Category: Section 7 (Clayton Act) - Antitrust Commentary

Mar

06

FTC Settles Challenge to Whole Foods’ Acquisition of Wild Oats

Posted by : Matthew Wild | On : March 6, 2009

Today the FTC announced a settlement with Whole Foods that requires Whole Foods to divest 32 supermarkets in 17 geographic markets. The FTC also required to Whole Foods to transfer Wild Oats’ intellectual property, including the “Wild Oats” name. The divestiture, which will have to be an FTC approved buyer, is intended to restore competition between these stores that was adversely affected by the acquisition. The FTC press release, agreement containing consent order and analysis to aid public comment are attached — FTC Press Release (Whole Foods), Whole Foods Consent Order, Whole Foods Analysis to Aid Public Comment.

The remedy in this case illustrates how rescission rather than divestiture is rare. The preference is to put the assets in the hands of a firm that is eager to run the business as opposed to a firm seeking to exit. Thus, it is in the seller’s interest to force consummation of the transaction as soon as legitimately possible. (Note that there are certain limited circumstances that will justify rescission where although legal, the parties gamed the system, see, e.g., FTC v. Elders Grain, 868 F.2d 901 (7th Cir. 1989 (Posner, J.)).

This merger has resulted in considerable litigation. Whole Foods defeated the FTC federal action for a preliminary injunction. That decision was reversed (see July 29, 2008 Post). Then on Whole Foods’ application for rehearing en banc, the original panel amended its decision to make clear that one judge did not join the opinion reversing the order below. With one judge dissenting, there was no opinion of the Court, which would have been binding on future panels, and thus there was no need for en banc review (see December 1, 2008 Post). The FTC had also imposed a harsh expedited schedule for its administrative proceeding and took the unusual step of appointing an FTC commissioner as the presiding judge. Whole Foods unsuccessfully challenged this process as a denial of due process in a plenary lawsuit it brought in federal court (see December 11, 2008 Post).

Jan

13

FTC Seeks Hold Separate Order on Remand Against Whole Foods

Posted by : Matthew Wild | On : January 13, 2009

Category: Antitrust, FTC Actions, Mergers and Acquisitions, Section 7 (Clayton Act)

Tags:Antitrust, clayton act, federal trade commission, ftc, hold separate, matthew wild, remand, section 7, whole foods, wild oats

On January 12, 2009, the FTC sought a hold separate order against Whole Foods on remand from the D.C. Circuit’s reversal of the lower court’s denial of a preliminary injunction. During the pendency of its administrative proceeding, the FTC seeks an order that enjoins Whole Foods from further integration of Wild Oats’ assets, rebranding of former Wild Oats stores and appointment of an independent trustee and management team to run the former Wild Oats stores. (Whole Foods Remand) It is questionable whether such relief would be effective to restore competition if for example, Wild Oats lost key employees, a loyal customer base and a distribution network. Prior coverage of the Whole Foods litigation appears on the July 29, 2008, December 1, 2008 and December 11, 2008 Posts. This remand proposal is likely to spark Whole Foods to seek expedited relief in its lawsuit against the FTC challenging the fairness and integrity of the FTC’s administrative process. (See December 11, 2008 Post) On December 12, 2008, the FTC has moved to dismiss the Complaint in that action contending that only a U.S. Court of Appeals has subject matter jurisdiction because Congress only granted those courts the power to review the FTC’s actions. (FTC Motion to Dismiss)

Dec

11

Whole Food’s Sues FTC to Enjoin Administrative Proceedings

Posted by : Matthew Wild | On : December 11, 2008

Category: Antitrust, FTC Actions, Section 7 (Clayton Act)

Tags:administrative proceedings, Antitrust, clayton act, due process, federal trade commission, ftc, matthew wild, preliminary injunction, scheduling order, section 7, supermarkets, whole foods, wild oats

On December 8, 2008, Whole Foods brought an action in federal court claiming that the FTC’s administrative process is unconstitutional as applied to it. (Whole Foods Complaint) Whole Foods claims that the FTC has prejudged the FTC’s challenge to its merger with Wild Oats. Whole Foods also claims that the Scheduling Order entered in the administrative proceedings is so expedited that it is impossible for it to complete discovery and be ready for trial and therefore represents a denial of due process. Whole Foods seeks to have the FTC’s challenge heard in federal court and bypass the administrative process. One would think that Whole Foods is ensured of due process because it can file a petition for review of an adverse administrative decision before any United States Court of Appeals and if it was denied due process, the administrative decision would be vacated. This is the latest saga in the Whole Foods litigation. While Whole Foods defeated the FTC’s federal court action for a preliminary injunction in aid of the administrative process to enjoin consummation of the merger, the D.C. Circuit reversed. The transaction had closed but the D.C. Circuit remanded to the action to the district court to inquire whether there was any way to restore competition notwithstanding consummation. After Whole Foods sought reharing en banc, the original panel amended its decision to make it on behalf of a single judge with one judge concurring in the result and the other judge dissenting. This effectively mooted any need for en banc review because there was no decision of the Court which would have been binding on future panels. See Posts of December 1 and July 29, 2008 for more coverage of FTC v. Whole Foods.

Dec

01

Whole Food’s Denied Rehearing But D.C. Circuit Amends Its Earlier Decision

Posted by : Matthew Wild | On : December 1, 2008

Category: Antitrust, FTC Actions, HSR Review, Mergers and Acquisitions, Section 7 (Clayton Act)

Tags:Antitrust, clayton act, federal trade commission, ftc, matthew wild, preliminary injunction, section 7, supermarkets, whole foods, wild oats

On November 21, 2008, the United States Court of Appeals for the D.C. Circuit denied rehearing and rehearing en banc in FTC v. Whole Foods with Judge Kavanaugh dissenting. Judge Kavanaugh had dissenting in the original decision. The original opinion is linked to the July 29, 2008 Post, which also analyzes it. On November 21, the court also issued a revised and amended decision. The revision and amended decision is particularly interesting because it clarifies that Judge Tatel concurred only in the judgment and not in Judge Brown’s opinion. (Whole Food’s Amended Decision ) As a result, it has become clear that Judge Brown’s opinion has no binding affect on the rest of the Court. Judges Ginsburg and Sentelle voted against rehearing en banc “because, there being no opinion for the Court, that judgment sets no precedent beyond the precise facts of this case. See King v. Palmer, 950 F.2d 771, 783 (D.C. Cir. 1991) (en banc) (‘without implicit agreement’ among a majority of the judges ‘we are left without a controlling opinion’).” (Whole Food’s Rehearing Denial)

Nov

30

FTC Challenges Proposed Merger Between Firms that Provide Electronic Systems to Estmate the Cost of Collision Repairs

Posted by : Matthew Wild | On : November 30, 2008

Category: Antitrust, FTC Actions, HSR Review, Mergers and Acquisitions, Section 7 (Clayton Act)

Tags:Antitrust, ccc information, clayton act, ftc, matthew wild, merger, mitchell international, section 7

On November 25, 2008, the FTC issued an administrative complaint challenging the proposed merger between CCC Information Services and Mitchell International. The FTC alleges that “the merger would hinder competition in the market for electronic systems used to estimate the cost of collision repairs, known as “estimatics,” and the market for software systems used to value passenger vehicles that have been totaled, known as total loss valuation (TLV) systems. The FTC’s administrative complaint alleges that the merger, which is valued at $1.4 billion, would harm insurers, repair shops and, ultimately, U.S. car owners by reducing from three to two the number of competitors in the two related businesses.” FTC CCC-Mitchell Press Release The FTC claims that with the existence of high barriers to entry, the merger would allow the combined firm to raise prices to its customers unilaterally as well as allow the remaining two firms to collude and raise prices. Absent extraordinary circumstances, the agencies will challenge mergers to duopoly. The posture of this challenge is interesting. The FTC issued the administrative complaint and approved commencement of action in federal court to seek a temporary restraining order and preliminary injunction but has not commenced such an action. The parties must have consented to delay closing or the HSR waiting must not have yet expired. These actions are usually brought at the very end of the waiting period and parties do not routinely consent to delay their mergers. It would be interesting to know what happened here.

Nov

03

DOJ Uses Familiar Delay Tactics to Try to Gain an Unfair Advantage in the Beef Packing Merger Litigation

Posted by : Matthew Wild | On : November 3, 2008

Category: Antitrust, HSR Review, Section 7 (Clayton Act), U.S. Department of Justice (Antitrust Division)

Tags:, Antitrust, clayton act, consolidated, hsr act, matthew wild, preliminary injunction hearing, section 7, trial

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

DOJ Clears the Merger of Northwest and Delta Airlines

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

Category: Antitrust, HSR Review, Mergers and Acquisitions, Section 7 (Clayton Act), U.S. Department of Justice (Antitrust Division)

Tags:airlines, Antitrust, Antitrust Division, delat airlines, DOJ, HSR, matthew wild, northwest

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

DOJ and 13 States Sue to Protect Cattle Suppliers and Beef Consumers

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.

Aug

20

FTC Clears EA’s Acquisition of Take-Two

Posted by : Matthew Wild | On : August 20, 2008

Category: Antitrust, FTC Actions, HSR Review, Mergers and Acquisitions, Section 7 (Clayton Act)

Tags:Antitrust, ea, electronic arts, federal trade commission, ftc, hart scott rodino, HSR, HSR Review, matthew wild, take-two

The Wall Street Journal reported today that the FTC has informed Electronic Arts and Take-Two Interactive Software that is has no objection to the combination of the companies. As you may recall, on June 4, 2008 the parties agreed to give the FTC an additional 45-days to review the transaction under the HSR Act. The clearance might be too late. EA’s tender offer expired on August 18, 2008. The Wall Street Journal reports, however, that EA is still is exploring ways to acquire Take-Two.

Aug

12

FTC Approves Final Consent Order Against Talx With Minor Modifications

Posted by : Matthew Wild | On : August 12, 2008

Category: Antitrust, Consent Decrees, FTC Actions, Section 7 (Clayton Act)

Tags:adp, ceridian, clayton act, convergys, ftc, matthew wild, section 7, talx, ucm, unemployment compensation management, verification of income and employment, voie

On August 8, 2008, the FTC approved its preliminary consent order (with minor, immaterial modifications) from April 28, 2008 against Talx Corporation that remedied Talx’ anticompetitive acquisitions of competitor. See April 30, 2008 Post. As explained it that Post, this FTC action was of interest to practitioners because of the nature of Talx’ conduct and the use of a conduct remedy rather than divestitures to remedy acquisitions that violated the Section 7 of the Clayton Act.

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