If the agency responsible for a given transaction determines that the transaction may harm competition in a relevant market, the parties and the agency may attempt to negotiate some modification to the transaction or settlement that resolves the competitive concerns expressed by the agency. The most common form of such a settlement is a consent order, pursuant to which the acquiring company agrees to divest a certain portion of its existing assets or a portion of the assets it will acquire.
In the context of certain acquisitions, the antitrust agencies have indicated that, before they will enter into a consent order, the parties must identify an acceptable buyer for the businesses that are to be sold and must enter into a definitive divestiture agreement with such a buyer (with the buyer being approved by the responsible agency). Furthermore, consent orders require that the divestiture be completed within a fixed period of time. If the divestiture is not completed within this period, a trustee can be appointed to complete the divestiture.
The agencies have required divestitures in a number of recent transactions, including the following: Fresenius Medical Care and NxStage Medical (April 2019, pharmaceutical products); Penn National Gaming and Pinnacle Entertainment (February 2019, gaming, lodging entertainment); Agilent Technologies and Varian, Inc (October 2018, scientific products); and CRH plc and Ash Grove Cement Company (March 2018, building materials).
Behavioural remedies may also be imposed, though they have been uncommon in practice. However, the imposition of such remedies, which are often uniquely tailored to the merger concerned and require detailed monitoring, has been on the rise where mergers may present vertical foreclosure issues.
In May 2018, the FTC settled its charges that a proposed merger between two companies providing air ambulance transport services in Hawaii was likely to lessen competition. Under the terms of the settlement, AMR Holdco agreed to sell the business in question and enter into a Monitor Agreement pursuant to which the parties’ divestiture, asset maintenance and other obligations would be monitored.
In December 2018, the FTC settled its charges that Northrop Grummon’s acquisition of Orbital ATK likely would provide Northrop the ability and incentive to harm competition for missile contracts. Under the terms of the settlement, Northrop agreed to make its solid rocket motors and related services available on a non-discriminatory basis to all competitors for missile contracts and separate the operation of its SRM business from the rest of its operations with a firewall. The settlement also allows the Department of Defence to appoint a compliance officer to oversee Northrop’s conduct related to the settlement.
In June 2017, the DOJ entered into a consent decree with The Dow Chemical Company and EI DuPont de Nemours & Co, requiring them to divest multiple crop protection and two petrochemical products to proceed with their proposed $130 billion merger. The DOJ claimed that the parties were two of only a handful of chemical companies that manufacture certain crop protection chemicals and that vigorous competition between them had benefited farmers through lower prices, more effective solutions and superior service, which would be lost if the merger was allowed to proceed.
In December 2017, the DOJ settled with CLARCOR Inc and Parker-Hannifin Corporation with respect to their merger, which was consummated in February 2017 after complying with the HSR filing and waiting period requirements. The DOJ alleged that prior to the merger the parties were the only suppliers of a certain aviation fuel filtration system and filter elements to US customers, with the only other manufacturer of such products being located in Germany. The settlement required that Parker-Hannifin divest this business.
In July 2013, the FTC challenged General Electric Company’s US$4.3 billion acquisition of the aviation business of Avio SpA, alleging that the acquisition gave GE the ability and incentive to disrupt the design and certification of an engine component designed by Avio for rival aircraft manufacturer Pratt & Whitney. GE and Pratt & Whitney were the only engine manufacturers for Airbus’s A320neo aircraft and competed head-to-head for A320neo sales. Avio was the sole designer for the accessory gearbox (AGB) on the Pratt & Whitney engine for that Airbus aircraft. As a condition to the transaction, the FTC prohibited GE from interfering with Avio’s design and development work on the AGB for the Pratt & Whitney engine, and from accessing Pratt & Whitney’s proprietary information about the AGB that was shared with Avio.
In April 2011, the Antitrust Division allowed Google Inc’s acquisition of ITA Software, Inc to proceed on condition that Google continue to license and improve ITA’s travel software product, which was used by airfare comparison and booking websites. Google’s acquisition of ITA was considered to be its first step toward entering the online travel search market, and the Antitrust Division expressed concern that Google’s ownership of ITA’s software would give the former the incentive to foreclose competitors’ access to ITA or significantly reduce the quality of the software available to them.
In January 2011, the Antitrust Division required that Comcast and General Electric’s NBC Universal business (NBCU), as a condition of a joint venture between Comcast and NBCU, provide online video distributors (OVDs) with access to their video programming on terms comparable to those given to traditional multichannel video programming distributors. Conditions also included prohibitions on restrictive licensing practices, which serve to limit distribution of content to OVDs, and retaliation against any other content provider for providing programming to an OVD.
In January 2010, the Antitrust Division imposed, as a condition of the merger between Ticketmaster and Live Nation, which combined the country’s primary ticketing service provider and largest concert promoter, certain ‘anti-retaliation’ restrictions, prohibiting the merged firm from retaliating against any concert venue owner that chooses another firm’s ticketing or promotional services. The conditions included allowing former Ticketmaster clients to retain a copy of ticketing data generated while a Ticketmaster client. The Antitrust Division also imposed a ‘firewall’ preventing the merged firm from using information obtained from its ticketing business in its promotions and artist management businesses. The Antitrust Division’s settlement lasts for 10 years.
The Antitrust Division, in June 2011, released a revised version of the Antitrust Division’s Policy Guide to Merger Remedies, which is intended to provide guidance to Antitrust Division staff in their work analysing proposed remedies for mergers, including structural (divestment) remedies, conduct (behavioural) remedies, and ‘hybrid’ or combination remedies. The Policy Guide is available at https://www.justice.gov/sites/default/files/atr/legacy/2011/06/17/272350.pdf. FTC’s guidance on negotiating merger remedies is available at https://www.ftc.gov/tips-advice/competition-guidance/merger-remedies. The FTC studied its merger remedies from 2006-2012, and in January 2017 released its findings. The evaluation covered 50 FTC merger orders involving divestitures of ongoing businesses and limited packages of assets, in horizontal and vertical mergers. The FTC’s Merger Remedies Report is available at https://www.ftc.gov/reports/ftcs-merger-remedies-2006-2012-report-bureaus-competition-economics.
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