FTC Extra Scrutinizes Use of Non-Competes in Merger Transactions | Seyfarth Shaw

The Federal Commerce Charge (FTC) currently set its sights squarely on non-compete agreements in merger transactions, making them ripe for added scrutiny. In a Consent Order issued June 14, 2022, the FTC ordered GPM Investments LLC and its mom or father agency ARKO Corp. to roll once more provisions it deemed “anticompetitive” in GPM’s Might 2021 acquisition of 60 Categorical Stop retail fuel stations from Corrigan Oil Agency. Under the FTC’s order, ARKO and GPM agreed to limit the non-compete settlement that it imposed on Corrigan, and return 5 retail fuel stations in numerous native Michigan markets. This decision comes on the heels of a June tenth assertion by the FTC’s Chair Lina M. Khan, joined by Commissioners Rebecca Kelly Slaughter and Alvaro M. Bedoya, warning corporations that contract phrases in merger agreements that in all probability impede trustworthy opponents might be extraordinarily scrutinized.

As part of the $94 million acquisition, GPM required Corrigan to sign not solely a non-compete settlement defending the 60 Categorical Stop locations that had been acquired, however moreover requiring Corrigan to not compete with higher than 190 pre-existing GPM locations all via Michigan and Ohio . Quite a lot of the roughly 190 pre-existing GPM locations subject to the non-compete settlement had been positioned in geographic areas faraway from the acquired Categorical Stop locations.

The non-reportable transaction, which fell just under the reporting threshold of the Hart-Scott-Rodino Antitrust Enchancment Act (HSR Act), bought right here beneath scrutiny of every the FTC and Michigan’s Office of the Lawyer Fundamental, which assisted inside the investigation of the case. The criticism issued by the FTC alleged that the noncompete settlement, as utilized to the roughly 190 pre-existing GPM locations, was unreasonable on account of it bore no relation to the acquisition of the Categorical Stop locations and harmed purchasers in native retail gasoline and diesel fuel markets in Michigan and Ohio who would in some other case revenue from potential opponents. “By holding Corrigan from competing to advertise gasoline and diesel to prospects in [Michigan and Ohio]the settlement to not compete harmed purchasers who in some other case could profit from this opponents,” said Holly Vedova, the FTC’s Director of the Bureau of Rivals, in a press launch saying the movement.

The Grievance moreover alleged that, even inside the 60 markets acquired from Corrigan, the non-compete settlement was unreasonably overbroad in geographic scope and longer than pretty compulsory to protect a legit enterprise curiosity. Furthermore, the Grievance alleged that the acquisition harmed opponents inside the retail sale of gasoline and diesel fuel in 5 native Michigan markets by reducing the neutral market contributors to 2 or fewer.

The settling the FTC’s criticism in opposition to ARKO and GPM required them to:

  • amend the settlement to not compete to solely apply to the retail fuel corporations acquired by GPM, excluding the 5 locations to be returned to Corrigan;
  • prohibit the phrases of the settlement to not compete in these markets to no broader than 3 years in interval and no more than 3 miles from each Categorical Stop location;
  • return to Corrigan, no later than June 28, 2022, the retail fuel retailers in each of the 5 native markets;
  • obtain prior approval from the Charge sooner than shopping for retail fuel property inside a 3-mile driving distance of any of the returned locations for 10 years;
  • not enter into or implement any settlement to not compete related to acquisitions of a retail enterprise that restricts opponents solely spherical a retail fuel enterprise already owned or operated by GPM; and
  • notify third occasions subject to comparable agreements to not compete of GPM’s obligations beneath the order.

The Charge voted unanimously to problem the Grievance and accept the proposed Consent Order. The FTC will now publish the Consent Order inside the Federal Register and invite public comment. As quickly as processed, suggestions could be posted on Guidelines.gov.