n bite, or whether the issuance of Pre-Consummation Warning Letters becomes a common practice.Issues for Parties to ConsiderAs a SELLER, do your antitrust covenants allow the Buyer to refrain from closing, even when the HSR waiting period has expired, because an investigation is still open?As a BUYER, can you refrain from closing (if desired) because an investigation is still open?As a BUYER, what are the realistic risks of a post-close investigation in any particular transaction?Do BOTH PARTIES have document preservation obligations on an indefinite basis upon receipt of an FTC warning letter?Reproduction of FTC’s Sample Pre-Consummation Warning Letter17Jane Doe Law Firm XYZ Washington, DC 20001Re: Company A Side/Company B Side Transaction, FTC File No. XXX-XXXXDear Ms. Doe:As you know, the Federal Trade Commission’s Bureau of Competition has been conducting a nonpublic investigation to determine whether the above-referenced transaction may violate Section 7 of the Clayton Act, 15 U.S.C. § 18, or Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45. Although the waiting period will expire imminently, the Commission’s investigation remains open and ongoing.

efore closing their deal. The size-of-person test is necessary if the transaction is valued in excess of $111.4 million (as adjusted) but is $445.5 million (as adjusted) or less. The basic “size-of-person test” established by Section 7A(a)(2) of the HSR Act requires a filing in transactions valued in excess of $111.4 million (as adjusted) but at $445.5 million (as adjusted) or less only where at least one of the persons involved in the transaction has $222.7 million (as adjusted) or more in annual net sales or total assets, and the other has $22.3 million (as adjusted) or more. Thus, parties do not need to complete an HRS filing if the size thresholds are not met. The discussed large oil and gas acquisitions required premerger notifications because the transactions all had values exceeding $445.5 million.For a full review of the revised 2024 Merger Guidelines issued by the Department of Justice and the Federal Trade Commission, please click here: Merger Guidelines (ftc.gov).References 15 U.S.C.A. § 18 (West).Hart-Scott-Rodino Premerger Notification ProgramIntroductory Guide II: To File or Not to File, FTC.gov/BC/HSR.Id. Thresholds adjusted on Feb 27, 2023, remain in effect until early 2024.Id. We note that Oliva Gibbs does not handle tax issues, SEC filings, or related matters.

This summer, the Federal Trade Commission (“FTC”) issued a Notice of Proposed Rulemaking (“NPRM”) proposing extensive revisions to the rules that implement the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”). The NPRM represents what the FTC has described as a “comprehensive redesign of the premerger notification process.” The public comment period ended about a month ago. If ultimately finalized and implemented, the new rules would substantially increase the time and expense of preparing a premerger Notification and Report Form under the HSR Act. This Client Alert will discuss a few of the proposed changes that are particularly relevant to private equity firms and to “middle market” deals (i.e., deals with transaction values under $1.0 billion).HSR ACTThe purpose of the HSR Act is “to amend the federal anti-merger law, Section 7 of the Clayton Antitrust Act (15 U.S.C. §18) by establishing premerger notification and waiting requirements for corporations planning to consummate very large mergers and acquisitions.” The HSR Act is procedural and does not substantively expand the antitrust laws.When originally enacted in 1976, all transactions with an “acquisition price” in excess of $15 million were reportable. Over time, the acquisition price threshold has been increased and today mergers and acquisitions above $111.4 million are reportable to the federal antitrust agencies (unless certain exceptions apply) for antitrust review prior to closing. The HSR Act charges the FTC and the Antitrust Division of the United States Department of Justice (collectively the “Agencies”) with conducting this review. Premerger notification is intended to trigger a relatively brief period (generally 30 days) for the Agencies to assess whether a transaction presents any competitive concerns. In a typical year, about 97% of reportable transactions sail through the HSR process

g film upon its release, producing $1 billion in sales in five days). Call of Duty titles have comprised ten of the top fifteen console games sold from 2010 through 2019, and the franchise has purportedly had $27 billion in revenues from its launch in 2003 through 2020. The Call of Duty franchise is currently available across console and non-console gaming platforms. The franchise’s newest edition, Call of Duty: Modern Warfare II, can be played on two of the three major consoles and on PCs. One franchise game is available on mobile devices. Some Call of Duty games also permit real-time gameplay between consoles and across PCs and consoles. This means that someone playing Call of Duty on Microsoft’s Xbox could simultaneously play with another gamer on a PC, or on Sony’s PlayStation. The franchise typically releases a new game every year.Denial of the FTC’s Injunction BidThe FTC alleged that the proposed merger between Microsoft and Activision would violate Section 7 of the Clayton Act, 15 U.S.C. § 18, and Section 5 of the FTC Act, 15 U.S.C. § 45. These claims required the FTC to show that the merger “may substantially . . . lessen competition, or . . . tend to create a monopoly” in the relevant market, which is determined by product and geography.The FTC Act prohibits “unfair methods of competition in or affecting commerce.” The FTC advanced a vertical merger theory, which requires the court to apply a burden-shifting framework between the parties. First, the FTC must make a “fact-specific showing that the proposed merger is likely to be anticompetitive.” If a prima facie case is shown, Microsoft must show that the FTC’s claim “inaccurately predicts the relevant transaction’s probable effect on future competition,” or else Microsoft must “sufficiently discredit [the FTC’s] evidence.” Because the court evaluated this theory on a motion for a preliminary injunction, Judge Corley did not fully evaluate the merits of the claim and did not conduct a full burden-shifting analysis. Rathe

Circuit declined to block the $315 million purchase of Imperial Sugar Company (“Imperial”) by United States Sugar Corporation (“U.S. Sugar”), rejecting the Department of Justice’s (“DOJ”) claim that the merger would violate antitrust law and increase prices. See United States v. United States Sugar Corp., et al., No. 21-cv-1644, 2023 WL 4526605 (3d Cir. July 13, 2023). The Third Circuit’s decision let stand the District of Delaware’s initial order from September 2022, United States v. U.S. Sugar Corp., et al., No. 20-1644 (MN), 2022 WL 4544025, at *20-21 (D. Del. Sept. 23, 2022), which declined to enjoin the merger on the grounds that DOJ failed to identify the relevant product and geographic markets. Both decisions drive home the necessity of a proper market definition in merger cases, and they reflect enforcers’ continued uphill battle when it comes to challenging mergers in the courts.DOJ’s suit alleged that the acquisition would harm competition under Section 7 of the Clayton Act, 15 U.S.C. § 18 (“Section 7”) because it would leave only two entities in control of 75% of refined sugar sales in the southeastern United States. Such challenges to proposed mergers are reviewed under a three-part burden-shifting framework wherein the government must first assert a prima facie case that the subject merger is anticompetitive. FTC v. Penn State Hershey Med. Ctr., 838 F.3d 327, 337-38 (3d Cir. 2016). To do so, the government must (1) identify the proper relevant market; and (2) show that the effects of the merger are likely to be competitive. Id. If the government succeeds, the burden shifts to the defendant to produce evidence rebutting the government’s prima facie case, and then shifts back to the government to produce additional evidence of anticompetitive effects. See id.; see also United States v. Baker Hughes Inc., 908 F.2d 981, 982-82 (D.C. Cir. 1990).Here, in formulating a prima facie case, DOJ defined the relevant product market as “the production and sale of refined sugar” by

se in the healthcare industry without guidance regarding price and cost information sharing, joint purchasing, and other types of collaborations (including ACOs), and signals heightened scrutiny by the FTC and DOJ of healthcare industry collaborations and information sharing practices.Agencies Reduce Market Concentration Thresholds, Cast Wide Net for Vertical Transactions, and Push to Examine Labor Market EffectsDespite having a mixed track record regarding litigated merger challenges and investigations in the healthcare industry, the Agencies’ draft Merger Guidelines double down on their aggressive stance toward growth and expansion through healthcare-related mergers and acquisitions. The Merger Guidelines outline the roadmap the Agencies use to evaluate whether a proposed transaction violates Section 7 of the Clayton Act. Section 7 prohibits transactions that “may substantially lessen competition or tend to create a monopoly” in a relevant geographic and service/product line market (15 U.S.C. § 18).For those in the healthcare industry, some key takeaways from the Agencies’ draft Merger Guidelines include:Market Concentration Thresholds. The Agencies propose to decrease the market concentration thresholds used to evaluate whether a transaction presumptively violates antitrust law (measured using the Herfindahl-Hirschman Index) to pre-2010 levels. Alternatively, the Agencies state that an entity or organization with over 30% market share in a relevant service line presents an “impermissible threat of undue concentration regardless of the overall market concentration,” when they are considering a potential merger or acquisition. Cluster Markets. The Agencies continue to view cluster markets as an appropriate service line market definition in healthcare provider transactions. For example, a cluster service line definition in a hospital acquisition is inpatient general acute care hospital services.Vertical Transactions. The Merger Guidelines have expanded the definition of what cons

oach of the DOJ and FTC under the Biden Administration, that enforcement approach has so far led to a string of recent court defeats in litigated merger cases. As a practical matter, however, only a small percentage of mergers end up in court; indeed, the DOJ and FTC have noted that several deals have been abandoned in the face of agency opposition, and they have also pointed to a potential deterrent effect on deals that may have been contemplated but not pursued for fear of a challenge.The deadline for public comments on the draft Merger Guidelines is September 18, 2023. The Merger Guidelines should be considered together with the FTC’s recent proposed changes to the Hart-Scott-Rodino (HSR) premerger notification process, which would require transaction parties to provide significantly more information and documentation upfront. Those changes could make it easier for the DOJ and FTC to pursue the broader and/or newer theories of competitive harm described in the Merger Guidelines.[1] 15 U.S.C. § 18.

ce.What Is Next?The Draft Guidelines will be subject to a 60-day comment period expiring on 18 September 2023, during which time the public may submit comments. Following the comment period, the Agencies will review the comments and then publish a final version of the Merger Guidelines.While the Draft Guidelines will not take immediate effect, they likely reflect the Agencies’ current merger enforcement objectives. Mergers reviewed by the Agencies in the coming months are likely to receive substantially similar scrutiny to that described in the Draft Guidelines. Accordingly, businesses contemplating mergers and acquisitions should expect their transactions to be evaluated pursuant to the principles and analyses described in the Draft Guidelines.1 The Agencies enforce the federal antitrust laws, specifically Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2; Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45; and Sections 3, 7, and 8 of the Clayton Act, 15 U.S.C. §§ 14, 18, 19. Section 7 of the Clayton Act is the antitrust law that most directly addresses mergers, though mergers may also violate other of the above-referenced statutes.2 A “Second Request” is a discovery procedure by which the Agencies seek additional information through document requests and interrogatories to investigate mergers that they believe have the potential to be anticompetitive.3 138 S. Ct. 2274 (2018).4 E.g., United States v. U.S. Sugar Corp., --- F.4th----, 2023 WL 4526605 (3d Cir. 2023); Fed. Trade Comm’n v. Microsoft Corp., --- F. Supp. 3d ----, 2023 WL 4443412 (N.D. Cal. July 10, 2023).

aft Merger Guidelines continue that trend, reflecting a view that M&A activity should be viewed skeptically across the board. Inevitably, as the agencies ratchet up investigations, refuse to negotiate remedies, or will try to extract onerous concessions from merging parties, a greater number of deals will go to litigation.Takeaways for DealmakingWhile the draft Merger Guidelines technically are not yet in place, the FTC and DOJ have been applying many of the theories found in this document in pending reviews. Thus, unlike the proposed changes to the HSR reporting rules, the principles in the draft Merger Guidelines are already impacting M&A activity. For the foreseeable future, the antitrust environment will be one of hostility from the DOJ and FTC, and that appears likely to increase toward the end of this year and into 2024. The best path forward for dealmakers is to plan for such uncertainty in deal documents, their clearance strategy, and potential litigation/settlement scenarios. 15 USC § 18. See our prior update here: https://www.paulhastings.com/insights/client-alerts/ftc-plans-massive-revamp-of-hsr-act-reporting-requirements. The Herfindahl-Hirschman Index is defined as the sum of the squares of the market shares of the respective competitors. In Brown Shoe Co. v. United States, the Supreme Court blocked a merger that would have increased the defendant’s market share from a mere 5.6% to just 7.2%. 370 U.S. 294 (1962).FTC v. Procter & Gamble, 386 U.S. 568 (1967) (upholding challenge to “product extension merger” because it would “substantially reduce the competitive structure of the industry by raising entry barriers and by dissuading the smaller firms from aggressively competing”).See, e.g., https://www.paulhastings.com/insights/attorney-authored/considerations-for-private-equity-after-ftc-vet-clinic-deal.https://www.promarket.org/2022/06/03/qa-with-ftc-chair-lina-khan-the-word-efficiency-doesnt-appear-anywhere-in-the-antitrust-statutes/. The FTC and DOJ focus heavily

JetBlue Airways Corporation (“JetBlue”) is currently defending two antitrust lawsuits brought by the U.S. Department of Justice (“DOJ”) in the District of Massachusetts. In the first, which was filed in March, DOJ challenges JetBlue’s proposed acquisition of Spirit Airlines, Inc. (“Spirit”). JetBlue and Spirit filed Answers in that action this week. The second lawsuit, which went to trial in Fall 2022, questions JetBlue’s Northeast Alliance with American Airlines Group Inc. (“American”). In both, DOJ contends that the relevant product market definition is scheduled air passenger service. Both cases remain pending.DOJ Sues to Block JetBlue’s Acquisition of SpiritIn March 2023, DOJ sued to block JetBlue’s proposed $3.8 billion acquisition of Spirit. In its Amended Complaint, DOJ asserts a claim under Section 7 of the Clayton Act, 15 U.S.C. § 18, which prohibits a company from acquiring another when “the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.” 15 U.S.C. § 18.DOJ alleges that Spirit’s “ultra-low-cost business model has increased competition and brought low fares to hundreds of routes across the country” and that JetBlue’s acquisition of Spirit would “eliminate the unique competition that Spirit provides[.]” Amended Complaint at 1. Specifically, DOJ argues that JetBlue’s acquisition of Spirit would harm travelers in three ways: (1) it would eliminate head-to-head competition between JetBlue and Spirit, which benefits cost-conscious travelers; (2) it would eliminate the largest ultra-low-cost carrier and thus increase the risk that the remaining airlines would raise prices in parallel or reduce capacity on certain routes; and (3) it would deprive customers of the option to choose Spirit’s unbundled fares, which separate costs for some aspects of flying, such as car