May 11, 2020
Joel Mitnick comments on how COVID-19's economic fallout could lead merging parties to rely more frequently on the "failing firm" defense to convince regulators that deals that enforcers might otherwise challenge should be permitted.
Excerpts from “Mergers In Virus Crunch Create New 'Failing Firm' Paradigm,” Law360, May 11, 2020:
"I don't know that the DOJ or FTC want to face a headline that they're responsible for more closings and layoffs during this pandemic than are necessary," said Joel Mitnick, a partner at Cadwalader Wickersham & Taft LLP and a former FTC trial attorney.
. . .
Mitnick says that failing firms are a real result of the epidemic and not just an argument concocted to persuade regulators to let a deal close. And Mitnick says he's made the case of COVID-19's economic impacts in several recent merger reviews.
"Those reviews might have gone to a second request. But they didn't," Mitnick said, referring to the more in-depth probe beyond FTC and DOJ reviews of initial merger notification disclosures.
Only the enforcers themselves know why they choose not to take a closer look at any given deal, Mitnick says. But it's possible the pandemic was a factor.
Pro Bono Report 2019