As we navigate uncharted waters in our work and home lives in response to the COVID-19 pandemic, a few changes have happened quickly. We claimed “home office” space to take on the challenges of working remotely. Bureau of Competition staff shifted from in-person meetings to conference calls, made from unlikely venues (such as couches) without all the usual professional trappings (sweatpants optional, children entirely possible). Most significantly, our Premerger Notification Office flipped the switch almost overnight, crafting a temporary solution to accept Hart-Scott-Rodino filings electronically for the first time.
The manner in which we conduct our investigations has adapted to the constraints of physical distancing, but make no mistake about it: the substance of our work remains the same.
The antitrust laws are flexible enough to account for changing market conditions, even during uncertain times. As we saw during the 2008 financial downturn and countless other difficult periods in our nation’s history, “emergency” exceptions to the antitrust laws are not needed. Now more than ever, FTC staff must continue to analyze carefully the potential effects of proposed transactions and business conduct.
We will not suspend our usual rigorous approach to ferreting out anticompetitive harm and seeking appropriate relief, even in the face of uncertainty. It might be tempting, for example, for parties to urge us to relax the rules in a time of crisis. But we know what the likely long-term negative consequences of such a reactionary policy would be: fewer competitors, reduced innovation, and higher prices. Therefore, we must stay the course. We will continue to follow the facts, adjust to changing market conditions, and master the many details that comprise a thorough antitrust review.
This continued diligence is particularly important as we analyze divestiture remedies in merger matters, including evaluating proposed buyers of divestiture assets. As always, we are happy to entertain reasonable settlement options. What we will not do, however, is lower the Commission’s long-held standards for effective relief. Any prospective buyer of divested assets must be able to maintain or restore competition in the markets of concern, so the Commission can ensure that the merger will not cause harm. FTC staff will continue to vet potential buyers, taking full account of current financial and economic realities. Now, more than ever, it is important for us to conduct thorough due diligence to ensure the success and viability of proposed divestitures.
For example, FTC staff will continue to evaluate whether the buyer has the current financial capability to acquire and operate the divestiture assets, as well as the buyer’s ability to compete in the relevant markets with those assets. We will look at whether the buyer can successfully integrate the assets into its business, and evaluate that execution risk. We understand that both current and future financial stability may become issues for buyers as they are considering purchases during these uncertain times. However, the Bureau cannot sacrifice effective relief by rushing to approve a less-than-financially-stable buyer.
The Bureau of Competition has provided proposed buyers with guidance regarding their obligations during the evaluation process. As a reminder, buyers should be prepared to provide detailed information about how the proposed acquisition would be financed. In addition, a buyer should:
- explain the structure of the funding for the investment, including any limitations of the funds;
- provide all sources of financing for the acquisition of the divested assets, including private equity or other investors, and explain the criteria used for evaluating such sources;
- explain how the buyer and the financial entities reviewed and evaluated the transaction and formed the basis for authorizing the purchase;
- make representatives from the financing entities available for discussions with staff;
- provide detailed financial and business plans, with supporting documentation;
- explain the underlying assumptions of the financial and business plans, including contingency plans if sales and other financials do not meet projections; and
- make management, sales and marketing representatives, and accounting and other personnel available for discussions with FTC staff.
We look forward to the return of some of the trappings of the regular order (although it may be hard to give up the sweatpants). When that time comes, we want to make sure the work we did during this difficult time helped preserve competition—now and for the future.