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    Antitrust Law Journal

    Volume 85, Issue 3

    Fixing “Litigating the Fix”

    Steven C Salop and Jennifer Sturiale

    Mar 12, 2024

    77 min read

    Antitrust Antitrust Litigation & Enforcement Antitrust Policy & Legislation DOJ Antitrust Enforcement FTC Antitrust Enforcement Mergers Premerger Review

    Summary

    • Merging parties sometimes propose remedies after a complaint is filed and convince trial courts to evaluate whether or not the “as-remedied” merger violates Section 7. This procedure has been termed “Litigating-the-Fix” (LTF). This article identifies LTF as a procedural problem, analyzes the adverse policy effects that flow from it, and analyzes a proposed procedural solution to correct the problem.
    • This article does not propose requiring the merging parties to file an amended HSR that includes the parties’ remedial provisions. But it does recommend an analogous “remedy filing” with the court, which would trigger a waiting period that would afford the agencies sufficient time to gain the necessary information and evaluate the new merger proposal.
    • In addition, this article proposes that, in court, the merging parties bear the burden to rebut the presumption that the merger will create an appreciable risk of substantially lessening competition. 
    Fixing “Litigating the Fix”
    ondacaracola photography via Getty Images

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    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) submission. These fixes typically involve remedy proposals that the reviewing antitrust agency has rejected. This procedure has been termed “litigating the fix” (LTF). LTF remedies may involve the buyer divesting assets to a third party, the seller retaining assets in a business that competes with a buyer business, the buyer committing to certain conduct duties or constraints, or some combination thereof. These remedies may be unilateral promises, commitments 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 complaint. Various outcomes have occurred in recent cases:

    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; UHG/Change);
    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 demanding stronger consent decrees or adopting a “just say no” policy of refusing to negotiate consent decrees. Either way, the merging parties have the incentive to request judicial assessment of proposed remedies to combat what they see as agency overreach. Courts generally have denied agency motions in limine to exclude consideration of these remedies, at least where the merging parties have offered a definite remedy with sufficient time for the reviewing agency to investigate.

    The agencies’ recent track record in LTF trials has been mixed. While the district court rejected the proposed remedy in Penguin/Simon & Schuster, the trial courts accepted the proffered remedies in AT&T/Time Warner, UHG/Change, and Microsoft/Activision. And in Illumina/Grail, the administrative law judge (ALJ) accepted Illumina’s proposed remedy, though the FTC rejected this recommendation in its decision. The 5th Circuit rejected the FTC’s standard for evaluating the remedy and remanded to the Commission for further analysis.

    One might argue that the agencies should have simply accepted the merging parties’ commitments in a consent decree at the end of the HSR investigation. However, this position overlooks a key point. As discussed below, a credible agency threat to reject the parties’ proposals will lead the parties to propose improved relief during the HSR process or before trial. For example, in some of the older cases, remedies were only proposed after the complaint was filed. Microsoft offered additional commitments after the complaint was filed. In Assa Abloy, the settlement negotiated during the trial offered an additional commitment, breaking new ground by permitting the DOJ to request a modification if the relief failed to preserve competition.

    This article proposes a judicial procedure for managing cases in which the merging parties attempt to LTF. Our recommendations flow from our analysis of LTF case law, the merger enforcement record, the language and goals of Section 7 of the Clayton Act, and economic analysis of the incentives that LTF creates for merging parties and the agencies. Our recommended procedure allows LTF in most instances but mitigates the potential for anticompetitive effects from doing so. We build on the analysis and proposals of other scholars and commentators. Our proposed procedure has some features that are similar to a recent proposal by professors Kwoka and Waller but is more defendant friendly.

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