Fixing 'Litigating the Fix'

Abstract

Merging firms have increasingly been asking trial courts to adjudicate their merger 'as remedied' by a voluntary 'fix'. These are remedies that have been rejected by (or never proposed to) the agency. This procedure is known as Litigating-the-Fix” (“LTF”). This article proposes a judicial procedure for managing cases in which the merging parties attempt to LTF. Our recommendations flow from a decision theory approach informed by the relevant LTF case law, the merger enforcement record, the language and goals of Section 7, and an economic analysis of the incentives of the parties and agencies created by LTF. Our recommendation addresses four features of the procedure that we believe are most important to insure against consumer harm: (i) timing and notice of the parties’ remedy proposal, (ii) definitiveness of the proposal, (iii) evidentiary burdens placed on the parties, and (iv) certainty of execution and enforcement of the remedy. Our recommended procedure focuses on the effect of the merger as modified by the merging parties’ proposed remedy. But we recommend that the government be able to satisfy its prima facie evidentiary burden by showing that the transaction would satisfy the structural presumption if the buyer obtained all the assets of the seller. The defendant then can rebut this presumption, either by showing that concentration is improperly measured or with other evidence that competitive harm is unlikely. We also suggest several possible refinements to the procedure related to specific remedy proposals. We recommend that courts treat with a higher degree of skepticism proposed divestiture of only select assets and behavioral remedies. Promises to operate divisions within a vertically integrated firm as though the businesses are separate entities should only be accepted if they involve legal commitments and the firm’s compliance can be verified with confidence. Furthermore, we recommend that commitments regarding competition among divisions be excluded from consideration altogether because they are unenforceable, limitless and inconsistent with Copperweld, Trenton Potteries, and National Society of Professional Engineers.

Keywords: Antitrust, Mergers, Remedies