December 15, 2017

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THE LATEST: DOJ Antitrust Chief Casts Doubt on Using “Behavioral Remedies” to Fix Problematic “Vertical” Mergers

WHAT HAPPENED:

  • On Thursday, November 16, 2017, newly confirmed Assistant Attorney General for Antitrust Makan Delrahim, speaking at the American Bar Association Section of Antitrust Law’s Fall Forum, explained where antitrust enforcement fits in the broader Trump administration effort to reduce federal regulations.
  • Delrahim remarked that “antitrust is law enforcement, it’s not regulation.” Antitrust enforcement “supports reducing regulation, by encouraging competitive markets that, as a result, require less government intervention.” Delrahim explained that “[v]igorous antitrust enforcement plays an important role in building a less regulated economy in which innovation and business can thrive, and ultimately the American consumer can benefit.” As a result, the government can minimize regulation related to price, quality, and investment.
  • Delrahim announced that the Antitrust Division of the US Department of Justice (DOJ) would seek to reduce the number of long-term consent decrees and “return to the preferred focus on structural relief to remedy mergers that violate the law,” thereby limiting the use of behavioral remedies in consent decrees particularly in vertical transactions, where such remedies have historically been common. According to Delrahim, “a behavioral remedy supplants competition with regulation; it replaces disaggregated decision making with central planning.” Delrahim also expressed concern that behavioral remedies simply delay the exercise of otherwise anticompetitive market power.
  • Mentioning by name several consent decrees in vertical transactions containing behavioral provisions in merger cases brought by the Obama administration, Delrahim expressed concern that these remedies “entangle the [Antitrust] Division and the courts in the operation of a market on an on-going basis.” Delrahim cautioned that the lack of enforceability and reliability of behavioral remedies diminish the effectiveness of antitrust enforcement, a risk that consumers should not have to bear.

WHAT THIS MEANS:

  • Delrahim’s stance on behavioral remedies starkly contrasts with previous DOJ policies, followed under both Democratic and Republican administrations. Prior administrations strongly preferred structural remedies, but recognized that behavioral remedies could be appropriate particularly for vertical transactions that presented pro-competitive benefits. The DOJ’s most recent policy paper on remedies (issued by the Obama administration) exemplifies this view, stating: “conduct remedies often can effectively address anticompetitive issues raised by vertical mergers.”
  • Despite the new administration’s disfavored view of behavioral remedies for a vertical merger, such remedies are not off the table. To secure a DOJ consent decree with behavioral remedies for a vertical merger, parties will likely have to show that the transaction “generates significant efficiencies that cannot be achieved without the merger or through a structural remedy.” Delrahim unambiguously stated that this is “a high standard to meet.”
  • Delrahim’s speech appeared aimed at several high profile vertical transactions that are currently under review by the DOJ, likely seeking to explain why the DOJ will insist on structural remedies in transactions where most outside observers thought a behavioral remedy may suffice.
  • It is possible that Joe Simons, President Trump’s unconfirmed appointee for Chairman of the Federal Trade Commission, may take a differing stance on behavioral remedies, following prior policy statements. This could result in a slight difference in policies between the Federal Trade Commission and the DOJ in merger enforcement.
© 2017 McDermott Will & Emery

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About this Author

Ryan Leske, mcdermott will emery, antitrust, competition lawyer litigation
Associate

Ryan Leske* is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, D.C., office.  He focuses his practice on antitrust and competition matters. Ryan received his J.D., magna cum laude, Order of the Coif, from Tulane University Law School, where he was a managing editor for the Tulane Law Review, the senior articles editor of The Sports Lawyer, and a senior fellow for the legal research and writing program.  While in law school, Ryan interned with the U.S. Securities and Exchange Commission’s Division...

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Lisa A. Peterson, McDermott Will Emery law Firm, Antitrust Attorney
Associate

Lisa A. Peterson* is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, D.C., office.  She focuses her practice on antitrust and competition matters.

* Not admitted to practice in the District of Columbia.  Supervised by principals of the Firm who are admitted to the District of Columbia bar.

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