DOJ's New Merger Remedies Manual: Altering M&A Deal Structures to Preserve Competition and Gain DOJ Approval

This CLE course will analyze the Merger Remedies Manual recently released by the Department of Justice (DOJ)’s Antitrust Division, as well as recent experience from merging parties seeking to address the federal agencies’ concerns through a remedy, and how it might impact companies’ strategy when looking at proposed M&A deals. The panel will discuss the principles laid out in the Manual for evaluating a merger remedy and the nuances to consider when proposing structural (i.e. divestitures) and conduct remedies, as well as enforcement actions to help companies navigate these tricky waters.

On September 3, 2020, DOJ's Antitrust Division released a new Merger Remedies Manual, which confirms the DOJ's preference for structural over conduct remedies to resolve potential anticompetitive concerns relating to both horizontal and vertical proposed mergers. Timelines faced by parties to proposed mergers have also expanded, potentially due in part to agency concerns about proposed remedies.

The Manual provides key principles DOJ will apply in evaluating structural remedies. These principles include: (1) remedies must preserve competition; (2) remedies should not create ongoing government regulation of the market; (3) temporary relief should not be used to remedy persistent competitive harm; (4) remedies should preserve competition, not protect or favor particular competitors; (5) the merging parties, rather than consumers, should bear the risk of a failed remedy; and (6) remedies must be enforceable.

The Manual also details a number of factors that may lead DOJ to reject a divestiture remedy as inadequate, including: (1) divestiture of less than a standalone business; (2) mixing and matching assets of both merging firms; (3) permitting the merged firm to retain rights to essential intangible assets; (4) ongoing entanglements between the merged firm and the divestiture purchaser; and (5) significant regulatory or logistical hurdles.

Consistent with DOJ’s strong preference for structural remedies, the Manual sets forth limited circumstances where conduct remedies may be appropriate. The Manual provides that merger parties can show that conduct relief is appropriate by establishing that: (1) a transaction generates significant efficiencies that cannot be achieved without the merger; (2) a structural remedy is not possible; (3) the conduct remedy will completely cure the anticompetitive harm; and (4) the remedy can be enforced effectively. The Manual also acknowledged that conduct remedies such as supply agreements, transitional services agreements, and temporary limits on a merged firm's ability to hire employees from the divested business may (and in some instances should) be combined with structural remedies.

Finally, the Manual emphasizes that a divestiture must include the assets necessary to ensure that the divestiture buyer will be a viable, long-term competitor in the marketplace, as well as ensure that the buyer has the incentive to preserve competition. Recent experience suggests that divestiture buyers are facing increased scrutiny in proving that they will be successful with a divestiture.

Listen as our authoritative panel discusses all this and more, as well as strategies for getting regulatory approval.