Home / HSR Review

Dec

22

Investment Funds Fined for Violating HSR Pre-Merger Notification Requirements

Posted by : Matthew Wild | On : December 22, 2008

Category: Antitrust, Consent Decrees, Government Investigations, HSR Review, U.S. Department of Justice (Antitrust Division)

Tags:, , , , , , , , ,

Antitrust Division’s press release:

“WASHINGTON — Two related investment funds will pay civil penalties totaling $800,000 to settle charges that they violated premerger reporting requirements, the Department of Justice announced today.

The Department’s Antitrust Division, at the request of the Federal Trade Commission, filed a civil lawsuit today in U.S. District Court in Washington, D.C., against ESL Partners L.P. and ZAM Holdings L.P. for violating the notification requirements of the Hart-Scott-Rodino (HSR) Act of 1976. At the same time, the Department filed a proposed settlement that, if approved by the court, will settle the charges. Under the terms of the settlement, ESL Partners has agreed to pay $525,000, and ZAM Holdings $275,000, in civil penalties.

ESL Partners, based in Greenwich, Conn., and ZAM Holdings, based in New York City, are investment funds with holdings in numerous companies. The investment decisions for both ESL Partners and ZAM Holdings were made by RBS Partners, of Greenwich.

According to the complaint, ESL Partners and ZAM Holdings failed to comply with the antitrust premerger notification requirements of the HSR Act before acquiring voting securities of AutoZone Inc., based in Memphis, Tenn., in September and October of 2004. As a result of these acquisitions, ESL Partners and ZAM Holdings each held AutoZone voting securities valued in excess of the $50 million HSR reporting threshold then in effect. The complaint alleges that ESL Partners was in violation of the HSR Act from Sept. 28, 2004, through Feb. 28, 2005, and that ZAM Holdings was in violation from Oct. 12, 2004, through March 2, 2005.

The Hart-Scott-Rodino Act of 1976, an amendment to the Clayton Act, imposes notification and waiting period requirements on individuals and companies over a certain size before they consummate acquisitions resulting in holding stock or assets above a certain value. The violations occurred when the HSR reporting threshold was $50 million. Since March 2005, the threshold has been adjusted annually to reflect changes in gross national product.

The Act permits a federal court, in a lawsuit brought by the Department, to assess a civil penalty of up to $11,000 for each day a person or company is in violation.”

This action shows the agencies’ vigilance in enforcing compliance with the HSR Act.  Unwary investment funds can violate the HSR Act when they begin to engage in sizeable transactions.  They have done so on many occassions.  Unlike the securities laws with which they are generally familar, the HSR Act requires the filing before acquiring the outstanding securities.  It is thus important for investmnet funds to obtain antitrust compliance counseling.

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:, , , , , , , , ,

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:, , , , , , ,

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:, , , , , , , ,

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:, , , , , , ,

 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

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

Tags:, , , , , , , , , , , , , , ,

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:, , , , , , , , ,

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.

Jul

25

The FTC Protects Vodka Drinkers

Posted by : Matthew Wild | On : July 25, 2008

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

Tags:, , , , , , , , , , ,

It appears that the antitrust agencies are more vigilant to protect the interests of vodka drinkers than beer drinkers. As explained in the June 6, 2008 Post, the Antitrust Division was not concerned that there would be negative effects on competition if Coors and Molson formed a joint venture. However, the FTC has taken the opposite view in a merger among spirit makers because it effectively would put Absolut and Stolichnaya under the control of one company. The buyer Pernot Ricard will gain control V&S Vin Spirit’s Absolut and has a distribution agreement that covers Stolichnaya, In analyzing the transaction, the FTC defined the market as super premium brands of vodka and claimed that consumers viewed Absolut and Stolichnaya as their top two choices. Without discussing market shares, the Analysis to Aid Public Comment asserts that post-merger the buyer will be able to increase the prices of super premium vodka. Under the consent agreement, Pernot Ricard must end its distribution agreement for Stolichnaya within 6 months. The press release and Analysis to Aid Public Comment are attached. FTC Press Release (Vodka); Analysis to Aid Public Comment (Vodka).

Jul

17

DOJ Requires Divestitures in Signature Flight Support’s Acquisition of Hawker Beechcraft’s Flight Support Services Business to Prevent a Monopoly

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

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

Tags:, , , , , , , ,

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.

Jun

30

HP Receives Antitrust Clearance to Acquire EDS

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

Category: Antitrust, HSR Review, Mergers and Acquisitions

Tags:, , , , , , , ,

According to Reuters, Hewlett Packard Co. received approval today of its $12.6 billion proposed acquisition of Electronic Data Services. Consummation of the transaction would make HP the second largest provider of technology services behind International Business Machines. The transaction is still subject to approval by the EU Competition Commission.