Eyes Wide Open: There are no blinders in merger reviews

The FTC's Bureau of Competition sometimes reviews proposed mergers against the backdrop of civil and criminal antitrust investigations or litigations leveled in the same industry. And at times, such investigations and litigations are leveled against the merger parties themselves. Those ongoing matters may affect our analysis of a merger, as well as the vetting of divestiture packages and proposed divestiture buyers. Even if details of such investigations are not public, Bureau staff are likely to discover their existence during our own investigation of a merger.

To be clear: an ongoing government or private antitrust probe involving the companies or the industry does not necessarily signal that a merger is anticompetitive. Still, such probes may be relevant to the Bureau’s analysis of the merger. Concurrent investigations or litigations regarding party conduct may undermine parties’ arguments about the adequacy of the number of players in the market, the possibility of tacit coordination, or a party’s market position or lack of monopoly power. While the Bureau does not take as proven an allegation that one of the parties has violated the antitrust laws, we cannot ignore such allegations, either.

In particular, companies and individuals facing criminal probes or civil antitrust claims alleging collusion or coordinated behavior are likely to face additional scrutiny during their merger review. Section 7.2 of the Horizontal Merger Guidelines makes it clear that “[t]he Agencies presume that market conditions are conducive to coordinated interaction if firms representing a substantial share in the relevant market appear to have previously engaged in express collusion.” This approach is consistent with caselaw finding unlawful, in the absence of special circumstances, an acquisition that reduces the number of significant sellers in a market already highly concentrated and prone to collusion based on history and circumstances.

Allegations of criminal or civil coordination may likewise play a role in the Bureau’s vetting of proposed divestiture buyers. Prosecutions against a proposed buyer or its executives, or detailed allegations of potential antitrust wrongdoing against either the proposed buyer or its executives (even if undertaken at a prior employer), may scuttle approval for a proposed buyer. The Commission takes seriously its obligation to ensure that a negotiated settlement prevents the harm that likely would occur from a merger. That means that the risk of a failed divestiture – including one undermined by illegal coordination after the Commission accepts the settlement – cannot fall on consumers. 

Other factors may mitigate these concerns. For instance, during the buyer vetting process, the Bureau will assess whether an antitrust compliance program is in place, as well as whether executives involved in allegedly collusive conduct are not part of the C-suite or no longer maintain authority over pricing, sales or marketing within the company.  

In order to better understand when potentially relevant investigations and litigations have been leveled at the merging parties by other government entities, the Bureau’s model Second Request now incorporates a specification (specification 26 of the model) seeking such information. The Bureau encourages parties and potential divestiture purchasers to be forthcoming with information that implicates them in antitrust probes. Hiding the ball on such allegations potentially undermines credibility and can prolong the antitrust review.