ANTITRUST ALERT
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
Mergers & Acquisitions
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THE LATEST: Collateral Risk in Merger Reviews

by and | Jul 30, 2018 | ,

WHAT HAPPENED
  • The Wall Street Journal has reported that the Antitrust Division of the Department of Justice (DOJ) is currently investigating whether advertising sales teams for competing television station owners engaged in anticompetitive conduct regarding communications on performance levels. Per the Journal’s reporting:
  • DOJ is investigating whether the purported communications led to higher rates for television commercials.
  • DOJ’s industry-wide investigation developed from its review of Sinclair Broadcast Group’s (Sinclair) proposed acquisition of Tribune Media (Tribune).
  • As part of the DOJ’s merger review, Sinclair and Tribune received a “Second Request.” Responding to a Second Request typically involves the production of a wide range of company documents regarding competition in the industry under investigation.
  • Many times in the past, merging parties’ Second Request responses have led to separate anticompetitive conduct cases. A few notable examples are provided below:
  • In April 2018, DOJ brought a civil complaint alleging that three rail equipment companies had no-poaching agreements that depressed salaries and competition for their employees. The agreements were discovered during the review of an acquisition involving two of the three companies.
  • In 2003, DOJ filed a civil antitrust lawsuit to block the acquisition of Morgan Adhesives Company by UPM-Kymmene and, at the same time, opened a criminal investigation into price-fixing conduct in the labelstock industry.

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Antitrust Litigation Update for Health Care Providers

by and | Jun 25, 2018 | , ,

In this Special Report, we highlight notable trends in antitrust litigation involving health care providers over the past two and a half years. Our complimentary update identifies the types of cases filed against providers, who is filing them, case results and currently pending cases to watch.

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Three Lessons from AT&T/Time Warner and Three Strategies for Future Vertical Transactions

by , and | Jun 19, 2018 | ,

The challenges that the government faces in litigating vertical mergers was illustrated in the DOJ’s recent loss in its challenge of AT&T’s proposed acquisition of Time Warner. The result provides guidance for how companies can improve their odds of obtaining antitrust approval for similar transactions.

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Aerospace & Defense Series: Behavioral Remedies Remain a Viable Solution for Vertical Mergers in the Defense Industry

by | Jun 18, 2018 | , ,

The recent FTC decision in the Northrop Grumman / Orbital ATK matter has shed light on the agency’s vertical merger enforcement policy and outlined a path to antitrust merger clearance for the Aerospace and Defense industry. The FTC’s June 5 consent decree shows behavioral remedies remain a viable solution if the parties can prove both that the DoD would benefit from the transaction and that those benefits would be lost if the agency required a divestiture.

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European Court of Justice Provides Guidance on Scope of the Standstill Obligation Enshrined in the EU Merger Regulation

by | Jun 7, 2018 | ,

Pursuant to the EU merger control rules, a transaction that falls within the purview of the EU Merger Regulation (EUMR) must be notified to the European Commission (Commission) in advance (Article 4(1) EUMR), and must not be implemented until cleared by the Commission, known as the “standstill” obligation (Article 7[1] EUMR). A principal rationale behind the standstill obligation is to prevent the potentially negative impact of transactions on the market, pending the outcome of the Commission’s investigation.

While the standstill obligation represents a clear-cut rule, it can often be a significant challenge for businesses to apply in practice. Failure to get it right, however, can result in draconian penalties. Indeed, the Commission’s recent €124.5 million fine on Altice, which comes in the wake of a spate of enforcement actions in this arena, bears testimony to an increasingly hard stance against companies flouting the notification requirement/standstill obligation. (more…)



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Antitrust M&A Snapshot

by , and | May 7, 2018 | , , , ,

United States: January – March 2018 Update

One year into the Trump administration, the US antitrust agencies are finally starting to implement their enforcement policies. Most notably, trial began in the US Department of Justice’s (DOJ) challenge of the AT&T/Time Warner merger, which is the Antitrust Division’s first significant vertical challenge in several decades. Judge Richard J. Leon’s opinion in that case could alter the outlook for several other vertical transactions pending before the agencies. While the DOJ was preparing for trial, the Federal Trade Commission (FTC) was preparing for a transition to five new commissioners, who were approved by the Senate in April. It remains unclear whether the new, Republican-led FTC will be more moderate in its enforcement efforts, similar to prior Republican administrations, or will follow in the footsteps of President Trump’s DOJ, which has been surprisingly aggressive.

EU: January – March 2018 Update

The European Commission (EC) continued to be quite active in the first quarter of 2018, clearing five mergers. The most significant decision was the approval of a megamerger in the agrochemical sector—Bayer/Monsanto—where the parties submitted a remedy package that totalled over €6 billion. This remedy package included divestitures of research and development assets that addressed the EC’s concerns about innovation, similar to the EC’s Dow/DuPont clearance last year. In addition to Bayer/Monsanto, two other proposed acquisitions in the chemicals sectors fell through, most notably Celanese/Blackstone, due to excessive divestiture requests required by the Commission. (more…)



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DOJ Consent Decree Changes Reduce Room for Error

by | Mar 21, 2018 | ,

WHAT HAPPENED

The Department of Justice Antitrust Division (DOJ) implemented new provisions in merger consent decrees that:

  • Make it easier for DOJ to prove violations of a consent decree and hold parties in contempt;
  • Allow DOJ to apply for an extension of the decree’s term if the court finds a violation; and
  • Shift DOJ’s attorneys’ fees and costs for successful enforcement onto the parties.

DOJ has implemented these provisions in four decrees to date1, and has communicated that it will require the same in future decrees.

WHAT THIS MEANS

For merger decrees, by reducing its burden of proof for decree violations, DOJ is shifting additional risk to parties for divestitures that do not go as planned. Willfulness is not a required element of civil contempt2, so the change to the burden of proof is significant. Parties will need to be sure to commit to realistic divestiture timelines and asset packages that will not present undue implementation challenges.

For non-merger decrees, settling parties will need to remain vigilant against decree violations or even the appearance of them, as the DOJ has ratcheted up its ability to obtain large settlements and civil penalties for violations.

THE CHANGES

The DOJ states that its changes are driven by the principle that antitrust enforcement is law enforcement, not regulation3. Nonetheless, the main impact of the changes is to increase the risk and potential cost on merging parties.

Preponderance Is Now Enough: Reversing the “clear and convincing evidence” standard that has been in place for civil contempt cases since at least the 1960s4, DOJ is now requiring settling parties to agree that a preponderance of the evidence will be enough for a showing of civil contempt and for an appropriate remedy. DOJ states that under the old standard, the DOJ frequently had to engage in extensive discovery when faced with a violation, giving the parties an incentive to hold out from a resolution and “exacerbate the situation.”5 Under a preponderance of the evidence standard, it will be easier for the DOJ to bring an enforcement action without conducting a full CID investigation.

Fee-Shifting Now the Norm: The DOJ now requires the shifting of fees and costs to the parties in the event a violation is proven. DOJ states that fee-shifting provisions are standard fare in many private contracts. Their use by DOJ is designed to discourage violations of consent decrees and speed resolution of disputes.

DOJ Can Request Extension of Decrees: Settling parties must now agree that in the event a court finds a violation, DOJ can request a one-time extension of the decree’s term. The extension that DOJ can request is not time-limited, and the new language does not set forth a standard for when the court should grant DOJ’s request. For decrees that involve costly monitoring and affirmative compliance, this open-ended provision may greatly raise the cost of disputing an alleged violation.

CONCLUSION

The DOJ’s new provisions shift risk and cost to settling parties in the [...]

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China to Consolidate Antitrust Law Enforcement Power

by | Mar 20, 2018 | , ,

The Chinese government announced on March 13, 2018, that it will consolidate the duties of three competition agencies into a new government agency to handle all antitrust matters. While it is too early to tell how this reorganization will impact China’s review of transactions and conduct cases, we believe that this change could lead to greater consistency and potentially more experienced attorneys reviewing competition matters.

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FTC Alleges Another Price Discrimination Market – Seeks to Block Wilhelmsen’s Acquisition of Drew Marine

by and | Mar 15, 2018 | ,

The Federal Trade Commission (FTC) recently announced that it has challenged a merger between Wilhelmsen Maritime Services (Wilhelmsen) and Drew Marine Group (Drew) because of an overlap in service to “global fleet customers,” a narrow customer segment that purchases marine water treatment chemicals and services.

WHAT HAPPENED:
  • The FTC issued an administrative complaint and filed a complaint in federal court seeking a temporary restraining order and preliminary injunction, asserting that Wilhelmsen’s proposed $400 million acquisition of Drew would significantly reduce competition in the market for marine water treatment chemicals and services used by global fleets.
  • The FTC enforcement action focuses on a narrow sub-segment of customers, global fleet customers, that buys marine water treatment chemicals and services.
  • The FTC distinguished global fleet customers from other marine water treatment chemical customers on the basis that:
  • (1) global fleets have specialized needs that only a few suppliers can meet
    (turn-key global sales, service and delivery capabilities, as well as consistent and reliable product supply); and
  • (2) these customers seek out suppliers via requests for proposal and direct negotiation and therefore potential suppliers can price discriminate to that subset of customers.
  • Because of the specific needs of global fleet customers and because global fleet suppliers can identify which customers are seeking service for global fleets, suppliers are able to price discriminate to the global fleet customer set.
  • The FTC alleged a harm to competition because their investigation showed Wilhelmsen and Drew are each other’s closest competitors based on company documents, statements by the business personnel, and bid data showing that the companies are most frequently the first and second choice for global fleet customers. In addition, the FTC noted that Wilhelmsen and Drew would control at least 60 percent of the market with the next largest competitor having less than a 5 percent share.
  • The FTC complaint disparaged the remaining market participants as unable to practicably compete with Wilhelmsen and Drew to service global fleets because they are perceived as offering lower quality products with less reliability, having more limited service capabilities, and failing to price competitively.
WHAT THIS MEANS:
  • The FTC’s enforcement action continues a trend of applying price discrimination markets. These markets are characterized by: (1) buyers with special requirements that only select suppliers can service; and (2) sellers who can identify the buyers with those special requirements and selectively price based upon the knowledge of those special needs.
  • Antitrust enforcement of price discrimination markets lead to narrower product market definitions. Therefore, applying price discrimination markets may result in antitrust enforcers challenging mergers that appear lawful when viewed as a broader market.
  • There is increased risk of price discrimination markets being applied by antitrust enforcers in industries in which:
    • The customers’ end uses differ for the same product;
    • Merging companies’ documents recognize distinctions among customer groups; and
    • Groups of customers require unique product characteristics.


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Antitrust M&A Snapshot: July – December 2017 Update

by | Mar 14, 2018 | , , , , , , ,

United States: July – December 2017 Update

Although delays in antitrust appointments continued throughout the second half of 2017, the Federal Trade Commission (FTC) and Department of Justice (DOJ) continued to actively investigate and challenge mergers and acquisitions. Notably, the DOJ challenged the vertical AT&T/Time Warner transaction, the first vertical merger the DOJ has tried since the 1970s. The end of 2017 showed a trend where the FTC and DOJ are focusing on structural remedies rather than behavioral remedies. Additionally, at the end of 2017, the FTC and DOJ challenged several consummated transactions, as well as transactions that were not reportable under the Hart-Scott-Rodino Antitrust Improvements Act.

European Union: July – December 2017 Update

After two concentrations within the agrochemicals sector in the second quarter of 2017 — Dow/DuPont and ChemChina/Syngenta — the European Commission continued to see megamergers notifications in the agrochemical sector in the second half of 2017. The fourth quarter of 2017 saw the second Commission merger decision challenged successfully this year and the fourth case of annulment of a clearance decision since the implementation of the EU Merger Regulation.

Snapshot of Events (Legislation/Agency Remarks/Speeches/News, etc.)

United States

  • Seats at the FTC Remain Unfilled Despite Continued Progress in the Appointment of New Antitrust Leadership

After a long wait, on September 27, the Senate confirmed Makan Delrahim, President Trump’s nominee to head DOJ’s antitrust division. The DOJ has also named several deputies to serve under Delrahim: Andrew Finch, Bernard Nigro, Luke Froeb, Donald Kempf and Roger Alford. These positions are not subject to Senate confirmation.

President Trump nominated four Commissioners for the FTC, including Joseph Simons to lead the FTC as Chairman. Joe Simons is an experienced antitrust attorney who was previously Director of the FTC’s Bureau of Competition. He has mainstream Republican views. Until the new Commissioners are confirmed, there must presently be unanimity between the two Commissioners for the FTC to take action.

  • FTC Warns That It May Challenge Vertical Mergers

Acting Bureau of Competition Director, Bruce Hoffman, gave remarks at the Global Antitrust Enforcement Symposium on September 13, 2017. He said that the FTC would be ready to challenge vertical mergers if there were competition issues to resolve. He added that the FTC may impose structural remedies in vertical mergers where it views the remedy as necessary to prevent competitive harm.

  • Senator Amy Klobuchar (D-Minn) Introduces New Legislation to Curtail Market Concentration and Enhance Antitrust Scrutiny of Mergers and Acquisitions

On September 14, 2017, two bills were introduced by Senator Amy Klobuchar to the Senate: the Consolidation Prevention and Competition PromotionAct (CPCPA) and the Merger Enforcement Improvement Act (MEIA). Both bills are part of the Senate Democrats’ “A Better Deal” antitrust agenda. The CPCPA would impose extra scrutiny on so-called “mega deals” by shifting the burden of proof from antitrust enforcers to the companies. It would also update the Clayton Act to refer to “monopsonies” in addition to “monopolies.” The MEIA [...]

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