• Federal Trade Commission Issues Guidelines for Negotiating Divestitures to Resolve Merger Investigations
  • May 19, 2003 | Author: Neil W. Imus
  • Law Firms: Vinson & Elkins LLP - Washington Office ; Vinson & Elkins LLP - Houston Office
  • The Federal Trade Commission issued Guidelines for Negotiating Merger Remedies that explain the Commission process for approving a divestiture remedies in merger investigations. The press release explains that "the staff will continue to listen to all alternatives the parties wish to present," but deviations will likely be more difficult and time consuming to negotiate. The key elements of the new Guidelines are as follows:

    Buyer acceptability - The proposed buyer of the divested assets should be competitively and financially viable.

    Entire business unit - A proposed divestiture package should include "a demonstrably autonomous, on-going business unit comprising the entire business."

    Up-front buyer - If less than an entire business unit will be divested, the Commission is likely to seek to approve the buyer and asset package prior to allowing the parties to merge. This can often delay closing of the major deal.

    Seller assistance to buyer - Where the buyer of the divested assets needs short-term assistance from the sellers, the Commission is likely to require the merged entity to provide those services and appoint an independent third party to monitor the parties' compliance with the Commission's order.

    Hold Separate & Trustee - Where the Commission is concerned about interim competitive harm between the time the parties close their merger and the assets are divested, the Commission is likely to issue an order to hold separate and/or maintain assets and appoint an independent third party to monitor compliance with any such order. The costs of this hold separate normally fall on the sellers.