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

Today, the D.C. Circuit reversed the district court’s decision that denied a preliminary injunction in the Whole Foods/Wild Oats merger. FTC v. Whole Foods Markets, Inc., No. 07-5276 (D.C. Cir. July 29, 2008) (Whole Foods decision). Crucial to the decision was the D.C. Circuit’s holding that the FTC might have been able to establish a submarket consisting of premium natural and organic supermarkets.

The case was remanded to the district court and one of the questions was whether there was some remedy available during the pendency of the FTC administrative proceedings. The D.C. Circuit noted that the FTC complained of adverse effects on competition in only eighteen different local markets. The D.C. Circuit also noted that neither party discussed whether sufficient distribution facilities were available for Wild Oats to remain a viable competitor and if only one Wild Oats store can re-open that would be better than nothing. The D.C. Circuit suggested a hold separate order, which seems to imply that the assets would be carved out and transferred from Whole Foods to a trustee. This begs the question, however, of who would (and could) manage the store(s) independent of Whole Foods.

Ultimately, it seems like Whole Foods can expect to lose the administrative proceedings. If it does, Whole Foods may have to divest stores in these markets. The Supreme Court long ago held that divestiture is the preferred remedy. Neither the courts nor the agencies favor rescission.

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).

May

05

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)

Mar

05

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

March 4, 2008. On October 11, 2007, Cookson Group plc — a U.K. company — entered into an agreement to purchase Foseco plc – a U.K. company — for about $1 billion. Both companies manufacture isotstatically press carbon ceramic products (“CBCs”) in North America and sell them throughout the United States. CBCs are used in the continuous casting steelmaking process. The parties’ 2006 CBC sales in the U.S. were $75 million and $4 million, respectively. The Antitrust Division alleged relevant product markets narrower than CBCs generally — namely, laddle shrouds and stopper rods. The Antitrust Division alleged a relevant geographic market of North America because foreign producers are at a competitive disadvantage. They have higher delivered costs and greater lead time. Rather than providing market share and HHI information for each relevant market, the Antitrust Division simply alleged that post-merger the parties would have a combined market share in the laddle shrouds and stopper rods markets of 75% and the markets would have an HHI of more than 6000 with a delta of 700. The Antitrust Division alleged high entry barriers because of the high costs of manufacturers of other CBCs to switch to the manufacture of laddle shrouds and stopper rods in response a small but significant non-transitory price increase. Accordingly, the Antitrust Division required divestiture of the overlapping assets. This action demonstrates the Antitrust Division’s vigilance in catching small competitive overlaps. Foseco had only $4 million in annual sales of CBCs in North America. Yet the Antitrust Division caught the potential competitive harm and required a remedy. The DOJ Press Release and Competitive Impact Statement are attached. DOJ Press Release (Cookson);Competitive Impact Statement (Cookson)

Feb

28

Posted by : Matthew Wild | On : February 28, 2008

February 13, 2008.  On November 16, 2006, Bain Capital and Thomas H. Lee Partners (“THL”) entered into an agreement to purchase a 70% interest in Clear Channel Communications for $28 billion.  By the time that the transaction was scheduled to close, Bain and THL also would have passive equity interests in two competing radio operators – Cumulus Media Partners (“CMP”) and Univision Communications.  Notwithstanding that the equity interests would be passive and with respect to Univision would be only 14%, the Antitrust Division alleged that the overlap between these competitors would result in higher prices for radio advertising and Spanish-language radio advertising in the geographic markets in which they compete.  Accordingly, the Antitrust Division conditioned approval of the transaction on divestiture of the competing assets.  Attached is a more in depth discussion of the transaction and Antitrust Division’s competitive concerns.  Discussion(Bain&THL/Clear Channel)  The DOJ Press Release and Competitive Impact Statement also are attached.  DOJ Press Release (Clear Channel)Competitive Impact Statement (Clear Channel)