May 5, 2022
Antitrust: The FTC’s Prior Approval Policy in Action
Last October, the FTC announced that it was reinstating its policy requiring M&A divestiture orders to include provisions mandating that respondents seek the agency’s prior approval for future acquisitions within certain markets for a period of 10 years. More than six months have passed since that announcement, and this Gibson Dunn memo takes a look at how that policy has been applied in real world settings.
The memo reviews the prior approval terms set forth in the seven consent agreements that the FTC has entered into since reintroducing the prior approval policy, and also offers up some key takeaways for parties considering deals that may be subject to FTC consent orders. This one highlights the fact that the parties may not be out of the woods if they decide to abandon a transaction:
The 2021 Policy Statement put merging parties on notice that even if they abandon a proposed merger after litigation commences, the Commission may subsequently pursue an order incorporating a prior approval provision. To obtain such an order the FTC would have to pursue an enforcement action in its administrative court seeking injunctive relief to prevent a potential recurrence of the alleged violation, which would likely require significant resources.
Since the 2021 Policy Statement was issued, the FTC has yet to pursue such an order against merging parties who have abandoned post-complaint but before fully litigating the challenged transaction. There have been indications, however, that the FTC is exploring the possibility of seeking an order against Hackensack Meridian Health and Englewood Healthcare—who abandoned their proposed merger after the Third Circuit upheld a preliminary injunction entered by the U.S. District Court for the District of New Jersey enjoining the merger—that would require the two hospital systems to provide prior notice should they attempt the same merger in the future.
The memo also points out that the DOJ doesn’t have a prior approval policy, so it remains to be seen whether it will follow the FTC’s lead in consent decrees that it enters into. Of course, the DOJ is currently breathing fire about its desire to litigate antitrust cases, so it may be some time before we have an answer to that question.
– John Jenkins