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Antitrust M&A Snapshot | Q2 2021

In the United States, aggressive antitrust enforcement is likely to continue with the appointment of Lina Khan as Federal Trade Commission (FTC) Chair and the nomination of Jonathan Kanter to lead the Department of Justice’s (DOJ) Antitrust Division. The premerger notification landscape continues to shift as filings reach another record high. Technology companies remain in the “hot seat” as legislators in the US House of Representatives introduced five antitrust reform bills that would change the enforcement landscape for digital platforms, including seeking to preclude large digital platform companies from acquiring smaller, nascent competitors. And the US Department of Justice is making good on President Biden’s pledge to regulate “Big Ag” by challenging Zen-Noh Grain Corporation’s proposed acquisition of 38 grain elevators from Bunge North America, Inc.

Meanwhile, in Q1 2021, the European Commission (Commission) published its Guidance on Article 22 of the EU Merger Regulation. The Guidance encourages the EU Member States to refer certain transactions to the Commission even if the transaction is not notifiable under the laws of the referring Member State(s). In Q2, not long after the issuance of the Guidance, the Commission received its first referral request to assess the proposed acquisition of GRAIL by Illumina. In light of the growing global debate on the need for more effective merger control, EU Competition Commissioner Margrethe Vestager confirmed that the Commission will not soften EU merger policy going forward. The Commission’s statement was made despite the fact no deals have been blocked by the Commission in about the last two years.

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FTC Continues To Zero In On Problematic M&A Noncompetes

Since September 2019, the Federal Trade Commission has challenged noncompete provisions in at least three transactions. These challenges demonstrate that the FTC will challenge noncompete provisions even when it concludes that the underlying transaction raises no substantive antitrust issues and when the provision relates to
minority investments.

Noncompete provisions help protect a buyer’s significant investment in an acquired business by restricting the seller from turning around and starting a new business that devalues the business sold. Although noncompete clauses often play a vital role in mergers and acquisitions, they are not immune from antitrust scrutiny. The recent challenges to noncompete provisions show that the FTC and other antitrust enforcers are closely scrutinizing noncompetes and will not hesitate to challenge problematic provisions — whether standalone or as part of a larger challenge to a transaction.

Parties to a commercial transaction, however, can easily manage these risks by carefully tailoring the scope of the noncompete to the transaction at hand. This article reviews recent enforcement actions involving noncompetes and provides practical guidance for mitigating antitrust risk associated with these valuable provisions.

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THE LATEST: DOJ Price-Fixing Probe Demonstrates That Deal Risk Is Not the Only Antitrust Concern Merging Parties Should Keep in Mind

Bumble Bee Foods, and two of its senior vice presidents, have recently pled guilty to US Department of Justice (DOJ) charges that they engaged in a conspiracy to fix prices of shelf-stable tuna fish sold in the United States from 2011 to 2013. Bumble Bee agreed to pay a $25 million criminal fine that can increase to $81.5 million under certain conditions, and the company’s two senior vice presidents pled guilty and agreed to pay criminal fines as well. The investigation appears to have been prompted by information that the DOJ uncovered during its investigation of Thai Union Group’s (owner of Chicken of the Sea) proposed acquisition of Bumble Bee, which was abandoned after DOJ concerns.

WHAT HAPPENED:
  • On December 19, 2014, Thai Union Group, the largest global producer of shelf-stable tuna, announced that it had agreed to acquire Bumble Bee Foods for $1.5 billion. A year later, on December 3, 2015, the DOJ announced that the parties had abandoned the transaction after the DOJ expressed concerns that the acquisition would harm competition. The DOJ stated that “Thai Union’s proposed acquisition of Bumble Bee would have combined the second and third largest sellers of shelf-stable tuna in the United States in a market long dominated by three major brands, as well as combined the first and second largest domestic sellers of other shelf-stable seafood products.”
  • Beyond its comments about the potential for competitive harm from the transaction, however, the DOJ further noted that “[o]ur investigation convinced us – and the parties knew or should have known from the get go – that the market is not functioning competitively today, and further consolidation would only make things worse.”
  • It appears that the DOJ’s concerns that the market for packaged seafood was not functioning competitively spurred the government to proceed with an investigation into potential collusion among the suppliers of packaged seafood. After its investigation, the DOJ concluded that Bumble Bee Foods, two of its senior vice presidents, and other co-conspirators “discussed the prices of packaged seafood sold in the United States[,] agreed to fix the prices of those products [and] negotiated prices and issued price announcements for packaged seafood in accordance with the agreements they reached.”
WHAT THIS MEANS:
  • In the Mergers & Acquisitions context, the merging parties are most often concerned with the potential risk that antitrust concerns may pose to the deal and the ability to obtain DOJ or Federal Trade Commission (FTC) clearance for the transaction. This criminal investigation by the DOJ demonstrates that the parties need to be aware of their conduct in the market, whether they have engaged in conduct that may be found to be collusive, and the potential consequences of such conduct [...]

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Lessons Learned – The State of Affairs in US Merger Review

In the last year, the US antitrust regulators successfully challenged multiple transactions in court and forced companies to abandon several other transactions as a result of threatened enforcement actions. Looking back at the different cases, there are some trends that we see developing in the government’s positioning on mergers, and these should be kept in mind as parties contemplate mergers and acquisitions moving forward.

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Aerospace & Defense Series: Leading Antitrust Considerations for M&A Transactions

Aerospace and defense contractors engage in a wide range of mergers, acquisitions and joint venture transactions, which are often subject to heightened antitrust scrutiny. This article highlights some of the leading antitrust factors that contractors should consider when contemplating M&A transactions in their unique industry.

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