Legal Dictionary of Pakistan

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. "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).