Opinion ID: 548938
Heading Depth: 3
Heading Rank: 3

Heading: Neutrality Under the Williams Act

Text: 34 A further though lesser conflict may also be seen between the antitrust laws and the Williams Act. It surfaces in the legislative policy of maintaining neutrality among bidders, shareholders and target company management. Congress realized that takeover bids should not be discouraged because they serve a useful purpose in providing a check on entrenched but inefficient management. S.Rep. No. 550, 90th Cong., 1st Sess. 3-4 (1967). If the antitrust laws were applied to prohibit agreements between rival bidders, it would discourage potential bidders from making a tender offer. Once more than one bidder entered the fray for control of a target company, the shareholders of that company could use the antitrust laws to force a fight to the last ditch, notwithstanding that the bidders could agree on terms more advantageous to themselves. Certainly this would discourage takeover activity--an end Congress sought to avoid in enacting the Williams Act. See Statement of Senator Williams, 113 Cong.Rec. 854-55 (1967) (the Williams Act seeks to balance the scales equally to protect the legitimate interests of the corporation, management, and shareholders without unduly impeding cash takeover bids). 35 This conflict has been recognized in cases discussing implied preemption of state takeover laws by the Williams Act. See, e.g., CTS, 481 U.S. 69, 107 S.Ct. 1637; Edgar v. MITE Corp., 457 U.S. 624, 102 S.Ct. 2629, 73 L.Ed.2d 269 (1982). In MITE, a plurality of the Supreme Court held that the Illinois Take-Over Act was preempted by the Williams Act because some of its provisions favored target company management in takeover contests, and therefore upset the Act's objective of evenhandedness between the target company and bidders. 457 U.S. at 630-40, 102 S.Ct. at 2634-40. A different result was reached in CTS, where the Court stated that even under the broad interpretation of the Act adopted by the plurality in MITE, an Indiana takeover statute was not preempted because it did not favor incumbent management over hostile bidders in contests for control. 481 U.S. at 80-87, 107 S.Ct. at 1645-1648. 36 Here, the application of the antitrust laws would upset the balance among incumbent management, target shareholders and bidders which Congress sought to achieve through the Williams Act. Allowing antitrust suits to rule out agreements between rival bidders would give target shareholders undue advantage in the takeover context and discourage such activity. Fewer takeover attempts ultimately favor incumbent management whose entrenched position is thereby less subject to challenge. Hence, reasoning by analogy from the logic of MITE and CTS, the antitrust laws are rendered inapplicable by the Williams Act in the instant case.