Challenging the economic incentives analysis of competitive effects in acquisitions of passive minority equity interests

Abstract

Both the Federal Trade Commission (FTC) and the Department of Justice's Antitrust Division (DOJ) have recently investigated the direct or indirect acquisition of minority equity interests by firms in their competitors. The agencies have challenged some investments and entered into consent decrees either requiring the disposal of the interests or setting conditions for the continued holding of them. Each agency has done so without providing substantial public explanation of the economic or legal bases for taking action. It seems likely that additional transactions will be faced with this issue: John M. Nannes, then-Deputy Assistant Attorney General, recently highlighted minority equity interest issues as being an area of increasing interest for the DOJ, and predicted that such issues would receive heightened scrutiny.1 The increased use of strategic alliances and other joint activities increases the likelihood that firms will have ownership interests in actual or potential competitors,