Tag Archive for "HSR" - Antitrust Commentary

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)

Tags:autozone, consent decree, ESL, fine, hart scott rodino, HSR, matthew wild, notification requirements, pre-merger, Zam

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.

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)

Tags:airlines, Antitrust, Antitrust Division, delat airlines, DOJ, HSR, matthew wild, northwest

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

DOJ and 13 States Sue to Protect Cattle Suppliers and Beef Consumers

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.

Aug

20

FTC Clears EA’s Acquisition of Take-Two

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

Category: Antitrust, FTC Actions, HSR Review, Mergers and Acquisitions, Section 7 (Clayton Act)

Tags:Antitrust, ea, electronic arts, federal trade commission, ftc, hart scott rodino, HSR, HSR Review, matthew wild, take-two

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

25

The FTC Protects Vodka Drinkers

Posted by : Matthew Wild | On : July 25, 2008

Category: Antitrust, Consent Decrees, FTC Actions, HSR Review, Mergers and Acquisitions, Relevant Markets, Section 7 (Clayton Act)

Tags:absolut, Antitrust, clayton act, ftc, hart scott rodino, HSR, matthew wild, pernot ricard, section 7, stolichnaya, v&s vin spirits, vodka

It appears that the antitrust agencies are more vigilant to protect the interests of vodka drinkers than beer drinkers. As explained in the June 6, 2008 Post, the Antitrust Division was not concerned that there would be negative effects on competition if Coors and Molson formed a joint venture. However, the FTC has taken the opposite view in a merger among spirit makers because it effectively would put Absolut and Stolichnaya under the control of one company. The buyer Pernot Ricard will gain control V&S Vin Spirit’s Absolut and has a distribution agreement that covers Stolichnaya, In analyzing the transaction, the FTC defined the market as super premium brands of vodka and claimed that consumers viewed Absolut and Stolichnaya as their top two choices. Without discussing market shares, the Analysis to Aid Public Comment asserts that post-merger the buyer will be able to increase the prices of super premium vodka. Under the consent agreement, Pernot Ricard must end its distribution agreement for Stolichnaya within 6 months. The press release and Analysis to Aid Public Comment are attached. FTC Press Release (Vodka); Analysis to Aid Public Comment (Vodka).

Jun

30

HP Receives Antitrust Clearance to Acquire EDS

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

Category: Antitrust, HSR Review, Mergers and Acquisitions

Tags:Antitrust, eds, electronic data services, hart scott rodino, hewlett-packard, hp, HSR, matthew wild, Mergers and Acquisitions

According to Reuters, Hewlett Packard Co. received approval today of its $12.6 billion proposed acquisition of Electronic Data Services. Consummation of the transaction would make HP the second largest provider of technology services behind International Business Machines. The transaction is still subject to approval by the EU Competition Commission.

Jun

21

DOJ Protects College Students from Potential Anticompetitive Effects of Textbook Publishers’ Merger

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).

Jun

06

DOJ Refuses to Protect Beer Drinkers from Miller/Coors Joint Venture

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

Category: Antitrust, HSR Review, Mergers and Acquisitions, Section 7 (Clayton Act), U.S. Department of Justice (Antitrust Division)

Tags:, Antitrust, beer, coors, Department of Justice, DOJ, HSR, joint venture, matthew wild, miller, molson

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

04

EA Grants FTC an Extension to Review Its Proposed Acquisition of Take-Two

Posted by : Matthew Wild | On : June 4, 2008

Category: Antitrust, FTC Actions, HSR Review, Mergers and Acquisitions

Tags:ea, electronic arts, federal trade commission, ftc, hart scott rodino, HSR, HSR Review, matthew wild, take-two

On June 4, 2008, Electronic Arts (video game maker) gave the FTC an extension of time under the HSR Act to review the potential competitive effects of its $2 billion proposed acquisition of Take-Two (maker of Grand Theft Auto). Under the agreement, EA must give the FTC 45 days’ notice of its intention to close. Parties often grant the Antitrust Division and FTC more time to review their transactions with the hope of convincing the agencies not to challenge the merger or to allow them to negotiate a remedy.

May

12

FTC Conditions Its Approval of Retail Farm Store Merger on Divestitures in Michigan and Maryland

Posted by : Matthew Wild | On : May 12, 2008

On May 5, 2008, the FTC conditioned its approval of Agrium’s $2.65 billion proposed acquisition of UAP Holding on divestitures on divestitures. The parties provide one-shopping for farms and farmers rely on these type of local stores for bulk fertilizer. Because of its weight, it does not make economic sense to ship these products more than 30 miles. Entry is difficult because of high sunk costs and the need to train personnel. Based on these dynamics, FTC believed that the parties’ overlapping stores in Croswell, Richmond, Imlay City, Vestaburg and Standish, Michigan and Girdletree, Maryland might give the combined company the ability to raise prices in those areas. Accordingly, the FTC required divestitures of one of the parties’ stores in these areas. The press release and analysis to aid public comment are attached.Agrium (Press Release);

Agrium (Analysis to Aid Public Comment)

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