Google announced today that Arthur D. Levinson resigned from its board of directors. However, Mr. Levinson remains on Apple’s board of directors. Mr. Levinson was the remaining common director on the Google and Apple boards. As reported in the June 3, 2009 Post, Eric D. Schmidt, Google’s CEO, resigned from Apple’s board amid antitrust concerns raised by the FTC. The June 3 Post noted that it was unclear whether the FTC would require Mr. Levinson’s resignation from one of the boards. Apparently, the FTC did just that as FTC Chariman Jon Leibowitz said, “Google, Apple and Mr. Levinson should be commended for recognizing that overlapping board members between competing companies raise serious antitrust issues, and for their willingness to resolve our concerns without the need for litigation.” Chairman Leibowitz further warned, “[b]eyond this matter, we will continue to monitor companies that share board members and take enforcement actions where appropriate.” It seems that the FTC is warning corporations that it plans to take an increased interest in enforcing section 8 of the Clayton Act, which prohibits interlocking directorates among competitors under some circumstances. That statute has not been enforced with much frequency. Nevertheless, antitrust practitioner always have to be concerned that the existence of common directors could be used as evidence of a conspiracy between the two corporations in violation of the Sherman Act because it provides an opportunity to conspire. Accordingly, antitrust practitioners know to advise against such overlaps among corporations vulnerable to Sherman Act litigation without regard to section 8 of the Clayton Act.
Oct
13
Posted by : | On : October 13, 2009
Sep
30
Posted by : | On : September 30, 2009
As noted in the June 29, 2009 Post, the Supreme Court granted certiorari to review the Seventh Circuit’s decision in American Needle v. Nat’l Football League. As explained in the September 4, 2008 Post, American Needle applied the Copperweld doctrine to a sports league’s joint licensing scheme for the first time. In so doing, it affirmed summary judgment in favor of the NFL, its teams and Reebok in an antitrust challenge to an exclusive license of team names and logos to Reebok for use on headwear. (The decision is linked to the September 4 Post). As explained in Wild, et al., “Private Equity Groups Under Common Legal Control Constitute a Single Enterprise Under the Antitrust Laws,” 3 NYU Journal of Law and Business 231, 237 and n.31 (attached under articles above), that doctrine treats two or more firms that are under common ownership or have a unity of interest in a common course of action as a single firm incapable of conspiring or otherwise acting collectively under the antitrust laws.
In their amici curiae brief, the government urges reversal. It argues that the Seventh Circuit extended the Copperweld doctrine in a manner inconsistent with prior precedent — e.g., Texaco Inc. v. Dagher, 547 U.S. 1 (2006), in which the Supreme Court applied the rule of reason to a price-setting joint venture and NCAA v. Board of Regents, 468 U.S. 85 (1984), in which the Supreme Court applied a “quick look” to a NCAA restriction on each individual college’s right to broadcast their football games. While the government conceded that the league should be entitled to Copperweld immunity under circumstances in which the teams need to cooperate such as to produce games, the licensing of NFL team logos is not one of them. Indeed, the government observed that the NFL joint licensing scheme was similar to the type of scheme under review in Broadcast Music, Inc. v. CBS, 441 U.S. 1 (1979). In BMI, the Supreme Court applied the rule of reason to a joint venture in which composers created a clearinghouse to sell a blanket license to works by more than one of them. The American Antitrust Institute and Consumer Federation of America also filed a brief as amici curiae urging reversal. Their brief and the government’s brief are linked below. DOJ and FTC Brief; AAI Brief
Aug
03
Posted by : | On : August 3, 2009
Eric Schmidt, Google’s CEO, resigned today from Apple’s board of directors because the increased competition between Google and Apple raised conflicts for him that precluded his participation in many of Apple’s business decisions. It is unclear whether his resignation was in response to an inquiry by the FTC into Google’s and Apple’s interlocking directorates first reported on May 5, 2009 by the New York Times. Section 8 of the Clayton Act forbids competitors from having common directors and has been interpreted broadly. Nevertheless, it is a toothless statute that is rarely enforced and imposes no penalties for violations. The offending director must simply resign from one board. In this case, it is unclear whether the FTC has undertaken to enforce the statute as Arthur Levison remains on the boards of Google and Apple. His presence on both boards would seem to violate Section 8. It should be noted, however, that the genuine issue that can arise from interlocking directorates is that it can provide circumstantial proof of a conspiracy in violation of Section 1 of the Sherman Act. If the two firms engage in parallael conduct, for example, plaintiffs might allege that the companies had an opportunity to conspire through the common directors. Thus, antitrust practitioners advise companies to avoid interlocking directorates where meaningful competition between the two companies exists.
Jan
13
Posted by : | On : January 13, 2009
On January 12, 2009, the FTC sought a hold separate order against Whole Foods on remand from the D.C. Circuit’s reversal of the lower court’s denial of a preliminary injunction. During the pendency of its administrative proceeding, the FTC seeks an order that enjoins Whole Foods from further integration of Wild Oats’ assets, rebranding of former Wild Oats stores and appointment of an independent trustee and management team to run the former Wild Oats stores. (Whole Foods Remand) It is questionable whether such relief would be effective to restore competition if for example, Wild Oats lost key employees, a loyal customer base and a distribution network. Prior coverage of the Whole Foods litigation appears on the July 29, 2008, December 1, 2008 and December 11, 2008 Posts. This remand proposal is likely to spark Whole Foods to seek expedited relief in its lawsuit against the FTC challenging the fairness and integrity of the FTC’s administrative process. (See December 11, 2008 Post) On December 12, 2008, the FTC has moved to dismiss the Complaint in that action contending that only a U.S. Court of Appeals has subject matter jurisdiction because Congress only granted those courts the power to review the FTC’s actions. (FTC Motion to Dismiss)
Dec
11
Posted by : | On : December 11, 2008
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
01
Posted by : | 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)
Aug
20
Posted by : | On : August 20, 2008
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
29
Posted by : | 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
09
Posted by : | On : June 9, 2008
On June 6, 2008, Inova Health System announced that it is has abandoned its merger plans with Prince William Health Systems. The FTC had commenced an action in the United States District for the Eastern District of Virginia on May 12, 2008, in which it sought a preliminary injunction to block the merger during the pendency of its adminstrative proceeding. After the motion for a preliminary injunction had been submitted, the hospitals’ abandoned their merger plans. Abandoning merger plans after litigating through a preliminary injunction hearing is rare. The parties must have incurred millions of dollars in legal fees and a decision on the injunction was due in only a month. If the hospitals had prevailed in district court and merged, it is possible that the FTC would have dropped its administrative challenge. The administrative proceedings in this case also were unusual because the FTC appointed one of its Commissioners (Thomas Rosch) to act as the administrative judge.