Senator Klobuchar Introduces Legislation Placing Additional Burdens on Corporate Mergers: Possible Conflicts for Associations
Client Alert
Under the current Antitrust laws, large companies seeking to merge must file a Hart-Scott-Rodino Report with the Federal Trade Commission (FTC) or the Department of Justice (DOJ) describing the proposed transaction. The respective antitrust agencies then review the information in the report and, within a given time period, must inform the parties to the transaction whether they will approve the transaction. In many instances, the antitrust agencies and the companies involved will negotiate modifications to the proposed merger resulting in a spin-off of part of the business in a manner that will lessen the chance of harm to competition and thus, avoid litigation.
Under current law, the DOJ or FTC may sue to enjoin a proposed merger. In such a suit, the government must show that the merger would substantially harm competition. Senator Klobuchar, the ranking Democrat on the Senate Judiciary Committee, has proposed legislation that would reallocate the burden of proof from the government to the merger parties. Under the proposed legislation, the companies proposing the merger would be required to prove that the transaction would not substantially lessen competition. This legislation presents an interesting conflict for associations in industries with both large and small competitors. Large companies, whose mergers are more likely to have a significant impact on competition, are more likely to oppose the legislation than smaller companies. Associations would be wise to alert those members who may be affected by this proposed legislation.
For further information, please contact Steve Fellman (sfellman@gkglaw.com) or David Monroe (dmonroe@gkglaw.com).
