ANTITRUST ALERT
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
DOJ Developments
Subscribe to DOJ Developments's Posts

Auction Rigger Enters Guilty Plea

by | Nov 11, 2013 |

A thirty-seventh individual pleaded guilty to participating in a conspiracy to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California.  The guilty plea, entered on Monday, November 4, is yet another victory for the Department of Justice (DOJ) Antitrust Division in its ongoing investigations into a bid rigging and mail fraud conspiracy that took place from 2007 to 2011.

According to the DOJ, the conspirators arranged winning bidders for specific public real estate foreclosure auctions in several California counties.  After acquiring the properties at sub-competitive prices, the conspirators then conducted a second, private auction only open to members of the bid rigging ring.  The difference in the private auction price and public auction price could then be used for payoffs to the conspiracy members.  Had the public auctions been competitive and free from bid rigging, however, that same money taken by the conspiracy would have been used to pay off the mortgage, the debt holders of, and sometimes even the owners of the properties being foreclosed.

This investigation highlights the government’s increased focus on rooting out financial crimes as part of its larger economic recovery plan.  In particular, the interagency Financial Fraud Enforcement Task Force, established by President Obama in 2009, has used the “broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud” in financial markets and those hit hardest by the recession.



read more

Support for Airlines Merger Grows

by | Oct 25, 2013 | ,

Mayors from Charlotte, Chicago, Dallas, Fort Worth, Philadelphia, Phoenix and Miami-Dade County wrote to Attorney General Eric Holder on Wednesday, urging him to allow American Airlines Inc. and U.S. Airways Group Inc. to merge.  The mayors encouraged the Justice Department to “reconsider [the] ill-conceived lawsuit,” and asserted that the deal would benefit both consumers and their respective communities where the largest hubs for the two airlines are located.  “Without this merger,” the letter continued, “American and U.S. Airways will be at a permanent competitive disadvantage to Delta and United, each of which has been allowed to build superior route networks through mergers that were cleared by the Justice Department.”  The letter comes one week after 68 House Democrats, led by legislators from Texas and Arizona – home to American and U.S. Airways headquarters, respectively – wrote a similar letter of support to President Barack Obama, pressing him to call off the lawsuit.  The Justice Department and seven state Attorneys General sued to block the $11 billion merger back in August, but the Texas Attorney General dropped out of the lawsuit earlier this month.



read more

Assistant Attorney General Addresses Antitrust Remedies in First Formal Remarks

by | Oct 16, 2013 | , ,

On September 25, 2013, Assistant Attorney General Bill Baer gave his first formal remarks since becoming head of the Antitrust Division at the United States Department of Justice (DOJ) in January. Speaking at Georgetown Law’s Seventh Annual Global Antitrust Enforcement Symposium, Baer’s address was entitled “Remedies Matter: The Importance of Achieving Effective Antitrust Outcomes.”

Baer emphasized that achieving a remedy that preserves or restores competition is more important than the government winning a particular lawsuit.  He then addressed remedies in four contexts: merger remedies, civil non-merger remedies, civil disgorgement and criminal remedies.

Regarding mergers, Baer said that the DOJ “should only consider remedies that effectively resolve the competitive concerns and protect the competitive process.”  He indicated that some deals are nearly unfixable and noting that litigation is not DOJ’s preferred option, Baer warned that reaching a consent decree takes time and cautioned parties against waiting until late in an investigation to engage the DOJ in negotiations.  The proposed acquisition of Grupo Modelo by Anheuser-Busch InBev initially included a component addressing antitrust concerns, but the DOJ wanted more.  Baer used the consent decree in that matter to highlight important provisions in “an effective merger remedy:” structural relief, a fully-vetted up-front buyer, a monitoring trustee and a conveyance of intellectual property and know-how.

For civil non-merger remedies, Baer pointed to the e-books litigation involving Apple and five of the six largest publishers in the United States.  In prosecuting Apple for its role in the civil price-fixing conspiracy, DOJ was seeking a remedy “that would stamp out any lingering effects of the conspiracy,” prevent similar conduct in the future, and ensure Apple’s compliance, with “success … measured not by [DOJ’s] ability to prove the violation, but rather by the effectiveness of the remedies … obtained.”  Baer believes the final judgment accomplishes this through antitrust compliance requirements, including an external compliance monitor.

Baer said that civil disgorgement is appropriate where an offending party would have otherwise “retained the monetary benefits of its anticompetitive conduct.”  He also indicated that it would be a remedy considered in both merger and conduct cases.  Pointing to the “broader legal landscape” and what some observers see as hurdles in private antitrust cases, Baer said that the DOJ would take into account the likelihood of success in private actions when it fashions its public remedies.

For criminal remedies, Baer discussed DOJ’s prosecution of AU Optronics Corporation, its U.S. subsidiary and two top executives for a criminal price-fixing conspiracy.  The remedy included a $500 million fine, probation and an independent monitor to oversee an antitrust compliance program.

Baer appears open to developing creative remedies to achieve outcomes the agency finds most effective in “remedy[ing] anticompetitive conduct and guard[ing] against any recurrence.”  Throughout the speech he emphasized the use of external monitors (the costs of which are borne by the offending parties) and difficult remedies to “fix” past offenses, including disgorgement and unwinding consummated mergers.



read more

Takata Corp. Agrees to Pay $71.3 Million Fine for Its Role in Alleged Price-Fixing and Bid-Rigging in the Automotive Parts Industry

by | Oct 14, 2013 | ,

On October 10, 2013, Takata Corp. (Takata), a Japanese auto parts maker, agreed to pay a $71.3 million as part of a plea agreement for its role in an alleged conspiracy to fix prices on seat belts sold to car manufacturers.   In addition, Takata agreed that the Chairman-CEO, Shigehisa Takada, will take a 30 percent cut in his compensation and the other directors will take a 15 percent cut.

According to the criminal charges filed in Detroit last week, Takata is accused of conspiring with other companies between January 2003 and February 2011 to suppress and eliminate competition in the automotive parts industry by agreeing to rig bids for, and to fix, stabilize and maintain the prices of certain seatbelts.

The alleged price-fixing affected products sold to multiple U.S. and international automobile manufacturers.  Takata is also a supplier of automotive air bags, interior components and steering wheel systems, which have previously been a focus of investigation in the Department of Justice’s (DOJ) auto parts price-fixing investigations.

The DOJ’s ongoing auto parts investigation has yielded charges against companies who manufacture a wide number of automotive parts including seatbelts, airbags, steering wheels, antilock brake systems, instrument panel clusters and wire harnesses.

The DOJ has already brought criminal charges against 21 companies and 21 executives and has imposed nearly $1.7 billion in total fines as part of its automotive parts investigation.



read more

FTC Initiates Inquiry Into Patent Assertion Entities

by | Oct 4, 2013 | , ,

by William Diaz

Last week, the Federal Trade Commission (FTC) announced its decision to seek public comment on a proposal to gather information from approximately 25 patent assertion entities (PAE).  The agency defines a PAE as a company whose business model focuses primarily on purchasing patents and then attempting to generate revenue by asserting the intellectual property against persons who are already practicing the patented technologies.  The FTC also anticipates seeking information from approximately 15 other entities asserting patents in the wireless communications sector, including manufacturers and other non-practicing entities or licensing organizations.  None of the PAEs or other firms has been identified by the FTC.

In late 2012, the FTC and Department of Justice conducted an industry workshop on the impact of PAEs on innovation and competition.  Workshop participants identified numerous potential harms, but noted the lack of empirical data on PAE activities.  The FTC now proposes to collect such data pursuant to its information-gathering authority under Section 6(b) of the FTC Act.  The full scope of the information the FTC will seek is described in the official notice, which is can be found here.  Public comments will be accepted for 60 days following publication in the Federal Register.



read more

FTC and DOJ Accepting HSR Filings During Shutdown

by | Oct 1, 2013 | , ,

by Gregory Heltzer

The Federal Trade Commission (FTC) and Department of Justice (DOJ) both announced that they will have limited staff on hand to accept Hart-Scott-Rodino (HSR) premerger notification filings during the U.S. federal government shutdown.  The HSR Act requires that parties subject to the Act must wait 30 days before closing their transaction.  This waiting period provides the agencies with time to determine whether to challenge a transaction prior to closing.  During the shutdown, the FTC will continue HSR investigations to the extent that “a failure by the government to challenge the transaction before it is consummated will result in a substantial impairment of the government’s ability to secure effective relief at a later time.”  (See, FTC Shutdown Plan.)  Likewise, the DOJ will also prepare cases that must be filed due to expiration of the HSR waiting period.  (See, DOJ Shutdown Plan.)  We will provide updates if and when we learn more regarding the protocols for merger review during the shutdown.



read more

Department of Justice Launches an Antitrust Investigation into Pressure Pumping Services Used in Hydraulic Fracturing

by | Jul 29, 2013 | ,

by Nicole Castle

On July 24, 2013, Baker Hughes, Inc., the owner of the third-largest pressure pumping fleet in the United States, disclosed as part of its filing with the Securities and Exchange Commission that it had received a civil investigative demand (CID) from the Department of Justice (DOJ) on May 30, 2013.  The CID requests information and documents relating to U.S. pressure pumping services for the period from May 29, 2011, through May 30, 2013.  

Baker Hughes stated in its filing that it was “not able to predict what action, if any, might be taken in the future by the DOJ or other governmental authorities as a result of the investigation.”

Pressure pumping services generally refers to the process of pumping water and other materials into a well to break apart rock formations and increase the well’s oil or gas production.   Pressure pumping is the main step in the hydraulic fracturing process, and has in recent years become more heavily used for extracting oil and natural gas from rock formations.

The following day, on July 25, 2013, Halliburton Co., the largest provider of pressure pumping services in the United States., confirmed that it had also received a CID from the DOJ regarding pressure pumping services.  



read more

Judge Finds that Apple Conspired to Raise E-book Prices

by | Jul 12, 2013 | ,

by James Camden

On July 10, 2013, Judge Denise Cote of the Southern District of New York issued a 160-page opinion holding that Apple conspired with five book publishers to raise e-book prices and eliminate retail price competition in violation of Section 1 of the Sherman Act and several relevant state statutes.  United States v. Apple Inc., case number 12-civ-2826 (DLC).  The five publishers – Hatchett, HarperCollins, Macmillan, Penguin and Simon & Schuester – had all previously settled with the U.S. Department of Justice (DOJ).

The opinion stated that as Apple prepared to launch its iPad to the public and sought to concurrently enter the e-book market with its iBookstore, it met with the publishers and agreed to provide them with an “agency model” for e-book pricing that allowed the publishers to set the prices of the e-books themselves, subject to certain price caps.  Apple’s agreements with the publishers also included Most Favored Nation provisions which ensured that Apple could match its competitors’ prices and also provided an incentive for the publishers to lobby Amazon and other retailers to change their wholesale business models to agency models.  According to the court’s opinion, these agency model agreements caused e-book prices to increase, sometimes 50% or more for a specific title.

A separate trial for potential damages will be scheduled later.  Apple said it will appeal the ruling.



read more

$720,000 Civil Penalty for Failure to File HSR

by | Jun 21, 2013 | , ,

by Carla A. R. Hine

Today the Department of Justice (DOJ), on behalf of the Federal Trade Commission (FTC), announced a settlement with MacAndrews & Forbes for failing to file Hart-Scott-Rodino (HSR) in connection with the acquisition of voting securities of Scientific Games (SG).  MacAndrews & Forbes, which is a wholly-owned holding company of Ronald Perelman, will pay $720,000 for failing to file HSR. 

MacAndrews & Forbes had filed HSR and observed the waiting period for a prior acquisition of SG voting securities.  Under the HSR Rules, a buyer that has filed HSR and observed the waiting period can continue to acquire voting securities of an issuer valued up to the next notification threshold for a period of five years following expiration of the HSR waiting period.  (The relevant notification thresholds in acquisitions of less than 50 percent of the voting securities are $50 million, $100 million and $500 million, each of which are adjusted annually.)  However, if the buyer will pass the next notification threshold, or acquire additional stock after the five year period expires, a new HSR filing is required.  The HSR size-of-transaction is determined by valuing what a buyer will hold as a result of the transaction.  In other words, the buyer needs to look at the value of the voting securities of an issuer it currently holds aggregated with the value of the stock it will acquire.  The value of publicly traded stock, such as SG’s, is determined by looking at the lowest closing quotation price in the preceding 45 calendar days.  As such, if a stock goes up in value over time, even acquisitions of small tranches of shares can put an acquiring person above a notification threshold.

That is what happened in MacAndrews & Forbes’s case.  It had filed HSR in February 2007 and the five year period in which it could make additional acquisitions expired when it acquired an additional 800,000 shares, valued at $6.5 million, in June 2012.  This acquisition, when aggregated with the value of SG stock MacAndrews & Forbes already held, exceeded the filing threshold.  MacAndrews & Forbes realized the inadvertent failure to file, and submitted a corrective filing in September 2012.  The takeaways here are to remember that HSR thresholds consider both what a buyer already holds in addition to what else it will acquire, and that subsequent potential HSR obligations need to be monitored over time.

To view the press release, click here.

To view the complaint, click here.



read more

FTC Issues Fiscal Year 2012 HSR Report

by | May 6, 2013 | , ,

by Carla A. R. Hine

Earlier this week, the Federal Trade Commission (FTC) issued its Hart-Scott-Rodino (HSR) report for fiscal year 2012 (FY2012), which summarizes enforcement actions and key statistics regarding number of filings, second requests and challenges.  The press release and a link to the report can be found here.

Filings were relatively flat from 2011 to 2012.  There were fewer second requests and there wasn’t a remarkable difference in the overall percentage of filings resulting in second requests (3.9 percent in 2011; 3.5 percent in 2012).  In 2012, the FTC issued more second requests than the U.S. Department of Justice (DOJ).  However, when looking at the number of second requests each agency issued as a percentage of the filings each agency was "cleared" to investigate, the FTC only issued second requests in 14.8 percent of the filings it was cleared to investigate, whereas the DOJ issued second requests in 40.8 percent of filings the agency was cleared to investigate.  Overall, it is hard to read too much into these statistics other than reportable transactions remain steady and there do not seem to be any wild swings in enforcement trends.

The report also notes that of 60 corrective filings (i.e., filings where the parties closed the transaction and later realized they should have filed), two resulted in enforcement actions with civil penalties ($500,000 and $850,000).



read more

BLOG EDITORS

Gregory E. Heltzer

STAY CONNECTED

Subscribe

TOPICS

ARCHIVES

Ranked In Chambers USA 2022
US Leading Firm 2022