The Guide to Merger Remedies

Antitrust Remedies in Highly Regulated Industries

Cravath Swaine & Moore

Introduction

In the United States, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) (together, ‘the antitrust authorities’) are responsible for reviewing mergers and acquisitions, imposing appropriate remedies and ensuring a competitive market. From a regulatory perspective, firms in most industries must only wait for either the DOJ’s or FTC’s clearance to move forward with their transactions. However, firms in most highly regulated industries may face an additional barrier to closing their transactions. Subject not only to review by the DOJ or FTC, transactions in the banking, telecommunications, energy, agriculture, transportation and medical industries, among others, may also require transaction approval from the relevant regulatory agency that has jurisdiction over that industry.

Those regulatory agencies, as experts in the respective industries over which they have jurisdiction, may have their own views on how to fashion an effective remedy to counter any alleged harms from a transaction that could differ from the antitrust authorities’ approach. Where the antitrust authorities and regulatory agencies may disagree, the merging entities often face the consequences of prolonged review periods and repeated negotiations. However, regulatory review in conjunction with antitrust review can also have many benefits. The antitrust authorities can take advantage of the regulatory agencies’ strengths, including ready access to industry-specific information, expertise on the industry dynamics, insight into the market and its participants, and the ability to effectively monitor and oversee compliance. These strengths, if used effectively, can lead to more tailored remedies than the DOJ or FTC alone might be able to implement. Striking the right balance of deferring to regulatory expertise and adhering to the antitrust authorities’ mandate to maintain competition is key to ensuring both efficient and appropriate review and remedies.

This chapter contains three sections. ‘Overview of merger remedies’ identifies common types of merger remedies across all industries; ‘Highly regulated industries’ discusses the different approaches taken between the antitrust authorities and regulatory agencies in three highly regulated industries: telecommunications, banking and energy; and ‘Balancing remedies with regulation’ discusses questions raised by having both agency and antitrust review, and offers three considerations that may facilitate more efficient and effective remedies in those circumstances.

Overview of merger remedies

As described by the FTC and DOJ, the goal of remedies in merger review is to ‘effectively preserve competition in the relevant market’.2 The antitrust authorities have long recognised that determining an appropriate merger remedy – perhaps especially where the transaction involves a highly regulated industry – requires a close analysis of the facts of each individual transaction. Because every merger remedy must be tailored to the circumstances, ‘effective merger remedies . . . come in a wide variety of shapes and sizes’.3 Nonetheless, the antitrust authorities adhere to several key principles requiring that merger remedies (1) should effectively preserve competition, (2) should focus on preserving competition rather than protecting individual competitors, and (3) must be based on a careful application of legal and economic principles to the particular facts of a specific case.4 Only if it is unable to fashion a remedy that satisfies these principles will the DOJ or FTC seek to block the merger.5

The range of potential remedies typically falls within one of two categories: structural remedies that require divestitures of assets or business divisions; or non-structural conduct remedies that impose behavioural restrictions or requirements on merging firms.6 The DOJ and FTC generally require structural remedies, described by the DOJ as ‘simple [and] relatively easy to administer’, to remedy competitive concerns in horizontal mergers.7 By contrast, where vertical mergers raise competitive concerns, the DOJ and FTC historically have more often relied on conduct remedies, but have imposed structural remedies where conduct remedies are deemed inadequate.

Structural remedies, including divestitures of assets, business divisions and intellectual property, are common where a merger presents competitive concerns. A recent analysis by the FTC of merger remedies over a decade found that 80 per cent of challenged mergers resulted in structural remedies, with 87 per cent of challenged horizontal mergers resulting in a structural remedy.8 When imposing structural remedies, the DOJ and FTC strongly prefer divestitures of ‘existing, intact businesses’ as opposed to a set of assets.9 Where a merging entity proposes discrete asset (as opposed to business) divestitures, the DOJ or FTC may require additional assurances such as an upfront (as opposed to post-close) buyer, or a ‘crown jewels’ provision that would allow regulators to select a group of highly valued assets if the merged entity is otherwise unable to negotiate a satisfactory divestiture.10 The FTC’s recent remedy study found that 69 per cent of the transactions included in the study required an upfront buyer,11 compared with 33 per cent for which a post-close remedy was allowed. And, while the agencies have stated a strong preference for business divestitures as opposed to discrete asset divestitures, at least historically, only 40 per cent of structural remedies involved ongoing business divestitures, compared with 67 per cent involving selected assets.12

The antitrust authorities have a wide range of conduct remedies at their disposal, however these are imposed less frequently than structural remedies. According to the DOJ, conduct remedies are often viewed as an option where ‘a structural remedy would eliminate the merger’s potential efficiencies’ but where a remedy is still necessary.13 The most common conduct remedies include firewalls, non-discrimination provisions, mandatory licensing provisions, transparency requirements, anti-retaliatory provisions and the prohibition of certain contracting practices.14 Of course, the antitrust authorities are not limited to specific types of conduct remedies and may tailor consent decrees to the facts of the transaction to maximise the likelihood of an effective remedy. Conduct remedies, such as transparency provisions that may require a merging entity to share information with regulatory authorities on an ongoing basis, may be particularly relevant to addressing competitive concerns in transactions involving highly regulated industries.

The antitrust authorities have also combined both structural and conduct remedies to provide a more complete remedy.15 This was particularly true under the Obama administration, which withdrew the 2004 Merger Remedies Guidelines – and the explicit preference for structural remedies – indicating a more open approach to conduct remedies.16 David Gelfand, former Deputy Assistant Attorney General for Litigation, noted that the 2011 merger remedies ‘signaled a greater willingness to seek behavioral remedies in merger cases’.17 At the same time, the FTC withdrew its policy statement on limiting monetary remedies, allowing the FTC to add more weapons to its arsenal.18 In re Robert Bosch GmbH exemplifies this trend towards using a combination of structural and conduct remedies. The FTC challenged the merger of Robert Bosch GmBH and SPX Service Solutions, which would have created a ‘virtual monopoly in the market for automobile air conditioning and servicing equipment’.19 The parties reached a consent agreement that included standard divestiture requirements along with conduct relief requiring that the firm participate in a standard-setting process, agree to disclose patents essential to the set standard and agree to license those patents either royalty-free or on fair, reasonable and non-discriminatory terms.20

However, under the Trump administration, the DOJ has signalled a change in policy regarding conduct remedies, which DOJ and FTC leadership have criticised for being difficult to enforce, ineffectual and a sign of government overstep. For example, the Assistant Attorney General of the DOJ’s Antitrust Division, Makan Delrahim, has criticised conduct remedies as ‘fundamentally regulatory, imposing government oversight on what should preferably be a free market’.21 And the Acting Director of the FTC’s Bureau of Competition, Bruce Hoffman, recently commented that, for problematic vertical mergers, the FTC ‘prefer[s] structural remedies [because] they eliminate both the incentive and the ability to engage in harmful conduct, which eliminates the need for ongoing intervention’.22 The DOJ’s Remedy Guidelines also recognise these concerns, noting that conduct remedies are not designed to ‘displac[e] the competitive decision-making process’ and that because the DOJ ‘is not a regulatory agency’, conduct remedies should be ‘tailored as precisely as possible to the competitive harms associated with the merger’.23 It remains to be seen how any revamped approach to conduct remedies will impact antitrust remedies in highly regulated industries, which are already subject to the type of ongoing regulatory oversight that the antitrust agencies seek to avoid.

Highly regulated industries

The DOJ and FTC have primary jurisdiction over enforcing the antitrust laws, including merger review under Section 7 of the Clayton Act, 15 USC Section 18.24 However, transactions in certain highly regulated industries – such as banking, agriculture, energy, telecommunications and others – may require additional approvals from the relevant regulator for that industry. Multiple agencies including the Federal Communications Commission (FCC), the Federal Energy Regulatory Commission (FERC), federal banking regulators such as the governors of the Federal Reserve, the Department of Agriculture (USDA) and the Department of Transportation (DOT) are often called upon to weigh in on a merger or acquisition, and potentially a proposed remedy, within their relevant industries.

The DOJ and FTC recognise the significance of merger review in these highly regulated industries, and have stated that ‘the existence of industry regulation can have a significant impact on crafting an effective remedy.’25 For example, the Merger Remedies Guidelines suggest that where mergers involve other regulatory agencies, ‘collaboration with the regulatory agency is a best practice’ to ensure efficient and effective remedies.26 The DOJ and FTC have also recognised that in highly regulated industries, the industry regulator may be a partner in fashioning a remedy. For example, the DOJ may decide not to include certain provisions in a consent decree if in its view such issues would be better handled by regulatory remedies and may be able to make monitoring more efficient by relying on the regulatory agency to ensure compliance.27

The extent to which the antitrust authorities defer to or collaborate with other regulatory agencies generally varies by industry. In some regulated industries, the DOJ and FTC have exclusive jurisdiction over certain merger reviews. For example, while FERC maintains jurisdiction over merger review of certain energy sectors, it has no authority over transactions involving securities acquisitions by natural gas companies or by oil and petroleum companies, which have historically been reviewed by the FTC.28 On the other end of the spectrum, in certain regulated industries the DOJ and FTC have no authority or the relevant regulatory agency has exclusive jurisdiction over mergers. In the energy sector, mergers involving the licensing of nuclear power plants are immune from antitrust scrutiny.29 In the sports world, there are several well-known exemptions from the antitrust laws, including an explicit exemption in the Sports Broadcasting Act to allow the American Football League and National Football League to merge into a single league.30 In the agriculture sector, the Capper-Volstead Act ensures that only the Secretary of Agriculture has the authority to challenge cooperative associations.31 In the transportation sector, despite ongoing deregulation, the Surface Transportation Board has exclusive jurisdiction over mergers involving common carriers in railways.32

Between these two extremes, there are many regulated industries in which the antitrust authorities share merger review responsibilities with a regulatory agency. This dual review model raises many questions about the appropriate balance between the antitrust authorities’ prerogatives with the regulatory agency’s interests and expertise. Should the DOJ and FTC defer to regulatory agencies that have the experience and resources to monitor their industries? Or should the regulatory agencies’ interests take a back seat in the interest of a consistent approach to antitrust enforcement? The following subsections provide an analysis of merger reviews and remedies in three industries with dual review: telecommunications, banking and energy.

Telecommunications

In the telecommunications industry, the Communications Act dictates that the FCC must conduct a review that ‘is separate from (though complementary to) the analysis conducted by’ the antitrust authorities under Section 7 of the Clayton Act.33 This model of separate but complementary review arises from different statutory standards: the DOJ and FTC’s analysis under the Clayton Act focuses on ensuring that transactions do not ‘substantially lessen competition’ in any relevant market; the FCC is charged with ensuring that any merger or acquisition is in ‘the public interest’.34 This public interest standard ‘is not limited to purely economic outcomes’ but also must ‘[encompass] the broad aims of the Communications Act’, which include not just a preference for preserving competition but also, among other things, ‘ensuring a diversity of information sources and services to the public, and generally managing spectrum in the public interest’.35 If the potential harms are outweighed by the potential benefits, including public interest benefits such as ensuring diversity, localism and broadcasting, the FCC will approve the transaction.

Since the passage of the 1996 Telecommunications Act mandating deregulation of the telephone and wireless industry, there has been significant merger activity in this sector. In response, the antitrust authorities and the FCC have imposed a wide range of remedies in telecommunications mergers.36 Generally, the DOJ, which has historically reviewed transactions in the telecommunications space, more often has required structural remedies such as divestitures. For example, the DOJ required divestitures in 13 markets in response to the 2004 merger of Cingular Wireless and AT&T;37 divestitures in 16 markets in the 2005 Alltel Corporation/Western Wireless merger;38 and divestiture in eight markets in the 2009 AT&T/Centennial Communications merger.39 Not all remedies imposed by the antitrust authorities were strictly structural. The DOJ imposed a conduct remedy in United States v. Verizon Communications concerning a series of commercial agreements between Verizon Communications Inc, CellcoPartnership d/b/a/ Verizon Wireless, Comcast Corporation, Time Warner Cable Inc, Bright House Networks LLC and Cox Communications relating to bundling packages. The parties agreed to enter into a consent decree requiring that the involved cable companies modify the parties’ joint agreement and prohibited Verizon from selling its products in certain geographic areas.40

The FCC, by comparison, has more often required conduct remedies. For example, the FCC approved the AOL and Time Warner merger subject to several conditions to protect competition in the broadband industry, including requiring that the merged entity allow non-affiliated cable broadband service on its system and prohibiting the company from interfering with content from non-affiliated services.41 Likewise, the FCC approved the GTE Corporation and Bell Atlantic transaction subject to conduct remedies, including several market opening conditions, and structural remedies, including an agreed-upon spin-off of a subsidiary, Genuity Inc, to an independently owned public corporation.42

These patterns of antitrust authorities applying structural remedies and the FCC applying conduct remedies likely reflect not only the agencies’ respective approaches to merger review but also their respective mandates and resources. The DOJ and FTC are agencies charged with enforcing the antitrust laws – not regulating and monitoring industries’ compliance. By contrast, the FCC is a regulatory agency with both the capacity and statutory imperative to monitor and regulate the telecommunications industry. The 2017 Centurylink and Level3 merger demonstrates how the agencies can work together to impose a holistic remedy package with both structural and conduct elements. After review by both the DOJ and FCC of a merger between the two largest fibre infrastructure providers, the DOJ imposed structural remedies requiring divestiture of intercity dark fibre assets and other fibre assets in concentrated geographic areas. In conjunction with the DOJ’s order, the FCC imposed conduct remedies requiring the merged entity to agree to not raise rates for five years in certain geographic locations.43

However, the two agencies may not always view transactions in the same light. Occasionally, one agency may approve a transaction unconditionally while the other identifies concerns and deems that a remedy is necessary. In the Comcast and Time Warner acquisition of Adelphia Communications assets, for example, the FCC imposed conditions months after the FTC had approved the transaction without remedies.44 While the FTC may have opted to defer to the FCC’s decision in this situation, this sort of discrepancy as to outcome can add significant costs to firms in terms of the cost of negotiating with multiple agencies and delay in closing the transaction.

Banking

In the banking industry, mergers are reviewed by both the DOJ, under the Clayton Act, and the banking regulators with jurisdiction over the merging banks – either the Federal Reserve or the Federal Deposit Insurance Corporation – under the Bank Merger Act of 1966.45 Banking regulators have separate concerns distinct from the DOJ’s primary concern of maintaining competition. These concerns are reflected in the Bank Merger Act, which allows banking regulators to approve even anticompetitive mergers if the negative effects are ‘clearly outweighed in the public interest by the probable effect of the transition in meeting the convenience and needs of the community to be served’.46 Likewise, the Dodd-Frank Act requires banking regulators to perform an analysis of the efficiency and competitiveness of financial firms, and assess potential risks of concentration on stability of the US financial system as a result of mergers. Because of the different legislative mandates of the DOJ and banking regulators, even if the relevant banking regulator approves a merger, the DOJ has the authority to intervene to block a bank merger within a consolidated 30-day window after banking regulators’ approval.47

The Bank Merger Act largely replicates the language of the Clayton Act, prohibiting mergers or acquisitions that ‘would result in a monopoly’ or whose ‘effect . . . may be substantially to lessen competition’.48 It is not surprising then that both banking regulators and the DOJ have taken similar approaches to reviewing mergers. Both have adopted the Bank Merger Screening Guidelines, which outline a method to screen out mergers or acquisitions that do not reach certain market concentration levels, measured by the Herfindahl-Hirschman Index (HHI) levels,49 allowing the regulators to focus their scrutiny only on mergers that are above these thresholds.50 Despite starting with the same screening guidelines, the DOJ’s analysis can diverge from the banking regulators’ when it comes to defining the market. Bank regulators have long adhered to the market definition laid out in United States v. Philadelphia National Bank, where the Supreme Court found that the relevant market included a ‘cluster’ of products including services to both consumers and small businesses.51 By contrast, the DOJ tends to use a stricter definition that often separates small business services from consumer services and also does not take trusts into account in calculating HHIs.52 This difference in market definition has led the DOJ to intervene in mergers where banking regulators have approved a merger or ordered fewer divestitures than the DOJ believes is necessary.53

Both the banking regulators and DOJ agree that ‘appropriate divestiture’ is the correct remedy to resolve anticompetitive concerns in the banking industry.54 Large-scale divestitures are relatively uncommon in bank mergers – a 1998 study by the Federal Reserve found that for 4,400 bank mergers there had only been 751 branch divestitures between 1989 and 1998, with the largest divestiture (attributed to the BankAmerica merger with Security Pacific Corporation) requiring a divestiture of 187 branches.55 In the years since, there have been several high-profile bank mergers, yet large divestitures remain relatively uncommon. Where divestitures are involved, the DOJ takes a far more active role in the divestiture process compared to the Federal Reserve Board. The Federal Reserve Board often defers to the DOJ in negotiating the specifics of divestitures, as the Federal Reserve Board itself is more concerned with maintaining the structure of the market and ensuring continued access to community banking.56

Energy

FERC and the antitrust authorities both have jurisdiction to review proposed mergers involving electric public utilities.57 Sections 201 and 203 of the Federal Power Act place all entities that meet the definition of a public utility under the jurisdiction of FERC and require that FERC approve the ‘proposed disposition, consolidation, acquisition, or change in control’ of such an entity.58 As opposed to the antitrust authorities’ focus on the effect on competition, FERC is required to take into account three broad factors: the effect of the merger on competition; the effect on rates; and the effect on regulation.59 Moreover, FERC is also charged with ensuring that mergers are in the public interest. While FERC is not required to find that a merger has a clearly positive benefit in order to approve the merger, it must find that the ‘transaction taken as a whole [is] consistent with the public interest’.60

FERC largely adheres to the antitrust authorities’ approach to merger review. In a 1996 policy statement, FERC clarified its merger review process in an effort to ensure ‘greater regulatory certainty and expedition of regulatory action in order to respond quickly to rapidly changing market conditions’.61 In this statement, FERC endorsed the application of the 1992 Horizontal Merger Guidelines for its own review.62 However, following the DOJ and FTC’s release of updated merger guidelines in 2010, FERC decided to maintain its current approach and declined the full adoption of the 2010 guidelines. Instead, FERC reiterated that its analysis was largely in accordance with the 2010 Guidelines in an effort to ensure that it would continue to take a similar approach to merger review as the antitrust authorities.63

Recent mergers approved by FERC suggest that antitrust authorities may defer to FERC’s analysis. In March 2016, FERC preliminarily approved Energy Capital Partners and Dynegy Inc’s plans to form a joint venture to acquire ENGIE’s power portfolio.64 FERC did require mediation of at least one market.65 Citing the merger guidelines, FERC explained that the guidelines ‘contemplate using remedies to mitigate any harm to competition’ and required the merging entities to provide a plan for mitigation, which could include divestitures or ‘other mitigation measures’, within 30 days.66 The FTC granted the parties early termination of the Hart–Scott–Rodino waiting period after FERC’s approval.67 In September 2016, FERC approved the merger of Fortis Inc with ITC Investment Holdings Inc without remedy.68 Similarly, no action was brought by the antitrust authorities.

Despite the consistency between FERC and the antitrust authorities in recent mergers, the agencies have not always taken consistent approaches. In 2000, FERC required conduct remedies in the merger between American Electric Power Company and Central and South West Corporation where the DOJ had cleared the transaction without remedy.69 The opposite occurred in the merger of Exelon Corporation and Public Service Enterprise Group Inc, which was approved by FERC yet opposed by the DOJ.70 These may be examples where either the antitrust authority or FERC was deferring to the decision of the other agencies, but these examples could also highlight why some have criticised the dual review model as inviting ‘potential inconsistencies’ and resulting in ‘cost duplication’.71

Other industries

Telecommunications, banking and energy are far from the only industries where regulatory agencies have historically held some responsibility to review mergers along with antitrust authorities. For example, in agriculture, while the Capper-Volstead Act continues to provide antitrust immunity for agricultural cooperatives meeting certain criteria,72 USDA and the antitrust authorities have taken a collaborative approach to mergers and acquisitions in industries that are subject to antitrust review. In 1999, the agencies formalised this arrangement in a memorandum of understanding, dictating that the agencies would ‘coordinate and confer’ on issues relating to competitive conditions in the agricultural marketplace.73 Today, the DOJ and FTC often review mergers in certain agricultural industries with the USDA’s input.

In certain transportation industries, Congress has shifted merger review responsibility from the DOT to the DOJ as part of the ongoing deregulation of the transportation industry more generally.74 However, the DOT continues to work with the DOJ where appropriate. For example, in 2001, after United Airlines and US Airways abandoned an attempted merger in the face of antitrust scrutiny, the two entities approached DOT with a code share arrangement. The DOT worked with the DOJ to impose conduct restrictions on the arrangement including requiring independent fairs, firewalls on review and code share routes, and non-discrimination provisions.75

Balancing remedies with regulation

As discussed above, there is a wide range of approaches for merger review between antitrust authorities and specialised regulatory agencies. Given the range of different approaches, it is difficult to make generalisations across either agencies or industries. What is clear is that there are certain strengths and weaknesses to a dual merger review and remedy approach. On the one hand, the dual review system has been criticised for its purported inefficiency and added costs of concurrent reviews by two agencies.76 On the other hand, others have touted the importance of consistent antitrust review77 and the avoidance of agency capture that a dual review system can accomplish. So how should antitrust authorities approach mergers in highly regulated industries? Should Congress do away with dual review and grant exclusive merger review jurisdiction to the DOJ or FTC? Or should the regulatory agencies be responsible for merger review and remedies in their areas of expertise? A review of past practices suggests that there is not a single right answer to these questions. However, in the current landscape there are considerations that could mediate some concerns about inefficiency and cost.

First, coordination between the relevant antitrust authority and regulatory agency can facilitate consistent outcomes and ensure that the appropriate remedies are ordered. The most common critique of having both antitrust and regulatory review of mergers is inefficiency. Having two federal agencies both expend time and resources reviewing mergers and imposing remedies is expensive for both taxpayers and the merging entities, and extends the time required to review transactions. Conflicting decisions – where one agency may approve a transaction while the other challenges it – also add to the risk of inefficiency. Better coordination and cooperation can mediate these concerns to an extent.78 As the American Antitrust Institute identified, increased cooperation should be a ‘high priority’, particularly in industries transitioning from regulated to a more competitive free market.79

Second, antitrust authorities should continue to use regulatory agencies’ strengths to the fullest extent possible to construct appropriate remedies. Regulatory agencies have expert knowledge of the industry and often have access to far more information on the market than the DOJ or FTC would be able to gather on their own. The DOJ and FTC have to rely on receiving information from parties, competitors and customers in the market. Such information is often limited in scope and time period. By contrast, regulatory agencies, such as the FCC and Federal Reserve, have access to information on the market spanning decades and are better able to access necessary information that can save antitrust authorities time and cost. Moreover, regulatory agencies already have the ability to monitor and oversee industry actors. Reliance on the regulatory agencies’ ability to monitor could resolve the frequent concerns about imposing conduct remedies and the use of long-term consent decrees.80 The ability to impose effective conduct remedies may reduce the DOJ and FTC’s reliance on the one-time fix of a structural remedy and open the possibility of more tailored remedies.81

Third, the antitrust authorities should consider the regulatory goals of an industry in fashioning a remedy in that industry. Regulatory agencies often face different and sometimes competing legislative mandates compared with the DOJ or FTC mandate of maintaining competition. For example, where the statutory goal is deregulation, such as in telecommunications, antitrust authorities can play a larger role in fashioning remedies that ensure a competitive market; where a statutory goal is to ensure the stability of the US banking market, it may be appropriate to consider or defer to regulatory expertise even if competition concerns could require more extensive remedies. Similarly, multiple regulatory agencies are charged with ensuring a merger is in the ‘public interest’, including the FCC and FERC. While adherence to the Clayton Act will often lead to outcomes that are in the public interest, in the form of lower price or better quality owing to increased competition, this outcome is not guaranteed – a natural monopolist may be able to maximise consumer interest in some cases.82 For this reason, some have argued that the DOJ and FTC should take a back seat with regard to the judgments of other regulatory agencies.83 Of course, a regulatory agency’s judgment of what is in the public interest may fail to take into account the antitrust concerns of the FTC and DOJ, and may result in a less competitive market that harms consumers in the future. This is the balance that must be weighed.

Conclusion

There is no one solution for how to approach merger review and remedies in highly regulated industries. There are, however, many examples of the different approaches taken by both the antitrust authorities and regulatory agencies in various industries. Despite the often different approaches and standards applied in dual review circumstances, merger remedies as a whole have generally been effective and relatively predictable in such industries. As the DOJ, the FTC and the multiple other regulatory agencies responsible for reviewing mergers in highly regulated industries continue to refine and rework their approaches, one can hope that merger remedies continue to be tailored and effective – and predictable – in the future.

1 Christine A Varney, Julie A North and Margaret Segall D’Amico are partners, and Molly M Jamison is an associate, at Cravath, Swaine & Moore LLP.

2 DOJ, Antitrust Division Policy Guide to Merger Remedies 1 (June 2011) (Merger Remedy Guidelines) (describing preserving competition as the ‘touchstone principle’ of appropriate merger remedies); see also Richard Feinstein, FTC Bureau of Competition, Negotiating Merger Remedies 4 (January 2012) (describing the FTC’s view that acceptable remedies ‘maintain or restore competition in the markets affected by the merger’).

3 Merger Remedy Guidelines, supra note 2, at 2.

4 Id.

5 Id. at 3.

6 Id. at 6.

7 Id. at 6 (quoting United States v. EI du Pont de Nemours & Co, 366 US 316, 331 (1961)).

8 FTC, The FTC’s Merger Remedies 2006–2012, at 13 (January 2017) (FTC Remedy Review), available at www.ftc.gov/system/files/documents/reports/ftcs-merger-remedies-2006-2012-report-bureaus-competition-economics/p143100_ftc_merger_remedies_2006-2012.pdf.

9 Merger Remedy Guidelines, supra note 2, at 9.

10 Id.; see also, e.g., Competitive Impact Statement at 8 n.1, United States v. Cookson Group plc, 1-08-cv-00389 (DDC 4 March 2008), available at www.justice.gov/atr/cases/f230700/230742.pdf (requiring a proposed remedy ‘enabl[ing] the purchaser to offer the “full line” of’ products offered by one of the merging parties, ‘ensur[ing] that the purchaser would have the incentive and all the assets necessary to be an effective, long-term competitor in these products’).

11 The antitrust authorities may require that the parties propose a divestiture to a particular buyer before accepting the proposed remedy, otherwise known as requiring an upfront buyer.

12 FTC Remedy Review, supra note 8, at 14.

13 Merger Remedy Guidelines, supra note 2, at 7.

14 Id. at 12–18 (describing the various conduct remedies).

15 See id. at 18–19.

16 DOJ, Press Release No. 11-788, Antitrust Division Issues Updated Merger Remedies Guide (17 June 2011), available at www.justice.gov/opa/pr/antitrust-division-issues-updated-merger-remedies-guide.

17 James J O’Connell, Seven Years On: Antitrust Enforcement During the Obama Administration, 30 Antitrust 5, 10 (Spring 2016).

18 See Policy Statement on Monetary Equitable Remedies in Competition Cases, 68 Fed Reg 45,820 (4 August 2003).

19 Robert Bosch Gmbh, 155 FTC 713 (2013).

20 See id.

21 Makan Delrahim, Assistant Attorney General, DOJ, Keynote Address at Am Bar Association’s Antitrust Fall Forum (16 November 2017), available at www.justice.gov/opa/speech/assistant-attorney-general-makan-
delrahim-delivers-keynote-address-american-bar.

22 D Bruce Hoffman, Acting Director, FTC Bureau of Competition, Remarks at the Credit Suisse 2018 Washington Perspectives Conference (10 January 2018).

23 Merger Remedy Guidelines, supra note 2, at 7 n.12.

24 The Hart–Scott–Rodino Act established the pre-merger notification programme that governs the process by which the FTC and DOJ evaluate proposed mergers. See 15 USC Section 18a.

25 Merger Remedy Guidelines, supra note 2, at 20.

26 Id.

27 Id.; see also Christine Varney, Assistant Attorney General, DOJ, Briefing on Comcast/NBCU Joint Venture (18 January 2011), available at www.justice.gov/atr/public/speeches/266156.htm (‘I really want to highlight the great cooperation and unprecedented coordination with the FCC. The FCC’s order made it unnecessary for the division to impose similar requirements on certain issues. This approach resulted in effective, efficient and consistent remedies.’).

28 See II ABA Section of Antitrust Law, Antitrust Law Developments 1372 (7th ed 2012) (Antitrust Law Developments); Cal v. Fed Power Comm’n, 369 US 482, 486–87 (1962) (finding that the DOJ, FTC and private parties have standing to challenge natural gas mergers and acquisitions).

29 See Antitrust Law Developments, supra note 28, at 1,377; Energy Policy Act of 2005 Section 625, Pub L 109–58, 119 Stat 594 (codified at 42 USC Section 2,135).

30 Sports Broadcasting Act, 15 USC Section 1,291.

31 See Antitrust Law Developments, supra note 28, at 1,319.

32 15 USC Section 21.

33 Jon Sallet, General Counsel, FCC, FCC Transaction Review: Competition and the Public Interest (12 August 2014), available at www.fcc.gov/news-events/blog/2014/08/12/fcc-transaction-
review-competition-and-public-interest.

34 See Telecommunications Act of 1996 Section 601, Pub L No. 104–104, 110 Stat 143 (‘[N]othing in this Act or the amendments made by this Act shall be construed to modify, impair, or supersede the applicability of any of the antitrust laws.’). See also Verizon Commc’ns Inc v. Law Offices of Curtis V Trinko, LLP, 540 US 398, 406 (2004) (noting that ‘Section 601(b)(1) of the 1996 Act is an antitrust-specific saving clause . . . that . . . bars a finding of implied immunity.’)

35 Sallett, supra note 33.

36 See Antitrust Law Developments, supra note 28, at 1344–47.

37 United States v. Cingular Wireless Corp, No: 1:04-CV-01850 (RBW), 2005 WL 6357269, at *2–3 (DDC 14 March 2005).

38 United States v. AllTel Corp, No. 05-1345 (RCL), Slip Op at 4–5 (DDC 13 October 2005), available at
www.justice.gov/atr/case-document/file/484861/download.

39 United States v. AT&T Inc, No. 1:09-cv-1932 (HHK), 2010 WL 1726890, at *1–2 (DDC 10 February 2010).

40 United States v. Verizon Commc’ns Inc, No. 1:12-CV-01354 (RMC), Slip Op at 8–15 (DDC 13 August 2013), available at www.justice.gov/atr/case-document/file/514946/download.

41 Time Warner Inc, 16 FCC Rcd. 6547, 6678–79 (2001).

42 GTE Corp, 15 FCC Rcd 14032, 14232–35 (16 June 2000).

43 Final Judgment at 3–4, 13–16, United States v. CenturyLink Inc, No. 1:17-CV-02028 (KBJ), (DDC 6 March 2018) available at www.justice.gov/atr/case-document/file/1041566/download (requiring divestitures of dark fibre and other fibre assets); Level3 Commn’cns Inc, No. 16-403, 2017 WL 4942794, at *8, *20-21 (FCC 30 October 2017) (imposing additional conduct remedies).

44 FTC, FTCs Competition Bureau Closes Investigation into Comcast, Time Warner Cable and Adelphia Communications Transactions (31 January 2006) www.ftc.gov/news-events/press-releases/2006/01/ftcs-competition-bureau-closes-investigation-comcast-time-warner (announcing close of FTC investigation in January 2006); Time Warner Cable Inc, 21 FCC Rcd 8203, 8332 (13 July 2006) (imposing conditions on the transaction in July 2006).

45 See IB Phillip E Areeda and Herbert Hovenkamp, Antitrust Law (4th ed 2013) 40 para. 251 (describing that the banking authority that maintains jurisdiction over a bank will be charged with enforcement. For federal banks this is the Comptroller of the Currency and for state chartered banks this is the Federal Deposit Insurance Corporation or the Board of Governors of the Federal Reserve System.); 12 USC Section 1828(c)(2).

46 See 12 USC Section 1828(c)(5)(B).

47 12 USC Section 1828(c)(7)(A); see also Bd of Governors of the Fed Reserve Bd, How do the Federal Reserve and the US Department of Justice, Antitrust Division, analyze the competitive effects of mergers and acquisitions under the Bank Holding Company Act, the Bank Merger Act and the Home Owners’ Loan Act? FAQs, at 11 (Bank Merger FAQs), available at www.justice.gov/sites/default/files/atr/legacy/2014/10/09/308893.pdf (‘If the banking agency nonetheless approves the transaction, the Division generally has 30 days after the agency approval to challenge the proposed transaction in court.’).

48 See 12 USC Section 1828(c)(5).

49 The HHI is calculated by summing the squares of the individual firms’ market shares to provide a measure of market concentration by market share. See DOJ, Horizontal Merger Guidelines Section 5.3 (19 August 2010), available at www.justice.gov/atr/horizontal-merger-guidelines-08192010#5c.

50 See Bank Merger FAQs, supra note 47, at 8 (‘An application for a transaction that includes a proposed divestiture that would cause the structural effects of the transaction to meet the delegation criteria for competition (i.e., a change in the HHI of less than 200 points or a post-merger HHI of less than 1800, and a post-merger market share below 35 percent) is unlikely to be denied for competitive reasons.’)

51 United States v. Phila Nat’l Bank, 374 US 321, 356–57 (1963).

52 See Anthony W Cyrnak, Bank Merger Policy and the New CRA Data, Federal Reserve Bulletin 703, 703–04 (September 1998), available at www.federalreserve.gov/pubs/bulletin/1998/998lead.pdf.

53 While relying on older data (from 1992), a study found that the DOJ was more likely compared to the Federal Reserve to require divestitures and to require more divestitures. In at least two cases, the Federal Reserve proposed either a smaller number of divestitures or no divestitures and the DOJ sued to intervene. Jim Burke, Divestiture As an Antitrust Remedy in Bank Mergers, at 8–9 (1998), available at www.federalreserve.gov/pubs/feds/1998/199814/199814pap.pdf.

54 Merger Remedies Guidelines, supra note 2, at 22.

55 Steven J Pilloff, What’s Happened at Divested Bank offices? An Empirical Analysis of Antitrust Divestitures in Bank Mergers, FEDS Working Paper No. 2002-60, at 10 Tbl 1 (December 2002) available at
www.federalreserve.gov/pubs/feds/2002/200260/200260pap.pdf.

56 See generally Bank Merger FAQs, supra note 47 (detailing Federal Reserve Board’s approach).

57 Federal Power Act, 16 USC Section 824b (requiring authorisation from FERC for any public utility to ‘merge or consolidate’).

58 FERC, Mergers and Sections 201 and 203 Transactions, (last accessed 28 February 2018) www.ferc.gov/industries/electric/gen-info/mergers.asp.

59 Id.

60 Inquiry Concerning the Commission’s Merger Policy Under the Federal Power Act: Policy Statement, 61 Fed Reg 68,595–01, 68,598 (30 December 1996).

61 Id. at 68,596.

62 See id.

63 Order Reaffirming Comm’n Policy and Terminating Proceeding, 138 FERC para. 61,109, 61,459–60 (16 February 2012).

64 Atlas Power Finance LLC, 157 FERC para. 61,237 (22 December 2016) (order conditionally authorising acquisition).

65 Id.

66 Id. at 24.

67 Fed Trade Comm’n, 20160921: Dynegy Inc; ENGIE SA (1 April 2016), www.ftc.gov/enforcement/premerger-notification-program/early-termination-notices/20160921.

68 Fortis Inc, 156 FERC para. 61,219 (23 September 2016) (order conditionally authorising acquisition).

69 The New PJM Companies, 104 FERC para. 61274 (12 September 2003) (order announcing comm’n inquiry).

70 Proposed Final Judgment, United States v. Exelon Corp, No. 1:06-cv-01138 (JDB) (DDC 22 June 2006), available at www.justice.gov/atr/case-document/proposed-final-judgment-113.

71 Garry A Gabison, Dual Enforcement of Electric Utility Mergers and Acquisitions, 17 J Bus & Sec L 11, 34–36 (2017).

72 See Christine A Varney, The Capper-Volstead Act, Agricultural Cooperatives, and Antitrust Immunity, Antitrust Source (December 2010), www.americanbar.org/content/dam/aba/publishing/antitrust_source/Dec10_Varney12_21.authcheckdam.pdf.

73 Antitrust Law Developments, supra note 28, at 1,315.

74 See Antitrust Law Developments, supra note 28, at 1,507–09.

75 See Review Under 49 USC 41720 of United/US Airways Agreements, 67 Fed Reg 62,846 (8 October 2002).

76 See, e.g., Gabison, supra note 71, at 34–36.

77 See, e.g., William J Baer, Former Dir, FTC, FTC Perspectives on Competition Policy and Enforcement Initiatives in Electric Power (4 December 1997), available at www.ftc.gov/public-statements/1997/12/ftc-perspectives-competition-policy-and-enforcement-initiatives-electric.

78 Stuart M Chemtob, Special Counsel for Int’l Trade, DOJ, The Role of Competition Agencies in Regulated Sectors (11 May 2007) available at www.justice.gov/atr/speech/role-competition-agencies-regulated-sectors.

79 Diana L Moss, Am Antitrust Institute, Regulated Industries 3–4 (5 December 2005), available at
https://govinfo.library.unt.edu/amc/commission_hearings/pdf/Moss_Statement.pdf.

80 See, e.g., Delrahim, supra note 21.

81 See Moss, supra note 79, at 5 (explaining that structural remedies are ‘immediate and permanent . . . [but] not trouble-free’).

82 See Gabison, supra note 71, at 33–34 (explaining that ‘[t]he FERC . . . has more experience with public utilities and natural monopolies’).

83 Id. (arguing that FERC should be the only antitrust regulator of public utility mergers).

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