Insights

The Federal Trade Commission took a major step recently to crack down on unlawful interlocking directorates and leverage its “standalone” authority that prohibits “unfair methods of competition.”  In a complaint and consent order issued last week, the FTC alleged that a transaction between EQT Corporation and QEP Partners, LP (Quantum) violated Section 8 of the Clayton Act, the first time in 40 years that the agency has enforced the statute.  The FTC also alleged that the transaction and an existing joint venture independently violated Section 5 of the FTC Act based largely on the prospective ability to share competitively sensitive information, an expansive theory of harm. The consent order goes well beyond the typical remedy for a Section 8 violation – prohibiting the interlock – and also prohibits Quantum from serving on certain other competitors’ boards without prior approval of the Commission.  The Section 5 information sharing remedy is similarly aggressive, requiring the parties to dissolve an existing “cozy” joint-venture and requiring Quantum to divest all EQT shares it acquired in the underlying transaction.  These novel theories of harm and aggressive remedies are a warning shot to companies that the agencies are ramping up scrutiny of board interlocks and competitor information exchanges.

This week, after months of anticipation, the Antitrust Division of the Department of Justice and the Federal Trade Commission issued draft revised Merger Guidelines containing 13 principles that the Agencies use as a framework for evaluating all forms of transactions. As widely expected, the Draft Guidelines harken back to 1960s-era legal precedents and seek to roll back the modern structural presumptions adopted in the 2010 Horizontal Merger Guidelines. They also express a far more skeptical view of the benefits of mergers in ways that would subject more mergers to challenge. At the same time and in line with current DOJ and FTC practices, the Draft Guidelines expressly expand the reach of merger reviews into labor markets, take a skeptical view of serial acquisitions, add new provisions for multi-sided platforms, and espouse broader theories of harm.

On November 1, 2019, the Federal Trade Commission (FTC) issued a unanimous opinion unwinding the consummated acquisition of Freedom Innovations by Otto Bock HealthCare. Although the case involves prosthetic knees, the case offers several important lessons for companies within and outside the health care sector contemplating mergers, particularly companies where innovation is a key aspect of competition.