Antitrust

3 0 UNITED STATES Section 7 of the Clayton Act — which was enacted many years before the Hart-Scott-Rodino (HSR) Act pre-merger notification statute — allows antitrust authorities to challenge the acquisition of stock or assets, and without regard to whether the acquisition requires a pre-merger notification. Indeed, the antitrust agencies, the Department of Justice (DOJ) and the Federal Trade Commission (FTC), have investigated and challenged several transactions that were not reportable under the HSR Act or that were reported by the parties but not challenged by the agencies following an initial, pre-closing review. For example, in 2017 the DOJ sued Parker-Hannifin Corp. and CLARCOR Inc., alleging that Parker-Hannifin's US$4.3 billion acquisition of CLARCOR seven months prior created an unlawful monopoly for aviation fuel filtration systems. The DOJ sought a court order to partially unwind the deal, even though the parties went through the HSR notification process and the Act's waiting period expired. The timing of the DOJ's challenge was a function of when it learned about the overlap in fuel filtration products. The DOJ learned about overlaps in this area after its initial review and the expiration of the waiting period, as a result of post-merger complaints from customers. The case is a reminder that merging parties may need to be proactive in addressing certain overlaps during the review process, as well as anticipating and addressing potential customer complaints. Earlier in 2017, the FTC challenged a consummated deal that was not subject to HSR reporting requirement. FTC v. Mallinckrodt, No. 1:17-cv-00120 (D.D.C. filed Jan. 18, 2017). In particular, the FTC alleged that Mallinckrodt subsidiary Questcor Pharmaceuticals, Inc. harmed competition by acquiring Synacthen Depot (a possible competitor to a Questcor product). In exchange for settling the allegations, Mallinckrodt agreed to pay US$100 million in equitable relief and sublicense Synacthen Depot for certain medical purposes. In May 2019, following a full hearing on the merits, Chief Administrative Law Judge D. Michael Chappell upheld the FTC's challenge to a consummated, nonreportable transaction between manufacturers of microprocessor prosthetic knees. In September 2017, Otto Bock acquired Freedom Innovations for an undisclosed sum. The FTC challenged the transaction in December 2017 alleging that Freedom Innovations was Otto Bock's closest competitor. Finding that competition between Otto Bock and Freedom Innovations led to lower prices for customers and increased innovation in the relevant market for microprocessor prosthetic knees, Judge Chappell concluded that the FTC met its burden of showing that the merger may substantially lessen competition. Judge Chappell's order, subject to appeal, would require Otto Bock to divest all of Freedom Innovations' assets to a buyer approved by the FTC. MERGER CONTROL 05 S E C T I O N 7 O F T H E C L A Y T O N A C T A L L O W S A N T I T R U S T A U T H O R I T I E S T O C H A L L E N G E T H E A C Q U I S I T I O N O F S T O C K O R A S S E T S , A N D W I T H O U T R E G A R D T O W H E T H E R T H E A C Q U I S I T I O N R E Q U I R E S A P R E - M E R G E R N O T I F I C A T I O N Risks for Consummated Deals Even Where No Notification Requirements

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