ANTITRUST ALERT
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
U.S. Department of Justice
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Has Antitrust Enforcement Been ‘Reinvigorated’ Under Obama?

by and | Oct 27, 2015 | , ,

In the 2008 presidential election campaign, then-candidate Barack Obama promised to “reinvigorate” antitrust enforcement. Over the last few years, several observers have concluded that the Obama administration’s antitrust record is not substantially different from that of his predecessor. Conventional wisdom suggests that antitrust enforcement is non-partisan. Some key statistics bear out this conclusion, but a comparative review of the data in Hart-Scott-Rodino (HSR) Annual Reports published jointly by the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ), including the recently issued fiscal year 2014 report, reveals some significant differences in antitrust enforcement during the Obama administration.

Analyzing the first six years of each administration reveals some superficial differences, but also significant continuity. Between 2001 and 2006, the agencies received a total of 9080 HSR filings; in 2009–2014 they received only 7530 filings. The total number of filings reviewed by the agencies also declined in absolute terms in the Obama years (Bush: 1537; Obama: 1251). Yet the percentage of filings reviewed has been remarkably consistent at slightly less than 17 percent of filings received in each period (Bush: 16.9 percent; Obama: 16.6 percent). The same consistency applies to Second Requests issued. The agencies actually issued a higher number of Second Requests in the first six years of the Bush administration compared to the same period in the Obama administration (Bush: 284; Obama 275). Given the lower number of filings in 2009–2014, the number of Second Requests as a percentage of all filings reviewed was higher in the Obama years, but only slightly (Bush: 3.1 percent; Obama: 3.7 percent).

If the analysis stopped there, we might conclude that antitrust review and enforcement has changed little during the Obama years. But data for the individual agencies reveals a different picture. In the Bush years, the FTC issued 142 Second Requests compared to 134 during the Obama years. Once again, given the different volume of transactions, this difference in absolute numbers results in no meaningful change in the Second Requests issued as a percentage of the transactions reviewed (Bush: 15.3 percent; Obama: 15.4 percent). For the DOJ, however, the numbers reveal a different story. Although the DOJ issued an almost equal number of second requests in each administration (Bush: 142; Obama: 141), as a percentage of all transactions reviewed by the DOJ, this steady rate results in a significant increase in the total as a percentage of the transactions reviewed; 23.4 percent during the Bush administration, compared to 37.1 during the Obama administration.

The number of enforcement actions pursued by each agency also reveals significant differences. The FTC launched nine more actions under Obama than it did under Bush (Bush: 113; Obama: 124). These totals translate to a modest two percent increase when measured as a percentage of the transactions reviewed by the agency (Bush: 12.1 percent; Obama: 14.2 percent). At the DOJ, the total number of enforcement actions also increased, from 86 under Bush to 101 under Obama. Given the different number of transactions reviewed, however, this change almost doubled [...]

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Top Antitrust Enforcers Respond to Congressional Questioning

by | May 26, 2015 | , , , , ,

Federal Trade Commission (FTC) Chairwoman Edith Ramirez and Assistant Attorney General William Baer testified before the House Committee on the Judiciary’s Subcommittee on Regulatory Reform, Commercial and Antitrust Law on May 15, 2015. The oversight hearing provided an opportunity for the heads of the U.S. antitrust enforcement agencies to survey their agencies’ priorities and recent achievements. The two agency heads also faced congressional questions on a variety of topics ranging from proposed reforms to the FTC’s merger review process to the alleged unfair targeting of foreign firms by Chinese antitrust authorities.

In her prepared testimony, Chairwoman Ramirez reviewed her agency’s recent activity, emphasizing especially recent U.S. Supreme Court and appellate court victories. She reiterated the agency’s strategic focus on core areas of concern, including health care, where the agency continues to review health care provider and pharmaceutical industry mergers carefully. Ramirez also stressed the agency’s continued attention to combating efforts to stifle generic drug competition. Other key focus areas include consumer products and services, technology and energy markets.

For the U.S. Department of Justice’s (DOJ’s) Antitrust Division, Assistant Attorney General Baer’s prepared remarks focused on the division’s criminal cartel enforcement activity, including the expansive London Interbank Offered Rates  and auto parts investigations. Baer also highlighted the Division’s civil enforcement activity, noting for example that three major mergers had recently been abandoned in the face of concerns raised by the division.

Chairwoman Ramirez faced questioning from the subcommittee about its merger review process. Asked about a recent rule change, Ramirez downplayed the significance of the change and stated that it was meant merely to clarify the agency’s position in situations where a court has refused to issue a preliminary injunction. She stated that the new rule was not a departure from past practice and that the Commission always assessed each case to determine whether to continue with an administrative hearing in the wake of the denial of an injunction.

Ramirez also faced questioning about the proposed SMARTER Act. The proposed legislation, which passed out of committee in the House last fall, would require the DOJ and FTC to satisfy the same standards to obtain preliminary injunctions against mergers. Currently, for the DOJ to obtain an injunction, it must show that the transaction would cause irreparable harm if allowed to go forward. The FTC faces a different test, and must only show that the injunction is in the public interest. Under the proposed legislation, both agencies would be held to the irreparable harm standard. In addition, the legislation would prevent the FTC from using its administrative court for mergers where an injunction has been denied.  Chairwoman Ramirez contended that the proposed Act “undermines one of the central strengths of the Federal Trade Commission and one of the reasons the FTC was created in the first instance, which was to have an expert body of bipartisan commissioners rule on and develop antitrust doctrine.” She pointed also to the agency’s record of appellate success to stress her view that the [...]

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Parking Heater Manufacturer Pleads Guilty to Price-Fixing

by | Mar 17, 2015 | ,

On March 12, 2015, the U.S. Department of Justice (DOJ) announced that Espar Inc., pleaded guilty to one count of price-fixing under the Sherman Act in a scheme involving parking heaters for commercial vehicles that ran from October 2007 through December 2012.  Parking heaters heat the inside of a vehicle when the engine is not running.

According to the press release, Espar, a parking heater manufacturer, agreed to pay a criminal fine and cooperate in the DOJ’s ongoing investigation.  Espar and its co-conspirators discussed prices for parking heaters and agreed to set a price floor for parking heater kits sold to aftermarket customers.  Further, the companies agreed to coordinate the timing and amount of price increases, and enforced the agreement by exchanging information.  Investigation into the other companies is ongoing, with assistance from the Federal Bureau of Investigation.

Although the judge initially agreed to Espar’s and DOJ’s joint request to waive the pre-sentence investigation report and schedule sentencing on the same day as the plea hearing, the judge later changed his mind.  The judge stated in his order that his review of the pre-sentence report would ensure that “the agreed-upon fine is not too modest” and address any concerns that the terms of the plea agreement may implicate Fifth Amendment issues for individual employees who are required to cooperate with DOJ.  Espar’s plea agreement is still subject to court approval, and sentencing is scheduled for June 5, 2015.  The maximum fine for price-fixing in violation of the Sherman Act for corporations is either $100 million, or the amount twice the gain derived from the crime or twice the loss suffered by the victims—whichever is greater.

DOJ Assistant Attorney General Bill Baer stated that the “plea demonstrates the Antitrust Division’s commitment to holding companies accountable for conspiracies that fix prices on parts used in every day products,” and that “[t]he Antitrust Division will vigorously prosecute companies that engage in schemes that subvert normal competitive processes and defraud American consumers and businesses.”



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Increasing Antitrust Risk in Non-Reportable Transactions – DOJ Obtains Disgorgement of Profits in Tour Bus Settlement

by | Mar 11, 2015 | ,

The U.S. Department of Justice (DOJ) recently reached a settlement with Coach USA Inc. and City Sights LLC, breaking up their joint venture. The DOJ also employed the rarely used remedy of disgorgement to recover $7.5 million in profits from the defendants. This case demonstrates the aggressive posture the antitrust agencies are taking to challenge and impose harsh remedies upon transactions that are not reportable under the Hart-Scott-Rodino (HSR) Act. It also highlights the need to properly evaluate and prepare for the antitrust implications of non-reportable transactions under the HSR Act.

DOJ Obtains Disgorgement

In 2009, two operators of hop-on, hop-off bus tours in New York City formed a joint venture, Twin America LLC. Prior to the formation of Twin America, Coach USA and City Sights were the two largest companies in the alleged hop-on, hop-off bus tour market in New York City, with a combined 99 percent share of the market. The DOJ alleged that the two companies’ joint venture created an unlawful monopoly and enabled them to increase prices by approximately 10 percent. The DOJ filed an antitrust complaint challenging the deal in December 2012, well after it was consummated in 2009. The case was proceeding towards trial when the parties agreed to a settlement, which they announced on March 16, 2015.

Under the terms of the settlement, the defendants must take several steps to restore competition allegedly lost through the formation of the venture. Twin America must divest all 50 of City Sight’s valuable Manhattan bus stop authorizations. The divestiture will eliminate a significant barrier to entry, as the bus stop authorizations are required by the New York City Department of Transportation to operate bus tours, and little capacity for new authorizations exists. Coach USA and Twin America must also establish antitrust training programs and provide the government with advance notice of any future acquisition in the alleged market. Coach USA must pay $250,000 in attorney’s fees to the United States in connection with claims that it spoliated evidence and did not meet its document preservation obligations.

Most noteworthy, the settlement requires the defendants to pay $7.5 million to disgorge what the DOJ viewed as excess profits obtained as a result of the combination. Prior to this settlement, the defendants had already agreed to pay $19 million to settle a related class action lawsuit. One criticism of disgorgement as a remedy in antitrust matters is that disgorgement may excessively punish defendants that are also subject to potential civil litigation in which they may pay additional damages. Here, the DOJ concluded that the defendants were unjustly enriched by an amount greater than the $19 million settlement, and the additional $7.5 million disgorgement was intended to divest the defendants of additional ill-gotten profits and deter similar conduct in the future.

This disgorgement is significant. It is a remedy that the FTC and DOJ have used very infrequently, particularly in merger cases. To the extent the Twin America case creates a precedent for the use of that remedy, it increases [...]

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Top Antitrust Watchdog to Merging Firms: DOJ Not Interested in Remedies that Require Ongoing Regulatory Oversight

by | Feb 19, 2015 | ,

Head U.S. Department of Justice (DOJ) antitrust enforcer, Bill Baer, believes the Federal Trade Commission and DOJ are law enforcement agencies, not regulators.  In his recent speech at the Global Competition Review Fourth Annual Antitrust Leaders Forum, Baer stressed that antitrust regulation “is not what we do.  And it is not how we ought to think about what we do.”  He added that the antitrust agencies “do not aspire to be regulators or to pick winners and losers.  Instead antitrust enforcement, done right, focuses on removing impediments to competitive markets and protecting market structures that facilitate competition.”  Baer’s enforcement-minded approach likely explains one reason why the federal antitrust agencies do not typically accept conduct remedies to resolve antitrust concerns.  Conduct remedies require an entity to take, or refrain from, certain business conduct (e.g., price maintenance commitments).  The federal antitrust agencies disfavor conduct remedies in part because they often require significant monitoring (i.e., regulation) to fully protect competition.  As enforcers, Baer believes the agencies should use the antitrust laws to preserve competition with little regulatory involvement.  He noted in his recent speech that effective antitrust remedies “minimize the need for ongoing regulatory involvement in decisions better left to the market.”

As litigation expenses continue to rise, it is often prudent for parties under antitrust investigation to resolve the antitrust agencies’ concerns through a consent agreement.  The nature of the parties’ proposed remedy is highly important.  With federal antitrust agencies unlikely to accept conduct remedies to resolve antitrust concerns, parties must be ready to present structural remedies—i.e., asset divestitures to ready, willing and able buyers—that fully preserve competition.  The antitrust agencies will carefully scrutinize any proposed remedy.  If the reviewing agency believes the remedy falls short of fully preserving competition, then it likely will be rejected.  Indeed, Baer messaged in his speech that “[s]ound antitrust enforcement requires careful attention to remedies.”  He praised DOJ’s recent efforts to reject inadequate remedy proposals in favor of pursuing law enforcement actions to obtain the relief DOJ deemed necessary to preserve competition.  In short, parties must be ready to fully address the antitrust agencies concerns or do battle in court.



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Aerospace & Defense Series: Leading Antitrust Considerations for M&A Transactions

by | Dec 18, 2014 | , , ,

Aerospace and defense contractors engage in a wide range of mergers, acquisitions and joint venture transactions, which are often subject to heightened antitrust scrutiny. This article highlights some of the leading antitrust factors that contractors should consider when contemplating M&A transactions in their unique industry.

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Coastal Water Freight Transportation Company Pleads Guilty and Pays $45 Million Fine for Price-Fixing

by | Feb 24, 2011 |

by Nicole L. Castle

Today the Department of Justice announced that Horizon Lines LLC agreed to plead guilty and pay a $45 million fine for its involvement in price fixing coastal water freight services between the continental U.S. and Puerto Rico.  This plea is the result of an ongoing federal antitrust investigation into price fixing and bid rigging in the coastal water freight transportation industry.  As a result of the investigation, five former executives have been charged and sentenced to serve prison time.  
 

For additional information, please visit: https://www.justice.gov/atr/public/press_releases/2011/267605.htm



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