The Mergers Remedies Manual “will provide greater transparency and predictability regarding the Antitrust Divison’s approach to remedying a proposed merger’s competitive harm.”
After nearly a decade, the U.S. Department of Justice Antitrust Division (DOJ) released an updated Merger Remedies Manual on September 3, 2020. The manual is intended to reflect the significant changes in the merger landscape since 2011, when the DOJ last issued a merger remedies guide. In September 2018, the DOJ withdrew the 2011 guide and reinstated the 2004 Policy Guide to Merger Remedies. The new manual replaces the 2004 guide and follows the release of the updated Vertical Merger Guidelines, which the DOJ jointly issued with the U.S. Federal Trade Commission (FTC) earlier this year. These new guidelines will help parties considering a horizontal or vertical combination anticipate the government’s treatment of the transaction.
The DOJ and FTC enforce the U.S. antitrust laws and have the authority to challenge mergers, acquisitions and other transactions that may substantially lessen competition. If either enforcement agency determines that a particular transaction may substantially lessen competition, it may seek an injunction preventing the parties from consummating the transaction. In the alternative, the agency may enter into a consent agreement with the merging parties that includes remedial measures aimed at preserving or restoring competition while allowing the transaction to proceed. These remedial measures are the focus of the manual. Even though it lacks the force or effect of law, the manual provides a framework for how the DOJ will attempt to preserve competition when facing potentially problematic transactions through evaluation, implementation and enforcement of remedial measures. According to Assistant Attorney General Makan Delrahim, the Mergers Remedies Manual “will provide greater transparency and predictability regarding the Antitrust Divison’s approach to remedying a proposed merger’s competitive harm.”
When analyzing a transaction, the DOJ will first determine whether competitive harm has occurred or is likely to occur. If the parties propose a remedy that they believe will eliminate the identified harm, the DOJ will attempt to determine whether there is a logical nexus between the proposed remedy and the identified harm. In so doing, the DOJ will also seek to preserve transaction-specific efficiencies, to the extent possible, and it will make sure that the proposed remedy has sufficient reporting and access requirements to allow the DOJ to enforce the remedy.
The Merger Remedies Manual outlines certain principles that will be applied to structuring and implementing remedies to both horizontal and vertical competitive harms, including the following:
- Resolution of a competitive issue is fact-intensive and any proposed remedy should be as narrowly tailored as possible to resolve the issue;
- Structural remedies—such as divestiture of assets to a third party―are strongly preferred to conduct remedies because they are typically simpler, cleaner, more effective and avoid government regulation of the free market;
- Remedies should protect competition, not competitors; and
- Remedies must be enforceable, i.e., they must be clear and straightforward.
Structuring the Remedy
When crafting a proposed remedy, there are a few things that the parties should consider. A proposed divestiture should include all assets, tangible and intangible, that will allow the divestiture buyer to be an effective, long-term competitor in the relevant market. In addition, the agencies prefer divestiture of an existing standalone business because it has demonstrated success competing in the relevant market. Parties wishing to avoid the filing of a complaint should afford themselves enough time to evaluate competitive harm related to a potential transaction and to craft a fix-it-first remedy that completely cures the identified harm. Parties should also provide the DOJ with a sufficient opportunity to fully analyze the potential transaction, the proposed remedy and any proposed divestiture buyers.
The legal and economic analysis of remedies crafted to alleviate potential competitive harm related to mergers, acquisitions and other horizontal and vertical transactions depends on the facts and circumstances of each transaction and is often time-consuming. The outcome of this analysis can have significant consequences for the parties attempting to structure an adequate remedy to a problematic transaction. When considering a horizontal or vertical transaction that might invite antitrust scrutiny, companies should seek experienced antitrust counsel to advise them on the potential competitive issues with the transaction and any potential remedies.
For More Information
If you have any questions about this Alert, please contact Sean P. McConnell, Christopher H. Casey, any of the attorneys in our Antitrust and Competition Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.