Parties contemplating a merger must often discuss and exchange critical business information as part of their due diligence activities, even when they are direct competitors. These discussions and exchanges are generally permissible. However, because the antitrust laws require that merging firms operate as separate entities until the closing of the transaction, parties must proceed with care and adopt appropriate antitrust guidelines and safeguards.
Whether such discussions and exchanges raise antitrust concerns is governed by several factors, including the reason for the exchange, the sensitivity of the information, the method and timing of the exchange, and the role of the recipients within the merging companies. The Department of Justice, for example, has challenged merging parties sharing their customer contract terms and rates, correspondence relating to contract negotiations, and full drafts of proposed contracts in connection with pre-merger "gun-jumping" violations and for facilitating unlawful conspiracies to fix prices.
The plaintiff in Omnicare, Inc. v. UnitedHealth Group alleged that the defendants' merger discussions and due diligence interfered with the plaintiff's ability to negotiate a competitive contract with the defendants. The Seventh Circuit, however, held that the defendants were entitled to summary judgment because the firms had implemented important safeguards – safeguards that should be applied whenever competitors engage in merger discussions and due diligence. The Omnicare decision serves as a reminder that a well-counseled approach to due diligence and integration planning will facilitate the exchange of critical business information, even between competitors, without exposing a company to antitrust liability.
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