Gun-Jumping and Premerger Information Exchanges Toolkit

Practical Law Toolkit w-016-7542 (Approx. 6 pages)

Gun-Jumping and Premerger Information Exchanges Toolkit

by Practical Law Antitrust

Maintained • USA (National/Federal)

A Toolkit to help counsel advise business people and other members of a deal team for mergers and acquisitions on permissible and impermissible pre-closing conduct under the antitrust laws, including information exchanges. Counsel may use this Toolkit to help merging parties avoid gun-jumping.

The antitrust laws require transacting parties to remain separate and independent economic actors before closing. The Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) review all transactions reported under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) and have jurisdiction to review any transaction affecting US commerce, even if not reportable. Merging parties must remain independent before closing to:

Ensure that competition is preserved between them, if the parties are competitors.
Allow the antitrust agencies to review the transaction's competitive significance during the applicable waiting period, if subject to the HSR Act.

Merging parties can violate the HSR Act and other antitrust laws by engaging in certain activity before closing, commonly referred to as gun-jumping, which includes:

Sharing competitively sensitive information, such as current or future pricing information.
Improperly exercising control over the target party or assets.
Impermissible joint conduct, such as joint bidding or contracting.
Prematurely coordinating, combining, or integrating operations.
One party acquiring the other's equity or assets before the HSR Act waiting period expires, known as an acquisition of beneficial ownership.

Merging parties that exchange competitively sensitive information may be more likely to coordinate their behavior, facilitating or inviting collusion in violation of:

Section 1 of the Sherman Act, which prohibits agreements that unreasonably restrain trade, such as competitors agreeing or colluding on price (see Practice Note, Section 1 of the Sherman Act: Overview).
Section 5 of the FTC Act, which broadly prohibits unfair methods of competition and unfair or deceptive acts or practices (see Practice Note, FTC Act Section 5: Overview).

In HSR-reportable transactions, the antitrust agencies can challenge conduct as gun-jumping that occurs both:

During the HSR waiting period, as a violation of the HSR Act.
After the HSR Act waiting period expires and before closing, as a violation of Section 1 or Section 5.

This Toolkit includes resources to help counsel prevent improper information exchanges or gun-jumping before closing.

Gun-Jumping and Premerger Information Exchanges Toolkit | Practical Law