January 16, 2018
Antitrust: Merger Enforcement Trends
This Wilson Sonsini memo reviews 2017 M&A antitrust enforcement trends in the U.S., the EU, and China. One area of note is the DOJ’s changing approach to vertical mergers – i.e., deals involving businesses operating at different levels of a supply chain. Here’s an excerpt:
Antitrust agencies have, generally, resolved competitive concerns in vertical mergers, through behavioral decrees that enable the transaction to proceed while targeting specific conduct that is the source of potential competitive harm. The DOJ’s Remedy Guide issued in 2010 states that behavioral remedies may be a valuable tool in alleviating competitive harm that may result from a merger while preserving its potential efficiencies.
For example, where the agencies have a concern about the merged entity withholding acquired assets from rivals, transacting parties may be required to continue to license or sell their products to third parties. The merged company may also be required to establish firewalls that prevent the sharing and misuse of information newly accessible as a result of the transaction.
In a notable departure, in one of his first speeches as AAG, Makan Delrahim expressed his significant skepticism about behavioral remedies, describing them as “overly intrusive and unduly burdensome for both businesses and government.” He noted that the DOJ will “return to the preferred focus on structural relief to remedy mergers that violate the law and harm the American consumer.” Four days later, on November 20, 2017, the DOJ filed a complaint challenging AT&T’s proposed acquisition of Time Warner—a vertical merger combining AT&T’s video distribution business with Time Warner’s content business.
The DOJ alleges that AT&T will have the incentive to withhold Time Warner’s content from third-party distribution businesses. In reply, AT&T and Time Warner note that they offered third-party distributors licensing terms similar to those accepted by the DOJ in 2010’s Comcast/NBC Universal deal.
While the DOJ’s actions in the AT&T/Time Warner case may signal an important shift in approach, the memo points out that the FTC has continued to endorse settlements involving behavioral remedies, and that it remains unclear whether the FTC will follow the DOJ’s lead here.
– John Jenkins