Merger Controls First Edition - J Sagar Associates

White & Case LLP USA
Since 2010, for example, the DOJ has conducted reviews of mergers in collaboration with:
• the Canadian Competition Bureau (Ticketmaster/Live Nation);
• the European Commission (Cisco/Tandberg);
• the German Federal Cartel Office (CPTN/Novell); and
• the antitrust authorities of Mexico, the United Kingdom, and South Africa (Alberto Culver/Unilever), among others.
Furthermore, the US continues to lay the foundation for cooperation with countries with emerging antitrust frameworks,
entering into memorandums of understanding with the Russian competition authority in 2009 and with China’s antitrust
agencies in the summer of 2011. In addition, the US is in discussions with India about entering into a similar agreement.
Reform proposals
Streamlined Clearance Mechanism
Traditionally, if both the DOJ and FTC want to review a given transaction, the matter is assigned through a liaison process,
and one of the two agencies is granted the investigation. This process is known as “clearance”. Clearance is not an issue with
most mergers. The agencies over time have respectively developed significant experience with certain industries and familiarity
with certain companies. As a result, it is often fairly easy to predict which agency will review a given transaction. (For example,
transactions in the steel industry are usually reviewed by the DOJ and transactions in the pharmaceutical industry are usually
reviewed by the FTC.) If there is a clearance battle, however, the parties to a transaction can become caught in the middle of
a bureaucratic turf war. For the parties to the transaction, a clearance battle can result in a potentially significant delay of up
to 30 days before the companies even know which agency will review their transaction, and this delay can significantly adversely
affect the ability of the companies to try to resolve substantive competitive issues before the agency reviewing the merger must
issue a Second Request (or otherwise let the transaction close).
There have been, and continue to be, discussions about a streamlined clearance mechanism to ensure timely resolution of
potential clearance battles. In 2002, then-FTC Commissioner Timothy Muris and DOJ Assistant Attorney General Charles
James attempted to streamline the merger clearance process by dividing jurisdiction over mergers by industry. The 2002
Accord was ill-fated; a few months after announcing the agreement, it was abandoned, largely attributed to political
pressure from Congress. Almost a decade later, antitrust practitioners and their clients still face uncertainty, particularly
in new and evolving industries. On one extreme, some practitioners have advocated moving all merger review authority
to the DOJ, and thereby circumventing any merger clearance battles. As a practical matter, it seems unlikely that such a
proposal would succeed, due at least in part to likely political opposition. A less extreme approach would be to revisit a
division of responsibility between the DOJ and FTC by industry and experience through a formal notice-and-comment
rulemaking process.
Reforms to the FTC Part III Litigation Process
Many antitrust practitioners believe that the same transaction reviewed by the DOJ and FTC could well result in different
outcomes. A major reason for this – in addition to differences in the substantive analysis of the agencies and potentially
differing standards required for injunctive relief in federal court, and different processes and requirements for obtaining
consent decrees – is the practice of FTC to bring administrative litigation to determine the legality of a proposed transaction,
sometimes at the same time that the FTC is bringing a challenge in federal court. See, e.g., FTC v. Inova (E.D. Va. 2008).
Such administrative litigation, referred to as Part III proceedings, commonly takes significantly longer than federal litigation
seeking to enjoin a proposed transaction. See, e.g., J. Thomas Rosch, Reflections on Procedure at the Federal Trade
Commission, ABA Antitrust Masters Course IV (Sept. 25, 2008) at 3 (“The average part 3 proceeding in the last 10 years
has lasted 33.5 months from complaint through Commission decision (which may then be appealed to the federal appellate
courts). That compares with the average federal court antitrust case, which lasted 24 months from complaint through
district court judgment (which may then be appealed to the federal appellate courts).”). As a result, the timeline of a
merger reviewed and challenged by the DOJ is often significantly shorter than by the FTC.
Thus, parties to a merger challenged by the FTC may not only be faced with litigation on two separate fronts (federal
court injunctive action and administrative litigation) for the same proposed transaction, but also face the specter that even
if they succeed in federal court, the proposed transaction could be found to be unlawful many months or even years later
by the FTC. See, e.g., J. Thomas Rosch, A Peek Inside: One Commissioner’s Perspective on the Commission’s Roles as
Prosecutor and Judge, NERA 2008 Antitrust & Trade Regulation Seminar (July 3, 2008) at 13-14 (“the Commission has
arguably abdicated its judicial responsibilities and has instead allowed federal district courts to usurp them” as a result of
the FTC’s policy of not pursuing plenary administrative proceedings following the denial of a preliminary injunction by
a federal district judge). The uncertainty of such a result, potentially years down the line, can be tremendously unnerving
to merging firms. This heightened anxiety and risk has been enhanced by recent FTC actions such as the FTC’s opposition
in Inova to file contemporaneous federal court and administrative challenges.
In 2001 and in 2009, the FTC purported to streamline its timelines for a Part III administrative proceeding. This change
may result in tighter timelines for the parties, but even at a minimum, under the FTC’s new streamlined rules, Part III
proceedings can result in an additional delay of up to three months or longer. See FTC v. Laboratory Corporation of
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