Goodwin Insights January 07, 2019

Antitrust Enforcers Continue to Express Their Strong Preference for Structural Merger Remedies

There was a time when conventional wisdom suggested that agreeing to alter business practices post-transaction could provide sufficient comfort to the FTC and DOJ to clear a transaction. Recently, the tide has been starting to shift. The DOJ’s challenge of AT&T’s acquisition of Time Warner highlighted the DOJ’s strong preference for structural remedies — rather than conduct-based, behavioral remedies — to potentially anticompetitive transactions. Speaking at an ABA event, Assistant Attorney General Delrahim criticized the DOJ’s previous decisions to enter into behavioral consent decrees to resolve potentially anticompetitive effects of vertical mergers, including in Comcast-NBCU, Google-ITA, and Live Nation-Ticketmaster. He noted that these types of remedies “supplant competition with regulation,” and “antitrust is law enforcement, not regulation.”  Later, he stated, “Such [behavioral] decrees, over time, effectively become perpetual regulations that the [DOJ] and the courts are often not well-suited to enforce.” More recently, he reaffirmed “[a]ntitrust enforcement is law enforcement, not industrial regulation.”

Also, earlier this year, FTC Bureau of Competition Director made clear that the FTC prefers structural remedies because “people are smart” and incentivized such that they can find ways to act around the proscribed conduct remedies.

That’s not to say that behavioral remedies are entirely disfavored. Indeed, Goodwin recently represented five hospital systems in the greater Boston, MA area who received unconditional clearance from the FTC after an intensive investigation on the basis of certain behavioral remedies the parties made to the Attorney General of Massachusetts, including price controls and detailed monitoring provisions. The new entity, Beth Israel Lahey Health, will be the area’s second largest medical system, with revenues into the billions of dollars.

The key takeaway is that parties contemplating transactions that will raise concerns of potential anticompetitive effects should be aware that the antitrust enforcement agencies are hesitant to accept behavioral or conduct remedies to their concerns of potential anticompetitive effects and a proactive and convincing explanation will be required to satisfy such concerns. By way of reminder, parties contemplating any merger remedy should factor in time for the antitrust agencies to review any proposed remedy. Recent FTC guidance suggests that such an evaluation “typically takes four weeks to review . . . after staff and the parties formally submit the settlement package to the Director of the Bureau of Competition.”