Further, the Synopsis Matter Statement suggests that merger remedies are back in vogue. It criticized the Biden FTC’s position that settlements should be rare and litigation encouraged, citing the burden this imposes on the FTC’s limited resources and the often highly uncertain outcomes in court. Moreover, refusing to accept merger remedies often encourages parties to an anticompetitive merger to try to “fix” the anticompetitive issues before bringing it to the FTC, “which may not be adequate to address fully the anticompetitive problems posed by the merger.” According to the Chair, “[s]ettlements … must be on the table if the FTC is to protect competition efficiently and as fully as its resources allow.”
Two practical messages from the Synopsis Matter Statement provide helpful guidance for those engaging with transactions that may come under FTC review:
- Behavioral remedies remain disfavored. The FTC’s more receptive view of merger remedies is limited to “structural” remedies—i.e., those that involve divestitures of discrete lines of business. In contrast, behavioral remedies “are often difficult or impossible for the Commission to enforce effectively and can lock the Commission into the status of a monitor for individual firms rather than a guardian of competition across the entire economy. They are therefore disfavored.” This position is not new, and has been the mantra of prior administrations.
- Remedies should involve the divestiture of standalone or discrete businesses that minimize ongoing entanglements. Chair Ferguson emphasized that divested businesses must be able to compete effectively from Day 1 of the divestiture, that the divestiture buyer must have the incentive and ability to compete vigorously against the merged firm, and that any ongoing entanglements between the merged and divested firms should be eliminated to the extent possible. The divestiture buyer must also possess the resources and experience necessary to succeed in the market. Like the disfavor of behavioral remedies, these requirements are not new, but are familiar guideposts that have a long history of application in prior investigation remedy proceedings. Here, the parties to the merger agreed to divest standalone or discrete business units in three relevant markets to resolve FTC concerns.
The FTC’s re-endorsement of remedies is not without drawbacks. As noted by Chair Ferguson, parties with deals pending before the Biden FTC often crafted their own remedies to “fix” the antitrust issues either before FTC review or before trial—a practice known as “fix-it-first.” With formal remedies back on the table, parties can expect the FTC to be more involved in crafting them, which may imply greater FTC oversight of the remedy. This can and will lead to greater reliance on formal consent orders subject to notice and comment rather than informal commitments undertaken by the parties—with the red tape, delay, and formalities that accompany such orders.
Overall, however, the Statement provides helpful guidance and assurance to practitioners and merging parties that the FTC under Chair Ferguson intends to return to its prior practice of working to craft remedies to otherwise-anticompetitive mergers. Such a return to prior practice was predicted but not guaranteed, particularly as both the FTC and DOJ have endorsed key aspects of the Biden Administration’s antitrust policy, like the 2023 Merger Guidelines. The Chair’s endorsement of remedies is welcome news that in appropriate cases, the FTC will help clear a path to closing that avoids costly litigation.
The FTC is not alone. DOJ has also embarked on the path of re-embracing remedies in merger cases. It filed a proposed consent decree on June 2 that will permit the merger of Keysight Technologies, Inc. and Spirent Communications plc to proceed on the condition the parties divest three overlapping lines of business, confirming an earlier statement by Assistant Attorney General Gail Slater that she would be “more open to consent decrees in merger cases” than her predecessor in the Biden Administration. Together, the Keysight/Spirent and Synopsis/Ansys settlements signal clearly that, in appropriate cases, structural merger remedies are realistic possibilities at both agencies.
