Global Antitrust Economics conference 2015
20 May 2015
John Terzaken, partner and head of our U.S. cartel defence practice, has been invited to speak at the inaugural Global Antitrust Economics conference on 29 May, at George Mason University, Washington D.C. John will be a panel member with other experts discussing “Corporate Liability and Individual Liability: Double-Paying?”.
This is the first joint international conference, dedicated to law and economics, organised by George Mason University’s Global Antitrust Institute and Concurrences Competition Law Journal. The one-day conference will feature keynote addresses from Antonin Scalia, Associate Justice, U.S. Supreme Court; Maureen Ohlhausen, U.S. Federal Trade Commission; Douglas Ginsburg, Judge, US Court of Appeals for the District of Columbia Circuit, as well as Professor Bruce Kobayashi, Director of the Global Antitrust Institute, George Mason University School of Law. Leading government representatives, corporate counsel, practitioners and academics will gather together to discuss current challenges.
We are delighted to be an active supporter of the conference. On this occasion, global co-head of Allen & Overy’s Antitrust practice, Antonio Bavasso, interviewed Deborah Feinstein - Director, Bureau of Competition, U.S. Federal Trade Commission.
Click here for more information on the conference and to register.
Interview with Deborah Feinstein
Antonio Bavasso: The FTC recently announced its intent to study the effectiveness of Commission orders in merger cases requiring a divestiture or other remedy. As described, it appears the study will rely most heavily on interviews of market participants, with “hard” economic data seemingly playing a less significant role than it does, for example, in the evaluation of a prospective merger. Can you explain what role the FTC sees for economic analysis in the merger study, and why?
Deborah Feinstein: In the previous Divestiture Study, we relied solely on interviews with market participants. Once we have OMB approval of the new study, we plan to conduct interviews but also issue orders to file special reports under our authority in Section 6(b) of the Federal Trade Commission Act requesting very limited annual unit and dollar sales data for each relevant market. These data will supplement and complement the interview information to help us better assess the relative success of the divested entities. In addition, the data will allow us to assess, in some general sense, how well the remedy has maintained competition in the relevant markets. For instance, we hope to use the data to calculate the market shares of competitors in the relevant markets before and after the required divestiture, compare the buyer’s position to the position of the previous owner of the divested assets, and explore whether any significant changes took place in the market after the remedy was implemented (e.g., entry, exit, or another merger). In general, though, we intend to listen to the buyers to understand whether issues or concerns arose that we hadn’t even thought about or were unaware of. If there are common issues that buyers experienced that could be avoided in the future through changes in our remedy process, then we hope to identify those opportunities.
Antonio Bavasso: We are all well aware of the requirement for divestiture buyers to file compliance reports with the Commission and the role of monitor trustees. Are there other, informal steps that the Commission takes to monitor the success of its remedies over the longer term, and there hypotheses about the sufficiency or insufficiency of particular terms of orders that the Commission is hoping to validate through the study?
Deborah Feinstein: The Bureau’s Compliance Division has been doing brief follow-up interviews with divestiture buyers over the last ten years, focusing primarily on whether the buyer has entered the market and whether it has encountered any problems in connection with that entry. And in some cases we have used public information, and information obtained in other investigations, to fill out our understanding of the market after the remedy. But we haven’t done these follow-ups in a rigorous or systematic fashion. That’s what we hope to do through the study. As outlined in our Federal Register Notice, we will examine a number of specific issues, including changes the Commission implemented since the earlier study. For instance, the Commission now makes more frequent use of up-front buyers, and we want to know if potential buyers upfront have enough time to perform due diligence. We will also explore whether our requirement for shorter divestiture periods has had any adverse effect on the buyers or the divestiture process more generally. We will also probe a number of questions related to the increased use of monitors. For instance, we plan to assess the selection process and examine how effective monitors have been in assuring that assets remain competitive, respondents meet their post-divestiture obligations, and so forth. As with the earlier study, we will again examine whether the asset package was sufficient, including whether assets outside the relevant market have been properly included in the divestiture package when necessary. Finally, we will look at the effect of other support provisions such as transitional services or technical assistance.
Antonio Bavasso: The last formal study by the Commission on merger remedies was 15 years ago. One of the more surprising conclusions from the previous study was that “many buyers, including large, apparently sophisticated, multinational corporations, were unaware of major economic factors in the businesses they were buying.” What are your thoughts on the reasons for that—and do you see otherwise sophisticated multinational corporations making those same mistakes today?
Deborah Feinstein: Access to information through due diligence is one of the issues that we will examine in the new study. Keep in mind that the divestitures in the earlier study were what we call “post order” divestitures, meaning that the Commission’s order required the respondent to divest the assets to a buyer approved by the Commission, and by a certain date. The deadline for divestiture was typically a year after the order became final, and the Commission staff was not actively involved in the process of selecting a buyer. While the extended time frame should have permitted prospective buyers to conduct adequate due diligence, it did not guarantee that result and was probably much longer than buyers, and respondents, really needed. With the new study, we intend to take a fresh look at the due diligence performed by the buyers. For instance, with the more frequent use of upfront buyers, we want to examine whether that requirement may have led at least some buyers to shortchange their due diligence to assure that they were selected as the buyer. In addition, because vetting possible upfront buyers takes place while the Commission staff is still completing its Section 7 analysis but before the underlying transaction is consummated, we believe that staff has an opportunity to be much more involved in assuring that prospective buyers have access to all the information they may need. While staff is deciding the scope of the relief and preparing transaction documents, staff can also ensure that buyers are conducting thorough due diligence. We will explore this as well.