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 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

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.

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

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

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

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

Part II: Structural and Conduct Remedies

Structural and Conduct Remedies Two types of remedies 1.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

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)

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

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)

Part III: Considerations for Divestiture Remedies

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

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.

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.

Additional Resources on Merger Remedies US Dep’t of Justice, Antitrust Division Policy Guide to Merger Remedies (Oct. 2004), available at Federal Trade Comm’n, Statement of the Federal Trade Commission’s Bureau of Competition on Negotiating Merger Remedies (Apr. 2, 2003), available at Frequently Asked Questions About Merger Consent Order Provisions, available at

Questions?