During the fifth annual Antitrust Clearance and Merger Enforcement Conference (ACME), leading antitrust practitioners Franco Castelli, Counsel, Antitrust from Wachtell, Lipton, Rosen & Katz; Jeane Thomas, Partner at Crowell & Moring; and Alexander Okuliar, Co-Chair Global Antitrust Law Practice Group at Morrison Foerster, examined the rapidly evolving merger clearance landscape. The panel focused on three critical challenges facing practitioners today: agencies' increased skepticism toward remedies, the rise in gun jumping investigations, and the expanding scope of second requests. Their discussion provided practical insights from recent cases and concrete strategies for navigating these new challenges.

Understanding the New Agency Landscape

The merger clearance landscape has changed dramatically under the current administration. Both the Federal Trade Commission (FTC) and the Department of Justice (DOJ) have expressed strong opposition to negotiating remedies. Assistant Attorney General Jonathan Kanter has stated a clear DOJ policy preference for blocking mergers deemed likely to decrease competition, rather than settling. Similarly, FTC Chair Lina Khan has reinforced this stance, declaring the FTC would focus resources on litigation rather than settlements.

Navigating Different Agency Approaches

While both agencies have expressed a hesitance to negotiating remedies, in practice, the FTC has been more willing to entertain negotiations compared to the DOJ. Statistical evidence shows the FTC has completed 18 recent merger settlements, including notable cases like Amgen Horizon. In contrast, the DOJ settled only one case during this same period—the ASA ABLOY matter—which reached resolution during trial. Even with the FTC's relative receptiveness, negotiations have become more demanding. The agency now requires larger divestiture packages and applies heightened scrutiny to transition services agreements. They also conduct more intensive examinations of intellectual property (IP) licenses between divestiture buyers and sellers.

Responding to Agency Resistance

Companies face three strategic options when agencies resist remedies. First, they can abandon the transaction if contract terms permit. Second, they can litigate the proposed transaction as is. Third, they can pursue a "litigate the fix" strategy. The United Health-Change deal demonstrated this approach successfully. The company divested overlapping businesses to a private equity fund, which the judge approved. Microsoft-Activision used similar tactics, offering public pledges and agreements to license Activision content to competing console manufacturers.

However, there are risks inherent in adopting a “litigating the fix” approach. As intended, the agency may determine that the proposed fix does not satisfy the competition concerns and sue to block the transaction. However, there is also a risk that the court will see the proposed fix as an admission that the original transaction would reduce competition. Furthermore, proposed divestitures may require their own premerger filings, which could introduce delays and create uncertainty around timing. Finally, this overall approach will prolong the merger clearance process, potentially turning what could be a 60- to 90-day process into an endeavor lasting a year or more.

Contrasting these risks, a litigating the fix approach presents several potential benefits to merger parties faced with potential competition concerns. The likelihood of prolonged antitrust litigation is decreased if the agency tacitly accepts any proposed fix. If not, it shifts approval of the proposed fix from the agencies to the courts, where there is a greater chance of success. This approach also provides certainty regarding the scope of the remedy and avoids the compliance burdens of an agency consent decree. Finally, it can help avoid sales at depressed prices when the sale occurs at the end of the merger review process.

Managing Gun Jumping Enforcement

Over the last few years, merging parties have experienced an increase in gun jumping investigations—though not necessarily prosecutions. In August, the DOJ filed its first substantive Hart-Scott-Rodino (HSR) gun jumping violation complaint since 2017, against Legends Hospitality. The case resulted in a $3.5 million penalty plus mandatory antitrust training and compliance programs.

Prohibited gun jumping activity can be challenged under the HSR Act or the Sherman Act. Examples of prohibited gun jumping can include: joint activity or agreement between the parties on prices, terms, or customers prior to closing; exchanging information relating to pricing, terms, or customers; transfers of beneficial ownership prior to deal clearance; coordinating bid opportunities; or an acquiring party exercising approval over contractual arrangements of the seller prior to closing. The agencies, though, have particularly scrutinized interim operating covenants during merger investigations, examining how companies implement these covenants and whether they create opportunities for pre-merger coordination.

In practice, gun jumping investigations are a means for the agencies to request more information from merging parties and apply greater scrutiny to deals, providing additional leverage in merger clearance proceedings. These ancillary investigations significantly increase the burden on merging parties, raise the costs associated with getting of deal approval, and can continue long after the deal clears, potentially prolonging the merger process for years.

Tackling Increasing Sale and Complexity of Second Requests

Second requests have significantly expanded in scope and complexity over recent years. The actual breadth of specifications has increased, resulting in more custodians, more documents, and longer time frames. Agencies are now requesting documentation on labor market impacts, serial acquisitions, vertical relationships, and prior transactions going back many years. There is also far less flexibility for negotiating and modifying custodians, timelines, and the scope of requests. This all leads to expanded timelines, increased deal sizes, and higher deal costs, which, in turn, has a chilling effect on merger activity.

In response, parties must come to the deal table prepared to face these challenges. Merging parties should be prepared for broader document productions and more intensive agency scrutiny, building longer timelines into merger agreements and planning to comply with second requests without negotiating changes. Success requires understanding each agency's distinct approach and adapting a strategy accordingly.

Final Thoughts

The merger clearance process requires early engagement with antitrust counsel to develop specific strategy options. Flexibility is key and companies should structure deal timelines to accommodate either agency settlements or litigation paths, evaluating their readiness to invest 18 months of resources before pursuing court-approved remedies. The key to successful clearance lies in selecting the optimal approach—settlement, litigation, or abandonment—based on deal value, industry context, and agency precedent.