M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

A Member of the Law Professor Blogs Network

Thursday, November 8, 2012

Attack of the Penguin?

The Authors Guild, for one, appears to be opposed to the recently announced Penguin-Random House merger:

“Survival of the largest appears to be the message here,” said Scott Turow, Authors Guild president. “Penguin Random House, our first mega-publisher, would have additional negotiating leverage with the bookselling giants, but that leverage would come at a high cost for the literary market and therefore for readers. There are already far too few publishers willing to invest in nonfiction authors, who may require years to research and write histories, biographies, and other works, and in novelists, who may need the help of a substantial publisher to effectively market their books to readers.”

Penguin and Random House are controlled by Pearson and Bertelsmann, respectively.  This combination is likely to raise antitrust concerns and that's the obvious target for the Authors Guild message.  Of course, consolidation in the book publishing industry is going to happen.  There's no standing against that wave.  This transaction, though, will present a good test for those who like to define markets.  On the one hand, the authors will argue that the market in question is the market for books.  Pearson and Bertelsmann will counter that the prevalence of iPad, tablets and eBooks makes a broader market definition a requirement.  They're likely to have the winning argument. 

-bjmq

November 8, 2012 in Antitrust | Permalink | Comments (1) | TrackBack (0)

Thursday, August 30, 2012

Brazilian premerger notification

You want to know why the HSR guy down the hall sighs and slumps his shoulders every time you burst into his office with the great news that you just signed a deal to acquire a company with big operations in Brazil?  This is why:

Under the legislation, the [Brazilian] antitrust authority known as Cade has said it will take no more than 330 days to review a proposed merger. Previously, companies filed requests to review a deal after an accord had already been closed, allowing operations to be integrated before approval from Cade, which took as long as two years in some cases.

Brazil is proposing to revise its premerger notification system to speed up approvals from two years following closing to 330 days.  I guess that's better, but still ... ugh.  I don't know if this change is necessarily an improvement.  Previously, you had to file post-closing and then let it sit for years -- with the risk that antitrust authorities might require you to 'unscramble the eggs' at some point.  Now, you will be required to file within 15 days of signing, but then you have to sit for as long as 330 days (240 days, plus an additional 90 days in "complex" cases), not 30 days like in the US (The Economist).  

-bjmq 

August 30, 2012 in Antitrust, Cross-Border | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 22, 2012

FTC clears Instagram transaction

That according to Reuters.  Here's a copy of the letter from the FTC to Facebook closing the investifation.  Now on to the fairness hearing.

-bjmq

August 22, 2012 in Antitrust | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 15, 2012

Senators weigh in on EMI acquisition

In a letter to the FTC, Senators Herb Kohl (D-WI) and Mike Lee (R-UT) come to the defense of audiophiles everywhere.   Their letter summarized findings of a hearing by the Subcommittee on Antitrust, Competition Policy, and Consumer Rights on the proposed acquisition of EMI by Universal.  They point to the rapid shift in the structure of the music distribution market from CDs to online distribution and caution that the acquisition could potentially be anticompetitive - a combined Universal/EMI controls over 40% of US market share by revenue (and 51 of the 2011 Billboard 100).  Sens. Kohl and Lee argue that the strength of a combined Universal/EMI's catalogue could form a bottle-neck in any online distribution and create market power for the combined entity, stifling potential competition and efficiency.  

For its part, Universal's CEO told the committee that it would be "insane not to license, develop, make available through as many platforms through as many retailers as possible."  I don't know...I seem to remember a time not long ago when all the major record labels were "insane" in precisely that way. 

In any event, here's the full text of the letter to the FTCThe ball is in the FTC's court.  

-bjmq

August 15, 2012 in Antitrust, Miscellaneous Regulatory Clearances | Permalink | Comments (0) | TrackBack (0)

Thursday, July 19, 2012

Questioning the antitrust revival

On this blog and elsewhere there was a palpable sense of change with respect to the vigor of antritrust enforcement and pre-merger review when the Obama administration came to power.  Now, a new essay at the Stanford Law Review Online by Prof Daniel Crane calls "BS" to that idea:

The merger statistics do not evidence “reinvigoration” of merger enforcement under Obama. Focusing on the last two fiscal years under Bush and the first two fiscal years under Obama, the numbers are comparable. In those periods, the Bush Administration conducted more total merger investigations (Bush 185, Obama 154) and more Hart-Scott-Rodino investigations (Bush 152, Obama 127). The two administrations had almost exactly the same number of “second requests” for information under Hart-Scott (an investigatory mechanism that delays the closing of a merger and often forces the merging parties to either negotiate with the government or abandon the merger). From 2007 to 2008, Bush made 52 second requests, and from 2010 to 2011, Obama made 53. The Obama Administration challenged slightly more mergers (Bush 16, Obama 19), and challenges announced by the Obama Administration resulted in more transactions restructured or abandoned prior to filing a complaint (Bush 9, Obama 15), although the numbers are small under both metrics.

These raw comparisons may not be sufficiently informative because of the reduced numbers of mergers due to the effects of the financial crisis. But even adjusted for the number of Hart-Scott filings, the numbers remain comparable, although with a tick up in second requests under Obama. The Bush Administration conducted 0.04 investigations per Hart-Scott filing; Obama conducted 0.05 investigations per filing. The Bush Administration made 0.013 second requests for information per Hart-Scott filing; Obama’s made 0.020—a 50% increase on a per capita basis.

Well.  How about that.  Prof Crane notes that statistics don't tell the entire story and that there may have been a change in attitude that prevented otherwise antitrust sensitive deals from going forward, etc.  Still, it's eye-opening.

-bjmq 

July 19, 2012 in Antitrust | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 27, 2012

Antitrust Enforcement Activity

The FTC and Department of Justice have just released their HSR report for 2011.

Mayer Brown has issued a client alert analyzing the report, which notes  (among other things), that

  • A significant increase in Hart-Scott-Rodino (HSR) filings, continuing a trend from the low point in 2009 after the economic downturn;
  • The Obama administration continues to investigate a higher percentage of mergers than did the previous administration; and
  • As has been the case since 2009, once a full investigation is opened, there is a high likelihood that the investigation will result in the government challenging the transaction.

Based on the report, Mayer Brown warns that parties considering mergers and acquisitions should expect continued aggressive antitrust enforcement by the Obama administration.

MAW

June 27, 2012 in Antitrust | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 24, 2012

Pozen reviews her tenure at DOJ-Antitrust

As Acting Assistant Attorney General for the Antitrust Division Sharis Pozen prepares to move on, she took some time this week to review the last three and half years at the DOJ's Antitrust Division.  You're all aware that under the current administration, antitrust enforcement and pre-merger reviews are back.  In this speech to an audience at Brookings, Pozen reflects on candidate Obama's committment to “to reinvigorate antitrust enforcement."

-bjmq

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

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)