DOJ may take dim view of contract extensions to fix antitrust problems, official says

12 April 2018 9:44am
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11 April 2018. By Jenna Ebersole.

If merging parties offer customers a contract extension to resolve competition concerns and avoid litigation, the US Department of Justice may reject it as a behavioral fix that does not fundamentally change company incentives, a DOJ official said Wednesday.

Caroline Laise, assistant chief of the Transportation, Energy and Agriculture Section of the DOJ’s antitrust division, said during a panel discussion* the DOJ generally prefers structural relief in the form of divestitures compared to behavioral relief or conduct commitments. Her comments echoed those of DOJ antitrust chief Makan Delrahim in recent months, though she prefaced her remarks on the panel by saying they did not represent the views of the division broadly.

A panelist in the discussion who is in private practice, Josh Soven, said there are several ways to try to avoid having the antitrust agencies take a narrower view of the market focused on a subset of customers.

For one, he said, merging parties can work to explain their deal proactively to customers. On other end of the spectrum, they can try to negotiate a contract extension with them.

The moderator asked Laise how the DOJ would view the negotiation of long-term supply agreements. Laise said the DOJ always welcomes creative solutions and if the parties at least facially take care of customers, that can make a challenge harder.

But she said a contract designed to take care of competition issues and avoid litigation could be viewed as a behavioral fix, which the agency does not prefer. After the merger, the DOJ could be concerned there would not be an incentive to uphold the contract.

“It raises a risk that the remedy won’t work over the long term,” she said. Consumers should not bear the risk, she said.

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