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The Federal Trade Commission tapped Michael Cowie to lead the new merger litigation task force. Formed to enhance how the agency reviews deals, the group will focus on retail industry transactions and hospital mergers. In an interview with The Daily Deal, Cowie discusses the rationale for the task force and its mission. The Daily Deal: What is the point of the task force? Michael Cowie: One thing the task force hopes to accomplish is to improve the merger review process. In that regard, we have tried to put together the attorneys with significant experience with retail mergers. The FTC has had a lot of activity over the years in the retail sector. There was Heinz/Beech-Nut, Seagram-Diageo and Nestl�-Ralston (Purina). So retail has been a core competency of the FTC. What the task force will do is put under one roof the attorneys who have the experience and skills with retail, and going forward we hope to develop that further. DD: What will the group add beyond what the FTC normally does? Cowie: Formation of the group does not indicate any change of policy in the retail sector. This is not a sign that retail merger analysis is changing. I do think, however, that bringing together the attorneys with the most experience in retail and having them focus on retail will over time make them more effective for the parties who are most affected. So over time it could lead to faster merger reviews and could lead us to clear mergers that should be cleared and to identify anticompetitive transactions more effectively just by virtue of having a block of people who are very experienced in retail. This is not just a theoretical proposition. There are common elements to retail merger analysis. You have heavily branded products. There is economic literature in this area. There is a lot of antitrust precedence on how to analyze branding in considering entry analysis. For instance, how do private-label food products or beverage products compete and are they in the same market as branded products? So it helps to have thought about this. We also have some of the data available in the retail sector that is common across deals. That helps too. DD: The FTC and antitrust lawyers have raised the issue of when it’s appropriate to use “up-front” buyers for divested assets as a regulatory remedy in retail mergers. Does this signal a policy change? Cowie: I am unaware of any directional change in policy. But going forward, our institutional understanding of how remedies work in the retail sector will improve. We will have folks who work repeatedly in retail deals. DD: So what is the agency’s position on up-front buyers? Cowie: The practice is relatively fact-specific. I see the analysis continuing to be fact-specific. [FTC Chairman Timothy Muris] has talked about stubborn facts, and that is a key area. In the cases in the past when the commission has asked for up-front buyers, the situation has been where the assets could dissipate rapidly. You could have a concern that an asset like a supermarket might not be kept in a sellable form over time. That would be a factor, and going forward we will look substantially at the facts and the risk that the assets might not be maintained in such a way that competition would continue. DD: For hospital deals, you’ve said the task force will examine consummated mergers. Why review closed deals? Cowie: In most of the merger cases that we handle under the Hart-Scott-Rodino Act, the antitrust agency and the parties are trying to make predictive judgments about how the mergers will affect consumers. This is an opportunity to assess whether specific transactions have been anticompetitive or pro-competitive. We also hope to evaluate whether there have been efficiencies gained from these transactions. At a minimum, what we have learned will help with hospital merger analysis. It also has potential to improve merger analysis in other sectors because we will be going back and looking at some of the arguments raised in the past. A related issue is that going back to the early 1990s, the government has lost the last seven hospital merger cases. The courts have essentially established a paradigm for geographic markets in hospital merger cases. All of these cases are pre-consummation where the parties and the agencies are trying to make predictive judgments about what happens. By looking at consummated deals, we can actually assess whether the geographic market analysis that the courts have accepted is actually correct. DD: What will the agency do if you find a hospital deal that has proved anticompetitive? Cowie: In the past year, the commission has litigated two consummated cases. Chicago Bridge & Iron is pending, and MSC.Software has settled. So the commission has shown its willingness to bring cases in appropriate situations. If we were to find compelling evidence that a hospital merger led to anticompetitive price increases and there exists a viable remedy, then that is something that would be a consideration. But we also plan to dedicate some nontrivial amount of resources to assessing the efficiencies associated with these deals. We want to make sure that part of the analysis is developed as well. DD: The FTC’s bureau of competition consists of various “shops,” which are self-contained units that review mergers and investigate anticompetitive behavior. Why not create a retail shop and a hospital shop rather than put together this task force? Cowie: For the hospital cases, the reaction was that it would be too small to run as a separate unit. You have to assign paralegals, investigators and secretarial groups. Just to do a hospital shop would be too small, while the health care shop has gotten too big. So we want to get each shop to an optimal size. Retail has been an area with a lot of resources committed to it historically. So in theory we could do that. But with the health care shop quite busy, we thought we could solve that problem by combining it with this new group. Also, the hospital work is obviously merger work, and there may be some benefits to having attorneys who are dedicated to merger analysis work on the hospital mergers while the work done in the current health group is more in the nature of conduct cases. DD: How many staff will work on the task force? Cowie: It has roughly 20 attorneys and two paralegals dedicated to it. DD: How did you get this job? Cowie: I was a partner at Howrey & Simon, where I practiced since 1989. I started there out of law school. I had some relations here with some of the new folks that came in with the new administration, and I have been working extensively in this area. I came here about a year ago. Copyright �2002 TDD, LLC. All rights reserved.

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