On July 3, 2008, the Antitrust Division conditioned its approval of Signature Flight Support’s acquisition of Hawker Beechcraft’s competing flight support business on divestitures at the Indianapolis International Airport. Signature and Hawker both provide flight support services (also called fixed base operations) to charter and corporate airplanes at 45 and 7 airports respectively across the United States. At the Indianapolis airport, Signature and Hawker are the only two providers of these services. Accordingly, the Antitrust Division required divestiture of one of the two parties’ assets at the Indianapolis airport to a buyer that it approves.
Posted by : Matthew Wild | On : July 17, 2008
Posted by : Matthew Wild | On : June 21, 2008
On May 28, 2008, the Antitrust Division required divestitures as a condition of its approval of Cengage Holdings’ $750 million proposed acquisition of Houghton Mifflin College Division. Both companies publish college textbooks. The Antitrust Division defined the relevant product market as textbooks in courses on particular subject matters. The Antitrust Division alleged that students had no significant alternatives to new textbooks in these courses because, for example, used textbooks are not consistently available in large numbers. The Antitrust Division limited the relevant geographic market to the United States but did not explain why foreign publishers could not compete effectively. The Antitrust Division calculated that in 14 overlapping courses, the minimum post-merger HHI would be 3,000 with a delta of 500. The Antitrust Division concluded that high barriers to entry exist because instructors infrequently switched textbooks and therefore it would be unlikely that a publisher would invest in the authors and editorial staff necessary to write a new textbook. The Antitrust Division’s Press Release and Competitive Impact Statement are attached. DOJ Press Release (Cengage/Houghton Mifflin); Competitive Impact Statement (Cengage/Houghton Mifflin).
Posted by : Matthew Wild | On : June 3, 2008
On May 29, 2008, in Floral Accounting Systems, Inc. v. Florists Transworld Delivery, Inc., No. 06-1098, 2008 WL 2224416 (W.D. La. May 29, 2008), the district court unsealed an antitrust settlement holding that antitrust settlements were entitled to less protection than typical disputes between private parties because antitrust cases by the very nature implicate public interests. The parties had a dispute over the scope of their antitrust settlement agreement. The agreement contained a confidentiality provision which both parties sought to enforce and thus sought to have the agreement filed under seal. The district court declined the request with the exception of the amount of license fees to be paid — which it considered a trade secret. This case is consistent with the trend among federal courts to deny sealing documents filed in litigation. To increase the chance of obtaining an order sealing documents, the movant should try to show that the documents contain trade secrets.
Posted by : Matthew Wild | On : May 28, 2008
On May 27, 2008, the Antitrust Division settled its litigation against the National Association of Realtors (“NAR”) pending in the United States District Court for the Northern District of Illinois. The Antitrust Division explained the nature of challenge as follows: “[t]he first rule challenged by the Department required MLSs to permit traditional brokers to withhold their listings from VOWs [virtual office websites] by means of an ‘opt out.’ NAR does not permit brokers to withhold their listings from traditional broker members of an MLS. Many local MLSs adopted NAR’s policy before NAR suspended its policy during the Department’s investigation. In one market in which the MLS adopted the policy, all brokers withheld their listings from the one VOW in the community, which was then forced to discontinue its popular website. The second rule prevented a broker from educating customers about homes for sale through a VOW and then referring those customers (for a referral fee) to other brokers, who would help customers view homes in person and negotiate contracts for them. Some of the VOWs that focused on referrals also passed along savings to consumers as a result of increased efficiencies.” The consent decree (if approved under the Tunney Act) will require NAR to treat internet-based brokers the same as other brokers on the MLS and rescind these rules. Notably, the Antitrust Division and FTC have been aggressive in promoting competition among real estate brokers. They have obtained a number of settlements against real estate broker associations that had limited the ability of internet brokers to compete and have urged state legislatures not enact legislation that would have the same effect. The press release and proposed consent decree are attached. NAR (Proposed Consent Decree); NAR (DOJ Press Release)
Posted by : Matthew Wild | On : May 12, 2008
On May 5, 2008, the FTC conditioned its approval of Agrium’s $2.65 billion proposed acquisition of UAP Holding on divestitures on divestitures. The parties provide one-shopping for farms and farmers rely on these type of local stores for bulk fertilizer. Because of its weight, it does not make economic sense to ship these products more than 30 miles. Entry is difficult because of high sunk costs and the need to train personnel. Based on these dynamics, FTC believed that the parties’ overlapping stores in Croswell, Richmond, Imlay City, Vestaburg and Standish, Michigan and Girdletree, Maryland might give the combined company the ability to raise prices in those areas. Accordingly, the FTC required divestitures of one of the parties’ stores in these areas. The press release and analysis to aid public comment are attached.Agrium (Press Release);
Posted by : Matthew Wild | On : May 8, 2008
On May 6, 2008, the FTC granted Nine West’s petition to modify its consent decree to allow Nine West to engage in resale price maintenance with its dealers. In 2000, Nine West — a footwear manufacturer — had entered into a consent decree with the FTC and several state attorneys general to resolve allegations that it fixed the prices at which its retailers may sell its shoes. Because of the Supreme Court’s recent decision in Leegin Creative Leather Products v. PSKS, 127 S.Ct. 2705 (2007), which allowed such agreements to be treated under the rule of reason rather than subject to per se condemnation, the FTC allowed Nine West to engage in resale price maintenance but did not rule that such conduct would be necessarily lawful. Rather, the consent decree requires to Nine West to provide periodic reports to the FTC of prices and output during periods when it has engaged in resale price maintenance. As a practical matter, modification of the consent decree may be bring little comfort as some state attorneys general have taken the position that resale price maintenance is still a per se violation of their antitrust statutes. Herman Miller (discussed in the March 31, 2008 post) is an example of such an application of the state antitrust antitrust laws. Attached is the FTC’s order in Nine West. Nine West (Order)
Posted by : Matthew Wild | On : May 6, 2008
On April 30, 2008, the FTC obtained a consent decree against Talx Corporation for violating Section 7 of the Clayton Act. With $270 million in revenue last year, Talx Corporation is the leading provider of outsourced unemployment compensation management (“UCM”) and outsourced verification of income and employment services (“VOIE”). In 2002, Talx was the leader in the VOIE market and began a series of acquisitions in the VOIE and UCM markets that gave Talx market power. The Complaint alleged relevant markets of VOIE and UCM services and simply alleged that the markets were “highly concentrated and the consummated acquisitions increased concentration substantially.” The Complaint also challeged Talx’ alliance agreements in which ADP, Convergys and Ceridian outsource their VOIE and UCM to Talx. Although the preferred remedy is divestiture, the Consent Decree governed only Talx’ future conduct. Among other things, Talx must waive enforcement of certain non-compete and non-solicitation agreements, allow customers to rescind certain types of agreements, not allocate or divide markets for UCM services or discourage suppliers to refrain from doing business with competitors in the UCM market and allow ADP to outsource UCM services to competitors. It appears that Talx avoided substantial exposure for consummating transactions that ultimately prove to harm competition. As examined at length “Buyer Beware: Consummating Non-HSR Reportable Transactions May Prove Costly In the End,” Antitrust Litigator (Winter 2007) (see link to article under articles tab), Talx could have been required to divest the assets at distressed prices and possibly been faced with exposure for civil damages. The press release and analysis to aid public comment are attached. Talx (Press Release)Talx (Analysis to Aid Public Comment)
Posted by : Matthew Wild | On : May 5, 2008
On April 30, 2008, the Antitrust Division conditioned its approval of an acquisition by Regal Cinemas, Inc. of Consolidated Theater Holdings GP on divestitures in Southern Charlotte, Northern and Southern Raleigh and Asheville. On January 14, 2008, Regal — with $2.6 billion in revenue last year — agreed to acquire Consolidated — with $144 million in revenue last year — for $210 million. The Antitrust Division alleged a product market of the exhibition of first-run commercial movies. With respect to the geographic markets, the Antitrust Division alleged that moviegoers in Southern Charlotte, Northern and Southern Raleigh and Asheville would be unlikely to travel a significant difference in response to a small but significant non-transitory increase in price. The relevant markets were highly concentrated with HHIs ranging from 6058 to 6523 and deltas exceeding 2,000 except for Southern Raleigh where the transaction would be a merger to monopoly. The Antitrust Division also alleged high entry barriers because the demographics of these geographic markets would not support the sunk costs associated with opening a new theater. Attached are the DOJ Press Release and Competitive Impact Statement. Regal (DOJ Press Release); Regal (Competitive Impact Statement)
Posted by : Matthew Wild | On : March 31, 2008
Category: Antitrust, Consent Decrees, New York Cases, Per Se Analysis, Resale Price Maintenance, Rule of Reason, Section 1 (Sherman Act), State Antitrust and Consumer Protection Claims, State Attorneys General
On March 21, 2008, Herman Miller, Inc. entered into a consent decree with the attorneys general for New York, Michigan and Illinois to resolve allegations of resale price maintenance over its Aeron chair — an ergonomic desk chair. Filed in the United States District Court for the Southern District of New York, the Complaint alleged that Herman Miller used its Suggested Retail Price policy to enforce a resale price maintenance scheme over the Aeron chairs. According to the Complaint, Herman Miller coerced retailers to agree not to advertise or discount Aeron chairs below Herman Miller’s Suggested Resale Price or a pre-determined discount set by Herman Miller. The states alleged violations of Section 1 of the Sherman Act and the New York, Illinois and Michigan antitrust statutes. Although this action was brought after the Supreme Court in Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 127 S.Ct. 2705 (2007), held that resale price maintenance was subject to analysis under the rule of reason (and no longer a per se violation of Section 1), the Complaint pled only a per se violation. The consent decree requires Herman Miller to refrain from resale price maintenance and enforcement of its Suggested Retail Price policy for all of its products. Herman Miller also was required to pay a $750,000 fine. This case serves as a cautionary tale to manufacturers who take too much comfort from Leegin. With aggressive enforcement by state attorneys general and potential litigation by terminated retailers under more stringent state laws, manufacturers would be well advised to act unilaterally under the Colgate doctrine. They are free to terminate discounters unilaterally but should not require retailers to agree to adhere to resale prices as a condition of receiving shipments. Similarly, to reduce the chance that any termination of a discounter could be considered the product of a conspiracy between the manufacturer and other retailers, manufacturers should refuse to listen to complaints from retailers about discounting. The Herman Miller Complaint and Consent Decree are attached. Herman Miller Complaint; Herman Miller Consent Decree
Posted by : Matthew Wild | On : March 24, 2008
Tags:acquisitions, Antitrust, Antitrust Division, bain, Chicago Bridge, Clear Channel, consent decree, Cookson, Department of Justice, divestiture, federal trade commission, Foseco, ftc, HSR, matthew wild, mergers, petition, Pitts-Des Moines, post-merger, THL, United States Court of Appeals for the Fifth Circuit, Univision
Three recent developments serve as cautionary tales to parties to prospective transactions. These actions serve to remind practitioners that there is a genuine possibility of agency action even in cases where the buyer has only a minority ownership interest in a company that competes with the target; the value of the overlapping assets represent less than one percent of the transaction’s value; and the transaction has closed without any HSR review. In Bain’s and THL Partner’s (“THL”) bid to acquire acquire Clear Channel, the Antitrust Division required, among other things, divestiture by THL Partners of its passive 14% equity interest in a company that competes with Clear Channel because it was concerned that THL would seek to reduce competition between the two parties post-merger. (See Post of February 28, 2008 and attached description). In the Cookson/Foseco transaction, the Antitrust Division required divestitures worth about $4 million out of a $1 billion transaction. Although the monetary value of the divestitures was relatively minimal, the Antitrust Division’s HSR review appears to have delayed the closing by nearly five months. (See Post of March 5, 2008). Parties should therefore understand that even smallest competitive overlap can trigger serious agency scrutiny and appreciate the attendant cost and delay resulting from a Second Request under the HSR Act. On January 25, 2008, the U.S. Court of Appeals for the Fifth Circuit denied Chicago Bridge’s Petition for Review of the FTC’s order requiring divestitures after Chicago Bridge acquired Pitts-Des Moines’ (“PDM”). See Chicago Bridge & Iron Co, N.V. v. FTC, No. 05-60192, 2008 WL 203802 (5th Cir., Jan. 25, 2008). Merging parties should be particularly concerned that the FTC initiated its investigation of the transaction after the HSR mandatory waiting period had expired. On September 12, 2000, Chicago Bridge and PDM made their HSR filings and the mandatory waiting expired without any HSR review by the antitrust agencies. More than 30 days after the filings (and thus after the HSR waiting period expired) but before closing, the FTC informed the parties that it had begun to investigate the potential competitive effects of the transaction. Nevertheless, in February, 2001, the parties closed the transaction, and in October 2001, the FTC issued its administrative complaint. Ultimately, Chicago Bridge was required to divest all of PDM’s assets. Notably, because the transaction closed, the Buyer — Chicago Bridge — assumed all of the antitrust risk in the transaction. Chicago Bridge paid $84 million for PDM’s assets and will have to sell them at fire sale prices. Thus, Buyers should be cautious in consummating transactions that may prove anticompetitive particularly during the pendency of an agency investigation. If the purchase agreement allows them to delay closing, they ought to consider doing so. “Buyer Beware: Consummating Non-HSR Reportable Transaction May Prove Costly In the End” (appearing in the Antitrust Litigator; attached) examines the risks that can arise from consummating a merger that turns out to be anticompetitive. Discussion(Bain&THL/Clear Channel); Buyer Beware: Consummating Non-HSR Reportable Transactions May Prove Costly in the End”