This is the latest in a series of columns from attorneys at O’Melveny & Myers LLP, examining the intersections of the political and legal worlds in the run-up to Election Day 2012.

Antitrust law was born of politics. The Sherman and Clayton Antitrust Acts were enacted in the late 19th and early 20th centuries, respectively, amid a public outcry against “trusts.” From Theodore Roosevelt’s “trust-busting” in the early years of the 20th century, to the swirl of debate around high-profile litigation near the end of the century—including the break-up of AT&T and the civil action against Microsoft—antitrust law has always been closely tied to prevailing political passions and trends.

So it is no surprise that high-profile mergers and acquisitions are analyzed by antitrust authorities in the context of today’s highly partisan political environment. After all, during his presidential campaign, then-Senator Barack Obama vowed to “reinvigorate antitrust enforcement” after what he called “the weakest record of antitrust enforcement of any administration in the last half century.”1 Over the past three years, the U.S. antitrust enforcement agencies have issued new merger guidelines and have increased the frequency at which they issued Second Requests, the formal part of the Hart-Scott-Rodino review process during which antitrust regulators peer closely at the potential anticompetitive impacts of a transaction.2 They have also confronted some of the nation’s most powerful companies, including Google and Intel.

Indeed, the administration is entering an election year on the heels of the Department of Justice’s victory in its first fully litigated merger challenge since its loss in the Oracle/PeopleSoft merger in 20043 and the abandonment of AT&T’s acquisition of T-Mobile after the DOJ filed suit last August.4

Given all this, our counsel to in-house lawyers may be surprising. We think, by and large, the best approach for companies involved in high-profile mergers and acquisitions is to ignore the political trends and do what lawyers have always been taught to do: analyze the law, the facts, and the markets; prepare as if trial were preordained; and advocate effectively in front of the staff of antitrust agencies.

That is the best way to build the right foundation for success—even where pending transactions garner press interest, are reviewed by political appointees, attract commentary from think tanks or other commentators, or even become the subject of congressional hearings.

Most importantly, antitrust counsel need to advise clients on how the companies describe the markets in which they compete. Documents and company statements should describe the competitive effects of the merger in ways that are not colorful, but analytical and mindful of the consequences of downplaying the strength of competitors and possible entrants. Companies should coordinate public statements and the drafting of documents that discuss competition, synergies, and market dynamics with legal counsel to ensure they are accurate and consistent with the companies’ regulatory merger strategy. Otherwise, the risk is substantial that an ill-considered view (perhaps articulated by an employee with little or no direct knowledge of the markets or the proposed acquisition) will be taken as the company’s final analysis.

The merging parties’ internal documents are especially important, because the agencies are increasingly relying on what the companies themselves say, especially when they think they are talking only internally. In most cases, the parties’ internal statements are the single most important factor in the government’s decision on whether to challenge a merger or a practice.

For example, in H&R Block, the court rejected the defendants’ contention that the relevant product market included all methods of tax preparation, including online tax preparation, manual tax preparation, and assisted tax preparation. In reaching this conclusion, the court focused principally on the companies’ own documents showing that they had developed their pricing and business strategies by considering only their digital do-it-yourself tax preparation as competitors.5
And in its complaint against AT&T and T-Mobile, the DOJ recited AT&T documents that highlight competitive pressure that AT&T has faced from T-Mobile’s innovation to discount the merging parties’ claims that T-Mobile is not an important innovation competitor in the wireless industry.6

Of course, there are times (as with the breakup of AT&T and the Microsoft litigation) when proposed transactions may need to be explained to broader audiences. In those circumstances, remember these lessons:

  • Be mindful of how markets are described internally. Persuasive public advocacy that is later contradicted by internal documents is not just unpersuasive—it can be damaging to a company’s credibility;
  • Include the lawyers at every stage in the process. Any press release, congressional testimony, or executive speech about a transaction should be analyzed as if it were being reviewed by an antitrust enforcer in order to ensure consistency with the company’s submissions; and
  • Think hard about how to reconcile the often-arcane language of antitrust economics with the understandable language of public policy. Involving the lawyers in the process means they have to work hard to understand the importance and needs of non-legal audiences.

Regardless of the political trends, the best strategy for any company involved in a high-profile transaction that attracts political or public attention is effective lawyering through careful planning and a legal strategy that conforms to market realities. Smart advocacy—using carefully crafted legal and economic analysis supported by the merging parties’ documents, statements, and the characteristics of the relevant market—will be just as compelling in front of antitrust agencies and courts as it will be on Capitol Hill.

Richard Parker is chair of O’Melveny & Myers LLP’s antitrust & competition practice, and Courtney Dyer is a counsel in the practice. Both work in O’Melveny’s Washington, D.C., office.

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  1. Senator Barack Obama, Statement for the American Antitrust Institute (Sept. 17, 2007), available here [PDF].
  2. U.S. FED. TRADE COMM’N AND DEP’T OF JUSTICE ANTITRUST DIV., HART-SCOTT-RODINO ANNUAL REPORT FISCAL YEAR 2010, available here [PDF].
  3. United States v. H&R Block, Inc., Civil Action No. 11-00948 (D. D.C. Nov. 10, 2011).
  4. Press Release, U.S. Dep’t. of Justice Antitrust Div., Justice Department Issues Statements Regarding AT&T Inc.’s Abandonment Of Its Proposed Acquisition Of T-Mobile USA Inc. (Dec. 19, 2011), available here.
  5. United States v. H&R Block, Inc., Civil Action No. 11-00948, at 20-21 (D. D.C. Nov. 10, 2011).
  6. Amended Complaint at 14-15, United States v. AT&T Inc., Civil Action No. 11-01560 (D. D.C. Sept. 16, 2011).