Challenging Mergers: Timing Is (Mostly) Everything

Published date01 November 2021
Subject Matterorporate/Commercial Law, Anti-trust/Competition Law, M&A/Private Equity, Corporate and Company Law, Antitrust, EU Competition
Law FirmLewis Brisbois Bisgaard & Smith LLP
AuthorMr Christopher H. Wood and Thomas L. Dyer

Denver, Colo. (October 28, 2021) - Clayton Act Section 7 is a statute private companies often overlook when seeking to combat mergers that are likely to degrade competition and, in the process, impair a company's ability to participate as a market supplier or consumer. A Fourth Circuit case reminds us, however, that private parties directly can use the statute in the right circumstances to level the playing field where they operate. In that Fourth Circuit case, a company successfully obtained damages and divestiture of a merger even though years had passed since government regulators approved the deal.

Post-merger attacks under Section 7 have an Achilles heel though: the equitable defense of "laches." Unnecessarily delaying action to vindicate competitive rights can derail a private claim as well as uproot or limit claims of government regulators upon whom a private entity might otherwise rely to restore purportedly lost competition.

Background on Section 7

Section 7 (15 U.S.C. ' 18) prohibits mergers and acquisitions that substantially lessen competition or tend to create a monopoly. In other words, combinations can be unwound on the front end (prior to consummation) or back end (after consummation) if there is a reasonable probability the merged entity will erode the competitive landscape to the detriment of consumers. In calling on Section 7, a party need not prove harm is certain to arise from a merger (though the harm must be probable). Parties, however, cannot predicate claims solely on injury to themselves; there must also be harm to the competitive process itself.

Merging companies can try to overcome showings of probable harm by offering evidence of the procompetitive benefits of the merger. In this way, the analysis turns to whether the evidence of market harm (e.g., likely higher prices) outweighs the market positives (e.g., improved product quality) being supplied to consumers by the merging entity. To assist them in weighing the evidence, courts have free reign to assess a wide variety of factors; the analysis is not strictly scripted but examines a "totality-of-the-circumstances."

The United States, state governments, and private parties can pursue relief under Section 7 and related antitrust statutes (15 U.S.C ' 15, 18, 26). Historically, private parties have left merger challenges to federal competition regulators: primarily the Department of Justice (DOJ) and Federal Trade Commission (FTC).1 In turn, these regulators often deploy Section 7...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT