US Department of Justice Archives - Page 6 of 14

US Department of Justice

THE LATEST: DOJ’s Packaged Seafood Probe Yields Conditional Leniency Applicant

by Lisa A. Peterson | Sep 14, 2017 | Cartel Enforcement, DOJ Developments, Mergers & Acquisitions

On Monday, September 11, Tri-Union Seafoods LLC, the US subsidiary of Thai Union Group, announced it blew the whistle on competitors in the US Department of Justice’s (DOJ) investigation of the packaged seafood industry. The “Chicken of the Sea” canned tuna manufacturer also said it received conditional leniency from DOJ in exchange for its cooperation.

WHAT HAPPENED:

In 2015, DOJ began investigating the packaged seafood industry for anticompetitive conduct, including price fixing. DOJ’s investigation followed a failed merger between Thai Union and Bumble Bee Foods LLC.

In May 2017, Bumble Bee pleaded guilty to violations of Sherman Act Section One. Bumble Bee agreed to fix the price of shelf-stable tuna fish from as early as the first quarter of 2011 through at least the fourth quarter of 2013. The company agreed to pay a $25 million fine, which was substantially reduced to protect the company from insolvency. Two Bumble Bee executives also pleaded guilty.

In June 2017, a former StarKist Co. sales executive pleaded guilty to price fixing.

Private plaintiffs filed class action complaints in October 2016 alleging antitrust violations in the packaged seafood industry. The private plaintiffs represent grocery retailers who sold packaged tuna to US consumers.

WHAT THIS MEANS:

Despite the significant costs of participating in DOJ’s Corporate Leniency Program, leniency recipients continue to receive significant value for their cooperation. Conditional leniency recipients like Tri-Union and their employees will not face criminal fines, jail time or prosecution.

Full cooperation with DOJ’s program will place heavy demands on leniency applicants, including gathering and translating foreign documents, bringing foreign witnesses to the United States for interviews and testimony, and providing several attorney proffers.

It is critical to have a robust compliance program in place to detect any potential or actual violations of antitrust law. Such a program will allow a company to investigate any potential misconduct and, if necessary, report it to DOJ. Time is of the essence when seeking leniency with DOJ’s Corporate Leniency Program.

Companies contemplating acquisitions should consider whether any problematic antitrust conduct could arise during the merger review and result in a subsequent criminal investigation.

DOJ Prosecution of Heir Location Service Providers Dismissed on Statute of Limitations Grounds

by McDermott Will & Emery and Mary Strimel | Sep 11, 2017 | DOJ Developments

The US Department of Justice (DOJ) Antitrust Division’s criminal case against an heir location service provider collapsed when the US District Court for the District of Utah ruled that the government’s Sherman Act § 1 case was barred by the statute of limitations. The court held that the alleged conspiracy ceased when the alleged conspirators terminated their market division guidelines, and that continued receipt of proceeds tied to the alleged conspiracy did not extend the limitations period. The court further rejected DOJ’s argument that the case should be subject to the per se standard, instead finding the alleged anti-competitive agreement amongst competitors to be unique and subject to the rule of reason.

This ruling opens a crack in the line of Sherman Act per se cases, creating an opportunity for defendants to argue for rule of reason treatment where there are novel factual issues.

Continue Reading

THE LATEST: Another E-Commerce Retailer Pleads Guilty in DOJ Investigation of Online Promotional Products Industry

by McDermott Will & Emery | Aug 25, 2017 | DOJ Developments

On August 14, 2017, we reported on an online retailer’s guilty plea for conspiring to fix the prices of “customized promotional products” such as silicone wristbands and lanyards, and the ongoing US Department of Justice (DOJ) investigation into the online promotional products industry. On August 22, 2017, DOJ announced two more guilty pleas in the investigation, announcing that e-commerce company Custom Wristbands Inc. and its owner and CEO Christopher Angeles had pled guilty to violating the Sherman Act, 15 USC § 1.

WHAT HAPPENED:

According to an Information filed in the US District Court for the Southern District of Texas by DOJ and the US Attorney’s Office for the Southern District of Texas, Defendant Angeles and his co-conspirators engaged in a conspiracy from at least as early as June 2014 through at least June 2016 to “suppress and eliminate competition by fixing and maintaining prices of customized promotional products, including wristbands, sold in the United States and elsewhere.”

DOJ alleges that Defendants and co-conspirators attended meetings and communicated via text and online messaging platforms regarding pricing for the online sale of customized promotional products.

Defendant Custom Wristbands Inc. (d/b/a Kulayful Silicone Bracelets, Kulayful.com, Speedywristbands.com, Promotionalbands.com, Wristbandcreations.com, and 1inchbracelets.com) has agreed to pay a criminal fine in the amount of $409,342. Defendant Angeles faces up to 10 years in prison and up to a $1 million fine.

DOJ has announced that both defendants have agreed to cooperate with the Antitrust Division’s ongoing investigation.

WHAT THIS MEANS:

The DOJ Antitrust Division continues to investigate the “online promotional products industry” and we anticipate that additional defendants will be charged over the course of the investigation.

DOJ continues to hold individual executives accountable in price fixing cases, even where their corporations plead guilty and agree to cooperate with ongoing investigations.

Antitrust M&A Snapshot: April – June 2017 Update

by McDermott Will & Emery, Jon B. Dubrow and Joel R. Grosberg | Aug 3, 2017 | DOJ Developments, EC Developments, EU Developments, FTC Developments, Healthcare Antitrust, Joint Ventures/Competitor Collaboration, Mergers & Acquisitions, Monopolization/Abuse of Dominance

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 the full report here.

THE LATEST: Federal Judge Blocks Merger of Nuclear Waste Disposal Companies Rejecting “Failing Firm” Defense

by Mary Strimel | Jul 18, 2017 | DOJ Developments, Mergers & Acquisitions

On June 21, 2017, US District Judge Sue L. Robinson blocked EnergySolutions, Inc.’s proposed acquisition of Waste Control Specialists LLC (WCS), applying a strict standard for the “failing firm” defense to a merger challenge. The parties compete in the disposal of low level radioactive waste (LLRW). WCS had argued that it would be forced to exit the market due to heavy operating losses if the transaction were not approved. Judge Robinson’s recently released opinion provides insights into how aggressively a putative failing firm must shop its assets to third parties before it can qualify for the failing firm defense to an otherwise anticompetitive merger.

WHAT HAPPENED:

The US Department of Justice (DOJ) filed suit in November 2016 to enjoin the proposed acquisition of WCS by EnergySolutions, arguing that the merger would lead to a substantial lessening of competition in the LLRW disposal industry. DOJ alleged that EnergySolutions and WCS are the only significant competitors in this industry for the relevant geographic market.

The court found that the government easily established a prima facie case of anticompetitive effects by demonstrating that the proposed acquisition would create a firm controlling an exceedingly high percentage of the relevant market and result in a significant increase in market concentration. Judge Robinson identified two product markets: the disposal of higher-activity LLRW, and the disposal of lower-activity LLRW. In both markets she found that the relevant measures of concentration “blow past the presumptive barriers” for harm to competition, especially in regards to higher-activity LLRW where the transaction would result in a “merger to monopoly.”

The defendants’ main defense to rebut the government’s prima facie case was that WCS was a “failing firm.” The failing-firm doctrine considers the possible harm to competition resulting from an acquisition preferable to the negative impact on competition, loss to stockholders, and negative effect on local communities that results when a company goes out of business. Judge Robinson’s opinion explains that in order to assert a valid failing firm defense, the defendants must show that WCS faces the “grave possibility of business failure” and that there was no “other prospective purchaser.”

Judge Robinson avoided deciding the more difficult question concerning whether WCS indeed faced imminent business failure, finding instead that the defendants failed to demonstrate that EnergySolutions was the only available purchaser. According to Judge Robinson, WCS’s parent company failed to make the necessary “good faith efforts to elicit reasonable alternative offers” that would have lesser negative effects on competition.

The opinion highlights the fact that once it was clear that the parent company was serious about selling all of WCS, the parent company had already agreed to several deal protection devices, such as a 30-day exclusivity period with EnergySolutions, and a “no-talk” provision in the merger agreement. WCS and its parent company thus did not respond to other companies that reached out to express interest in acquiring WCS after the transaction with EnergySolutions was [...]

Continue Reading

THE LATEST: DOJ Price-Fixing Probe Demonstrates That Deal Risk Is Not the Only Antitrust Concern Merging Parties Should Keep in Mind

by Will Diaz | Jun 15, 2017 | Cartel Enforcement, DOJ Developments, FTC Developments, Joint Ventures/Competitor Collaboration, Mergers & Acquisitions

Bumble Bee Foods, and two of its senior vice presidents, have recently pled guilty to US Department of Justice (DOJ) charges that they engaged in a conspiracy to fix prices of shelf-stable tuna fish sold in the United States from 2011 to 2013. Bumble Bee agreed to pay a $25 million criminal fine that can increase to $81.5 million under certain conditions, and the company’s two senior vice presidents pled guilty and agreed to pay criminal fines as well. The investigation appears to have been prompted by information that the DOJ uncovered during its investigation of Thai Union Group’s (owner of Chicken of the Sea) proposed acquisition of Bumble Bee, which was abandoned after DOJ concerns.

WHAT HAPPENED:

On December 19, 2014, Thai Union Group, the largest global producer of shelf-stable tuna, announced that it had agreed to acquire Bumble Bee Foods for $1.5 billion. A year later, on December 3, 2015, the DOJ announced that the parties had abandoned the transaction after the DOJ expressed concerns that the acquisition would harm competition. The DOJ stated that “Thai Union’s proposed acquisition of Bumble Bee would have combined the second and third largest sellers of shelf-stable tuna in the United States in a market long dominated by three major brands, as well as combined the first and second largest domestic sellers of other shelf-stable seafood products.”

Beyond its comments about the potential for competitive harm from the transaction, however, the DOJ further noted that “[o]ur investigation convinced us – and the parties knew or should have known from the get go – that the market is not functioning competitively today, and further consolidation would only make things worse.”

It appears that the DOJ’s concerns that the market for packaged seafood was not functioning competitively spurred the government to proceed with an investigation into potential collusion among the suppliers of packaged seafood. After its investigation, the DOJ concluded that Bumble Bee Foods, two of its senior vice presidents, and other co-conspirators “discussed the prices of packaged seafood sold in the United States[,] agreed to fix the prices of those products [and] negotiated prices and issued price announcements for packaged seafood in accordance with the agreements they reached.”

Bumble Bee Foods and its two senior vice presidents have pled guilty to these charges, agreed to pay significant criminal fines, and are cooperating with the DOJ in its ongoing investigation.

WHAT THIS MEANS:

In the Mergers & Acquisitions context, the merging parties are most often concerned with the potential risk that antitrust concerns may pose to the deal and the ability to obtain DOJ or Federal Trade Commission (FTC) clearance for the transaction. This criminal investigation by the DOJ demonstrates that the parties need to be aware of their conduct in the market, whether they have engaged in conduct that may be found to be collusive, and the potential consequences of such conduct [...]

Continue Reading

THE LATEST: Limiting Early Discovery in Parallel Criminal and Civil Cases

by Gregory E. Heltzer, Lauren Salins and Mary Strimel | Apr 20, 2017 | Cartel Enforcement, DOJ Developments, Private Litigation

Companies are increasingly facing parallel proceedings involving government investigations and follow-on private litigation. These complex cases often involve competing interests between the parties that can influence a judge’s determination on discovery timing and process.

Private plaintiffs are incentivized to obtain as much information about the case as early as possible to support their allegations and avoid having the case dismissed on summary judgment.

Defendants hope to delay, or save altogether, the expenditure of potentially millions in discovery costs.

The government has a strong interest in preserving the confidentiality and integrity of their investigation without interference from civil plaintiffs. (more…)

THE LATEST: Entanglements and Concentrated Markets Require Divestiture in the Dairy Industry

by McDermott Will & Emery and Mary Strimel | Apr 13, 2017 | Agriculture, DOJ Developments, Mergers & Acquisitions

On July 6, 2016, Danone S.A. (Danone) agreed to acquire The WhiteWave Foods Company (WhiteWave) for $12.5 billion.

WhiteWave is the leading manufacturer of fluid organic milk in the United States and one of the top purchasers of raw organic milk. Danone is the leading US manufacturer of organic yogurt (Stonyfield). Nearly 90 percent of the raw organic milk used by Danone to manufacture organic yogurt is supplied via a strategic agreement by CROPP Cooperative (CROPP). As of 2009, the strategic supply agreement between Danone and CROPP also includes Danone providing CROPP with an exclusive license for the production and sale of Stonyfield branded fluid organic milk.

WhiteWave and CROPP are the two largest purchasers and top competitors for purchasing raw organic milk from farmers in the Northeast US. Additionally, WhiteWave, CROPP and Danone-CROPP are the only nationwide competitors for the sale of fluid organic milk to retailers and have a 91 percent share of nationwide branded fluid organic milk: Horizon (WhiteWave), Organic Valley (CROPP) and Stonyfield (Danone-CROPP). (more…)

DOJ Policy Updates Signal Continuity of Antitrust Program

by Mary Strimel | Feb 1, 2017 | DOJ Developments

This month, the US Department of Justice Antitrust Division revised its “Frequently Asked Questions About the Antitrust Division’s Leniency Program and Model Leniency Letters” (FAQs), with releases both before and after the new administration took office. The revisions serve as a signal that the continuity we have seen in previous years from the Antitrust Division is likely to continue. The changes include long-needed clarifications and updates since the release of the FAQs in 2008.

Read the full article.