Black underrepresentation in the acquisition of divested assets raises questions at FTC and DOJ

MLex Market Insight

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4.9 • 9 Ratings

🗓️ 22 December 2021

⏱️ 17 minutes

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Summary

Divestitures are part and parcel of the US regulatory landscape: When a deal raises red flags, the merging companies offer to shed parts of their businesses, in a bid to get the proposal over the line. But who buys those divested assets and businesses? According to an investigation by MLex’s sister publication FTC Watch, black-owned and black-backed businesses are missing out. In fact, over a recent three-year period, no African American businesses have been involved in acquiring divested assets. It’s something that goes to the heart of the merger operations of both the Federal Trade Commission and the Department of Justice because they are the regulators that sign off on acquisitions of this kind and, therefore, are the gatekeepers of divestitures. The federal agencies argue that they’re just applying the rules; But black businesses and lawyers who spoke to FTC Watch argue that the underrepresentation of minority acquisitions in divestitures is a result of structural racism.

Transcript

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0:00.0	Hi there, great to have your company again.
0:13.0	As you well know, this is Mlex's weekly podcast covering the top regulatory stories from around the world.
0:19.7	James Panicki with you from Emlex's Asia Pacific team
0:23.0	and welcome to our very last podcast for 2021. And to take us to the end of year holidays,
0:30.2	we're going to have a chat with our Washington, D.C. team about a story that they've written
0:34.9	for our US-based sister publication, FTC Watch.
0:39.9	We've all heard of divestiture in the context of a large deal.
0:44.3	That's when merging companies need to sell off chunks of their businesses to appease regulators.
0:50.1	But who buys up those divested businesses, I hear you ask?
0:58.6	Well, the Federal Trade Commission and the Department of Justice don't choose the buyer,
1:03.3	but they certainly need to sign off to make sure that there are no competition concerns.
1:05.9	And here's where the story becomes interesting.
1:13.0	Black investors, business owners or companies with a majority African-American board are underrepresented,
1:19.2	according to FTC's watch painstaking research. In fact, our team wasn't able to identify a single divestiture asset that was acquired by black businesses over a three-year period
1:25.9	ending in July 2021. So what's going on? Well, Curtis Eichelberger,
1:31.7	Kathleen Murphy and Robert Thomason crunched the numbers and tried to make sense of why this
1:36.8	under-representation was occurring. And Curtis and Kathleen join me right now. So Curtis, starting from you, so in that three-year period,
1:48.1	the FTC oversaw about 30 or so divestiture sales, but not one of them, to a black-based or
1:55.8	black-owned company. That's right, James. We began our research by contacting the agencies to ask how many of the buyers fit in those categories. The FTC and the DOJ both said that they didn't track this information. They had no idea on race or gender and couldn't be any help. So they recommended every time they have a divestager buyer, the FTC puts out a press release.
2:19.2	They said, go back over the last three years worth of releases, pull out these divestiture releases,
2:25.4	and then you can go track them down.
2:26.7	But we have nothing in-house that we can help you with.
	...

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