Merger Controls First Edition - J Sagar Associates

White & Case LLP USA
The annual update to the applicable thresholds and detailed rules regarding notification thresholds and filing requirements
are available on the FTC website. See www.ftc.gov/bc/hsr/index.shtm.
If the jurisdictional tests are met, the acquiring party must submit an HSR filing and refrain from consummating the
transaction during the HSR waiting period. The statutory waiting period for transactions, other than cash tender offers, is
30 calendar days. In cash tender offers, or in cases where the seller is in bankruptcy, the waiting period is 15 days.
Transactions without any substantive antitrust issues are usually granted either “early termination” of the statutory waiting
period (which requires notification of the early termination and identification of the parties to the transaction in the Federal
Register and on the FTC website), or, if the statutory waiting period has elapsed, the parties may close the transaction.
For transactions that appear to pose potential substantive antitrust issues that cannot be resolved during the waiting period,
the antitrust agencies may issue a Second Request for additional information to the parties in order to conduct a more
thorough investigation of the proposed transaction.
During the HSR waiting period, the parties to a transaction must maintain and operate their businesses as separate entities.
The antitrust agencies continue to vigorously enforce the HSR Act, including prohibiting certain behavior during the HSR
waiting period. Impermissible activities by the parties to a proposed transaction during the waiting period are referred to as
“gun-jumping” in violation of the HSR Act. If the parties are competitors, gun-jumping could violate Section 1 of the Sherman
Act (15 U.S.C. § 1) as well. Impermissible activities by the parties to a proposed transaction include, for example: integrating
operations before the waiting period has expired; controlling or influencing the competitive decision making of the other
party; acting together, or representing themselves, as one firm; sharing competitively sensitive information; etc.
In 2010, the DOJ settled with Smithfield Foods, Inc. and Premium Standard Farms for $900,000 allegations that Smithfield
engaged in gun-jumping by exercising control over a significant segment of the business of Premium Standard before the
expiration of the statutory waiting period. According to the DOJ, Premium Standard improperly provided to Smithfield,
for its review and consen,t three multi-year input supply contracts. The DOJ’s complaint alleged that “[r]equiring a buyer’s
approval of the seller’s ordinary course contracts can prematurely transfer operational control, violating premerger
notification requirement”. Interestingly, the DOJ alleged that the parties had been in continuous violation of the HSR Act
from the date on which Premium Standard first submitted its contracts to Smithfield through the expiration of the waiting
period. This is the latest case in a string of gun-jumping cases, indicating the willingness of the antitrust agencies to
monitor and enforce prohibitions on gun-jumping. Other noteworthy enforcement actions include United States v. Gemstar-
TV Guide Int’l, Inc., No. Civ. A. 03-0198, 2003 WL 21799949 (D.D.C. July 11, 2003) (settling charges of violations of
Section 1 of the Sherman Act and Section 7A of the Clayton Act due to Gemstar’s allegedly, inter alia, sharing customerspecific
pricing information) and United States v. Computer Assocs. Int’l, Inc., No. Civ. A. 01-02062, 2002 WL 31961456
(D.D.C. Nov. 20, 2002) (alleging violations of Section 1 of the Sherman Act and Section 7A of the Clayton Act due to,
inter alia, Computer Associates prematurely taking control of the target company).
In addition to enforcement of the HSR Act by the antitrust agencies, private plaintiffs may also bring an action against the
merging parties for alleged gun-jumping behaviour. For example, in January 2011, in Omnicare, Inc. v. UnitedHealth
Group, Inc., 629 F.3d 697 (7th Cir. 2011), the Seventh Circuit Court of Appeals found that the merging parties had not
violated antitrust and consumer protection laws by sharing “generalised and averaged high-level pricing data” before
consummation of the merger as part of their due diligence.
Key industry sectors reviewed, and approach adopted, to market definition, barriers to entry, nature of
international competition etc.
The DOJ and FTC have indicated recently that the following sectors are of increased interest to them: agriculture; energy;
health care; and technology. Merger developments in each of these sectors is discussed below.
Agriculture. In 2010, the DOJ and US Department of Agriculture held joint workshops focusing on antitrust issues in
agriculture. Over the course of the year, five workshops were held across the country exploring the impact of buyer power
(i.e., monopsony power) in agricultural markets and vertical integration among food processors. According to DOJ
Assistant Attorney General Christine Varney “the knowledge we gained at the workshops will aid us in indentifying and
prosecuting conduct that violates the antitrust laws, and enforcement in the agricultural sector remains a priority”. Christine
Varney, Joint DOJ and USDA Agriculture Workshops: Concluding Remarks (Dec. 8, 2010), available at
http://www.justice.gov/atr/public/speeches/264911.pdf.
In addition to the workshops, the DOJ has been active in challenging mergers in the agricultural sector. As Assistant
Attorney General Varney discussed in her concluding remarks at the agriculture workshops, “[i]t is our role to enforce the
antitrust laws and advocate for competition in the agricultural sector, and the stories we heard at the workshops confirmed
the importance of these efforts. We are currently challenging the Dean Foods acquisition of Foremost Farms, and we
stand vigilant against violations of the antitrust laws”. Id.; see United States v. Dean Foods, No. 2:10-cv-00059 (E.D.
Wisc. Mar. 29, 2011) (challenging the proposed acquisition by Dean Foods of two fluid milk processing plants in
Wisconsin). Also this year, the DOJ challenged George’s Food’s acquisition of a West Virginia processing plant from
rival Tyson Foods. See United States v. George’s Food, LLC, No. 5:11-cv-00043 (W.D.W.Va. June 23, 2011). Notably,
both transactions were valued below the HSR notification thresholds, yet the DOJ investigated and challenged both
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