Shearman & Sterling LLP > Antitrust Blog en-us Defensive Patent Aggregation https://www.antitrustunpacked.com/?pageid=4 Tue, 19 Mar 2024 07:42:22 -0500 hourly 1 <![CDATA[Antitrust Reverse Termination Fees--2020 Q3 Update]]> An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse term]]> [...] An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.
Our sample now covers 1359 strategic negotiated transactions announced between January 1, 2005, and September 30, 2020. Of these, 171 transactions, or 12.6% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.1% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.2% of the transaction value.
We thought it might be helpful to give some statistics for various subsamples covering different periods so that you could get an idea of how, if at all, antitrust reverse terminations fees have varied over time.

The most recent subsample covers the almost six-year period from January 1, 2015, through September 30, 2020. This subsample covered 537 transactions, of which 83, or about 15.5%, had antitrust reverse termination fees. The fees in this sample had a mean of 4.6%, 0.5 percentage points less than the 5.1% of the full sample, and a median of 4.1%, almost the same as the full sample. The relative convergence of the mean and the median is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 12.5%.
The charts below give the frequency of antitrust reverse breakup fees across the almost six-year subsample set.


Of the 83 transactions signed since January 1, 2015, with an antitrust reverse termination fee, the antitrust reviews have been completed for 77 transactions. Of the transactions for which reviews have been completed, 58, or about 75.3%, were cleared without any antitrust challenge. Three transactions (Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, one transaction (Walgreens Boots/Rite Aid) was abandoned in the face of agency opposition, twelve transactions closed subject to a DOJ or FTC consent order, one subject to a Public Utilities Commission order, and one transaction (AT&T/Time Warner) defeated an Antitrust Division preliminary injunction challenge and closed.
Dale Collins
+1.212.848.4127
dale.collins@shearman.com
Resources:

  Antitrust Reverse Termination Fees--Data Set (January 1, 2005, through September 30, 2020)

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http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=77Mon, 28 Dec 2020 12:00:00 -0500
<![CDATA[Antitrust Reverse Termination Fees--2020 Q2 Update]]> An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse terminati]]> [...] An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.
Our sample now covers 1356 strategic negotiated transactions announced between January 1, 2005, and June 30, 2020. Of these, 169 transactions, or 12.5% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.2% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.3% of the transaction value.
We thought it might be helpful to give some statistics for various subsamples covering different periods so that you could get an idea of how, if at all, antitrust reverse terminations fees have varied over time.

The most recent subsample covers the roughly four-year period from January 1, 2015, through June 30, 2020. This subsample covered 529 transactions, of which 81, or about 15.3%, had antitrust reverse termination fees. The fees in this sample had a mean of 4.6%, 0.6 percentage points less than the 5.2% of the full sample, and a median of 4.2%, almost the same as the full sample. The relative convergence of the mean and the median is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 12.5%.
The charts below give the frequency of antitrust reverse breakup fees across the four-year-plus subsample set.


Of the 81 transactions signed since January 1, 2015, with an antitrust reverse termination fee, the antitrust reviews have been completed for 72 transactions. Of the transactions for which reviews have been completed, 55, or about 76.4%, were cleared without any antitrust challenge. Three transactions (Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, one transaction (Walgreens Boots/Rite Aid) was abandoned in the face of agency opposition, ten transactions closed subject to a DOJ or FTC consent order, one subject to a Public Utilities Commission order, and one transaction (AT&T/Time Warner) defeated an Antitrust Division preliminary injunction challenge and closed.
Dale Collins
+1.212.848.4127
dale.collins@shearman.com
Resources:

  Antitrust Reverse Termination Fees--Data Set (January 1, 2005, through June 30, 2020)

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http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=76Tue, 21 Jul 2020 12:00:00 -0500
<![CDATA[Antitrust Reverse Termination Fees--2020 Q1 Update]]>This post updates the public deal antitrust reverse termination fee database through March 31, 2020.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse te]]> [...]This post updates the public deal antitrust reverse termination fee database through March 31, 2020.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 1351 strategic negotiated transactions announced between January 1, 2005, and March 31, 2020. Of these, 164 transactions, or 12.1% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.2% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.3% of the transaction value.

We thought it might be helpful to give some statistics for various subsamples covering different periods so that you could get an idea of how, if at all, antitrust reverse terminations fees have varied over time.

The most recent subsample covers the roughly four-year period from January 1, 2015, through March 31, 2020. This subsample covered 529 transactions, of which 81, or about 15.3%, had antitrust reverse termination fees. The fees in this sample had a mean of 4.6%, 0.6 percentage points less than the 5.2% of the full sample, and a median of 4.2%, almost the same as the full sample. The relative convergence of the mean and the median is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 12.5%.

The charts below gives the frequency of antitrust reverse breakup fees across the four-year-plus subsample set.
 

Of the 81 transactions signed since January 1, 2015, with an antitrust reverse termination fee, the antitrust reviews have been completed for 72 transactions. Of the transactions for which reviews have been completed, 55, or about 76.4%, were cleared without any antitrust challenge. Three transactions (Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, one transaction (Walgreens Boots/Rite Aid) was abandoned in the face of agency opposition, ten transactions closed subject to a DOJ or FTC consent order, one subject to a Public Utilities Commission order, and one transaction (AT&T/Time Warner) defeated an Antitrust Division preliminary injunction challenge and closed.


Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2005, through March 31, 2020)]]>http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=74Mon, 08 Jun 2020 12:00:00 -0500
<![CDATA[Antitrust Reverse Termination Fees--2019 Q4 Update]]> This post updates the public deal antitrust reverse termination fee database through December 31, 2019.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust rev]]> [...] This post updates the public deal antitrust reverse termination fee database through December 31, 2019.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 1333 strategic negotiated transactions announced between January 1, 2005, and December 31, 2019. Of these, 162 transactions, or 12.2% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.2% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.3% of the transaction value.

We thought it might be helpful to give some statistics for various subsamples covering different periods so that you could get an idea of how, if at all, antitrust reverse terminations fees are varying over time.

The most recent subsample covers the roughly four-year period from January 1, 2015, through December 31, 2019. This subsample covered 483 transactions, of which 75, or about 15.5%, had antitrust reverse termination fees. The fees in this sample had a mean of 4.7%, 0.5 percentage points less than the 5.2% of the full sample, and a median of 4.4%, the same as the full sample. The relative convergence of the mean and the median is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 12.5%.

The charts below gives the frequency of antitrust reverse breakup fees across the four-year-plus subsample set.
 

Of the 79 transactions signed since January 1, 2015, with an antitrust reverse termination fee, the antitrust reviews have been completed for 68 transactions. Of the transactions for which reviews have been completed, 52, or about 76.5%, were cleared without any antitrust challenge. Three transactions (Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, one transaction (Walgreens Boots/Rite Aid) was abandoned in the face of agency opposition, nine transactions closed subject to a DOJ or FTC consent order, one subject to a Public Utilities Commission order, and one transaction (AT&T/Time Warner) defeated an Antitrust Division preliminary injunction challenge and closed.


Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2005, through December 31, 2019)]]>http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=73Thu, 04 Jun 2020 12:00:00 -0500
<![CDATA[Antitrust Reverse Termination Fees--2019 Q3 Update]]> This post updates the public deal antitrust reverse termination fee database through September 30, 2019.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust re]]> [...] This post updates the public deal antitrust reverse termination fee database through September 30, 2019.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 1305 strategic negotiated transactions announced between January 1, 2005, and September 30, 2019. Of these, 158 transactions, or 12.1% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.2% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.4% of the transaction value.

We thought it might be helpful to give some statistics for various subsamples covering different periods so that you could get an idea of how, if at all, antitrust reverse terminations fees are varying over time.

The most recent subsample covers the roughly four-year period from January 1, 2015, through September 30, 2019. This subsample covered 483 transactions, of which 75, or about 15.5%, had antitrust reverse termination fees. The fees in this sample had a mean of 4.7%, 0.5 percentage points less than the 5.2% of the full sample, and a median of 4.4%, the same as the full sample. The relative convergence of the mean and the median is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 12.5%.

The charts below gives the frequency of antitrust reverse breakup fees across the four-year-plus subsample set.
 

Of the 75 transactions signed since January 1, 2015, with an antitrust reverse termination fee, the antitrust reviews have been completed for 68 transactions. Of the transactions for which reviews have been completed, 52, or about 76.5%, were cleared without any antitrust challenge. Three transactions (Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, one transaction (Walgreens Boots/Rite Aid) was abandoned in the face of agency opposition, nine transactions closed subject to a DOJ or FTC consent order, one subject to a Public Utilities Commission order, and one transaction (AT&T/Time Warner) defeated an Antitrust Division preliminary injunction challenge and closed (the DOJ has appealed).


Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2005, through September 30, 2019)]]>http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=72Tue, 10 Dec 2019 12:00:00 -0500
<![CDATA[Antitrust Reverse Termination Fees--2019 Q2 Update]]> This post updates the public deal antitrust reverse termination fee database through June 30, 2019.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse]]> [...] This post updates the public deal antitrust reverse termination fee database through June 30, 2019.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 1282 strategic negotiated transactions announced between January 1, 2005, and June 30, 2019. Of these, 157 transactions, or 12.2% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.2% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.4% of the transaction value.

We thought it might be helpful to give some statistics for various subsamples covering different periods so that you could get an idea of how, if at all, antitrust reverse terminations fees are varying over time.
 

The most recent subsample covers the four-year period from January 1, 2015, through June 30, 2019. This subsample covered 356 transactions, of which 74, or about 20.8%, had antitrust reverse termination fees. The fees in this sample had a mean of 4.7%, 0.5 percentage points less than the 5.2% of the full sample, and a median of 4.4%, the same as the full sample. The relative convergence of the mean and the median is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 12.5%.

The charts below gives the frequency of antitrust reverse breakup fees across the four-year-plus subsample set.
 



 

Of the 74 transactions signed since January 1, 2015, with an antitrust reverse termination fee, the antitrust reviews have been completed for 65 transactions. Of the transactions for which reviews have been completed, 50, or about 77%, were cleared without any antitrust challenge. Three transactions (Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, one transaction (Walgreens Boots/Rite Aid) was abandoned in the face of agency opposition, nine transactions closed subject to a DOJ or FTC consent order, one subject to a Public Utilities Commission order, and one transaction (AT&T/Time Warner) defeated an Antitrust Division preliminary injunction challenge and closed (the DOJ has appealed).


Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2005, through June  30, 2019)
 

]]>http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=71Mon, 05 Aug 2019 12:00:00 -0500
<![CDATA[Antitrust Reverse Termination Fees--2019 Q1 Update]]> This post updates the public deal antitrust reverse termination fee database through March 31, 2019.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust revers]]> [...] This post updates the public deal antitrust reverse termination fee database through March 31, 2019.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 1260 strategic negotiated transactions announced between January 1, 2005, and March 31, 2019. Of these, 156 transactions, or 12.0% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.3% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.4% of the transaction value.

We thought it might be helpful to give some statistics for various subsamples covering different periods so that you could get an idea of how, if at all, antitrust reverse terminations fees are varying over time.

    Subsample statistics

The most recent subsample covers the four-year period from January 1, 2015, through March 31, 2019. This subsample covered 433 transactions, of which 68, or about 15.7%, had antitrust reverse termination fees. The fees in this sample had a mean of 4.7%, 0.6 percentage points less than the 5.3% of the full sample, and a median of 4.3%, just about the same as the full sample. The relative convergence of the mean and the median is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 12.5%.

The charts below gives the frequency of antitrust reverse breakup fees across the four-year-plus subsample set.
 

Frequency of Antitrust Reverse Termination Fees

ARTFs over Time

Of the 63 transactions signed since January 1, 2015, with an antitrust reverse termination fee for which the antitrust reviews have been completed, 48, or about 76%, were cleared without any antitrust challenge. Three transactions (Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, one transaction (Walgreens Boots/Rite Aid) was abandoned in the face of agency opposition, nine transactions closed subject to a DOJ or FTC consent order, one subject to a Public Utilities Commission order, and one transaction (AT&T/Time Warner) defeated an Antitrust Division preliminary injunction challenge and closed (the DOJ has appealed).


Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2005, through March  31, 2019)

]]>http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=70Mon, 29 Apr 2019 12:00:00 -0500
<![CDATA[Antitrust Reverse Termination Fees--2018 Q4 Update]]> This post updates the public deal antitrust reverse termination fee database through December 31, 2018.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust rev]]> [...] This post updates the public deal antitrust reverse termination fee database through December 31, 2018.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 1239 strategic negotiated transactions announced between January 1, 2005, and December 31, 2018. Of these, 155 transactions, or 12.5% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.3% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.4% of the transaction value.

We thought it might be helpful to give some statistics for various subsamples covering different periods so that you could get an idea of how, if at all, antitrust reverse terminations fees are varying over time.

    Subsample Statistics

The most recent subsample covers the four-year period from January 1, 2015, through December 31, 2018. This subsample covered 417 transactions, of which 66, or about 15.8%, had antitrust reverse termination fees. The fees in this sample had a mean of 4.7%, one-half of a percentage point less than the 5.2% of the full sample, and a median of 4.4%, the same as the full sample. The relative convergence of the mean and the median is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 12.5%.

The chart below gives the frequency of antitrust reverse breakup fees across the four-year subsample set.


  Frequency of Antitrust Reverse Breakup Fees

Of the 62 transactions signed since January 1, 2015, with an antitrust reverse termination fee for which the antitrust reviews have been completed, 49, or about 79%, were cleared without any antitrust challenge. Three transactions (Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, one transaction (Walgreens Boots/Rite Aid) was abandoned in the face of agency opposition, seven transactions closed subject to a DOJ or FTC consent order, one subject to a Public Utilities Commission order, and one transaction (AT&T/Time Warner) defeated an Antitrust Division preliminary injunction challenge and closed (the DOJ has appealed).


Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2005, through December 31, 2018)

]]>http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=69Tue, 08 Jan 2019 12:00:00 -0500
<![CDATA[Antitrust Reverse Termination Fees--2018 Q3 Update]]> This post updates the public deal antitrust reverse termination fee database through September 30, 2018.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust re]]> [...] This post updates the public deal antitrust reverse termination fee database through September 30, 2018.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 1217 strategic negotiated transactions announced between January 1, 2005, and September 30, 2018. Of these, 154 transactions, or 12.7% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.2% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.4% of the transaction value.

We thought it might be helpful to give some statistics for various subsamples covering different periods so that you could get an idea of how, if at all, antitrust reverse terminations fees are varying over time.

    Frequency of Antitrust Reverse Breakup Fees

The most recent subsample covers the three-year-plus period from January 1, 2015, through September 30, 2018. This subsample covered 395 transactions, of which 65, or about 16.5%, had antitrust reverse termination fees. The fees in this sample had a mean of 4.67%, a little more than one-half of a percentage point less than the 5.2% of the full sample, and a median of 4.4%, the same as the full sample. The relative convergence of the mean and the median is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 8.8%.

The chart below gives the frequency of antitrust reverse breakup fees across the three-year-plus subsample set.

  Frequency of Antitrust Reverse Breakup Fees

Of the 55 transactions signed since January 1, 2015, with an antitrust reverse termination fee for which the antitrust reviews have been completed, 43, or about 78%, were cleared without any antitrust challenge. Three transactions (Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, one transaction (Walgreens Boots/Rite Aid) was abandoned in the face of agency opposition, six transactions closed subject to a DOJ or FTC consent order, and one transaction (AT&T/Time Warner) is in litigation.


Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2005, through September 30, 2018)

]]>http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=68Mon, 05 Nov 2018 12:00:00 -0500
<![CDATA[Sample Antitrust Risk-Shifting Provisions in M&A Transactions--2018 Edition]]> This note updates and expands the sample of antitrust-related provisions in M&A agreements over the one we posted in November 2014. As in the earlier edition, the sample provisions have been taken (sometimes with a little modification) from actual M&A agreements. 

This sample will]]> [...] This note updates and expands the sample of antitrust-related provisions in M&A agreements over the one we posted in November 2014. As in the earlier edition, the sample provisions have been taken (sometimes with a little modification) from actual M&A agreements. 

This sample will give you with a good idea of the wide variety of provisions parties have used, including:

  • the jurisdictions and the timing where merger control filings are to be made;
  • the level of cooperation the parties owe each other in defending the transaction;
  • who controls the defense strategy
  • the antitrust-related conditions precedent
  • whether the parties are obligated to litigate an adverse agency decision and, if so, who controls the litigation strategy and how long will the parties have to litigate before the drop-dead date;
  • whether the buyer is obligated to "fix" any antitrust concerns through consent decree relief and how far this obligations goes;
  • whether an antitrust reverse termination fee is to be paid in the event of a failure of the antitrust conditions; and
  • the conditions under which the agreement may be terminated or the drop-dead date extended

Of course, every deal stands on its own. The language that has been used in one deal may not be appropriate for another deal, and inclusion of a provision in this sample does not constitute an endorsement of the language. Still, I find the collection helpful in drafting and negotiating the antitrust provisions in M&A agreements.
 

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

]]>http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=67Tue, 03 Jul 2018 12:00:00 -0500
<![CDATA[Antitrust Reverse Termination Fees--2018 Q1+ Update]]> This post updates the public deal antitrust reverse termination fee database through May 31, 2018.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse ]]> [...] This post updates the public deal antitrust reverse termination fee database through May 31, 2018.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 1190 strategic negotiated transactions announced between January 1, 2005, and May 31, 2018. Of these, 153 transactions, or 12.9% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.3% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.4% of the transaction value.

We thought it might be helpful to give some statistics for various subsamples covering different periods so that you could get an idea of how, if at all, antitrust reverse terminations fees are varying over time.

    Frequency of Antitrust Reverse Breakup Fees

The most recent subsample covers the three-year-plus period from January 1, 2015, through May 31, 2018. This subsample covered 367 transactions, of which 64, or about 17%, had antitrust reverse termination fees. The fees had a mean of 4.7%, a little more than one-half of a percentage point less than the 5.3% of the full sample, and a median of 4.4%, the same as the full sample. the relative convergence of the mean and the median is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 8.8%.

The chart below gives the frequency of antitrust reverse breakup fees across the three-year subsample set.

  Frequency of Antitrust Reverse Breakup Fees

Of the 52 transactions signed since January 1, 2015, with an antitrust reverse termination fee for which the antitrust reviews have been completed, 41, or about 79%, were cleared without any antitrust challenge. Three transactions (Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, one transaction (Walgreens Boots/Rite Aid) was abandoned in the face of agency opposition, six transactions closed subject to a DOJ or FTC consent order, and one transaction (AT&T/Time Warner) is in litigation.


Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2012, through May 31, 2018)

]]>http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=66Sat, 09 Jun 2018 12:00:00 -0500
<![CDATA[Unsteady Foundations: The European Commission's New Approach to Infrastructure State Aid]]> Traditionally, the European Commission’s (EC) approach towards public funding of infrastructure was that such aid fell outside the scope of State aid rules. Recent investigations show that this approach is changing, as the scope for commercial exploitation of infrastructure has increased due to increased liberalization, privatization, market integration and technological progress. The renaming of one of the EC]]> [...] Traditionally, the European Commission’s (EC) approach towards public funding of infrastructure was that such aid fell outside the scope of State aid rules. Recent investigations show that this approach is changing, as the scope for commercial exploitation of infrastructure has increased due to increased liberalization, privatization, market integration and technological progress. The renaming of one of the EC’s units to Infrastructure and Regional aid also clearly signals that the EC is carefully re-examining the boundaries between the construction of public infrastructure that is freely accessible (and therefore not State aid) and infrastructure that is dedicated to a particular investor (which amounts to State aid).

In the Commission 2016 Notice on the Notion of State aid (the Notice), the EC aimed to clarify the scope of EU State aid rules to facilitate public investment. The EC’s press release states that the Notice intends to clarify that:

  • Public investment for the construction or upgrade of infrastructure (such as roads, railway infrastructure, inland waterways and water supply and waste water networks) is free of State aid, if it does not directly compete with other infrastructure of the same kind. In contrast, State aid rules apply to the public funding of infrastructure (such as energy, broadband, airports or ports) that is often in competition with similar infrastructure to investigate whether the subsidized project is given a selective economic advantage over its rivals.
  • Even if infrastructure is built with the help of State aid, there is no aid to operators and end-users if they pay a market price. Therefore, public authorities need to ensure that such aid is not passed on to the operator or users of the infrastructure.

The EC’s Notice, however, missed an opportunity to set out a definition for ‘dedicated infrastructure.’ This distinction between what constitutes general public infrastructure and infrastructure that is dedicated to one company is still an evolving area of EU State aid law. The handful of cases in this area have arisen in the context of public funding of ports, airports and toll roads, which can be exploited directly to generate revenue. There is little decisional practice in relation to State aid that is granted for the development of greenfield industrial parks and aid to end-users of such parks. From a policy perspective, greenfield investment is critical to the future development of the EU. Such development requires public investment to make the land suitable for industrial use such as creating flood defenses, carrying out groundwork to ensure that the land is ready to build on and connecting the site to utilities such as gas and electricity.

The landmark Leipzig-Halle case on infrastructure development marked a change in the EC’s policy. Here, the EC found that public funding for the construction of a new runway, to one exclusive operator, amounted to dedicated State aid because the construction was indissociable from that operator’s subsequent competition with other exclusive operators of competing infrastructure.1 By contrast, this is not the case when it comes to the development of a greenfield site where the end-user does not have any exclusive rights over commercially exploitable infrastructure. In these circumstances, the end-use can be completely disassociated from the infrastructure, and there is no competition with other infrastructure of the same kind.

Therefore, carrying out infrastructure development providing general public infrastructure on a greenfield site should not be considered, by the EC, to amount to State aid.

Following this case, Germany re-notified a measure to clarify the application of State aid rules to public funding for the development and revitalization of public land by public authorities for the subsequent construction of commercial infrastructure. In the GRW Decision, the EC held that making public terrain ready to build upon and ensuring that it is connected to utilities (water, gas, sewage and electricity) and transport networks (rail and road) did not constitute an economic activity.2 Rather, this was part of the public function of the State to provide and supervise land in line with local urban and spatial development plans and, therefore, did not amount to State aid.

The notified measure was called the GRW Framework and the factual scope of this scheme set out that: “[c]ustomised development of land for ex ante identified undertakings and tailored to their needs (bespoke development) is excluded from the scheme. The same holds for land redevelopment for large retail stores.”3 This was simply part of the facts, and the EC makes no legal finding on this point. The case does not find that the bespoke development of land for an ex ante identified investor amounts to State aid. In fact, the EC’s assessment of State aid in the GRW Decision makes no reference to the chronology of when an investor comes into the picture. What mattered when deciding whether there is aid granted to the purchasers of developed land was whether an advantage had been excluded through a payment (or receipt in the case of the developer) on market terms. Aid to the end-user was simply dealt with as follows:

“[a]fter the development of the land, any interested third party may buy the remedied land, which must be sold in accordance with the guidance provided in the Commission’s land sale communication, i.e. at a market price.”4

This approach is also in line with the Notice which provides that there is no infrastructure aid to an end-user if it pays market price. There is no reference in the Notice or in the GRW Decision of a requirement for investors to not have been identified ex ante or any reference to the history behind the specific industrial sites chosen.

The development of infrastructure was also considered in the Propapier case, where the complainant alleged that certain infrastructure projects that had been financed using public resources, in a newly extended industrial plant, were exclusively intended for Propapier’s this amounted to dedicated infrastructure and therefore State aid for the benefit of Propapier. What was relevant in this case was not the percentage of infrastructure occupied by Propapier, but whether it received a selective benefit. The EC found the percentage of land occupied by Propapier was not necessarily an indication of dedication:

“[t]he Commission is of the view that the fact that the TAZV plant is at present predominantly ([< 70]% on average and [< 70]% maximum) used by Propapier does therefore not necessarily mean that it constitutes dedicated infrastructure, as its modular design makes sense from an economic point of view in times of limited public budgets.”6

Therefore, there is no ‘bright line’ test for dedication based on the percentage of occupation of the infrastructure that was occupied by Propapier. Once a market price has been determined, it makes no difference what percentage of the land is occupied by the end-user. It makes no sense that where a user occupies 100% of a pre-existing industrial park, or 60% of a newly built park, that development is considered to be non-economic and costs of prior development at a loss can be met by the State, but if the user occupies 80% of a newly built park as an anchor investor, the same coverage of losses would constitute State aid to the end-user. In such a scenario, it is difficult to understand what benefit the user has received in the second case that the user in either of the first cases has not.

The policy implications of applying a percentage usage test in a greenfield development context to determine ‘dedication’ could also be detrimental. Member States would have an incentive to either develop industrial parks speculatively, potentially wasting public funds and lowering land values by creating over-supply, or to expand the size of industrial parks in order that investments involving anchor investors fell beneath the ‘dedication’ threshold. This would result in some industrial parks being over-dimensioned and would also lead to public funds being wasted. This approach of waiting for a main investor is also consistent with Propapier where the EC found that:

“[t]he fact that the regional aid for the construction of the plant was granted subject to the settlement of a main investor, in this case Propapier, in the extended business park, is considered by the Commission to constitute good public management of scarce resources since it makes sense not to start building a major public infrastructure without ensuring that it will be used, and not to over-dimension it.”7

Any threshold for the level of occupation that is sufficient to constitute dedication is also bound to be arbitrary–indeed even 100% of a current footprint does not take into account any possible expansion. The concept of ‘dedicated infrastructure’ is ill-suited to development of industrial parks, especially since the focus should be whether the end-users actually receive a benefit. As long as a genuine market price is paid, an end-user of a greenfield site cannot receive any advantage.

Footnotes

1. Case C-288/11 P, Mitteldeutsche Flughafen AG and Flughafen Leipzig-Halle GmbH v. European Commission (EU:C:2012:821).
2. Case SA.36346, Germany–GRW land development scheme for industrial and commercial use, (GRW Decision).
3. Id., para 18.
4. Id., para 25.
5. Case SA.36147, Alleged infrastructure aid implemented by Germany in favour of Propapier PM2 GmbH p. 72–93.
6. Id., para 160.
7. Id., para 161.

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http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=63Tue, 01 May 2018 12:00:00 -0500
<![CDATA[The Winding Road to the Supreme Court: United States v. American Express Co.]]> Last year’s Antitrust Annual Report described American Express’ sweeping victory over the Department of Justice (DOJ) and 17 state Attorneys General (AGs) in the Second Circuit pertaining to its use of Non-Discrimination Provisions (NDPs) in its merchant contracts – that is, contractual provisions that forbid merchants from trying to influence consumers to use lower cost forms of payment. But the S]]> [...] Last year’s Antitrust Annual Report described American Express’ sweeping victory over the Department of Justice (DOJ) and 17 state Attorneys General (AGs) in the Second Circuit pertaining to its use of Non-Discrimination Provisions (NDPs) in its merchant contracts – that is, contractual provisions that forbid merchants from trying to influence consumers to use lower cost forms of payment. But the Second Circuit’s decision was not the end of the dispute. The Supreme Court agreed to hear the case – only without the DOJ’s continued participation.

The Winding Road to the Supreme Court

On September 26, 2016, the Second Circuit reversed the district court’s holding in favor of the DOJ and a group of AGs that American Express’ use of NDPs unreasonably restrained trade in the ‘network services market,’ because the NDPs prevented merchants from steering consumer volume to less expensive forms of payment.1 The Second Circuit found several errors in the district court’s decision, all of which, the circuit court said, were the result of the district court’s failure to properly account for the two-sided nature of the credit card industry and the effect of consumer reaction to merchants who would drop out of a credit card network in response to higher prices. To the Second Circuit, this failure caused the district court to make flawed findings with respect to market definition and market power, among other things.

In the wake of the Second Circuit’s reversal, the question facing the DOJ was whether to petition the Supreme Court for certiorari. The dilemma, however, was that the new presidential administration had not nominated, and the Senate had not confirmed, anyone to fill certain key leadership positions within the DOJ. While awaiting action by the President and Senate, the DOJ sought, and the Supreme Court granted, two extensions to its time to file a certiorari petition, first to May 5, 2017, then to June 2, 2017. With the leadership positions still unfilled at the latter of these deadlines, the DOJ opted not to petition the Supreme Court to review the case.

However, a group of 11 AGs did file such a petition.2 The AGs contended that the Supreme Court should use the American Express case as a vehicle to provide guidance to the lower courts on how to properly apply the rule of reason analysis, because “‘nowhere’ is the combination of ‘vague rules’ and ‘high stakes’ ‘more deadly than in antitrust litigation under the rule of reason.’” The AGs illustrated this point by showing that it was only after years of investigation and a seven-week trial that they found out that they had focused on the “wrong market.” Further, the AGs claimed that the Second Circuit’s decision was incorrect, because it conflicted with the Supreme Court’s market definition precedent and improperly shifted the burden to the DOJ and the AGs to affirmatively disprove the existence of pro-competitive benefits (when the burden should have been on American Express to prove the existence of those benefits).

In an unusual move, the DOJ filed a brief opposing the AGs’ certiorari petition.3 While agreeing with the AGs’ legal arguments, the DOJ opposed certiorari because “neither [the Supreme Court] nor any other circuit has squarely considered the application of the antitrust laws to two-sided platforms as such.” Rather than granting certiorari now, the DOJ said that the Court should “await [ ] further percolation in the lower courts before taking up such novel legal issues.”

Nonetheless, over the DOJ’s and American Express’ objections, the Supreme Court granted certiorari.

Supreme Court Briefing

On December 7, 2017, the AGs submitted their opening merits brief to the Supreme Court.4 The AGs made three primary arguments. First, that the NDPs limit interbrand, rather than just intrabrand, competition, so a lower standard of proof should be required than in other vertical restraint cases. Moreover, regardless of whether a lower standard applies, the AGs claimed that the DOJ and the AGs sufficiently showed that the NDPs reduced competition and resulted in higher prices because merchants could not steer consumer volume to lower cost forms of payment.

Second, the AGs claimed that the circuit court erred because requiring the DOJ to show that reduced competition on the merchant side (that potentially led to higher merchant fees) was ‘offset’ by increased competition on the consumer side (in the form of benefits to consumers, such as cardholder rewards) conflicted with Supreme Court precedent. Essentially, the AGs claimed, antitrust law does not allow private companies to choose the dimensions on which they compete and that competition across all dimensions produces optimal results.

Third, the circuit court’s acceptance of American Express’ ‘offset’ argument tainted its product market definition analysis. The AGs argued that the Supreme Court has endorsed a product market definition test that focuses on interchangeability. It was therefore improper, according to the AGs, for the Second Circuit to collapse credit card merchant services and credit card consumer services into a single market because those services are not interchangeable, despite the fact that the pricing of the two services are interdependent.

The DOJ filed a brief in support that largely echoed the AGs’ arguments.5 The DOJ added that it had demonstrated, and the district court made a factual finding, that the NDPs actually caused anti-competitive effects, which obviates the need to define the market. As a result, the DOJ said that the Court need not opine on market definition in this case. The DOJ also argued that the Second Circuit erred by requiring the DOJ to refute the existence and extent of cardholder benefits as part of its prima facie case. While the DOJ conceded that cardholder benefits, and the interdependence of the merchant and cardholder markets, are relevant, the DOJ argued that it is American Express’ burden to establish those benefits, not the DOJ’s burden to refute them at the outset.

On January 26, 2018, American Express filed its opposition brief in which it made two primary arguments for upholding the Second Circuit’s decision.6 First, as a matter of law and economics, a firm without market power cannot unlawfully restrain trade under the rule of reason by using vertical restraints because “curtailing supply unilaterally will simply result in a loss of market share, because other suppliers will fill the gap.” American Express contended that the AGs do not contest the Second Circuit’s holding that American Express does not have market power. Second, American Express argued that the DOJ and the AGs failed to demonstrate harm to competition. During the period in which the NDPs were in effect, “quantity and quality of output in the market for credit card services have increased sharply,” and the AGs’ only argument to the contrary is that prices American Express charged to merchants increased. American Express downplayed these price increases as evidence of anti-competitive effects because “given the… two-sided nature of the market… merchant prices in isolation do not provide an accurate proxy for output.” Instead, American Express insisted that the market can only be properly analyzed by considering the cardholder and merchant sides of the market together. American Express claimed that the AGs one-sided focus and position that the NDPs are illegal because they “restrict ‘the competitive process’” amounted to an inappropriate relaxation of their burden under the rule of reason. American Express concluded that “in the absence of market power, the antitrust laws rely on competition – not court-imposed regulation – to promote consumer welfare.”

Conclusion

The Supreme Court is expected to issue its decision by the end of June 2018. Regardless of which side prevails, the Supreme Court’s decision could provide guidance on how lower courts should apply the rule of reason, and it could have major impacts on how markets are analyzed in antitrust cases going forward, particularly in industries that have interrelated, but distinct, components.

Footnotes

1. United States v. American Express Co., 838 F.3d 179 (2d Cir. 2016).
2. Petition for Writ of Certiorari, United States v. American Express Co., – S. Ct. – (June 2, 2017) (No. 16-1454).
3. Br. for the United States in Opposition, American Express, – S. Ct. - (Aug. 7, 2017).
4. Br. for the Petitioners and Respondents Nebraska, Tennessee, and Texas, American Express, – S. Ct. – (Dec. 7, 2017).
5. Br. for the United States as Respondent Supporting Petitioners, American Express, – S. Ct. – (Dec. 7, 2017).
6. Br. for Respondents 20-23, American Express, – S. Ct – (Jan. 16, 2018).

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http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=61Mon, 30 Apr 2018 12:00:00 -0500
<![CDATA[Antitrust Discovery and International Comity: Limitations to Document Production]]> Under the Federal Rules of Civil Procedure, there are no geographical limitations on discovery requests.

Overview Of International Comity In The Antitrust Discovery Context

A U.S. court could theoretically order the production of documents held anywhere in the world, so long as those documents pertain to a “nonprivileged matter that is relevant.” 1 [...] Under the Federal Rules of Civil Procedure, there are no geographical limitations on discovery requests.

Overview Of International Comity In The Antitrust Discovery Context

A U.S. court could theoretically order the production of documents held anywhere in the world, so long as those documents pertain to a “nonprivileged matter that is relevant.” 1 These broad discovery procedures create tension between the various foreign antitrust enforcement agencies and the U.S. federal courts, particularly with respect to documents submitted to foreign enforcement authorities as part of their confidential investigations.2 In order to incentivize parties to self-disclose information through amnesty programs and more generally to cooperate with investigations, most, if not all, enforcement authorities take the position that confidential submissions made during their antitrust investigations cannot be used for any other purpose other than the investigation itself. U.S. regulators that have received documents from their counterparts in foreign jurisdictions, as well as multinational defendants embroiled in antitrust litigation and investigations in multiple jurisdictions, have resisted requests to produce these documents in civil litigation, citing principles of international comity – the concept of judicial respect for the sovereignty of foreign nations3 – to argue that courts should curtail broad U.S. discovery where it would intrude on the sovereignty of other nations.4

To assess whether international comity should limit discovery in the antitrust context, U.S. federal courts have adopted a five-factor test that considers: (i) the documents’ importance to the litigation; (ii) the request’s specificity; (iii) whether the information originated in the United States; (iv) the availability of alternative means of securing the information; and (v) the extent to which noncompliance with the request would undermine important interests of the United States, or compliance with the request would undermine important interests of the state where the information is located.5

The modern trend is for U.S. courts to decline to order production in civil discovery of confidential submissions to foreign competition enforcement authorities on grounds of comity.6 However, a recent decision in the U.S. District Court in the Northern District of California took a different approach and ordered the production of confidential submissions made to the Korean Fair Trade Commission (KFTC) and the European Commission (EC). There are substantial reasons for distinguishing this result from several prior cases addressing discovery of these kinds of confidential submissions, but this case is a reminder that firms contemplating the submission of such materials to foreign enforcers can have no firm assurance that they will be protected from civil discovery in the United States.

Qualcomm: International Comity Limitations Claimed By A Public Agency

In FTC v. Qualcomm, Qualcomm faced multiple investigations across a number of jurisdictions, including by the United States Federal Trade Commission (FTC), for alleged monopolistic behavior in the sale of semiconductor devices used in mobile phones and the licensing of related technology.7 Qualcomm sought from the FTC certain documents that foreign competition enforcement authorities had shared with the FTC in connection with their related investigations of Qualcomm. These documents had been provided to the foreign enforcement agencies by various firms, including customers, competitors and licensees of Qualcomm.8 The FTC argued that the documents should not be produced to Qualcomm because of international comity concerns.9 The EC and the KFTC filed letters, siding with the FTC and objecting to the discovery based on the confidentiality interests of the third parties that had provided information in their investigations and the agencies’ continuing interests in protecting the integrity of their investigatory process by ensuring confidentiality.10

The court, however, did not accept the FTC’s international comity argument and ordered the FTC to produce the documents.11 Skeptical that international comity applied at all, the court’s decision focused on the FTC’s physical possession of the documents in the United States.12 Further, the court held that even if international comity were at play, Qualcomm would still be entitled to the documents under the five-factor test.13 Focusing on the last factor, the court discounted the foreign enforcers’ confidentiality interests, because the enforcers’ letters did not state how disclosure would directly conflict with specific laws in their jurisdiction. Accordingly, the court concluded that Qualcomm’s need for the documents outweighed the confidentiality concerns of the foreign entities.14

Previous Decisions Declining To Order Production Of Foreign Submissions Based On International Comity

The decision in In re Rubber Chemicals Antitrust Litigation is an example of a different approach to the comity issue. In Rubber Chemicals, the plaintiff brought private antitrust claims against a defendant chemical company whose foreign affiliate had recently been under investigation by the EC for potential antitrust violations.15 The plaintiff sought the production of documents that the defendant had provided to the EC as part of an effort to cooperate with the regulator’s antitrust investigation.16 The defendant objected, citing international comity, and the court agreed, denying the plaintiff’s motion to compel.17 The court put particular emphasis on the third factor in the comity analysis, noting that the documents were “created, transmitted, and used only in Europe and in conjunction with European enforcement proceedings.”18 As is common in multi-jurisdictional antitrust investigations, the defendant provided its EC submission only to the EC, and there is no indication that its submission was ever provided to any agency in the United States.19 The court credited a letter submitted by the EC in support of the defendant’s objection, finding that it “raise[d] concerns that discovery of the EC documents could impact U.S.-EU cooperation in the enforcement of the antitrust laws.”20 Taking these factors together, the court concluded that “[c]omity is a sensitive balance” but that “in this case the principles of comity outweigh the policies underlying discovery.”21

Conclusion

International comity can be used by litigants in U.S. antitrust litigation to limit the production of documents submitted to foreign enforcement agencies. While at first glance Rubber Chemicals and other cases like it may seem directly contrary to the FTC v. Qualcomm decision, important differences in the facts and contexts of the two cases suggest that they are reconcilable and that U.S. litigants, especially amnesty or leniency applications, continue to have strong, albeit not ironclad, arguments to keep their submissions to foreign enforcers confidential. As these cases demonstrate, the context of the submission is very important: For confidential leniency or amnesty submissions to a foreign agency enforcing its own laws that were not provided to U.S. agencies or otherwise used in the United States, U.S. courts have tended to give a higher degree of deference to comity concerns and to foreign enforcers’ desire to maintain the confidentiality of their cooperators. In other contexts, however – such as FTC v. Qualcomm, where the foreign enforcer voluntarily shared the submissions with a U.S. agency that was itself a party in the U.S. case – courts may find the comity interest substantially less compelling and may be more inclined to order the submissions to be produced. Although the five-factor test described above is well-established, it is impossible to provide firm assurances as to how U.S. courts will apply the test and resolve the issue in every instance.

Footnotes

1. Fed. R. Civ. P. 26(b)(1).
2. Diego Zambrano, A Comity of Errors: The Rise, Fall, and Return of International Comity in Transnational Discovery, 34 Berkeley J. of Int’l L. 157, 170 (2016).
3. Id. at 161.
4. In re Rubber Chemicals Antitrust Litig., 486 F. Supp. 2d 1078, 1081 (N.D. Cal. 2007) (citing Societe Nationale Industrielle Aerospatiale v. U.S. Dist. Court for the S. Dist. of Iowa, 482 U.S. 522, 544 (1987)).
5. Id.
6. The modern trend increasingly analyzes the foreign enforcers’ confidentiality interests in their leniency programs through the five-factor Aerospatiale test. See, e.g., In re TFT-LCD (Flat Panel) Antitrust Litig., Special Master’s Order Denying Motion to Compel, No. M:07-cv-01827-si, Dkt. No. 286 (N.D. Cal. April 26, 2011) (holding that foreign enforcers’ confidentiality interests outweighed the plaintiffs’ interests under the Aerospatiale test).
7. Order on Discovery Dispute at 1, FTC v. Qualcomm Inc., No. 17-cv-00220 (N.D. Cal. filed Aug. 24, 2017), ECF No. 176.
8. Id.
9. Id. at 2.
10. Id. at 3.
11. Id.
12. Id.
13. Id.
14. Id.
15. In re Rubber Chemicals, 486 F. Supp. 2d at 1080–81
16. Id.
17. Id.
18. Id. at 1083.
19. While leniency/amnesty applicants often approach multiple jurisdictions simultaneously, each submission is typically tailored to each individual enforcer and not shared with others.
20. Id. at 1084.
21. Id.

]]>http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=60Fri, 27 Apr 2018 12:00:00 -0500
<![CDATA[Antitrust Enforcement Under the Trump Administration]]> Divining trends in antitrust enforcement in a given presidential administration can take some time. Many commentators didn’t notice material changes in antitrust enforcement in the Obama administration – at least in merger enforcement – until the summer of 2011, when the Antitrust Division of the Department of Justice (DOJ) brought suit challenging AT&T’s acquisition of T-Mobile, more tha]]> [...] Divining trends in antitrust enforcement in a given presidential administration can take some time. Many commentators didn’t notice material changes in antitrust enforcement in the Obama administration – at least in merger enforcement – until the summer of 2011, when the Antitrust Division of the Department of Justice (DOJ) brought suit challenging AT&T’s acquisition of T-Mobile, more than two years into President Obama’s term. However, in the early tenures of antitrust enforcers appointed by President Trump, there are indicators worth watching to see whether and to what extent they are harbingers for antitrust enforcement.

At the DOJ, newly appointed Assistant Attorney General (AAG) Makan Delrahim has provided some clues about how the DOJ under his leadership will approach antitrust issues at the intersection of antitrust and intellectual property, merger enforcement and the DOJ’s use of consent decrees generally. At the Federal Trade Commission (FTC), the direction of change will be less certain until a Trump nominee has been confirmed.

AAG Delrahim was nominated in late March 2017 and assumed office, following confirmation by the Senate, in late September 2017. In this fairly short period as AAG, Delrahim has already announced a few important changes in enforcement priorities at the DOJ. Befitting his status as the first registered patent lawyer to head the Antitrust Division, one of Delrahim’s first public speeches about the DOJ’s enforcement priorities touched on the role of antitrust law in the context of standard setting organizations (SSOs) and their policies regarding patents. Delrahim expressed concern that antitrust enforcers had strayed too far in the direction of accommodating the concerns of technology implementers over IP creators. Rather than focus on the patent ‘hold up’ problem, in which an IP licensor threatens to delay licensing until its royalty demands are met, Delrahim said that the more serious impediment to innovation is the ‘hold out’ problem, which arises where technology implementers underinvest in the implementation of a standard, or threaten not to take a license, until their royalty demands are met. Delrahim expressed skepticism about using antitrust law to address the hold up problem, noting that common law and non-antitrust statutory remedies are adequate remedies for SSOs and their members. Interestingly, while the DOJ had issued an influential business review letter regarding an SSO’s revised patent policy in 2015, during and prior to the Obama administration, the FTC had been more active than the DOJ in using the antitrust laws to address SSO issues. However, the AAG has a significant bully pulpit on any issues involving antitrust, even if the law continues to develop outside of the DOJ’s purview (e.g., in private actions).

In perhaps the most notable action taken in Delrahim’s tenure, the DOJ challenged AT&T’s proposed $85.4 billion acquisition of Time Warner. In the Obama administration, a few vertical deals (transactions between parties in the same value chain), including Comcast’s acquisition of NBC Universal, were approved subject to behavioral remedies prohibiting, among other things, discriminatory and retaliatory behavior and practices. Delrahim, in a November 2017 speech at the ABA Antitrust Fall Forum, expressed skepticism about behavioral remedies, saying that they supplant competition with regulation, require companies to make decisions contrary to their profit-maximizing incentives and demand more ongoing monitoring than structural decrees. Additionally, Delrahim noted that the DOJ has found it difficult to enforce behavioral remedies given the “exacting standards of proving contempt.”

Less than a week after the speech, the DOJ challenged AT&T/Time Warner, reportedly after rejecting an 11th-hour behavioral settlement offer from AT&T, marking the first time the DOJ (or the FTC) has challenged a vertical deal in decades. Delrahim’s statement on behavioral remedies reflected a view that may have been crystallizing at the DOJ regarding the difficulty of enforcing behavioral remedies. Notably, President Trump made a statement during the campaign that his administration would block AT&T/Time Warner. However, it is quite possible that a DOJ in a hypothetical Hillary Clinton administration may have reached the same result. Neither the DOJ’s vertical theory of harm asserted in AT&T/Time Warner nor the disfavoring of behavioral remedies are novel viewpoints. What remains to be seen is how Delrahim’s skepticism of behavioral remedies will affect other vertical mergers the DOJ is reviewing. The disfavoring of behavioral remedies could lead to an increase in challenges to vertical deals, or it could lead to more vertical deals being allowed to proceed without any conditions (or a challenge). Given the idiosyncratic context of AT&T/Time Warner and the recency of Delrahim’s speech, it would be prudent to see how the DOJ approaches similar vertical transactions in the future before drawing too many conclusions.

While AT&T/Time Warner provides some clues as to how the Trump era antitrust enforcers will approach vertical transactions, there is less evidence about how the DOJ or FTC may change antitrust enforcement towards horizontal transactions, which, of course, leaves room for speculation. In the latter years of the Obama administration, many observers saw at least two major changes in the substantive standard used to weigh whether transactions would substantially lessen competition. The enforcement agencies were (1) lowering the concentration thresholds at which they decided to intervene in a transaction; and (2) giving less credit to parties’ efficiency arguments. Additionally, the enforcement agencies were seen as requiring more stringent remedies, e.g., by trending towards favoring the divestiture of entire operating units rather than more limited products and by taking a stricter view of financial viability of divestiture buyers. It remains to be seen which of these enforcement trends will be reversed in a Trump administration.

In the same speech about behavioral remedies, Delrahim provided some general thoughts about the DOJ’s approach to consent decrees. He said that settlements should be simple and administrable, should avoid usurping regulatory functions and should preserve economic liberty and preserve the competitive process. He signaled an intention to improve the enforceability of consent decrees, mentioning a new provision that the DOJ will seek to put in decrees in which parties will agree that alleged violations will be judged under a preponderance standard, rather than the more rigorous contempt standard. The DOJ included such a provision in its recent Entercom/CBS decree. Delrahim also said that the DOJ will be seeking agreement on obtaining costs of ongoing monitoring and enforcement of decrees.

As no Trump FTC nominee has yet been confirmed, the direction of potential change is not yet as evident at the FTC. But acting FTC Chairman Maureen Ohlhausen has announced her intention to streamline the FTC’s information requests during its investigations, and it’s likely that Joe Simons, if and when confirmed as Chairman, will continue that approach. In a speech at the American Bar Association’s Antitrust Fall Forum in November 2017, Donald Kempf, the Antitrust Division’s Deputy Assistant Attorney General for Litigation, made a similar pronouncement that the DOJ would also seek to reduce the burden on parties involved in investigations.

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http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=59Tue, 17 Apr 2018 12:00:00 -0500
<![CDATA[The DOJ's Evolving Approach to Consent Decrees]]> Our enforcement agencies are tasked with the difficult job of evaluating mergers to assess their effect on the competitive landscape. While most mergers are able to pass agency review unscathed, there are a select number that could lead to anti-competitive outcomes if allowed to proceed. It is for these mergers that remedies come into play. Traditionally, if an enforcement agency found that a merger was likely to su]]> [...] Our enforcement agencies are tasked with the difficult job of evaluating mergers to assess their effect on the competitive landscape. While most mergers are able to pass agency review unscathed, there are a select number that could lead to anti-competitive outcomes if allowed to proceed. It is for these mergers that remedies come into play. Traditionally, if an enforcement agency found that a merger was likely to substantially lessen competition, it would impose a structural remedy. Of course, structural remedies aren’t without their own complications, but by and large, enforcement of structural remedies are fairly straightforward: either the merger is blocked/ abandoned or the assets or portion of a business are sold to a third party.

While structural remedies remain the primary remedy of choice, and virtually the only option in the case of horizontal mergers, under the Obama Administration and with respect to vertical mergers, the agencies increasingly embraced the use of remedies that regulate the combined firm’s conduct, also known as behavioral remedies. This trend, however, may soon come to an abrupt halt as the Department of Justice’s (DOJ) new Assistant Attorney General of the Antitrust Division, Makan Delrahim, has made it clear that his regime will look at behavioral remedies with a much more critical eye.

The DOJ was not always keen on employing behavioral remedies. Prior to 2011, the DOJ’s 2004 Antitrust Division Policy Guide to Merger Remedies (2004 Merger Remedies Guide) illustrated skepticism towards remedies that regulate conduct. The 2004 Merger Remedies Guide had stated that “[s]tructural remedies are preferred to conduct remedies in merger cases because they are relatively clean and certain, and generally avoid costly government entanglement.”1 The 2011 Merger Remedies Guide, on the other hand, took a different approach. Not only did the 2011 version remove the statement illustrating preference of structural remedies, but also deleted comments that behavioral remedies were only appropriate in a narrow set of circumstances. Taking a more accepting approach, the 2011 Merger Remedies Guide state that “[i]n certain factual circumstances, structural relief may be the best choice to preserve competition. In a different set of circumstances behavioral relief may be the best choice.” 2

Needless to say, several of the DOJ’s challenges to vertical mergers in the following years resulted in consent decrees that focused on regulation of the combined firm’s conduct. Specifically, the consent decrees in Live Nation/ Ticketmaster, Comcast/NBCU and Google ITA Software contained a number of behavioral remedies, including anti-retaliation provisions protecting customers contracting with the firms’ competitors, obligations to provide non- discriminatory access to necessary inputs, requirements to continue to develop upgrades and invest in specific products, the creation of informational firewalls and various reporting requirements, including reporting competitors’ complaints.3

There are several problems that emanate from the use behavioral remedies, especially in the merger context, which Delrahim addressed in a recent keynote at the American Bar Association Antitrust Fall Forum on November 16, 2017. As Delrahim noted, the DOJ’s goal in remedying anti-competitive transactions should be “to let the competitive process play out.” However, by replacing competition with regulation, behavioral remedies often fail to achieve this goal, requiring “centralized decisions instead of a free market process.” Behavioral remedies inevitably are static, based on the view of competitive market conditions at a specific point in time (i.e., the time of the merger). However, markets are often dynamic, particularly those in rapidly evolving industries, such as those in tech-based industries. Unsurprisingly, behavioral remedies often fail to predict the ways in which the market and competition may evolve and have the effect of locking the combining firm into a behavior that may ultimately restrict its ability to adapt to the changing market conditions. Thus, in regulating how a firm interacts with its customers and competitors, it is very difficult for regulators to fashion rules that ban anti- competitive conduct without precluding the pro-competitive. Furthermore, given the ever-changing nature of markets, it is difficult to determine when behavioral remedies should expire. Short-term remedies simply serve as a ‘band-aid’ rather than a fix, only delaying the firm’s exercise of market power. However, as Delrahim notes, indefinite commitments would transform the DOJ into “full-time regulators instead of law enforcers.”

This leads to another issue with behavioral remedies: the challenge of enforceability. Although he did not touch upon specifics, Delrahim mentioned in his keynote that the DOJ is investigating behavioral decree violations over recent years and that it has proven to be very difficult to collect information or satisfy the standards of proving contempt and seeking relief for the violations. Regulators do not have a continuous view into the day-to-day operations of a business, which makes it difficult to monitor and enforce “granular commitments like non-discrimination and information firewalls.” Requiring the DOJ to enforce such remedies would involve constant oversight into the affairs of a business, which, even if it was feasible, would detract the agency’s attention from other investigations that might warrant intervention to prevent anti-competitive conduct.

This is not to say that behavioral remedies should be banned outright. In fact, Delrahim did acknowledge in his keynote that his remarks should not be interpreted as a blanket statement that the DOJ will never accept behavioral remedies. As the 2004 Merger Remedies Guide conceded, there are certain circumstances where behavioral remedies can be beneficial in the merger context. For instance, one could conceive of a pro-competitive merger where no divestiture is feasible, yet if allowed to proceed, would result in net benefits to customers. In this situation, the implementation of behavioral remedies would allow such a merger to proceed, where the DOJ would have otherwise challenged such merger absent such remedies.

However, such instances are a small percentage of all merger activity, and it does not appear the DOJ will be as accepting as the Obama administration. Indeed, the DOJ seems to already be employing Delrahim’s philosophy, suing to block the AT&T/Time Warner merger. As AT&T has argued, any anti-competitive concerns caused by their proposed merger with Time Warner could be cured by behavioral remedies, similar to those the DOJ has employed in past cases, specifically the Comcast/NBCU merger.

So what does all this mean for the future? As Delrahim stated, the DOJ should strive to employ consent decrees that are administrable and do not take “pricing decisions away from the markets.” As such, the DOJ will continue to review settlement offers but will be skeptical of any remedy – be it behavioral or divestiture – that does not completely remedy the competitive harm. If the AT&T/Time Warner challenge is any indication, in the context of behavioral remedies, it seems that the DOJ will be employing a very critical eye indeed.

Footnotes

1. U.S. Department of Justice, Antitrust Division Policy Guide To Merger Remedies § III.A (October 2004).
2. U.S. Department of Justice, Antitrust Division Policy Guide To Merger Remedies (June 2011).
3. See generally William F. Shughart II & Diana W. Thomas, Antitrust Enforcement in the Obama Administration’s First Term: A Regulatory Approach, Cato Inst. Pol’y Analysis No. 739 (Oct. 22, 2013), at 14–17. ]]>
http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=62Fri, 13 Apr 2018 12:00:00 -0500
<![CDATA[Gun-Jumping and Procedural Compliance]]> Many jurisdictions across the world have mandatory notification regimes. When the relevant filing thresholds are met, the merger review process has a suspensive effect on the transaction, meaning that the parties must continue to operate as competitors and cannot integrate until they receive merger approval.

‘Gun-jumping’ refers to unlawful conduct of the merging parties before such approval i]]> [...] Many jurisdictions across the world have mandatory notification regimes. When the relevant filing thresholds are met, the merger review process has a suspensive effect on the transaction, meaning that the parties must continue to operate as competitors and cannot integrate until they receive merger approval.

‘Gun-jumping’ refers to unlawful conduct of the merging parties before such approval is granted, including early implementation of the merger, the coordination of competitive conduct or the unrestricted exchange of competitively sensitive information.

The EU and U.S. competition authorities have been and remain active in enforcing gun-jumping cases, while in recent years other competition authorities across the world, including in China, have also become increasingly active. This is a trend we expect to continue.

At the time of writing, the European Commission (EC) is investigating two potential gun-jumping cases– Altice/PT Portugal and Canon/Toshiba Medical Systems (TMS).

These cases are significant because, while the EC has made clear that in each case its approval in respect of the merger will not be affected, they demonstrate that not only is gun-jumping a live risk, but the EC is prepared to pursue potential procedural infringements even if the risk of serious harm is low.

Canon/TMS involves allegations that Canon implemented the merger before both notifying and obtaining approval from the EC. This case involved a two-step acquisition procedure known as ‘warehousing.’ On signing, Canon acquired a single non-voting share in TMS, for which it paid effectively the full value of TMS. At the same time, an interim buyer acquired voting shares in TMS for a nominal amount. Canon also took options over these shares. Canon intended to have control of TMS only when it exercised the options following notification and merger approval. The EC cleared the merger in September 2016 but has subsequently opened an investigation into whether these arrangements let Canon effectively acquire TMS before it notified the deal.

The Canon case is particularly significant as the EC has taken issue with the very design of the transaction. Warehousing structures are not uncommon. They can, for example, be used in auctions to enable potential ‘strategic’ purchasers, whose business may overlap with a target’s, to compete on a level playing field with potential private equity purchasers, which are less likely to have competition issues. In the Canon case, the structure was designed to enable the purchase price to change hands as quickly as possible on signing, as Toshiba was in urgent need of cash to balance its books following an accounting scandal. The Canon case highlights the need for businesses to be aware of the risks certain transaction structures may bring, particularly as the reason for breach is irrelevant, whether deliberate, negligent or innocent.

However, it is not just the EC that has taken issue with the arrangements in Canon/TMS. The opening of its investigation followed a public warning by the Japanese competition authority, the Japan Fair Trade Commission (JFTC), in 2016 that the arrangements may be in violation of antitrust law. The JFTC did not impose a fine on Canon, but the public announcement serves as a warning to others contemplating similar structures. The Chinese competition authority, the Ministry of Commerce (MOFCOM), went a step further and, in January 2017, fined Canon RMB300,000 (approx. US$45,166) for failure to notify the transaction at the first step.

In this regard, the Canon case highlights a significant discrepancy in the severity of risk posed by breaching gun-jumping rules across the different regimes, particularly between China and other merger control jurisdictions, such as the EU and the United States.

In the EU, the financial consequences of running afoul of the rules can be severe. The EC can impose a fine of up to 10% of worldwide turnover, should it decide that Canon has broken the rules. The EC has previously fined companies up to €20 million for gun-jumping. Similarly, in the United States, the Department of Justice (DOJ) can impose fines of up to US$41,4841 per day, per company that is out of compliance, for gun-jumping offenses. The DOJ has obtained civil penalties as high as $5.67 million for gun-jumping violations, when it reached a settlement in 2003 with Gemstar-TV Guide, reflecting the then-maximum penalties of $11,000 per day that each company was out of compliance.

In fact, the DOJ continues to monitor potential gun-jumping violations closely. On January 18, 2017, the DOJ obtained a US$600,000 civil penalty from Duke Energy, a seller of wholesale electricity, for gun-jumping violations relating to Duke’s acquisition of Osprey, an electricity generating plant in Florida. Duke agreed to purchase Osprey in August 2014. At the same time, the parties entered into a tolling agreement whereby Duke assumed control of operational responsibilities at Osprey and also retained any profit (or loss) from the operation of the plant. While similar tolling arrangements standing alone are not uncommon in the electric power generation industry, and the DOJ did not allege that the tolling agreement standing alone was a violation of the antitrust laws, the DOJ did allege that the use of the tolling agreement in conjunction with the purchase agreement was a gun-jumping violation, because it transferred beneficial control prior to HSR clearance. The DOJ obtained penalties from Duke for the 150-day period that the parties were out compliance: from the effective time of the tolling agreement in October 2014, through the date that Duke received early termination of the HSR waiting period for the acquisition in February 2015.2

By contrast, in China, the maximum financial penalty for gun-jumping is a fine of RMB500,000 (approx. US$75,277). It is certainly true that in recent years China has increased its focus on enforcing gun-jumping rules. As of the end of 2017, the Ministry of Commerce (MOFCOM) of the Government of China has publicly announced 17 gun-jumping cases. However, the average amount of the fine imposed per penalized company is RMB190,000 (approx. US$29,000). This has led to criticism that the fines are too low to act as a sufficient deterrent to prevent companies from taking calculated risk with regard to jumping the gun.

For large-scale transactions, the financial cost for each day of delaying the closing can easily exceed the average fine for gun-jumping. However, gun-jumping may lead to additional and substantive delay of clearance. MOFCOM can request the parties to suspend the implementation during the gun-jumping investigation, and did so in seven out of the 17 cases. On average, the investigation period takes approximately 230 calendar days. So even if the fine is insignificant, gun-jumping may lead to severe loss considering the possible additional delay of the transaction.

For companies with multi-jurisdictional operations engaging in complex M&A transactions, evaluating the risks posed by gun-jumping rules across jurisdictions can be particularly challenging; not only do the rules frequently lack clarity, but the assessment by the regulators takes place on a case-by-case basis and there are often differences in approach between regimes. However, the competition authorities have recently shown that they are likely to enforce the rules rigorously as a deterrent to others. Given the increased enforcement activity in this area from competition authorities across the world, businesses must be aware of the risks and take measures to mitigate these based on the individual circumstances of their case.

Footnotes

1. Subject to annual adjustment based on inflation.
2. The DOJ agreed to adjust the penalty downward from the maximum penalty permitted in part because Duke was willing to resolve the matter by consent decree.

]]>http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=65Thu, 12 Apr 2018 12:00:00 -0500
<![CDATA[What Role For Fairness in EU Competition Policy and Enforcement? ]]> The role of fairness in EU competition policy and enforcement has been the subject of renewed debate. A perception has emerged among commentators that the European Commission’s (EC) enforcement priorities under the current Competition Commissioner, Margrethe Vestager, seem to have become increasingly focused on ‘fairness,’ rather than the more traditional competition objectives of promoting consume]]> [...] The role of fairness in EU competition policy and enforcement has been the subject of renewed debate. A perception has emerged among commentators that the European Commission’s (EC) enforcement priorities under the current Competition Commissioner, Margrethe Vestager, seem to have become increasingly focused on ‘fairness,’ rather than the more traditional competition objectives of promoting consumer welfare and an efficient allocation of resources.

Is this perception well-founded? And does it represent a new policy trend towards ‘social justice’ objectives or simply a continuation of a policy driver that has underpinned EU competition enforcement for some time?

In this note we look at the evidence against the backdrop of the relevant EU legal framework.

State aid

The evidence for ‘fairness’ being at the forefront of EC enforcement is strongest in the area of State aid. The EC launched a series of investigations into multinational tax arrangements in 2013 to determine whether tax rulings granted undue benefits to certain companies.

The EC has already made a number of high-profile decisions requiring Member States to recover aid found to be illegal, including in relation to tax advantages granted by Luxembourg and the Netherlands to Fiat and Starbucks, respectively; Belgium’s excess profits tax scheme, which benefitted some 35 multinationals; and Apple’s tax arrangements with Ireland.

This trend has continued in 2017 with the EC reaching a decision regarding Amazon’s tax arrangements with Luxembourg and ordering €250 million to be recovered; referring Ireland to the Court of Justice of the European Union for failing to recover €13 billion in taxes from Apple, as required by the EC’s 2016 decision; opening two further Luxembourg cases (involving McDonald’s and Engie); and launching an investigation into the United Kingdom’s tax scheme for multinationals.1

Fundamentally, these cases are aimed at ensuring that taxpayers’ money is not misused and removing the distortive effects caused by illegal State aid. But they must also be viewed against the backdrop of the EC’s broader objective of achieving fair taxation in the EU, which includes legislative initiatives to combat tax avoidance. Given this, it’s not surprising that both Commissioner Vestager and the President of the European Commission, Jean-Claude Juncker, have described the recent tax cases in terms of fairness and social justice (“All companies must pay their fair share of tax;” “This is the social side of competition law”).2

Anticompetitive agreements and conduct

In a 2016 speech, Vestager noted, “Cartels are another way for companies to protect their profits at the expense of consumers. So companies that form a cartel mustn’t get away with just a slap on the wrist.”3

Cartels have remained an enforcement priority in 2017 with a number of significant decisions taken, including the re-adoption of the EC’s airfreight decision and a fine of €776 million imposed on air cargo carriers for participation in a price-fixing cartel; and a record fine of €2.9 billion imposed on six truck manufacturers (including an individual fine of €880 million fine for Scania) for colluding on truck pricing and on passing on the costs of new technologies to meet stricter emission rules.

There have also been notable developments in enforcement against anti-competitive conduct, where EU law prohibits a dominant firm from imposing unfair prices or unfair trading conditions.

The EC has launched a formal investigation into concerns that Aspen Pharma has engaged in excessive pricing for five life-saving cancer medicines – the first EC investigation into excessive pricing in this sector.4

In terms of non-price based conduct, Google received a record fine of €2.42 billion for abusing its dominant position as a search engine by giving illegal advantage to its own comparison shopping service. Vestager noted that Google’s conduct “denied European consumers a genuine choice of services and the full benefits of innovation.”

There are ongoing investigations into other aspects of Google’s conduct which also look at the extent to which consumers are being denied the full range of choice and innovation. These include the Android operating system case, where the EC is concerned that Google has stifled choice and innovation in a range of mobile apps and services by pursuing an overall strategy on mobile devices to protect and expand its dominant position in general internet search; and the AdSense case, where the EC is concerned that Google has reduced choice by preventing third-party websites from sourcing search ads from Google’s competitors.

Mergers

A concern that consumers might be denied the benefits of innovation was also a key driver in the EC’s decision to clear the merger between Dow Chemical and DuPont. The clearance was conditioned on the companies’ agreement to divest assets, including significant parts of DuPont’s pesticides business and almost all of its R&D operations. The latter component of the remedy was designed to solve EC concerns that the merger would reduce innovation competition, with the result that consumers (farmers) would miss out on the benefits of new pesticides that will be less toxic and more efficient. The decision has attracted attention for its analysis of competition in ‘innovation spaces’ rather than the more traditional approach of looking at specific pipeline products.5 Vestager noted, “This is literally a question about our daily bread and the ability for farmers to use different seeds, different pesticides in order to secure their crops.”

As the Director-General for Competition, Johannes Laitenberger, recently noted,6 issues of procedural fairness have also been under scrutiny in 2017, with the EC imposing a fine of €100 million on Facebook for providing misleading information during the review of its WhatsApp merger. The EC also appealed the General Court’s judgment annulling its prohibition decision in UPS/TNT on the grounds that the EC had infringed the parties’ rights of defense by failing to provide the final version of its econometric modelchose by the EC to assess the competitive effects of the proposed merger.

The EU legal framework

Based on the above snapshot, it’s certainly possible to consider the wide range of enforcement action taken recently and perceive there to be a common thread of ‘fairness’ running through all of these decisions – particularly when a number of the decisions are explicitly couched in such terms when discussed in speeches by Commissioner Vestager and others within the EC hierarchy.

But it’s important to bear in mind that fairness and social justice concepts have been enshrined within EU law and principles for some time. In particular:

  • The preamble to the 2009 Treaty of Lisbon, or the Treaty on the Functioning of the European Union (TFEU), calls for concerted action to guarantee “fair competition.”
  • As noted above, Article 102 TFEU which prevents abuse of a dominant position explicitly includes “unfair trading conditions” and “unfair prices” within the prohibition.
  • Companies accused of anti- competitive agreements or practices prohibited by Article 101(1) TFEU can escape sanction if they can demonstrate that efficiencies are generated and consumers will be allowed “a fair share” of the resulting benefits.
  • The EU State aid rules prevent Member States from granting companies a selective advantage, so that the same rules apply to everyone–which is self-evidently ‘fair’ within the ordinary meaning of that word.
  • More fundamentally, following the entry into force of the TFEU, the EU has a social market economy goal among its constitutional objectives.7 It follows that EU competition law is supposed to implement the social market economy concept. In other words the EU isn’t a system of ‘laissez-faire capitalism.’ Rather, it involves market capitalism combined with social objectives, with competition driving wealth gains which are then to be fairly distributed.

Against this backdrop, it’s to be expected that the EC should use ‘fairness’ in describing the aims and outcomes of its work; in the EC’s view, enforcement makes markets fairer which benefits society as a whole.

Before concluding that this necessarily means that there is a fundamental difference of approach between the EU and, say, the U.S. antitrust agencies, it’s worth remembering that a recent speech by Vestager’s counterpart at the U.S. Department of Justice, Renata Hesse, referred at the outset to “the ultimate goal of antitrust, economic fairness” and ended with the following: “Our efforts protect competition, and that helps keep the economy fair.”8

Footnotes

1. See The European Commission Investigates U.K. Tax Rules on page 108.
2. European Commission – Speech, State of the Union Address 2016: Towards a better Europe – a Europe that protects, empowers and defends, Strasbourg, September 14, 2016; European Commission – Press release, State aid: Commission opens in-depth investigation into UK tax scheme for multinationals, Brussels, October 26, 2017. 3. Competition for a Fairer Society, 10th Annual Global Antitrust Enforcement Symposium, Georgetown, September 20, 2016.
4. CMA fined Pfizer and Flynn Pharma £90 million (December 2016); CMA SO to Actavis, Intas Pharmaceuticals and Accord Healthcare (amended August 2017); CMA SO to Concordia (November 2017).
5. See Excessive Pricing, ‘Pay-For-Delay’ and Rebates: A New Era of Enforcement in the Pharmaceutical Industry on page 72.
6. Johannes Laitenberger, Director-General for Competition, European Commission, EU competition law in innovation and digital markets: fairness and the consumer welfare perspective, Mlex/Hogan Lovells Event, Brussels, October 10, 2017.
7. Article 3(3) of the Treaty on European Union (TEU) sets out a target of “a highly competitive social market economy aiming at full employment and social progress.”
8. Opening remarks of Acting Assistant Attorney General Renata Hesse of the DOJ Antitrust Division, 2016 Global Antitrust Enforcement Symposium, Washington, DC, September 20, 2016.

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http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=64Tue, 10 Apr 2018 12:00:00 -0500
<![CDATA[2018 S&S Annual Antitrust Report]]> Shearman & Sterling publishes its sixth annual Antitrust Annual Report today. The 2018 Report discerns two key trends – a global resurgence of controls on foreign direct investment and the focus on ‘fairness’ developing in the European Union (EU). The report also discusses various other important developments in ]]> [...] Shearman & Sterling publishes its sixth annual Antitrust Annual Report today. The 2018 Report discerns two key trends – a global resurgence of controls on foreign direct investment and the focus on ‘fairness’ developing in the European Union (EU). The report also discusses various other important developments in international competition law enforcement.

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http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=58Mon, 09 Apr 2018 12:00:00 -0500
<![CDATA[Antitrust Reverse Termination Fees--2017 Q4 Update]]> This post updates the public deal antitrust reverse termination fee database through December 31, 2017.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust rev]]> [...] This post updates the public deal antitrust reverse termination fee database through December 31, 2017.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 1140 strategic negotiated transactions announced between January 1, 2005, and December 31, 2017. Of these, 142 transactions, or 12.5% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.3% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.6% of the transaction value.

We thought it might be helpful to give some statistics for the more recent subsample covering the three-year period from January 1, 2015, through December 31, 2017. This subsample covered 214 transactions, of which 53, or about 25%, had antitrust reverse termination fees. This suggests that antitrust reverse breakup fees are becoming more common in transactions satisfying our sample criteria. These fees had a mean of 4.8%, one-half of a percentage point less than the 5.3% of the full sample, and a median of 4.6%, the same as the full sample. This is consistent with a tighter distribution of the fees, which ranged from a low of 0.6% to a high of 8.8%.

The chart below gives the frequency of antitrust reverse breakup fees across the three-year subsample set.

  Frequency of Antitrust Reverse Breakup Fees

Of the 46 transactions signed since January 1, 2015, with an antitrust reverse termination fee for which the antitrust reviews have been completed, 35, or about 76%, were cleared without any antitrust challenge. Three transactions (Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, one transaction (Walgreens Boots/Rite Aid) was abandoned in the face of agency opposition, six transactions closed subject to a DOJ or FTC consent order, and one transaction (AT&T/Time Warner) is in litigation.


Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2012, through December 31, 2017)

]]>http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=57Wed, 10 Jan 2018 12:00:00 -0500
<![CDATA[Antitrust Reverse Termination Fees--2017 Q3+ Update]]> This post updates the public deal antitrust reverse termination fee database through October 31, 2017.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reve]]> [...] This post updates the public deal antitrust reverse termination fee database through October 31, 2017.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 1121 strategic negotiated transactions announced between January 1, 2005, and October 31, 2017. Of these, 136 transactions, or 12.1% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.4% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.6% of the transaction value.

We thought it might be helpful to give some statistics for the more recent subsample covering the five-year-plus period from January 1, 2012, through October 31, 2017. This subsample covered 517 transactions, of which 79, or about 15%, had antitrust reverse termination fees. This suggests that antitrust reverse breakup fees are becoming more common in transactions that meet our sample criteria. These fees had a mean of 5.2%, not much different than the full sample, but a median of 5.0%, indicating that the fees were shifting in their distribution to a slightly higher percentage value. This is consistent with a tighter distribution of the fees, which ranged from a low of 1.5% to a high of 10.4%.

The chart below gives the frequency of antitrust reverse breakup fees across the five-year subsample set.

  

NB: The percentage intervals on the horizontal axis are not of equal size.

Of the 67 transactions signed since January 1, 2012, with an antitrust reverse termination fee for which the antitrust reviews have been completed, 49, or about 73%, were cleared without any antitrust challenge. One transaction (Halliburton/Baker Hughes) was terminated in the course of litigation with the U.S. antitrust enforcement agencies, four transactions (Sysco/US Foods, Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court, and 13 transactions closed subject to a DOJ or FTC consent order.


Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2012, through October 31, 2017)

]]>http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=56Wed, 15 Nov 2017 12:00:00 -0500
<![CDATA[Antitrust Reverse Termination Fees--2017 Q2 Update]]> This post updates the public deal antitrust reverse termination fee database through June 30, 2017.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse]]> [...] This post updates the public deal antitrust reverse termination fee database through June 30, 2017.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 1099 strategic negotiated transactions announced between January 1, 2005, and June 30, 2017. Of these, 133 transactions, or 12.1% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the entire sample was 5.4% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.6% of the transaction value.

We thought it might be helpful to give some statistics for the more recent subsample covering the five-year-plus period from January 1, 2012, through June 30, 2017. This subsample covered 422 transactions, of which 73, or about 17%, had antitrust reverse termination fees. This suggests that antitrust reverse breakup fees are becoming more common in transactions that meet our sample criteria. These fees had a mean of 5.3%, not much different than the full sample, but a median of 5.0%, indicating that the fees were shifting in their distribution to a slightly higher percentage value. This is consistent with a tighter distribution of the fees, which ranged from a low of 1.5% to a high of 10.4%.

The chart below gives the frequency of antitrust reverse breakup fees across the five-year subsample set.

 

NB: The percentage intervals on the horizontal axis are not of equal size.
 
Of the 65 transactions signed since January 1, 2012, with an antitrust reverse termination fee for which the antitrust reviews have been completed, 47, or about 72%, were cleared without any antitrust challenge. One transaction (Halliburton/Baker Hughes) was terminated in the course of litigation with the U.S. antitrust enforcement agencies, four transactions (Sysco/US Foods, Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court,* and 13 transactions closed subject to a DOJ or FTC consent order.

* Anthem has challenged Cigna's termination of the merger agreement in Delaware Chancery Court.

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2012, through June 30, 2017)

 
]]>http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=55Mon, 10 Jul 2017 12:00:00 -0500
<![CDATA[Antitrust Reverse Termination Fees--2017 Q1 Update]]> This post updates the public deal antitrust reverse termination fee database through March 31, 2017.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust revers]]> [...] This post updates the public deal antitrust reverse termination fee database through March 31, 2017.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 1072 strategic negotiated transactions announced between January 1, 2005, and March 31, 2017. Of these, 131 transactions, or 12.2% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the sample was 5.5% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.6% of the transaction value.

We thought it might be helpful to give some statistics for the more recent subsample covering the five-year-plus period from January 1, 2012, through March 31, 2017. This subsample covered 395 transactions, of which 71, or about 18%, had antitrust reverse termination fees. This suggests that antitrust reverse breakup fees are becoming more common in transactions that meet our sample criteria. These fees had a mean of 5.3%, not much different than the full sample, but a median of 5.0%, indicating that the fees were shifting in their distribution to a slightly higher percentage value. This is consistent with a tighter distribution of the fees, which ranged from a low of 1.5% to a high of 10.4%.

The chart below gives the frequency of antitrust reverse breakup fees across the five-year subsample set.

 

NB: The percentage intervals on the horizontal axis are not of equal size.

Since January 1, 2012, of the 57 transactions with an antitrust reverse termination fee for which the antitrust reviews have been completed, 40, or about 70%, were cleared without any antitrust challenge. One transaction (Halliburton/Baker Hughes) was terminated in the course of litigation with the U.S. antitrust enforcement agencies, four transactions (Sysco/US Foods, Staples/Office Depot, Aetna/Humana, and Anthem/Cigna) were terminated after the reviewing agency obtained a preliminary injunction in federal district court,* and 12 transactions closed subject to a DOJ or FTC consent order.

* Anthem has challenged Cigna's termination of the merger agreement in Delaware Chancery Court.

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

Resources:
  Antitrust Reverse Termination Fees--Data Set (January 1, 2012, through March 31, 2017)

]]>http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=54Sat, 15 Apr 2017 12:00:00 -0500
<![CDATA[Antitrust Reverse Termination Fees--2016 Q3 Update]]> This post updates the public deal antitrust reverse termination fee database through September 30, 2016.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust re]]> [...] This post updates the public deal antitrust reverse termination fee database through September 30, 2016.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 1010 strategic negotiated transactions announced between January 1, 2005, and September 30, 2016. Of these, 118 transactions, or 11.7% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the sample was 5.5% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.6% of the transaction value. The fees ranged from a low of 2.3% to a high of 21.0%.

The chart below gives the frequency of antitrust reverse breakup fees across the sample set.

Frequency of Antitrust Reverse Breakup Fees

NB: The percentage intervals on the horizontal axis are not of equal size.

Since January 1, 2005, of the 107 transactions with an antitrust reverse termination fee for which the antitrust reviews have been completed, 75, or about 70%, were cleared without any antitrust challenge. Two transactions (AT&T/T-Mobile and Halliburton/Baker Hughes) were terminated in the course of litigation with the U.S. antitrust enforcement agencies, two transactions (Sysco/US Foods and Staples/Office Depot) were terminated after the FTC obtained a preliminary injunction in federal district court, and 28 tranactions were subject to a DOJ or FTC consent order.

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

]]>http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=52Sat, 15 Oct 2016 12:00:00 -0500
<![CDATA[Antitrust Reverse Termination Fees--2016 Q2 Update]]> This post updates the public deal antitrust reverse termination fee database through June 30, 2016.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse]]> [...] This post updates the public deal antitrust reverse termination fee database through June 30, 2016.

An antitrust reverse termination fee (ARTF), sometimes called an antitrust reverse breakup fee, is a fee payable by the buyer to the seller if and only if the deal cannot close because the necessary antitrust approvals or clearances have not been obtained. The idea behind an antitrust reverse termination fee is twofold: (1) it provides a financial incentive to the buyer to propose curative divestitures or other solutions to satisfy the competitive concerns of the antitrust reviewing authorities and so permit the deal to close, and (2) it provides the seller with some compensation in the event the deal does not close for antitrust reasons.

Our sample now covers 978 strategic negotiated transactions announced between January 1, 2005, and June 30, 2016. Of these, 114 transactions, or 11.7% of the total, had antitrust reverse termination fees. The fees were very idiosyncratic and showed no statistically significant relationship to the transaction value of the deal or trend over time, with fees ranging from a low of 0.1% to a high of 39.8%. The average antitrust reverse termination fee for the sample was 5.5% of the transaction value, although several high percentage fees skewed the distribution to the high end. A better indicator may be the median, which was 4.6% of the transaction value.

If we just look at the deals announced since January 1, 2011, the mean was 5.7% and the median was 5.1%, suggesting a slightly higher fee over the last five years. Since January 1, 2011, the fees ranged from a low of 2.3% to a high of 21.0%. The chart below gives the frequency of antitrust reverse breakup fees since January 1, 2011.

Frequency of Antitrust Reverse Breakup Fees

NB: The percentage intervals on the horizontal axis are not of equal size.

Since January 1, 2011, of the 48 transactions with an antitrust reverse termination fee for which the antitrust reviews have been completed, 34, or about 71%, were cleared without any antitrust challenge. Two transactions (AT&T/T-Mobile and Halliburton/Baker Hughes) were terminated in the course of litigation with the U.S. antitrust enforcement agencies, two (Sysco/US Foods and Staples/Office Depot) were terminated after the FTC obtained a preliminary injunction in federal district court, and ten were subject to a DOJ or FTC consent order.

Dale Collins
+1.212.848.4127
dale.collins@shearman.com

 

]]>http://www.antitrustunpacked.com/rss.cfm?feedID=2&itemID=51Thu, 14 Jul 2016 12:00:00 -0500
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