Background

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CHAPTER I
BACKGROUND
This chapter provides an overview of the merger review process at
the Federal Trade Commission (FTC or Commission) and the
Department of Justice (DOJ or Antitrust Division). This overview will
set the stage for the remainder of this Handbook, which addresses the
merger review process in chronological order, beginning with the
preparation required before the transaction parties file their notification
forms under the Hart-Scott-Rodino Antitrust Improvements Act (HSR
Act) and following the review process through filing, initial review,
issuance of, and compliance with a Request for Additional Information
and Documentary Materials (second request); investigation by the
agency’s attorneys and economists; decision making at each agency; and
potential resolution of agency challenges without litigation. The
Handbook also discusses non-Hart-Scott-Rodino (HSR) merger
investigations, the role of third parties in the merger review process, and
multijurisdictional review.
This chapter (1) describes the statutory basis for federal antitrust
review of mergers, (2) provides an overview of each agency and the
merger review process, and (3) discusses confidentiality considerations.
The chapter concludes with a brief overview of: (i) the implications for
mergers from the Sarbanes-Oxley Act of 2002, which, although not
specifically related to antitrust review, has had a significant impact on
the U.S. corporate regulatory environment; and (ii) the Exon-Florio
national security review process, which is relevant to acquisitions by
foreign persons of U.S. businesses with potential national security
implications.
A. Statutory Authority
1.
Substantive Statutes
a. Clayton Act Section 7
The principal federal substantive law governing mergers,
acquisitions, and joint ventures is Section 7 of the Clayton Act
2 The Merger Review Process
(Section 7).1 This provision generally prohibits the acquisition of stock or
assets by any “person” where “the effect of such acquisition may be
substantially to lessen competition, or to tend to create a monopoly.”
Section 7 can reach the acquisition of virtually any “asset” (using that
term in its broadest sense), including acquisitions of assets such as
intellectual property rights, real estate interests, and certain contractual
rights, as well as the formation of a joint venture or the transfer of a joint
venture interest. Section 7 may be enforced by the Antitrust Division, the
FTC, state attorneys general, and private plaintiffs.2
A full discussion of the substantive standards applicable under
Section 7 is beyond the scope of this Handbook. The reader is referred to
the extensive case law that has developed over the years.3 Also of
particular help in understanding the substantive merger standards and the
federal enforcement agencies’ positions regarding mergers are various
merger enforcement policy guidelines and statements that the DOJ and
the FTC have issued.4 The National Association of Attorneys General
1. 15 U.S.C. § 18.
2. Section 7, as originally enacted in 1914, applied only to the acquisition of
the stock of one corporation by another corporation. Several amendments
over the years expanded Section 7’s coverage to virtually all acquisitions
of stock or assets by any person.
3. For a more complete review of the substantive aspects of merger review,
see 1 ABA SECTION OF ANTITRUST LAW,ANTITRUST LAW
DEVELOPMENTS (6th ed. 2007) (Antitrust Law Developments (Sixth)) and
ABA SECTION OF ANTITRUST LAW,MERGERS AND ACQUISITIONS:
UNDERSTANDING THE ANTITRUST ISSUES (3d ed. 2008).
4. The principal statement of current enforcement policy is contained in the
2010 Horizontal Merger Guidelines, issued jointly by the DOJ and the
FTC. U.S. DEPT OF JUSTICE &FED.TRADE COMMN,HORIZONTAL
MERGER GUIDELINES (2010), reprinted in Trade Reg. Rep. (CCH)
¶ 13,100 (Aug. 19, 2010) (Horizontal Merger Guidelines). The
Horizontal Merger Guidelines are also available at the Web sites of the
FTC and the Antitrust Division, respectively. See http:/ /www.ftc.gov/os/
2010/08/100819hmg.pdf; http://www.justice.gov/atr/public/guidel ines/hm g-
2010.html. Also helpful to understand the substantive merger law
standards and federal enforcement attitudes are: U.S. DEPT OF JUSTICE,
ANTITRUST ENFORCEMENT GUIDELINES FOR INTERNATIONAL
OPERATIONS,reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,109 (Nov. 10,
1988); U.S. DEPT OF JUSTICE & FED.TRADE COMMN, 1995 ANTITRUST
ENFORCEMENT GUIDELINES F OR INTERNATIONAL OPERATIONS,rep rinted
Background 3
(NAAG) also has issued merger enforcement guidelines,5 which differ in
significant respects from the federal guidelines.
In brief, applying Section 7 first requires a determination of the
product and geographic dimensions of the relevant market(s) within
which the competitive effects of the merger should be analyzed.6 In
analyzing the competitive effects within the defined relevant market(s),
the key concerns are whether the merger will create or enhance market
power or facilitate its exercise, either by coordinated or unilateral
conduct.
in 4 Trade Reg. Rep. (CCH) ¶ 13,107 (Apr. 15, 1995); U.S. DEPT OF
JUSTICE & FED.TRADE COMMN, 1996 STATEMENTS OF ANTITRUST
ENFORCEMENT POLICY IN HEALTH CARE, reprinted in 4 Trade Reg. Rep.
(CCH) ¶ 13,153 (1996); U.S. DEPT OF JUSTICE & FED.TRADE COMMN,
COMMENTARY ON THE HORIZONTAL MERGER GUIDEL INES,reprinted in 7
Trade Reg. Rep. (CCH) ¶ 50,208 (Mar. 27, 2006); and speeches by DOJ
and FTC officials, available on the Web sites of the Antitrust Division
(http://www.justice.gov/atr) and the FTC (http://www.ftc.gov). Both the
Antitrust Division and the FTC have also separately issued guidelines
regarding merger remedies. See U.S. DEPT OF JUSTICE,ANTITRUST
DIVISION POLICY GUIDE TO MERGER REMEDIES (2011), available at
http://www.justice.gov/atr/public/guidelines/272350.pdf; FED.TRADE
COMMN, STATEMENT OF THE FEDERAL TRADE COMMISSIONSBUREAU
OF COMPETITION ON NEGOTIATING MERGER REMEDIES, available at
http://www.ftc.gov/bc/bestpractices/bestpractices030401.pdf.
5. NAAG’s Horizontal Merger Guidelines were initially issued in
1987 and revised in 1993. NATLASSOC. OF ATTYGEN.,
HORIZONTAL MERGER GUIDELINES (1993), reprinted in 4 Trade Reg.
Rep. (CCH) ¶¶ 13,405, 13,406 (Mar. 30, 1993) (NAAG Merger
Guidelines), available at http://www.naag.org/assets/files/pdf/at-
hmerger_guidelines.pdf. For additional information regarding state
merger enforcement, see NATLASSOC. OF ATTYGEN., VOLUNTARY
PRE-MERGER DISCLOSURE COMPACT (Mar. 21, 1994), reprinted in 4
Trade Reg. Rep. (CCH) ¶ 13,410 (NAAG Compact), available at
http://www.naag.org/assets/files/pdf/200612-antitrust-voluntary-premerger-
disclosure-compact.pdf; ABA SECTION OF ANTITRUST LAW,STATE
ANTITRUST PRACTICE AND STATUTES (4th ed. 2009) (State Antitrust
Practice).
6. See generally Antitrust Law Developments (Sixth),supra note 3, at
327-38. The enforcement agencies’ guidelines, supra note 4, are very
useful to an understanding of the market definition issues under
Section 7.

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