Heading into 2025, U.S. antitrust authorities favored litigating to block mergers that raised partial competition concerns, rather than entering into negotiated solutions. Now, well into the new administration, there is evidence of how this enforcement approach has shifted, not just in policy statements, but in live cases as well. The authorities are doing more to resolve concerns at a pre-litigation stage, touting a more efficient process to foster innovation. That said, there have still been new litigated merger cases filed since January. Examining the cases brought and settled, several key trends have emerged that may impact future deal planning.
A Shift in Policy Rhetoric
Early on in the last administration, the former Federal Trade Commission (FTC) chair confirmed that she would “focus [] resources on litigating, rather than on settling.” The policy was driven at least in part by the complexity with finding the right solution. As the Department of Justice (DOJ) leadership put it, “remedies shorty of blocking a transaction too often miss the mark.” The follow-through was stark as any negotiated settlements fell off sharply several months into the administration. This impacted dealmaking by lengthening timelines and costs.
The new FTC Chair, Andrew Ferguson, has emphasized a more predictable merger review process and more efficient use of agency resources. He views merger settlements as a tool to “complement to [FTC’s] merger litigation efforts” and explicitly broadcasts that “the Commission is open to settlement offers that eliminate the possibility” of competitive harm. The rationale behind this, according to all three current FTC commissioners, is to promote innovation: “[m]ergers and acquisitions are a critical way in which capital fuels innovation because they are part of how investors realize returns on their investments. . . . If acquisition by a larger company is not a realistic potential exit strategy, investors will have less incentive to invest.” Consistent with this shift in tone, both FTC and DOJ have approved merger settlements this year.
Licensing Remedies Have Surfaced to Bolster Divestitures
U.S. antitrust authorities have long preferred structural relief (i.e., divestitures), rather than obtaining behavioral commitments from parties because the later creates the potential for ongoing oversight. However, products giving rise to competitive concerns in a merger may sometimes have elements shared with other products that do not, making a complete divestiture of the former more complicated. The new antitrust leadership, however, has stated that “[t]here may be times in which limited behavioral remedies buttress genuine structural relief. Remedies are inherently fact-specific, and behavioral conditions can provide necessary and adequate support.” Indeed, in one case that the DOJ settled over the summer, the buyer agreed to sell its competitive business and at the same time license related software source code used in the target’s product (as well as provide engineers and sales employees) to further foster competition post-close. Going forward, parties should consider whether supplemental commitments would help to bolster any divestitures to resolve competitive concerns.
Openness to Arguments About a Target’s Failing Economics
Historically, claiming that a transaction lacks competitive concerns because a target is failing has been subject to a high evidentiary bar. The DOJ and FTC 2023 Merger Guidelines outline that the agencies will consider such arguments where a target cannot meet its financial obligations in the near future, there is no prospect of reorganization and/or attempts to resolve matters with creditors has failed, and the acquiring party (creating the competitive concern due to its overlap) is the only available purchaser, meaning solicitation of other bidders was tried and failed.
However, when the DOJ closed its investigation of T‑Mobile/UScellular in July, it stated that it had concerns “UScellular simply could not keep up with the escalating cost of capital investments in technology required to compete vigorously,” and concluded that, absent the transaction, consumers would face “slow degradation” in quality. While the statement did not go so far as to establish all the “failing-firm defense” elements, it did find the potential harm to consumers from a challenged UScellular outweighed the potential harm with leaving only three main wireless competitors, as DOJ characterized. While each industry and the status of any target is unique, in today’s climate, parties should consider whether arguments about the weakened financial state of a target are available to buttress a broader advocacy strategy.
Prior Approval and Notice Provisions Still in Use
While settlements have returned to the enforcer toolbox—potentially benefiting parties in terms of time and cost to close—the use of prior‑approval and prior‑notice provisions in those settlements have also returned, creating ongoing burdens. Such provisions allow the government to avoid having to go to court to block a future deal or receive notice of deals that are not otherwise reportable under the Hart-Scott-Rodino Antitrust Improvements (HSR) Act. In 2021, the FTC issued a formal policy statement restoring its use of prior‑approval clauses in merger settlements. This year, the FTC has used them in a retail deal and a healthcare deal—both cases involving local markets. Dealmakers may expect that in some instances a settlement might come with ongoing oversight, implicating future roll-up or tuck-in plans.
Litigation Remains in Toolbox—Healthcare Focus Thus Far
Lastly, despite the more open settlement climate, parties should still consider the risk of litigation if a compromise is not feasible. While both authorities are dedicating significant resources to active monopolization cases, they are still willing to litigate mergers. FTC has filed two cases since January, both in the healthcare space. For example, in March, the FTC sued to block private‑equity firm GTCR’s proposed acquisition of Surmodics, alleging the deal would combine the two leading suppliers of outsourced hydrophilic coatings for medical devices and create a firm with over half the market. Accordingly, dealmakers should continue to pay close attention to where parties are close head-to-head competitors in any potentially relevant market when anticipating how a merger review process might unfold.
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