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Mergers & Acquisitions

Judge Rules in Favor of DOJ Finding Bazaarvoice/PowerReviews Merger Anticompetitive

by McDermott Will & Emery | Jan 13, 2014 | DOJ Developments, Mergers & Acquisitions

On January 8, 2014, Judge Orrick of the Northern District of California ruled that Bazaarvoice’s acquisition of competitor PowerReviews violated Section 7 of the Clayton Act. The ruling was in favor of the U.S. Department of Justice (DOJ). The public version of the opinion was made available on January 10. In its self-described “necessarily lengthy opinion,” which spans 141 pages, the court ultimately found that the facts overwhelmingly showed the acquisition will have anticompetitive effects and that Bazaarvoice did not overcome the government’s prima facie case. The case included 40 witnesses at trial, more than 100 depositions and 980 exhibits. Dr. Carl Shapiro testified as DOJ’s economist and Dr. Ramsey Shehadeh testified on behalf of Bazaarvoice/PowerReviews. The court noted that the case presented some difficult issues, including that there were no generally accepted “market share statistics covering the sales of R&R solutions or social commerce solutions and no perfect way to measure market shares.” And while neither side presented flawless analyses, the court found Dr. Shapiro’s approaches more persuasive than those of Dr. Shehadeh.

Bazaarvoice and PowerReviews each offered sophisticated “R&R platforms.” R&R platforms provide a user interface and review form for the collection and display of user-generated content (i.e., user reviews) on the product page of a commercial website where the product can be purchased. Often these are in the form of star ratings and open-ended reviews in a text box. R&R platforms increase sales for the retailer and have a variety of different features. The court noted that many on-ine retailers view an R&R platform as “necessary.” Before the merger, Bazaarvoice and PowerReviews offered similar products and features and targeted similar customers.

The court found that the relevant product market was the narrow “R&R platforms,” rather than the broader “social commerce tools” or “eCommerce platforms.” The court went through many popular social media platforms such as Facebook, Google+, Twitter, Instagram, and Pinterest, explaining why each was not a substitute for these R&R platforms. In this relevant market, the court found that PowerReviews was Bazaarvoice’s only real competitor, and thus the merger “would eliminate Bazaarvoice’s only meaningful commercial competitor.”

At the end of the opinion, the court commented on the role of antitrust “in rapidly changing high-tech markets.” It noted that there is a debate as to whether antitrust is properly suited to assess competitive effects in these markets. The court declined to take sides and stated that its “mission is to assess the alleged antitrust violations presented, irrespective of the dynamism of the market at issue.”

The case now moves to the remedy phase. In its complaint, the DOJ requested that the court order Bazaarvoice to divest assets originally possessed by either Bazaarvoice and/or PowerReviews to create a viable, competing business. However, as Judge Orrick noted, 18 months after the merger, it may not be so simple to divest assets. The judge scheduled a conference for January 22 with the parties to discuss a possible remedy.

There are several lessons to be gathered from this case. First, the [...]

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Court Certifies Class in Hospital Merger Antitrust Lawsuit

by Emily Townsend | Dec 19, 2013 | Mergers & Acquisitions, Monopolization/Abuse of Dominance, Private Litigation

On December 10, 2013, Judge Edmond Chang of the Northern District of Illinois certified a class of plaintiffs who filed a proposed class action against NorthShore University Health System (formerly Evanston Northwestern Healthcare) on behalf of all end-payors who purchased inpatient and outpatient healthcare services directly from NorthShore.

In 2000, Evanston Northwestern acquired rival Highland Park Hospital. The FTC successfully challenged the consummated merger in 2004, but did not order divestiture because the hospitals had already been merged and was functioning as a single entity for several years. After the FTC’s decision, the plaintiffs brought their class action, alleging that NorthShore illegally monopolized the market and caused the plaintiffs and the putative class to pay artificially inflated prices for healthcare services.

A previously assigned judge denied the plaintiffs’ motion for class certification, holding that the plaintiffs had failed to satisfy the Rule 23(b)(3) “predominance” prerequisite to class certification – i.e., that there are questions of law or fact common to class members that predominate. Fed. R. Civ. P. 23(b). On interlocutory appeal, the Seventh Circuit held that the plaintiffs did satisfy predominance, then vacated the district court’s order and remanded.

On remand, Judge Chang held that the only remaining issue as to class certification was whether the plaintiffs had satisfied the Rule 23(b)(3) “superiority” prerequisite to class certification, i.e., that a class action must be “superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3). NorthShore argued that the plaintiffs failed to satisfy the superiority prerequisite because: 1) arbitration is superior to class action litigation (with respect to the payors who NorthShore alleged are bound by arbitration provisions in the payor contracts); 2) managed care organizations have an interest in individually controlling any claim against NorthShore; and 3) class certification would be unmanageable because a trial would require “hundreds of mini-trials analyzing many individual [NorthShore contracts with payors]”. Judge Chang disagreed, finding, among other things, that the parties disagreed as to whether all of NorthShore’s contracts with payors even contained arbitration provisions. Moreover, Judge Chang noted that the payors had not yet taken a position as to whether they wanted to exercise their individual right to control the litigation, despite ample opportunity to do so. Finally, Judge Chang commented that the “Seventh Circuit credited the ability of the plaintiffs’ expert . . . to use common evidence to show that all of the class members suffered some antitrust impact,” which would eliminate the need for hundreds of mini-trials on liability. Accordingly, Judge Chang found that the plaintiffs had satisfied the superiority prerequisite and certified the class.

This is a unique case because most hospital mergers are challenged pre-consummation, where an injunction is the only remedy available to plaintiffs. In fact, this is the first private antitrust class action related to a hospital merger.

European Commission Simplifies Aspects of EU Merger Control

by McDermott Will & Emery | Dec 10, 2013 | EC Developments, Mergers & Acquisitions

The European Commission (Commission) has issued a package of measures (the Reform Package), the rationale for which is to simplify and streamline EU merger control. The Reform Package does this by extending “simplified” treatment to more transactions, reducing the information that parties to a notifiable transaction have to submit and streamlining the pre-notification process. The reforms take effect on 1 January 2014.

The overall objective of the Reform Package is to make EU merger procedures simpler and more business friendly. But it may actually introduce additional work for some types of transactions, for instance by introducing new categories of information that parties to a notifiable transaction must be prepared to supply.

The Reform Package

The Reform Package is comprised of a revised Merger Implementing Regulation, a Notice on Simplified Procedures and revised notification forms, namely a revised Form CO, a revised Short Form CO and a revised Form RS.

The main features of the Reform Package are as follows.

Extension of the Simplified Procedure

At present, transactions that do not present competition concerns are eligible for simplified treatment. Parties to these transactions are entitled to use the Short Form CO, which requires less information and generally requires less time because a market investigation is not necessary.

The Reform Package expands the simplified procedure to apply it to more transactions. Specifically:

In markets in which two merging companies compete (horizontal overlap), the simplified procedure applies to mergers below a 20 per cent combined market share, instead of 15 per cent currently.
In mergers where one of the companies sells an input to a market where the other company is active (vertically-related markets), the simplified procedure applies to mergers below a 30 per cent combined market share, instead of 25 per cent currently.
Provided that the increase in market shares is small, i.e., a Herfindahl–Hirschman Index increase of 150 or less, the simplified procedure applies where the parties’ combined market shares are between 20 per cent and 50 per cent.

The Commission estimates that, under the Reform Procedure, between 60 and 70 per cent of notifiable transactions will be eligible for simplified treatment, representing a 10 per cent increase over current levels.

Information Requirements

The Reform Package introduces several changes in respect of the provision of information in connection with EU merger procedures. Some of these changes will reduce the overall amount of information that parties to notifiable transactions will have to provide to the Commission.

More transactions eligible for simplified treatment. As the Reform Package makes more transactions eligible for simplified treatment, it follows that parties to those transactions will need to provide less information in connection with their merger procedure.
Waivers for certain information. The Reform Package envisages that parties using either the Form CO or the Short Form CO will also need to provide less information, but this will largely remain within the discretion of the Commission case team reviewing the transaction. Specifically, under the Revised Package, parties will have greater likelihood of being relieved from [...]

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Office Supplies Surprise: FTC Approves Office Depot-OfficeMax Merger

by Emily Townsend | Nov 7, 2013 | FTC Developments, Mergers & Acquisitions

On Friday, November 1, 2013 the Federal Trade Commission (FTC) ended a seven-month investigation of the proposed merger between Office Depot Inc. and OfficeMax Inc., allowing the transaction to move forward.

The merger between the second and third largest office supply superstores (OSS) is not the first time the FTC has been interested in OSS transactions. In 1997, the FTC successfully blocked a proposed merger between the two largest OSS in FTC v. Staples, Inc., 970 F.Supp. 1066 (D.D.C. 1997). The FTC’s seemingly contradictory positions can be discerned, however, by the changes in the competitive landscape for OSS.

As acknowledged in the FTC’s statement concerning the proposed merger, OSS now compete with online retailers and mass merchants far more than in 1997. In fact, in Staples, the court determined that while mass merchants, wholesale clubs and mail order firms sold office supplies, prices at OSS were primarily affected by the presence of another OSS in the geographic market. Because of this determination, the FTC was successful in arguing that the relevant product market was the sale of consumable office supplies just through OSS.

Now, OSS compete rigorously with the growing number and size of online retailers and mass merchants. As the FTC found, OSS “closely monitor” and “respond competitively” to non-OSS retailers. Indeed, the FTC noted that OSS are responding to such competition not only through staples of competition such as price matching and price-checking, but also through innovation, such as “offering in-store pickup for online purchases and using in-store internet kiosks to order products online.”

The rapidly changing landscape in the consumable office supplies market is highlighted by two contrasting outcomes sixteen years apart. It highlights the importance of staying abreast of how changes in market dynamics and modernizing competition law may affect regulators’ view of potential transactions. As exemplified in this case, such knowledge can lead to a successful evaluation of a transaction that was previously thought to be impossible.

China’s MOFCOM Launches Electronic Merger Filing System

by Emily Townsend | Oct 28, 2013 | Chinese Developments, Mergers & Acquisitions

Beginning on October 28, 2013, all merger control cases before China’s Ministry of Commerce (MOFCOM) will have to be filed, and only be filed, in electronic form. In the past, it was required by MOFCOM to provide both hard and soft copies (i.e., paper or scanned copies) of all materials submitted. The new filing system uses software developed by MOFCOM itself (System) that incorporates a digitalized merger notification form updated by MOFCOM in June 2012 (please see “China Streamlines Antitrust Notification Process” https://www.mwechinalaw.com/news/2012/chinalawalert061c.htm).

The System appears to work well. Generally, the System allows a filing party to submit all data and information required by MOFCOM in electronic form (i.e., either by typing into or choosing an option in the software). A data package, incorporating all data and documentation submitted in support of the filing, will be generated by the software automatically.

The launch of this new System is unlikely to change the procedure of merger filing to any great extent. However, it does allow MOFCOM to collect and compile data in a much more efficient and timely manner. This new System also allows MOFCOM to much more easily compare information provided by others in the same or a similar industry, and to compare information submitted by the same party in different cases. The new System will therefore require a higher level of vigilance by notifying parties to ensure they provide accurate and consistent information. Also, counsel practicing in this area can expect to see an improvement in efficiency, and likely more sophisticated assessment by MOFCOM of mergers, acquisitions and joint ventures, as this new tool should help with data analysis.

Support for Airlines Merger Grows

by Young Cynn | Oct 25, 2013 | DOJ Developments, Mergers & Acquisitions

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.

Assistant Attorney General Addresses Antitrust Remedies in First Formal Remarks

by Emily Townsend | Oct 16, 2013 | Cartel Enforcement, DOJ Developments, Mergers & Acquisitions

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.

Tweet: No Antitrust Problems Here

by Emily Townsend | Oct 7, 2013 | FTC Developments, Mergers & Acquisitions

by Lincoln Mayer

The Federal Trade Commission (FTC) has approved social media heavyweight Twitter’s $350 million stock acquisition of MoPub. Twitter’s purchase of the mobile advertising exchange, which helps companies place ads on mobile devices, is expected to enhance Twitter’s ability to tailor mobile ads to users. The size of the deal triggered the Hart-Scott Rodino (HSR) Act’s mandatory filing requirement, but the FTC concluded that the acquisition posed no anticompetitive obstacles.

This high-profile transaction is a reminder of the value of good planning and involving antitrust counsel early in the planning process, even where the parties do not anticipate significant antitrust issues. With enough advance warning, counsel can work with the antitrust agencies to showcase the procompetitive aspects of the transaction, mitigate any problematic aspects and seek rapid clearance of deals that, at least from a competitive standpoint, are relatively straightforward. In Twitter’s case, that meant being able to resolve a potential regulatory issue involving its largest acquisition to date before the launch of Twitter’s initial public offering.

FTC and DOJ Accepting HSR Filings During Shutdown

by Emily Townsend | Oct 1, 2013 | DOJ Developments, FTC Developments, Mergers & Acquisitions

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.

FTC Reaches Unique Settlement with Phoebe Putney Health System Resolving Lengthy Hospital Merger Challenge

by Emily Townsend | Aug 28, 2013 | FTC Developments, Healthcare Antitrust, IP Antitrust, Mergers & Acquisitions

by Carrie G. Amezcua and Stephen Wu

The U.S. Federal Trade Commission (FTC) and Phoebe Putney Health System settled the FTC’s complaint that the health system’s merger with Palmyra Park Hospital violated the antitrust laws. Unique state statutes and regulations effectively prevented the FTC from obtaining its usual remedy for unlawful mergers or acquisitions, a divestiture. Instead, the FTC is requiring Phoebe Putney to provide prior notice of certain future acquisitions and prohibiting it from objecting to state applications by competitors to enter or expand in the marketplace.

To read the full article, click here.

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