On Dec. 14, 2010, the U.S. Department of Justice announced a settlement that will require Pittsburgh-based L.B. Foster Company to divest a West Virginia plant used in the development, manufacture, and sale of certain railroad joints in order to proceed with its acquisition of Portec Rail Products Inc.1 Notably, the agreement designated a preapproved buyer for divested assets, a practice that seems at odds with both the Justice Department’s stated policy and its traditional practice.
In most divestiture settlements, the Justice Department allows parties to consummate a transaction first, and subsequently negotiate an agreement with an approved buyer to purchase the divestiture assets. However, the L.B. Foster agreement marked the second time in 2010 that the Justice Department required parties to identify a buyer before the government would accept a consent decree. A possible shift in Justice Department practice comes at a time when it seems the Federal Trade Commission (FTC) may actually be trending away from its traditional practice of requiring upfront buyers.2 However, many questions remain as to how the agencies may (or may not) rely on upfront buyers in antitrust merger enforcement heading into 2011.
Policy and Practice
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