The Guide to Merger Remedies

Negotiating Remedies: A Perspective from the Agencies

09 August 2018

Overall approach to negotiating with the agency

It is frequently stated that every merger case turns on its particular facts, and that is perhaps doubly true for merger remedies. Nevertheless, the US Department of Justice (DOJ) and the Federal Trade Commission (FTC) approach the process in a regularised way. Any successful remedy discussion requires the parties – the merging parties and possible divestiture buyers – to understand how the staff is analysing the case: what remedy the staff is looking for, and why and how the overarching need to minimise the risk of failure will drive much of the decision-making. These are the subjects of this chapter.

The agencies enter all settlement discussions with a broad goal: to fully restore or maintain the competition that the merger would eliminate.2 Unless the agency can conclude that a remedy will fully maintain competition, it will likely reject the proposal and challenge the merger.3 Accordingly, the agency will resist partial solutions.

The parties must start with a clear understanding of the antitrust case as the agency staff perceives it. By the time parties begin settlement talks, they should understand how the agency views the markets and overlaps. If the parties have any doubts about that, they should ask. The agency staff will almost always discuss its concerns. In any event, if the parties are unclear about the agency’s view, discussions will quickly identify areas of disagreement. Any proposal should address how it will solve the problems raised by the merger.4

For horizontal mergers, both agencies have emphasised a strong preference for a complete divestiture of overlapping assets. As often explained,5 a complete divestiture is the cleanest way to quickly create a robust competitor to compete with the merged firm.6 The divestiture should transfer the current (and expected future) market share and competitive presence of one of the merging firms to a new firm.7 Although the parties may continue discussing the substantive case, extended discussion over why something less than one side’s market presence should be divested will delay settlement. Reaching agreement with the agency on this point usually focuses the rest of the discussions on the particulars of which assets and businesses must be divested and how.

Separately, however, the parties must also have a solid understanding of the businesses involved in the merger: how (and where) the products are made; other products that may also be made at the same location;8 what critical inputs are needed (and where they come from); the role of any sales organisation; supplier and customer relationships; and the importance of research and development. A successful divestiture is one where the buyer obtains (or already has) all the pieces that are critical to the success of the business operation. Settlement discussions can be delayed if information needed to design a successful divestiture is not readily available to the parties or their counsel. A complete understanding of both the relevant markets and the ways those markets operate will allow the parties and agency staff to agree on what must be divested, and how and to whom.

The agency will assess any proposal by how well it will achieve the agency’s goal. Any divestiture presents three categories of risk. The first risk is that the divested assets will fail to maintain competition because they are insufficient to create a robust competitor. This risk is heightened when the proposed divestiture excludes assets, contracts or other arrangements that are important to the competing business’s success (even though outside the relevant antitrust market). Accordingly, the agency will strongly prefer a divestiture of ‘an ongoing business’.9

The second risk is that the buyer will fail to compete successfully with the divested assets, because the buyer lacks other critical assets, or financial or management resources. The risk of buyer failure increases as less than a full business is divested. Although both agencies will insist on doing full due diligence on any buyer, and will assure the buyer conducts its own diligence, ‘buyer risk’ cannot be fully eliminated. The agency will seek to minimise that risk, and will not accept a proposed remedy if it believes the risk is unacceptably high.

The third risk, which is receiving more attention, is ‘implementation risk’. Even if the divestiture business is robust and the agency is satisfied that the proposed buyer has the financial and business capacity to take the divested business and compete successfully, the transfer may nonetheless fail for unanticipated reasons, and the buyer will not become an effective competitor. The agencies now consider the actual mechanics of the divestiture in more detail, and, as with the other risks, will not accept a proposed remedy if the implementation risk is unacceptably high.

These three risks are interrelated. A ‘complete business’ divestiture will reduce the risk that a buyer will fail to obtain all needed assets and relationships, and will greatly reduce the risk that the divestiture itself will not proceed smoothly. Similarly, a buyer that fully understands the markets, has deep financial resources and has developed a robust business plan (with full due diligence) will reduce the risk that the asset package may have failed to include some important piece. Finally, a proposal to divest a complete business to a well-prepared and well-financed buyer will reduce implementation risk. By understanding these risks, parties will be better able to offer an acceptable remedy. Parties that explain how their offer addresses and minimises these risks are more likely to reach an expedited settlement agreement.

Aside from the above considerations, parties should decide when they will begin settlement discussions. It is generally better to begin discussions as soon as possible. Serious discussions cannot proceed before the agency has determined where the competitive problems lie, however. It is not recommended that parties attempt to reach a quick settlement in one market in the hope that the staff does not identify a competitive problem in another. If an additional market problem is identified late in discussions, the staff will insist that it be remedied, along with the previously identified problems. That is likely to delay reaching an agreement. A complete settlement is therefore most likely to happen sooner if the parties engage with the staff as soon as there is agreement on the markets that need to be addressed.

The parties must also fully understand their own goals when entering negotiations. Whether deal timing, the scope of any required divestitures, or other factors are most important, parties should be clear about what they are trying to achieve. They must understand how their positions may conflict with the agency’s goals and cause delay.

Finally, parties will need to decide what they will and will not continue to debate. The parties often disagree with staff on some, or even all, markets. In matters involving multiple products, further investigation may lead staff to drop markets from its concern, and the parties may continue to urge the staff to drop others. At some point, however, it will become clear that the parties and staff will have to ‘agree to disagree’ in order to reach a settlement.

Timing concerns and decisions

Almost every merger raises issues about timing, and it is rare that the parties are truly neutral about when their deal can close. Factors that drive the parties’ concerns can include financing arrangements (and expiring lending commitments), required shareholder votes, deal termination provisions, seasonality in certain markets, and, not least, the presence of competing bidders for the firm being acquired. Most importantly, the parties should be planning their work backwards from the critical dates, with a full understanding of what the agency’s staff needs to do, what issues are being addressed and how the interests of other parties (including potential buyers for divested assets) will affect the process.

Not all deadlines are equally important. In particular, staff will likely give more weight to third-party obligations than to simple wishes to close by a particular date. For example, the parties may have a general desire to close their merger by the end of a particular month, or before the start of a period of high demand.10 These dates are important to the parties, but they are likely less immutable than the end of lender financing (when interest costs may need to be renegotiated). The parties should be aware of all their timing concerns and plan accordingly.

The staff will try to expedite its investigation, and will understand that the parties want their deal to close as soon as possible. Nevertheless, the parties cannot assume that the staff will know how any third-party timing drives the process. The parties must alert staff to those critical timing issues as soon as they can. Waiting until late in the process to alert staff that ‘financing will run out in three weeks’ will almost always be counterproductive. The staff will not shortcut its own process to allow the parties to meet a critical date that should have been revealed much sooner.

Parties should also be prepared to document their timing concerns, especially if they are asking the staff to expedite its internal processes. They should produce documents showing, inter alia, where the financing provisions contain terminations, and how a jurisdiction’s corporate and securities laws require action by a certain date. Staff may question how firm a deal deadline is. Although those deadlines may give one of the parties the opportunity to abandon the deal, it is important to know how real that concern is. Staff will not ignore these arguments, but none of them can be assumed to be dispositive.11

Throughout the process, parties may continue to discuss the antitrust merits with the staff to try to carve markets out of the case. The parties should consider how those efforts will take time away from the staff’s work to design the remedy, review proposed buyers and draft the settlement papers.12 As a practical matter, staff cannot focus fully on the underlying case (and, especially, prepare for a court challenge) and simultaneously conduct all the work needed to design a good remedy.

Timing for a merger subject to the HSR Act is often covered by a timing agreement between the parties and the agency’s staff. Parties agree not to certify compliance with the second request without giving advance notice to the staff.13 Such agreements allow all parties to focus on settlement discussions and other aspects of the investigation, and not on a possible court challenge. If the parties either certify or announce their ending of the timing agreement, however, the staff will very likely stop discussing settlement and turn its full attention to preparing the case for challenge in federal court. Staff will not jeopardise its litigation position by diverting trial-preparation resources to settlement discussions as the deadline for filing their complaint approaches.14

Finally, the particular details about the proposed remedy can affect the timing of settlement – the assets proposed for divestiture can affect both the likely buyers and the time needed for review. For example, it is generally easier, and likely quicker, to be prepared to divest an entire business that contains the overlap products than it is to divest a select group of assets (a carveout). However, parties sometimes prefer to divest the select assets, generally because it is a smaller overall package. As discussed in other chapters, both agencies will likely require an upfront buyer for those assets, and selection of that buyer and staff’s review will take longer than review of a ‘going concern’ divestiture would.15 In addition, the particular asset package may be acceptable only in the hands of a very few approvable buyers. Parties need to understand the trade-off between the divestiture proposal and the time needed to review it.16

All else being equal (which is often not the case), staff generally does not have a preference for whether the parties divest the acquirer’s assets (A-side) or the target’s (B-side). In most cases the parties prefer to divest the smaller of the overlap products. But staff will likely resist a divestiture that raises risks about the package, the proposed buyer or implementation of the remedy if the alternative divestiture can be ‘clean’.17 That trade-off raises many issues beyond timing alone, but the parties should understand that straightforward remedies can be resolved, documented and completed more quickly.

Divestiture buyers and the policy choices

Discussions over the scope of divestiture can often be the most difficult aspect of a settlement. Selection of an upfront buyer that is acceptable to the agency is often only slightly less fraught. The two are closely related – when the agency requires an upfront buyer it is precisely because the agency insists that the parties must support their particular divestiture proposal by showing that a particular buyer is both interested and capable of successfully competing with what it will be buying.18

The parties’ choice of a divestiture buyer will always raise a number of basic issues that the staff must investigate. This section discusses what the parties should consider when proposing a buyer as part of settlement – the ‘upfront buyer’. The agency will require the same information, and conduct the same analysis as it would for a divestiture after the remedy is final, but the dynamics of overall settlement discussions will raise additional issues.19 Those issues are the focus of this section.

Any proposed buyer must be able to take the divested assets and succeed with them, meeting the stated goal of ‘maintaining or restoring competition in the relevant market’.20 The parties, with the proposed buyer’s help, must therefore show that their proposal will meet that goal. The agency’s demands can best be considered by referring to the three broad risks already discussed: (1) whether the proposed divestiture assets will give the proposed buyer what it needs to compete successfully; (2) whether the proposed buyer has the financial and management ability to take those assets and compete; and (3) whether the proposed buyer has a well-prepared plan for taking the assets and integrating them into its existing business operations.

The merging parties have the burden of showing that their proposal should be accepted – this obligation covers all aspects of the showing, although some information will necessarily come directly from the proposed buyer.21 The information needed to show that the assets are an acceptable package is fairly straightforward and will flow directly from the relevant market analysis of the investigation. The parties should keep in mind, however, that assets that are outside the precise antitrust market may need to be divested to create a viable business. These may include assets needed to provide critical inputs (speciality products); research and development assets; contractual relationships with suppliers, distributors or customers; and a sales force.22 The parties’ willingness to divest more – making a true ongoing business – will better assure that a proposed buyer has all assets needed to succeed.

The greatest focus will often be on the particular buyer’s own assets, business plans and financial wherewithal. The parties will have a good basic understanding of the proposed buyer, and should understand that the staff will expect them to explain why they chose that buyer and why they believe it will succeed. The staff will then turn its attention to the proposed buyer itself, and will likely request information that the parties themselves do not have. Review of the buyer will move more quickly if the parties have fully explained that process to the buyer and explained why the buyer will need to provide further information to the agency.23

The agency’s staff will examine three main areas of the buyer’s capability by reviewing documents, and meeting with and interviewing the buyer’s most knowledgeable employees. First, staff will ask the buyer to explain its own market position and relationship to the relevant markets in the case. The buyer may be involved in a related business, or may be a competitor in a geographic market not implicated by the proposed merger. Staff will expect the buyer to explain its plans for taking the divested assets, integrating them into its own operations, expanding its business and becoming competitive with the parties.24 Depending on the particular matter, those plans may need to address, for example, expanding production capacity at an existing plant (if acquiring particular manufacturing assets), or increasing and expanding the buyer’s existing sales force. Buyers often present their case by bringing the relevant personnel (eg, sales managers and production supervisors) and by offering well-drafted plans to the staff, over the course of one or several interview sessions.

The proposed buyer must also show that it has a well-capitalised financial plan: capital to make the divestiture purchase, fund integration and willingness to pursue expansion efforts over the time needed to become fully established. If the buyer is relying on third-party financing, it will need to provide documentation to show the terms of that financing, and how it would deal with any contingencies.

The proposed buyer may need to provide financial projections, including the assumptions used, to show its anticipated performance over the early years after divestiture. The details will depend on the industry, the assets and the buyer. The agency will conduct its own review of those arrangements, and may raise detailed questions about financial projections and especially the assumptions used.25 The staff may request any documentation that the proposed buyer used to obtain outside financing or high-level corporate authorisation to buy the assets.26 This documentation should explain how the buyer sees its opportunity and risk, including how its position may change if assumptions do not bear out.

As with most issues involving merger review, the specific areas for analysis and the degree to which they are critical will vary with the facts of the case. The agency’s review will take time, and it is best to address these issues as soon as a potential buyer is identified. Questions that arise towards the end of the process will undoubtedly cause delay.

The agencies have long made clear that if the parties advocate for a divestiture of less than an ongoing business, they will almost certainly have to propose a particular buyer. As the size of the offered package diminishes, the need for a close and thorough review of the buyer increases. Conversely, in cases where parties are willing to divest a complete business covering the affected markets (i.e., with inputs, suppliers and customer contracts, and a complete workforce) the agencies will be more willing to allow that divestiture to occur after the settlement and after the merger is consummated. In those cases, nevertheless, the staff will expect the parties to show that there are approvable firms available to buy the divested assets.27 The difference is in the level of review that the agency will undertake during settlement. For upfront buyers, the staff will insist upon seeing, for example, the final negotiated divestiture contracts, financing arrangements and business plans. For post-order divestitures, the agency will expect those documents and arrangements to be presented when the merged firm makes its request for agency approval of the proposed divestiture.28 The effort and time needed during settlement is greater for upfront buyers, but the parties will need to make some initial showing of likely interested and approvable buyers even for a post-order divestiture plan.29

A remedy requiring divestiture of a complete business will likely require the parties to enter some interim arrangement to hold the to-be-divested business separate from the merged firm, pending divestiture, and to maintain their competitive vigour. The agencies have used hold separate and asset-maintenance agreements and orders for many years, and the terms are very similar from case to case. A review of the agencies’ public record will show the general approach. Parties should plan accordingly, and should be prepared to establish an acceptable arrangement. The agencies will also likely require appointment of a third-party monitor, who will oversee the held separate arrangement, report to the agency, and otherwise help minimise any problems that may arise in the interim.30 As with other terms, engaging early with the staff about the hold separate and any needed monitor will help avoid delay.31

Other standard provisions and party obligations

Most merger settlements contain a number of standard provisions with which the parties should become familiar. For divestitures that raise potentially difficult technical issues (such as the transfer of complex intellectual property), whether to an upfront buyer or in a later post-decree divestiture, the agency may require a transition services agreement between the merging parties and the buyer, to assure that the merged firm does what it must to ensure the buyer receives the needed information. Further, as noted in the FTC Merger Remedies Report, transfer of certain ‘back office’ functions from the parties to the buyer has at times been more difficult than anticipated.32 Accordingly, the agency may require that transfer function to be memorialised in an additional agreement between the parties and the buyer (it may be a part of any transition services agreement). Just as for hold separates, a monitor will likely be required to oversee that process.

Similarly, if the buyer will need an interim supply of a critical input while it completes its own alternative arrangements, the parties may need to negotiate and enter a supply agreement, again likely overseen by the same monitor. The supply agreement will specify the terms of that obligation, including volumes, pricing and delivery details. The agency will expect the length of such an agreement to be long enough to allow the buyer to separate seamlessly from the parties, but not so long as to create a long-term dependency. Such agreements tend to run for 18 to 24 months, but will depend on the particular facts of the case.

The agencies’ final settlement documents also contain routine reporting and access provisions, and examples of all of these33 can be found by a simple review of any recent merger settlement.34

Final timing and the agency’s schedule

The parties should understand that the agencies have a general working rule for how much time is needed to review and approve the settlement before the underlying merger can proceed. At the FTC, the Bureau of Competition generally requires two weeks to review the final arrangements and the commissioners generally require two weeks to review the settlement. At the DOJ, time must be allowed for final review by the Assistant Attorney General. These time periods are often shortened for contingencies, but the parties should anticipate building in enough lead time to their discussions.

At the FTC, it is not necessary that the parties meet with commissioners, or senior management in the Bureau of Competition, and the parties should discuss with staff whether they need to seek meetings before they arrange them. Senior leadership will already be aware of the matter (and will have approved the settlement before the staff reaches final terms), and it is generally unnecessary to seek a meeting if the staff has not indicated one is needed. Similarly, unless a commissioner’s office has raised an issue it wants addressed, or has identified other problems or concerns, there is no need to schedule those meetings. The staff will alert the parties if an issue arises that would be best dealt with at such a meeting. At the DOJ, parties should take their cue from the staff concerning the need to meet with the Antitrust Division’s leadership.

Parties’ obligations after settlement

After the settlement is complete and approved by the agency or filed with the court, the parties should assure that they remain attentive to their ongoing obligations. The upfront divestiture should be completed expeditiously, supply deliveries should begin as scheduled, and technology transfers should be completed cooperatively. The parties should address any questions raised by the monitor as soon as they can. As with all remedy compliance, it is better to bring issues to the agency’s attention quickly so they can be resolved, and not allow small concerns to become major problems.35 Ongoing communication by all parties with the staff is always advised.36 The parties will need to file any required compliance reports on time, including a full description of their compliance with the remedy’s terms, and they should understand that continuing oversight of their compliance will be a regular part of the agency’s work during the relevant terms of the remedy.

1 Daniel P Ducore is the former assistant director of the Compliance Division of the US Federal Trade Commission’s Bureau of Competition.

2 FTC, The FTC’s Merger Remedies 2006–2012, www.ftc.gov/system/files/documents/reports/ftcs-merger-
remedies-2006-2012-report-bureaus-competition-economics/p143100_ftc_merger_remedies_2006-2012.pdf
(2017, ‘FTC Merger Remedies Report’) at 1. See also, DOJ, Antitrust Division Policy Guide to Merger Remedies, www.justice.gov/sites/default/files/atr/legacy/2011/06/17/272350.pdf (2011, ‘DOJ Merger Remedies Guide’) at 2, ‘preserve competition in the relevant market’. In particular, the FTC Merger Remedies Report includes a final Section VII on best practices, which highlights critical points that all parties should understand when discussing merger remedies.

3 The agencies consider remedies only if they conclude the merger would be unlawful. ‘[D]ecrees have become so common that one might forget they arise from a conclusion that a transaction was illegal under Section 7 of the Clayton Act. The complaints brought alongside such challenges should not be ignored, however – they reflect a conclusion by the Antitrust Division that a transaction broke the law.’ ‘Remarks of Assistant Attorney General Makan Delrahim Delivered at the New York State Bar Association’, 25 January 2018, available at www.justice.gov/opa/speech/remarks-assistant-attorney-general-makan-delrahim-delivered-new-
york-state-bar. Both agencies view merger settlements through that law enforcement lens. Further, the complaints explain the specific markets and analysis that support the agencies’ conclusions that the merger would be unlawful.

4 At the FTC, the Bureau of Competition’s Compliance Division will be closely involved in any discussions. Compliance Division attorneys will become part of the investigating team as soon as a settlement appears possible. At DOJ, the investigating staff will coordinate its settlement work through the office of the Director of Civil Enforcement.

5 See above, fn.1. More recently, see ‘Assistant Attorney General Makan Delrahim Delivers Keynote Address at American 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. The FTC has published other guides, available at www.ftc.gov/enforcement/merger-review (‘Negotiating Merger Remedies’ and ‘FAQs on Remedies’). Clearly, and especially for horizontal mergers, a structural remedy – divestiture – will be required.

6 ‘The most effective and complete form of a divestiture is the sale or spin-off of an ongoing or stand-alone business that will create an independent competitor to the merging companies.’ ‘Deputy Assistant Attorney General Barry Nigro Delivers Remarks at the Annual Antitrust Law Leaders Forum in Miami, Florida’, 2 February 2018, available at www.justice.gov/opa/speech/deputy-assistant-attorney-general-barry-nigro-
delivers-remarks-annual-antitrust-law.

7 Exactly how the parties will divest the complete overlap is discussed later.

8 Scale and scope economies may require a divestiture of more than simply the overlap products or services.

9 The FTC’s Merger Remedies Report noted that all of the divestitures of ‘ongoing businesses’ succeeded, while some of the less-than-all divestitures failed – even when divested to upfront buyers.

10 In some retailing industries, peak demand is in the last quarter of the calendar year, and most firms want to avoid major transition efforts, and store conversions, while shoppers are filling their stores. Similarly, some industries have regular contracting cycles, and the agencies and parties both will likely want to avoid a disruptive business transfer during that peak period.

11 Staff will insist that the buyer have the time needed to conduct its own due diligence review.

12 For a general discussion of the different documents used to settle a matter at the FTC and DOJ, See, A Visitor’s Guide to Navigating US/EU Merger Remedies, 12 Competition Law Internat’l No. 1, 85, April 2016, especially at 87–88; available at www.justice.gov/atr/file/883616/download.

13 Where parties have certified, they may agree not to move forward on the merger until they have given the agency advance notice, often 60 days or more.

14 Parties may propose a settlement late in an investigation, where staff is preparing its case for a challenge. They should be prepared at that point either to enter or extend a timing agreement.

15 While staff conducts its due diligence, it will expect the buyer to complete full due diligence as well. Parties can expedite that process by making sure the buyer has direct access to the documents and information needed to review the proposal. See FTC Merger Remedies Report at VII.C.1 (Implementing the Remedy, Due Diligence).

16 In some cases, the divestiture may be workable only in the hands of a single buyer. If that buyer comes to believe that it is, indeed, the only acceptable one, it may press the parties for a low divestiture price. The staff is unlikely to be sympathetic to the parties’ concerns that the proposed buyer is taking advantage of that situation, because they could decide to divest the other overlapping product if they choose.

17 This chapter does not address broader question of when a mix of both A-side and B-side assets may go into a divestiture package.

18 The agencies do not have a fixed requirement that the parties make the opening proposal (unlike the EC and some other jurisdictions). As a practical matter, however, once the parties understand the staff’s concerns, they will be expected to offer a solution. As noted earlier, any offer must fully address the antitrust concerns identified by the staff.

19 For divestitures that occur after the remedy is final, the FTC’s Rules of Practice set out the procedure for the parties (the respondents under the final order) to make an application for FTC approval: if the Commission rejects an approval application, the parties may challenge that decision in federal court but must show that the Commission’s decision, based on the record made by the parties in their application, was arbitrary or capricious. This standard of review makes clear that the respondents have the burden to show their application should be approved. See, Dr Pepper/Seven Up Cos Inc v. FTC, 991 F.2d 859 (DC Cir 1993). DOJ conducts a similar substantive analysis; its decrees require defendant’s proposals to satisfy DOJ in its ‘sole discretion’.

20 FTC Merger Remedies Report at 1; VII.B.. See also DOJ Merger Remedies Guide, at 1.

21 The agency staff will make clear that it does not want the parties to be privy to the buyer’s confidential financial, business, and other plans and information, but the parties will need to make sure the buyer provides that information to the staff.

22 See the recent settlement in DOJ’s challenge to the merger of Bayer AG and Monsanto Co, www.justice.gov/atr/case/us-v-bayer-ag-and-monsanto-company (2018). That divestiture settlement includes assets outside the alleged product markets, and broadly covers research and development assets, employees, and contractual arrangements in the industry.

23 This is generally not an issue. Yet, some smaller businesses do not always fully understand what the staff needs, and the parties’ failure to prepare the buyer for the staff’s review may delay settlement.

24 The parties and buyer should recognise that it may not be enough to show that the buyer will succeed and be profitable. The agency is looking for a competitive remedy. That is, what is good for the buyer must also offer robust competition in the affected markets. Although circumstances are rare, the agencies have rejected proposed buyers who likely would have succeeded financially, but who would not have met the broad goals of relief – to restore or maintain the competition (in all affected markets) that the proposed merger would lessen. The divestiture must also not create new antitrust problems in any market. See, West Texas Transmission LP v. Enron Corp et al, 1989-1 Trade Cases (CCH) paras. 68,424 at 60,334 (WD Texas 1988), aff’d on other grounds 907 F.2d 1554 (5th Cir 1990), cert denied 499 US 906 (1991).

25 The staff may ask about the sensitivity of the buyer’s projections to changes in assumptions, such as sales projections, cost estimates, etc. A projection that is closely dependent on those assumptions not varying may be more risky than one with a larger margin for error.

26 For example, presentations to the board of directors.

27 The parties’ general assurances that firms are interested will usually not be sufficient. Depending on the circumstances, the staff may need to talk to those firms to assess their interest and ability.

28 The agencies generally require any post-remedy divestiture to be completed within four to six months.

29 Staff will reach out to these possible post-remedy buyers to gauge their interest and to learn if the remedy is insufficient, for some reason.

30 See, e.g., DOJ Merger Remedies Guide at 26. The two agencies have issued many decrees and orders providing for monitors. The terms of those agreements track the remedy’s requirements and are usually public, although the compensation schedule is confidential. Although monitors are formally appointed or named by the agency, the parties are encouraged to propose candidates, for several reasons. First, the parties may be best able to identify individuals (or firms) that have the precise industry experience needed to meet their obligations. Second, because of the necessary ongoing relationship between the monitor and the parties (as well as the agency), the parties’ identification of a candidate they believe can work well is more likely to lead to a problem-free process. The agency will, however, fully review any proposed candidate, for both expertise and possible financial or other conflicts, and may request the parties to select an alternative. Once appointed, the monitor owes its duties to the agency’s remedy, not to the parties (who must pay the monitor), and the monitor will report formally to the agency on a regular basis, and more often on an informal basis.

31 The FTC and DOJ do not conduct a formal ‘market test’ of the divestiture proposal, unlike some other jurisdictions, most notably the European Commission. But the US agencies will (consistent with confidentiality restrictions) reach out to major customers and other knowledgeable parties to assess their views of a potential divestiture and buyer. The goal is the same as for the EC’s market test: to determine if there are issues or problems that need to be considered before agreeing to the proposed remedy.

32 FTC Merger Remedies Report, at VII.A.2.

33 For a recent FTC order requiring an upfront buyer, and containing an asset maintenance provision, see Becton Dickinson and Co, www.ftc.gov/enforcement/cases-proceedings/171-0140/becton-dickinson-company-cr-
bard-inc-matter (2018). See also CRH plc, www.ftc.gov/enforcement/cases-proceedings/171-0230-c-4653/crh-plc (2018).

34 This discussion has been in the context of the most common settlement, made during the merger investigation itself and completed before the merger proceeds. Two other situations are possible: (1) the merger has already occurred (likely because it was not subject to the HSR Act), and (2) the agency is already in litigation with the parties. The procedures are different for mergers that have been consummated, but the substantive issues that the agency will address are the same. Timing issues may differ, because the parties have already completed their transaction, but the agencies will not likely allow the investigation to slow without real progress towards a remedy. Instead, the agency will move its investigation towards a challenge (an administrative trial at the FTC, or a district court complaint brought by the DOJ). In the case of administrative litigation at the FTC, certain ex parte rules prohibit unilateral communications between the FTC’s staff (‘complaint counsel’) and the commissioners, but if a settlement is reached with staff, the matter will be removed from adjudication, at which point the staff, and parties, may communicate directly with commissioners (and their own staff). Whether before the FTC or in federal court, settlement discussions can proceed during trial preparation, but the staff will not be distracted from trial preparation (including depositions), and they will require real progress towards settlement before agreeing to any delays. The parties are therefore best served if they conduct settlement discussions as they would in a pre-merger investigation, focusing on the merits and being mindful that a failure to settle will move the case closer to trial. Similarly, cases can be settled during litigation over a preliminary injunction. Timing limitations may be severe, but the substantive issues about what should be divested, and how and to whom will be similar.

35 The Antitrust Division recently announced that its decrees would begin containing ‘fee shifting’ provisions, requiring the defendant parties to bear the costs (including DOJ attorney fees and expert fees) of any prosecution of a decree violation. ‘Remarks of Assistant Attorney General Makan Delrahim Delivered at the New York State Bar Association’, 25 January 2018.

36 FTC Merger Remedies Report, VII.E.

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