Mergers & Acquisitions Archives - Page 20 of 48

Mergers & Acquisitions

FTC’s Feinstein Declines to Provide Safe Harbor Guidance for Low GUPPIs

by McDermott Will & Emery | Mar 4, 2016 | FTC Developments, Mergers & Acquisitions

At a recent panel discussion during George Mason Law Review’s annual antitrust symposium, Deborah Feinstein, director of the Federal Trade Commission’s (FTC) Bureau of Competition, was asked what levels of gross upwards pricing pressure index (GUPPI) could raise concern in the FTC’s merger review process. Feinstein declined to provide a specific level that would raise concern, thereby rejecting movement towards a safe harbor for merging parties in markets where the GUPPI is particularly low.

The FTC’s policy regarding a GUPPI safe harbor has a substantial impact on its investigations of mergers with potential unilateral price effects. Generally unilateral price effects exist where the merged entity has the incentive to raise the price of the products of one or both firms. One way to conceptualize the potential unilateral effects of a merger is to consider the opposing forces of downwards and upwards pricing pressures. The elimination of competition between merging firms creates upwards pricing pressure. The benefits gained from efficiencies generate downward pricing pressure. GUPPI is an economic measure that attempts to estimate the upwards pricing pressure for a particular product resulting from a merger. Three market conditions lead to a higher GUPPI: 1) a high diversion ratio to the merging partner’s product; 2) a higher margin for the merging partner’s product; and 3) a higher price for the merging partner’s product (Moresi 2010). (more…)

Recent Judgments Illustrate How the European Commission Can Correct Its Errors Post-Annulment

by McDermott Will & Emery | Feb 22, 2016 | Cartel Enforcement, EC Developments, Mergers & Acquisitions

As a general proposition, when the validity of a European Commission antitrust decision is challenged before the General Court of the European Union (GCEU), the procedure is one of judicial review, not a retrial on the merits (although the GCEU does have special jurisdiction to increase or reduce the amount of any fine). Thus there are only three possible outcomes: annulment of the Commission’s decision; variation in the amount of any fine, upwards or downwards; or rejection of the challenge altogether.

In the case of annulment, Article 266 of the Treaty on the Functioning of the European Union requires that the Commission “take the necessary measures to comply with the judgment” of the GCEU. Provided that the limitation period has not expired, the Commission may take a new decision on the case, taking care to avoid the illegalities identified by the GCEU in respect of the first decision. The new decision can be different from the first decision, as illustrated by the recent judgments in Mitsubishi Electric and Toshiba, but it can also be substantially the same, as illustrated by the recent judgment in Éditions Odile Jacob.

The Mitsubishi Electric and Toshiba cases arose out of the gas insulated switchgear cartel. Mitsubishi Electric and Toshiba were fined for their participation in the cartel. The companies challenged the Commission’s decision imposing the fines, and the GCEU annulled the fines imposed individually on Mitsubishi Electric and Toshiba on the ground that the Commission had infringed the principle of equal treatment by choosing, when calculating the fine, a reference year for Mitsubishi Electric and Toshiba which was different from that chosen for the European participants in the infringement.

Following the annulment, the Commission addressed a letter of facts to Mitsubishi Electric and Toshiba informing them of its intention to adopt a new decision remedying the unequal treatment criticised by the GCEU. Mitsubishi Electric and Toshiba submitted comments on the Commission’s letter of facts and had meetings with the Commission team responsible for the case. Subsequently the Commission adopted a new decision imposing lower individual fines on Mitsubishi Electric and Toshiba than in the first decision.

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The EU Court of Justice Brings to an End Odile Jacob’s Fight Against Lagardère’s Purchase of Vivendi Universal Publishing

by Emily Townsend | Jan 29, 2016 | EC Developments, French Developments, Mergers & Acquisitions

By its judgment of 28 January 2016 (C-514/14 P, Editions Odile Jacob SAS v Commission), the European Court of Justice (Court) upheld the General Court of the European Union’s (GCEU) ruling with respect to each of the grounds raised by Editions Odile Jacob (Odile Jacob) thereby dismissing Odile Jacob’s appeal.

The case concerned the sale, in 2002, of Vivendi Universal’s subsidiary Vivendi Universal Publishing (VUP) to the Lagardère Group (Lagardère).

The European Commission (Commission) authorized the concentration in 2004, subject to undertakings by Lagardère. Specifically, Lagardère undertook to divest a significant amount of VUP assets. Lagardère thus approached several undertakings potentially interested in purchasing those assets. Odile Jacob was one of the undertakings that expressed an interest in the acquisition of the divested assets. However, Lagardère accepted the purchase offer made by Wendel Investissement (Wendel) whom the Commission approved as a suitable purchaser. Odile Jacob challenged the Commission’s decision authorizing the concentration and the decision approving Wendel as a suitable purchaser. In 2010, the GCEU confirmed the decision authorizing the concentration but annulled the decision approving Wendel as a suitable purchaser on the ground that it had been adopted on the basis of a report drawn up by a trustee that was not deemed independent. This judgment was upheld by the Court in 2012.

Following the GCEU’s judgment, Lagardère made a further request to the Commission for the approval of Wendel by proposing a new trustee who was subsequently approved by the Commission, in 2011, with effect from 2004. Odile Jacob brought another action for annulment of this approval decision which was dismissed by the GCEU by judgment of 5 September 2014 (T-471/11).

In its judgment of 28 January 2016, the Court upheld the September 2014 judgment of the GCEU.

First, the Court considered that the GCEU correctly ruled that, in order to give full effect to the judgments of 2010, the Commission was only required to approve a new trustee responsible for drawing up a new report evaluating Wendel’s candidature and to assess this candidature on the basis of this new report. In this respect, the Court found that the Commission neither had to revoke the decision authorizing the concentration nor to repeat the whole procedure from the date on which Lagardère appointed the first trustee.

Second, the Court ruled that the GCEU had not erred in law by declaring that the 2011 Commission decision, which approved again Wendel as an acquirer of VUP’s assets, could be retroactive. Indeed, the Court found that the Commission could adopt retroactive decisions where this is required by the intended aim and where the principle of protection of the legitimate expectations of the parties is properly observed. Here, the Court confirmed that these conditions had been met in the case: the new retroactive approval decision was intended inter alia to fill the legal vacuum created by the annulment of the first approval decision. In that regard, the Court found that Odile Jacob failed to demonstrate that there were no grounds that could justify [...]

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Notification Threshold Under the Hart-Scott-Rodino Act Increased to $78.2 Million

by Jon B. Dubrow | Jan 21, 2016 | Mergers & Acquisitions

The Federal Trade Commission (FTC) recently announced increased thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) and 2016 thresholds for determining whether parties trigger the prohibition against interlocking directors under Section 8 of the Clayton Act.

Read the full article.

FTC Comments Discourage Legislation Purporting to Grant Antitrust Immunity for Health Care Providers

by McDermott Will & Emery | Nov 9, 2015 | FTC Developments, Healthcare Antitrust, Mergers & Acquisitions

In late September, the Federal Trade Commission (FTC) submitted comments to the Virginia and Tennessee Departments of Health regarding each state’s proposed rules concerning hospital cooperation agreements. These proposed rules permit two or more hospitals to consolidate by merger or other combination of assets if, in the departments of health’s view, the benefits of the cooperative agreement outweigh any disadvantages caused by a reduction in competition. While the main purpose of the comments was to offer FTC assistance in the states’ evaluation of such agreements, the FTC re-iterated its position that “legislation purporting to grant antitrust immunity is un-necessary to encourage procompetitive collaborations among health care providers.” In fact, according to the FTC, such legislation is more likely to harm consumers.

The FTC believes the “antitrust laws are consistent with the laudable public policy goals of improving quality, reducing costs, and improving patient access for health care services.” With that position in mind, the FTC’s letters to the Virginia and Tennessee Departments of Health suggest that antitrust regulators should be focused on prohibiting agreements among providers that could harm competition rather than encouraging the creation of new agreements. Specifically, the FTC stressed that “efforts to shield such conduct from antitrust enforcement are likely to harm [state] health care consumers, no matter how rigorous or well-intentioned the regulatory scheme may be.”

Under the proposed rules, the states must weigh the benefits resulting from the cooperation agreements against any potential disadvantages likely to result from a reduction in competition. Both states’ rules specifically outline factors to be considered during the process. Potential benefits of cooperation agreements as noted in the FTC comments include the following:

Enhancement in quality of care and population health status
Preservation of hospital facilities to ensure access to care
Gains in cost-efficiency of hospital services provided
Improvements in utilization of hospital resources and equipment
Avoidance of duplication of hospital resources
Increases in access to hospital services for medically underserved populations
Participation in the state Medicaid program
Reductions in the total cost of care

Dis-advantages of such agreements that the states propose to consider include the following:

The adverse impact on the ability of payers to negotiate reasonable payment and service arrangements with providers
A reduction in competition among providers
An adverse impact on patients in the quality, availability and price of health care services
The availability of alternative arrangements that are less restrictive to competition and achieve the same benefits or a more favorable balance of benefits over dis-advantages

While these factors align with those that the FTC considers when reviewing a potential provider transaction, state authorities and the FTC differ on whether it is sound policy to encourage cooperation agreements among providers. The state legislators seek to allow cooperation agreements to move forward without fear of potential antitrust enforcement. Conversely, the FTC thinks legislation protecting provider cooperation agreements is un-necessary to encourage procompetitive collaborations and potentially harmful to the extent it shields anticompetitive collaborations from antitrust enforcement. In any event, providers entering such [...]

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FTC Settles Allegations of HSR Act Violation by Activist Investment Fund

by Jon B. Dubrow | Oct 28, 2015 | FTC Developments, Mergers & Acquisitions

The Federal Trade Commission (FTC) announced a settlement on August 24, 2015, with Third Point Funds for failing to file a notification under the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act) in connection with the acquisition of shares in Yahoo! Inc. (Yahoo) in 2011. Third Point Funds initially did not file and observe the HSR waiting period because it believed its acquisitions were exempt under the so-called “investment-only” exemption. The settlement provides insight into how the FTC interprets the investment-only exemption, and an important reminder that the HSR Act is a procedural statute for which the lack of competitive effect has no bearing on how the FTC chooses to enforce violations of its reporting requirements.

Read the full On the Subject.

Has Antitrust Enforcement Been ‘Reinvigorated’ Under Obama?

by Daniel Powers and Gregory E. Heltzer | Oct 27, 2015 | DOJ Developments, FTC Developments, Mergers & Acquisitions

In the 2008 presidential election campaign, then-candidate Barack Obama promised to “reinvigorate” antitrust enforcement. Over the last few years, several observers have concluded that the Obama administration’s antitrust record is not substantially different from that of his predecessor. Conventional wisdom suggests that antitrust enforcement is non-partisan. Some key statistics bear out this conclusion, but a comparative review of the data in Hart-Scott-Rodino (HSR) Annual Reports published jointly by the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ), including the recently issued fiscal year 2014 report, reveals some significant differences in antitrust enforcement during the Obama administration.

Analyzing the first six years of each administration reveals some superficial differences, but also significant continuity. Between 2001 and 2006, the agencies received a total of 9080 HSR filings; in 2009–2014 they received only 7530 filings. The total number of filings reviewed by the agencies also declined in absolute terms in the Obama years (Bush: 1537; Obama: 1251). Yet the percentage of filings reviewed has been remarkably consistent at slightly less than 17 percent of filings received in each period (Bush: 16.9 percent; Obama: 16.6 percent). The same consistency applies to Second Requests issued. The agencies actually issued a higher number of Second Requests in the first six years of the Bush administration compared to the same period in the Obama administration (Bush: 284; Obama 275). Given the lower number of filings in 2009–2014, the number of Second Requests as a percentage of all filings reviewed was higher in the Obama years, but only slightly (Bush: 3.1 percent; Obama: 3.7 percent).

If the analysis stopped there, we might conclude that antitrust review and enforcement has changed little during the Obama years. But data for the individual agencies reveals a different picture. In the Bush years, the FTC issued 142 Second Requests compared to 134 during the Obama years. Once again, given the different volume of transactions, this difference in absolute numbers results in no meaningful change in the Second Requests issued as a percentage of the transactions reviewed (Bush: 15.3 percent; Obama: 15.4 percent). For the DOJ, however, the numbers reveal a different story. Although the DOJ issued an almost equal number of second requests in each administration (Bush: 142; Obama: 141), as a percentage of all transactions reviewed by the DOJ, this steady rate results in a significant increase in the total as a percentage of the transactions reviewed; 23.4 percent during the Bush administration, compared to 37.1 during the Obama administration.

The number of enforcement actions pursued by each agency also reveals significant differences. The FTC launched nine more actions under Obama than it did under Bush (Bush: 113; Obama: 124). These totals translate to a modest two percent increase when measured as a percentage of the transactions reviewed by the agency (Bush: 12.1 percent; Obama: 14.2 percent). At the DOJ, the total number of enforcement actions also increased, from 86 under Bush to 101 under Obama. Given the different number of transactions reviewed, however, this change almost doubled [...]

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Four FTC Commissioners Reject Wright’s Call for GUPPI Safe Harbor

by Daniel Powers | Jul 16, 2015 | DOJ Developments, FTC Developments, Mergers & Acquisitions

Four members of the Federal Trade Commission (FTC) issued a statement on July 13, 2015, disputing claims by a fellow commissioner that the 2010 Horizontal Merger Guidelines include a “safe harbor” that is available in unilateral effects merger investigations. Commissioner Joshua Wright’s comments about the potential safe harbor arose in the context of the Commission’s investigation into Dollar Tree’s proposed acquisition of Family Dollar Stores, Inc. The FTC has accepted a proposed settlement to resolve the alleged anticompetitive effects of that transaction.

The dispute involves a Gross Upward Pricing Pressure Index (GUPPI) analysis. The GUPPI analysis permits the federal antitrust enforcement agencies to assess whether a merger involving differentiated products is likely to result in unilateral anticompetitive effects. Such effects can arise where the merged entity can profit from diverted sales. The GUPPI measures the value of diverted sales that would be gained by the second firm measured in proportion to the revenues that would be lost by the first firm.

The 2010 Horizontal Merger Guidelines anticipate the use of such an analysis in certain cases. Indeed, according to the guidelines, “[i]f the value of diverted sales is proportionately small, significant unilateral price effects are unlikely.” Commissioner Joshua Wright pointed to this language, and statements by one of the principal drafters of the 2010 Guidelines, to argue that the Department of Justice had already publicly announced a safe harbor where the GUPPI is less than five percent. Commissioner Wright argued that there was a strong legal, economic and policy case in favor of such a safe harbor, and urged the FTC to “adopt a GUPPI-based safe harbor in unilateral effects investigations where the data are available.”

Wright’s fellow commissioners firmly disagreed that any safe harbor has previously been identified, or that such a safe harbor is appropriate. In their statement, Chairman Ramirez and Commissioners Brill, Ohlhausen and McSweeney explained that the GUPPI analysis serves “as a useful initial screen to flag those markets where the transaction might likely harm competition and those where it might pose little or no risk to competition.” They emphasized that the GUPPI analysis is “only a starting point” in a merger investigation. The commissioners further claimed that Commissioner Wright’s remarks ignored “the reality that merger analysis is inherently fact-specific” and that “[t]the manner in which GUPPI analysis is used will vary depending on the factual circumstances, the available data, and the other evidence gathered during an investigation.” The commissioners concluded that “accumulated experience and economic learning” do not provide an adequate basis for recognizing a GUPPI safe harbor. The Commission will continue to “use GUPPIs flexibly and as merely one tool of analysis in the Commission’s assessment of unilateral anticompetitive effects.”

ICN Adopts New Guidance Focusing on Investigative Process and International Cooperation in Mergers

by Louise Aberg | Jun 22, 2015 | Cartel Enforcement, Mergers & Acquisitions, Monopolization/Abuse of Dominance

From April 28 through May 1, the International Competition Network (ICN) held its 2015 annual conference. The ICN is a network that unites 132 competition watchdogs from 119 jurisdictions, including the Antitrust Division of the U.S. Department of Justice (DOJ), the Federal Trade Commission (FTC), the European Commission (EC) and the Japan Fair Trade Commission (JFTC). Its role is to act as a forum for the global antitrust community and to facilitate dialogue and build consensus on competition policy and practices. Members participate in working groups and produce recommendations once they have reached consensus. Each year, during the annual conference, recommendations are adopted by the members and become best practices or guidance tools that may be implemented by competition authorities across the world.

This year, the ICN adopted several recommended practices including, most notably, “ICN Guidance on Investigative Process” and an “ICN Practical Guide to International Enforcement Cooperation in Mergers.”

Guidance on Investigative Process

The “ICN Guidance on Investigative Process” is the result of discussions held within the Agency Effectiveness Working Group over several years as part of the ICN’s Investigative Process Project co-led by the FTC and the EC. This is the first time the ICN has addressed investigative processes used by competition agencies across all competition enforcement areas. The discussions focused on two prongs: (i) enforcement tools available to competition agencies to obtain relevant information in the course of their investigations, and (ii) the procedures they follow when conducting such investigations. The adopted work product contains a list of key principles and practices which the participants deemed important in order to guarantee an effective and fair investigative process:

Investigative tools. Competition authorities should be able to make use of investigative tools, such as requests for information, inspections and interviews. They should have the possibility to obtain information by compulsion if necessary. Such investigative tools should be used in accordance with a legal framework setting out clear criteria, and be subject to both internal checks and balances and external review.
Transparency concerning policies and standards. Competition authorities should lay out legal standards and agency policies in formal or informal documents, such as manuals, staff working papers, best practices or guidelines. There is one limit: transparency should not undermine the effectiveness of investigations.
Transparency during an investigation. Competition agencies should let parties know as soon as feasible that an investigation has been opened; the legal basis for the investigation; the competitive concerns and the applicable theories of harm; the progress and timing of the investigation; and, once formal allegations are made, the evidence relied upon. The level of transparency may be different depending on the type of investigation.
Engagement during an investigation. Competition agencies should provide parties with the possibility to defend themselves against the allegations raised. In doing so, parties should be able to submit factual, legal, and economic evidence in due course. Interested third parties should also be able to submit their views.
Confidentiality protection and legal privileges. Parties and third parties should be able to ask [...]

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