When a merger raises competitive concerns, the Federal Trade Commission or Antitrust Division of the U.S. Department of Justice may require remedies or conditions before the proposed transaction can proceed. Such remedies may be structural, which require the divestiture of business units to a third-party buyer, and/or behavioral, which require a binding commitment regarding the future behavior of the merged firm.
Merging parties must carefully consider the scope and likelihood that the FTC or DOJ will impose remedies as a condition of deal antitrust approval. On February 3, 2017, the FTC released a staff report, The FTC’s Merger Remedies 2006-2012: A Report of the Bureaus of Competition and Economics, providing guidance to businesses and their counsel in evaluating the scope of possible remedies.
Key Takeaways
- The FTC has a strong preference for companies to divest complete businesses or business units as those remedies are usually the most successful in maintaining or restoring competition.
- The FTC will require clearly defined asset divestiture packages, facilitate the buyer’s due diligence, promote customer transition and retention and require transition services or supply agreements if needed.
- Proposed buyers of assets to be divested should be prepared to justify how they will ensure competitiveness and viability of the divested assets and be prepared to share detailed financial and business plans with agency staff.