The one rule all general counsels can agree on is that no CEO wants to be surprised by an antitrust issue that delays or prevents the closing of a deal. In an effort to help steer clear of such surprises, Fried Frank Partner Bernard (Barry) A. Nigro Jr. recently led a roundtable discussion of the NACD General Counsel Advisory Council, noting that antitrust enforcement has become increasingly hostile.
For example, between 2007 and 2008, the number of non-reportable deals challenged by the agencies rose by more than 400 percent. With uncertainty ruling the marketplace, fewer deals are being consummated, which means “lawyers at the FTC and DOJ are trying to keep themselves busy. It takes just one unhelpful phone call from a customer or competitor to trigger an investigation,” said Nigro.
No company is outside the reach of the antitrust laws. From the government’s perspective, “there really is no deal or product that is too small,” said Fried Frank Antitrust Partner Peter Guryan. One recent $5-million transaction—ESS’s acquisition of certain Diebold subsidiaries—triggered an eight-month investigation by the DOJ and 17 states. The DOJ required a complete divestiture of an entire business line and imposed restrictions on ESS’s ability to bid on future contracts.
President Obama has charged both DOJ Assistant Attorney General Christine Varney and FTC Chairman Jon Leibowitz 
with reinvigorating antitrust enforcement, Nigro noted. Certain industries—high tech, pharmaceutical and financial services—have been subject to heightened scrutiny at both agencies.
Douglas Friedman, general counsel at Tradeweb, asked whether there are differences between the antitrust enforcement agencies since the change in presidential administrations. According to Nigro, the FTC and DOJ have moved closer in ideology in the last two years. Under the second Bush administration, “you had situations where the FTC…and the DOJ openly disagreed with each other and were at war. Many of those ideological differences have disappeared.”
Despite similar ideologies at the FTC and DOJ, Nigro said “fundamentally, the FTC is a different animal from the DOJ, regardless of which party is in power. The DOJ is more hierarchal and speaks with one voice. The FTC is a 
commission with many voices—they rule by majority so each commissioner has an opinion and a vote.”
Nigro emphasized that while it may come as a surprise, “it makes a difference whether you’re at the FTC or the DOJ.” This is particularly the case after a recent D.C. Circuit opinion in Whole Foods, which arguably adopted a different standard for granting preliminary in-junctions in merger challenges brought by the FTC. This view finds support in one of the opinions issued in the split two-judge majority, stating that that the FTC “need only raise ‘serious, substantial’ questions as to the merger’s legality.”
“That couldn’t be more different than the standard if you’re at the DOJ,” said Nigro, which has to demonstrate a “substantial” likelihood of success on the merits.
In Europe, Fried Frank Antitrust Partner Alasdair Balfour noted there are separate agencies at the European and national 
levels. “There will be a jurisdiction analysis that will determine whether the investigation will be European or national, but then there are various processes where either the parties or the agencies can switch in both directions.”
Critical to the success of closing a deal is to avoid what CEOs in particular can’t tolerate. “When you’re looking at transactions, the one thing you want to do is not surprise the CEO, and that means really looking for ways to mitigate or allocate the risk upfront and to manage expectations,” said Nigro.
Fried Frank Corporate Partner David Shine, who has worked on numerous transactions, including Merck’s acquisition of Schering-Plough and the more recent buyout of United BioSource by Medco Health Solutions, noted that “in the M&A and the antitrust area, contractual risk allocation is obviously a key part” early in a transaction. “How you allocate the risk very much depends on the risk profile of the party and the sort of substantive judgment that was made in due diligence.” Guryan added that “the worst thing that can happen—and it happens a lot—is to get stuck on an issue where you actually haven’t had time to negotiate that risk into the deal.”
According to Shine, “there are all sorts of covenants” that parties include in agreements to address antitrust risk, including reverse breakup fees and divestiture commitments, although it is “rare to see express prohibitions.” Another important step in avoiding antitrust surprises is to have an appropriate document management system in place. “Managing the documents from the day that the parties start looking at the deal” is key, said Nigro. “Smoking gun documents often will turn an investigation that shouldn’t be going anywhere into something that’s a real concern.”
David Maryles, legal director at BlackRock, the international asset-management company, asked when and how soon in the deal process antitrust counsel should be consulted. Guryan responded that “antitrust counsel should get involved in the early stages of a transaction.”
“During the deal concept phase,” advised Guryan, “you want to understand whether there are any showstoppers and determine if the antitrust risk is manageable.” At this stage, while the parties are principally focused on completing negotiations, “more advanced planning on the front end” allows you to “better manage expectations,” he said, citing one deal where significant upfront work ultimately yielded the closing of a complex multibillion-dollar transaction in a relatively short period of time.
Early preparation is ultimately the key to minimizing potential antitrust problems. “You don’t want to land in a situation where you’re looking at litigation, and then suddenly realizing that you’re negotiating from a weak position,” said Nigro. “If you have a plan from the beginning, you’re going to get there faster, it’s going to be a lot smoother, and, most importantly, the CEO won’t be surprised.”
General Counsel Advisory Council
Adam Amsterdam – General counsel, Broadridge Financial Solutions
Alasdair Balfour – Partner, Antitrust and Competition, Fried, Frank, Harris, Shriver, and Jacobson
Walter Bardenwerper – General counsel, Saks
Christopher Clark – Publisher, NACD Directorship
Michael Denton – General counsel, Curtiss-Wright
Douglas Friedman – General counsel, Tradeweb
Peter Guryan – Partner, Antitrust and Competition, Fried, Frank, Harris, Shriver, and Jacobson
Andrew Koslow – General counsel, Pesnson Worldwide
Lori Marino – Assistant general counsel, Corporate Law & Business Development, Medco Health Solutions
David Maryles – Director, Legal, BlackRock
Robert Masters – General counsel, chief compliance officer, Acadia Realty Trust
Brian Miller – General counsel, The AES Corporation
Bernard A. Nigro, Jr. – Partner, Antitrust and Competition, Fried, Frank, Harris, Shriver, and Jacobson
Alyson Redman – Special counsel, Antitrust and Competition, Fried, Frank, Harris, Shriver, and Jacobson
Sara Shindel – General counsel, Lifetime Brands
David Shine – Partner, Corporate, Fried, Frank, Harris, Shriver, and Jacobson
Alexander Simpson – General counsel, Reis