M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

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Thursday, April 5, 2012

Express Scripts and private antitrust risk

Just because you received clearance to close from the FTC/DOJ through the Hart-Scott-Rodino process, don't think you're necessarily in the clear if your transaction is antitrust sensitive. Take the current case  Express Scripts/Medco as an example.  Express Scripts/Medco was cleared by the FTC with no conditions earlier this week, but it still faces the hurdle of a possible injunction in a private action brought by the National Association of Chain Drug Stores and the National Community Pharmacists Association under Section 16 of the Clayton Antitrust Act. The plaintiffs are seeking to hold up the transaction from closing, or in the event it closes to force the parties to hold separate all the merged assets until the case has been resolved. Here's their complaint.  

The big lesson from the Express Script/Medco? Don't think that since the FTC passes on the deal that there are no more antitrust risks out there.

-bjmq  

April 5, 2012 in Antitrust | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 24, 2012

Antitrust turnover

I suppose the DOJ's new more active approach is more taxing on its chief.  That might be why, as the division's head according to various news reports, the DOJ's Antitrust Division is looking forward to new leadership as Sharis Pozen prepares to leave her position . 

-bjmq

January 24, 2012 in Antitrust | Permalink | Comments (0) | TrackBack (0)

Friday, October 28, 2011

U.S. & E.U. Best Practices on Cooperation in Merger Investigations

Antitrust regulators in the U.S. and the European Union have long cooperated on antitrust matters (see the Antitrust & Competition Policy Blog for excerpts from several recent speeches on Transatlantic cooperation, here and here). Recently, regulators issued an updated set of best practices for coordinating merger review.  According to the press release:

"The best practices, originally issued in 2002, provide an advisory framework for interagency cooperation when one of the U.S. agencies and the European Commission’s Competition Directorate review the same merger. The revised U.S.-E.U. best practices:

  • Provide more guidance to firms about how to work with the agencies to coordinate and facilitate the reviews of their proposed transactions;
  • Recognize that transactions that authorities in the U.S. and Europe review may also be subject to antitrust review in other countries; and
  • Place greater emphasis on coordination among the agencies at key stages of their investigations, including the final stage in which agencies consider potential remedies to preserve competition."

For those interested in a summary of the revised best practices, Davis Polk has a useful memorandum setting out the key points.

-AA

October 28, 2011 in Antitrust, Europe | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 20, 2011

Chinese rules on assessment of competitive effects

Chinese firm King & Wood - there's actually no Mr. King or Mr. Wood, but in the Chinese King & Wood are good names ... - anyway they have the run-down on the Provisional Rules of Assessment of Competitive Effects of Concentration of Business Operators (MOFCOM 2011/55).  This is another in a series of new rules and regs the Chinese have been rolling out to implement their Anti-Monopoly Law.

-bjmq

September 20, 2011 in Antitrust, Asia | Permalink | Comments (0) | TrackBack (0)

Thursday, August 11, 2011

Gibson Dunn Update on 2011 Mid-Year Merger Enforcement

Gibson Dunn has posted a useful update on merger enforcement trends in the US and Europe since the beginning of 2011.  The update notes that "As was the case in 2010, antitrust enforcers in the United States and Europe have continued to make headlines by intervening in major merger cases and launching new policy initiatives.   While M&A activity on both sides of the Atlantic continues to recover from the global financial crisis, it appears that antitrust enforcers are placing a higher priority on merger enforcement, a pattern that is likely to continue for the foreseeable future."  The update also discusses the DOJ's recently released Policy Guide to Merger Remedies and conduct remedies imposed in recent merger transactions.

-AA

August 11, 2011 in Antitrust | Permalink | Comments (0) | TrackBack (0)

Friday, August 5, 2011

Clifford Chance on new antitrust risks for private equity firms

In this client alert, Clifford Chance notes that the European Commission recently targeted a PE firm for potential fines for antitrust breaches allegedly committed by one of its portfolio companies even though there is no allegation that the firm or any of its personnel participated in, or were aware of, the alleged cartel. Thus, if a fine is imposed on the PE firm, it would be solely on the basis of parental liability for the activities of the portfolio company.

According to the alert "this is one of the first instances - and certainly the most high profile - in which a private equity firm has been targeted in this way."

MAW

August 5, 2011 in Antitrust, Europe, Private Equity | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 21, 2011

New DOJ merger guidelines

The Antitrust Division at the DOJ just released its new merger guidelines.  You can find them here.  Any M&A lawyer worth his/her salt download and read the new guidelines on the beach - cause it's summer.

-bjmq

June 21, 2011 in Antitrust | Permalink | Comments (0) | TrackBack (0)

Monday, June 20, 2011

Cleaning out the closets at Skype

So late last week, the FTC granted early termination to Microsoft and Skype for their announced deal.  Early termination of the HSR waiting period means that Microsoft and Skype can move towards closing that deal.  Now, comes the news from Bloomberg that Skype has fired a number of executives prior to closing: 

Skype Technologies SA, the Internet- calling service being bought by Microsoft Corp. (MSFT), is firing senior executives before the deal closes, a move that reduces the value of their payout, according to three people familiar with the matter.

The reasons for the letting go this group of 8 high level Skype execs prior to closing aren't known, but the Skype Journal blog reinforces what is hinted at in the Bloomberg report - that the firings were done in order to reduce the number of stock options that are vested at closing and thus raises the payout to venture investors.

Now, I have no way of knowing if increasing the payout for investors is in fact true or if the execs that were let go didn't get an equivalent cash payout on their way out the door.  My guess is that they did, but I don't know.  If on the other hand it's true, then it's pretty cheesy.  

The prospect of getting a large cash payout from valuable options after an IPO or a when unvested options are automatically vested coincident with sale is a huge part of the incentive package that keeps talented people working at start-ups.  If it's true, and I guess everyone in the Valley will know the truth soon enough, then it means that executives with unvested options will be spending more time than one might like ensuring their positions in the event of a sale rather than risk getting let go just before their big payout.  

-bjmq

June 20, 2011 in Antitrust, Executive Compensation, Venture Capital | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 24, 2011

DOJ Sues H&R Block

The DOJ's Antitrust Division filed a suit to block H&R Block's proposed acquisition of TaxAct yesterday.  H&R Block is in the process of learning a lesson (likely expensive) about what not to say in the run up to a deal.  For example, internal documents from H&R Block noted that the primary benefit of the acquisition would be “elimination of competitor.”  That's never good a good document to hand over when the antitrust authorities come knocking.  Another goodie - internal documents note that “acquir[ing] TaxACT and [will] eliminate the brand to regain control of industry pricing and further price erosion.”  

Here's the DOJ's complaint.

-bjmq

May 24, 2011 in Antitrust | Permalink | Comments (0) | TrackBack (0)

Friday, May 13, 2011

M&A and Competition Law in India

This week the Competition Commission of India (CCI) released the new M&A regulations. These rules are somewhat softened from the stringent guidelines issued earlier this year (for various commentary see here).  For example, deals entered into prior to June 1st have been exempted, and filing fees have been significantly decreased (see this useful Mayer Brown summary). 

The rules exempt a host of transactions from the scrutiny of the CCI.  For example, if an acquirer has a 50% stake in a firm then further acquisition will not trigger the competition law except where the acquisition leads to transfer from joint control to single control.  Moreover a combination taking place entirely outside India with insignificant local nexus and effect on markets in India “need not normally be filed.” 

With respect to timing, the regulations provide that within 30 days of submission of the notification form the CCI is to form a prima facie opinion as to whether the combination is likely to cause or has caused an appreciable adverse effect on competition within the relevant market in India.  The proposed transaction will then be cleared or subject to a second phase investigation. The regulations provide that the CCI “shall endeavour to pass an order” in a second phase investigation within 180 days from the date of submission of the notification form.

The new regulations still leave some grey areas, such as failing to address pre-merger consultation, although the CCI has indicated that it will issue regulations on consultations.  There is also concern about potential conflict between the new rules and the proposed overhaul of the Takeover Code by SEBI.

-AA

May 13, 2011 in Antitrust, Asia | Permalink | Comments (0) | TrackBack (0)

Monday, May 9, 2011

Hertz takes another bite at the Dollar apple

Hertz announced this morning that it was giving the acquisition of Dollar Thrifty another go.  You'll remember that last year, Dollar terminated its agreement with Hertz after Dollar shareholders voted no on its $50/share offer.   The sharehodler vote followed sharehiolder litigation in Delaware to try to get the deal protections in the Hertz-Dollar deal invalidated (In re Dollar Thrifty), resulting in a termination of the merger agreement.  Following which Dollar and Avis entered into protracted - and so far unsuccessful = talks amongst themselves and the antitrust authorities about getting a deal done.  

Apparently, Hertz has decided enough is enough and has decided to jump back in - hoping that Dollar shareholders will think differently this time around. Here's a summary of the new offer from the Hertz press release:

Hertz will offer Dollar Thrifty shareholders $72.00 per share (based on Hertz’s closing stock price on May 6, 2011), consisting of $57.60 in cash and 0.8546 shares of Hertz.  The offer represents:
   
    * a 26% premium and 18% premium to Dollar Thrifty’s 90-day and 60-day average share price, respectively;
    * a 7.6x multiple of Dollar Thrifty’s LTM EBITDA for the period ended March 31, 2011; and
a 24% premium to the value of the entirely hypothetical price announced by Avis Budget Group, Inc. (“Avis Budget”) over seven months ago.
 
In an e-mail to employees, Hertz's CEO Mark Frissora provides a little more information about their reasons for giving the acquisition of Dollar one more try.

You may wonder why we are moving forward now after the unsuccessful Dollar Thrifty shareholder vote last fall.  First, the vote did not prevent Hertz from re-engaging at any time of our choosing.  Additionally, economic conditions continue to improve, creating revenue growth opportunities over the next several years.  Moreover, Avis has been trying unsuccessfully for the past 12 months to secure government approval to buy Dollar Thrifty and all they have to show for their year-long efforts are “constructive discussions” with U.S. regulators.  We don’t believe Avis can get a deal done and the time is right to resolve this matter once and for all to our and Dollar Thrifty’s satisfaction.

In contrast with Avis, we’ve picked up where we left off with the government last fall and we are confident we can secure its consent to proceed.  Unfortunately, that will mean divesting Advantage Rent-a-Car in the U.S., which is not our preference, but it’s clear that a merger with Dollar Thrifty becomes far more difficult if the government opposes the transaction.

For its part, Hertz appears to be taking an aggressive stance towards offering Dollar's shareholders a deal they can't refuse.  It's offering an improved bid and is committing to  sell its Advantage rental brand (e-mail to Advantage employees)- to help clear the way for regulators to provide clearance to the proposed transaction. We'll see how Doolar II proceeds and whether shareholders have a different view on the transaction given what they've seen over the past few months. 

-bjmq

Update: Reuters has a timeline for this deal here.

May 9, 2011 in Antitrust, Transaction Defenses, Transactions | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 5, 2011

Antitrust Merger Efficiencies

Daniel Sokol (Univ. FL) and James Fishkin (dechert) has posted Antitrust Merger Efficiencies in the Shadow of the Law

Abstract:   This Essay provides an overview of U.S. antitrust merger practice in addressing efficiencies both in terms of actual practice before the agencies and in scholarly work as a response to Jamie Henikoff Moffitt‘s Vanderbilt Law Review article Merging in the Shadow of the Law: The Case for Consistent Judicial Efficiency Analysis.

-bjmq

April 5, 2011 in Antitrust | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 22, 2011

Things t-Mobile wishes it didn't say...

 

"Sometimes you just gotta pay more to be slower ... makes sense if you don't think about it ..."

 

March 22, 2011 in Antitrust, Miscellaneous Regulatory Clearances | Permalink | Comments (0) | TrackBack (0)

Sunday, March 20, 2011

AT&T and T-Mobile

AT&T announces that is acquiring T-Mobile for $39 billion.  My first thought is that this will take a long time to clear the HSR process.  I haven't given this much thought, yet, but if this transaction doesn't at least go through a 'second request' we should just shut down the FTC altogether.  I mean, there is no question that this transaction will result in AT&T being the single largest wireless carrier by far.  Because this is a telecom deal, the FCC will also have a say in whether this deal can go forward.  The FCC's mandate to ensure that mergers are in the "public interest" has come under some criticism for being too far reaching at times.  The FCC was able to squeeze out of CenturyLink/Qwest commitments to build out low-income broadband access as a condition to approving that merger just last Friday.  I wonder if the FCC can squeeze out of AT&T a commitment not to drop more of my calls? 

In any event, the FCC has recently been talking about reworking its merger approval process, perhaps narrowing its scope.  Jonathan Baker, the Chief Economist over at the FCC posted a couple of days ago to the FCC's official blog on the proposed changes to the FCC's merger approval process. 

AT&T and T-Mobile have a transaction web-site up already:  http://www.mobilizeeverything.com.  Go there for merger docs, etc.

-bjmq

March 20, 2011 in Antitrust, Mergers, Miscellaneous Regulatory Clearances | Permalink | Comments (1) | TrackBack (0)

Tuesday, March 15, 2011

Coffee talks

I suppose the potential hostile offer by NASDAQ for the NYSE might raise antitrust issues, but the real worry should be the potentially anticompetitive effects of the rumored Starbucks-Peets tie-up.  That might be a real headache - literally.

-bjmq

March 15, 2011 in Antitrust | Permalink | Comments (0) | TrackBack (0)

Friday, March 11, 2011

Merger Pre-approvals in India

The Indian Competition Commission has recently published draft rules on the pre-approval of mergers in India.  The draft rules are intended to go into effect this summer (June/July 2011).  After they go into effect, India will join the growing list of countries (US, EU, Brazil, China, etc.) that will assert jurisdiction over international transactions where there is a nexus to India.  Unlike the 30 day US HSR process for most transactions, the Indian process commits to resolving reviews of applications within 180 days of receiving them, with an outside date of 210 days.  Nothing like efficiency!

The Commission is presently taking comments until March 22, 2011. I have an idea for a comment -- how about reducing the review period to say ... 30 days unless there is any reason to undertake a more extensive investigation.

-bjmq

 

March 11, 2011 in Antitrust, Asia, Miscellaneous Regulatory Clearances | Permalink | Comments (0) | TrackBack (0)

Thursday, October 7, 2010

Annual HSR Report

The FTC's annual report on enforcement of the Hart-Scott-Rodino Act is out now.  You can download it now.  Some interesting tidbits, including this figure:

Mergers2000-2009

In recent days, you've no doubt heard talk of the new merger wave - how business seems to have turned around and the prospect that businesses might be about ready to unleash the $3 billion on their books as a private stimulus.  Indeed, the number of deals is up 20% or so this year.  Looking at the figure above puts all that talk into some context.  We're nowhere near the salad days of the Internet bubble in 2000 or even the height of the credit bubble in 2007.  If things are turning around, no one should think those days will be back anytime soon. 

What else?  Well, there may not be nearly as many deals, but the FTC is busy - enforcement is up, way up: 

Enforce2000-2009
The FTC's annual report is worth downloading and reading if for no other reason it will give you some insight on how the current FTC is approaching the question of pre-merger clearance.

-bjmq

October 7, 2010 in Antitrust | Permalink | Comments (0) | TrackBack (0)

Monday, May 10, 2010

Unscrambling Eggs

It doesn't happen often. But, that doesn't mean it doesn't happen.  The FTC is now suing Dun & Bradstreet (H/T Main Justice) to unwind a transaction D&B closed last year.  According to the complaint, D&B acquired the Quality Education Data (QED), a division of Scholastic, Inc., in an asset purchase and integrated QED with its own Market Data Retrieval unit in February 2009.  The FTC sums up the transaction this way:

 Market Data Retrieval (“MDR”), a company of D&B, is the leading provider of data for marketing to kindergarten through twelfth-grade teachers, administrators, schools and school districts (“K-12 data”) in the United States. K-12 data includes but is not limited to contact, demographic and other information relating to K-12 educators. K-12 data is sold or leased to customers that use the data to market products and services to educators. In early 2009, D&B acquired the assets of QED, MDR’s primary competitor. As a result of the acquisition, MDR now holds over 90% of the relevant market, with only a small fringe consisting of two firms accounting for the remainder. This transaction is in practical effect a merger-to-monopoly and, if allowed to remain, would likely allow MDR unilaterally to exercise market power in various ways, including increasing prices and reducing product quality and services to K-12 data customers.

"Merge-to-monopoly"?  Acquiring your “primary competitor”?  Neither of those sound good.  In fact, they’re not.  So, why didn’t the HSR process catch this transaction?  Simply put, the deal was too small to trigger a required HSR filing.  The transaction was valued at $29 million, well below the $69 million trigger at the time.  It was probably unwise not to file anyway.  Certainly, in antitrust sensitive transactions the FTC will accept a voluntary filing.  Here it looks like the parties decided against such a filing.  They either neglected to consult antitrust counsel on the transaction, or they did, and then took a shot (in Feb 2009) that the somnolent attitude towards enforcement that was a hallmark of the previous administration would continue going forward.  And anyway … unscrambling the eggs post closing is so expensive and time-consuming, the FTC wouldn’t waste their time on such a small market.  Would they?

They would.  Here's a little advice from the FTC's Richard Feinstein, Director of the Bureau of Competition

Despite its relatively low dollar value, this transaction dramatically decreased competition in the marketplace.  When Dun & Bradstreet acquired QED, it bought its closest competitor and created a monopoly. That’s going to get the FTC’s attention every time.

While a voluntary HSR filing would not have created an absolute safe harbor from a subsequent antitrust suit, it might have cleared the ground and allowed the parties to address the government's antitrust concerns earlier on in the process - before there had been any integration work, before there had been any joint marketing, etc.  True, making such a filing might have added additional costs and added time to an otherwise small transaction.    These are common cost/benefit questions that parties have to consider with antitrust counsel in these kinds of transactions.  They can be close calls.  In this case, it looks like the parties may have made the wrong call.  By avoiding a voluntary pre-closing process, the parties have apparently triggered a worse fate - the potential that the government will come in ex post and undo a deal that closed more than a year ago.   

-bjmq

Update:  A reader helpfully points out the following:  

Technically there is no such thing as a voluntary HSR filing.  If you fall below the jurisdictional thresholds they’ll reject your filing. Of course, regulators will be glad to discuss whatever parties bring to their attention about pending transaction.  So, there is a way that you can get the antitrust regulators’ temperature before driving the car into the deep blue.  But, as a business matter, a target might be disinclined to wait for months pre-closing as the regulators sort it out.

May 10, 2010 in Antitrust, Cases | Permalink | Comments (2) | TrackBack (0)

Wednesday, April 21, 2010

Revised Horizontal Merger Guidelines

The FTC and the  DOJ's Antitrust Division have just released their draft revised horizontal merger guidelines for public comment.  The draft is available on the joint FTC/DOJ webpage.   These revised guidelines are the result of a series of workshops that the FTC and DOJ conducted in the Fall and Winter.  According to the press release major differences between the current and proposed Guidelines are as follows:

  • The proposed guidelines clarify that merger analysis does not use a single methodology, but is a fact-specific process through which the agencies use a variety of tools to analyze the evidence to determine whether a merger may substantially lessen competition.
  • The proposed guidelines introduce a new section on “Evidence of Adverse Competitive Effects.”  This section discusses several categories and sources of evidence that the agencies, in their experience, have found informative in predicting the likely competitive effects of mergers.
  • The proposed guidelines explain that market definition is not an end itself or a necessary starting point of merger analysis, but instead a tool that is useful to the extent it illuminates the merger’s likely competitive effects.
  • The proposed guidelines provide an updated explanation of the hypothetical monopolist test used to define relevant antitrust markets and how the agencies implement that test in practice.
  • The concentration levels that are likely to warrant either further scrutiny or challenge from the agencies are updated in the proposed guidelines. 
  • The proposed guidelines provide an expanded discussion of how the agencies evaluate unilateral competitive effects, including effects on innovation. 
  • The proposed guidelines provide an updated section on coordinated effects.  They clarify that coordinated effects, like unilateral effects, include conduct not otherwise condemned by the antitrust laws.
  • The proposed guidelines provide a simplified discussion of how the agencies evaluate whether entry into the relevant market is so easy that a merger is not likely to enhance market power. 
  • The proposed guidelines add new sections on powerful buyers, mergers between competing buyers, and partial acquisitions.  

-bjmq


April 21, 2010 in Antitrust | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 24, 2010

Live Nation - Ticketmaster Analysis


Meese and Richman have a recent paper analyzing the competitive effects of the pending Ticketmaster-Live Nation merger, A Careful Examination of the Live Nation-Ticketmaster Merger.  It's a little long, so pick out your favorite Springsteen album and set your iPod to loop before you start.   If you're interested in this deal and/or antitrust, this paper is worth reading.  

Abstract: As great admirers of The Boss and as fans of live entertainment, we share in the popular dismay over rising ticket prices for live performances. But we have been asked as antitrust scholars to examine the proposed merger of Live Nation and Ticketmaster, and we do so with the objectivity and honesty called for by The Boss’s quotes above. The proposed merger has been the target of aggressive attacks from several industry commentators and popular figures, but the legal and policy question is whether the transaction is at odds with the nation’s antitrust laws. 

One primary source of concern to critics is that Ticketmaster and Live Nation are two leading providers of ticket distribution services, and these critics argue that the merged entity would have a combined market share that is presumptively anticompetitive. We observe, however, that this transaction is taking place within a rapidly changing industry. The spread of Internet technologies has transformed the entertainment industry, and along with it the ticket distribution business such that a reliance on market shares based on historical sales is misleading. A growing number of venues, aided by a competitive bidding process that creates moments of focused competition, can now acquire the requisite capabilities to distribute tickets to their own events and can thus easily forgo reliance upon providers of outsourced distribution services. If self-distribution is an available and attractive option for venues, as it appears to be, then it is unlikely that even a monopolist provider of fully outsourced ticketing services could exercise market power. Ultimately, a proper assessment of the horizontal effects of this merger would have to weigh heavily the emerging role of Internet technologies in this dynamic business and the industry-wide trend towards self-distribution. 

The second category of arguments by critics opposing the merger rests on claims that vertical aspects of the transaction would produce anticompetitive effects. Indeed, Ticketmaster’s and Live Nation’s core businesses are in successive markets, and thus the proposed transaction is primarily a vertical merger, but there is broad agreement among economists and antitrust authorities that vertical mergers rarely introduce competitive concerns and are usually driven by efficiency motivations. This wealth of academic scholarship, which is reflected in current antitrust law, has not - from our vantage point - been properly incorporated into the public dialogue concerning the proposed merger. To the contrary, critics articulate concerns, including the fears that the merger would lead to the leveraging of market power and the foreclosure of downstream competition, that are refuted by accepted scholarship. Moreover, there are a number of specific efficiencies that, consistent with economic and organizational theory, are likely to emerge from a Live Nation-Ticketmaster merger and would be unlikely but for the companies’ integration. For these reasons, we submit this analysis in an effort to inform the debate with current economic and legal scholarship.

-bjmq



March 24, 2010 in Antitrust | Permalink | Comments (0) | TrackBack (0)