Sullivan & Cromwell’s Renata Hesse on Being a ‘Worthy Adversary’ to Antitrust Regulators Renata Hesse, the co-head of the antitrust department at Sullivan & Cromwell, has no shortage of work these days. According to financial market data provider Refinitiv, the firm was top among legal advisors in terms of deals announced through the third quarter, with a total of $269 billion worldwide. With the U.S. antitrust authorities with whom Hesse interacts on merger clearance issues currently taking aggressive and novel stands on competition issues, she and her team sit at the busy intersection of deal-making, regulatory work and potential litigation. Case in point: she and her team led the consent discussions with the U.S. Federal Trade Commission on behalf of client Amgen in the leadup to a settlement allowing the biotechnology company to move forward with a $27.8 billion deal to acquire Horizon Therapeutics. The Litigation Daily caught up with Hesse–who earlier in her career twice served as acting assistant attorney general in charge of the Justice Department’s Antitrust Division—to discuss the current antitrust climate. What follows has been edited for length and clarity. Litigation Daily: I see your name ended up on a lot of top litigator lists, but your focus is as much interfacing with regulators as it is what I think of as stand-up courtroom litigation. So how do you describe what you do? And what does it have in common with that sort of pure litigation practice and where does it depart? Renata Hesse: I think there are many things that are very, very similar. There's a lot of advocacy, there's marrying facts to law and economics, there's writing, there's depositions—a lot of the same kinds of things. I think the biggest difference is that, for the most part, you are dealing with an expert agency as your interlocutor as opposed to a generalist judge. I think you end up making the same kinds of arguments in both places. Often the translation of the work you do in the regulatory process, if and when you get to litigation, is actually pretty seamless. The discussion with regulators is a little more steeped in antitrust doctrine and economic concepts and arcane cases. When you get into litigation, you're doing that in sort of a more truncated pithy fashion. I think that's really the biggest difference. Obviously, there are lots of procedural differences. You don't have direct and cross-examination. You really are presenting and answering questions. It's more like an appellate argument, maybe, than a district court trial in the process sense. Well, what's challenging about doing all that in this particular moment, when the antitrust regulators you're dealing with are taking a more aggressive posture and raising novel challenges to certain deals? I think most of the time when you have a deal in front of you you know if it's going to be something that's likely to generate interest, if it’s in the middle—maybe it will, maybe it won't—or if it’s really unlikely. When you go into the process, you have a general feeling for what you're in for, for the most part. I think that's changed a little bit, because it's a little harder to predict. The consequence of that is that when I think about going in on a transaction that is high profile or in a particular industry that's of interest I used to think “Okay, this could get some questions.” Now I'm thinking more about the end game: Where are we going to end up? I need to make sure that if the agency ends up unexpectedly litigating, I've done what I need to do to be ready for that—either from a timing perspective or from an advocacy perspective, developing experts and witnesses and preparing the company for that possibility. So I feel like I'm doing more of that than I might have done before. When you think about the regulatory process, the backstop is always litigation. The only way, in the end, if the agency has an issue and you're not going to abandon your deal, is you're going to have to litigate. So you really have to be prepared for that possibility. Things might change over time as you're going through the regulatory process, and it seems more and more likely you're going to be in litigation. In my case, I would probably bring on one of my litigation partners to just make sure that I'm not missing something as I'm thinking through what the litigation would look like. But I pretty much always start thinking about a deal like that: with the possibility of litigation in mind now in a way that I think I probably didn't before. Well, deal deadlines are just that—deadlines. So are there ways to nudge the government to make their up or down decision in a way that acknowledges that reality? It's a very tricky process to navigate. I always view my role as an advocate and a lawyer for a company to be what I used to think of when I was in the government as a worthy adversary. So, by that, I mean you're not a jerk. You engage on substantive issues that really matter. You are polite and cooperative. And you try to do the best job you can to really engage and answer the agency's questions. But you also recognize that there may come a point where we're just going to have to agree to disagree. And so I think when the timing becomes an issue, you really have to be very transparent with the agency about where you are on that. And that doesn't have to be an adversarial process. My job is to try to get this deal closed. And I've got a limited amount of time within which to do that. Particularly now, there are all kinds of financing challenges. The agencies used to always say, “Well, you can always renegotiate the outside date.” It's harder to do that these days given financing costs. You really just have to be very straightforward with the agency about where you are and work with them. And hopefully, you can get to a point where everybody agrees that maybe this isn't the right one to challenge. But if you don't get to that point, then you at least get into litigation—you get to the point of the agency making a decision with enough time to litigate. The agencies do not like being rushed. I didn't like being rushed when I was at the Antitrust Division. But you know, each side has a goal: The agency wants to do as thorough an analysis as they can. The parties have a transaction that they want to close that they think is not going to harm competition. And as long as both sides are dealing in good faith and pushing forward and engaging and talking then I think you can usually work that out. To me the key points where people run into trouble with deadlines are either where somebody's got a complete misconception of what's actually going on: You're convinced they're going to clear your deal and they're convinced they're not going to clear your deal. That happens sometimes. It's not great when it happens, but it does happen. When I was the acting AG at the Division, people were surprised by an outcome that I thought wouldn't have been surprising. There are also cases when people are really just talking past each other. Each side's got some issue and they're not having the conversation they should be having. If you can avoid those two things, then I think, more often than not, you can navigate the process in a way that meets the needs of both, even if you end up having to agree to disagree. So how do you measure success in this practice? I know litigators can point to motions won and cases resolved. What do you point to as a win? Deals closing when we're talking about the merger practice. There's lots of other stuff that I do that doesn't have to do with deals, but in the merger practice, it's getting the client’s deal done on the timeline that they want. To me, success is doing that without generating a challenge from the government. That means that I've actually succeeded in explaining adequately to the agency why the transaction doesn't harm competition. I remember listening to a litigator who said people who blame judges for making a mistake have got it wrong. She said she never blamed judges. I always think if I don't get my deal done, or if I don't win, it's because I've failed to explain something well enough to a court. I haven't done my job well enough. And that's kind of how I think about it. Sometimes you have erratic behavior that you can't predict. So I don't want to count it as a failure every time I might fail to get a deal done. But that's what I think my job is. My job is just to get the deal closed. As someone who served a lot of time in the Antitrust Division and served as its acting head a couple of times, have you thought much about what it would be like to work in the government right now? I've thought about it a little bit. I think it's a really interesting time. I think there's a lot of undue pressure being put on the antitrust agencies to solve society's ills. I don't think that doing more merger enforcement is going to solve income inequality, for example, or make life better for workers. I think there are things you can do on those fronts. But with a lot of these policy issues, I think, there's a misdirection of attention to antitrust as if it is somehow able to solve a lot of the issues that people feel are happening in the country. So I think the agencies feel a lot of pressure to at least behave as if they're delivering on that. And I think that's hard. I think that's hard on the leadership of the agencies, although I think they also invite it a little bit. But I also think it's hard on the staff because it's the goal and how they measure success. I think that metric has changed and I think it puts a lot of pressure on people. I'm not sure I would be so happy with that kind of pressure. I enjoyed working in the government tremendously. And I enjoyed running the Antitrust Division. It’s one of the best jobs I've ever had. That was interesting and challenging and fun because you were thinking about doing the right thing for competition and for consumers—and not thinking about some of these other policy goals that may be harder to reach. | 