March 24, 2015

Mergers Blocked by the FTC Over Potential Privacy Concerns?

Here’s news from Carla Hine from McDermott Will & Emery:

Although the analysis of whether a transaction may be anti-competitive typically focuses on price, privacy is increasingly regarded as a kind of non-price competition, like quality or innovation. The FTC has indicated that it can challenge mergers it believes will result in a substantial lessening of competition on the basis of privacy – for example, lower quality of privacy for consumers. During a February 26th symposium on the parameters and enforcement reach of the FTC Act, Deborah Feinstein, the director of the FTC’s Bureau of Competition, noted that privacy concerns are becoming more important in the agency’s merger reviews. Specifically she stated, “Privacy could be a form of non-price competition important to customers that could be actionable if two kinds of companies competed on privacy commitments on technologies they came up with.”

While the FTC has not yet challenged a transaction because of privacy, parties can expect it to closely assess the transaction’s impact on consumer privacy. The FTC’s review of mergers between entities with large databases of consumer information may focus on: (1) whether the transaction will result in decreased privacy protections, i.e., lower quality of privacy; and (2) whether the combined parties achieve market power as a result of combining their consumer data. Companies in data-rich industries who are considering merging with or acquiring a competitor should expect privacy to play a prominent role in the antitrust review of their proposed transaction. Companies should undertake due diligence of a target’s privacy practices, talk with key IT and business personnel and consider hiring economic consultants to analyze the competitive impact of the merger on privacy impacts.