Divestiture Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Divestiture, written in plain English, along with examples of how it is used.
What is Divestiture?
n. Voluntary or court-ordered forfeit of a possession or right. Common result to antitrust actions to prevent a monopoly or other restraint of trade.
History and Meaning of Divestiture
Divestiture is the legal term used to describe the action of an individual or company selling off assets, subsidiaries, or business units. It can be done voluntarily or under court-ordered orders, often as a result of an antitrust decision.
In the United States, divestiture has become a common tool used to break up large monopolistic companies and promote competition. The Sherman Antitrust Act of 1890 gave the government the power to prevent and punish anticompetitive business practices. This act paved the way for the United States government in the early 1900s to break up trusts and monopolies through divestiture.
Examples of Divestiture
In 1982, AT&T was ordered to divestiture itself into seven regional Baby Bell companies due to antitrust violations.
In 2017, General Electric announced its plan to divestiture of several businesses, including its lighting division.
In 1999, the European Union ordered Microsoft to divestiture of its media player, which eventually resulted in the creation of the popular media player VLC.
Legal Terms Similar to Divestiture
Merger Remedies: Merger remedies are intended to address the anticompetitive effects of a merger or acquisition.
Spin-off: Spin-off is a corporate action where a company creates a new independent company by divesting a part of its existing business.
Dissolution: Dissolution occurs when the assets and liabilities of a corporation are disposed of through winding up of its affairs.