Oct

29

Posted by : Matthew Wild | 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 : Matthew Wild | 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.

Jul

29

Posted by : Matthew Wild | On : July 29, 2008

On July 25, 2008, the D.C. Circuit reversed summary judgment in favor of the government that denied appellant’s Freedom of Information Act request. Stolt-Nielsen Transportation Group Ltd. v. United States, Nos. 07-5191, 07-5192 2008 WL 2853214 (D.C. Cir. July 25, 2008) (attached Stolt v. U.S.). The appellant (Stolt-Nielsen) had sought the Antitrust Division’s amnesty agreements with other recipients that were based on the model that the Antitrust Division used in the early days of the program. Stolt limited its request to allow for redaction of the names of companies and individuals from the request. The amnesty program allows the first company or individual that self-reports an antitrust violation to receive immunity from prosecution except in extraordinary circumstances. Congress also has enacted legislation that reduces an amnesty recipient’s exposure from treble to single damages in private antitrust litigation. Thus, amnesty can be invaluable to a company that learns of criminal antitrust misconduct of its officers. The D.C. Circuit reversed the district court that held that the information sought by Stolt was not reasonably segregable because the district court did not make any findings to support its decision. The D.C. Circuit remanded the case for the district court to make findings consistent with its opinion. As you may recall, Stolt had been in litigation over enforcement of its amnesty agreement ultimately prevailing at trial. The Antitrust Division revoked the agreement claiming that Stolt breached it by continuing to violate the antitrust laws after entering into the agreement. The Eastern District of Pennsylvania disagreed and dismissed the indictment. (See Mach 15, 2008 Post, “DOJ’s Antitrust Division (Criminal Section) Suffers Four Major Losses Within the Last Year.”

Jul

17

Posted by : Matthew Wild | On : July 17, 2008

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.

Jul

07

Posted by : Matthew Wild | On : July 7, 2008

On July 1, 2008, the Antitrust Division announced that VISA agreed to rescind a rule that required merchants to give VISA debit cards superior treatment than non-VISA debit transactions from VISA branded cards. Under the rule, VISA allowed merchants to waive the signature and PIN requirements for transactions of less than $25 on VISA debit cards but required the entry of a PIN or a signature on a VISA branded card for a non-VISA debit transaction. With a 70% share of the debit card market, this hurdle may have given VISA an unfair competitive advantage. This practice had become the subject of investigations by the Antitrust Division and the District of Columbia, New York and Ohio attorneys general. It is not surprising that VISA is gun-shy in light of its multi-billion settlements in private antitrust litigation. The Antitrust Division’s press release is attached. DOJ Press Release (VISA)

Jul

02

Posted by : Matthew Wild | On : July 2, 2008

According to Reuters, the Antitrust Division has opened an investigation into the proposed revenue sharing agreement between Yahoo and Google. Under the agreement, Yahoo will allow Google to put advertisements on its site in exchange for a share of the revenue. Google and Yahoo are reported to have shares of about 80% and 16% respectively of online advertising revenue. The obvious concern is whether the agreement will reduce the incentives for Google and Yahoo to compete and therefore, violate Section 1 of the Sherman Act. Yahoo may have an incentive to raise its prices knowing that under the agreement, it will share in any lost business to Google. The Antitrust Division reportedly has issued civil investigative demands not just to Google and Yahoo but to many other players in the industry. Although not required to do so, Google and Yahoo agreed not to go forward with their collaboration until the Antitrust Division has an opportunity to review the potential effects on competition. The parties have attempted to shrug-off the investigation as expected. But it certainly is not routine. The Antitrust Division does not take issuance of CIDs lightly.

Jun

26

Posted by : Matthew Wild | On : June 26, 2008

On June 26, 2008, the Antitrust Division announced that Air France (and KLM Royal Dutch Airlines), Cathay Pacific, Martinair Holland and SAS Cargo Group entered into plea agreements for their participation in the cartel to fix air cargo rates. They agreed to fines of more than $504 million. Air France-KLM agreed to pay $350 million — the second largest fine for an antitrust conviction in U.S. history. Cathay agreed to a $60 million fine; Martinair agreed to a $42 million fine; and SAS agreed to a $52 million fine. So far, the Antitrust Division has obtained $1.27 billion in fines from guilty pleas by cartel participants. This is the largest amount of fines ever imposed as a result of a criminal antitrust investigation. The Antitrust Division’s press release is attached.  DOJ Press Release (International Cargo Cartel)

Jun

24

Posted by : Matthew Wild | On : June 24, 2008

On June 23, 2008, the Supreme Court granted certiorari in Pacific Bell Telephone Co. v. Linkline Communications, No. 07-512, 2008 WL 2484729 (U.S. June 23, 2008). In a highly unusual public disagreement, the Antitrust Division had filed an amicus curiae supporting certiorari while the FTC had issued a statement opposing certiorari. More on this disagreement is set forth in the June 3, 2008 post.

Jun

21

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).

Jun

15

Posted by : Matthew Wild | On : June 15, 2008

On June 2, 2008, the Antitrust Division’s Criminal Section lost a four-day jury trial in the District of Columbia. In United States v. Keitt, 07-CR-041, the defendant was accused of paying a former associate director of the TSA in exchange for favorable treatment in overseeing and administering his company’s contract. The jury acquitted in less than one day. This is the fifth major blow to the Criminal Section within the last year. The March 15, 2008 post discusses the Criminal Section’s four other defeats within the last twelve months — three acquittals after trial and the denial of extradition by the U.K. House of Lords.