US DOJ: merger counsel should highlight overlaps

Charles McConnell

28 September 2017

US DOJ: merger counsel should highlight overlaps

Chris Pearce

The head of civil enforcement at the US Department of Justice’s antitrust division said today that it might “behoove” counsel for merging companies to alert the antitrust authorities to obvious product overlaps. Charles McConnell at GCR Live in New York

Patricia Brink, who has spent nearly 28 years at the Antitrust Division, made the suggestion in response to a question about the division’s lawsuit this week against the consummated merger between Parker Hannifin and Clarcor, which alleges the deal led to a monopoly in the market for aviation fuel filtration devices.

The companies announced their merger in December of last year with an expected closing date after June 2017, but were able to consummate the tie-up on 28 February after the Hart-Scott-Rodino waiting period expired without a second request or merger challenge.

If there is “some clear and obvious” product overlap, Brink said, it may behoove counsel to raise that to the antitrust agencies, as obtaining HSR clearance will not shield an anticompetitive and illegal merger from later scrutiny by the agencies.

She noted that the DOJ’s complaint alleges Parker knew the fuel filtration market might be a problem, with one executive asking another if the company should be “forthcoming” about the potential antitrust issue. He went so far as to say that Parker was preparing for the chance that it would have to divest Clarcor’s aviation ground fuel filtration business, according to the complaint.

Parker’s refusal to hold the fuel filtration businesses separate pending the outcome of the investigation – which the DOJ started only after receiving customer complaints through its citizen complaint centre – compelled the division to go forward on the lawsuit, Brink said.

In prefacing her suggestion that merging companies should disclose clear issues such as these with the DOJ or Federal Trade Commission before the HSR period expires, Brink said that the Antitrust Division is committed to enforcing section 7 of the Clayton Act, even if it has to do so after a merger has closed.

“There should be serious consideration given to whether counsel should be forthcoming and raise very clear issues such as these” with the Antitrust Division or FTC before the HSR period expires, she said.

Brink, who was interviewed during today’s GCR Live conference in New York, denied that the timing of the HSR filing – the deal was announced after the presidential election, and the waiting period expired three days before President Donald Trump’s inauguration – and initial clearance of the deal had anything to do with the transition period between administrations.

Cravath Swaine & Moore partner Margaret D’Amico conducted the interview. The conference concludes today.

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