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Heard on Day One of 2022 Antitrust Law Spring Meeting

by Lisa P. Rumin, Anthony S. Ferrara, Reese Poncia, Alexandra Lewis, Graham Hyman, Joshua W. Eastby and Han Cui | Apr 7, 2022 | Cartel Enforcement, DOJ Developments, FTC Developments, Healthcare Antitrust, Joint Ventures/Competitor Collaboration, Mergers & Acquisitions, Monopolization/Abuse of Dominance

This week, the American Bar Association’s Antitrust Law Section kicked off its annual Spring Meeting in Washington, DC, which features updates from the antitrust enforcers and substantive discussions on today’s most pressing antitrust issues. In this post, we share key takeaways from the first day of the Spring Meeting.

Agencies Continue to Be Hostile to M&A: Republican Federal Trade Commission (FTC) Commissioners Noah Phillips and Christine Wilson emphasized that the prevailing view under Democratic leadership at the antitrust agencies is that mergers provide no value and only carry costs.

Progressive leadership wants to “throw sand in the gears” to prevent deals from being proposed altogether. Recent policy changes are aimed at creating uncertainty, heightening risk and raising the transaction costs of doing deals to slow the pace of M&A activity.
Despite this, there was a precipitous drop in the number of FTC merger enforcement actions in the final year of the Trump administration (31) compared to the first year of the Biden administration (12).
There is no indication that early termination for Hart-Scott-Rodino (HSR) pre-merger notification filings will be reinstated.
“Close At Your Peril” letters are another tactic the agencies are using to heighten deal risk and deter parties from pursuing or consummating transactions, even though the antitrust agencies have always had the authority to investigate and challenge consummated transactions.
Many panelists commented on the lack of transparency between agency staff and merging parties on recent transactions. If the lack of transparency persists, it may create due process issues and problems for timing agreements that merging parties typically negotiate with staff.
The antitrust agencies are increasingly skeptical of the efficacy of structural and behavioral remedies to resolve competition concerns regarding a transaction. The Department of Justice (DOJ) Antitrust Division’s Principal Deputy Assistant Attorney General Doha Mekki said merging parties should expect the DOJ to reject “risky settlements” more often and instead seek to block transactions outright. Mekki said literature has shown that many merger settlements failed to protect competition.

Increased Antitrust Litigation Is on the Horizon: DOJ officials said companies should expect an increase in antitrust litigation on both civil and criminal matters.

The DOJ Antitrust Division has more cases in active litigation than it has had at any time in recent history. It currently has six active litigations involving civil matters and 21 ongoing litigations involving criminal matters.
The Antitrust Division is not considering cost as a gating factor for bringing new cases. Instead, it is bringing cases where it deems necessary to uphold the law and preserve competition. The DOJ is hiring more attorneys and using shared DOJ resources to support the increased rate of litigation.
The DOJ is also seeking faster access to the courts. Mekki indicated that in cases where potential anticompetitive harm resulting from a transaction is clear, the agency may file suit while an investigation remains pending and before merging parties have certified substantial compliance.

Updated Merger Guidelines Are Coming: Officials from both the FTC and [...]

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Antitrust M&A Snapshot | US Agencies Aggressive While the EC Publishes Report on Competition Policy for the Digital Era

by Joshua W. Eastby | Aug 28, 2019 | DOJ Developments, EC Developments, EU Developments, FTC Developments, Mergers & Acquisitions

The second quarter of 2019 proved to be a busy season for antitrust matters. In the United States, agencies continued to be aggressive and blocked transactions or required significant remedies. They cleared three mergers where divestitures were required; and in the face of FTC or DOJ opposition, companies abandoned several transactions, including between Republic National Distribution Company and Breakthru Beverage Group. Regarding vertical transactions, we continued to see a split between the FTC Republican and Democratic Commissioners regarding whether enforcement is required and the appropriate remedies.

In the European Union, the EC published a report on competition policy for the digital era, which deals with, among other things, acquisitions of nascent competitors. The EC also closed two merger control proceedings subject to divestitures, blocked a proposed joint venture, and showed that it will seek large fines for companies violating EU competition rules for merger notifications.

Access the full issue.

Antitrust M&A Snapshot | US Tackles Vertical Merger Enforcement Guidelines while the EC Blocks 2 Transactions

by McDermott Will & Emery, Anthony S. Ferrara, Jon B. Dubrow and Joel R. Grosberg | May 15, 2019 | DOJ Developments, EC Developments, EU Developments, FTC Developments, Mergers & Acquisitions

The first quarter of 2019 proved to be as active as ever for antitrust regulators in both the United States and Europe. In the United States, vertical merger enforcement was the focus of a few high-profile matters. The US DOJ has been working on an update to the Non-Horizontal Merger Guidelines, possibly providing clarification for merging parties.

Meanwhile in Europe, although the European Commission cleared a number of merger control proceedings with remedies, the European Commission also blocked two transactions during the first quarter of 2019.

Access the full issue.

Hélène de Cazotte, a trainee in the Firm’s Brussels office, also contributed to this publication.

Antitrust M&A Snapshot

by McDermott Will & Emery, Jon B. Dubrow and Joel R. Grosberg | May 7, 2018 | DOJ Developments, EC Developments, EU Developments, FTC Developments, Mergers & Acquisitions

United States: January – March 2018 Update

One year into the Trump administration, the US antitrust agencies are finally starting to implement their enforcement policies. Most notably, trial began in the US Department of Justice’s (DOJ) challenge of the AT&T/Time Warner merger, which is the Antitrust Division’s first significant vertical challenge in several decades. Judge Richard J. Leon’s opinion in that case could alter the outlook for several other vertical transactions pending before the agencies. While the DOJ was preparing for trial, the Federal Trade Commission (FTC) was preparing for a transition to five new commissioners, who were approved by the Senate in April. It remains unclear whether the new, Republican-led FTC will be more moderate in its enforcement efforts, similar to prior Republican administrations, or will follow in the footsteps of President Trump’s DOJ, which has been surprisingly aggressive.

EU: January – March 2018 Update

The European Commission (EC) continued to be quite active in the first quarter of 2018, clearing five mergers. The most significant decision was the approval of a megamerger in the agrochemical sector—Bayer/Monsanto—where the parties submitted a remedy package that totalled over €6 billion. This remedy package included divestitures of research and development assets that addressed the EC’s concerns about innovation, similar to the EC’s Dow/DuPont clearance last year. In addition to Bayer/Monsanto, two other proposed acquisitions in the chemicals sectors fell through, most notably Celanese/Blackstone, due to excessive divestiture requests required by the Commission. (more…)

THE LATEST: Trump DOJ’s Next Target: the Illinois Brick Indirect Purchaser Rule?

by McDermott Will & Emery and Mary Strimel | Feb 2, 2018 | Cartel Enforcement, DOJ Developments, Private Litigation

In the course of one week, two top level DOJ Antitrust officials in the Trump Administration separately spoke at panels and suggested the possibility of a sea change in federal antitrust law with respect to indirect purchaser lawsuits. The comments further reinforce the Administration’s active focus on antitrust issues.

WHAT HAPPENED:

Makan Delrahim, DOJ’s Assistant Attorney General in charge of the Antitrust Division (the Division), spoke at a conference organized by the Antitrust Research Foundation on January 19, 2018, and is reported to have stated that the Division was looking into the possibility of pursuing civil damages on behalf of taxpayers in antitrust price-fixing suits.
A few days later, on January 23, 2018, Andrew Finch, DOJ’s Principal Deputy Assistant Attorney General for Antitrust, spoke at a Heritage Foundation conference and reportedly stated that the Division was “looking at whether or not it might be worthwhile to revisit those rules and suggest the same to the Supreme Court,” referencing the landmark decision Illinois Brick Co. v. Illinois, which prohibits indirect purchasers from recovering antitrust damages under federal antitrust law.

(more…)

Trump’s DOJ Challenges Merger Cleared during Waning Days of Obama Administration

by Gregory E. Heltzer and Joel R. Grosberg | Sep 27, 2017 | DOJ Developments, FTC Developments, Mergers & Acquisitions

WHAT HAPPENED

On December 1, 2016 Parker-Hannifin agreed to acquire Clarcor for $4.3 billion.
The merger agreement included a $200 million divestiture cap – that is, Parker-Hannifin was required, if necessary, to divest assets representing up to $200 million in net sales to obtain antitrust clearance.
The initial antitrust waiting period under the Hart-Scott-Rodino Act (HSR Act) expired on January 17, 2017.
Parker-Hannifin completed the acquisition on February 28, 2017.
Nearly seven months later on September 26, 2017, the DOJ filed suit in US District Court for the District of Delaware seeking to require Parker-Hannifin to divest either its or Clarcor’s aviation fuel filtration assets.
The DOJ did not include in its complaint an allegation or statement that the parties increased prices.
The DOJ press release indicates that the parties “failed to provide significant document or data productions in response to the department’s requests.” We believe that this refers to the DOJ’s post-closing investigation.
The DOJ did not suggest in its complaint or the press release that the parties failed to provide required documentation under the HSR Act (e.g., Item 4 documents). During the initial 30-day HSR waiting period, the parties are under no obligation to submit documentation or data to DOJ or FTC requests – all responses are voluntary.

WHAT THIS MEANS

Challenges to transactions after the HSR waiting period expired are rare and typically involve a situation where the parties failed to supply required documentation under the HSR Act.
Challenges post-HSR clearance are even rarer when the parties complied with their obligations under the HSR Act and supplied all required documentation (e.g., Item 4 documents).
The DOJ’s post-HSR clearance action demonstrates that the DOJ may still challenge a transaction post-closing if it later discovers a niche problematic overlap that it did not discover during the initial HSR waiting period.
While this challenge may be an aberration, it raises additional considerations when drafting risk allocation provisions in merger agreements for HSR reportable transactions because merger agreements do not typically account for a post-HSR clearance challenge from the DOJ or FTC.
DOJ action in this matter suggests the Trump administration is unlikely to be lax in its merger enforcement and will continue to analyze competition in narrow markets.

THE LATEST: American Guild of Organists Reaches Settlement Agreement with the FTC over Challenged Professional Association Rules

by Gregory E. Heltzer and Katharine M. O'Connor | May 31, 2017 | FTC Developments

The two current commissioners of the Federal Trade Commission (FTC) approved a final order and consent agreement with the American Guild of Organists (AGO) after a public comment period of two months. The FTC alleged that the AGO violated Section 5 of the Federal Trade Commission Act by agreeing to restrain competition among its organist and choral conductor members. Under the terms of the settlement, the AGO agreed to make certain changes to its rules and policies.

WHAT HAPPENED

The AGO represents approximately 15,000 member organists and choral directors in 300 chapters in the United States and abroad.
The FTC initiated an inquiry into the AGO’s practices in late 2015 after receiving complaints from consumers and organists regarding guild rules.
Specifically, the AGO’s rules required a customer seeking to hire a musician who was not dedicated as the “incumbent musician” in a particular area to pay both the “incumbent musician” in the area as well as the hired musician. The AGO’s Code of Ethics stated that members should “protect themselves” through contracts that secured fees even when not performing.
Also, the AGO published compensation schedules and formulas, instructing its membership to use the formulas to determine pricing in their region.
Finally, the AGO’s rules prohibited a member from soliciting employment from an organization already employing an “incumbent musician.”
The FTC’s complaint alleged that these actions restrained competition by encouraging a fixed pricing schedule between and among the AGO’s membership, and by preventing members from freely seeking or accepting employment. It also alleged that the AGO’s rules and guidelines likely raised prices for consumers seeking to employ organists for special occasions, as well as the organizations that employed organists.
The settlement requires the AGO to change its rules and Code of Ethics, and mandates that each chapter of the AGO certify compliance in order to remain in the organization. In particular, the AGO no longer can publicize or endorse any standardized or suggested prices or interfere with any member’s ability to seek work as an organist or choral conductor.

(more…)

McDermott Releases 1Q2017 Antitrust M&A Snapshot

by Jon B. Dubrow and Joel R. Grosberg | Apr 21, 2017 | DOJ Developments, EC Developments, EU Developments, FTC Developments, Mergers & Acquisitions

McDermott’s Antitrust M&A Snapshot is a resource for in-house counsel and others who deal with antitrust M&A issues but are not faced with these issues on a daily basis. In each quarterly issue, we will provide concise summaries of Federal Trade Commission (FTC), Department of Justice (DOJ) and European Commission (EC) news and events related to M&A, including significant ongoing investigations, trials and consent orders, as well as analysis on the trends we see developing in the antitrust review process.

Read McDermott’s 1Q2017 M&A Snapshot.

DOJ and SDNY US Attorney’s Office Indict Three Dealers in Foreign Currency Exchange Spot Market Conspiracy Case

by McDermott Will & Emery | Mar 28, 2017 | DOJ Developments, EC Developments

A grand jury has indicted three foreign currency exchange spot market dealers for alleged violations of the Sherman Act, 15 U.S.C. § 1, in a case brought jointly by the DOJ’s Antitrust Division and the US Attorney’s Office for the Southern District of New York (SDNY). The allegations in the case, United States v. Usher, et al., are that the three named defendants conspired to suppress and eliminate competition for the purchase and sale of Euro/US dollar (EUR/USD) currency pairs via price fixing and bid rigging.

The foreign currency exchange spot market (the “FX Spot Market”) enables participants to buy and sell currencies at set exchange rates. The FX Spot Market is an “over-the-counter” market conducted via direct customer-to-dealer trades, i.e., without an exchange. In the market, currencies are traded and priced in pairs, whereby one currency is exchanged for the other. When filling customer orders, dealers in the FX Spot Market do not serve in a broker capacity, but rather fulfill the orders via their own trading and speculation in the requested currency markets. Dealers employ traders to quote prices and engage in trades to fill customer orders. The dealers and their traders are able to access a separate virtual market, known as the interdealer virtual market, which enables currency trades amongst dealers. According to the Indictment, currency pair prices are set by a continuous auction in the interdealer virtual market, where “individual actions taken by competing traders—to bid or not bid, to offer or not offer, to trade or not to trade, at certain times, and using certain tactics—can cause or contribute to a change in the exchange rate shown in the [virtual trading] interface, and thus may benefit, harm, or be neutral to a competing trader.” The Indictment asserts that this is because the benchmarks used by the virtual market were calculated at particular times each day and were based on “real-time bidding, offering, and trading activity” on the virtual trading market.

The Indictment asserts that the defendants violated the Sherman Act by:

engaging in chat room communications whereby they discussed customer orders, trades, names and risk positions;
refraining from trading against each other’s interests;
coordinating bids for the purpose of fixing the price of the EUR/USD pair.

Defendants are alleged to have engaged in profitable EUR/USD transactions while acting to fix prices and rig bids for the EUR/USD product in the FX Spot Market. The Indictment further alleges that others were co-conspirators, suggesting that there may be cooperating witnesses and possibly further indictments to follow. Of note, however, recent Trump Administration changes to US Attorneys and DOJ Division Deputies and Chiefs may conceivably alter the course of this and any follow-on litigation. Regardless, over-the-counter markets have been a focus of antitrust lawsuits in recent years, most notably in the widely-covered Libor suits, and that trend is expected to continue.

THE LATEST: Further Efforts to Broaden the Scope and Impact for CFIUS Reviews of Foreign Acquisitions of US Businesses

by David Levine and Mary Strimel | Mar 17, 2017 | Agriculture, Mergers & Acquisitions

We reported earlier on the Committee on Foreign Investment in the United States (CFIUS) and its legal and practical authority to review M&A transactions for possible risks to US national security posed by foreign ownership of a US business. Sens. Cornyn (R-TX) and Schumer (D-NY) reportedly are working separately on legislation to strengthen CFIUS, which could directly affect some cross-border M&A. Sen. Cornyn’s proposed changes to CFIUS would target Chinese technology investments while Sen. Schumer’s bill would encourage CFIUS to look at economic implications as part of its review. These legislative efforts follow a bipartisan Congressional request in late Fall 2016 for the Government Accountability Office (GAO) to update its periodic analysis of CFIUS, urging the GAO to evaluate the possible expansion of factors considered by CFIUS in its M&A reviews to cover investment reciprocity and net economic benefits.

WHAT HAPPENED:

Now Sen. Debbie Stabenow (D-MI) and Sen. Chuck Grassley (R-IA) have introduced legislation that would add the Secretary of Agriculture and the Secretary of Health and Human Services as voting members of CFIUS. The bill would also direct CFIUS to consider matters of food security, access and safety when it reviews overseas acquisitions of US firms.

Though CFIUS may already consider food security as an element of national security, the new proposal would at a minimum enhance this factor. Stabenow said in a statement introducing the bill, “As foreign entities continue their aggressive acquisitions of US food and agriculture companies, it’s imperative that these transactions face additional scrutiny.”

WHAT THIS MEANS:

More broadly, the bipartisan legislative activity suggests an increased likelihood that CFIUS reform will gain traction in the Congress. Further support for broadening the scope and force of CFIUS may come from the Trump Administration, which would be consistent with its “America first” trade policy.

Any businesses with planned or pending cross-border M&A activity in the US, including those in the agribusiness sector, should monitor these developments.

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