Litigation and Antitrust partner Fiona Schaeffer was recently quoted in the Bloomberg Law article: "Distressed Deals Ripe for ‘Failing Firm’ Antitrust Exemption."
Discussing the possibility of competitor consolidation resulting from COVID-19, Ms. Schaeffer said, “We’re already seeing an uptick in bankruptcies and I think in a similar vein, we’re going to see more consolidation among competitors who are struggling to survive on their own.” Distressed competitors seeking to merge could find that the ongoing COVID-19 pandemic makes it easier for them to assert the failing firm defense to clear antitrust hurdles. But the failing firm defense is traditionally difficult to make out. The failing company must prove that it is unable to meet its financial obligations in the near future, that it cannot reorganize in bankruptcy, and that it has made unsuccessful “good-faith” efforts to find alternative offers that don’t pose as severe competition problems.
Other arguments such as that the companies are “failing” and will not be a competitive force in future, may be more productive. “As companies seek to advance such arguments in front of the DOJ or FTC, firms should try to demonstrate how the deal would make a firm a better competitor that in turn could lower costs and compete more effectively in a given industry,” Ms. Schaeffer continued. Furthermore, “competitors seeking to merge will need to show more than that the merger benefits shareholders and alleviates their financial distress,” she said. “They will also need to show how the merger benefits their customers,” she added.
Ms. Schaeffer is an international antitrust lawyer with over 25 years of experience practicing on both sides of the Atlantic. Clients entrust Ms. Schaeffer with the defense of “bet-the-company” criminal and civil cases as well as their most complex transactions. She counsels clients in a variety of industries, with a particular depth of experience in healthcare, financial services, energy, media and communications. Ms. Schaeffer regularly represents clients in FTC and DOJ investigations and follow on class actions in the US and internationally. She also counsels clients on optimizing intellectual property rights and licensing, distribution and marketing practices without creating unnecessary legal risks.
