A recent enforcement action by the Federal Trade Commission (FTC) is particularly noteworthy because of the theory of potential harm and the accepted remedy.
According to the FTC, an increased likelihood of adverse coordinated effects (i.e., collusion among the remaining firms) creates sufficient grounds to challenge a merger, even if the potential for adverse unilateral effects resulting from the merger does not provide a sufficient basis to bring a challenge. A central factor in evaluating the potential for coordinated effects is a history of actual or attempted collusion in the industry at issue, and the complaint alleges a history of coordinated activities among market participants.
Despite concerns about potential post-transaction collusion among market participants, the FTC agreed to settle its enforcement action with a consent order that provides for a conduct remedy rather than a structural remedy. Notwithstanding its stated aversion to resolving enforcement actions with conduct remedies, the FTC concluded that this was a rare instance where the imposition of a behavioral remedy was appropriate. The FTC was also confident in its ability to closely monitor the parties’ compliance with the requirements of the consent order.
This case highlights the importance of considering historical industry behavior when analyzing the potential effects of a merger, as well as the benefits of early identification of potential conduct remedies to alleviate any concerns should the need arise.
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