ANTITRUST ALERT
ANTITRUST ALERT
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A Global Resource for Compliance Officers & Legal Advisors
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DOJ Prosecutes Attempted Collusion among Business Competitors for First Time in Decades

by , and | Nov 1, 2022 | ,

On October 31, 2022, the US Department of Justice’s (DOJ) Antitrust Division (Division) made good on its intention earlier this year to revitalize efforts surrounding criminal enforcement of Section 2 of the Sherman Act when the president of a paving and asphalt contractor in Montana pleaded guilty to one count of attempting to monopolize the market for certain construction services in Montana and Wyoming. This is the Division’s first criminal prosecution of a Section 2 case in approximately 50 years. While criminal enforcement of antitrust laws has traditionally focused on per se anticompetitive agreements between two or more horizontal competitors, Section 2 primarily focuses on conduct by one firm or company with significant market power. This announcement—and subsequent criminal resolution—marks a significant departure from long-standing DOJ antitrust enforcement of monopolization claims and is a landmark result for the Division’s continued expansion of its criminal enforcement efforts.

Most notably, seemingly unilateral conduct that “attempts” to collude is now subject to criminal prosecution under Section 2, even if such an attempt did not result in any agreement. In contrast, there is no “attempt” component of a Sherman Act Section 1 charge, where the Division has traditionally investigated and prosecuted per se criminal price fixing, bid rigging and market allocation conduct requiring an agreement or “meeting of the minds” between horizontal competitors.

According to court documents, the DOJ alleged that Nathan Nephi Zito attempted to monopolize the markets for highway crack sealing services administered by Montana and Wyoming by proposing that his company and its competitor allocate regional markets. Zito approached a competitor about a “strategic partnership” and proposed that his company would stop competing for projects administered by South Dakota and Nebraska and the competitor would stop competing for projects administered by Montana and Wyoming. Zito allegedly offered a $100,000 payment as additional compensation for lost business in Montana and Wyoming and proposed that they enter into a transaction to “disguise their collusion.” The competitor company then approached the government and cooperated in its investigation, including by recording phone calls with Zito.

This case, the first Section 2 criminal resolution in decades, was prosecuted in coordination with the Procurement Collusion Strike Force (PCSF), which remains a top priority for the DOJ. The PCSF has been quite active in recent months, obtaining several convictions and bringing new indictments.

Although Section 2 is regularly associated with unilateral monopolist conduct, it also makes it a crime to attempt to monopolize or to conspire to monopolize. The “attempt” provision is what the Division relied on to obtain a conviction in this case, which is essentially an attempted but unconsummated Section 1 market allocation case where one of the potential conspirators cooperated with the government rather than entering into a potentially collusive agreement.

Key takeaways from this case include the following:

  • Now companies need to consider potentially collusive agreements with competitors—or attempts to do the same—that may exclude other competitors from a market in their antitrust risk evaluations. In practice, this could significantly broaden the scope of any compliance [...]

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Antitrust M&A Snapshot | Q3 2021

by , , , and | Nov 1, 2021 | , , , , ,

In the United States, the US Department of Justice’s (DOJ) challenge of American Airlines and JetBlue’s “Northeast Alliance” after the joint venture’s approval by the US Department of Transportation earlier this year demonstrates the Biden administration’s commitment to aggressive antitrust enforcement. US President Joe Biden issued an Executive Order calling for tougher antitrust enforcement, including “encouraging” the DOJ and Federal Trade Commission (FTC) to modify the horizontal and vertical merger guidelines to address increasing consolidation. At the same time, the FTC, under Chair Lina Khan, continues its rapid pace of change to the merger review process.

Under a new interpretation of Article 22 of the EU Merger Regulation (EUMR), the European Commission (Commission) asserted jurisdiction over Illumina’s acquisition of GRAIL and Facebook’s acquisition of Kustomer, even though the transactions did not meet the Commission or Member State filing thresholds. The EU General Court confirmed a significant gun-jumping fine imposed on Altice for breach of the EUMR notification and standstill obligations.

In the United Kingdom, the UK government published plans to update antitrust rules, including revising its jurisdictional thresholds and expanding the “share of supply” test to allow the CMA to more easily capture vertical and conglomerate mergers, as well as acquisitions of startups. And the Competition & Markets Authority’s (CMA) handling of the Veolia/Suez transaction demonstrates the CMA’s willingness to engage with parties to seek practical interim solutions while it is investigating a consummated transaction for potential antitrust concerns.

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Executive Order Encourages FTC, DOJ to Address Hospital Consolidation, Vigorously Enforce Antitrust Laws

by , and | Jul 15, 2021 | , , ,

President Biden recently issued an executive order affirming his administration’s policy of enforcing the antitrust laws to “combat the excessive consolidation of industry” and cited healthcare markets as one of several priorities. The Federal Trade Commission (FTC) and US Department of Justice (DOJ) already have been actively enforcing the antitrust laws in provider consolidation matters. The FTC is currently challenging the proposed merger of two health systems in New Jersey, and in the past year unsuccessfully challenged the combination of Jefferson Health and Einstein Health in Philadelphia and successfully challenged the proposed combination of two health systems (Methodist Le Bonheur and Saint Francis) in Memphis.

The executive order follows a proposed bill to increase budgets for the FTC and DOJ, FTC resolutions on compulsory process in healthcare investigations, congressional calls to investigate the use of COVID-19 Provider Relief Fund payments for acquisitions, the FTC physician practice acquisition retrospective and other health antitrust developments.

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Federal Judge Finds Qualcomm Violated the FTC Act Through Monopolistic and Exclusionary Conduct

by , and | May 23, 2019 | , ,

On May 21, a California federal judge ruled in favor of the Federal Trade Commission (FTC) in its suit against Qualcomm in a much-anticipated decision, concluding that Qualcomm violated the FTC Act by maintaining its monopoly position as a modem chip supplier through a number of exclusionary practices, including refusing to license standard essential patents (SEPs) on fair, reasonable and non-discriminatory (FRAND) terms. Qualcomm likely will appeal the decision to the US Court of Appeals for the Ninth Circuit, but in the meantime, the court’s sweeping decision is likely to affect the course of dealing between SEP-holders and licensees. The decision is likely to substantially affect the ways in which SEP-holders take their technology and associated components that they manufacture to market.

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THE LATEST: Ninth Circuit Affirms Dismissal of Antitrust Counterclaim against Labor Union Clarifying Scope of Noerr-Pennington Doctrine and the Implied Labor Exemption

by | Jul 28, 2017 | ,

On July 24, 2017, the US Court of Appeals for the Ninth Circuit affirmed the dismissal of an antitrust counterclaim brought by ICTSI Oregon, Inc. (ICTSI), the operator of a marine shipping facility, against the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA). ILWU is a labor union that represents many ICTSI employees, including longshoremen and mechanics. PMA is a multi-employer collective bargaining association covering the West Coast of the United States, which represents employers, including ICTSI, in negotiations with labor unions.

The opinion elucidates the current law surrounding the scope of Noerr-Pennington immunity and the implied labor exemption to antitrust liability.

WHAT HAPPENED
  • ICTSI’s antitrust counterclaim arose out of a labor dispute concerning ILWU’s collective bargaining agreement (CBA) with PMA, which required that all “reefer work” (i.e., plugging, unplugging and monitoring refrigerated shipping containers) performed by PMA members must be assigned to ILWU workers. When ICTSI instead assigned its reefer work to a rival union, the collective bargaining agreement administrator, the Joint Coast Labor Relations Committee, notified ICTSI that it was in violation of the CBA and faced monetary fines and expulsion from the collective bargaining association.
  • ICTSI initiated a proceeding before the National Labor Relations Board (NLRB) to resolve the dispute. The NLRB ruled that the rival union workers were entitled to the reefer work. While the NLRB proceedings were pending, ILWU and PMA filed suits in the US District Court for the District of Oregon seeking an injunction ordering ICTSI to comply with the Joint Committee decision and assign the work to ILWU.

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FTC Opinion Finds Domestic Pipe Fitter Unlawfully Maintained Its Monopoly

by | Feb 7, 2014 | ,

On February 6, 2014, the Federal Trade Commission (FTC) released its opinion and final order against McWane Inc., finding the company unlawfully maintained its monopoly by excluding competitors.  McWane Inc. is the largest domestic supplier of ductile iron pipe fittings, which are used in municipal and regional water distribution systems to change water flow or allow connectivity for hydrants, valves and water meters.

The administrative complaint alleged that McWane conspired with two of its competitors that altogether supply the majority of domestic fittings, to raise and stabilize prices.  Additionally, McWane was alleged to have excluded its competitors from the domestic pipe fittings market in order to unlawfully maintain its monopoly in violation of antitrust laws.

The Commission found McWane liable for unlawfully maintaining its monopoly in domestic pipe fittings, which constitute a separate market because many local, state and federal regulations required special fittings.  Consequently, imported products were not substitutable and domestic distributors required access to special fittings to supply all the project needs of their customers.  While one of McWane’s competitors sold the commonly used fitting sizes and configures that could be used in nearly 80 percent of projects, as a new entrant, it did not sell more specialized fittings.  Knowing that the competitor did not supply a full line of pipe fittings, McWane established an unlawful exclusive dealing program.  Under McWane’s “Full Support Program,” it threatened that distributors purchasing domestic fittings from Star would be prohibited from purchasing domestic fittings from McWane.  Thus, McWane was able to unlawfully maintain its monopoly by “foreclose[ing] [its competitor] and other potential entrants from accessing a substantial share of distributors.”  The Commission further found that McWane “created a strong economic incentive for distributors to reject Star’s products, artificially diminishing Star’s competitive prospects in the domestic fittings market.”

While the Commission’s opinion found McWane liable for unlawfully maintaining its monopoly, the remaining counts in the administrative complaint were dismissed for a variety of reasons.  Although the two commissioners found McWane engaged in price-fixing behavior, the counts were dismissed in the public interest due to a lack of majority position.  The Commission’s final order precludes McWane from requiring exclusivity from its distributors, but still permits McWane to lure customers through discounts, rebates and other price and non-price incentives.



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Be Aware of the EU Watch Dog:  Commission Blocks Merger Between Aegean Airlines and Olympic Air

by | Apr 29, 2011 | ,

by Martina Maier and Philipp Werner

In January 2011, the European Commission decided that the proposed merger between Aegean Airlines and Olympic Air should be prohibited because it would have resulted in a quasi-monopoly on the domestic Greek air transport market.  This decision shows that traditional airline merger remedies, such as slot releases, are sometimes insufficient to allay concerns of monopolization.  It also illustrates that the Commission will take a tough stance on competition policy, even when facing strong political pressure to clear the merger for the sake of the economy.

To read the full article here, click here. 



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