FAILING-COMPANY DOCTRINE
failing-company doctrine.Antitrust. The rule that allows an otherwise proscribed merger or
acquisition between competitors when one is bankrupt or near failure. 15 USCA §§ 12–27. —
Also termed failing-firm defense. [Cases: Monopolies 20(1). C.J.S. Monopolies §§ 106–111,
115–116, 125.]
“The 1992 guidelines provide a limited defense for failing firms and failing divisions of firms.
The defense is available if impending failure would cause the assets of one party to leave the
market if the merger does not occur. Thus to establish a failing firm defense, the parties must show
that the failing firm cannot (1) meet its financial obligations, (2) reorganize in bankruptcy, and (3)
find another buyer whose purchase of the firm would pose lesser anticompetitive risks. The parties
must further show that (4) without the merger, the failing firm’s assets will exit the market.” Ernest
Gellhorn & William E. Kovacic, Antitrust Law and Economics in a Nutshell 398–99 (4th ed.
1994).[Blacks Law 8th]