The second was more concrete and required that Anthem, as the purchaser, “take all necessary measures to avoid any obstacle” to the concentration that a public entity might raise. Provisions such as these are often commonly referred to as “hellish or floodable” rules because they theoretically require the purchaser to commit to yielding to the entire acquired activity (and in theory more) without the sanitized authorizations being respected, although the question of whether it actually requires it has never been thoroughly examined in the courts. When the parties enter into merger negotiations, the goal is to make the deal, take into account the sellers and determine how the combined company can do a better job for customers, employees and shareholders. What needs to be done and what happens when things disintegrate, it is up to the lawyers to do it. There are many reasons why mergers go wrong before closing, and all should be dealt with in the agreement of the parties. In the case of transactions involving major players in the sector, the emphasis should be on antitrust rules. The risk of cartels and abuse of dominance must be analysed, assessed and handicapped, and the manner in which this risk is shared or deferred between the parties becomes crucial to the negotiations and the final agreement. The problems arise not only with respect to U.S. antitrust authorization, but also outside the United States. Nidec and Whirlpool have entered into a share purchase agreement for Nidec`s purchase of Whirlpool`s refrigeration compressor business. The agreement attributed risks to cartels and abuse of dominance and, given that antitrust authorization and the transaction have not yet been concluded, Whirlpool sued Nidec to ensure that it obtained antitrust authorization before the April 2019 deadline expired. According to the complaint, Nidec agreed to include in the agreement a “hellish or flood” clause, which required the company to take all necessary measures to obtain authorization for cartels and abuse of dominant position within the allotted time. Whirlpool claimed that Nidec had not done everything in its power to address the concerns of antitrust authorities in the European Union, Mexico and Turkey.
The Tribunal dismissed the appeal on the grounds that Nidec still had time to obtain authorization for cartels and abuse of dominance. The court found nothing in the agreement allowing a party to take legal action against non-compliance with a condition. The European Union finally accepted Nidec`s proposed purchase on 12 April and the company announced the successful acquisition of Whirlpool on 2 July 2019. The Court`s approach raises the specter that reasonable “Best-Efforts” clauses are in fact worthless. But did the court really unmask the Achilles` heel in these provisions, which went unnoticed by the lawyers of the agreement for decades, or was the Court`s decision for this agreement a drift? To answer this question, we need to take a closer look at the merger agreement and the court`s reasons. Even Cigna could not reasonably claim a breach of Anthem`s appropriate overall undertaking. Cigna therefore turned to another provision – one that imposed special obligations on Anthem as an acquirer. In many transactions, the seller requires the buyer to take on all of the risk in terms of cartels and abuse of dominance (or as far as reasonable). A common way to do this is to provide what is called “hell or flood,” which would force the purchaser to do everything in its power to obtain authorization for the transaction, including the sale of most of the acquired activity to a third party as necessary.