The Department of Justice (“DOJ”) recently signaled a possible shift in its antitrust merger review and remedies practice, moving away from a willingness to allow transactions to proceed through a divesture process. In his January 24, 2022 speech for the New York Bar Association’s Antitrust Law Section, Jonathan Kanter, the new assistant attorney general for the DOJ’s Antitrust Division, announced his concerns that the often-used settlement and divesture practice “miss[ed] the mark” in remedying antitrust concerns.1 Kanter argued that the best way to preserve competition will often be to seek an injunction to block a merger rather than to allow the merger to proceed with a divestiture. This announcement potentially marks a dramatic change in merger relief and is another step towards the Biden administration’s goal of heightened antitrust scrutiny and enforcement.
Merger Review: A Change in Guidelines
In his speech, Kanter emphasized the unprecedented volume of premerger filings in 2021. According to the DOJ’s provisional data, the antitrust agencies received over 3,500 Hart-Scott-Rodino Act (“HSR Act”) premerger notifications, more than double the number of filings received in 2020.2 Kanter stated that the increasing number of HSR Act filings “shows no signs of slowing down,” and is occurring despite studies indicating that “consolidation has led to less competition and more market power.”3 Thus, Kanter argued, the merger review process must keep up with the transaction numbers and conform with the realities of the marketplace in order to preserve competition.
To address this, Kanter said the Federal Trade Commission (“FTC”) and DOJ are working together to amend the existing Horizontal and Vertical Merger Guidelines. The antitrust agencies have requested public comment on the current guidelines to “better detect and prevent illegal, anticompetitive deals in today’s modern markets.”4 The agencies are interested in hearing about the public’s view on a number of different topics that would help determine whether the guidelines efficiently identify anti-competitive transactions in today’s economy, including the application of the merger guidelines to the digital market and nascent competitors.5
Remedies: More Challenges
Perhaps most noteworthy were Kanter’s statements regarding his views on settlements. Kanter discussed his concerns that “merger remedies short of blocking a transaction too often miss the mark,” and that “[c]omplex settlements, whether behavioral or structural, suffer from significant deficiencies.”6 According to Kanter, the best way to preserve competition in cases where a transaction will lessen competition is to seek an injunction and block the merger altogether.
This policy change could mark a significant shift from the DOJ’s longstanding practice of allowing a transaction to proceed through a divestiture, which Kanter stated is difficult to do when competition and the market are “dynamic, complex and often multidimensional.”7 He asserted that divestitures often lead to so-called “concentration creep,” which occurs when the buyer of a divested asset uses the asset ineffectively. Divestitures may work in more static markets where the asset or business unit to be divested is “sufficiently discrete,” but according to Kanter, “those circumstances are the exception, not the rule.”8 Kanter argued that the DOJ “must give full weight to the benefits of preserving competition that already exists in a market, rather than predicting whether a divestiture will actually serve to keep a market competitive.”9 Often, the most beneficial remedy will be an injunction to block the merger. Moreover, Kanter stated that litigated cases would help “move the law forward” by allowing courts to weigh in on the application of the law to today’s markets.10 This would provide clarity on the boundaries of the law so that businesses can know what is permissible and what would subject them to more scrutiny.11
In conduct cases, Kanter said that it is often difficult to implement a behavioral remedy that takes into account the “complex incentives that drive corporate decision-making” and the evolving nature of market realities.12 Accordingly, the DOJ will pursue forward-looking structural remedies to help “restore competition in markets that have been harmed by antitrust violations” when possible.13
Key Takeaways: What Does This Mean
Kanter’s remarks were in line with the Biden administration’s goal of more aggressive antitrust enforcement, as previously reported here and here. Time will tell what Kanter’s remarks will mean for future transactions as the antitrust agencies conduct their merger reviews and, potentially, bring challenges. Nevertheless, merging parties should prepare for an increased risk of merger litigation and greater skepticism that proposed divestitures of overlapping businesses will be sufficient to address agency concerns with proposed transactions.
1 Jonathan Kanter, Ass’t Att’y Gen., Dep’t of Justice, Antitrust Div., Remarks to the New York State Bar Association Antitrust Section (Jan. 24, 2022), https://www.justice.gov/opa/speech/assistant-attorney-general-jonathan-kanter-antitrust-division-delivers-remarks-new-york [hereinafter “Remarks from Jonathan Kanter”].
2 See id.; Press Release, Fed. Trade Comm’n, Federal Trade Commission and Justice Department Seek to Strengthen Enforcement Against Illegal Mergers (Jan. 18, 2022), https://www.ftc.gov/news-events/press-releases/2022/01/ftc-and-justice-department-seek-to-strengthen-enforcement-against-illegal-mergers [hereinafter “FTC Press Release”].
3 Remarks from Jonathan Kanter.
4 FTC Press Release.
5 Id.
6 Remarks from Jonathan Kanter.
7 Id.
8 Id.
9 Id.
10 Id.
11 Id.
12 Id.
13 Id.
