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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)

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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

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)

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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

08

Second New York Criminal Trial Begins Against Marsh Executives

Posted by : Matthew Wild | On : December 8, 2008

Category: Antitrust, Criminal, Government Investigations, New York Cases, State Antitrust and Consumer Protection Claims, State Attorneys General

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On December 2, 2008, three Marsh executives went on trial in the Supreme Court of the State of New York (New York County) on charges of violating the Donnelly Act in connection with bid rigging of insurance policies.  As you may recall (and discussed on the February 22, 2008 Post), two Marsh executives were convicted on Donnelly Act violations after a 10 month trial.  These cases have been brought by the New York Attorney General.  Marsh paid $850 million to settle and another Marsh executive pleaded guilty.

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)

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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)

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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

30

Court Rejects DOJ’s Request for Prison Time for Two Defense Contractors

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

Category: Antitrust, Criminal, U.S. Department of Justice (Antitrust Division)

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In November 2008, the United States District Court for the District of Maryland sentenced two defense contractors to probation who had pleaded guilty in connection with a conspiracy to steal confidential bidding information from a competitor.  The conspiracy concerned contracts to supply the Department of Defense with jet fuel abroad.  In its press release announcing the guilty pleas (attached Cartwright Press Release), the Antitrust Division’s Criminal Section noted that the defendants pleaded guilty to offenses that had maximum prison sentences of 20 years — conspiracy to commit wire fraud by one defendant and conspiracy to commit wire fraud, defraud the United States and steal trade secrets by the other defendant.  The court rejected the government’s requests for prison time.  It noted that the defendants had otherwise been exemplary businessman and citizens and were pioneers in supplying fuel to newly opened routes in Eastern Europe.  They were responsible for opening aviation from throughout the world in  these far flung areas.  The defendants were represented by Richard Levitt, Esq. of Levitt & Kaizer, Ray Granger, Esq. of Granger & Associates and Gordon Mehler, Esq. of Law Offices of Gordon Mehler.

Nov

16

DOJ Loses Another Criminal Price Fixing Trial

Posted by : Matthew Wild | On : November 16, 2008

Category: Antitrust, Criminal, Section 1 (Sherman Act), U.S. Department of Justice (Antitrust Division)

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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

Google Abandons Deal with Yahoo in Response to Antitrust Concerns

Posted by : Matthew Wild | On : November 5, 2008

Category: Antitrust, Government Investigations, U.S. Department of Justice (Antitrust Division)

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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

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)

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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)

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 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.”