key term - Structural Remedies

Definition

Structural remedies are a type of antitrust enforcement action used to address anticompetitive mergers or acquisitions. These remedies aim to restore or maintain competition in a market by restructuring the merged entity or requiring the divestiture of certain assets or business units.

5 Must Know Facts For Your Next Test

1. Structural remedies are often preferred by antitrust authorities over behavioral remedies, as they aim to address the root cause of the anticompetitive concern by restructuring the merged entity.
2. Divestitures are a common structural remedy, requiring the merged company to sell off certain assets or business units to a third-party buyer approved by the antitrust agency.
3. Structural remedies can also involve the creation of a new, independent competitor through the spin-off of a business unit from the merged entity.
4. The goal of structural remedies is to preserve or restore the competitive conditions that existed prior to the merger or acquisition, ensuring that consumers continue to benefit from a healthy, competitive market.
5. Successful implementation of structural remedies requires careful oversight and monitoring by antitrust authorities to ensure the divested assets or business units remain viable and competitive.

Review Questions

• Explain the purpose of structural remedies in the context of corporate mergers.
  • Structural remedies in the context of corporate mergers are designed to address anticompetitive concerns by restructuring the merged entity or requiring the divestiture of certain assets or business units. The goal is to restore or maintain competition in the market, ensuring that consumers continue to benefit from a healthy, competitive environment. Structural remedies aim to address the root cause of the anticompetitive issue, rather than relying on behavioral restrictions or ongoing oversight.
• Describe the key differences between structural remedies and behavioral remedies in antitrust enforcement.
  • Structural remedies focus on restructuring the merged entity or divesting assets to restore competition, while behavioral remedies impose restrictions on the merged company's conduct, such as price controls or limits on business practices. Structural remedies are generally preferred by antitrust authorities as they address the underlying competitive concerns more directly, whereas behavioral remedies require ongoing monitoring and enforcement. The choice between structural and behavioral remedies depends on the specific circumstances of the merger and the assessment of which approach is most effective in preserving or restoring competition.
• Analyze the role of divestitures as a structural remedy in antitrust enforcement, and discuss the key considerations for ensuring the effectiveness of such divestitures.
  • Divestitures are a commonly used structural remedy, where the merged entity is required to sell off certain assets or business units to a third-party buyer approved by the antitrust agency. The goal is to create a new, independent competitor that can replace the competition lost due to the merger. For divestitures to be effective, antitrust authorities must carefully consider the scope and composition of the divested assets, ensuring they are viable and can compete effectively in the market. The buyer of the divested assets must also have the necessary resources and incentives to operate the business as a successful, independent competitor. Ongoing monitoring and enforcement are crucial to ensure the divested assets remain competitive and the structural remedy achieves its intended purpose of preserving or restoring competition.

Related terms

Antitrust Enforcement: The actions taken by government agencies, such as the Federal Trade Commission (FTC) or Department of Justice (DOJ), to enforce antitrust laws and prevent or remedy anticompetitive practices.

Divestiture: The sale or spin-off of a business unit or assets to a third party in order to address antitrust concerns and restore competition in a market.

Anticompetitive Merger: A merger or acquisition that reduces competition in a market, often leading to higher prices, lower quality, or less innovation for consumers.