reportable transactions that involve competitive overlaps or raise other competitive issues can be investigated and challenged by federal and state authorities.

In addition, the FTC and DOJ have recently signaled that they are considering HSR rule changes that could eliminate certain real estate exemptions, potentially subjecting more real estate transactions to pre-merger review.[4]

• Real estate deals are susceptible to narrow market definitions. The Massachusetts AG in this case alleged harm in a very narrow market to claim that the transaction would have resulted in a combined market share above 50%-the market for renters in specific building types (mid-rise and high-rise multifamily rentals) in just seven zip codes making up "Downtown Boston." The local nature of real estate assets makes the industry more susceptible to particularly narrow market definitions in which the antitrust agencies can allege that competitive harm could occur.
  
  
• State AGs are active antitrust enforcers. While the DOJ and FTC have been the traditional enforcers of U.S. antitrust laws, state AGs are now playing a larger role. Real estate is a particularly attractive market for antitrust enforcement by the states given the local nature and the potential direct impact on state constituents.

This communication is for general information only. It is not intended, nor should it be relied upon, as legal advice. In some jurisdictions, this may be considered attorney advertising. Please refer to the firm's data policy page for further information.