On June 17, 2011, the Antitrust Division of the Department of Justice (“DOJ”) updated its Policy Guide to Merger Remedies, signaling a shift toward a more flexible, case-by-case approach to merger remedies. In particular, the revised guide reflects DOJ’s increased willingness to accept conduct remedies - that is, restrictions on how the merging parties can conduct business once the transaction is completed. The new guide replaces the DOJ’s original merger remedies policy issued in 2004 and is intended to provide the business community and antitrust bar with transparency into the way the DOJ analyzes and crafts relief in cases where it believes that a proposed merger will have anticompetitive effects.
Recent Merger Settlements Foreshadowed Policy Updates
The 2004 guide reflected DOJ policy preferences for clean, structural remedies (i.e., the sale of assets to a third-party buyer, with the intention of creating a viable competitor to the merged company). Conduct remedies were thought to be rarely effective and to needlessly entangle the government in the merged company’s business affairs. However, the DOJ under the Obama Administration has shown a willingness to impose behavioral restrictions on merging parties rather than sue to block the merger. The DOJ accepted conduct remedies in recent high-profile cases such as NBC/Comcast, Ticketmaster/Live Nation, Google/ITA, Bemis/Alcan, and the vertical beverage mergers undertaken by Coca-Cola and PepsiCo and their respective bottlers. The updated policy guide thus reflects “changes in the merger landscape” and “lessons learned” since 2004, and is intended to make sure that the policy now “accurately details the division’s merger remedy practices.”1
Two aspects of the updated policy guide are especially noteworthy:
- Greater Acceptance of Conduct Remedies: The 2011 policy abolishes the presumption against conduct relief. The DOJ now acknowledges that effective merger relief typically includes structural or conduct provisions, and that “[e]ach can be used to preserve competition in the appropriate factual circumstances.”2 The policy goes even further to state that, while conduct remedies are an effective form of relief to remedy concerns posed by vertical mergers, they may also be used to address competition concerns arising from horizontal mergers. This comports with recent DOJ practice but is a seachange from the original DOJ policy.
- Closer Alignment with the FTC: Though the DOJ and FTC share merger review authority, the agencies’ merger remedies policies have differed in some respects. The 2011 DOJ policy brings the Division closer in-line with its sister agency. For example:
Upfront Buyer/Crown Jewel Provisions - When merging parties propose to divest less than an autonomous, intact business, the DOJ may now require an upfront buyer for the assets or an enhanced, more attractive package of assets called a “crown jewel.” In the past, the DOJ has strongly disfavored crown jewel provisions and did not require upfront buyers.
Compliance Oversight - The 2011 guide also highlights a major structural change that places the Antitrust Division’s General Counsel’s Office in charge of enforcing merger decrees. “By concentrating remedy expertise in the General Counsel’s Office, the Division can efficiently develop and disseminate remedy best practices and conduct ex post reviews of remedy effectiveness.”3 This change will result in the DOJ more closely resembling the FTC from a procedural and organizational standpoint, as the FTC has long had a Compliance Division dedicated to the monitoring and enforcement of merger decrees.
Conclusion - “Finding A Remedy That Works”
The DOJ’s policy revision will be generally positive for the business community. Parties considering a merger or joint venture may find more success crafting flexible conduct restrictions that satisfy staff’s concerns, while preserving the value and efficiencies of the proposed transaction. The key to effective merger remedy policy, according to the updated guide, is “finding a remedy that works,” which suggests that parties may not have to accept the lesser of evils between overbroad divestitures or court challenge.