On November 10, 2008, the DOJ Antitrust Division’s criminal section lost another high profile criminal price fixing trial. This time the individual defendant was acquitted of alleged participation in the highly publicized marine hose cartel that had resulted in numerous guilty pleas. After a two-week trial, the jury returned a verdict in less than two hours. Paul Calli, Michael Pasano and Marissel Descalzo of Carlton Fields, P.A. represented the defendant. (Carlton Fields press release) The criminal section has lost a number of high profile trials recently — DRAM (hung jury; decision not to re-prosecute) and magazine paper.
Nov
05
Posted by : | On : November 5, 2008
On July 2, 2008, this blawg reported that the Antitrust Division issued civil investigative demands to investigate the potential competitive effects from an agreement between Google and Yahoo that would allow Google to post advertisements on Yahoo in exchange for part of the revenue. Google announced today that it has withdrawn from the transaction in response to concerns from antitrust regulators.
Nov
03
Posted by : | On : November 3, 2008
It appears that in United States v. JBS, S.A., the government is using the same tactics that it did in United States v. UPM-Kymmene Oyj — both of which were brought in the United States District Court for the Northern District of Illinois. The government is hoping to kill the deal by trying to delay the case and seeking to avoid a consolidated trial on the merits with a preliminary injunction hearing. If the preliminary injunction hearing is not consolidated, the government can prevail by only showing that there is a serious question going to the merits rather than by a preponderance of evidence. This approach will allow the government to avoid proving its case at trial because as the parties have made clear, a preliminary injunction will kill the deal. They will not wait for a trial at a later date.
UPM was successful in obtaining a prompt preliminary injunction hearing because UPM was not required to consent to an extension of the temporary restraining order. Notwithstanding that Section 15 of the Clayton Act and the legislative history of the HSR Act support a prompt consolidated trial on the merits as the Clayton Act directs that “the trial shal be as soon as may be” and the HSR Act was enacted to “promote the legitimate interests of business community” as well as the nearly uniform line of cases that consolidated such proceedings, the UPM Court did not do so. As the parties had promised, they abandoned the merger after the preliminary injunction was granted. Thus, UPM further supports the proposition that consolidation is the most practical approach because as numerous courts have observed, a preliminary injunction will kill the deal.
It is regrettable that the government chooses to engage in these tactics rather than allow a court to decide the merits.
Oct
29
Posted by : | On : October 29, 2008
Excerpt of the Antitrust Division’s press release:
WASHINGTON — The Department of Justice’s Antitrust Division issued the following statement today after the Division announced the closing of its investigation of the proposed merger of Delta Air Lines Inc. and Northwest Airlines Corporation:
“After a thorough, six-month investigation, during which the Division obtained extensive information from a wide range of market participants — including the companies, other airlines, corporate customers and travel agents — the Division has determined that the proposed merger between Delta and Northwest is likely to produce substantial and credible efficiencies that will benefit U.S. consumers and is not likely to substantially lessen competition.
“The two airlines currently compete with a number of other legacy and low cost airlines in the provision of scheduled air passenger service on the vast majority of nonstop and connecting routes where they compete with each other. In addition, the merger likely will result in efficiencies such as cost savings in airport operations, information technology, supply chain economics, and fleet optimization that will benefit consumers. Consumers are also likely to benefit from improved service made possible by combining under single ownership the complementary aspects of the airlines’ networks.”
Oct
24
Posted by : | On : October 24, 2008
On October 20, 2008, the Antitrust Division, Colorado, Iowa, Kansas, Minnesota, Missouri, Montana, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Texas and Wyoming sued to enjoin JBS Beef’s acquisition of National Beef Packing in the United States District Court for the Northern District of Illinois. (Beef Complaint; Beef Press Release) The government alleges that the merger would combine the third and fourth largest U.S. beef packers, which would result in lower prices for cattle and higher prices for beef consumers. This action is interesting in two respects. First, one of the theories of competitive harm is that the beef packers will gain monopsony power. While the monopsony theory is well established and has been pursued in Antitrust Division challenges to mergers (e.g., Cargill’s acquisition of Continental Grain’s Commodity Marketing Group), some academics reject it because it is inconsistent with the monopsonist’s economic interest to drive prices so low that suppliers exit. Second, although venue and personal jurisdiction were available in any district where the companies did business, the government chose the Chicago as its forum. It likely did so because it has received favorable treatment there in the past and Seventh Circuit cases are favorable to merger challenges. For example, the government prevailed in United States v. UPM Kymmene Oyj (a case in which this author was trial counsel) even though the government’s case was at best shaky and viewed by many as without merit.
Oct
06
Posted by : | On : October 6, 2008
The United States Court of Appeals for the Second Circuit recently held that Major League Baseball’s licensing of team logos was subject to rule of reason review under Section 1 of the Sherman Act. The court affirmed summary judgment in favor of MLB because the appellant did not challenge the licensing program under that rule. Major League Baseball Properties, Inc. v. Salvino, Inc., No. 06-1867 (2d Cir. Sept. 12, 2008) (attached MLB Properties v. Salvino). The baseball clubs give (with a few exceptions) exclusive licensing rights to a single entity. According to the MLB’s expert Frank Fisher (a world renowned economist), this system offers many efficiencies including allowing MLB licensing to compete better with other sports licensing; offering one-stop shopping to licensees; centralized management on matters such as quality control, intellectual property rights enforcement and negotiations and sales to licensees. According to Fisher, these efficiencies should result in lower licensing fees. The appellant had offered an expert report from economist Mr. Louis A. Guth, a Special Consultant for NERA, who disputed these efficiencies and asserted that the MLB licensing entity functioned as a cartel unresponsive to demand. The Second Circuit affirmed the exclusion of Guth’s report under Daubert v. Merrell Dow because (unlike Fischer’s report) it was unsupported by evidentiary citations or empirical analysis. The Second Circuit held that the rule of reason and not the per se rule or “quick look” analysis applied because the “arrangement might plausibly be thought to have a net precompetitive effect, or possibly no effect at all on competition.” Through different reasoning, the Second Circuit in this case reached the same result as the Seventh Circuit did in a challenge to a nearly identical licensing program by the NFL. See American Needle Inc. v. Nat’l Football League, No. 07-4006, 2008 WL 3822782 (7th Cir. Aug. 18, 2008) discussed in the Post of September 4, 2008. In that case, the Seventh Circuit held that the NFL teams were incapable of conspiring with themselves under the Copperweld doctrine in these particular circumstances. In this case, the Second Circuit did not address the Copperweld doctrine, but it did observe that the relevant market should include licenses for other professional sports. Therefore, it would be unlikely for the MLB’s licensing activities to have an effect on competition. This case should prove useful for practitioners for its discussion of when the per se rule, rule of reason or quick look analysis applies, the tests used under these analyses and the pitfalls of an inadequate expert report.
Sep
18
The Ninth Circuit Affirms Dismissal of Foreigners’ Claim Against DRAM Manufacturers for Price Fixing
Posted by : | On : September 18, 2008
The Ninth Circuit affirmed dismissal of foreigner purchasers’ Section 1 claims against DRAM manufacturers for price-fixing. In re Dynamic Random Access Memory (DRAM) Antitrust Litig., No. 06-15636, 2008 WL 3522419 (9th Cir. Aug. 14, 2008). The plaintiffs alleged that they purchased DRAM abroad at supra-competitive prices due to defendants’ price fixing activities. The only link between the effect on U.S. commerce and plaintiffs’ injuries was that in order for the cartel to be successful, defendants had to fix prices in the U.S. and abroad. Constitent with the many courts that have visited this issue since the Supreme Court’s decision in F. Hoffman-La Roche Ltd. v. Empagran S.A., 542 U.S. 155 (2004), the Ninth Circuit held that such allegations were insufficient to bring plaintiffs’ claims within the “domestic injury” exception to the Foreign Trade Antitrust Improvement Act. That statute excludes “conduct that causes only foreign injury” from the reach of the U.S. antitrust laws. Id. at 158. Judge Noonan’s concurring opinion is particularly interesting as he has explains that the decision is nothing more than a policy choice by “Congress and the Supreme Court that the economic interests of consumers outside the United States are normally not something American law is intended to protect.” As Judge Noonan observes, “[w]e reach this vanishing point not from guidance in words like ‘proximate’ or ‘direct’ but from a strong sense that the protection of consumers in another country is normally the business of that country. Location, not logic, keeps [plaintiff’s] claim out of court.”
Sep
11
Posted by : | On : September 11, 2008
The attorneys general of Virginia, Alabama, Colorado, Florida, Kansas, Nebraska, Oklahoma, Utah and Washington filed an amicus curiae brief in favor of petitioner in Pacific Bell Telephone Co. v. Linkline, No. 07-512, which is pending before the Supreme Court. This case raises the issue of whether a price squeeze claim can be maintained against a firm that does not have a duty to deal with the plaintiff. As discussed in the Post of June 24, 2008, this case created a conflict between the Antitrust Division and FTC. The Antitrust Division filed an amicus curiae brief supporting certiorai and urging reversal while the FTC issued a statement asserting that this case was not appropriate for certiorari and in any event, was correctly decided. The brief (attached States Amicus Curiae Brief) filed by these nine state attorneys general supports the Antitrust Division’s position.
Sep
04
Posted by : | On : September 4, 2008
The United States Court of Appeals for the Seventh Circuit applied the Copperweld doctrine to a sports league for the first time. In so doing, it recently affirmed summary judgment in favor of the NFL, its teams and Reebok in an antitrust challenge to an exclusive license of team names and logos to Reebok for use on headwear. American Needle Inc. v. Nat’l Football League, No. 07-4006, 2008 WL 3822782 (7th Cir. Aug. 18, 2008) (attached American Needle v. NFL). The plaintiff — an unsuccessful bidder — alleged that the collective action by the teams to combine all of their intellectual property rights and create an exclusive license was a conspiracy to prevent other vendors from obtaining licenses to the team names and logos in violation of Section 1 of the Sherman Act. The plaintiff also alleged that the teams monopolized “the NFL team licensing and product wholesale markets” in violation of Section 2 of the Sherman Act. Id. at *2. The Seventh Circuit held that the teams should be treated as a single entity under the Copperweld doctrine. As explained in Wild, et al., “Private Equity Groups Under Common Legal Control Constitute a Single Enterprise Under the Antitrust Laws,” 3 NYU Journal of Law and Business 231, 237 and n.31 (attached under articles above), that doctrine treats two or more firms that are under common ownership or have a unity of interest in a common course of action as a single firm incapable of conspiring or otherwise acting collectively under the antitrust laws. The Seventh Circuit did so because “the teams share a vital economic interest in collectively promoting all of NFL football” (id. at *7) and should be able to cooperate so that the NFL “can compete against other entertainment providers.” Id. at *8.