Antitrust Lawyer Blog

DOJ REQUIRES DIVESTITURES IN PROPOSED MERGER BETWEEN REGAL CINEMA AND CONSOLIDATED THEATERS

2008-04-29T19:51:51Z

On April 29, 2008, the DOJ required the divestiture of assets of Regal Cinema (“Regal”) and Consolidated Theatres Holding GP (“Consolidated”) in three metropolitan areas in North Carolina in order for the $210 million merger between the companies to proceed. The DOJ believes that the transaction would have resulted in less competition and higher ticket prices at the Crown Point 12 Cinema in Charlotte, the Raleigh Grand in Raleigh, the Town Square 10 in Garner (a suburb of Raleigh) and Hollywood 14 in Asheville, NC.

]]> Regal is based in Knoxville, TN owning and operating 540 theaters in 39 states and the District of Columbia. Consolidated, a North Carolina partnership, owns and operates 28 theaters in Georgia, Maryland, North Carolina, South Carolina, Tennessee and Virginia.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

FTC ORDERS REMEDY TO RESTORE COMPETITION BETWEEN EVANSTON NORTHWESTERN HEALTHCARE CORPORATION AND HIGHLAND PARK HOSPITAL

2008-04-28T19:51:15Z

On April 28, 2008, the Federal Trade Commission (“FTC”) issued its final order and opinion enabling the lost competition between Chicago-based Evanston Northwestern Healthcare Corporation (“ENH”) and Highland Park Hospital.

]]> In October 2005, an administrative law judge ruled that ENH’s acquisition of Highland Park Hospital was anticompetitive and violated federal antitrust law. In August 2007, the FTC affirmed the court’s decision but stated that it lacked sufficiently detailed information about ENH’s contract negotiations to craft a precise order.

After reviewing ENH’s proposal and comments, the FTC issued its final opinion and order to remedy the loss of competition. It required ENH to establish separate negotiating teams for both inpatient and outpatient services at ENH and Highland Park. The Order also requires ENH to give prior notification to the Commission of any future acquisitions of hospitals that it may make within the Chicago Metropolitan Statistical Area for the next 10 years. The Order terminates in 20 years.

FTC SETTLES WITH TALX CORP REGARDING ITS ACQUISITIONS OF UNEMPLOYMENT COMPENSATION MANAGEMENT AND EMPLOYMENT VERIFICATION SERVICE PROVIDERS

2008-04-28T19:50:15Z

On April 28, 2008, the Federal Trade Commission (“FTC”) entered into a settlement agreement with TALX Corporation regarding its acquisitions of various unemployment compensation management (“UCM”) and verification of income and employment (“VOIE”) services. UCM consists of administering, on behalf of large, multi-state employers, unemployment compensation claims filed with a state or territory. VOIE consists of providing income and employment information on behalf of employers to third parties, such as lending institutions.

]]> TALX was the largest provider of VOIE services in 2002. Later that year, it acquired the two largest UCM providers, James E. Frick Inc. and the Gates McDonald & Company. Between June 2003 and November 2005, TALX made a series of acquisitions of various UCM/VOIE services including Johnson & Associates, LLC, Sheakley-Uniservice, Inc., Employers Unity, Inc., TBT Enterprises, Inc. and its sister corporation, UI Advantage, Inc., Jon-Jay Associates, Inc.

The FTC alleges that while each transaction was not problematic, the “cumulative effect of the acquisitions” has in sum translated into the virtual acquisition of its competition. TALX’s acquisitions have allowed it to unilaterally increase its prices and decrease the quality of services in the relevant markets.

The settlement would foster market entry and expansion by current and future competitors. The Commission vote to accept the complaint and consent order was 4-0.

Robert Doyle
(202) 589-1834
rdoyle@dbmlawgroup.com

KANSAS OWNER OF COMPUTER SERVICE COMPANIES AND FAMILY MEMBER CHARGED WITH CONSPIRING TO DEFRAUD FCC E-RATE PROGRAM

2008-04-24T19:48:45Z

On April 24, 2008, Leonard Douglas “Doug” LaDuron, a former owner of three Kansas computer service companies (Serious ISP Inc., Myco Technologies Inc. and Elephantine Corporation), and his mother, Mary Jo LaDuron (a.k.a. Mary Jo Gault) pled guilty to conspiracy charges to defraud the Federal Communications Commission’s (“FCC”) E-Rate Program. The E-Rate Program was authorized under the Telecommunications Act of 1996 to provide economically disadvantaged school districts and libraries with funds to connect to the internet. Mr. LaDuron was also charged with making false statements by misrepresenting his employment status to gain housing assistance to the U.S. Department of Urban Development.

]]> Mr. LaDuron submitted false statements and withheld material facts from Universal Service Administrative Company, which administers the E-Rate Program for the FCC. Ms. LaDuron identified herself as a consultant and steered E-Rate contracts to companies owned by her son and two co-conspirators Benjamin Rowner and Jay H. Soled. Mr. Rowner and Mr. Soled were indicted yesterday on similar conspiracy charges to defraud the E-Rate program. At least 10 schools from New York to California were affected by this conspiracy.

As a result of the DOJ’s investigation into fraud and anticompetitive conduct in the E-Rate Program, a total of six companies and 12 individuals have pled guilty, have been convicted and found guilty, or entered civil settlements and have paid, agreed to pay, or been sentenced to pay, criminal fines and restitution totaling more than $40 million. Trials are currently pending in three additional E-Rate cases, and one individual remains an international fugitive.

BRISTOL-MYERS SQUIBB EXECUTIVE PLEADS GUILTY OF LYING TO FEDERAL GOVERNMENT

2008-04-23T19:48:08Z

On April 23, 2008, the former senior vice president of Bristol-Myers Squibb Company (“BMS”), Andrew Bodnar, was indicted for his false statements to the federal government in its investigation into a patent settlement involving a blood-thinning drug used by patients of heart attack and stroke called Plavix. Mr. Bodnar agreed to plead guilty and pay a criminal fine of $1 million. Plavix is the most widely prescribed blood thinning drug in the world, earning BMS over $3.5 billion in the U.S. alone in 2005.

]]> The DOJ alleged that at a meeting in 2006 Mr. Bodnar (representing BMS) made assurances to executives of Apotex, Inc, Canada’s largest generic pharmaceutical company, that BMS would not launch a generic version of its drug Plavix if Apotex agreed not to launch their generic equivalent to Plavix before 2011. The FTC notified Mr. Bodnar that it would not approve such a settlement. BMS was required to submit any proposed patent settlements to the FTC for prior unrelated conduct. The DOJ contends that Mr. Bodnar lied to the FTC regarding representations of his meeting with Apotex.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

CANADIAN DEFENSE COMPANY AND TWO EXECUTIVES INDICTED ON CHARGES TO DEFRAUD U.S. MILITARY IN IRAQ

2008-04-21T19:47:12Z

On April 21, 2008, a federal grand jury in San Francisco, CA unsealed an indictment against a Canadian company, Newcon Optik Ltd. (“Newcon”), and two of its executives, Michael Beker (a.k.a. Mendel Beker) and Arie Prilik for their role in a scheme to defraud the U.S. military in Iraq.

]]> Mr. Beker, president and CEO, Mr. Prilik, former senior vice president, along with the company itself are charged with two counts of wire fraud and one count of conspiracy to commit wire fraud. Mr. Beker and Newcon were charged separately for money laundering. The defense company and the two employees allegedly attempted to defraud the U.S. Army’s Tank-Automotive and Armaments Command (“TACOM”) by paying a competitor $50,000 to withdraw its supply of night vision goggles. The conspirators allegedly would then have supplied TACOM with their night vision goggles, by overcharging TACOM by approximately $11 million. TACOM is responsible for training and providing equipment to the Iraqi Army.

Mr. Beker and Mr. Prilik face 20 years of prison time for the wire fraud charges and up to five years in prison and a quarter million dollars in criminal fines if convicted on the conspiracy charge. Mr. Beker faces up to 20 years in prison and a criminal fine of $500,000 if convicted of the money laundering charge. Upon conviction, the U.S. government will seek a criminal forfeiture of the $50,000 payment.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

FTC FILES COMMENT WITH FERC ON COMPETITION IN WHOLESALE ELECTRICITY

2008-04-18T19:46:05Z

On April 18, 2008, the Federal Trade Commission (“FTC”) filed a comment with the Federal Energy Regulatory Commission (“FERC”) regarding an earlier notice of proposed rulemaking (“NOPR”) that sought to provide consumers incentives to reduce power use. FERC proposed to provide consumers with incentives to reduce power use when electricity is scarce and expensive at the wholesale level.

]]> The FTC initially asked FERC to make changes to its advanced notice of proposed rulemaking (“ANOPR”) which was filed in September 2007. In its earlier comment on FERC’s ANOPR, the FTC observed, “Although we commend FERC for its proposals to remove regulatory obstacles to vigorous competition and efficient resource allocation in electricity markets and for the specific changes proposed in the ANOPR, we also encourage FERC to improve the proposals.”

A major long term goal for FERC is to strengthen competition in organized electric power markets to increase economic efficiency, improve electric system reliability, and enhance consumer welfare. The FTC’s comment asked FERC to facilitate improvements in pricing and direct load control – collectively known as “demand response” to achieve FERC’s long term goal. The comment concludes that “[w]e believe that a focus on removal of regulatory obstacles to efficient real-time price signals and demand response at the federal and state levels can be an important step toward appropriate, efficient reliance on conventional price mechanisms to handle scarcity and guide investment.”

Robert Doyle
(202) 589-1834
rdoyle@dbmlawgroup.com

NINTH FOREIGN EXECUTIVE PLEADS GUILTY TO PARTICIPATING IN MARINE HOSE CARTEL

2008-04-17T19:44:41Z

On April 17, 2008, Charles J. Gillespie, a former executive of Italy based Manuli Rubbers Industries SpA, pled guilty to participating in a conspiracy to rig bids, fix prices, and allocate market shares of marine hose in the United States. Mr. Gillespie also agreed to serve 12 months and one day in jail and pay a criminal fine of $20,000 as well as cooperate in the Department of Justice’s ongoing investigation.

]]> Marine hose is a flexible rubber hose used to transfer oil between tankers and storage facilities. The cartel, that Mr. Gillespie was allegedly a part of, manipulated prices for hundreds of millions of dollars worth of marine hose worldwide. The conspiracy lasted from sometime in early 2000 to May 2007. Since May 2007, there have been eight foreign executives arrested in Houston and San Francisco and charged for their role in the marine hose cartel.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

JAPAN AIRLINES ADMITS INVOLVEMENT IN AIRLINE CARTEL THAT FIXED CARGO RATES TO AND FROM THE UNITED STATES AND ELSEWHERE

2008-04-16T19:43:17Z

On April 16, 2008, Japan Airlines International Co. Ltd. (“JAL”) agreed to plead guilty and pay a criminal fine of $110 million for its role in a conspiracy to fix prices for international cargo shipments.

]]> JAL was accused of attempting to fix rates on international cargo shipments to and from the United States between April 2000 and February 2006. JAL was the largest carrier of goods between the United States and Japan earning about $2 billion. According to the charges, which were filed at the U.S. District Court for the District of Columbia, JAL participated in meetings with its co-conspirators to fix cargo rates and monitored and enforced such agreed upon rates.

The airliner agreed to cooperate with the Department of Justice’s ongoing investigation. JAL is the fourth airliner to admit its involvement in a conspiracy to fix rates for cargo shipments to and from the United States. British Airways, Korean Air Lines, and Quantas Airways have all pled guilty and agreed to pay criminal fines ranging from $61 million to $300 million.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

CONTRACTOR PLEADS GUILTY TO PARTICIPATING IN FRAUD CONSPIRACY AT NEW YORK PRESBYTERIAN HOSPITAL

2008-04-11T18:41:38Z

On April 11, 2008, Aaron S. Weiner, of Aaron Weiner Construction Inc. (“AWC”), pled guilty for acting as a conduit for a million dollar kickback scheme to defraud the New York Presbyterian Hospital (“NYPH”). An owner of two construction companies located in New York paid Mr. Weiner to pose as a consultant as a means to provide kickbacks to a former senior purchasing official at NYPH in return for awarding contracts that totaled at least $20 million. An elaborate scheme was set up to further cover up the scheme by having the checks forwarded to AWC, who in turn wrote checks to a shell company under the name of the mother of the former senior official at NYPH.

]]> This case arose from an ongoing antitrust investigation relating to contracts administered by Facilities Operations Department and Engineering Department at NYPH and in the Engineering Department at Mount Sinai. It is being conducted by the Department of Justice’s Antitrust Division in New York, the Federal Bureau of Investigation and the Internal Revenue Service Criminal Investigation's New York Field Office. Last year, two other people Michael Theodorobeakos and Michale Vignola and their respective companies Monosis Inc and Mister AC Ltd. pled guilty to conspiring to rig bids on various services provided to the NYPH.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

DOD CONTRACTOR PLEADS GUILTY FOR CONSPIRING SELL TRADE SECRETS FOR AVIATION FUEL SUPPLY CONTRACTS

2008-04-09T18:40:25Z

On April 9, 2008 Matthew W. Bittenbender, a U.S. Department of Defense (“DOD”) contractor pled guilty to conspiring to steal competitive information regarding the supply of fuel to DOD aircraft around the world. Aviation fuel is obtained by the DOD through the Defense Energy Support Center (“DESC”) which lets contracts for a variety of products. The fuel is delivered worldwide to locations, including Croatia, Bulgaria and Afghanistan. Mr. Bittendender was an employee of Avcard, a division of Kropp Holdings LLC, that provided aviation products and services throughout the world.

]]> Mr. Bittenbender was accused of selling trade secrets to Avcard’s competitors Far East Russia Aircraft Services Inc. (“FERAS”) and Aerocontrol Ltd. As a result, FERAS and Aerocontrol underbid Avcard at every location where the companies were bidding together. Avcard lost every one of those bids. Christopher Cartwright and Paul Wilkinson, along with their respective companies, FERAS and Aerocontrol were indicted on related charges.

According to the plea agreement, Mr. Bittenbender will continue to cooperate in the ongoing investigation. The investigation is being conducted by the Antitrust Division's National Criminal Enforcement Section and the Defense Criminal Investigative Service.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

MONTANA BOARD OF REALTY REGULATION REPEALS RULE PROHIBITING REAL ESTATE BROKERS TO OFFER REBATES TO CONSUMERS

2008-04-01T18:35:55Z

On April 1, 2008, the Montana Board of Realty Regulation repealed its rule disallowing real estate brokers to "solicit business by offering gifts, rebates, or promotional items." In August 2007, the Department of Justice’s Antitrust Division began an investigation of the Montana Board of Realty Regulation. In most states, real estate brokers are allowed to compete by offering various cash-back options, discounts and the like. Montana’s rule prohibited such actions. Montana follows three other states including West Virginia, South Dakota, and Kentucky in repealing similar regulations.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

WILLIAM E. KOVACIC ASSUMES NEW ROLE AS CHAIRMAN OF FTC

2008-03-31T19:18:31Z

On March 31, 2008, William E. Kovacic assumed the role of Chairman at the Federal Trade Commission. Mr. Kovacic had served as a Commissioner since January 2006 before his nomination by President Bush and eventual confirmation by the Senate.

]]> Before joining the FTC, Mr. Kovacic was the E.K Gubin Professor of Government Contracts Law at The George Washington University Law School since 1999. Between 2001 and 2004, Mr. Kovacic was the General Counsel to the FTC. However, his work with the FTC had begun in 1979 at the Bureau of Competition’s Planning Office. Four years later, Mr. Kovacic joined the law firm of Brian Cave working at its Washington, DC office in the firm’s antitrust and government contracts department, before joining the faculty of George Mason University School of Law in 1986. Since 1992, Mr. Kovacic has served as an adviser on antitrust and consumer protection issues to over 15 foreign governments.

Robert Doyle
(202) 589-1834
rdoyle@dbmlawgroup.com

A DEFENSE FIRM PLEADS GUILTY TO RIG BIDS ON U.S. DEPARTMENT OF DEFENSE CONTRACTS

2008-03-26T19:17:02Z

On March 26, 2008, Peck & Hale, LLC, a Long Island, NY defense firm, pled guilty to a two-count felony charge for rigging bids for U.S. Department of Defense (“DOD”) military restraints equipment contracts. This equipment is used to tie down and secure vehicles, aircraft, munitions, shipping containers, and other specialized military cargo requirements for transportation. Peck & Hale was accused of being a part of two separate conspiracies. The firm also agreed to a pay a criminal fine of $275,000 and to cooperate with the Department of Justice (“DOJ”) in their ongoing investigation.

]]> From December 2002 through January 2004, the firm conspired to rig bids on contracts for metal sling hoists assemblies sold to the U.S. Navy. In a separate agreement, from November 2001 through January 2005, Peck & Hale allegedly rigged bids on six different types of tie down equipment and cargo securing systems used by the military. Peck & Hale, with its co-conspirators, were accused of attending meetings to discuss the sale of this military equipment, agreeing during those meetings not to compete, disclosing confidential contractual information to each other, selling the equipment to the DOD at non-competitive prices and accepting payment for those sales.

This is the sixth case to come about in the DOJ’s ongoing investigation. The ongoing investigation is being conducted by the Antitrust Division's National Criminal Enforcement Section with the assistance of the DOD's Defense Criminal Investigative Service.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

DOJ APPROVES XM/SIRIUS MERGER

2008-03-24T19:15:12Z

On March 24, 2008, the Department of Justice (“DOJ”) approved a proposed merger between XM Satellite Radio Holdings, Inc. (“XM”) and Sirius Satellite Radio, Inc. (“Sirius”), the only two satellite radio service providers in the United States. The DOJ stated despite a merger to monopoly that the merged companies would not increase prices to satellite radio customers because of alternative services for consumers and future technological changes that are going to provide consumers with more alternatives.

]]> The DOJ explained that there are two channels that satellite radios are sold: through car manufacturers, which build them into their new cars, and through mass-market retail stores that sell automobile aftermarket equipment. Initially, XM and Sirius used to compete for the rights to distribute their products. Since then XM and Sirius have entered into long term sole source contracts with the major automobile manufacturers. These contracts have fixed the amount of subsidies that indirectly reduce the equipment prices paid by car buyers to obtain a satellite radio through 2012 and beyond. Evidence also does not show that competition between the satellite radio companies would have any affect on their decision to buy a certain brand of car.

As of now, XM radio programs cannot be utilized on Sirius satellite radios and vice versa causing subscribers to rarely switch between XM and Sirius. From the evidence gathered by the DOJ, no such interoperable radio is on the market and such a radio likely would not be introduced in the near term. The DOJ could not define a market with just two satellite radio firms and stated that both companies compete with firms that manufacture traditional AM/FM radio, HD radio, MP3 players and other audio offerings. Furthermore, the DOJ stated that there are a number of new platforms under development that would provide consumers with new or improved alternatives to satellite radios. The DOJ cited the introduction within several years of next-generation wireless networks that would allow consumers to listen to Internet radio on their mobile devices.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com