April 22, 2019

April 22, 2019

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Trump’s DOJ Challenges Merger Cleared during Waning Days of Obama Administration

WHAT HAPPENED

  • On December 1, 2016 Parker-Hannifin agreed to acquire Clarcor for $4.3 billion.

  • The merger agreement included a $200 million divestiture cap – that is, Parker-Hannifin was required, if necessary, to divest assets representing up to $200 million in net sales to obtain antitrust clearance.

  • The initial antitrust waiting period under the Hart-Scott-Rodino Act (HSR Act) expired on January 17, 2017.

  • Parker-Hannifin completed the acquisition on February 28, 2017.

  • Nearly seven months later on September 26, 2017, the DOJ filed suit in US District Court for the District of Delaware seeking to require Parker-Hannifin to divest either its or Clarcor’s aviation fuel filtration assets.

  • The DOJ did not include in its complaint an allegation or statement that the parties increased prices.

  • The DOJ press release indicates that the parties “failed to provide significant document or data productions in response to the department’s requests.” We believe that this refers to the DOJ’s post-closing investigation.

  • The DOJ did not suggest in its complaint or the press release that the parties failed to provide required documentation under the HSR Act (e.g., Item 4 documents). During the initial 30-day HSR waiting period, the parties are under no obligation to submit documentation or data to DOJ or FTC requests – all responses are voluntary.

WHAT THIS MEANS

  • Challenges to transactions after the HSR waiting period expired are rare and typically involve a situation where the parties failed to supply required documentation under the HSR Act.

  • Challenges post-HSR clearance are even rarer when the parties complied with their obligations under the HSR Act and supplied all required documentation (e.g., Item 4 documents).

  • The DOJ’s post-HSR clearance action demonstrates that the DOJ may still challenge a transaction post-closing if it later discovers a niche problematic overlap that it did not discover during the initial HSR waiting period.

  • While this challenge may be an aberration, it raises additional considerations when drafting risk allocation provisions in merger agreements for HSR reportable transactions because merger agreements do not typically account for a post-HSR clearance challenge from the DOJ or FTC.

  • DOJ action in this matter suggests the Trump administration is unlikely to be lax in its merger enforcement and will continue to analyze competition in narrow markets.

© 2019 McDermott Will & Emery

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About this Author

Gregory E. Heltzer, Mergers and Acquisitions Lawyer, Antitrust Attorney, McDermott Will Emery, Law Firm
Partner

Gregory E. Heltzer is a partner 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 defending mergers and acquisitions before the Federal Trade Commission, Department of Justice, state antitrust authorities and foreign competition authorities.  In addition, his practice also includes complex antitrust litigation, government investigations and antitrust counseling (e.g., advising agricultural cooperatives on the requirements of the Capper Volstead Act).

Greg has experience in all three branches of...

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Partner

Joel R. Grosberg is a partner 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 defending mergers, acquisitions and joint ventures before the Federal Trade Commission, Department of Justice, state antitrust authorities, foreign competition authorities, as well as antitrust litigation.  Joel has significant experience in the high tech, chemical, health care and life sciences industries.  His experience includes counseling on matters related to pricing and distribution practices and other competition related matters.

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