Beyond its devastating human toll, the COVID-19 pandemic has had a historic impact on the U.S. economy, causing tens of millions of Americans to lose employment and numerous businesses to temporarily or permanently shutter.

This presents an environment ripe for distressed M&A activity. Will U.S. antitrust law stand in the way of the economic forces spurring such consolidation?

U.S. antitrust enforcers have historically viewed industry consolidation suspiciously, considering it better to let troubled businesses naturally run their course. But does that view apply in the context of a rapid economic downturn, particularly where the underlying cause is an environmental health crisis?

On one hand, the American consumer benefits from competition, no matter how fleeting it may be. On the other hand, denying consolidation prolongs excess capacity and duplicative overhead costs, which drag profits and waste resources and, potentially, the overall economic health and recovery of that industry.

There are two existing doctrines — the failing firm and flailing firm defenses — that nod in favor of, and could support, consolidation in a crisis. Still, the antitrust agencies have erected high hurdles to satisfying those defenses. They are rarely tried and even more rarely successful.

As COVID-19 has changed so much of American life, the moment demands revisiting those doctrines and asking afresh whether antitrust law should be more welcoming of distressed M&A.

Originally published October 28, 2020, “COVID-19 May Lower Bar For Distressed M&A Defenses,” Law360.

Photo of Colin Kass Colin Kass

Colin Kass is a partner in the Litigation Department and co-chair of the Antitrust Group, and a member of the Firm’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team. An experienced antitrust and commercial litigation lawyer, Colin has litigated cases before federal and state courts throughout…

Colin Kass is a partner in the Litigation Department and co-chair of the Antitrust Group, and a member of the Firm’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team. An experienced antitrust and commercial litigation lawyer, Colin has litigated cases before federal and state courts throughout the United States and before administrative agencies. His practice involves a wide range of industries and spans the full-range of antitrust and unfair competition-related litigation, including class actions, competitor suits, dealer/distributor termination suits, price discrimination cases, criminal price-fixing investigations, and merger injunctions.

Colin also has extensive experience dealing with the Federal Trade Commission and Department of Justice in obtaining clearance for competitively-sensitive transactions and handling anticompetitive practices investigations. His practice also includes counseling clients on their sales, distribution, and marketing practices, strategic ventures, and general antitrust compliance.

Photo of Michael E. Callahan Michael E. Callahan

Michael Callahan is a partner in the Corporate Department, and a member of the Private Equity and Mergers & Acquisitions Groups. Michael has spent his entire career at Proskauer and focuses primarily on representing strategic companies and private equity sponsors in mergers and…

Michael Callahan is a partner in the Corporate Department, and a member of the Private Equity and Mergers & Acquisitions Groups. Michael has spent his entire career at Proskauer and focuses primarily on representing strategic companies and private equity sponsors in mergers and acquisitions, including auctions and privately negotiated transactions, growth equity financings, co-investments, joint ventures and other strategic transactions.

Photo of Simon J. Sharpe Simon J. Sharpe

Simon Sharpe is a partner and a member of the Private Equity and Mergers & Acquisitions groups.

Simon represents public and private companies and private equity sponsors and their portfolio companies in acquisitions, dispositions, joint ventures, minority investments and restructurings. He also has…

Simon Sharpe is a partner and a member of the Private Equity and Mergers & Acquisitions groups.

Simon represents public and private companies and private equity sponsors and their portfolio companies in acquisitions, dispositions, joint ventures, minority investments and restructurings. He also has experience with spinoffs, secondaries, bankruptcy sales, credit bids, tender offers and recapitalizations, and frequently counsels clients on a variety of securities law, corporate governance, commercial and strategic matters.