Divestments often constitute the most appropriate remedy to resolve antitrust concerns in the context of merger control. However, behavioural commitments may also have the same commercial effects as a divestment. This was illustrated in a merger control case handled by the United Kingdom Competition Market Authority (the ‘CMA’) in the specialist magazines sector. Another feature of this case pertains to the market definition found by the CMA in this case. (more…)
The Federal Trade Commission (FTC) recently reversed its position on how to calculate the size-of-transaction for HSR purposes in connection with leveraged buyouts (LBOs). This change in position may result in more reportable transactions.
As detailed here, the FTC’s position, effective immediately, is that any new debt used to finance an LBO transaction, counts toward the size of transaction. Previously, whether or not new debt used to finance an LBO transaction was included in the size of transaction turned on whether the buyer or the target company incurred, provided, or guaranteed the debt.
This does not change the treatment of payment of third-party debt out of transaction consideration:
In pharmaceutical transactions involving generic products, the Federal Trade Commission (FTC) has typically focused on narrow antitrust theories of harm and applied a narrow product market analysis often limited to a treatment for a particular indication (and sometimes to a specific mechanism of action). In these transactions, the FTC has consistently required fixes for generic overlaps when the transaction (1) reduces the number of significant generic competitors in a particular product market to three or fewer or (2) involves the combination of a branded pharmaceutical product with a “first-to-file” generic for the same product for which there are no other generics yet on the market. Using this narrow methodology, pharmaceutical transactions involving generics that required a fix could move through the FTC review process very quickly and generally achieve clearance in approximately six months from filing.
While antitrust policy and enforcement has not received much attention from Donald Trump on the campaign trail, Mr. Trump has made a few notable statements regarding antitrust law that provide hints as to potential antitrust enforcement priorities for a Trump administration. Mr. Trump’s history as both a plaintiff and defendant in antitrust litigation is also notable and unprecedented.
In his 2011 book Time to Get Tough: Making America #1 Again, Mr. Trump addressed the Organization of the Petroleum Exporting Countries (OPEC) specifically in the context of antitrust law. Under the heading “Sue OPEC” Mr. Trump wrote:
We can start by suing OPEC for violating antitrust laws. Currently, bringing a lawsuit against OPEC is difficult. . . . The way to fix this is to make sure that Congress passes and the president signs the “No Oil Producing and Exporting Cartels Act” (NOPEC) (S.394), which will amend the Sherman Antitrust Act and make it illegal for any foreign governments to act collectively to limit production or set prices. If we get it passed, the bill would clear the way for the United States to sue member nations of OPEC for price-fixing and anti-competitive behavior. . . . Imagine how much money the average American would save if we busted the OPEC cartel. (more…)
On Monday, October 3, 2016, Hillary Clinton issued a statement on her website titled “Hillary Clinton’s Vision for an Economy Where our Businesses, our Workers, and Our Consumers Grow and Prosper Together.”
Prior to this statement, there had been some speculation over what a Clinton presidency might bring in terms of antitrust enforcement.
Unlike President Barack Obama, former Secretary Clinton had not issued a clear policy statement on her antitrust position before Monday. She had, however, penned one short op-ed piece for Quartz, and had made some general statements on the campaign trail regarding the problems of industry consolidation. It was unclear from these prior statements whether a Clinton administration would mean any change in the current state of affairs at Department of Justice (DOJ) Antitrust Division and the Federal Trade Commission (FTC). The current administration has challenged a higher percentage of mergers than any administration since before Reagan’s, but it has not significantly altered the law regarding what mergers are considered actionable.
In her Quartz op-ed, Secretary Clinton stated that “we need to fix [the system],” and decried the concentrated markets in the pharmaceutical, airline and telecommunications industries. But Secretary Clinton gave only two concrete examples of how she would “take on the fight” against “large corporations.” (more…)
On September 27, 2016, the US Court of Appeals for the Third Circuit handed an important victory to the Federal Trade Commission and the Commonwealth of Pennsylvania in a closely watched hospital merger case. The decision provides clear guidance on the appropriate tests for determining geographic markets in hospital merger cases, while also suggesting that efficiencies claimed in many hospital transactions may face increased scrutiny in future cases.
Read “Third Circuit Blocks Hospital Merger in Key Victory for FTC on Geographic Market Definition”
Financial regulatory authorities such as the US Security and Exchange Commission (SEC) and the French Autorité des marchés financiers frequently impose on companies that are listed on a stock exchange the obligation to disclose key information to investors to help them make informed investment decisions.
The difficulties for companies lie principally in the nature of the information to be disclosed, the timing of the disclosure, and the balance of the obligation towards financial regulatory authorities on one hand, and competition authorities on the other.
In May, the Federal Trade Commission (FTC) required Hikma Pharmaceuticals PLC to divest its 23 percent interest in Unimark Remedies, Ltd. and its US marketing rights to a generic drug under manufacture by Unimark as a condition to allowing Hikma to complete its acquisition of Roxane Laboratories. The FTC was concerned that Hikma’s continued holding of a 23 percent interest in Unimark after consummation of its proposed acquisition of Roxane would create the incentive and ability for Hikma to eliminate future competition between Roxane and Hikma/Unimark in the sale of generic flecainide tablets (a drug used to treat abnormally fast heart rhythms) in the United States.
The FTC’s divestiture requirement was unusual but not unprecedented. The Horizontal Merger Guidelines identify three theories of competitive harm associated with an acquisition or holding of a small but significant minority interest in a competitor.
These theories of potential antitrust harm from minority interest acquisitions are not unique to the United States; other competition agencies, including the European Union’s competition directorate, accept and apply these theories when considering the competitive impact of a firm’s actual or proposed partial ownership interest in a competitor. However, the United States applies a significantly lower threshold than the European Union (and other competition agencies) for the pre-acquisition notification of an entity’s acquisition of a minority, non-controlling interest in another firm.
Read the full article here.
In the last two years, the Federal Trade Commission (FTC) and the Antitrust Division of the US Department of Justice (DOJ) brought, and won, several litigated merger cases by establishing narrow markets comprised of a subset of customers for a product. This narrow market theory, known as price discrimination market definition, allowed the agencies to allege markets in which the merging parties faced few rivals and, therefore, estimate high post-merger market shares. By their nature, price discrimination markets can lead to a challenge of a high-value deal where only a small number of the merging parties’ customers are allegedly harmed. Given the increased usage by the agencies and now judicial acceptance of the theory, counsel for merging parties must consider the potential for price discrimination market definition in assessing the antitrust risks for transactions.
Read the full article here.
The Federal Trade Commission (FTC) and US Department of Justice’s (DOJ) Antitrust Division have been actively challenging mergers and acquisitions (M&A) across a variety of industries where there is not a viable or acceptable remedy to mitigate the agencies’ competitive concerns. Parties to M&A transactions that the FTC or the DOJ believe are likely to harm competition may remedy those concerns by divesting certain businesses or assets. The parties may divest the business or assets that raise anticompetitive concerns and proceed with the remainder of the transaction. Divestitures in horizontal mergers (i.e., transactions between competitors) aim to maintain or replace the competition in the relevant market that might otherwise be lost as a result of the transaction.
Proposed divestitures are evaluated on the particular facts of the case and must be robust enough to present a viable competitor. Recent transactions demonstrate that the FTC and DOJ will reject divestiture proposals that the agency finds insufficient, putting the entire deal at risk for merging parties. Before proposing a remedy to the FTC or DOJ, parties should keep the following in mind: (1) in today’s enforcement environment, the agencies are more demanding in seeking effective remedies; (2) the agencies are more likely to require a buyer up front, particularly if the parties seek to divest assets that are less than an entire on-going, stand-alone business, or the to-be-divested assets are at risk of deterioration pending divestiture; and (3) a buyer must be competitively and financially viable.
Read the full article here.
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