Jun

15

Posted by : Matthew Wild | On : June 15, 2008

On June 2, 2008, the Antitrust Division’s Criminal Section lost a four-day jury trial in the District of Columbia. In United States v. Keitt, 07-CR-041, the defendant was accused of paying a former associate director of the TSA in exchange for favorable treatment in overseeing and administering his company’s contract. The jury acquitted in less than one day. This is the fifth major blow to the Criminal Section within the last year. The March 15, 2008 post discusses the Criminal Section’s four other defeats within the last twelve months — three acquittals after trial and the denial of extradition by the U.K. House of Lords.

Jun

06

Posted by : Matthew Wild | On : June 6, 2008

On June 5, 2008, the Antitrust Division issued a press release advising that it was closing its investigation into the potential anticompetitve effects from a joint venture between SABMiller plc (Miller) and Molson Coors Brewing Company to combine their operations in the United States. Although it did not provide any quantitative data, the Antitrust Division stated that based on information it received during its eight-month investigation from a wide-range of industry participants, it concluded that no adverse effect on competition would arise from the combination. Indeed, the Antitrust Division credited the parties’ efficiencies claims — noting that they were “verifiable and specifically related to the transaction and include large reductions in variable costs that are likely to have a beneficial effect on prices.” Thus, they met criteria set forth in the Merger Guidelines. Clearance of a merger based in large part on efficiencies is unusual. As a general matter, efficiencies are used by the parties to explain that there is no anticompetitive motive for the merger. Here, the parties were able to obtain much more credit for their efficiencies. Where beer drinkers are concerned, however, Antitrust Division did not note whether there would be a decrease in quality. Indeed, it is possible that the beer companies might rationalize brands to obtain efficiencies. Do loyalists to, for example, Molson Dry, have anything to fear? The Antitrust Division’s press release is attached. DOJ Press Release (Miller/Coors)

Jun

03

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

On May 23, 2008, the FTC issued a statement explaining its reasons for its decision not to join the DOJ’s brief that seeks Supreme Court review of LinkLine Comm’n v. Pacific Bell Telephone Co., 503 F.3d 876 (9th Cir. 2007). The FTC “disagree[d] with DOJ’s analysis, and … [believed that] this case does not appear to be worthy of review at this time.” FTC Statement at 1. The FTC recognized that “[t]he Ninth Circuit is unquestionably correct: … claims of a predatory price squeeze in a partially regulated industry remain viable.” Id., at 3. The FTC also believed that because the Ninth Circuit’s decision resolved a motion to dismiss, it was premature for Supreme Court review. The lower court had yet to decide the appropriate measure of cost for the input. Therefore, the Supreme Court could not opine on this issue and any decision would be of limited value. The FTC Statement is attached. FTC Statement (linkLine)

May

28

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

On May 27, 2008, the Antitrust Division settled its litigation against the National Association of Realtors (“NAR”) pending in the United States District Court for the Northern District of Illinois. The Antitrust Division explained the nature of challenge as follows: “[t]he first rule challenged by the Department required MLSs to permit traditional brokers to withhold their listings from VOWs [virtual office websites] by means of an ‘opt out.’ NAR does not permit brokers to withhold their listings from traditional broker members of an MLS. Many local MLSs adopted NAR’s policy before NAR suspended its policy during the Department’s investigation. In one market in which the MLS adopted the policy, all brokers withheld their listings from the one VOW in the community, which was then forced to discontinue its popular website. The second rule prevented a broker from educating customers about homes for sale through a VOW and then referring those customers (for a referral fee) to other brokers, who would help customers view homes in person and negotiate contracts for them. Some of the VOWs that focused on referrals also passed along savings to consumers as a result of increased efficiencies.” The consent decree (if approved under the Tunney Act) will require NAR to treat internet-based brokers the same as other brokers on the MLS and rescind these rules. Notably, the Antitrust Division and FTC have been aggressive in promoting competition among real estate brokers. They have obtained a number of settlements against real estate broker associations that had limited the ability of internet brokers to compete and have urged state legislatures not enact legislation that would have the same effect. The press release and proposed consent decree are attached.  NAR (Proposed Consent Decree); NAR (DOJ Press Release)

Apr

22

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

The Antitrust Division (Criminal Section) has been busy lately. On April 19, the Criminal Section obtained plea agreements in two separate investigations. Today, the Criminal Section announced the unsealing of an indictment in the United States District Court for the Northern District of California. The indictment alleges that defendants agreed to have one company withdraw from bidding to supply TACOM night vision goggles to a military procurement unit for Iraq. The indictment charges wire fraud, conspiracy to commit wire fraud and money laundering. Notably absent is a charge for violating Section 1 of the Sherman Act. The failure to charge such an offense usually indicates that no actual bid was rigged. The March 15, 2008 Post discusses the Criminal Section’s spotty trial record over the last year.

Mar

24

Posted by : Matthew Wild | On : March 24, 2008

Three recent developments serve as cautionary tales to parties to prospective transactions. These actions serve to remind practitioners that there is a genuine possibility of agency action even in cases where the buyer has only a minority ownership interest in a company that competes with the target; the value of the overlapping assets represent less than one percent of the transaction’s value; and the transaction has closed without any HSR review. In Bain’s and THL Partner’s (“THL”) bid to acquire acquire Clear Channel, the Antitrust Division required, among other things, divestiture by THL Partners of its passive 14% equity interest in a company that competes with Clear Channel because it was concerned that THL would seek to reduce competition between the two parties post-merger. (See Post of February 28, 2008 and attached description). In the Cookson/Foseco transaction, the Antitrust Division required divestitures worth about $4 million out of a $1 billion transaction. Although the monetary value of the divestitures was relatively minimal, the Antitrust Division’s HSR review appears to have delayed the closing by nearly five months. (See Post of March 5, 2008). Parties should therefore understand that even smallest competitive overlap can trigger serious agency scrutiny and appreciate the attendant cost and delay resulting from a Second Request under the HSR Act. On January 25, 2008, the U.S. Court of Appeals for the Fifth Circuit denied Chicago Bridge’s Petition for Review of the FTC’s order requiring divestitures after Chicago Bridge acquired Pitts-Des Moines’ (“PDM”). See Chicago Bridge & Iron Co, N.V. v. FTC, No. 05-60192, 2008 WL 203802 (5th Cir., Jan. 25, 2008). Merging parties should be particularly concerned that the FTC initiated its investigation of the transaction after the HSR mandatory waiting period had expired. On September 12, 2000, Chicago Bridge and PDM made their HSR filings and the mandatory waiting expired without any HSR review by the antitrust agencies. More than 30 days after the filings (and thus after the HSR waiting period expired) but before closing, the FTC informed the parties that it had begun to investigate the potential competitive effects of the transaction. Nevertheless, in February, 2001, the parties closed the transaction, and in October 2001, the FTC issued its administrative complaint. Ultimately, Chicago Bridge was required to divest all of PDM’s assets. Notably, because the transaction closed, the Buyer — Chicago Bridge — assumed all of the antitrust risk in the transaction. Chicago Bridge paid $84 million for PDM’s assets and will have to sell them at fire sale prices. Thus, Buyers should be cautious in consummating transactions that may prove anticompetitive particularly during the pendency of an agency investigation. If the purchase agreement allows them to delay closing, they ought to consider doing so. “Buyer Beware: Consummating Non-HSR Reportable Transaction May Prove Costly In the End” (appearing in the Antitrust Litigator; attached) examines the risks that can arise from consummating a merger that turns out to be anticompetitive. Discussion(Bain&THL/Clear Channel); Buyer Beware: Consummating Non-HSR Reportable Transactions May Prove Costly in the End”

Mar

15

Posted by : Matthew Wild | On : March 15, 2008

In March 2008, the Antitrust division (Criminal Section) lost two price-fixing cases. On March 7, 2008, after an 11-day trial, Judge Phyllis Hamilton of the United States District Court for the Northern District of California declared a mistrial in United States v. Swanson because of a hung jury (which voted 10-2 for acquittal). The Antitrust Division has decided not to re-try Swanson. Charles Swanson, a former U.S. executive of Hynix Semiconductor, was the only defendant to go to trial in the cartel prosecutions of DRAM manufacturers. Four corporations (Samsung, Hynix, Infineon and Elpida Memory) and 16 individuals pleaded guilty. Fines exceeded $730 million and individual prison sentences ranged from 3 to 10 months. John Barthko of Barthko Zankel Tarrant & Miller represented Swanson. On March 12, 2008, the U.K. House of Lords declined to extradite Ian Norris, the former CEO of Morgan Crucible who the Antitrust Division (Criminal Section) had indicted for price-fixing in connection with electrical carbon cartel. Price-fixing was not a crime in the U.K. at the time that Norris was indicted and, therefore, Norris was not subject to extradition for the offense. To avoid that obstacle, the Antitrust Division also charged Norris with obstruction of justice and sought his extradition on that charge. Norris is subject to further proceedings and potential extradition on the obstruction charge. He was represented by Lawrence Byrne (Linklaters LLP) in the United States and Alistair Graham (White & Case LLP) in the U.K. This is the fourth recent blow to the Antitrust Division’s Criminal Section. On November 30, 2007, the United States District Court for the District of Delaware dismissed a price-fixing indictment against Stolt-Nielsen holding that the Antitrust Division breached its amnesty agreement. See United States v. Stolt-Nielsen S.A., 524 F. Supp. 2d 609 (E.D. Penn 2007). Solt was represented by Mark Gidley and Chris Curran (White & Case LLP). On July 19, 2007, Stora Enso North America was acquitted of price-fixing in the United States District Court for the District of Connecticut. The jury returned its verdict in less than two hours.

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

21

Posted by : Matthew Wild | On : February 21, 2008

February 19, 2008.  The Antitrust Division conditioned approval of Thomson Corporation’s $17 billion acquisition of Reuters Group PLC on divestitures of financial datasets and licensing of related intellectual property.  Thomson and Reuters compete head-to-head in providing three types of financial data used by investment professional to make investment decision.  The Antitrust Division analyzed three relevant product markets — fundamentals data, earning estimates data and aftermarket research reports.  The parties combined market shares post-merger would have been more than 50 percent and up to 90 percent.  The Antitrust Division required Thomson to sell the relevant datasets and license its relevant intellectual property to a suitable buyer.  The consent agreement contains a hold separate provision but did not require the parties to “fix-it-first.”  The DOJ and EU Competition Commission cooperated in their investigations.  The EU required different remedies that had no bearing in the U.S.   Attached are the Antitrust Division’s press release and Competitive Impact Statement. DOJ Press Release (Thomson) Competitive Impact Statement (Thomson)