Breaking Up Is Hard To Do During Competition Agency Review: Fixing Before Filing Can Be The Easier Path To Closing

• Published date: 18 November 2021
• Subject Matter: orporate/Commercial Law, Anti-trust/Competition Law, M&A/Private Equity, Corporate and Company Law, Antitrust, EU Competition
• Law Firm: Kelley Drye & Warren LLP
• Author: Mr William C. MacLeod

Mergers are surging, enforcement is changing, but one element of competition practice remains remarkably stable. A divestiture can save a deal otherwise destined for challenge. The substance of divestiture review still follows the principles applied in the past, and practice at the agencies remains reassuringly familiar. In an era of tougher and longer reviews, however, deal structure and timing may merit a new approach. Merging parties that fix deals before the culmination of review, and perhaps before the beginning of review, will have significant advantages. The challenge to parties and competition counsel is to assess the likely vulnerabilities of a deal, and undertake the repairs in advance of filing, instead of committing the transaction to a process they cannot control.

Commentators throughout the competition community have reported, analyzed, and opined on the changes in merger and acquisition review in 2021. Vertical merger guidelines have been rescinded. Early terminations at the FTC are gone for the time being. Horizontal merger guidelines are under review. Investors, not just companies, are new subjects of interest. Adding to the uncertainty surrounding M&A, Congress is contemplating numerous bills to change burdens of proof and create special rules for concentrated markets. Meanwhile, the FTC has expressed doubts over the advice that staff has given on premerger issues.² And after all is done, new consent orders may require companies to get permission of the FTC before consummating future deals.³ With a prior-approval clause in place, the agency could stop any deal covered by the order, regardless of its legality. What will come out of the Department of Justice, which awaits the next Assistant Attorney General, remains to be seen, but nobody is betting on the status quo.

In the wake of these shifting tides, one element of merger practice remains remarkably stable. A divestiture can save a deal otherwise destined for challenge. More encouraging, the substance of divestiture review remains largely consistent with the principles applied in years past, and the practices of the agencies bear more similarities than differences than before. In an era of heightened review, however, deal structure and timing may merit a new approach. Merging parties that fix deals before the culmination of review, and perhaps before the beginning of review, will have significant advantages.

The analysis, as always, should start with the law. Section 7 of the Clayton Act prohibits deals the effect of which "may be substantially to lessen competition, or to tend to create a monopoly." Some legislators want to...