Companies often abandon transactions in the face of an FTC or DOJ lawsuit seeking to block a deal in federal court, particularly where they run out of time under their transaction agreement, as discussed in the previous section. The DOJ’s recent decision to pursue a merger challenge in arbitration could change that dynamic.
Two merger litigations filed by the U.S. antitrust agencies in federal court in 2019 were litigated to a decision. These litigations – the FTC’s challenge to Evonik/PeroxyChem and the DOJ’s challenge to Sabre/Farelogix – provide additional data on the timeline companies should expect if they decide to fight the lawsuit. Both the FTC and the DOJ were unsuccessful in their attempts to block these mergers, which reached decision an average of 204 days after the filing of the complaint. This average nearly matched the 207- and 205-day averages observed in 2016 and 2017, respectively.
In addition to these federal court litigations, the DOJ for the first time arbitrated a significant portion of a merger challenge in a case filed in 2019 against the Novelis/Aleris transaction. The DOJ and the parties agreed to limit the arbitration to only the issue of product market definition.
Overall, the arbitration lasted 188 days from the filing of the case to the arbitrator’s decision, which was about two weeks faster than the 204-day average for the two most recent federal court litigations. The time from the filing of the DOJ’s complaint to the arbitration hearing was 173 days, about 32 percent longer than the 131-day average length for the two litigations. But the length of the arbitration hearing and the federal court hearings was approximately the same at 10-12 days for all three cases.
The main difference in timing between the arbitration and two federal court proceedings was in the time it took the arbitrator to reach a decision following the end of the hearing. It took only three days for the arbitrator to reach a decision, compared to an average of 63 days for the judges in the federal court proceedings. However, this significant difference was likely due to the fact that the arbitrator’s decision was limited to the issue of product market definition, whereas both federal court proceedings also involved a variety of other merger issues, such as geographic market definition, competitive effects, efficiencies, and the adequacy of a proposed divestiture remedy. Likely for this reason, the Novelis/Aleris decision was only nine pages, compared to the 64-page Evonik/PeroxyChem opinion and the 97-page Sabre/Farelogix opinion.