The Failing Firm Defence

The failing firm defence has arisen infrequently in merger cases but is expected to be used more frequently in the current economic climate. The FFD exists in most OECD jurisdictions and exempts an otherwise anticompetitive merger from challenge under the competition laws if the target company is in such poor financial condition that its only other option would be to exit the relevant market. Topics included the elements of proof for the FFD, the question of whether they should be made more lenient during economic downturns, and the special case of mergers between financial institutions. The delegates expressed doubt that there was any need to make adjustments to the approach taken toward the FFD during economic crises. They generally agreed that the burden of proof for the FFD should remain on the merging parties. Jorge Padilla of LECG was the guest speaker.