The U.S. Department of Justice's ("DOJ") new remedies guide reinforces its strong preferences for structural divestitures and upfront buyers to resolve merger investigations.
Last week, the DOJ released a new "Merger Remedies Manual" ("Manual"). The 35-page document provides "a framework for structuring and implementing appropriate relief short of a full-stop injunction in merger cases." The Manual, which applies only to transactions before the DOJ (the Federal Trade Commission ("FTC") has its own guidelines), is the first revision to DOJ's remedies guidance in nearly a decade. Release of the Manual follows DOJ's late 2018 decision to withdraw its 2011 remedies guide, which DOJ said adopted an overly permissive approach toward conduct remedies. Conduct remedies, which contrast with structural divestitures, regulate the post-closing behavior of the merged company.
DOJ's Manual identifies several key principles, all of which track DOJ (and FTC) practice in recent years:
- Remedies must safeguard competition, not competitors.
- Remedies should permanently address competitive harms without requiring ongoing market supervision/regulation.
- Risk of failed remedies should fall on merging parties, not on consumers.
- Remedies must be enforceable.
Although these high-level themes are not new, DOJ has adopted increasingly strong language concerning "red flags" that, in its view, heighten the risk that a remedy will not preserve competition. Drawing from recent experiences, the Manual explains DOJ's strategies to mitigate risk from these scenarios, including:
- Preference for Upfront Buyers. DOJ typically must preapprove both the asset package and buyer before it will agree to a settlement.
- Limited Conduct Remedies. The Manual reaffirms DOJ's strong preference for structural divestitures in horizontal and vertical transactions. It limits standalone conduct remedies to mergers where there are significant efficiencies, a divestiture is not possible, a conduct remedy completely cures anticompetitive harm, and DOJ can effectively enforce the remedy.
- Broad Divestiture Packages. DOJ may compel merging parties to include assets in a divestiture package that are beyond the scope of its product or geographic concerns if those assets are needed to compete.
- Compliance. In late August, DOJ established a new group focused on enforcing its settlements under a lower evidentiary standard to prove a violation (see our February 2018 Commentary).
The Manual is a useful survey of DOJ's priorities and practices, along with numerous citations to past enforcement actions. Although the principles outlined are not new, there is more discussion of onerous remedy scenarios, largely referencing the same few, high-profile cases. One area to watch is whether these examples are treated as outliers or precedent for DOJ to seek incrementally more aggressive remedies in a greater number of cases.