Some items on our site have recently moved. Visit our News Hub for selected articles, special reports, podcasts and other resources.
US DOJ’s resistance to remedies hasn't been absolute during Biden administration
30 January 2023 18:59 by Ilana Kowarski, Flavia Fortes
The US Department of Justice during the Biden administration has, in certain circumstances, provided remedy recommendations and accepted remedy offers behind the scenes in merger reviews, avoiding the formality of official settlement agreements but nevertheless participating in unofficial negotiations.
These rare and tactical moves in the background are a form of prosecutorial discretion; they could be motivated by concerns about the allocation and conservation of agency resources, or could be a logical response to the actions of foreign regulators.
While the department under Biden doesn't routinely embrace remedies during merger reviews, the fact that it does so at all counters the popular perception that it's unwilling to consider any solutions and suggests that the department may be willing to embrace rigorous remedies that meet its strict standards.
Such informal haggling over remedies between the DOJ and corporate lawyers also occurred prior to Biden taking office, so this kind of activity isn't unprecedented. However, certain high-profile and experienced private practice M&A attorneys, who aren't accustomed to receiving concrete proposals from DOJ officials about possible solutions to antitrust problems with transactions, were surprised when the DOJ issued this type of guidance.
Some corporate lawyers may view the practice as a welcome development — an unanticipated conciliatory gesture during a time of strife between the DOJ and the business community. Other commercial lawyers may have reservations about the utilization of this strategy and whether they want the DOJ to notify the general public and the legal community in particular about any merger remedy it supports, and to explain why.
How the agreements work
On the occasions when dealmakers and the DOJ reach a mutual understanding about how a transaction should be amended, companies modify their business arrangements in ways that the DOJ has quietly endorsed and may have even orchestrated, MLex has learned.
The result is a new financial bargain that might not have existed but for DOJ intervention — a pact between firms that doesn't contain any explicit promises from or to the DOJ, as the agency isn't a signatory for such an agreement. Because the covenant is made between nongovernmental entities, it's debatable whether such an arrangement technically qualifies as a government settlement, even if the government designs it.
Meanwhile, bipartisan Congressional legislation designed to create clarity about the terms of federal agency settlements via a public database recently received overwhelming support in the US House. The Settlement Agreement Information Database Act of 2023, as currently written, doesn't appear to prohibit the DOJ from providing input about the terms of binding contracts between entities outside the agency.
DOJ talking points about remedies
DOJ antitrust division leaders have stated in speeches that they will only repair transactions they deem anticompetitive in extraordinary circumstances, if and only if antitrust issues can be totally ameliorated by a fix.
“We need to obtain comprehensive relief that not only prevents the recurrence of a particular anticompetitive tactic, but that stops an exclusionary strategy altogether,” Assistant Attorney General Jonathan Kanter declared in September 2022.
Kanter’s skepticism about the utility of consent decrees as a law enforcement tool, which he has articulated in multiple speeches, could explain why the department intermittently bargains privately about the terms of consolidation contracts without seeking public consent decrees.
“It is not our role to micromanage corporate decision-making under elaborate consent decrees,” Kanter stated in an April speech where he outlined his five-point plan for antitrust law enforcement.
Back-channel remedy proposals to and from government officials, while good for merging parties — who see their deals completed faster and cheaper — raise some accountability, oversight and transparency issues. However, this type of mediation doesn't break rules for antitrust settlements outlined in the Antitrust Procedures and Penalties Act, commonly known as the Tunney Act.
Without entering into a consent decree, merging parties avoid Tunney Act proceedings, in which federal courts review each consent decree in civil antitrust cases filed by the DOJ. While these court proceedings are for the most part a formality, some private practice lawyers are still concerned about the propriety of avoiding them altogether. However, historically, dealmakers that received a go-ahead signal from the DOJ have frequently closed deals prior to the conclusion of Tunney Act proceedings, thereby sidestepping the waiting period suggested by that piece of legislation.
Traditionally, engagement with antitrust officials about concerns was limited and feedback wasn’t always clear, making it difficult for the parties to address potential issues. Dealmakers often suggested several remedy proposals before one was agreeable to the division. Now, it's understood DOJ officials are, in select cases, proactively coming to merging parties with advice.
The Tunney Act was enacted in 1974 after revelations during the Watergate scandal about how former President Richard Nixon ordered the DOJ to settle antitrust cases and clear a merger involving International Telephone & Telegraph, a company that had donated to the Republican National Convention. This law was designed to prevent corruption in the DOJ’s antitrust division, and it requires judicial evaluation of consent judgment proposals to ensure that these proposals serve the public interest.
It also mandates that the government compile a “competitive impact statement” explaining what antitrust problem its proposal is designed to address, how and why the government arrived at the conclusion that its proposed remedy was the best one possible, and an outline of the various alternatives that were considered and discarded.
Furthermore, the Tunney Act states that the general public should have the chance to comment on the merits of the government’s suggested consent decree. The act also imposes an obligation on government and corporate representatives to provide the court with their correspondence.
Undocumented compromises between merging parties and the DOJ differ from court-sanctioned and publicly documented deals as described in the Tunney Act and could be condemned by DOJ critics for violating the spirit of that law. However, the DOJ’s subtle conciliatory gestures to certain acquisitive corporations are currently permissible and do follow the letter of federal law, as they don't involve the creation of a consent decree.
According to the most recent quarterly report from the Dechert Antitrust Merger Investigation Timing Tracker, the DOJ hasn't agreed to a single consent decree since Kanter took office in November 2021.
Bargains between antitrust agencies and merging companies behind closed doors would typically be reflected in finalized merger, acquisition or joint venture paperwork, but such arrangements wouldn't have the imprimatur of federal authorities, even if authorities suggested whatever antitrust remedy was included in that document. Without a court decree, it could be hard for authorities to monitor whether the concessions imposed by these contracts were being implemented appropriately, and to sue if they believed that promises were broken.
Furthermore, if these accords are struck on a case-by-case basis, without an unambiguous guiding principle, it might be challenging — though not impossible, with responsible leadership — to ensure that all dealmakers are treated equally and to guarantee consistency in department policy.
The key question is whether efficiency gains from nonpublic remedy discussions outweigh other considerations.
20 March 2023 11:44 by Fiona MaxwellCredit Suisse shareholders have been spared the pain in comparison to bondholders in the bank's rush weekend takeover by UBS.
06 February 2023 23:21 by Michael ActonMeta and Within won their federal court case against the US Federal Trade Commission.
Assa Abloy-Spectrum Brands divestiture case another opportunity to develop caselaw on 'litigating the fix'01 February 2023 18:34 by Serafina SmithThe Department of Justice’s lawsuit to block Assa Abloy’s proposed acquisition of a Spectrum Brands