FTC Cautions Merger Parties To Protect Competitive Information

 
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The Federal Trade Commission ("FTC") Bureau of Competition urged companies to protect competitively sensitive information through established protocols during pre-merger negotiation and the due diligence process.

The FTC warned that, in transactions involving a competitor or a potential competitor, companies must be wary of antitrust risks that can arise when parties share information as part of their due diligence and pre-consummation integration planning. The exchange of competitively sensitive information may limit or eliminate competition between the parties to a merger, acquisition or joint venture.

The FTC stated that the antitrust agencies have taken action against companies for unreasonable information sharing prior to or during the Hart-Scott-Rodino Act ("HSR") merger review period (and, separately, as a course of conduct between competing parties). Parties to a transaction may inadvertently violate the waiting period requirements of the HSR Act by engaging in conduct that transfers beneficial ownership of the target company before HSR clearance is obtained.

The FTC advised companies to closely monitor the information shared by parties contemplating a merger, and encouraged antitrust counsel to (i) employ third-party consultants to protect the exchange of competitively sensitive information, (ii) ensure that companies agree to and follow established protocols to prevent problematic information sharing, and (iii) immediately stop information sharing if the transaction's consummation may be delayed.

Specifically, the FTC recommended...

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