Merger Control in the United States: Overview

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InfoPAKSM Merger Control in the United States: Overview

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Merger Control in United States: Overview

May 2017

Provided by the Association of Corporate Counsel 1025 Connecticut Avenue, NW, Suite 200 Washington, DC 20036 tel +1 202.293.4103 fax +1 202.293.4107 www.acc.com

This InfoPAKSM gives a high level overview of merger control, regulatory framework and regulatory authorities, relevant triggering events and thresholds in the United States. It also covers notification requirements, procedures and timetables, publicity and confidentiality, third party rights, substantive test, remedies, penalties, appeals, joint ventures and proposals for reform.

This Q&A is part of the global guide to competition and cartel leniency. For a full list of jurisdictional Merger Control Q&As visit www.practicallaw.com/mergercontrol-guide. For a full list of jurisdictional Restraints of Trade and Dominance Q&As visit www.practicallaw.com/restraintsoftrade-guide.

For a full list of jurisdictional Cartel Leniency Q&As, which provide a succinct overview of leniency and immunity, the applicable procedure and the regulatory authorities in multiple jurisdictions, visit www.practicallaw.com/leniency-guide.

Contents

I. Regulatory Framework ...... 5

A. What (if Any) Merger Control Rules Apply to Mergers and Acquisitions in Your Jurisdiction? What Is the Regulatory Authority? ...... 5

II. Triggering Events/Thresholds ...... 6

A. What Are the Relevant Jurisdictional Triggering Events/Thresholds? ...... 6

III. Notification ...... 7

A. What Are the Notification Requirements for Mergers? ...... 7

IV. Procedure and Timetable ...... 9

A. What Are the Applicable Procedures and Timetable? ...... 9

V. Publicity and Confidentiality ...... 10

A. How Much Information Is Made Publicly Available Concerning Merger Inquiries? Is Any Information Made Automatically Confidential and Is Confidentiality Available on Request? ...... 10

VI. Rights of Third Parties ...... 11

A. What Rights (if Any) Do Third Parties Have to Make Representations, Access Documents or Be Heard During the Course of an Investigation? ...... 11

VII. Substantive Test ...... 12

A. What Is the Substantive Test? ...... 12

B. What, if Any, Arguments Can Be Used to Counter Competition Issues (Efficiencies, Customer Benefits)? .. 13

C. Is It Possible for the Merging Parties to Raise a Failing/Exiting Firm Defence? ...... 13

VIII. Remedies, Penalties and Appeal ...... 14

A. What Remedies (Commitments or Undertakings) Can Be Imposed as Conditions of Clearance to Address Competition Concerns? At What Stage of the Procedure Can They Be Offered and Accepted? ...... 14

B. What Are the Penalties for Failing to Comply with the Merger Control Rules? ...... 15

C. Is There a Right of Appeal Against the Regulator's Decision and What Is the Applicable Procedure? Are Rights of Appeal Available to Third Parties or Only the Parties to the Decision? ...... 16

IX. Automatic Clearance of Restrictive Provisions ...... 17

A. If a Merger Is Cleared, Are Any Restrictive Provisions in the Agreements Automatically Cleared? If They Are Not Automatically Cleared, How Are They Regulated? ...... 17

X. Regulation of Specific Industries ...... 18

A. What Industries (if Any) Are Specifically Regulated? ...... 18

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B. Has the Regulatory Authority in Your Jurisdiction Issued Guidelines or Policy on Its Approach in Analysing Mergers in a Specific Industry? ...... 19

XI. Joint Ventures ...... 19

A. How Are Joint Ventures Analysed under Competition Law? ...... 19

XII. Inter-Agency Co-Operation ...... 20

A. Does the Regulatory Authority in Your Jurisdiction Co-Operate with Regulatory Authorities in Other Jurisdictions in Relation to Merger Investigations? If So, What Is the Legal Basis for and Extent of Co- Operation (in Particular, in Relation to the Exchange of Information, Remedies/Settlements)? ...... 20

XIII. Recent Mergers ...... 20

A. What Notable Recent Mergers or Proposed Mergers Have Been Reviewed by the Regulatory Authority in Your Jurisdiction and Why Is It Notable? ...... 20

XIV. Proposals for Reform ...... 22

A. Are There Any Proposals for Reform Concerning Merger Control? ...... 22

XV. Online Resources ...... 23

A. Federal Trade Commission (FTC) ...... 23

B. Department of Justice (DOJ) ...... 23

XVI. The Regulatory Authorities ...... 23

A. United States Department of Justice (US DOJ), Antitrust Division ...... 23

B. Federal Trade Commission (FTC) ...... 24

XVII. About the Authors ...... 25

A. Lisl Dunlop, Partner ...... 25

B. Shoshana Speiser, Associate ...... 26

I. Regulatory Framework

A. What (if Any) Merger Control Rules Apply to Mergers and Acquisitions in Your Jurisdiction? What Is the Regulatory Authority?

1. Regulatory Framework Mergers are principally governed by section 7 of the Clayton Act, which prohibits transactions where "the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly." In addition, other substantive US anti-trust laws can apply to transactions, such as sections 1 and 2 of the Sherman Act (prohibiting agreements in restraint of trade and monopolization respectively) and section 5 of the Federal Trade Commission Act (prohibiting unfair methods of competition).

Section 7A of the Clayton Act (Hart-Scott-Rodino Act (HSR Act)), and associated Rules form the pre-merger notification regime. This requires that parties to transactions meeting certain thresholds file HSR notification forms with the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) and observe a statutory waiting period prior to closing the transaction.

2. Regulatory Authority At the federal level, mergers are reviewed by the FTC and the DOJ. HSR filings are required to be made with both agencies, which (if not cleared summarily) go through a "clearance" process to allocate matters within the expertise or interest of either agency. In addition, several specialist agencies address competition issues as part of their own reviews, including the Federal Communications Commission and the Federal Reserve Bank.

Although there is no separate notification process, transactions also may be reviewed by state attorneys general, who typically focus on competitive effects within the states.

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II. Triggering Events/Thresholds

A. What Are the Relevant Jurisdictional Triggering Events/Thresholds?

1. Triggering Events All types of transactions are potentially subject to merger review. This includes both stock and asset acquisitions, mergers, joint ventures, minority investments and incremental investments. Note that the Hart-Scott-Rodino Act (HSR Act) is not jurisdictional: even if a transaction does not meet the HSR notification thresholds, it can still be reviewed by federal and state regulators.

2. HSR Thresholds HSR filings must be made, and the waiting period observed, for transactions meeting both "size of person" and "size of transaction" thresholds. Each year, the Federal Trade Commission adjusts the dollar thresholds in these tests based on changes in the US gross national product. The current thresholds were implemented on 25 February 2016.

Size-of-transaction threshold. Unless otherwise exempt under one of the many transaction type and asset class exemptions, acquisitions of assets or voting securities (or interests in an unincorporated entity) in excess of US$80.8 million may be subject to the HSR Act. This threshold is cumulative so that if an acquirer already holds voting securities and makes an additional acquisition resulting in the total holding exceeding the threshold, an HSR filing may be required.

Size-of person threshold. Transactions valued between US$80.8 and US$323 million will be subject to the HSR Act if the parties also meet the size-of-person thresholds. The size-of- person threshold is generally met where a person with annual net sales or total assets of US$161.5 million or more acquires a person with annual net sales or total assets of US$16.2 million or more, or vice versa. Transactions valued at more than US$323 million are subject to the HSR Act without reference to the size of the person, unless otherwise exempt.

III. Notification

A. What Are the Notification Requirements for Mergers?

1. Mandatory or Voluntary Where the applicable thresholds are met and the transaction is not otherwise exempt, notification is mandatory. Voluntary notifications are not accepted by the agencies.

2. Timing Parties can file as soon as they have a signed agreement in the form of a definitive agreement or non-binding letter of intent. There is no mandatory time for making Hart- Scott-Rodino (HSR) filings, so long as notification and observation of the waiting period is made pre-closing.

3. Pre-Notification Formal/Informal Guidance There is typically no consultation with the agencies in advance of filing. However, these consultations may take place where:

■ There is ambiguity in the reporting question; in which case parties engage with the Federal Trade Commission's Premerger Notification Office (PNO).

■ The parties want to engage the agency substantively as early as possible to start the review faster.

4. Responsibility for Notification Each party to the transaction must prepare and submit its own notification. The parties typically must co-ordinate the content of some aspects of the filings.

5. Relevant Authority Notification is made to the FTC and the Antitrust Division of the Department of Justice (DOJ).

6. Form of Notification The FTC prescribes the form of notification and revises the form from time to time. The FTC publishes the HSR form on its website.

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The HSR filing seeks high-level financial and corporate information, as well as copies of the agreement, financial documents, and internal company documents discussing the transaction. Unlike other jurisdictions, the filing does not require the parties to describe the industry or take positions on market definition or competitive effects. Instead, the agencies rely principally on market inquiries and on Items 4(c) and 4(d) of the HSR Form, which require the submission of internal company documents discussing the transaction. Item 4(c) of the HSR Form requires the submission of all studies, surveys, analyses and reports that were prepared by or for any officer or director for the purpose of evaluating or analysing the acquisition with respect to market shares, competition, competitors, markets, potential for sales growth or expansion into product or geographic markets. Item 4(d) targets confidential information memoranda (CIMs), bankers' books and other third party consultants' materials, and synergies documents.

7. Filing Fee The acquiring party must pay the filing fee, which ranges from US$45,000 to US$280,000 depending on the size of the transaction, although responsibility for the fee may be allocated differently by agreement between the parties. The current filing fees are as follows:

■ For transaction values greater than US$80.8 million but less than US$161.5 million: US$45,000.

■ For transaction values of US$161.5 million or more, greater but less than US$807.5 million: US$125,000.

■ For transaction values of US$807.5 million or greater: US$280,000.

8. Obligation to Suspend The transaction cannot be implemented before the HSR Act waiting period expires or is terminated. The agencies interpret "implementation" very broadly and have brought enforcement actions for "gun-jumping" (that is, implementation before clearance) where the parties take actions that prematurely transfer control or beneficial ownership of the target's business activities to the buyer, even where the transaction was not formally closed. The HSR Act waiting period cannot be waived, but may be terminated early by the FTC and DOJ if the transaction raises no competitive concerns.

IV. Procedure and Timetable

A. What Are the Applicable Procedures and Timetable?

If the Hart-Scott-Rodino (HSR) filing thresholds are met (see Section II.A.1) the parties must file and observe the applicable waiting period before completing the transaction.

The typical HSR waiting period is 30 days and begins when both parties have filed. The HSR waiting period is shortened to 15 days for certain bankruptcy and cash tender offer transactions. In addition, in some cases the waiting period can be started with just the buyer's filing. This is most typically the case with open market purchases of a publicly traded security. However, it can occur in other types of transactions where there is no agreement with the target.

The agency has the following options during the initial waiting period:

■ Grant early termination if requested by one of the parties and if the agency does not intend to investigate the transaction further.

■ Take no action and allow the waiting period to expire.

■ Open a formal or informal investigation of the transaction. An investigation during the initial waiting period usually takes the form of voluntary requests for information while the waiting period continues to run. The purpose of voluntary requests is to allow the agencies to conduct an initial investigation to determine whether to allow the waiting period to expire or conduct an in-depth investigation through issuance of a formal Request for Additional Information and Documentary Material ("Second Request").

In cases where additional time is required, but a full-blown Second Request investigation is not warranted, the parties can withdraw and resubmit the HSR Act filing ("pull and refile") once without payment of an additional filing fee. This procedure restarts the initial waiting period and gives the agency more time to complete its initial investigation.

If the reviewing agency issues a Second Request at the end of the initial waiting period, this has the effect of suspending the HSR waiting period until 30 days (ten for certain bankruptcy and tender offer transactions) following substantial compliance with the Second Request. Compliance is an extensive exercise, which can take anywhere from three to six months. In complex transactions, it is common for the parties and the reviewing agency to negotiate a timing agreement to govern procedural steps and extend the time for review to a date certain.

After the parties' compliance with the Second Request and the final waiting period (which may be extended by agreement), the reviewing agency may:

■ Close the investigation.

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■ Allow the transaction to close subject to a settlement with the parties setting out specified remedies.

■ Challenge the transaction by seeking a preliminary injunction in US District Court to block the transaction. In order to block a transaction, the reviewing agency must seek a temporary restraining order (TRO) and preliminary injunction from a US District Court. Parties typically stipulate to the TRO to allow the preliminary injunction proceedings to move forward on the merits. For FTC transactions, the FTC will simultaneously initiate its own administrative proceeding to rule on the legality of the transaction.

Under the FTC rules, this process, plus issuance of a final order by the Commission, takes at least 12 months from issue of the complaint. Therefore, as a practical matter, if the FTC is successful in obtaining a preliminary injunction, parties often abandon their transaction. For DOJ transactions, the DOJ will seek a final injunction against the transaction at the same time as applying for the preliminary injunction, and these proceedings are often combined. Completion of this process through court order can take anywhere from six to nine months from issue of the complaint.

V. Publicity and Confidentiality

A. How Much Information Is Made Publicly Available Concerning Merger Inquiries? Is Any Information Made Automatically Confidential and Is Confidentiality Available on Request?

1. Publicity By statute, Hart-Scott-Rodino (HSR) filings are confidential. However, grants of early termination are published, which will disclose the identity of the parties and the fact that a filing was made. Accordingly, where confidentiality is important parties typically will not request early termination and opt instead to observe the full waiting period.

Where early termination of the waiting period is not granted, no information is or may be made public. This information includes the parties' names and the fact that filings were made.

HSR filings can be made on a letter of intent before a definitive agreement has been executed. The agencies are required to keep the transaction confidential. However, if the reviewing agency conducts an initial investigation, market inquiries may result in news about the transaction leaking to the market.

If the transaction is ultimately challenged, there will be a public record of the matter and of the court filings made in the case.

2. Confidentiality on Request Parties can request confidentiality for additional materials submitted in investigations, and these are not made available to third parties or the public. HSR materials are not subject to Freedom of Information Act requests. In transactions that are litigated, parties can request that court submissions, evidence and even parts of the Court's decision be redacted to protect confidential information.

VI. Rights of Third Parties

A. What Rights (if Any) Do Third Parties Have to Make Representations, Access Documents or Be Heard During the Course of an Investigation?

The agencies will often solicit third parties' views as a normal part of the investigation. These can include customers, competitors and others. Contacts are made through phone calls to third parties rather than by publication of notices or surveys. Third party contacts are made confidentially.

1. Access to Documents Third parties are not given access to documents or information developed in the investigation unless the parties give consent or there are special circumstances, such as court proceedings where evidence compiled in the course of the investigation may be placed into the public record.

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2. Be Heard Where the agency does not affirmatively request third party representations, views or input, parties can come forward on their own accord to give those views to the agency. The agencies are typically very responsive to these requests and allow the party to be heard. The weight the agency gives third-party views depends on several factors, including the type of third party. Customer views, for example, are typically given more weight than competitor views.

VII. Substantive Test

A. What Is the Substantive Test?

Section 7 of the Clayton Act prohibits mergers "in any line of commerce or in any activity affecting commerce in any section of the country" where "the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly."

The Federal Trade Commission and Department of Justice have issued Horizontal Merger Guidelines (most recently updated in 2010) that outline the main analytical techniques, practices, and enforcement policies the agencies use to evaluate mergers and acquisitions involving actual or potential competitors (www.ftc.gov/sites/default/files/attachments/merger-review/100819hmg.pdf).

The Guidelines stress that merger analysis is flexible and does not use a single methodology; rather, the agencies will use a variety of tools to analyse the available evidence in determining whether a merger may substantially lessen competition.

Notably, the Guidelines explain that "market definition" is not an end itself or a necessary starting point for a merger analysis, and that market concentration is a tool that is useful to the extent it illuminates the merger's likely competitive effects but is not determinative. When challenging a transaction in court, however, the agencies have continued to allege relevant markets and rely on structural presumptions.

The Guidelines outline the agencies' analysis of competitive effects as "unilateral" (reduction of competition through the merger of two parties alone) or "coordinated" (diminished competition by enabling or encouraging post-merger coordinated interaction among firms in the relevant market). There is also discussion of common defences, such as the presence of powerful buyers in a market, entry, efficiencies and failing firm. The

Guidelines do include material on market shares and Herfindahl–Hirschman Index screens, but in practice these tools are not determinative of potential outcomes.

B. What, if Any, Arguments Can Be Used to Counter Competition Issues (Efficiencies, Customer Benefits)?

There are several substantive arguments that are available to counter competition concerns. These are discussed in the Horizontal Merger Guidelines and include:

■ Market definition. Based on substitution evidence, parties may argue that markets are broader than alleged, so that additional participants are included in the market and the parties' relative competitive significance is lowered. Conversely, defining the parties' areas of activity by narrower markets may exclude or limit areas of overlap.

■ Powerful Buyers. The agencies consider the possibility that powerful buyers may constrain the ability of the merging parties to raise prices. This can occur, for example, if powerful buyers have the ability and incentive to vertically integrate upstream or sponsor entry, or if the conduct or presence of large buyers undermines coordinated effects.

■ Entry. Parties may argue that barriers to entry to the relevant market are low so that entry would be timely, likely to occur, and sufficient to counter any anti- competitive price increases. Such arguments are most effective in industries with a history of entry and low switching costs for customers.

■ Efficiencies. Competitive effects may be balanced by pro-competitive effects in the form of cost-savings or other efficiencies that will be passed on to customers. In order to be cognizable, efficiencies must be reasonably verifiable and merger- specific. Speculative efficiencies, or efficiencies that could be attained without the transaction, will not be credited. In addition, efficiencies will rarely save a transaction with significant competitive effects.

■ Failing firm. (See Section VII.C).

C. Is It Possible for the Merging Parties to Raise a Failing/Exiting Firm Defence?

A failing firm defence, and to a lesser extent a "flailing firm" defence (in the case of a competitor firm that has become weakened or less effective, but not failing), is available. However, it is a difficult argument to raise successfully. For the agencies to recognise the defence, the evidence must convincingly establish that:

■ The firm would not be able to meet its financial obligations in the near future.

■ It would not be able to successfully reorganise in bankruptcy.

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■ The firm made good-faith efforts to elicit alternative offers that would keep the assets in the market and pose less danger to competition than the proposed transaction.

VIII. Remedies, Penalties and Appeal

A. What Remedies (Commitments or Undertakings) Can Be Imposed as Conditions of Clearance to Address Competition Concerns? At What Stage of the Procedure Can They Be Offered and Accepted?

The agencies recognise that effective merger remedies can include structural remedies, conduct remedies or some combination of each. Each can be used to preserve competition in the appropriate circumstances.

In horizontal merger cases, the agencies have a strong preference for structural remedies involving the divestiture of assets or the sale or licensing of IP rights, as these are straightforward to administer and monitor, and are most likely to preserve competition. At a minimum, the divestiture must restore competition lost through the transaction and be a viable business in the hands of the buyer.

Conduct remedies that direct aspects of the merged firm's post-completion business conduct are used less frequently as they are more complicated to administer and monitor. However, they can be appropriate in certain cases, for example, vertical cases.

There are no firm timing requirements or guidelines for offering remedies. Although remedies can be offered at any stage, they are most commonly agreed in a settlement and memorialised in a court-ordered consent decree during or after the Second Request compliance. Agreeing to a remedy and moving to final consent decree is typically a time- consuming process that can add two to three months to the process. In addition, the Federal Trade Commission in particular typically requires that a buyer of the divestiture be identified and approved prior to acceptance of the consent order, which also can impact timing.

Accordingly, offering robust remedies early in the investigation is a strategy that can expedite the review and settlement in some cases.

B. What Are the Penalties for Failing to Comply with the Merger Control Rules?

1. Failure to Notify Correctly Although technical, Hart-Scott-Rodino (HSR) filings are relatively straightforward to prepare. In the case of filing errors, the Premerger Notification Office staff will contact the parties to make corrections, which may delay the effective date of the filing and the start of the HSR waiting period. When there are serious deficiencies in filings that are not apparent from initial review, for example, the failure to include relevant Item 4(c) and 4(d) documents, the filing is treated as if it were not made at all (see Section III.A.6).

Failure to file notification at all can result in a statutory penalty of up to US$40,654 per day for the duration of the violation (that is, from the date of the closing of the transaction). However, the extent of the penalty often depends on the circumstances of the case. First- time and inadvertent offenders are likely to be penalised less or sometimes not at all, while intentional or repeat offenders can receive stiff penalties. The agencies are not afraid to impose the maximum penalty in particularly serious cases.

For example, in April 2016 the Department of Justice (DOJ) a complaint against two entities for failing to report their investments in two merging companies and sought penalties of at least US$19 million. According to the DOJ, the defendant companies erroneously claimed that their transactions fell under the ''investment only'' exemption. Under this exemption, an acquirer that holds 10% or less of an issuer's voting securities for investment purposes only, is not required to file an HSR notification. The DOJ alleges that the exemption did not apply in this case because the defendant companies purchased the shares with the intent to influence the merging companies' business decisions. (See United States v. VA Partners I, LLC, Case No. 3:16-cv-01672 (N.D. Cal. 2016)).

2. Implementation Before Approval or After Prohibition Before the transaction has cleared the merger review process (or after prohibition by way of a court-ordered injunction), no party to a proposed transaction can, actually or in effect:

■ Combine any activities of the businesses.

■ Act jointly.

■ Exercise any attributes of beneficial ownership over either the totality of the businesses or over the other party's business. This conduct is regarded as:

■ A violation of the HSR Act by implementing the acquisition before it is permitted under the HSR Act.

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■ Where the transaction has been prohibited by a court-ordered injunction, a contempt of a court order.

■ A violation of either: • section 1 of the Sherman Act, which prohibits agreements that unreasonably restrain trade; or • section 5 of the Federal Trade Commission Act (FTC Act), which prohibits unfair methods of competition. Premature implementation of a transaction even where a filing was properly made can result from a range of activities, including:

■ Overzealous integration planning activities.

■ Exercise of approval rights under conduct of business provisions.

■ Actions of sales people in relation to customers. The activities are known as ''gun jumping''.

The agencies are active in enforcement in this area. In a late 2014 enforcement action, the DOJ obtained US$3.8 million in penalties for pre-closing co-ordination by parties to a merger transaction who co-ordinated to close a manufacturing facility and move the facility's customers to the acquiring party. The acquirer was also ordered to disgorge profits of US$1.1 million. (See United States v Flakeboard America Limited et al, Case No. 3:14-cv- 4949.)

3. Failure to Comply with a Consent Decree Failure to comply with the terms of a consent decree settlement can constitute an order violation and subject the parties to penalties and other relief under section 5(l) of the FTC Act (for FTC orders) or contempt proceedings (for DOJ consent orders entered by a District Court). In addition, the consent decree itself may include provisions for appointment of monitors, trustees and/or requirements to divest alternative assets ("crown jewels") if the initial divestiture fails.

C. Is There a Right of Appeal Against the Regulator's Decision and What Is the Applicable Procedure? Are Rights of Appeal Available to Third Parties or Only the Parties to the Decision?

1. Rights of Appeal All aspects of orders made by the Federal Trade Commission or by a District Court (in the case of a Department of Justice transaction) are appealable. This includes restrictions relating to implementation of the transaction, divestiture orders and other remedial orders.

2. Procedure Appeals of FTC orders are made to the US Court of Appeals for the District of Columbia. Appeals of Federal District Court orders issued in DOJ cases are made to the US Court of Appeals for the relevant circuit. Appeals must be made within 30 days of a decision. They can take up to six months or more to complete.

3. Third Party Rights of Appeal Third parties do not have standing to intervene or to seek the overturning of a decision on the merger in a challenge brought by the agency. However, they can bring their own case against the transaction.

IX. Automatic Clearance of Restrictive Provisions

A. If a Merger Is Cleared, Are Any Restrictive Provisions in the Agreements Automatically Cleared? If They Are Not Automatically Cleared, How Are They Regulated?

Merger review is not a clearance process. The agencies retain jurisdiction to challenge any transaction after completion of the review process. Therefore, any potentially anti- competitive provisions remain subject to challenge. These challenges are most likely in cases where the provisions at issue result in actual anti-competitive effects after the transaction is implemented.

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X. Regulation of Specific Industries

A. What Industries (if Any) Are Specifically Regulated?

In certain industries, mergers are reviewed by a federal agency other than the Department of Justice (DOJ) and the Federal Trade Commission (FTC), either solely by that agency, or concurrently with FTC or DOJ review. Some examples of these instances are described below.

Airlines. While the DOJ has exclusive jurisdiction to review airline mergers, the Department of Transportation (DOT) provides views and otherwise assists the DOJ in its review. The DOT also has jurisdiction to approve slot transfer agreements that may be required as remedies in the merger review process.

Electric Power. Transactions involving energy companies are subject to review by the federal anti-trust agencies (either DOJ or FTC) as well as the Federal Energy Regulatory Commission. The public service commission of each state in which the parties do business also review energy transactions.

Financial Services. DOJ shares competition policy jurisdiction over mergers involving banks with four federal banking regulators:

■ The Office of the Comptroller of the Currency, which reviews transactions involving national banks

■ The Federal. Deposit Insurance Corporation, which reviews transactions involving federally-insured

■ State-chartered banks that are not members of the Federal Reserve System.

■ Board of Governors of the Federal Reserve System, which reviews transactions involving bank holding companies and state-chartered banks that are members of the Federal Reserve System.

■ The Office of Thrift Supervision which reviews transactions involving savings and loan companies and savings associations. In general, the banking regulators apply standards similar to those established under section 7 of the Clayton Act and must consider a report filed by the DOJ before completing their own assessment of a transaction.

Railroads. Jurisdiction over mergers involving railroads resides solely in the Surface Transportation Board (STB). The DOJ provides non-binding advice to the STB, which must consider, but need not heed the DOJ's recommendations.

Telecommunications transactions. Mergers involving telecommunications service providers usually are subject to review by the DOJ or the FTC (the DOJ has jurisdiction to review mergers involving telephone companies and both the DOJ and the FTC have review

B. Has the Regulatory Authority in Your Jurisdiction Issued Guidelines or Policy on Its Approach in Analysing Mergers in a Specific Industry?

The agencies jointly issue guidelines relating to their review of horizontal mergers. The latest iteration was issued in 2010. (See Section VII.A.) The most recent guidelines relating to vertical mergers were issued in 1997 (see https://www.justice.gov/archives/atr/1997- merger-guidelines). In addition, the agencies have issued specific guidance relating to transactions in certain industries, such as international operations, IP, and health care. All guidelines are available on the agencies' websites (see www.justice.gov/atr/public/merger-enforcement.html).

Additionally, each of the agencies have issued guidelines regarding merger remedies. Most recently the Federal Trade Commission issued a Statement of Negotiating Merger Remedies in January 2012 (see https://www.ftc.gov/system/files/attachments/negotiating-merger- remedies/merger-remediesstmt.pdf). The Department of Justice released its most recently revised Policy Guide to Merger Remedies in June 2011 (see https://www.justice.gov/sites/default/files/atr/legacy/2011/06/17/272350.pdf).

XI. Joint Ventures

A. How Are Joint Ventures Analysed under Competition Law? Joint ventures are subject to notification where the Hart-Scott-Rodino (HSR) thresholds are met. HSR analysis of joint venture formation can be complex and depends on the structure, assets being contributed, and resulting ownership of the venture.

Substantively, the agencies examine joint ventures similarly to mergers, though ancillary issues can also arise. These can relate, for example, to ensuring that the joint venture is not utilised as a conduit for the flow of competitively sensitive information from one party to the other.

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XII. Inter-Agency Co-Operation

A. Does the Regulatory Authority in Your Jurisdiction Co-Operate with Regulatory Authorities in Other Jurisdictions in Relation to Merger Investigations? If So, What Is the Legal Basis for and Extent of Co-Operation (in Particular, in Relation to the Exchange of Information, Remedies/Settlements)?

The US federal anti-trust authorities have several bilateral agreements with anti-trust agencies in other jurisdictions, including Australia, Brazil, Canada, Chile, China, Colombia, Germany, European Union, India, Israel, Japan, Mexico, and Russia. The legal basis for cooperation ranges from memoranda of understanding to formal cooperation agreements. A complete list of agreements with links is available on the agencies' websites (see www.justice.gov/atr/public/international/int-arrangements.html).

In addition, the Federal Trade Commission and Department of Justice participate in the Organisation for Economic Co-operation and Development and the International Competition Network, sharing best practices on merger investigation procedure and substance.

XIII. Recent Mergers

A. What Notable Recent Mergers or Proposed Mergers Have Been Reviewed by the Regulatory Authority in Your Jurisdiction and Why Is It Notable?

Notable recent mergers and proposed mergers reviewed by the regulatory authority include:

■ Staples, Inc.’s proposed acquisition of Office Depot, Inc. The proposed US$6.3 billion acquisition of Office Depot by Staples was approved in Europe, with some concessions, but was challenged by the Federal Trade Commission (FTC). The FTC alleged that the transaction would significantly reduce competition

nationwide in the market for consumable office supplies sold to large business customers for their own use, and that the entry or expansion into the market, including by online retailers, will not be likely, sufficient, or timely to counteract the transaction's anti-competitive effects. On 10 May 2016, the US District Court for the District of Columbia agreed with the FTC and issued a preliminary injunction blocking the transaction. The parties abandoned the deal a short time later.

■ Dollar Tree, Inc.'s proposed acquisition of Family Dollar Stores, Inc. The FTC approved Dollar Tree's US$9.2 billion acquisition of Family Dollar Stores on the condition that Dollar Tree sells 330 Family Dollar stores to a private equity firm, Sycamore Partners. According to the FTC, the stores both sell significantly discounted merchandise including food, home products, apparel, accessories, and seasonal items at prices below US$10 and directly compete on price, product assortment, quality, location, and customer service in local markets nationwide. The divestiture remedy is intended to preserve competition that would otherwise be lost in 35 states if the acquisition proceeded as originally proposed.

■ Halliburton Company's merger with Baker Hughes Inc. In April 2016, the Department of Justice (DOJ) sued to block the proposed merger of two of the three largest oilfield services companies in the world, valued between about US$28 and US$35 billion. Halliburton had attempted to remedy the DOJ's concerns by offering to divest a mixture of assets from certain business lines. The proposed remedy, however, was rejected by the DOJ because it did not include the full business lines and would disadvantage the buyer. Halliburton and Baker Hughes initially issued a joint press release that they would ''vigorously contest'' the DOJ's challenge, but abandoned the transaction in May 2016.

■ The FTC challenges hospital mergers. The FTC has recently brought three court challenges against hospital mergers. Firstly, the FTC challenged Advocate Health Care Network and NorthShore University HealthSystem's merger in Illinois. According to the FTC, the transaction would create the largest hospital in the North Shore area of Chicago, controlling more than 50% of the general acute care inpatient hospital services, and would likely lead to significant consumer harm in the form of increased health care costs and diminished incentives to upgrade services and improve quality. In mid-June, the Northern District of Illinois denied the FTC's motion seeking a preliminary injunction to prevent the parties from consummating their proposed merger. The merger has been temporarily enjoined pending the FTC's appeal to the Seventh Circuit. Secondly, the FTC challenged Cabell Huntington Hospital's proposed acquisition of St. Mary's Medical Center. The FTC alleged that the combination of the two hospitals would lead to a near monopoly in the Huntington, West Virginia and several surrounding counties. The FTC administrative proceeding is currently stayed pending the West Virginia Health Care Authority's review and approval or disapproval of the transaction. Thirdly, the FTC and Pennsylvania Office of Attorney General challenged Penn State Hershey Medical Center's proposed merger with Pinnacle Health System in the Harrisburg, Pennsylvania area due to concerns that the transaction would result in reduced quality and higher costs for

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local employers and residents. In early May 2016, the US District Court for the Middle District of Pennsylvania denied the FTC's motion seeking a temporary restraining order and preliminary injunction to prevent the parties from consummating their proposed merger. Shortly after, the Third Circuit granted the FTC's emergency motion for a stay pending appeal. These three challenges highlight the FTC's focus on the health care industry, and particularly hospitals.

■ Expedia's acquisition of Orbitz. After a six-month review, the DOJ announced in September 2015 that it would not challenge Expedia's US$1.3 billion acquisition of Orbitz. The DOJ found that the acquisition was unlikely to result in new charges being imposed directly on consumers or on the commissions that the companies negotiate with airlines, car rental companies, and hotels. The DOJ determined that Orbitz accounts for only a small source of bookings and therefore has little impact on Expedia charges. The DOJ also gave significant weight to the rapidly-changing nature of the online travel business, citing the introduction of two new market entrants in the past 18 months.

XIV. Proposals for Reform

A. Are There Any Proposals for Reform Concerning Merger Control?

There has been ongoing discussion concerning the different procedures and standards for Federal Trade Commission and Department of Justice merger challenges. This has resulted in the introduction of the Standard Merger and Acquisition Reviews Through Equal Rules (SMARTER) Bill (H.R. 5402) to Congress. Among other things, the SMARTER Bill aims to harmonise the FTC and DOJ's standards for obtaining a preliminary injunction of a proposed merger and preventing the FTC from initiating administrative procedures to evaluate whether mergers may constitute unfair competition. The SMARTER Bill passed both the House of Representatives and the Senate and is pending signature. There are, however, rumours that the White House may veto the SMARTER Bill due to the concern that it would undermine the FTC's role and effectiveness as a specialist competition agency. Proponents of the SMARTER Bill argue that it would lead to increased fairness and predictability in the merger review process.

XV. Online Resources

A. Federal Trade Commission (FTC)

W www.ftc.gov/about-ftc/bureaus-offices/bureau-competition

Description. This is the official website of the FTC Bureau of Competition. It is updated regularly and available in English only.

B. Department of Justice (DOJ)

W www.justice.gov/atr

Description. This is the official website of the US DOJ, Antitrust Division official website. It is updated regularly and available in English only.

XVI. The Regulatory Authorities

A. United States Department of Justice (US DOJ), Antitrust Division

Principal Deputy Assistant Attorney General. Renata B. Hesse

Contact details. 950 Pennsylvania Avenue, Washington, DC 20530-0001

T +1 202 514 2558 (Premerger Notification Unit)

E [email protected]

F +1 202 514 2363 (Premerger Notification Unit)

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W www.justice.gov/atr

Outline structure. The Antitrust Division is organised into several units, each with specific subject area responsibility, including:

■ Networks and technology enforcement.

■ Telecommunications and media enforcement.

■ Transportation, energy and agriculture.

■ National criminal enforcement.

■ Economic analysis group.

■ Appellate section.

■ Pre-merger notification.

■ Foreign commerce.

■ Legal policy.

■ Regional offices. In addition, there are several specialised litigation sections that have primary responsibility for specific industries and commodities. There is some overlap in industry specific expertise between the Federal Trade Commission and the US Department of Justice, Antitrust Division. Therefore, it is not always immediately clear which agency will investigate a particular transaction.

Responsibilities. The mission of the Antitrust Division is to promote economic competition through enforcing and providing guidance on anti-trust laws and principles.

Procedure for obtaining documents. Publicly available documents are available on the agency's website.

B. Federal Trade Commission (FTC)

Chair. Edith Ramirez. The Commission is currently operating with only three Commissioners. The other two commissioners currently are Tyrell McSweeney and Maureen K. Ohlhausen.

Contact details. 600 Pennsylvania Avenue, NW, Washington, DC 20580

T +1 202 326 2222

E [email protected] (Premerger Notification Office)

W www.ftc.gov

Outline structure. The FTC is organised into the following two main units:

■ Bureau of Competition.

■ Bureau of Consumer Protection. The Bureau of Competition is responsible for mergers. The bureau is further organised into several smaller units with specific industry area expertise, plus regional offices. There is some overlap in industry specific expertise between the FTC and the US DOJ, Antitrust Division. Therefore, it is not always immediately clear which agency will investigate a particular transaction.

Responsibilities. The FTC's mission is to:

■ Prevent business practices that are anti-competitive, deceptive or unfair to consumers.

■ Enhance informed consumer choice and public understanding of the competitive process.

■ Accomplish this without unduly burdening legitimate business activity. The Bureau of Competition seeks to prevent anti-competitive mergers and other anti- competitive business practices.

Procedure for obtaining documents. Publicly available documents are available at the agency website.

XVII. About the Authors

A. Lisl Dunlop, Partner

Manatt, Phelps & Phillips, LLP

T +212 790 4507

E [email protected]

W www.manatt.com

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Professional qualifications. Partner admitted in the Supreme Court of the United States; New York; District of Columbia; US District Court, District of Columbia; US District Court, New York, Eastern District; US District Court, New York, Southern District; US Court of Appeals, Second Circuit; Solicitor, England and Wales; Solicitor, New South Wales, Australia; Cornell University Law School, LLM; University of Sydney, BSc, LLB

Areas of practice. Anti-trust; health care; pharmaceuticals; financial services; media and entertainment; manufacturing.

Professional associations/memberships. ABA Section of Antitrust Law; International Task Force; ABA Section of International Law, Chair, International Antitrust Committee, Liaison to Section of Antitrust Law; New York State Bar Association, Antitrust Section, Chair; American Health Lawyers Association.

B. Shoshana Speiser, Associate

Manatt, Phelps & Phillips LLP

T +212 790 4502

E [email protected]

W www.manatt.com

Professional qualifications. Associate, admitted in the New York; District of Columbia; US District Court, New York, Southern District; Boston University School of Law, JD; Brandeis University, BA

Areas of practice. Anti-trust; health care; media; litigation.

Professional associations/memberships. ABA Section of Antitrust Law, Member; New York State Bar Association, Member; American Health Lawyers Association, Member.