Wachtell Lipton: Department of Justice Announces “aggressive campaign of antitrust enforcement”

Jonathan Kanter, the newly appointed Justice Department antitrust chief, gave his first majorspeech last night at the Annual Meeting of the New York State Bar Association’s Antitrust Section.  Kanter sent a strong message that he intends to change the way the Justice Department looks at mergers and its willingness to litigate to block transactions instead of striking settlements that he says often have “significant deficiencies.”

          Within hours of the speech, the DOJ released Assistant Attorney General Kanter’s prepared remarks.  I attended and spoke at the Annual Meeting, and Kanter’s remarks came across more vehemently in person than they do on paper.  His comments regarding merger remedies, highly relevant to companies negotiating antitrust efforts and risk provisions in merger agreements, emphasized his:

concern . . . that merger remedies short of blocking a transaction too often miss the mark.  Complex settlements, whether behavioral or structural, suffer from significant deficiencies.  Therefore, in my view, when the division concludes that a merger is likely to lessen competition, in most situations we should seek a simple injunction to block the transaction.  It is the surest way to preserve competition.

          While not entirely ruling out the potential for divestiture remedies to resolve competition concerns, Kanter expressed a concern that “concentration creep” results over time in markets where divested assets go to buyers who are not as effective competitors.  

          A litigator by training, Kanter also stated:

settlements do not move the law forward.  We need new published opinions from courts that apply the law in modern markets in order to provide clarity to businesses.  This requires litigation that sets out the boundaries of the law as applied to current markets, and we need to be willing to take risks and ask the courts to reconsider the application of old precedents to those markets . . . In short, we will pursue remedies — not settlements.  We cannot compromise if there is a violation of the law.

          Kanter’s remarks provide further evidence of the government’s desire to shift policy and process in antitrust enforcement, in the context of mergers and acquisitions, and more broadly.  Parties to potential transactions raising antitrust issues should be highly cognizant of these developments.  Parties should be prepared to approach deals with a holistic consideration of the antitrust, corporate and litigation implications of an increasingly more complex and difficult merger review and challenge process.  An encompassing early strategy and a team with experience across all aspects of deal analysis, negotiation, approval and challenge can help parties achieve their business goals while minimizing risk and maximizing the chances for deal success.