Setting the Terms of a Break-Up: The Convergence of Federal Merger Remedy Policies

William & Mary Law Review Volume 53 | Issue 6 Article 7 Setting the Terms of a Break-Up: The Convergence of Federal Merger Remedy Policies Jessica C. Strock Repository Citation Jessica C. Strock, Setting the Terms of a Break-Up: The Convergence of Federal Merger Remedy Policies, 53 Wm. & Mary L. Rev. 2147 (2012), https://scholarship.law.wm.edu/wmlr/vol53/iss6/7 Copyright c 2012 by the authors. This article is brought to you by the William & Mary Law School Scholarship Repository. https://scholarship.law.wm.edu/wmlr SETTING THE TERMS OF A BREAK-UP: THE CONVERGENCE OF FEDERAL MERGER REMEDY POLICIES TABLE OF CONTENTS INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. DIVESTITURE AS A PREFERABLE ANTITRUST REMEDY . . . . . . A. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B. Allocation of Investigations Between the FTC and DOJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. The Hart-Scott-Rodino Antitrust Improvements Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Attempted Reforms to the Clearance Process . . . . . . . II. THE SUCCESS OF THE FTC’S DIVESTITURE POLICY . . . . . . . A. The 1999 FTC Divestiture Study . . . . . . . . . . . . . . . . . . . B. Agency Involvement Has Led to Divestiture Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C. Past “Unsuccessful” FTC Divestitures . . . . . . . . . . . . . . . III. CONVERGENCE OF THE FTC’S AND DOJ’S DIVESTITURE POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A. Common Ground Between the Agencies . . . . . . . . . . . . . B. Structural Differences Between the Agencies . . . . . . . . . C. Areas in Which the Agencies’ Policies Diverge . . . . . . . . 1. Fix-It-First Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Up-Front Buyers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Crown Jewel Provisions . . . . . . . . . . . . . . . . . . . . . . . . D. Antitrust Community Concerns About the Differences Between the Agencies’ Divestiture Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. THE FTC’S POLICY IS STRONGER AND THUS SHOULD BE ADOPTED BY THE DOJ . . . . . . . . . . . . . . . . . . . . A. Consistency Between the Agencies Is Essential . . . . . . . B. The FTC’s Policy of Active Involvement in Divestitures Lowers Risk to Consumers . . . . . . . . . . . . . CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2147 2148 2152 2152 2155 2155 2156 2159 2159 2161 2163 2165 2165 2166 2169 2170 2172 2173 2174 2176 2176 2178 2178 2148 WILLIAM AND MARY LAW REVIEW [Vol. 53:2147 INTRODUCTION Since the passage of the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act) in 1976,1 firms planning mergers of a certain value are required to notify the antitrust agencies in order to make the agencies aware of combinations that may cause competitive issues. Either the Federal Trade Commission (FTC) or Department of Justice Antitrust Division (DOJ) (collectively, “the agencies”) will analyze the proposed merger, and if the agency has reason to believe the merger will be anticompetitive,2 it may consider modifications to the deal that would eliminate competitive concerns or seek an injunction to keep the parties from consummating their merger.3 The agencies and parties typically seek to modify the deal to preserve or restore the competitive landscape that 1. The Hart-Scott-Rodino Antitrust Improvements Act of 1976, Pub. L. No. 94-435, 90 Stat. 1383 (codified as amended at 15 U.S.C. § 18a (2006)); see also Hart-Scott-Rodino, Premerger Notification Program, FED. TRADE COMM’N, http://www.ftc.gov/bc/hsr/index.shtm (last visited Mar. 28, 2012). 2. 15 U.S.C. § 53(b) 3. DEP’T OF JUSTICE & THE FED. TRADE COMM’N, 2010 HORIZONTAL MERGER GUIDELINES § 1 (2010), available at http://www.justice.gov/atr/public/guidelines/hmg-2010.html (“The Agencies seek to identify and challenge competitively harmful mergers while avoiding unnecessary interference with mergers that are either competitively beneficial or neutral. Most merger analysis is necessarily predictive, requiring an assessment of what will likely happen if a merger proceeds as compared to what will likely happen if it does not. Given this inherent need for prediction, these Guidelines reflect the congressional intent that merger enforcement should interdict competitive problems in their incipiency and that certainty about anticompetitive effect is seldom possible and not required for a merger to be illegal.”). Procedurally, parties typically offer a modification or settlement to the agency, and the agency considers that proposal based on agency policy and the particular facts of the merger. See infra text accompanying note 18. 2012] SETTING THE TERMS OF A BREAK-UP 2149 existed before the merger4 by creating a viable competitor to replace the acquired or merged firm.5 If the agencies and parties agree on an acceptable modification, they may enter into a binding final judgment, or consent decree, that memorializes their agreement.6 Courts have the power under the Tunney Act to determine whether a final judgment that the DOJ proposes is “in the public interest.”7 Because courts do not have the power to conduct their own analyses beyond whether a proposed divestiture will be in the public interest, it is the realm of the antitrust agencies to build divestiture packages that will not only be in the public interest, but that will also adequately remedy competitive 4. See DEP’T OF JUSTICE, ANTITRUST DIVISION POLICY GUIDE TO MERGER REMEDIES 7 (2011) [hereinafter 2011 DOJ POLICY GUIDE], available at http://www.justice.gov/atr/ public/guidelines/272350.pdf (“The goal of a divestiture is to ensure that the purchaser possesses both the means and the incentive to preserve competition.”); DEP’T OF JUSTICE, ANTITRUST DIVISION POLICY GUIDE TO MERGER REMEDIES 4 (2004) [hereinafter 2004 DOJ POLICY GUIDE], available at http://www.justice.gov/atr/public/guidelines/205108.pdf (“Although the remedy should always be sufficient to redress the antitrust violation, the purpose of a remedy is not to enhance premerger competition but to restore it.”); FED. TRADE COMM’N, BUREAU OF COMPETITION, STATEMENT OF THE FEDERAL TRADE COMMISSION’S BUREAU OF COMPETITION ON NEGOTIATING MERGER REMEDIES (2003) [hereinafter FTC STATEMENT], available at http://www.ftc.gov/bc/bestpractices/bestpractices.shtm (describing the FTC’s “remedial objective” as “to prevent the anticompetitive effects likely to result from a merger that the Commission has determined is unlawful”). The Supreme Court has agreed that restoring competition is the “key to the whole question of an antitrust remedy.” United States v. E.I. du Pont de Nemours & Co., 366 U.S. 316, 326 (1961). 5. As former FTC Chairman Timothy Muris noted, the new competitor must be a viable business entity in practice, not just a creation (...truncated)