The Distressed Business Standard in Times of Crisis

• Published in: Antitrust 2020-06, Vol.34 (3), p.22-27
• Main Authors: Kazmerzak, Karen, Widnell, Nicholas
• Format: Magazinearticle
• Language: English
• Subjects: Aircraft industry; Antitrust laws; Bankruptcy; Communications industry; Competition; Coronaviruses; COVID-19; Economic forecasting; Market shares; Officials and employees; Steel industry; Telecommunications services industry
• ISSN: 0162-7996; 2162-996X

Most companies fail to meet the stringent criteria articulated in United States v. Greater Buffalo Press, Inc., requiring the firm to establish that it (1) faces a "grave probability of a business failure" and (2) has no alternative purchaser.3 Some courts have articulated a third requirement-that reorganization prospects are "dim or nonexistent," drawing on the Court's Citizen Publishing Company v. United States decision that preceded Greater Buffalo Press by two years.4 The U.S. Department of Justice & Federal Trade Commission Horizontal Merger Guidelines follow the requirements articulated in Citizen Publishing and Greater Buffalo Press." After seeking potential buyers, VieVu's owner sold the business to Axon, a competing maker of body-worn cameras and digital evidence management systems primarily sold to large, metropolitan police departments.10 During a pretrial conference, Axon argued that VieVu was failing prior to its acquisition: "When Axon acquired the company, VieVu had just three days'-three days' worth of operating cash, $27 million in debt, and almost a million dollars a month in operating losses. Statistics reflecting the shares of the market controlled by the industry leaders and the parties to the merger are, of course, the primary index of market power; but only a further examination of the particular market-its structure, history, and probable future-can provide the appropriate setting for judging the probable anticompetitive effect of the merger.15 If the Court relied on historical market share data, the combination of the two Midwestern coal companies would have been prohibited under Section 7 of the Clayton Act. [...]they recognize that recent or ongoing changes in the market may not allow using those shares if a particular firm's historical or current shares understate or overstate its future competitive significance.16 To put this in context, in a market with four firms comprising varying market shares of 40, 30, 20, and 10 percent, the combination of the firms with 30 and 10 percent market share would create a structural presumption that the transaction enhances market power.17 Assuming all firms in the market gain a share of the acquired firm's lost sales, the acquired firm would have to lose approximately 70 percent of its market share for that presumption not to apply18 Even if the acquired firm