Antitrust Division Updates 2004 Merger Remedy Guidance

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

To reflect changes in the merger landscape and lessons learned over the last seven years, the Department of Justice Antitrust Division has updated its 2004 guidance on merger remedies.

The Policy Guide to Merger Remedies is used by Antitrust Division staff in analyzing proposed remedies in its merger matters. It also provides transparency into the Antitrust Division’s approach to merger remedies for the business community, the antitrust bar, and the broader public, according to the Justice Department’s June 17 announcement of the update. The text of the updated policy guide appears at CCH Trade Regulation Reporter ¶13,172.

The key principles the Antitrust Division applies in analyzing merger remedies remain the same:

(1) Effectively preserving competition;

(2) Focusing on preserving competition, not protecting individual competitors; and

(3) Carefully applying legal and economic principles to the particular facts of a specific case.

Structural, Conduct Provisions

The policy guide states that effective merger remedies typically include structural provisions, conduct provisions, or a combination. In horizontal merger matters, the Antitrust Division continues to rely predominantly on structural remedies, sometimes in combination with conduct remedies, which usually prescribe certain aspects of the merged firm’s post-consummation business conduct. However, the Antitrust Division has found that, in many vertical transactions, tailored conduct relief can prevent competitive harm while allowing the merger’s efficiencies to be realized.

The most common forms of conduct relief are firewall, nondiscrimination, mandatory licensing, transparency, and anti-retaliation provisions, as well as prohibitions on certain contracting practices, according to the policy guide.

Misinterpretation of 2004 Guidance

The policy guide notes that some had misinterpreted the Antitrust Division’s 2004 guidance on remedies to mean that if a structural remedy is not available in a particular merger matter, or would be ineffective, the Antitrust Division must let the transaction proceed. That interpretation does not accurately reflect the policy or practice of the Antitrust Division, it was noted.

“In every case, the Antitrust Division focuses on the specific facts of the proposed transaction,” said Christine Varney, Assistant Attorney General in charge of the Antitrust Division. “We are prepared to clear a merger, block a merger or accept a remedy that maintains efficiencies as long as the result eliminates any competitive harm. In the current environment of increasing transnational mergers and complex vertical transactions, the Antitrust Division must be ever nimble in its efforts to ensure that any remedies effectively preserve competition, promote innovation and protect consumers. The updated policy guide takes into account these changes.”

Fix-It-First Remedies

In most merger cases, the Antitrust Division will require identification of a package of assets to be divested pursuant to a consent decree. However, the policy guide explains that the Antitrust Division will consider a fix-it-first remedy—a structural solution implemented by the parties that the Antitrust Division accepts before a merger is consummated—so long as the remedy need not be monitored.

A fix-it-first remedy may preserve competition in the market more quickly and effectively than a decree and provide the parties with the maximum flexibility in fashioning the appropriate divestiture, it was noted.

A news release on the issuance of the updated policy guide appears here on the Department of Justice Antitrust Division website. Text of the updated policy guide appears here.