Fix My Merger – Lessons from FTC Bureau Director Feinstein on the Use of Consent Orders to Remedy Anticompetitive Mergers

by BakerHostetler

In her first speech since becoming Director of the Federal Trade Commission’s Bureau of Competition, Deborah Feinstein highlighted five benefits arising from addressing antitrust violations through consent orders and dispelled a number of “persistent myths” about their use.

While emphasizing the FTC “employs a rigorous case-by-case approach to law enforcement decisions,” Director Feinstein explained that where “a consent order can address the harm the [FTC] alleges has occurred or is likely to occur without the need for litigation, there are enormous benefits to resolving matters through consent order.” Among the benefits she identified are: (1) quicker resolution; (2) conservation of both public and private resources; (3) more certainty of outcome; (4) flexibility in terms of crafting a remedy; and (5) providing valuable guidance to the legal and business community.

Recognizing the benefits presented by consent orders, Director Feinstein also dispelled a number of “persistent myths” about their use.  First, the negotiation of a consent order is not your “typical negotiation.” When the FTC proposes that “x plants must be divested to resolve [its] concerns,” she said, there is no “artificial” inflation of the “ask” – i.e., the FTC staff’s opening position – “so as to compromise in the middle.” This does not mean that through the back-and-forth of the consent process another outcome is unobtainable. As she put it, “settlement negotiations need not be a zero-sum game.”

Second, Director Feinstein said it is wrong to assume settlement discussions signal that the FTC staff thinks it has a weak case. Instead, practice shows that parties are more willing to discuss options to resolve competitive concerns “the stronger the evidence of likely competitive harm or the more predictable the needed remedy.” Accordingly, “litigation typically occurs in the merger context where the only viable remedy involves all or nearly all of what the buyer hoped to obtain through the deal.”

Finally, consent orders are “not boilerplate, one-size-fits-all documents.” Instead, Director Feinstein expressed that the FTC “uses the flexibility it has to craft each remedy to the specific situation before it in a given matter.”

What are the “key components” needed to remedy a problematic merger? According to Director Feinstein, the “key in devising an effective merger remedy is to preserve or replace the competition that would likely be lost due to the acquisition.” In this regard, she said, the agencies take the same approach by providing a “roadmap” for “designing remedies that work,” as reflected in prior statements by the FTC and the Department of Justice. Generally, Director Feinstein explained, “a merger remedy should (i) address the competitive harm from the merger; (ii) fit the facts of the case and characteristics of the relevant market by having a close and logical nexus between the theory of harm and the remedy; (iii) focus on preferred and time-tested approaches, such as divestiture of an on-going business to an up-front buyer, but retain flexibility when necessary; and (iv) preserve the procompetitive benefits of the merger consistent with obtaining effective relief.” Her passing reference to “flexibility” signals the FTC’s grudging willingness to consider conduct remedies in merger cases, while maintaining its long-standing and strong preference for divestitures to buyers vetted in advance by the FTC staff.

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