Antitrust Law Daily Schedule issued for government’s challenge to insurance brokers’ combination
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Thursday, July 22, 2021

Schedule issued for government’s challenge to insurance brokers’ combination

By E. Darius Sturmer, J.D.

Court’s order demands continuation of good-faith settlement negotiations as to three of five markets that would allegedly be harmed by the proposed transaction and sets trial date of November 18, 2021, for any remaining claims.

The federal district court in Washington, D.C. has issued a scheduling and case management order for the Department of Justice’s antitrust challenge to global insurance broker AON plc’s planned acquisition of rival Willis Towers Watson plc (WTW). The government filed suit against the two companies last month, asserting that the proposed takeover, valued at $30 billion, would substantially lessen competition in five relevant markets: (1) property, casualty, and financial risk broking for large customers; (2) health benefits broking for large customers; (3) actuarial services for large single-employer defined benefit pension plans; (4) the operation of private multicarrier retiree exchanges; and (5) reinsurance broking. In the order, the Court tells the parties to work out a settlement for the latter three of these markets and that trial would commence as to the first two markets in November (U.S. v. AON plc, July 20, 2021, Walton, R.).

Antitrust allegations. The Justice Department’s June 17 complaint alleges one violation of Sec. 7 of the Clayton Act for each of the five relevant markets. According to the government, each of these five products satisfies the well-accepted "hypothetical monopolist" test set forth in the Department of Justice and FTC Horizontal Merger Guidelines, which asks whether a hypothetical monopolist would profitably impose a price increase on at least one product sold by the merging firms in the relevant market.

AON and WTW are the second- and third-largest insurance brokers in the world. They and Marsh McLennon are generally considered the "Big Three" brokerage firms in the industry, with the ability to provide global service. sophisticated data and analytics, and a breadth and depth of knowledge and expertise that smaller brokers cannot, the government contends. Thus, the three compete exclusively with each other on price, service, and the development of innovative solutions.

Divestitures that have been proposed by AON and WTW to alleviate antitrust regulators’ competitive concerns would not come close to fully maintaining the competition that would otherwise be lost in two of the markets—property, casualty, and financial risk broking for large customers in the United States and health benefits broking for large customers in the United States—as a result of the proposed merger, in the government’s view. In the remaining three markets, remedies proposed by the defendants may preserve competition if reflected in an appropriate consent decree and final judgment, the agency acknowledged.

Scheduling order. The scheduling order states that the parties must "negotiate, in good faith, to finalize a consent decree with respect to the Potential Settlement Markets to preserve the competition in those relevant product markets that the United States alleges in the complaint will be harmed by the planned transaction." Should they achieve this, the court’s order would thereafter apply only to any relevant product markets not addressed by the consent decree.

The court’s order notes that fact discovery began on July 15 and that the parties had to produce investigation materials by July 20. They must answer the complaint by July 26. Fact discovery will close on October 1, and the government must serve any initial expert reports by this date as well. The defendants are required to serve any opposition expert reports by October 18. Numerous other filing and notice deadlines for the parties are specified for the ensuing month, with a final pretrial conference set for November 16. Trial is set to begin on November 18.

The order formally recognizes that the defendants have accepted service of the complaint, waived formal service of a summons, consented to personal jurisdiction and venue, and agreed not to close, consummate, or otherwise complete the proposed transaction until the tenth day following the entry of the judgment by the court.

Further, it defines the relevant investigation materials to be produced and lays out explicit parameters for many other aspects of the litigatory process, including timely service of fact discovery, subpoenas, written discovery requests, depositions, evidence from foreign countries, privilege logs, expert witness disclosures, witness lists, demonstrative exhibits, service of pleadings and discovery on other parties, and timely production of evidence concerning remedies.

The case is No. 1:21-cv-01633-RBW.

Attorneys: Eric Damian Welsh, U.S. Department of Justice, for the U.S. Edward Marcellus Williamson (Latham & Watkins LLP) for Aon plc.

Companies: Aon plc

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