The Department of Justice, Antitrust Division, recently updated its Policy Guide to Merger Remedies, the first update since 1994. The revised policy guide reflects the DOJ's increased willingness to pursue conduct-based remedies in certain cases rather than traditional injunctions that entirely bar proposed mergers. The new guidelines represent a departure from the DOJ's traditional disfavor of conduct-based remedies, which impose on the DOJ the burden of monitoring the merger parties' compliance.
Conduct-Based Remedies Focus on Anticompetitive Behavior. Conduct-based remedies are more likely to be acceptable to the DOJ in vertical transactions, which combine companies that are vendors and customers, rather than competitors. Even though these vendor/customer mergers do not reduce the number of competitors in a market, they can make it easier for the combined merger parties to impair competition by, for example, eliminating or restricting access by the customer's competitors to the vendor's products or services. The guidelines provide several examples of appropriate conduct-based remedies:
- Firewall provisions: These provisions prevent the dissemination of information within a merged entity, for example, the vendor may not share with the customer competitively sensitive information about sales to competitors of the customer.
- Nondiscrimination provisions: These provisions relate to equal access, equal efforts and equal terms. For example, under nondiscrimination provisions, the vendor party must accord the customer party's competitors terms equivalent to those offered to the customer party.
- Mandatory licensing provisions: These provisions require the merged entity to license certain technology on fair and reasonable terms to prevent harm to competition.
- Transparency provisions: These provisions require a merged entity in a regulated industry to make certain information available to a regulatory authority that the company would not otherwise be required to provide.
- Anti-retaliation provisions: These provisions bar the merged entity from retaliating against customers or other parties who enter into contracts or who do business with the merged entity's competitors.
Practical TipThe guidelines make clear that parties to mergers that raise competition concerns should approach the DOJ early in the review process and be prepared to discuss remedies to address those concerns, including conduct-based remedies. To avoid the delay, the parties should undertake their competition analysis and formulate possible remedies before the parties file their Hart-Scott-Rodino reports, which start the 30-day statutory waiting period. Early discussion of these issues may avoid a request for additional information, i.e., a "second request," and permit the parties and the DOJ to use the 30-day period to fine tune proposed remedies.
This update is intended only as our summary of the updates to the Antitrust Division Policy Guide to Merger Remedies. You can find the policy guide here and the Department of Justice's press release here.
© 2011 Perkins Coie LLP