DealLawyers.com Blog

This Ethisphere article by two BakerMcKenzie lawyers discusses the increasing role played by state AGs in merger enforcement, and points out that many states have taken a divergent approach from that taken by federal antitrust regulators when it comes to major M&A transactions.

The article provides several recent examples of situations in which state authorities have challenged transactions that their federal counterparts have not, and discusses legislative initiatives to add to the antitrust enforcement tools that state authorities have.  This excerpt summarizes some of the implications of the increased enforcement activity at the state level:

[T]he adoption of legislation in certain states to insert their attorney generals’ offices more directly into the premerger review process is a game changer. With more legislation pending or forthcoming in certain states—including potentially lowering the legal standard for establishing a proposed merger’s illegality—the boundaries for this state-level merger-review framework are not yet firm.

Some contend that the trigger for this recent elevation of state merger enforcement actions is a perceived laxness in antitrust enforcement at the federal level. Regardless of the trigger, however, the rise in state-level merger enforcement introduces a significant new variable that parties must consider as they assess the feasibility of and schedule for closing strategic M&A transactions.

The investments being made at the state level to bulk-up their antitrust enforcement capabilities do not appear temporary, and some return on that investment will be sought. While the political leanings and motivations of antitrust enforcers in some states may shift with a change in administrations at the federal level, the incentives to initiate antitrust scrutiny of strategic combinations will remain strong in others.

The article notes that it’s difficult to predict whether this heightened state-level enforcement activity will endure, but so long as it does, “state-level involvement may complicate and prolong merger reviews—presenting the opportunity to set precedents that may be challenging to overcome or reverse.”

– John Jenkins