Sen. Elizabeth Warren's call to break up tech companies by reversing merger and acquisition approvals could be a red flag for the industry's in-house counsel, accounting for extra precaution in deal negotiations.

A March 8 blog post from Warren, D-Massachusetts, outlines the presidential candidate's plan to “break up the biggest tech companies.” Warren said that, if elected, she would appoint “regulators committed to reversing illegal and anti-competitive tech mergers,” including Facebook's acquisition of competitors WhatsApp and Instagram and Google's acquisition of Waze.

“It is possible to challenge transactions that have already closed,” said Mark Ostrau, a partner and the chair of Fenwick & West's antitrust and trade regulation practice group. But that doesn't mean it's easy. Both Ostrau and Neely Agin, an antitrust partner at Winston & Strawn, compared separating integrated acquired companies to “unscrambling an egg.”

Usually, Agin said, the Department of Justice and Federal Trade Commission break up finalized deals that cause competition issues but were not large enough to trigger a Hart-Scott-Rodino pre-merger filing. She noted regulators rarely reverse their decisions to approve a deal, most often in cases where companies were not fully transparent and new information emerges. Warren's plan would be unusual, but not impossible to enact.

Agin said if Warren's enforcement plan ever does go into play, large tech company breakups could lead to fire sales on subsidiaries such as Instagram or Waze, with Facebook or Google forced to sell at a below-market price.

The increased risk in tech industry M&As could play into future deal negotiations, according to Ostrau.

“The technology industry [companies] have to take into account that there is a spotlight on them, and that the transactions are likely to get a lot of scrutiny,” Ostrau said. “They'll need to factor that into their risk assessment.”

According to Agin, there are precautions legal teams can take to avoid M&A deals ending in a fire sale and trouble with regulators. First, she said, do what's best for the customer post-merger—raising prices or cutting popular items shortly after a deal could raise red flags to regulators, especially if the deal didn't trigger an HSR filing.

She noted in retroactive M&A investigations regulators are able to see the deal's impact on the market. Pre-deal investigations are based on predictions alone.

If counsel are worried a proposed deal could raise antitrust concerns but doesn't trigger an HSR pre-merger filing, Agin suggested giving regulators a voluntary heads-up.

“You can call and let them know, 'Hey, we're working on this transaction, it's not reportable but we'd love to come in and talk to you about it and get you comfortable,'” Agin said. “Then, if you go through that process with them and give them the opportunity to review it, rather than ducking and hoping they don't see your deal, you get a similar benefit and comfort that you would [have] if you had an HSR reportable deal.”

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