The U.S. Department of Justice in October 2004 issued the “Antitrust Division Policy Guide to Merger Remedies” to provide insight for businesses into the policies that Antitrust Division attorneys and economists will follow in determining what remedies will be sought for mergers or acquisitions considered anticompetitive by the Department of Justice.
The Antitrust Division has three options when it concludes that a proposed merger or acquisition may substantially lessen competition. The Division may seek an injunction to halt the transaction, negotiate a consent decree to settle the Division’s concerns about the transaction, or accept a “fix-it” remedy that permits a modified transaction to go forward that does not present the threat of a substantial lessening of competition.
The Policy Guide sets out the Guiding Principles for considering appropriate remedies. Remedies will be considered only after there is reason to believe that the merger or acquisition at issue would violate Section 7 of the Clayton Act. Remedies must be case specific, enforceable, and stated clearly enough to avoid the possibility of contrary judicial interpretation at a later date. Acceptable remedies must promote competition rather than competitors.
The Antitrust Division states in the Policy Guide that it prefers structural remedies over conduct remedies although both types of remedies may be needed in particular cases. Structural remedies involve the sale of assets by the merging firms while conduct remedies, such as injunctive relief, require continuing monitoring of the post-merger or post-acquisition firm.
A remedy that includes a divestiture must include a divestiture of both tangible and intangible assets to the divested company so that it is truly capable of operating competitively in the post-merger or post-acquisition market. The Antitrust Division prefers including an existing business entity in any divestiture so that any lessening of competition is avoided while the divested business begins independent operations.
The Policy Guide also presents Antitrust Division preferences regarding how chosen remedies will be implemented. The Division states that a “fix-it-first” remedy will be considered and accepted if that remedy eliminates harm to competition and if there will be no need to monitor the post-merger or post-acquisition firm. A “fix-it-first” remedy is a structural remedy that the parties to a proposed merger or acquisition implement prior to the transaction so that the Antitrust Division does not need to seek injunctive relief.
The Antitrust Division believes that a “hold separate” provision will have to be part of any consent decree that the Division would enter into that requires a divestiture of assets. The hold separate provision would be designed to hold the assets to be divested away from the resulting firm so that the assets remain “separate, distinct, and saleable,” according to the Division, so that effective competition will remain after the merger or acquisition.
In addition, any divestiture the Division will agree upon would have to be accomplished quickly (normally within 60 to 90 days) in order to restore premerger competition and to maintain value of the assets to be divested. In order to preserve competition, the Division will insist upon the right to approve any purchaser of divested assets. Restrictions on any resale of divested assets usually will not be agreed to by the Division, and seller financing of the purchase of assets to be divested is disfavored by the Division.
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