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Antitrust lawyers familiar with Omnicare Inc.’s protracted bid for NeighborCare Inc. say one reason for the deal’s unusually long regulatory review is that investigators came across evidence of an antitrust irregularity by at least one of the parties that slowed the process last fall. The matter has been resolved, say the lawyers, who spoke on the condition of anonymity. The review is to close on June 16. The lawyers said it’s unclear what the antitrust issue was. But a former Federal Trade Commission official said it was most likely price-signaling, which occurs when a company warns competitors that it is about to raise prices, hoping they will follow suit. The former official said that is the most common of the various violations regulators tend to stumble upon during an investigation. It’s also difficult to prove, making it hard for the FTC to bring a case. Lawyers say other common violations, such as price-fixing and market allocation are easier to challenge and would probably have produced a case by now. Omnicare’s antitrust lawyer, Steve Axinn, who joined the Omnicare team in March, declined to comment Monday. NeighborCare would not comment. The prolonged review of the $1.3 billion Omnicare-NeighborCare deal has caused more than the usual share of speculation in Washington’s antitrust bar. The FTC issued a “second request” for information from the companies in early July 2004. Omnicare announced compliance with the second request in April. Most second-request investigations for a deal of this size take about six months. “My question is: Is this deal ever going to get done”? said a New York-based arbitrager who has followed the deal. Several arbitragers said they are watching closely to see if the review goes beyond June 16. The closing date has already been pushed back once. Finding some type of antitrust irregularity may delay a merger investigation, cause regulators to block the merger, or give rise to a parallel action, say antitrust experts. Since FTC officials have neither brought a case nor blocked the deal, lawyers suggest that the behavior under scrutiny may have been questionable but not severe enough to require prosecution. Wayne State University antitrust professor Steven Calkins, a former FTC general counsel, notes that the discovery of non-review violations confronts regulators with a tough call “deciding which is the better way to proceed” with a case. “In some cases, there may be times when they might propose a consent decree [for the merger], and then have the FTC sue [on the non-merger issue]. The existence of two issues creates pressure, and it makes sense to settle one first.” In the Omnicare-NeighborCare review, Calkins said, the matter could have been “a tempest in a teapot” that delayed the deal but didn’t force the parties to scuttle it. Alternatively, Calkins said, the FTC could be preparing for legal action after the deal is approved. A Washington-based lawyer who practices before both the FTC and the Department of Justice’s antitrust division said that the discovery of an antitrust violation should have prompted lawyers for the parties to certify compliance quickly, rather than waiting almost nine months, and push forward on the merger review if at all possible. He said the agencies “typically roll [the merger review and the non-related antitrust violation] all together, unless the matter affects the possible anti-competitive effects of the merger.” If the merger and violations are clearly discrete issues, companies usually separate them and try to keep the merger on track. “If true that there is another issue that the staff begins to look at, then it is all the more important that the parties’ lawyers put the regulators on the clock” and comply with the second request, then proceed to work through the merger issues, and separately deal with staff and managers to resolve the non-merger issues, he said. The fact that the review has taken a year suggests that both sides should have given it more oversight, he said. Copyright �2005 TDD, LLC. All rights reserved.

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