The Guide to Merger Remedies

Structural Remedies

Jones Day

Transaction remedy policies

Types of remedies

According to the Antitrust Division of the US Department of Justice (DOJ), ‘a successful merger remedy must effectively preserve competition in the relevant market’ without ‘removing the incentive for individual firms to compete’. 2

Of the types of remedies available to the merging parties, the Federal Trade Commission (FTC) and the DOJ, structural and behavioural (or conduct) remedies are the most common. Structural remedies generally require the ‘divestiture’ of assets by one or both of the merging firms. Behavioural remedies attempt to alter certain post-consummation conduct of the merged firm to remove the incentive of the merged firm to act in an anticompetitive manner. 3

As discussed later in this chapter, structural divestiture packages typically include not only assets, both tangible and intangible, but also know-how necessary for the entity buying the assets (the ‘divestiture buyer’) to effectively compete in the long term against the merged entity. 4

Therefore, because ongoing businesses already possess both the assets and the know-how to provide the relevant products or services, the agencies prefer divestiture packages that include an ongoing business rather than select assets. However, in certain circumstances, the agencies will consider a divestiture of less than an entire business.

By contrast, behavioural remedies impose requirements or restrictions on the post-consummation of the merged entity. The most common include firewalls, non-discrimination provisions, mandatory licensing, transparency requirements, anti-retaliation provisions and prohibitions on certain contracting practices. 5

Contrasted with structural remedies, enforcing behavioural remedies may require the agencies to exercise a certain level of oversight and enforcement after the remedy is imposed.

Merger remedies in many cases include both structural and behavioural remedies. However, as discussed below, settlement offers where a divestiture is the main feature will be viewed more favourably than offers where behavioural remedies are prominent.

Shifts in remedy policy

Although the prevailing view is that changes in political administrations have not resulted in major changes to merger enforcement policy, merger remedy policy is perhaps a notable exception. In the United States, for example, the current DOJ Merger Remedies Guide was issued in 2011 u nder the Obama administration, the first update to the guidelines since 2004 (under the second Bush administration).

The 2004 g uide expressed a preference for structural remedies over behavioural remedies. One key change in the 2011 M erger Remedies Guide, however, was the DOJ’s willingness to entertain behavioural remedies. 7  The 2011 G uide also expanded the list of potential behavioural remedies available to the DOJ when crafting possible settlements. 8 Following this lead, several consent decrees issued in the early days of the Obama administration imposed behavioural restrictions on the merging parties. 9   Those behavioural decrees were met with criticism that they necessitated ongoing DOJ oversight and were difficult to monitor and enforce. 10

An early focus of the Trump administration’s policy speeches and cases have signalled that the DOJ will have less of an appetite for behavioural remedies. According to DOJ Assistant Attorney General (AAG) Makan Delrahim, behavioural remedies contravene the original aim of the antitrust laws to protect free markets and the competitive process with limited government intervention. 11

Echoing the critics of Obama-era behavioural remedies, AAG Delrahim lamented that behavioural remedies fail to preserve free market competition because, rather than incentivising competition among market players, they supplant competition with regulation by both the government and the courts. 12

No case exemplifies this policy shift better than the DOJ’s November 2017 l awsuit to block the AT&T/Time Warner transaction. 13

While the DOJ’s 2011 M erger Remedies Guide stated that ‘[c]onduct remedies can be an effective method for dealing with competition concerns raised by vertical mergers and also are sometimes used to address concerns raised by horizontal mergers (usually in conjunction with a structural remedy)’, the DOJ rejected proposed behavioural remedies in the AT&T/Time Warner matter. 14

 According to one study, between 1994 a nd 2016, close to 75 p er cent of vertical mergers were approved with behavioural remedies. 15 Although the new policy may change little with respect to horizontal mergers, we expect to see a greater push for structural remedies in vertical cases. 16

All is not lost for behavioural remedies. AAG Delrahim has cautioned that the shortfalls of behavioural remedies do not mean that the DOJ ‘would never accept behavioral remedies’. 17

There may be mergers, for example, where the imposition of structural remedies would negate significant efficiencies that the parties would otherwise achieve. However, AAG Delrahim has said this will be a ‘high standard to meet’ and the DOJ will likely be ‘skeptical of those [settlement offers] consisting of behavioral remedies’. 18

Overview of the remedy standard

When crafting remedies, whether behavioural or structural, the antitrust agencies seek to preserve or restore the existing or pre-merger competition in the relevant markets at issue. 19

Although differences in procedure and terminology exist, the US antitrust agencies and the EC generally have similar policy goals with respect to merger remedies. 20The remedy must restore the competition and replace the competitive intensity lost by the merger. 21 In horizontal mergers (i.e., between competitors at the same level of the supply chain), the antitrust agencies typically have a strong preference for structural remedies, which may include limited behavioural features such as a temporary transition services agreement. As described above, problematic vertical mergers, historically, have been cured via a combination of behavioural and structural remedies.

Although each transaction is unique, the antitrust agencies prefer divestiture of an ongoing business because they believe that such divestitures are the least risky type of divestiture. Moreover, the antitrust agencies are wary of divestitures that require a ‘continuing relationship’ (e.g., licence, tolling agreements, supply agreements) between the divestiture buyer and the merged firm. The antitrust agencies are sceptical that the merged firm will act in a way that benefits a competitor, thus making the divestiture buyer vulnerable. In addition, the antitrust agencies will be concerned that a continuing relationship will blossom into anticompetitive collusion. 22

Success (and failure) of structural remedies

In January 2017, the FTC released a retrospective study on its remedies from 2006 t o 2012. During the study period, the FTC entered into settlements in 89 t ransactions that it believed were anticompetitive. 23

In sum, 81 o f the 89 F TC orders (greater than 90 p er cent) required structural remedies. 24 Of the six orders that required only non-structural relief, four involved vertical transactions. 25 These facts demonstrate that the FTC has a strong preference for structural remedies, particularly in horizontal transactions. Statistics for the DOJ would suggest the same.

The FTC study also discussed whether the structural remedy for each merger affected whether the remedy succeeded or failed. The FTC studied 39 p re-consummation divestitures in horizontal structural mergers. The study found that all 14 d ivestitures to buyers of an ongoing business succeeded. 26

The remaining 25 d ivestitures involved sales of selected assets, which had a failure rate of 28 p er cent. 27The FTC concluded, therefore, that divestitures of an ongoing business pose ‘little risk’ of failure. 28

As a result, the FTC study recommended that the agency should have a preference for divestitures of an ongoing business. 29

The study further recommended that sellers and divestiture buyers who propose a divestiture of selected assets:

  • explain why divestiture of an ongoing business is inappropriate or infeasible;
  • identify what assets are excluded and how a buyer will address those gaps, including the cost and speed of addressing those gaps;
  • show that a divestiture of selected assets can operate as a competitive business; and
  • provide the buyer with due diligence access to employees, facilities and documents. 30

Indeed, in recent years, the antitrust agencies have rejected a number of divestitures in which the parties proposed a divestiture of less than an ongoing business. For example, in April 2016, the DOJ sued to block the proposed acquisition of Halliburton by Baker Hughes. 31

According to the DOJ’s complaint, Halliburton’s proposed divestiture package was ‘a collection of assets selected from various Halliburton and Baker Hughes business lines’. 32The DOJ rejected the proposed divestiture because it would ‘separate business lines and divide facilities, intellectual property, research and development, workforces, contracts, software, data, and other assets across the world between the merged company and the buyer of the divested assets’. 33 The DOJ also complained that the proposed remedy failed to include all the assets necessary for a divestiture buyer to compete, including tools, facilities, employees and certain customer contracts. 34

In recent cases, courts too have expressed a preference for divestiture of an ongoing business. In US v. Aetna , the court stated that:

[d]ivestiture of an ‘existing business entity’ might be more likely to ‘effectively preserv[e] the competition that would have been lost through the merger,’ because it would have the ‘personnel, customer lists, information systems, intangible assets, and management infrastructure’ necessary to competition, but divestiture of some lesser set of assets might be appropriate when the purchaser already has, or could easily attain, the other capabilities needed to compete effectively. 35

The court rejected a divestiture of Medicare Advantage assets to Molina because, in part, Molina lacked (and Aetna was not divesting) care management resources, a sufficient provider network and internal capacity (including IT resources, management experience and personnel with expertise in the industry). 36

Settlement provisions in structural remedies

The most important consideration in any structural remedy is what assets, tangible and intangible, are needed for the divestiture buyer to replace competition lost by the merger on an independent, long-term basis. 37

Ongoing business

As alluded to earlier in this chapter, the antitrust agencies prefer divestitures of ongoing businesses because (1) existing businesses often already contain assets and infrastructure critical to compete in the relevant market; and (2) they have ‘demonstrated [the] ability to compete in the relevant market’. 38

From the perspective of the antitrust agencies, the ideal divestiture package is an autonomous or semi-autonomous business unit or division that relies little on the retained business, complete with all physical and intangible assets, personnel and distribution needed to compete. 39An ongoing business, in some cases, need not be an entire division or legal entity, but instead may be subunits, such as a factory, retail stores or radio stations, as long as those operations include the relevant assets needed to compete. 40 The DOJ refers to these types of businesses as ‘existing business entities’; 41in FTC parlance, they are ‘ongoing businesses’; 42 and in the EU, they are frequently described as ‘existing stand-alone businesses’. 43 Past marketplace success by these types of entities often confirms to the antitrust agencies that the divestiture business has the necessary collection of assets to compete effectively, including all physical assets and facilities, intangible assets, personnel, customers, and administrative tools necessary to efficiently produce, sell and distribute the relevant products. 44

The antitrust agencies will consider the divestiture of a collection of assets assembled from both of the merging firms rather than an ongoing business, but they ‘must be persuaded that these assets will create a viable entity that will effectively preserve competition’ 45

given the perceived increased risk of failure and inability to use past marketplace success as an indicator of future competitiveness. The divestiture package will need to include all assets (tangible or intangible) necessary to restore competition lost from the merger and incentivise the divestiture buyer to compete with (rather than liquidate or redeploy) those assets. 46To ensure that the package is sufficient, the antitrust agencies will typically discuss the package with the divestiture buyer and other marketplace participants, and request the divestiture buyer’s plan for the divested assets. In rare cases, divested businesses have been deemed independently viable and ‘spun off’ from the merging parties. 47

Tangible assets

Divestiture packages must contain all tangible assets required to replicate competition lost as a result of the merger. This is typically effectuated via outright sale or transfer of the assets to the divestiture buyer. Where a transfer is impractical and some other arrangement should be effective, it can also be accomplished, however, via other arrangements such as real estate leases with favourable terms.

Intangible assets

The type of intangible assets the antitrust agencies require divesting and the type of disposition varies by product, industry and divestiture buyer. Divestiture buyers must receive rights to the assets in question, either via outright sale or licensing. For example, the DOJ conditioned its settlement of litigation challenging the 2013 m erger of American Airlines and US Airways on the sale of divested slots and gates at certain capacity-constrained US airports to low-cost carriers. The DOJ asserted that divesting these slots and gates would provide low-cost carriers with ‘the incentive and ability to invest in new capacity and permitting them to compete more extensively nationwide’. 48

When a merged company needs to retain rights in the to-be -divested intangible assets, particularly intellectual property, the antitrust agencies may approve the issue of non-exclusive licences to divestiture buyers or the licensing back of intellectual property from the divestiture buyer to the merged company. 49

In 2007, for example, the DOJ reached a settlement allowing Monsanto to acquire Delta and Pine Land Company on the condition that the parties divest a business unit and several additional product lines and modify several of its product licences. 50>The divestiture included an obligation to divest Monsanto’s exclusive right to commercialise certain cotton plant varieties, but permitted the merged company to license back those products being used for a separate research project. 51 In 2017, the DOJ agreed to allow CenturyLink and Level 3 C ommunications to merge, subject to their agreement to divest certain fibre optic cable through long-term leases that were the industry standard arrangement for transferring such assets. 52

Scope of the divested assets (geographic and product markets)

To ensure that a divestiture buyer has the ability and incentive to vigorously compete in a relevant market affected by the merger, the antitrust agencies may require a divestiture package that goes beyond the particular product and geographic markets about which they have competition concerns. This can necessitate the divestiture of an entire ongoing business (including non-relevant products) or the divestiture of more than an ongoing business if the additional assets are deemed necessary to effectively preserve competition. 53

For parties with multinational operations, this can include the divestiture of a worldwide business to resolve concerns solely related to competition within a particular region. 54

For example, as a condition of approval of the Guinness/Grand Metropolitan PLC merger, the FTC required the divestiture of Dewar’s Scotch, Bombay gin and Bombay Sapphire gin brands on a worldwide basis, even though the relevant geographic market was limited to the United States. 55

The antitrust agencies also can require the divestiture of additional, non-overlapping products if necessary to recreate the divestiture seller’s incentive to compete. 56

In the Bayer AG/Monsanto merger, for example, the DOJ required the divestiture of ‘complementary assets . . . needed to ensure that [the divestiture buyer] has the same innovation incentives, capabilities and scale that Bayer would have as an independent competitor’. 57

Crown jewel provisions

The antitrust agencies sometimes require ‘crown jewel’ provisions that automatically trigger the divestiture of additional valuable assets to increase the attractiveness of the divestiture. 58

The antitrust agencies deploy crown jewel clauses where there is risk that a divestiture will not be completed, for example, if the sufficiency of an asset package is in doubt or in certain post-consummation divestitures. 59 Requiring that an ‘upfront buyer’ complete the divestiture purchase before the main transaction closes generally eliminates the need for crown jewel provisions; however, because upfront buyer transactions can fall apart, the FTC has required crown jewel clauses where the original asset package may be unattractive to different buyers. 60

The FTC included a crown jewel clause in the settlement in Quest Diagnostics’ acquisition of Unilab. 61

The FTC permitted Quest to divest to LabCorp a subset of its Northern California assets because LabCorp was a ‘well-positioned acquirer’ with financial resources, operations in nearby Southern California and a national presence. 62 If Quest failed to consummate the transaction with LabCorp, the settlement permitted the FTC to appoint a trustee to divest its entire laboratory services business in Northern California ‘because a prospective buyer other than LabCorp may require additional assets to fully restore competition in the relevant market’. 63

The FTC has enforced a crown jewel provision in just one matter. 64

In the Hoechst AG/ Rhone-Poulenc SA merger, the FTC obtained a settlement in December 1999 i n which the parties agreed to divest Rhone-Poulenc ’s newly developed direct thrombin inhibitor drug Revasc within six months. 65 If the parties proved unable to divest Revasc, the consent decree permitted (and the FTC ultimately required) appointment of a divestiture trustee who could require that the combined entity (renamed Aventis) divest its established product Refludan. 66

The DOJ position on crown jewel clauses has changed over time. The DOJ’s 2004 r emedies guide disfavoured crown jewel provisions ‘because generally they represent acceptance of either less than effective relief at the outset or more than is necessary to remedy the competitive problem’. 67

The DOJ’s 2011 r emedies guide endorses crown jewel provisions as ‘necessary in [some] cases to ensure that the remedy will effectively preserve competition’. 68 In the DOJ’s settlement with Thomson Corporation in its acquisition of the computer-based testing business of Harcourt General from Reed Elsevier, the DOJ required that the parties shop to potential divestiture buyers two asset packages, one containing Harcourt’s computer-based testing business, and another containing that business plus additional related assets. 69 The DOJ retained the right to decide which divestiture would proceed. 70

Trading up

In a merger between A and B, instead of divesting assets from only A or B, the parties may want to ‘trade up’ or ‘mix and match’ assets to divest some assets from A and some assets from B. The antitrust agencies will consider allowing the parties to ‘trade up’. 71

As in any divestiture, the parties must demonstrate that the divestiture will restore pre-merger competition. If the parties plan to divest only lower-performing , higher-cost , older or less conveniently located assets, the parties may have a more difficult time convincing the antitrust agencies to approve the divestiture. 72 A trade-up approach therefore may lengthen the antitrust agency’s investigation of the divestiture. 73

Ongoing entanglements: transition services agreements and supply agreements

As described above, the antitrust agencies prefer divestiture of an ongoing business that immediately and completely separates the divestiture buyer from the merging parties. Antitrust agencies disfavour ongoing entanglements between a divestiture buyer and a seller because merging parties are not motivated to help their competitors. 74

Antitrust agencies also may have concerns that ongoing entanglements can lead to improper collusion. 75

Nevertheless, the antitrust agencies typically accept that a divestiture buyer may need, on a short-term basis, transitional assistance from the merging parties to support a structural divestiture. 76

Indeed, the DOJ’s standard consent decree requires that the merging parties agree to provide transitional services, at the option of the buyer, for a limited time (e.g., one year). 77 Parties typically may apply to the DOJ for an extension of the transition services agreement, which may or may not be granted at the DOJ’s discretion. 78

The scope of the transition services agreement will vary with the needs of the divestiture buyer and the extent to which the parties have divested an ongoing business unit. Transition services commonly include back-office functions. Examples of transition services in antitrust agency settlements include information technology, human resources, financial, accounting, order processing, shipping, regulatory compliance, maintenance or repair, logistics, or other administrative services. 79

In some circumstances, the antitrust agencies may permit or require that a divestiture include a supply agreement. If a buyer cannot produce a product immediately, the antitrust agencies may require that the merging parties supply the product to the buyer on a temporary basis or until the buyer can produce the product on its own. 80

The antitrust agencies generally view supply agreements as short-term transitional arrangements because they expect divestiture buyers to become independent competitors. 81 The DOJ has expressed ‘serious concerns’ about long-term supply agreements because the merged firm (supplier) is not likely to help the divestiture buyer compete with itself. 82 The antitrust agencies might have concerns that the seller could degrade quality, deliver products late or fail to adhere to product specifications, among other things. 83 Therefore, parties will have to demonstrate that a supply agreement is no longer than necessary, but of sufficient duration for the divestiture buyer to establish its own supply. 84

The DOJ’s recent settlement in Bayer’s acquisition of Monsanto contains a supply agreement between Bayer and BASF, the divestiture buyer. The settlement agreement requires that, at BASF’s option, Bayer supply BASF with seed treatments that Bayer applies to its own row crop seeds for a period of two years. 85

The DOJ may agree to an extension of the supply agreement for up to four years. 86 The consent decree also specifies that Bayer must supply the seed treatments at Bayer’s variable cost. 87 The DOJ expects the supply agreement to provide BASF time to transition to its own seed treatments, seed treatments acquired from Bayer, seed treatments from alternative suppliers, or a combination of those options. 88

Other structural remedies

Intellectual property licences

As described elsewhere in this chapter, the antitrust agencies have a strong preference for divestiture of an ongoing business. In limited circumstances, the antitrust agencies have permitted the merging parties to license rather than sell intellectual property. Depending on the circumstances, a licence (e.g., a royalty-free exclusive licence) can be as effective (or ‘structural’) as a divestiture. However, divestitures involving licences are the exception rather than the rule and parties proposing a licence will have to convince the antitrust agencies that the licence fully restores competition. 89

Licensing may be the more desirable arrangement where both the merging parties and divestiture buyer need access to intellectual property; for example, if the intellectual property is used in both divested and non-divested products or in geographies that are not the subject of the divestiture. 90

The antitrust agencies may permit a licence if the parties can show that the divestiture buyer’s ability to compete will not be adversely affected. 91 The antitrust agencies may be concerned that the licence could give rise to collusion if it requires entanglements between the merging parties and the divestiture buyer. 92 In addition, the antitrust agencies will investigate whether the merged firm’s retention of the intellectual property will allow it to harm the divestiture buyer post-transaction by, for example, licensing intellectual property to other parties or failing to enforce the intellectual property against potential infringers. In addition, if relevant, the antitrust agencies may have concerns about the merged firm’s incentives to continue to develop the intellectual property.

In 1999, the DOJ permitted AK Steel’s acquisition of Armco to proceed subject to AK Steel’s agreement to grant a non-exclusive irrevocable licence to patents used in the manufacture and sale of aluminised 409 s tainless steel. 93

At the time, AK Steel was the only US manufacturer of the steel and Armco was the only other US company preparing to manufacture the product. 94 The DOJ’s press release is silent about why it accepted a licence in this matter.

In another example, the DOJ permitted 3D Systems Corporation, a rapid prototyping systems provider, to complete its 2001 p urchase of competitor DTM Corporation if the merged company licensed its rapid prototyping patents to an existing rapid prototyping systems provider entering the US market for the first time. 95

Rescission

Unlike a divestiture in which the merging parties sell off the offending assets to a third party, rescission requires that the original seller reacquire the assets. The antitrust agencies cannot unilaterally require rescission, but US equity courts may order rescission. 96

As a remedy, rescission is rare. 97 In FTC v. Elders Grain , the US Court of Appeals for the Seventh Circuit ordered rescission of Illinois Cereal Mills’ acquisition of the Lincoln Grain Company from Elders Grain. 98 The FTC informed the parties it planned to seek an injunction to block the transaction, but before it could do so, the parties consummated the transaction, moving the closing forward by several days. 99 The fact that the parties accelerated the closing in light of a known FTC challenge seemed to influence the court’s decision to grant an unusual remedy. 100 By comparison, in US v. Reed Roller Bit Co , the court refused to order rescission where a divestiture would accomplish the same goals because the seller had already tried to compete, failed, chosen to exit the business, and, unlike the seller in FTC v. Elders Grain , had clean hands. 101

Although the FTC cannot unilaterally order rescission, it typically includes a rescission clause in its upfront buyer settlement orders that permit it to reject the buyer following the public comment period. 102 To date, the FTC has never ordered rescission by an upfront buyer in a divestiture. 103

Disgorgement

On rare occasions, the US antitrust agencies have sought disgorgement of profits gained as result of unlawful, consummated acquisitions. Disgorgement does not fit neatly into either the structural or behavioural categories. Like a behavioural remedy, the antitrust agencies may seek disgorgement to encourage (or discourage) certain behaviour. 104

Like a structural remedy, disgorgement involves a one-time fix instead of ongoing regulation.

The antitrust agencies may seek disgorgement instead of or in addition to other remedies. 105

To date, the antitrust agencies have limited disgorgement to cases involving wrongdoing or egregious conduct on the part of the parties. For example, in FTC v. Hearst Trust , the FTC in 2001 s ought to unwind Heart’s January 1998 a cquisition of Medi-Span and disgorgement of profits. 106 The FTC alleged that Hearst failed to submit a number of significant documents in its Hart-Scott -Rodino filing that inhibited the FTC’s ability to conduct a preliminary investigation following the filing. 107 Hearst settled with the FTC, agreeing to divest the Medi-Span business and disgorging US$ 19 m illion in profits. 108

In 2017, the FTC and Mallinckrodt ARD Inc settled FTC allegations that ‘while benefitting from an existing monopoly over the only U.S. [adrenocorticotropic hormone (“ACTH”)] drug, Acthar, Mallinckrodt illegally acquired the U.S. rights to develop a competing drug, Synacthen Depot.’ 109

According to the FTC, Mallinckrodt raised the price of Acthar from US$ 40 p er vial to more than US$34, 000 p er vial following the acquisition of Synacthen Depot. 110 The terms of the settlement required Mallinckrodt to grant a licence to Synacthen to an FTC-approved licensee and pay the FTC US$ 100 m illion. 111

Conclusion

As the above discussion demonstrates, the antitrust agencies’ key principle in accepting a merger remedy is to fully restore any competition lost as a result of a transaction. At present, the antitrust agencies’ view is that structural divestitures of ongoing businesses present the least risk of failure among possible divestiture scenarios. Therefore, efforts to obtain a behavioural remedy or a divestiture of something less than an ongoing business will face an uphill battle with the antitrust agencies.

1 Michael A Gleason is a partner, and Lauren Miller Forbes and Dehmeh R Smith are associates, at Jones Day.

2 US Dep’t of Justice, Antitrust Div Antitrust Division Policy Guide to Merger Remedies, 3, 5 ( June 2011 ), www.justice.gov/sites/default/files/atr/legacy/2011/06/17/272350.pdf (the 2011 D OJ Merger Remedy Policy Guide).

3 Id. at 6.

4 Id. at 7.

5 Id. at 11–15.

6 In addition to revising the Bush administration’s 2004 M erger Remedies Guide, the Obama administration also withdrew a Bush-era policy statement regarding monetary equitable remedies in merger cases. That 2003 P olicy Statement outlined the process by which the FTC would seek disgorgement or other monetary remedies. In 2012, however, in a 4: 1 v ote, the FTC withdrew that policy statement, choosing instead to rely on the guidance of existing case law and prosecutorial discretion to determine whether and when to seek such equitable remedies. FTC Withdraws Agency’s Policy Statement on Monetary Remedies in Competition Cases; Will Rely on Existing Law, Federal Trade Commission ( 31 J uly 2012 ), www.ftc.gov/ news-events / press-releases /2012/07/ ftc-withdraws - agencys-policy - statement-monetary -remedies.

7 2011 D OJ Merger Policy Guide, at 2, n.3 (‘Some have interpreted the Division’s 2004 g uidance on remedies to mean that if a structural remedy is not available in a particular merger matter, or would be ineffective, the Division must let the transaction proceed. That interpretation does not accurately reflect the policy or practice of the Antitrust Division.’).

8 Compare id. at 13–17, with US Dep’t of Justice, Antitrust Div Antitrust Division Policy Guide to Merger Remedies, 22–25 ( October 2004 ), www.justice.gov/atr/ archived-antitrust - division-policy - guide-merger -
remedies-october -2004 (the 2004 D OJ Merger Remedy Policy Guide).

9 See, e.g., Modified Final Judgment, United States v. Comcast Corp et al , No. 11-0106 (DDC 21 A ugust 2013 ) (imposing several behavioural remedies, including a firewall provision, mandatory licensing, non-discrimination provisions, anti-retaliation provisions, and certain contracting restrictions); Final Judgment, United States v. Google Inc , No. 11-0688 (DDC 5 O ctober 2011 ) (mandatory licensing, mandatory arbitration, firewall provision, transparency provision and certain contracting restrictions); Final Judgment, United States v. Ticketmaster Entertainment Inc , No. 10-0139 (7/30/2010) (in addition to divestiture, anti-retaliation , firewall and certain contracting restrictions).

10 Eleven Senators wrote to the Attorney General about their scepticism of behavioural remedies, explaining that their lack of enforceability and reliability make them insufficient to effectively protect consumers from anticompetitive transactions or business practices. See Makan Delrahim, Assistant Attorney General Makan Delrahim Delivers Keynote Address at American Bar Association’s Antitrust Fall Forum, ( 16 N ovember 2017 ), available at www.justice.gov/opa/speech/ assistant-attorney - general-makan - delrahim-delivers -keynote-
address-american -bar.

11 Id.

12 Id.

13 See Post-Trial Brief of the United States at 24, United States v. AT&T Inc , DirecTV Group Holdings LLC and Time Warner Inc , No. 17-2511 (DDC 8 M ay 2018 ) (rejecting behavioural relief as inappropriate here, explaining that it ‘would not be effective to restore competition . . . [and] risk excessive government entanglement in the market’, and rather than eliminating the risk of harm to competition, ‘behavioral relief assumes regulatory conditions can effectively constrain a business’s natural incentives to maximize profits’.).

14 2011 D OJ Merger Remedy Policy Guide, at 12; see also Post-Trial Brief of the United States at 24, AT&T Inc , No. 17–2511.

15 See AAI Applauds Move to Block AT& T-Time Warner Merger, Sets Record Straight on Vertical Merger Enforcement, 3, American Antitrust Institute ( 21 N ovember 2017 ), available at www.antitrustinstitute.org/sites/default/files/AT%26T_Time%20Warner%20Commentary_F.pdf, and sources cited therein.

16 See Proposed Final Judgment, United States v. Bayer AG , 1: 18-cv -0124, at 18-31 (DDC 29 M ay 2018 ) (requiring divestiture of eight sets of assets to remedy an allegedly anticompetitive vertical merger).

17 Delrahim, Keynote ABA Address.

18 Id.

19 Federal Trade Commission, The FTC’s Merger Remedies 2006–2012, 15 ( January 2017 ) (the FTC’s Merger Remedies).

20 Patricia Brink et al, A Visitor’s Guide to Navigating US/EU Merger Remedies, 12 C ompetition Law Int’l 1, 86 (2016).

21 United States v. Aetna Inc , 340 F Supp.3d 1, 59 (DDC 2017); Commission notice on remedies acceptable under Council Regulation No. 139/2004, at 5 ( 22 O ctober 2008 ), available at http://ec.europa.eu/competition/mergers/legislation/files_remedies/remedies_notice_en.pdf (the 2008 E C Remedies Guide) (‘Structural commitments, in particular divestitures, proposed by the parties will meet these conditions only in so far as the Commission is able to conclude with the requisite degree of certainty that it will be possible to implement them and that it will be likely that the new commercial structures resulting from them will be sufficiently workable and lasting to ensure that the significant impediment to effective competition will not materialize.’).

22 FTC’s Merger Remedies, at 15.

23 Id. at 4. The FTC staff conducted interviews of market participants and studied sales data in 50 t ransactions, distributed a voluntary questionnaire in 15 t ransactions, and relied on internal knowledge in 24 t ransactions.

24 Id. at 7. In total, 76 o f the FTC’s 89 o rders required just structural relief. In five orders, the FTC required a combination of structural and non-structural relief in certain markets.

25 Id.

26 Id. at 21–22.

27 Id. at 22.

28 Id. Buyers in the FTC study also reported insufficient access to information during due diligence. Id. at 25.

29 Id. at 32.

30 Id.

31 Complaint, United States v. Halliburton Co , No. 1: 16-cv -00233 (D Del 6 A pril 2016 ).

32 Id. at para. 8.

33 Id. at para. 9.

34 Id.

35 240 F Supp 3d 1, 60 (DDC 2017), quoting US Dep’t of Justice, Antitrust Division Policy Guide to Merger Remedies 8–9 (2011).

36 Id. at 64–71.

37 2011 D OJ Merger Remedy Policy Guide at 7; 2008 E C Remedies Guide, at 8 (‘The divested activities must consist of a viable business that, if operated by a suitable purchaser, can compete effectively with the merged entity on a lasting basis and that is divested as a going concern.’).

38 2011 D OJ Merger Remedy Policy Guide at 8.

39 See, e.g., FTC Approves Red Ventures’ Application to Sell Caring.com ( 27 A pril 2018 ), available at
www.ftc.gov/ news-events / press-releases /2018/04/ ftc-approves - red-ventures - application-sell -caringcom (divestiture of subsidiary to private equity investors); Justice Department Requires Divestiture of General Electric Company’s Water & Process Technologies Business Before Merger with Baker Hughes Incorporated ( 12 J une 2017 ), available at www.justice.gov/opa/pr/ justice-department - requires-divestiture - general-electric -
company-s - water-process -technologies (divestiture of semi-autonomous subsidiary).

40 See, e.g., Justice Department Requires Martin Marietta to Divest Quarries to Preserve Competition in Connection With its Acquisition of Bluegrass Materials (Apr. 25, 2018), available at www.justice.gov/opa/pr/ justice-department - requires-martin - marietta-divest - quarries-preserve - competition-connection (requiring divestiture of particular quarry locations and all their included assets); FTC Approves Final Order Imposing Conditions on 7-Eleven ’s Acquisition of Nearly 1, 100 R etail Fuel Outlets from Competitor Sunoco ( 29 M arch 2018 ), available at www.ftc.gov/ news-events / press-releases /2018/03/ ftc-approves - final-order -
imposing-conditions - 7-elevens (requiring divestiture of 26 r etail fuel outlets); FTC Approves Final Order Requiring Alimentation Couche-Tard Inc and Affiliate CrossAmerica Partners LP to Divest 10 F uel States as a Condition of Acquiring Holiday Companies ( 16 F ebruary 2018 ), available at www.ftc.gov/ news-events / press-releases /2018/02/ ftc-approves - final-order - requiring-alimentation - couche-tard -inc; Justice Department Requires Divestitures of Radio Stations in Boston, San Francisco and Sacramento as Part of Entercom’s Acquisition of CBS Radio ( 1 N ovember 2017 ), available at www.justice.gov/opa/pr/ justice-department -
requires-divestitures - radio-stations - boston-san - francisco-and -sacramento.

41 2011 D OJ Merger Remedy Policy Guide at 9.

42 FTC’s Merger Remedies at 1.

43 2008 E C Remedies Guide, at 10 (‘The Commission has a clear preference for an existing stand-alone business. This may take the form of a pre-existing company or group of companies, or of a business division which was not previously legally incorporated as such.’).

44 See 2011 D OJ Merger Remedy Policy Guide at 8–9; Federal Trade Commission, Frequently Asked Questions About Merger Consent Order Provisions, www.ftc.gov/ tips-advice / competition-guidance / guide-antitrust -laws/mergers/ merger-faq #The Assets To Be Divested.

45 2011 D OJ Merger Remedy Policy Guide at 9.

46 Id. at 7.

47 See, e.g., Oerlikon-Buhrle Holding , 119 F TC 117 (1995); First Data Corp , 121 F TC 1 (1996).

48 Department of Justice, Justice Department Requires US Airways and American Airlines to Divest Facilities at Seven Key Airports to Enhance Systemwide Competition and Settle Merger Challenge ( 12 N ovember 2013 ), available at www.justice.gov/opa/pr/ justice-department - requires-us - airways-and - american-airlines -divest-
facilities-seven -key.

49 For additional discussion of intellectual property licensing as sufficient independent remedy, see the subsection ‘Intellectual property licences’ infra .

50 See, e.g., Competitive Impact Statement, United States v. Monsanto Co , 11: 07-cv -00992 (DDC 31 M ay 2007 ) available at www.justice.gov/atr/ case-document / competitive-impact - statement-154 .

51 Id.

52 Competitive Impact Statement, United States v. CenturyLink Inc, 1: 17-cv -02028, at 13 (DDC 14 N ovember 2017 ), available at www.justice.gov/atr/ case-document /file/1011721/download (‘The conveyance of intercity dark fiber via a long-term IRU is typical industry practice.’).

53 2011 D OJ Merger Remedy Policy Guide at 10–11.

54 2008 E C Remedies Guide, at 8 (‘For the business to be viable, it may also be necessary to include activities which are related to markets where the Commission did not identify competition concerns if this is required to create an effective competitor in the affected markets.’).

55 In the Matter of Guinness PLC , 1997 F TC LEXIS 324 ( 15 D ecember 1997 ).

56 2008 E C Remedies Guide, at 11 (‘Even though normally the divestiture of an existing viable stand-alone business is required, the Commission, taking into account the principle of proportionality, may also consider the divestiture of businesses which have existing strong links or are partially integrated with businesses retained by the parties and therefore need to be ‘carved out’ in those respects.’).

57 Department of Justice, Justice Department Secures Largest Negotiated Merger Divestiture Ever to Preserve Competition Threatened by Bayer’s Acquisition of Monsanto ( 29 M ay 2018 ), available at www.justice.gov/opa/pr/ justice-department - secures-largest - merger-divestiture - ever-preserve - competition-threatened.

58 Federal Trade Commission, Frequently Asked Questions About Merger Consent Order Provisions,
www.ftc.gov/ tips-advice / competition-guidance / guide-antitrust -laws/mergers/ merger-faq #Crown%20Jewels.

59 2008 E C Remedies Guide, at 44 (‘In certain cases, the implementation of the parties’ preferred divestiture option of a viable business solving the competition concerns might be uncertain in view, for example, of third parties’ preemption rights or uncertainty as to the transferability of key contracts, intellectual property rights, or the uncertainty of finding a suitable purchaser’); Id. at 45 (‘In such circumstances, . . . the parties will have to propose a second alternative divestiture . . . . Such an alternative commitment normally has to be a “crown jewel”, i.e. it should be as least as good as the first proposed divestiture in terms of creating a viable competitor once implemented, it should not involve any uncertainties as to its implementation and it should be capable of being implemented quickly in order to avoid that the overall implementation period exceeds what would normally be regarded as acceptable in the conditions of the market in question.’).

60 Id. See, e.g., In the Matter of Am Home Prods , Dkt No. C-3740 , at 12 (FTC 20 M ay 1997 ), available at
www.ftc.gov/sites/default/files/documents/cases/1997/05/c3740.do.pdf; In the Matter of Chevron Corp , 133 F TC 1, 29 ( 2 J anuary 2002 ).

61 135 F TC 350 (2003).

62 Id. at 421.

63 Id. at 421-22 .

65 Press Release, FTC, Announced Actions for 15 M arch 2002 ( 15 M arch 2002 ), www.ftc.gov/ news-events / press-releases /2002/03/ announced-actions - march-15 -2002.

66 Id. In the Matter of Hoechst AG , 1999 W L 1474043, * 12 F TC ( 7 D ecember 1999 ).

67 2004 D OJ Merger Remedy Policy Guide.

68 2011 D OJ Merger Remedy Policy Guide.

69 Competitive Impact Statement, US v. The Thompson Corp , 1:01CV 01419 D DC ( 27 J une 2001 ), www.justice.gov/atr/ case-document / competitive-impact - statement-206.

70 Id.

71 2011 D OJ Merger Remedy Policy Guide, at 9 (‘the Division may consider accepting divestiture of less than an existing business when a set of acceptable assets can be assembled from both of the merging firms.’); Federal Trade Commission, Negotiating Merger Remedies, 6–7 ( January 2012 ), www.ftc.gov/system/files/attachments/ negotiating-merger -remedies/ merger-remediesstmt .pdf (the 2012 F TC Merger Remedies Guide).

72 2012 F TC Merger Remedies Guide, at 7.

73 Id.

74 United States v. Aetna , 240 F Supp 3d 1, 71 (DDC 2017) (‘The Court will not rely too heavily on the [Administrative Services Agreement], because Aetna and Humana have no incentive to provide any assistance beyond the bare minimum during this period, lest they create too powerful a competitor.’); 2012 F TC Merger Remedies Guide, at 9 (‘Supply agreements and technical assistance may, however, create what the staff refers to as “continuing entanglements.” The staff seeks to avoid these because competitive issues may arise and complex monitoring may be required. In addition, the more a proposed buyer requires these provisions, the more difficult it may be to persuade the staff that such a divestiture would remedy the Commission’s competitive concerns. When they cannot be avoided, staff will seek to minimize the length of the agreements and may require independent monitoring.’).

75 2011 D OJ Merger Remedy Policy Guide, at 18 (‘Moreover, close and persistent ties between two or more competitors (as created by such agreements) can serve to enhance the flow of information or align incentives that may facilitate collusion or cause the loss of a competitive advantage.’).

76 Id. 2012 F TC Merger Remedies Guide, at 13; 2008 E C Merger Remedies Guide, at 7.

77 See e.g., Modified Final Judgment, United States v. Parker-Hannifin Corp , 1:17-cv -01354-JEJ , at 10 (D Del 30 A pril 2018 ), available at www.justice.gov/atr/case-document /file/1059391/download.

78 Id.

79 See, e.g., In the Matter of Ball Corp , 2016 W L 4446477, *12 (FTC 28 J une 2016 ); In the Matter of Alimentation Couche-Tard Inc , 2017 W L 6507209, *5 (FTC 15 D ecember 2017 ).

80 2012 F TC Merger Remedies Guide, at 9; 2011 D OJ Merger Remedy Policy Guide, at 18 (‘For example, the Division might require a supply agreement to accompany a divestiture if the purchaser is unable to manufacture the product for a transitional period (perhaps as plants are reconfigured or product mixes are altered.’).

81 2011 D OJ Merger Remedy Policy Guide, at 18, n. 41.

82 Id.

83 Id.

84 Id.

85 Proposed Final Judgment, United States v. Bayer AG , 1:18-cv -0124, at 22–23 (DDC 29 M ay 2018 ).

86 Id.

87 Id. at 23.

88 Competitive Impact Statement, United States v. Bayer AG , 1:18-cv -0124, at 20 (DDC 29 M ay 2018 ).

89 See DOJ and FTC, Antitrust Guidelines for the Licensing of Intellectual Property, 7–8, n.26 (January 2017 ), available at www.justice.gov/atr/IPguidelines/download.

90 2012 F TC Merger Remedies Guide, at 9.

91 Id.

92 See Makan Delrahim, Deputy Assistant Attorney General for Antitrust, DOJ, Forcing Firms to Share the Sandbox: Compulsory Licensing of Intellectual Property and Antitrust (10 M ay 2004 ), available at
www.justice.gov/atr/speech/forcing-firms -share-sandbox -compulsory-licensing -intellectual-property -
rights-and.

93 Press Release, DOJ, Ohio Steel Company Agrees to License Patents In Order to Resolve Justice Department’s Antitrust Concerns (26 A ugust 1999 ), www.justice.gov/archive/atr/public/press_releases/1999/2646.htm.

94 Id.

95 United States v. 3d Systems Corp , 2002- 2 T rade Cas para. 73,738 (DDC 2001).

96 FTC v. Elders Grain Inc , 868 F 2d 901, 907 (7th Cir 1989). The EU Commission has instead direct powers to require the parties to dissolve a concentration, in case the concentration either: (1) has been found to raise irremediable competition concerns and has been already implemented, (2) or has been approved conditional upon a remedy and the remedy has not been implemented. The Commission can accept restorative measures alternative to the dissolution (e.g., a different divestiture) only when the situation prevailing before the implementation of the concentration cannot be restored through dissolution of the concentration. Like in the US, also in the EU these provisions have been applied on very rare occasions (see M 2283, Schneider/Legrand and M 2416, Tetra Laval/Sidel ).

97 Id. Prior to FTC v. Elders Grain , a US district court had never ordered rescission under Section 13(b) of the FTC Act. Id.

98 Id. at 902.

99 Id.

100 Id. at 907 (‘Having stolen one march on the Commission, the defendants stole another by accelerating the closing date for their deal in order to prevent the Commission from getting into court in time to seek a temporary restraining order. To reward these tactics by holding that a district court has no power under section 13(b) to rescind a consummated transaction would go far toward rendering the statute a dead letter.’).

101 274 F Supp. 573, 590-92 (W D Okla 1967).

102 2012 F TC Merger Remedies Guide, at 7; See e.g., Decision and Order, In the Matter of Agrium Inc , Dkt No. C-4638 (FTC 7 F ebruary 2018 ), www.ftc.gov/system/files/documents/cases/161_0232_c4638_agrium_decision_and_order.pdf (requiring that respondents rescind the divestiture agreement in the event that the FTC determines the upfront buyer is not acceptable).

103 2012 F TC Merger Remedies Guide, at 7.

104 Kirk Victor, Debbie Feinstein of the FTC on the use of disgorgement in competition cases, mLex Market Insight, 6 O ctober 2015 , available at https://mlexmarketinsight.com/insights-center /editors-picks /antitrust/north-america /debbie-feinstein -of-the -ftc-on -the-use -of-disgorgement -in-competition -cases (quoting FTC Bureau of Competition Director Debbie Feinstein, ‘We think about whether there’s an important deterrent effect, both to the parties at issue and to other parties who might be doing similar things . . . we’re certainly thinking of applying disgorgement to consummated mergers – no question about it.’).

105 2011 D OJ Merger Remedy Policy Guide, at 6, n. 9.

106 Complaint, 2001 W L 34133969 (DDC 4 A pril 2001 ).

107 Id.

108 Press Release, FTC, Statement of Susan A Creighton, Deputy Director, Bureau of Competition Regarding FTC Settlement with Hearst Corporation (20 N ovember 2001 ), www.ftc.gov/news-events /press-releases /2001/11/statement-susan -creighton-deputy -director-bureau -competition.

109 Press Release, FTC, Mallinckrodt Will Pay $100 M illion to Settle FTC, State Charges It Illegally Maintained its Monopoly of Specialty Drug Used to Treat Infants (18 J anuary 2017 ), www.ftc.gov/news-events /press-releases /2017/01/mallinckrodt-will -pay-100 -million-settle -ftc-state -charges-it.

110 Id.

111 Id.

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