The United States Department of Justice Antitrust Division (DOJ) has issued a second Business Review Letter pursuant to the expedited review process it announced on March 24, 2020 to review conduct related to COVID-19 within seven days. The letter released on April 20, 2020 issued to AmerisourceBergen Corporation, which follows a letter issued last week to medical/surgical distributors, again shows the DOJ is open to creative solutions that combat COVID-19, especially when those solutions are “focused on facilitating the government’s efforts” to get medical supplies where they are needed most.
The Business Review Letter states that the DOJ has no present intention to challenge AmerisourceBergen’s collaboration with federal government agencies, including FEMA and HHS and other private sector distributors to ensure supply and facilitate distribution of medications and other healthcare products to treat COVID-19 patients.
The DOJ Antitrust Division’s recent challenge to the United Technologies/Raytheon merger highlights a few key considerations for antitrust reviews of aerospace and defense industry transactions. The case is a useful illustration of important principles applicable to this unique industry.
In a prior note we provided guidance on COVID-19’s Impact on HSR Filing Timelines. The Agencies had indicated that early termination would not be granted while FTC operated on a temporary e-filing system.
Today, the Agencies have updated that guidance and as of March 30 will again grant early termination when both the FTC and DOJ have determined that no enforcement action will be taken during the initial waiting period. The granting of early termination for the initial HSR waiting period is not a right and is granted only at the Agencies’ discretion. The new guidance from the Premerger Notification Office states that early termination will be provided on a more limited basis and later in the process than historically provided.
On March 24, 2020, the US Federal Trade Commission (FTC) and US Department of Justice (DOJ) issued a Joint Antitrust Statement Regarding COVID-19. In this statement, the FTC and DOJ recognize that public health efforts in response to the Coronavirus (COVID-19) require government and private cooperation. To address the speed at which companies and individuals must engage in COVID-19 response activities, the FTC and DOJ will respond to COVID-19-related requests for advisory opinions and business review letters within an expedited seven days of receipt of all information.
With COVID-19-related closures rolling in daily, you may have questions about the operating status of the federal government’s antitrust enforcement agencies. Currently, the HSR review process does not seem to be significantly impacted, although the agencies will not grant a request for early termination during this period (as noted in our recent update, the FTC will again process early termination requests as of March 30, though on a more limited basis and later in the process than historically provided). Unlike the government shutdowns in 2013 and 2018, all FTC and DOJ staff are working full time. In addition, the agencies have implemented a mandatory e-filing system for all HSRs.
Given that the agencies will continue to work full-time and that an e-filing system is in place, we think it is unlikely that there will be significant impact on timing for the vast majority of transactions, particularly where there is no competitive overlap between the transacting companies.
The Department of Justice Antitrust Division (DOJ) was active in 2019. At the beginning of 2019, the DOJ was preparing for trial in six matters and had 91 pending grand jury investigations. Throughout 2019, the DOJ made public several new investigations, including in the commercial flooring industry, online auctions for surplus government equipment, the insulation installation industry and suspension assemblies used in hard disk drives. The DOJ also announced developments in other ongoing investigations.
Meanwhile, the European Commission (Commission) entered into settlements with parties in three cartel cases: Occupant Safety Equipment, FOREX and Canned Vegetables. The Commission imposed total fines of €1,469 million in 2019. In March 2019, the Commission launched an online tool to submit documents and information in the context of leniency and settlement proceedings.
The potential for government investigation increases during periods of rapid and extreme movement in price. The US Department of Justice (DOJ) recently reiterated its focus on prosecuting violations of antitrust laws, especially in areas affected by the coronavirus outbreak. On March 9, 2020, the DOJ announced that individuals or companies engaging in price fixing, bid-rigging, customer or region allocation, or other antitrust violations could face criminal prosecution. Government scrutiny is likely to be even higher on companies that produce items for sale to federal, state or local governments, as the DOJ’s Procurement Collusion Strike Force acts as a dedicated watchdog over government contractors to prevent bid-rigging in government contracts. More information on the Strike Force is available here.
On March 3, 2020, the American Bar Association (ABA) hosted a Q&A with two members of the Procurement Collusion Strike Force (PCSF)—Mark Grundvig, the Assistant Chief of the DOJ Antitrust Division’s Criminal II section, and Marcus Mills, Special Agent, Major Fraud Investigations Division, USPS Office of Inspector General.
During the course of the Q&A, Mr. Grundvig and Mr. Mills provided their perspective on the goals and progress of the PCSF.
Last month, the Department of Justice Antitrust Division (DOJ) and Federal Trade Commission (FTC) released updated Vertical Merger Guidelines in draft form. These guidelines provide a useful resource for aerospace and defense contractors involved in M&A transactions. Vertical competition issues frequently arise in this industry given the nature of the supply base and contracting and supply relationships between companies operating at different levels of the supply chain.
This is the first time the antitrust agencies have released updated guidelines for analyzing vertical mergers since 1984. Although the agencies have updated the Horizontal Merger Guidelines several times since then (most recently in 2010), they have not provided similar updated guidance to businesses regarding vertical merger enforcement until now. The new guidelines summarize the practices, standards, and theories the agencies have used in evaluating vertical mergers for a number of years. Although the guidelines do not signal any shifts in current agency practice, they do provide the business community greater transparency about how the agencies analyze vertical mergers. This is helpful for the aerospace and defense industry, which is particularly susceptible to vertical competition issues given the heavy reliance on contracting out important elements at different levels of the supply chain.
Antitrust regulators in the United States and Europe were very active in the final quarter of 2019. The FTC and DOJ continue to investigate and challenge M&A transactions in a variety of industries. Events of this quarter highlight the importance of states in merger enforcement. As well, recent FTC activity highlights the regulators’ focus on preventing monopolists from buying nascent competitors.
In Europe, the UK CMA continues to expand its role as a key jurisdiction in the merger clearance process, which will only accelerate with Brexit. The EC agreed to clear, subject to conditions, acquisitions in the aluminum production and battery industries as well as in the wholesale supply and retail distribution of TV channels after conducting Phase II reviews. Moreover, the EC opened new in-depth investigations into transactions in the copper refining and engineering sectors.
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