Dec

08

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

Oct

20

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

In In re Apple & AT&TM Antitrust Litigation, No. 07-CV-05152-JW (N.D. Cal. Oct. 1, 2008) (attached IPhone Decision), plaintiffs alleged that the arrangement in which the Apple IPhone worked exclusively with AT&TM not only for the initial two-year contract period but also for three additional years after their contracts expired with AT&TM violated Section 2 of the Sherman Act.  Plaintiffs also alleged that Apple’s restrictions on dowloadable applications for use on IPhones violated Section 2.  Plaintiffs alleged Section 2 claims of monopolization and attempted monopolization of the market for IPhone applications and monopolization, attempted monopolization and a conspiracy to monopolize the market for voice and data services to IPhone owners.  The Northern District of California held that there were cognizable relevant product markets limited to Apple IPhone customers in these aftermarkets.  The court distinguished cases in which customers voluntarily commit to a lock-in through a contract such as when a franchisee agrees to purchase certain products from its franchisor.  In this case, the Complaint alleged that the lock-in was created through deceit or unbeknownst to the customers at the time of purchase.  The Complaint alleged that the IPhone customers did not know that they could not unlock their IPhones from AT&TM service after the two-year commitment or  the limitation on downloadable applications.  This case is consistent with the Supreme Court’s approach in determining whether aftermarkets represent separate relevant product markets.  The key inquiry is whether the consumer knows or has reason to know of limitations in purchasing products or services in the afermarket before he becomes locked-in by the initial purchase.