United States: Merger Remedies In The US: An Overview Of The Leading Cases

1 Introduction

This Special Issue presents a collection of important U.S. federal antitrust merger remedies since 2000.¹ For anyone trying to understand the U.S. approach to merger remedies, the guidance documents issued by the U.S. federal antitrust enforcement agencies, the Antitrust Division of the United States Department of Justice ("DOJ") and the Federal Trade Commission ("FTC") (each, an "Agency," or collectively, the "Agencies"),² are the right starting point. The Agencies, however, have recently called their own prior policies into question. New developments suggest that the Agencies may be less likely to accept remedies³ or will press for more robust protections.⁴ Therefore, it is important to actively monitor new developments in this dynamic environment.

The goal of this compilation is to discuss the main aspects of the Agencies' analysis, implementation, and enforcement of merger remedies, including more recent statements, and to provide a broader collection of illustrative examples than is found in the Agencies' formal guidance. For this collection, the remedies cited fall into at least one of the following categories: (1) representative examples of common DOJ/FTC remedies (based on the type of remedy, the industry, and/or the competitive issue addressed); (2) leading examples of recent trends; and (3) unusual remedies resulting from unusual circumstances.

This Foreword puts these examples in context, condensing the main principles from the Agencies' guidance documents, adding some commentary, and pointing readers to illustrative relevant remedies for further reading. Again, given the recent signi6cant policy shift signaled by the respective heads of the DOJ and FTC, the reader should be cautious in relying on past examples.

2 Background

A basic familiarity with how the Agencies review and analyze mergers better facilitates the understanding of the U.S. approach to merger remedies.

The Hart-Scott-Rodino ("HSR") Act⁵ established the U.S. premerger notification system. It requires parties whose mergers meet certain dollar thresholds to notify the Agencies and observe statutory waiting periods before consummating their merger.⁶ While both Agencies receive all HSR Act noti6cations, to the extent an Agency wants to review a proposed merger, it is "cleared" to one of the Agencies (usually based on the reviewing Agency's experience in the relevant industry). The Agency then reviews the merger to determine whether it may be anticompetitive. If at the end of the initial 30-day waiting period⁷ the reviewing Agency still has concerns about the merger's competitive implications, the Agency can extend the review period by issuing a Request for Additional Information and Documentary Material (a "Second Request"). The issuance of a Second Request stays the waiting period, and a new 30-day waiting period begins only once each of the parties has certi6ed substantial compliance with its respective Second Request.⁸]

The Agencies investigate whether the merger violates Section 7 of the Clayton Act, which prohibits transactions that may substantially lessen competition or tend to create a monopoly.⁹ The reviewing Agency may conclude that a proposed merger violates this standard because, for example, the merger would allow the merged 6rm to either unilaterally raise prices pro6tably or more easily coordinate with rivals on pricing decisions. In such a situation, there are a few potential outcomes: (1) a contested lawsuit, (2) a settlement, or (3) the abandonment of the merger.

Unlike the European Commission, the Agencies cannot unilaterally block a transaction. To prevent the parties from closing their merger, the reviewing Agency must seek a preliminary injunction ("PI") in federal district court to stop the parties from closing a transaction pending a full trial on the merits of the transaction.¹⁰ Many times, in the face of a multi-month delay, substantial litigation costs, and an uncertain outcome, the parties choose to settle or abandon their transaction either before the PI is actually filed or before a judge rules on the PI.¹¹

In practice, the vast majority of the Agencies' merger concerns are resolved through negotiated settlements before a PI is ever sought. These settlements generally take the form of a consent decree¹² between the reviewing Agency and the merging parties. As will be discussed in detail below, these settlements usually consist of obligations to address the anticompetitive aspects of the merger by making divestitures, limiting post-consummation conduct, or a combination of both.

While in the past the Agencies have resolved the vast majority of their merger concerns through negotiated settlements, recent statements by leadership at both Agencies suggest they may be more likely to seek block transactions rather than engage in remedy discussions. In a letter to Senator Elizabeth Warren, FTC Chair Lina Khan wrote: "While structural remedies generally have a stronger track record than behavioral remedies, studies show that divestitures, too, may prove inadequate in the face of an unlawful merger. In light of this, I believe the antitrust agencies should more frequently consider opposing problematic deals outright."¹³ Similarly, the Assistant Attorney General for the Antitrust Division of the DOJ, Jonathan Kanter, said, "I am concerned that merger remedies short of blocking a transaction too often miss the mark."¹⁴

In certain limited circumstances, the reviewing Agency may not require a consent decree to remedy competitive concerns. One such circumstance is when the merging parties unilaterally resolve the competitive concerns themselves, for example, by not acquiring certain assets (a so-called "6x-it-6rst" remedy). Another such circumstance occasionally occurs when another agency reviewing the transaction (e.g., a sectoral regulator or a foreign or state antitrust agency) requires a remedy that resolves the reviewing Agency's concerns and the Agency is satisfied that it does not independently need to be able to monitor or enforce that remedy.

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Footnotes

1. The term "merger" is used broadly to capture acquisitions, mergers, and certain joint ventures.

2. U.S. Dep't of Justice, Antitrust Division, Merger Remedies Manual (2020) [hereinafter DOJ Merger Remedies Manual], available at https://www.justice.gov/atr/page/file/1312416/download{ (last visited April 21, 2022); Fed. Trade Comm'n, Statement of the Federal Trade Commission's Bureau of Competition on Negotiating Merger Remedies (2012) [hereinafter FTC Merger Remedies Statement], available at https://www.ftc.gov/system/files/attachments/negotiating-merger-remedies/merger-remediesstmt.pdf (last visited April 21, 2022); Frequently Asked Questions About Merger Consent Order Provisions, Fed. Trade Comm'n, http://www.ftc.gov/bc/mergerfaq.shtm (last visited April 21, 2022) [hereinafter FTC Merger Consent Order FAQ].

3. See Assistant Attorney General Jonathan Kanter, "Remarks to the New York State Bar Association Antitrust Section" (Jan. 24, 2022), https://www.justice.gov/opa/speech/assistant-attorney-general-jonathan-kanter-antitrust-division-delivers-remarks-new-york; Letter from Lina Khan, Chair, Fed. Trade Comm'n, to Senator Elizabeth Warren (Aug. 6, 2021), https://www.warren.senate.gov/imo/media/doc/chair_khan_response_on_behavioral_remedies.pdf.

4. See US Federal Trade Commission, The US FTC announces the return of its long-established practice of restricting future acquisitions for firms that pursue anticompetitive mergers, 25 October 2021, e-Competitions October 2021, Art. N° 103131.

5. 15 U.S.C. § 18a, and the rules and regulations promulgated thereunder, 16 C.F.R. §§ 801.1- 803.90.

6. Unlike the European Commission, the Agencies can (and do) review mergers that do not have to be reported under the HSR Act.

7. The initial waiting period is 15 days for all-cash tender offers and certain bankruptcy transactions.

8. For all-cash tender offers and certain acquisitions in bankruptcy, this second waiting period is ten days, and is triggered upon the substantial compliance of the buyer only. Substantially complying with a Second Request is usually extremely time-consuming and expensive, as it typically entails producing large amounts of documents and data and submitting extensive narrative interrogatory responses.

9. 15 U.S.C. § 18.

10. The FTC holds full merits proceedings before an Administrative Law Judge and under its own rules for administrative proceedings. The DOJ must conduct full merits proceedings before the same federal district court that tried the PI; as a result, the two proceedings are often combined.

11. See, e.g., US Department of Justice Antitrust Division, The US DoJ announces withdrawal of shipping equipment giants merger after it refused their settlement proposal and threatened to sue them (Cargotec / Konecranes), 29 March 2022, e-Competitions April 2022, Art. N° 106000; US Federal Trade Commission, The US FTC publishes a statement regarding the termination of an attempted merger of two healthcare providers (Lifespan / Care New England), 2 March 2022, e-Competitions April 2022, Art. N° 105576; US Department of Justice Antitrust Division, The US AG Merrick Garland gives a statement on the decision to terminate the planned $30 billion merger of the second and third largest insurance brokers in the world (Aon / Willis Tower Watson), 26 July 2021, e-Competitions July 2021, Art. N° 102724; US Department of Justice Antitrust Division , The US DoJ reaches a settlement with two leading central Pennsylvanian health care providers regarding their merger (Geisinger Health / Evangelical Community Hospital), 3 March 2021, e-Competitions February 2021, Art. N° 99521; Press Release, Justice Department Settles with T-Mobile and Sprint in Their Proposed Merger by Requiring a Package of Divestitures to Dish (July 26, 2019), https://www.justice.gov/opa/pr/justice-department-settles-t-mobile-and-sprint-their-proposed-merger-requiring-package; Press Release, FTC Challenges CDK Global, Inc.'s Proposed Acquisition of Competitor Auto/Mate, Inc. (March 20, 2018), https://www.ftc.gov/newsevents/press-releases/2018/03/ftc-challenges-cdk-global-incs-proposed-acquisition-competitor; Press Release, Visant and Jostens Respond to FTC Decision on Proposed Transaction (Apr. 17, 2014), http://www.jostens.com/newsreleases/20140417.html ; Press Release, Statement of FTC Bureau of Competition Director Deborah Feinstein on Jostens' Decision to Drop its Proposed Acquisition of American Achievement Corp. (Apr. 17, 2014), http://www.ftc.gov/newsevents/press-releases/2014/04/statement-ftc-bureau-competition-director-deborah-feinstein.

12. Settlements with the DOJ are embodied in a "Final Judgment," which is filed with, and eventually issued by, a federal district court; settlements with the FTC are embodied in a "Decision and Order," which the FTC issues itself, first in proposed and then final form. In this Foreword, the term "consent decrees" is used to refer to Final Judgments and Decision and Orders.

13. Letter from Lina Khan, Chair, Fed. Trade Comm'n, to Senator Elizabeth Warren (Aug. 6, 2021), https://www.warren.senate.gov/imo/media/doc/chair_khan_response_on_behavioral_remedies.pdf.

14. Assistant Attorney General Jonathan Kanter, "Remarks to the New York State Bar Association Antitrust Section" (Jan. 24, 2022), https://www.justice.gov/opa/speech/assistant-attorney-general-jonathan-kanter-antitrust-division-delivers-remarks-new-york.

Originally published by Concurrences.

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