Post on 30-Jan-2016
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Merger Remedies WorkshopOctober 25, 2010
Deborah P. MajorasChief Legal Officer & SecretaryThe 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 remedies1. 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?