Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: FTC proposes divestiture study, seeks public comments, (Jan 9, 2015)

By Greg Hammond, J.D.

The FTC is seeking public comment on its plan to conduct a study regarding the effectiveness of its policies and practices when it permits a merger, but imposes a remedial or divestiture order, the agency announced today. The purpose of the study, which will update and expand on a previous divestiture study conducted in 1999, is to isolate factors that contribute to the Commission successfully or unsuccessfully achieving the goals of its remedial orders.

According to an FTC Federal Register Notice, the Commission has issued 281 orders in merger cases since the period covered by the previous study through 2013. The Commission now proposes to review all 92 orders issued between 2006 and 2012 in merger cases, noting that the orders were not issued so long ago that the parties would have likely forgotten details, but is sufficiently long ago to determine whether the divestiture and merger orders created new competitors and achieved their remedial goals.

Interviews of buyers will focus on a number of issues, including: (1) whether the increased use of buyers-up-front hindered the buyer’s ability to conduct adequate due diligence; (2) the extent to which FTC staff’s review of buyers and monitors were inadequate; (3) whether the orders effectively defined assets of an autonomous business; (4) whether assets outside of the relevant market were properly included in the divestiture package when necessary; (5) whether FTC orders effectively required sufficient technical assistance or other nurturing provisions as necessary; (6) whether monitors provided the oversight that the FTC expected; and (7) whether the respondent impeded the buyer’s ability to compete in the market.

Interviews of customers and other competitors will also be conducted to help determine whether the FTC’s orders achieved their remedial goals. These interviews will focus on: (1) identifying leading suppliers and their market shares of a product before and after the remedy; (2) whether the buyer competed in a manner that was as effective as the previous owner of the divested assets; (3) whether there were any other significant changes that took place in the market after the remedy was implemented; (4) customers’ and competitors’ views on how the merger would have affected the competitive environment without the remedy; and (5) customers’ and competitors’ views regarding the market’s competitiveness prior to and after the acquisition and remedy.

“Successful divestitures and other forms of relief are central to the Commission’s merger enforcement efforts,” stated FTC Chairwoman Edith Ramirez. “Building on prior Commission efforts, the proposed study seeks to provide valuable information to ensure that our remedies continue achieving their primary goal—maintaining competition in the affected markets.”

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