Partial Acquisitions

• Pages: 313-340

CHAPTER IX

PARTIAL ACQUISITIONS

A. Introduction

Section 7 of the Clayton Act (Section 7)1 prohibits acquisitions that

may substantially lessen competition, and in both theory and practice

applies to an acquisition of “any part” of another company. Therefore,

partial acquisitions (i.e., acquisitions that involve something less than an

entire entity) fall under Section 7’s purview.

As discussed below, the Antitrust Division of the Department of

Justice (DOJ or the Division), the Federal Trade Commission (FTC or

the Commission), and the courts have identified three main concerns in

the partial acquisition context: (1) the potential of one company to

control or influence the decisionmaking of another (including pricing and

output decisions); (2) the potential alteration of one company’s incentive

to compete agai nst the other (t hrough an equit y position or mor e direct

method); and (3) the potential for the exchange of competitively sensitive

information. As to all three concerns, the DOJ, the FTC, and the courts

have traditionally looked to certain factors to determine whether a given

partial acquisition violates Section 7—mainly, the role (if any) of an

acquirer in governing and managing the target post-acquisition (e.g.,

through a seat on the board of directors) and the size of the ownership

stake in the target.

In addition to Section 7 issues, partial acquisitions may trigger

potential concerns under Section 1 of the Sherman Act (Section 1),2

1. 15 U.S.C. §18.

2. 15 U.S.C. §1.

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314 Mergers and Acquisitions

Section 8 of the Clayton Act (Section 8),3 and the Hart-Scott-Rodino

Antitrust Improvements Act of 1976.4

B. Partial Acquisitions under Section 7

1. Transactions Covered

By its terms, Section 7 covers two types of partial acquisitions: asset

purchases and stock purchases. While the remainder of this chapter will

focus primarily on the acquisition of stock, it is worth noting that courts

generally interpret the term “asset” broadly, thereby “encompassing a

[wide] spectrum of transactions . . . .”5 For example, several courts have

classified intellectual property6 and a long term, exclusive distribution

license7 as an “asset” for Section 7 purposes.

2. Concerns

Partial acquisitions can have more attenuated anticompetitive effects

than complete acquisitions to the extent the parties continue to compete

(although efficiencies may also be less significant).8 Nevertheless, where

3. 15 U.S.C. §19. See part D of this chapter; see also United States v. First

Nat’l Bank & Trust of Lexington, 376 U.S. 665, 672-73 (1964) (“Where,

as here, the merging companies are major competitive factors in a

relevant market, the elimination of signi ficant competition between

them,” by merger or consolidation, itself “constitutes a violation of

Section 1 of the Sherman Act.”).

4. 15 U.S.C. §18a. See part D of this chapter and Chapter II .C. The FTC

may also seek to utilize Section 5 of the FTC Act, 15 U.S.C. § 45.

5. United States v. Columbia Pictures Corp., 1 89 F. Supp. 153, 182

(S.D.N.Y. 1960) (“As used in this statute, and depending upon the factual

context, ‘assets’ may mean anything of value.”).

6. SCM Corp. v. Xerox Corp., 645 F.2d 1195, 1205 (2d Cir. 1981) (defining

a patent as an “asset”); United States v. Beatrice Foods Co., 344 F.Supp.

104, 114 (D. Minn. 1972) (same for trademarks), aff’d, 493 F.2d 1259

(8th Cir. 1974). See also U.S. DEP’T OF JUSTICE & FED. TRADE COMM’N,

ANTITRUST GUIDELINES FOR THE LICENSING OF INTELLECTUAL PROPERTY

5.7 (1995), available at http://www.justice.gov/atr/public/guidelines/

0558.htm (noting t hat the agencies will apply a merger analysis to the

outright sale of exclusive licensing of intellectual property).

7. Columbia Pictures, 189 F. Supp. at 183.

8. See ORG. OF ECON. COOPERATION & DEV., POLICY ROUNDTABLE,

MINORITY SHAREHOLDINGS 176 (June 23, 2009), available at http://