Transcript Merger Remedies - US Chamber of Commerce

Merger Remedies Workshop
October 25, 2010
Deborah P. Majoras
Chief Legal Officer & Secretary
The Procter & Gamble Company
Agenda
• Part I: Key Principles
• Part II: Structural and Conduct Remedies
• Part III: Considerations for Divestiture
Remedies
Part I: Key Principles
Key Principles
• Merger Remedy should redress a violation
of law.
– Remedy without violation could unjustifiably
restrict companies and raise costs to
consumers
• If no violation is found, agency should not
stop the merger.
– Google/Double-Click merger
Key Principles
• Remedy should restore competition to
premerger levels and be based on sound
legal and economic principles.
• Fact-intensive exercise:
– What harm will result from merger?
– How will the remedy fix the harm?
• Remedy should be minimum necessary to
cure the competitive harm.
Key Principles
• Remedy should promote competition, not
competitors.
– Objective of remedy is to restore competition
to premerger levels, not to protect or favor a
particular competitor
Key Principles
• Remedy should be tailored to fit the
violation.
– No “one-size-fits-all” for remedies
– What works in one industry may not work for
another
Key Principles
• Remedy should not be punitive.
– Goal of remedy is to restore competition to
premerger levels, not to “punish” the merging
parties for proceeding with the merger
Key Principles
• Remedy should be enforceable.
– Remedy will not restore competition if it
cannot be enforced, or would be difficult to
enforce.
Part II: Structural and Conduct Remedies
Structural and Conduct Remedies
• Two types of remedies
1. Structural: deals with the structure of the
market
– Divestiture of tangible assets
– Licensing of intangible assets
2. Conduct: deals with the conduct of the
merging parties
– Firewalls
– Non-competes
– Restrictions on access to scarce personnel
Structural and Conduct Remedies
• Structural Remedies are preferred.
– Clean
– Certain
– Avoid costly government involvement in the market
• Structural Remedy Cases:
– U.S. v. Election Systems and Software, Inc. (June
2010)
– U.S. v. Microsemi Corporation (Aug. 2009)
– In re Pfizer, Inc. and Wyeth (FTC, October 2009)
Structural and Conduct Remedies
• Conduct Remedies are Disfavored. . .
–
–
–
–
Especially for horizontal mergers
Difficult to craft
More costly to administer
Easier for parties to circumvent
• . . . But May be Appropriate in Certain
Circumstances.
– Appropriate to address concerns in vertical mergers
without stopping the merger or altering deal structure
– More often used as a complement to structural
remedy
Structural and Conduct Remedies
• Conduct remedy cases:
– U.S. v. Live Nation, Inc. and Ticketmaster
Entertainment, Inc.
(DOJ, Jan. 2010)
– In the Matter of PepsiCo, Inc. (FTC, Feb.
2010)
– In the Matter of Pilot Corporation, Propeller
Corp., and Flying J Inc. (FTC, June 2010)
Part III: Considerations for
Divestiture Remedies
Divestiture Remedies - Considerations
• Divestitures are the most preferred structural
remedies.
• Divestiture should occur quickly.
– Restores competition to market as soon as possible
– Mitigates decrease in value of assets
• Agency should approve proposed Purchaser.
– Purchaser should have both the means and the
incentive to maintain premerger level of competition in
relevant market
Divestiture Remedies - Considerations
• Merging parties should hold divested
assets separate to avoid “unscrambling
the eggs.”
• Divestiture should include all assets
necessary for Purchaser to be effective,
long-term competitor.
Divestiture Remedies - Considerations
• “Fix-it-first” Divestiture
– What is it? Divestiture of business implemented by
parties and accepted by the agency prior to merger
consummation
– Benefit? May restore competition to the marketplace
more quickly and effectively than by being ordered by
the agency
• Downside? May require a “fire sale”
• A “fix-it-first” divestiture requires thorough
investigation by agency .
Additional Resources on Merger Remedies
• US Dep’t of Justice, Antitrust Division Policy Guide to Merger
Remedies (Oct. 2004), available at
http://www.usdoj.gov/atr/public/guidelines/205108.pdf
• Federal Trade Comm’n, Statement of the Federal Trade
Commission’s Bureau of Competition on Negotiating Merger
Remedies (Apr. 2, 2003), available at
http://www.ftc.gov/bc/bestpractices/bestpractices030401.shtm
• Frequently Asked Questions About Merger Consent Order
Provisions, available at http://www.ftc.gov/bc/mergerfaq.shtm
Questions?