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Merger Remedies Workshop October 25, 2010

Merger Remedies Workshop October 25, 2010. Deborah P. Majoras Chief Legal Officer & Secretary The Procter & Gamble Company. Agenda. Part I: Key Principles Part II: Structural and Conduct Remedies Part III: Considerations for Divestiture Remedies. Part I: Key Principles. Key Principles.

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Merger Remedies Workshop October 25, 2010

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  1. Merger Remedies WorkshopOctober 25, 2010 Deborah P. Majoras Chief Legal Officer & Secretary The Procter & Gamble Company

  2. Agenda • Part I: Key Principles • Part II: Structural and Conduct Remedies • Part III: Considerations for Divestiture Remedies

  3. Part I: Key Principles

  4. Key Principles • Merger Remedy should redress a violation of law. • Remedy without violation could unjustifiably restrict companies and raise costs to consumers • If no violation is found, agency should not stop the merger. • Google/Double-Click merger

  5. Key Principles • Remedy should restore competition to premerger levels and be based on sound legal and economic principles. • Fact-intensive exercise: • What harm will result from merger? • How will the remedy fix the harm? • Remedy should be minimum necessary to cure the competitive harm.

  6. Key Principles • Remedy should promote competition, not competitors. • Objective of remedy is to restore competition to premerger levels, not to protect or favor a particular competitor

  7. Key Principles • Remedy should be tailored to fit the violation. • No “one-size-fits-all” for remedies • What works in one industry may not work for another

  8. Key Principles • Remedy should not be punitive. • Goal of remedy is to restore competition to premerger levels, not to “punish” the merging parties for proceeding with the merger

  9. Key Principles • Remedy should be enforceable. • Remedy will not restore competition if it cannot be enforced, or would be difficult to enforce.

  10. Part II: Structural and Conduct Remedies

  11. Structural and Conduct Remedies • Two types of remedies • Structural: deals with the structure of the market • Divestiture of tangible assets • Licensing of intangible assets 2. Conduct: deals with the conduct of the merging parties • Firewalls • Non-competes • Restrictions on access to scarce personnel

  12. Structural and Conduct Remedies • Structural Remedies are preferred. • Clean • Certain • Avoid costly government involvement in the market • Structural Remedy Cases: • U.S. v. Election Systems and Software, Inc. (June 2010) • U.S. v. Microsemi Corporation (Aug. 2009) • In re Pfizer, Inc. and Wyeth (FTC, October 2009)

  13. Structural and Conduct Remedies • Conduct Remedies are Disfavored. . . • Especially for horizontal mergers • Difficult to craft • More costly to administer • Easier for parties to circumvent • . . . But May be Appropriate in Certain Circumstances. • Appropriate to address concerns in vertical mergers without stopping the merger or altering deal structure • More often used as a complement to structural remedy

  14. Structural and Conduct Remedies • Conduct remedy cases: • U.S. v. Live Nation, Inc. and Ticketmaster Entertainment, Inc. (DOJ, Jan. 2010) • In the Matter of PepsiCo, Inc. (FTC, Feb. 2010) • In the Matter of Pilot Corporation, Propeller Corp., and Flying J Inc. (FTC, June 2010)

  15. Part III: Considerations for Divestiture Remedies

  16. Divestiture Remedies - Considerations • Divestitures are the most preferred structural remedies. • Divestiture should occur quickly. • Restores competition to market as soon as possible • Mitigates decrease in value of assets • Agency should approve proposed Purchaser. • Purchaser should have both the means and the incentive to maintain premerger level of competition in relevant market

  17. Divestiture Remedies - Considerations • Merging parties should hold divested assets separate to avoid “unscrambling the eggs.” • Divestiture should include all assets necessary for Purchaser to be effective, long-term competitor.

  18. Divestiture Remedies - Considerations • “Fix-it-first” Divestiture • What is it? Divestiture of business implemented by parties and accepted by the agency prior to merger consummation • Benefit? May restore competition to the marketplace more quickly and effectively than by being ordered by the agency • Downside? May require a “fire sale” • A “fix-it-first” divestiture requires thorough investigation by agency .

  19. Additional Resources on Merger Remedies • US Dep’t of Justice, Antitrust Division Policy Guide to Merger Remedies (Oct. 2004), available athttp://www.usdoj.gov/atr/public/guidelines/205108.pdf • Federal Trade Comm’n, Statement of the Federal Trade Commission’s Bureau of Competition on Negotiating Merger Remedies (Apr. 2, 2003), available athttp://www.ftc.gov/bc/bestpractices/bestpractices030401.shtm • Frequently Asked Questions About Merger Consent Order Provisions, available athttp://www.ftc.gov/bc/mergerfaq.shtm

  20. Questions?

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