Mergers & Acquisitions Archives - Page 12 of 48

Mergers & Acquisitions

THE LATEST: FTC Continues Focus on Improving Procedures for Evaluating Remedy Packages

by Gregory E. Heltzer and Matt Evola | Sep 10, 2018 | FTC Developments, Mergers & Acquisitions

WHAT HAPPENED

The FTC posted a short article indicating that after finalizing a settlement package with FTC Staff, it takes approximately four weeks for the Directors of the Bureau of Competition and the Bureau of Economics (the Directors), as well as the Commission to review the Directors’ recommendations and vote on the package.
The FTC explained that an expedited review is unlikely, particularly when the parties’ actions contributed to the timing concerns.
The FTC provided a procedure for how parties seeking an expedited review should proceed, and outlining potential scenarios that would cause the FTC to look unfavorably upon the application–g., the parties caused their predicament. Expedited review is unlikely, for example, when:
- The parties agreed to a too-early drop dead date or a ticking agreement that fails to properly account for antitrust review; or
- Negotiations between the parties and the FTC on custodian review drag on or the parties provide responses to requests for documents and information that are incomplete.

WHAT THIS MEANS

Since the Merger Remedy Report was released in 2017, both the FTC and DOJ have taken steps to improve best practices for evaluating settlement packages. In particular, greater vetting of both the remedy package and buyer is the new norm, with more extensive information requests to establish the sufficiency of the settlement package. These changes are extending the merger review process when a settlement is necessary to address antitrust enforcer concerns.
In addition to its revised best practices for Staff development of settlement packages, this procedural move supports the FTC’s recent focus on developing protocols that allow it to take its due time in reviewing merger remedies.
- Last month, the FTC published a new Model Timing Agreement that, if agreed to, provides the government additional time to evaluate cases beyond the statutory period.
- The FTC has followed that move this month by setting out protocols and timing expectations for Directors and Commissioners to vet settlement packages advanced by Staff.
The latest move makes clear that the extended development of settlement packages by Staff will not lead to a curtailed review of those same settlement packages by the Directors or the Commission. Antitrust enforcers continue to take the principled view that enforcers must be cautious when approving a merger with remedies and any risks in the process should be shifted to the parties where appropriate.

THE LATEST: FTC Announces New Model Timing Agreement for Merger Investigations

by Jon B. Dubrow | Aug 9, 2018 | FTC Developments, Mergers & Acquisitions

WHAT HAPPENED:

On August 7, the FTC published a new Model Timing Agreement. Timing agreements are agreements between FTC staff and merging parties that outline the FTC’s expected timing for various events in order for it to conduct an orderly investigation during a Second Request.
The FTC expects the Model Timing Agreement to be used as drafted (or in a similar form) for all transactions that receive a Second Request. The FTC has used timing agreements frequently in the past, as has the DOJ, but the FTC has now published a model, which means this is likely to become the standard practice moving forward.
Parties are not required to enter into a timing agreement. However, in practicality, if parties do not agree to the timing agreement, the agency will proceed as if it must be in court to block the deal within 30 days of compliance. Therefore, it will prepare for litigation and will not consider settlement options or engage with the parties on the issues in the same way it would if the agency had more time under a timing agreement.
Some highlights of the new Model Timing Agreement are provided below (Note: All days listed refer to calendar days):
- Parties must provide 30 days’ notice before certifying substantial compliance, and such notice cannot be provided until at least 10 days after signing the timing agreement.
- Parties cannot close a proposed transaction until a specified time period after substantial compliance with the Second Request. The model indicates this will be 60 days in less complex matters or 90 days in more complex matters, but could be longer than 90 days in “matters involving particularly complicated industries.”
- Parties must provide 30 days’ notice before consummating the proposed transaction and cannot provide notice more than 40 days before the date on which they have a good faith basis to believe they will have cleared other closing conditions and will be able to complete the transaction, absent an FTC action to block the transaction.
- The agreement includes a stipulated Temporary Restraining Order (TRO) which will be entered in the event of a challenge. The TRO prevents the parties from consummating the transaction until after five days following a ruling on a motion for preliminary injunction.
- The timing agreement contains other timing-related provisions such as for document productions and investigational hearings as part of the FTC’s investigation.

WHAT THIS MEANS:

Though the Model Timing Agreement does not affect the statutory expiration of the HSR waiting period, it commits the parties not to consummate the transaction for a much longer period and, therefore, effectively extends the waiting period far longer than the 30 days specified under the HSR Act.
The 40-day notice required before the closing date means that if there is another condition in the way of closing, such as an ongoing investigation before the European Commission or in China, the parties cannot provide their notice of the anticipated closing date to the FTC. The FTC will [...]

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Antitrust M&A Snapshot

by McDermott Will & Emery, Jon B. Dubrow and Joel R. Grosberg | Aug 6, 2018 | DOJ Developments, EC Developments, EU Developments, FTC Developments, Mergers & Acquisitions, Monopolization/Abuse of Dominance

United States: April – June 2018 Update

The second quarter of 2018 ushered in a trial defeat for the US Department of Justice (DOJ) and the beginning of a new era at the Federal Trade Commission (FTC). In June, Judge Richard J. Leon of the US District Court for the District of Columbia denied the DOJ’s requested injunction of the AT&T/Time Warner acquisition. The case marked the first litigated vertical challenge by the Antitrust Division in nearly 40 years. DOJ filed a notice of appeal of the district court’s decision. At the FTC, four new commissioners were sworn in in May, with a fifth to join upon the approval of current commissioner Maureen Ohlhausen to the US Court of Federal Claims. With the transition nearly complete, new FTC Chairman Joseph Simons announced plans to re-examine and modernize the FTC’s approach to competition and consumer protection laws, possibly charting a new course for FTC antitrust enforcement.

EU: April – June 2018 Update

In this quarter, we saw two significant developments concerning the issue of gun-jumping. First, the Court of Justice of the European Union (CJEU) clarified the scope of the gun-jumping prohibition, ruling that a gun-jumping act can only be regarded as the implementation of a merger if it contributes to a change in control over the target. Second, the European Commission (EC) imposed a €124.5 million fine on Altice for having breached the notification and the standstill obligations enshrined in the EUMR by gun-jumping. The EC also issued two clearance decisions following Phase II investigations in the area of information service activities and the manufacture of basic metals. (more…)

THE LATEST: Collateral Risk in Merger Reviews

by Gregory E. Heltzer and Louise Aberg | Jul 30, 2018 | DOJ Developments, Mergers & Acquisitions

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.

(more…)

Antitrust Litigation Update for Health Care Providers

by Katharine M. O'Connor and Stephen Wu | Jun 25, 2018 | Healthcare Antitrust, Mergers & Acquisitions, Private Litigation

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.

Access the full report.

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

by McDermott Will & Emery, Jon B. Dubrow and Joel R. Grosberg | Jun 19, 2018 | DOJ Developments, Mergers & Acquisitions

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.

Access the full article.

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

by Jon B. Dubrow | Jun 18, 2018 | DOJ Developments, FTC Developments, Mergers & Acquisitions

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.

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

by McDermott Will & Emery | Jun 7, 2018 | EU Developments, Mergers & Acquisitions

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…)

Antitrust M&A Snapshot

by McDermott Will & Emery, Jon B. Dubrow and Joel R. Grosberg | May 7, 2018 | DOJ Developments, EC Developments, EU Developments, FTC Developments, Mergers & Acquisitions

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…)

DOJ Consent Decree Changes Reduce Room for Error

by Mary Strimel | Mar 21, 2018 | DOJ Developments, Mergers & Acquisitions

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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