Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: AAI comments on FTC’s proposed update to divestitures study, (Mar 20, 2015)

By Greg Hammond, J.D.

The American Antitrust Institute (AAI) submitted comments on March 17 to the FTC, in response to the Commission’s notice of proposal to conduct a study to update and expand on its study of divestitures conducted in the mid-1990s.

The Commission’s previous study assessed the effectiveness of the FTC’s policies and practices concerning remedial orders where the Commission permitted a merger but required a divestiture or other remedy, and identified factors that contributed to the Commission successfully or unsuccessfully achieving the remedial goals of the orders. The FTC now proposes a new study to focus on more recent orders, including divestiture orders that incorporated modifications based on the prior study and orders that required remedies other than divestitures.

In its comments, AAI focused on “important areas” where the FTC’s proposal would benefit from clarification, expansion, or revision, including:

• Methodology. AAI suggests that the FTC clearly articulate the well-known standard that the objective of any remedy is to fully restore the competition that would otherwise be lost as a result of an anticompetitive merger. The proposal should also explain how the methodology will ensure that the various forms of information to be collected are assessed against this standard to appropriately frame the Commission’s policy recommendations.

• Limited sample. The limited sample of merger cases to be studied will likely exclude important data, information, and context. The AAI consequently suggests that the Commission consider expanding its proposed study to consider Justice Department merger consent decrees, which would serve only to enhance the Commission’s efforts.

• Interviews. Simply extending the Commission’s previous approach of heavy reliance on the results of interviews risks embedding errors that could limit the objectivity and usefulness of the new study, according to AAI. Interviewing competitors that exited the market after a merger could provide important information that could affect the FTC’s assessment.

• Short-cuts. Contemplated short cuts in data and information collection may increase the difficulty of obtaining useful results and could require more Commission resources than anticipated. AAI suggests that pharmaceutical mergers should receive more careful attention in the updated and expanded study.

• Sales data. The proposed approach to collecting sales data excludes other important metrics for evaluating remedies, such as observations on product and service quality, safety and reliability, and research and development, according to AAI.

• Structural remedy. Lastly, AAI notes that the study is unlikely to answer the important questions of whether a structural remedy would have been more effective for the transactions to be studied. AAI consequently suggests that the FTC focus significantly more on a comparative assessment of structural and conduct remedies to determine whether a structural remedy would have been more effective.

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