January 25, 2018

Antitrust: No HSR? You Aren’t Out of the Woods Yet. . .

A few months ago, I blogged about the DOJ’s post-closing challenge to Parker-Hannifin’s acquisition of Clarcor.  That blog pointed out that post-closing challenges to deals that cleared HSR review have been exceedingly rare.  But what about deals that are small enough to avoid HSR filing requirements?  Many people assume that these deals pose little risk and simply aren’t big enough to attract the attention of the FTC & DOJ.

This Goodwin memo suggests that this is a dangerous assumption to make.  In fact, antitrust regulators followed up Parker-Hannifin/Clarcor with 2 more post-closing challenges – and both involved deals that were too small to require HSR filings.  Here’s the intro:

In the last several months the United States’ federal antitrust enforcement authorities, the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ), have challenged and sought to unwind three consummated mergers in whole or in part.  These challenges serve as a stark reminder that the antitrust authorities will seek to unwind consummated mergers that, in their view, have reduced competition or have created a monopoly.

In fact, many are unaware that antitrust authorities may challenge closed transactions even if the transactions were not required to be reported first under the Hart-Scott-Rodino Act pre-merger notification regime. Thus, even when a proposed transaction does not meet the filing requirements, parties to a transaction should nevertheless seek experienced antitrust counsel that can assess the potential for substantive antitrust risk. Failing to do so can result in inadvertent entanglement with lengthy investigations and, indeed, even litigation.

The memo goes on to review each of the FTC & DOJ challenges, and says that even in small deals, it’s essential to scope out the antitrust risk profile of the transaction carefully so that the scope of the risk is known before a decision is made to close the deal.

John Jenkins