Mergers and Acquisitions
(M&As): Running Afoul of
Antitrust Laws
Jennifer Sawayda
Program Specialist
Anderson School of Management
University of New Mexico
Albuquerque, NM
What Do We Need to Know about Antitrust?
• Sherman Antitrust Act of 1890
– Prohibits formation of trusts
– John Rockefeller’s Standard Oil – 1911
• Clayton Act of 1914
– Expands Sherman Antitrust Act
– Forbids price discrimination, M&As that
significantly reduce competition, sales on the
condition of exclusive dealing, and serving on
board of two rival companies.
Important Law for M&As
• Hart–Scott–Rodino Antitrust Improvements Act
– The Department of Justice and the Securities and
Exchange Commission must receive notice of M&As
valued over $70.9 million (adjusted accordingly)
– The companies involved must receive approval before
the transaction is closed
– The agencies will review the proposed transaction to
see whether it will significantly hinder competition
– If you don’t comply, it could cost your company
$16,000 in fines per day of non-compliance
The Waiting Period
• 30 day initial waiting period
– Afterward, the agencies might file a “Second
Request” wanting more information
– Agencies might allow transaction to proceed
earlier if no competitive issues are detected
Horizontal Mergers
• The biggest issues occur with horizontal mergers,
in which two competing companies combine.
Antitrust concerns arise if the merger significantly
reduces competition by decreasing the number
of entities in the market.
– Examples: Whole Foods’ acquisition of Wild Oats,
AT&T’s attempted acquisition of T-Mobile, proposed
acquisition between American Airlines and U.S.
Airways.
• Government challenges of M&As appear to be
rising in recent years
What Do the Agencies Look At?
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Market share
Geographic market
Substitute products in the market
Motivation of the companies involved
Ease of market entry
Perceived impact on innovation
Beware of What You Say!
• The agencies inspect documents of the firms
involved. If documents contain references to
reducing competition, creating barriers to
entry, or other antitrust language, agencies
more likely to see the M&A as an attempt to
reduce competition
• Instead, discuss procompetitive benefits of
the M&A
Whole Foods and Wild Oats
• Whole Foods announced its acquisition of
major rival Wild Oats
• FTC challenged the merger, believing it would
reduce competition in the natural and organic
supermarket industry and give Whole Foods
too much power over customers
• John Mackey’s postings criticizing rival Wild
Oats under pseudonym became an issue
• In 2009 Whole Foods agrees to sell Wild Oats
trademark and several stores
Southwest Airlines and Air Tran
• Southwest Airlines acquires AirTran for $1.4
billion in 2010
• FTC approves the deal
– Little overlap between two carriers
– Southwest’s high customer service could benefit
customers once carried over to AirTran
– New routes for Southwest customers
AT&T and T-Mobile
• In 2011 AT&T announced its intention to
purchase T-Mobile USA for $39 billion
• Justice Department announced it would file a
lawsuit to block the bid
– The merger would make AT&T the largest wireless
carrier in U.S.
– Justice Department believed this could have an
adverse impact on consumers and competitors
• AT&T dropped the bid; write-off of $4 billion
American Airlines and U.S. Airways
• In 2012 American Airlines announced intention to
acquire U.S. Airways
• The Justice Department filed a lawsuit
– The merger would make the firm the world’s largest
airline
– Claimed that merger would result in less competition
and higher prices
– Cites internal documentation to support its assertions
• American Airlines claims the DOJ is holding them
to different standards than it had used with other
airline mergers
Antitrust in Other Countries
• Antitrust issues are alive and well in other
countries
– New York Stock Exchange Euronext and Deutsche
Borse merger blocked by European Commission
– European Union seeking to block merger of U.P.S.
with TNT Express
– Chinese antitrust authorities rejected Coca-Cola’s
bid to acquire juice maker Huiyuan
Conclusion—Avoiding Problems
• Conduct risk assessments early on and
consider possible objections to M&A
• Be careful what is put in internal
documentation
• Educate customers about the benefits the
merger would afford them