Fixing -Litigating the Fix-.
Author | Steven C. Salop & Jennifer E. Sturiale |
Pages | 619-661 |
619
FIXING “LITIGATING THE FIX”
S C. S
J E. S*
INTRODUCTION ......................................... 620
I. “LITIGATING THE FIX” CASELAW ..................... 628
A. T S N ....................... 628
B. D .................................... 630
C. E B .............................. 630
II. MERGER ENFORCEMENT HISTORY SUPPORTS
CONCERNS REGARDING FALSE NEGATIVES ........... 633
A. A B C
U ................................ 634
B. I C D ....................... 635
III. ECONOMIC ANALYSIS OF LTF IMPACT ON
TRIAL OUTCOMES, CONSENT DECREES, AND
MERGER PROPOSALS ................................ 637
IV. PROPOSED PROCEDURE .............................. 640
A. B P .................................... 641
1. Timing and Sufficient Notice ....................... 642
2. Definitiveness .................................. 642
3. Evidentiary Burdens ............................. 643
4. Implementation and Post-Merger Oversight . . . . . . . . . . . 652
B. R E ....................... 653
1. Divestitures of Selected Assets and Behavioral
(Conduct) Remedies ............................. 653
* The authors are Professor of Economics and Law Emeritus, Georgetown University Law
Center (Salop) and Assistant Professor of Law, Delaware Law School of Widener University
(Sturiale). We are grateful to Bill Baer, Peter Carstensen, Darren Bush, Dale Collins, Daniel
Culley, Harry First, Daniel Francis, Andrew Gavil, Nicholas Hill, Herb Hovenkamp, Jack
Kirkwood, John Kwoka, Mark Lemley, Doug Melamed, Eric Posner, Robby Robertson, Henry
Su, Spencer Weber Waller, Dan Zach, and the participants of the 23rd Annual Loyola Antitrust
Colloquium for helpful comments, as well as Maryanne Magnier for excellent research assis-
tance. All opinions and errors remain our own. Professor Sturiale represented Illumina, Inc., in
connection with the Illumina/Grail merger in her capacity as of counsel with Huth Reynolds LLP.
620 A L J [Vol. 85
2. Remedies for Consummated Mergers ................ 653
3. Price Maximums and Constraints ................... 654
4. Vertical Merger Promises of Divisional
Separation ..................................... 655
5. Horizontal Merger Promises of
Intra-Corporate Competition ...................... 657
6. Defendant’s Choice of Divestee..................... 660
C. I P .................. 661
CONCLUSIONS .......................................... 661
INTRODUCTION
Merging firms have been increasingly asking trial courts to determine the
legality of their merger “as remedied” by a voluntary “fix” rather than based
on the merger agreement in their original Hart-Scott-Rodino (HSR) submis-
sion.1 These fixes typically involve remedy proposals that the reviewing anti-
trust agency has rejected. This procedure has been termed “litigating the
fix” (LTF).2 LTF remedies may involve the buyer divesting assets to a third
party,3 the seller retaining assets in a business that competes with a buyer
business,4 the buyer committing to certain conduct duties or constraints,5 or
1 For some recent examples, see, e.g., United States v. AT&T Inc., 310 F. Supp. 3d 161, 184
(D.D.C. 2018); United States v. Booz Allen Hamilton Inc., No. 22-cv-1603, 2022 WL 9976035
(D. Md. Oct. 17, 2022); United States v. Bertelsmann SE & Co. KGaA, 646 F. Supp. 3d 1 (D.D.C.
2022); United States v. UnitedHealth Grp. Inc., 630 F. Supp. 3d 118 (D.D.C. 2022); Initial Deci-
sion at 178–89, 193, 197, Illumina, Inc., FTC Docket No. 9401 (Sept. 9, 2022) [hereinafter
Illumina Initial Decision], rev’d, Opinion of the Commission at 2, Illumina, Inc., FTC Docket
No. 9401 (Mar. 31, 2023) [hereinafter Illumina Commission Opinion], vacated, Illumina, Inc. v.
FTC, No. 23-60167, 2023 WL 8664628, at *13 (5th Cir. Dec. 15, 2023); FTC v. Microsoft Corp.,
No. 23-cv-02880, 2023 WL 4443412, at *15 (N.D. Cal. July 10, 2023); Complaint at 3, United
States v. Assa Abloy AB, No. 22-cv-02791 (Sept. 15, 2022), ECF No. 1; Decision and Order,
Intercontinental Exchange, Inc., FTC Docket No. 9413 (Nov. 3, 2023) (approving divestiture to
settle litigation).
2 See, e.g., Thomas J. Horton, Fixing Merger Litigation “Fixes”: Reforming the Litigation of
Proposed Merger Remedies Under Section 7 of the Clayton Act, 55 S.D. L. R. 165, 167 n.15
(2010) (addressing the origins of “litigating the fix” cases).
3 See, e.g., FTC v. Arch Coal, Inc., 329 F. Supp. 2d 109, 114 (D.D.C. 2004) (Arch Coal
agreed to sell off one of the coal mines it intended to acquire); FTC v. Sysco Corp., 113 F. Supp.
3d 1, 15 (D.D.C. 2015) (defendants proposed to divest a collection of regional food distribution
facilities to the third-largest distributor in the United States); United States v. Aetna Inc., 240 F.
Supp. 3d 1, 8 (D.D.C. 2017) (Aetna proposed divestiture of a portion of its Medicare Advantage
business to third-party health insurance company); FTC v. RAG-Stiftung, 436 F. Supp. 3d 278,
304 (D.D.C. 2020) (defendants proposed divestiture of a Canadian production facility).
4 See FTC v. Libbey, Inc., 211 F. Supp. 2d 34, 41 (D.D.C. 2002) (noting that the amended
merger agreement provided that the seller would transfer subsidiary Anchor’s foodservice busi-
ness to another division, sell two glassmaking factories to Libbey, and buy glassware from an
outside source).
5 See, e.g., Bertelsmann, 646 F. Supp. 3d at 49–51 (Penguin promised an internal bidding
policy, whereby its separate publishing divisions would compete post-merger); Booz Allen, 2022
WL 9976035, at *6–7 (sister businesses would bid competitively after the merger); Illumina
2024] F “L T F” 621
some combination thereof.6 These remedies may be unilateral promises, com-
mitments placed into an amended merger agreement, or formal agreements
with a divestiture buyer, customers, or others.
To better understand the process in which LTF cases occur, consider the
situation where the merging parties propose conditions for a consent decree
at the end of the HSR period, but the agency rejects the offer and files a com-
plaint. Various outcomes have occurred in recent cases:7
1. Abandon the deal rather than LTF (NVIDIA/ARM; Lockheed Martin/
Aerojet);
2. LTF but fail because court rejects fix as untimely (Ardagh/Saint-Gobain);
3. LTF without offering more relief and win (RAG-Stiftung/PeroxyChem);
4. LTF without offering more relief and lose (Penguin/Simon & Shuster);
5. LTF while offering additional relief and win (AT&T/Time Warner;
Microsoft/Activision;8 UHG/Change9);
6. LTF while also offering additional relief and lose (Illumina/Grail); and
7. LTF but settle with additional relief before trial outcome (Assa Abloy/
Spectrum; Intercontinental Exchange/Black Knight).
This trend of LTF cases has increased because the agencies are demand-
ing stronger consent decrees or adopting a “just say no” policy of refusing to
negotiate consent decrees.10 Either way, the merging parties have the incen-
tive to request judicial assessment of proposed remedies to combat what they
Initial Decision, supra note 1, at 178–89, 193, 197 (Illumina committed to an “open offer” sup-
ply agreement with Grail’s competitors); United States v. AT&T Inc., 310 F. Supp. 3d 161, 184
(D.D.C. 2018) (agreement to arbitrate for dissatisfied customers and no supply blackouts during
negotiations); FTC v. CCC Holdings Inc., 605 F. Supp. 2d 26, 57 (D.D.C. 2009) (merging par-
ties proposed revising software license with a smaller competitor to remove restrictions); United
States v. Franklin Elec. Co., 130 F. Supp. 2d 1025, 1026 (W.D. Wis. 2000) (remedy proposal was
a third-party licensing program).
6 See, e.g., Libbey, 211 F. Supp. 2d 34 (seller would retain business and buyer would provide
inventory for a period); UnitedHealth, 630 F. Supp. 3d 118 (divestiture plus firewall to prevent
downstream foreclosure).
7 For citations to these cases, see supra notes 1 (Penguin/Simon & Shuster (Bertelsmann),
AT&T/Time Warner, Microsoft/Activision, UHG/Change, Illumina/Grail, Assa Abloy/Spectrum,
and Intercontinental Exchange/Black Knight) and 3 (RAG-Stiftung/PeroxyChem) and infra notes
11 (Ardagh/Saint-Gobain), 174 (NVIDIA/ARM), and 175 (Lockheed Martin/Aerojet).
8 The courts did not issue orders requiring AT&T or Microsoft to carry out their voluntary
commitments.
9 The court ordered UHG to divest Change’s ClaimsXTen division but did not issue an order
prohibiting misuse of competitors’ information. See United States v. UnitedHealth Grp. Inc.,
630 F. Supp. 3d 118, 140, 152 (D.D.C. 2022).
10 See Jonathan Kanter, Assistant Att’y General, Antitrust Div., U.S. Dep’t of Justice, Opening
Remarks at 2022 Spring Enforcers Summit (Apr. 4, 2022); Jonathan Kanter, Assistant Att’y
General, Antitrust Div., U.S. Dep’t of Justice, Antitrust Enforcement: The Road to Recovery,
Remarks as Prepared for Delivery (Apr. 21, 2022); see generally Spectrum Brands Holdings,
To continue reading
Request your trial