On September 25, 2012, the Federal Trade Commission (“FTC”) announced that Biglari Holdings, Inc., which owns Steak ‘n Shake and Western Sizzlin restaurant chains, agreed to pay $850,000 in civil penalties to resolve allegations that it failed to make a premerger notification filing in connection with its acquisition of 8.7% of the outstanding voting securities of Cracker Barrel Old Country Store, Inc. http://www.ftc.gov/opa/2012/09/biglari.shtm
The Antitrust Division of the Department of Justice (“DOJ”) scored an important victory on September 20, 2012 when AU Optronics Corp. (AUO) of Taiwan was fined $500,000,000 by U.S. District Court Judge Susan Illston in San Francisco for participation in a criminal price fixing conspiracy in the market for thin-film transistor liquid crystal display (LCD) panels. Judge Illston also sentenced two high level executives of AUO to 3-year prison terms each and fined each of them $200,000 for their participation in the criminal conspiracy. See Press Release, U.S. Dep’t of Justice, Taiwan-Based AU Optronics Corporation Sentenced To Pay $500 Million Criminal Fine For Role In LCD Price-Fixing Conspiracy (Sept. 20, 2012) (http//www.justice.gov/atr/public/press_release/2012/287189.htm).
Executive Agrees to Go to Jail for Submitting Falsified Documents to the Antitrust Agencies During the Merger Review Process
On May 3, 2012, the Antitrust Division of the Department of Justice (“DOJ”) announced that an executive of Hyosung Corporation, an affiliate of Nautilus Hyosung Holdings Inc. (“Nautilus”), agreed to plead guilty and serve five months in prison in the United States for obstruction of justice charges in connection with the antitrust agencies’ merger investigation of its proposed acquisition of U.S.-based Triton Systems. The transaction was abandoned.
On February 10, 2012, the Department of Justice (“Department”) entered into a settlement that allows International Paper to acquire Temple-Inland. The settlement agreement requires International Paper and Temple-Inland Inc. to divest three containerboard mills in order to proceed with their $4.3 billion merger. The Department said that the merger, as originally proposed, would have substantially lessened competition in the production and sale of containerboard, the type of paper used to make corrugated boxes, in the United States. The following mills are to be sold: (1) both the New Johnsonville Mill and the Ontario Mill, AND (2) either the Port Hueneme Mill or the Henderson Mill, but not both mills.
On October 21, 2011, the DOJ Antitrust Division (“DOJ”) filed a civil lawsuit in U.S. District Court in Washington, D.C. to prevent Grupo Bimbo S.A.B. de C.V. and BBU Inc. (collectively, “BBU”) from acquiring Sara Lee Corporation’s (“Sara Lee”) North American Fresh Bakery business. The DOJ simultaneously filed a Proposed Final Judgment, reflecting a settlement with BBU and Sara Lee upon which they agreed to divestitures of certain sliced bread brands and associated assets in select areas where the two companies compete head-to-head in order to proceed with the acquisition. Such divestitures would resolve competitive concerns alleged in the suit.
The Affordable Care Act of 2010 encourages health care providers to form integrated organizations to jointly offer services in order to reduce costs and improve the quality of health care in the United States. Section 3022 of the Act provides for the formation of Accountable Care Organizations (“ACOs”) to serve fee-for-service Medicare beneficiaries through Medicare’s Shared Savings Program (“SSP”). ACOs must sign up with the Department of Health and Human Services’ Centers for Medicare and Medicaid Services (“CMS”) to participate in the program for at least three years.
On May 23, 2011, the Department of Justice (“DOJ”) filed a civil antitrust lawsuit to block H&R Block Inc.’s (“H&R”) proposed acquisition of TaxAct, a digital do-it-yourself tax preparation software provider. The DOJ’s Antitrust Division filed its lawsuit in U.S. District Court in Washington, D.C., to prevent H&R Block from acquiring 2SS Holdings Inc., an entity within TA IX L.P. and the maker of TaxACT. The DOJ’s complaint details H&R’s motive to eliminate competition.
VeriFone and Hypercom Abandon Planned Divestiture of Hypercom’s U.S. Assets When Faced With DOJ’s Lawsuit
On May 20, 2011, the DOJ announced that VeriFone Systems Inc.(“VeriFone”), Hypercom Corp. (“Hypercom”), and Ingenico S.A. (“Ingenico”) abandoned plans for Hypercom to divest its U.S. point-of-sale (“POS”) business to Ingenico as the Department of Justice (“DOJ”) did not find the divestiture adequate to resolve the competitive concerns raised by the VeriFone/Hypercom transaction.
DOJ Challenges George’s Inc.’s Consummated Acquisition of Tyson Foods Inc.’s Harrisonburg Poultry Processing Complex
On May 10, 2011, the Department of Justice (“DOJ”) filed a civil antitrust lawsuit challenging George’s Inc.’s (“George’s”) acquisition of Tyson Foods’ (“Tyson”) chicken processing complex in Harrisonburg, VA. This is a challenge to a consummated $3 million acquisition in a very limited geographic market in Virginia.
On May 6, 2011, Unilever NV ("Unilever”) and the U.S. Department of Justice (“DOJ”) reached an agreement to settle antitrust concerns over its $3.7 billion acquisition of hair care company Alberto-Culver Co. (“Alberto”). The DOJ’s Antitrust Division filed a civil antitrust lawsuit in U.S. District Court in Washington, D.C. to block the proposed transaction between the parties of the acquisition along with a proposed consent decree that would resolve the competitive concerns alleged in the lawsuit.
DOJ Conditions Google’s Acquisition of ITA Software by Requiring Google to Develop and License Travel Software
On April 8, 2011, the Department of Justice (“DOJ”) filed a civil antitrust lawsuit in U.S. District Court in Washington, D.C., to block the proposed acquisition of ITA Software Inc. (“ITA”) by Google Inc. (“Google”). At the same time, the DOJ filed a proposed consent decree to resolve the DOJ’s antitrust concerns. The settlement requires Google to develop and license travel software currently owned by ITA, to establish internal firewall procedures and to continue software research and development pursued by ITA. Google will also be required to provide mandatory arbitration under certain circumstances and provide a mechanism for complaints if Google acts in an unfair manner.
On April 8, 2011, Stericycle Inc. (“Stericycle”) entered into a settlement agreement with Department of Justice (“DOJ”) allowing it to proceed with its acquisition of Healthcare Waste Solutions Inc. (“HWS”). The DOJ along with the attorney general of the state of New York filed an antitrust lawsuit to block the transaction and simultaneously filed a proposed settlement to resolve antitrust concerns raised by the transaction.
On March 29, 2011, Department of Justice (“DOJ”) reached a settlement with Dean Foods Company (“Dean”) that requires Dean to divest a significant milk processing plant in Waukesha, Wis., and related assets that it acquired from the Foremost Farms USA Cooperative, including the Golden Guernsey brand name. The DOJ’s Antitrust Division and state attorneys general from Illinois, Michigan and Wisconsin, filed a proposed consent decree in U.S. District Court for the Eastern District of Wisconsin in Milwaukee. The settlement agreement resolves the antitrust concerns alleged in the civil antitrust lawsuit originally filed by the DOJ and the state attorneys general on Jan. 22, 2010.
Judge William H. Pauley III of the United States District Court for the Southern District of New York entered final judgment in a review of a consent order under the Tunney Act and ruled that disgorgement was a proper remedy in a Sherman Act case involving manipulation of electricity rates in New York City.
On December 14, 2010, the U.S. Department of Justice announced a settlement with Pittsburgh-based L.B. Foster Co. to divest a West Virginia plant used in development, manufacture and sale of certain railroad joints to Koppers Inc., a wholly owned subsidiary of Koppers Holdings Inc., in order to proceed with Foster’s acquisition of Portec Rail Products Inc. DOJ said the acquisition as originally proposed would combine the two primary U.S. manufacturers of bonded insulated rail joints and two of only three U.S. manufacturers of polyurethane-coated insulated rail joints. Divestiture of the West Virginia plant will preserve competition. Without the divestiture, the acquisition would lead to higher prices, lower quality, less customer service and less innovation.
On October 18, 2010, the U.S. Department of Justice (“DOJ”) and the Michigan Attorney General challenged Blue Cross Blue Shield (“BCBS”) of Michigan in a civil antitrust action. The complaint alleges that “most-favored nation” (“MFN”) clauses in BCBS contracts with Michigan hospitals raises health-care costs for Michigan residents and employers and excludes other insurers from the Michigan health-care market. United States v. Blue Cross Blue Shield of Michigan, No. 2:10-cv-14155-DPH-MKM (Mich. E. Dist. Oct. 18, 2010).
On October 4, 2010, the Antitrust Division announced that it along with the states of Connecticut, Iowa, Maryland, Michigan, Missouri, Ohio, and Texas filed a civil antitrust lawsuit in U.S. District Court for the Eastern District of New York challenging rules that American Express, Master Card, and Visa have in place that prevent merchants from offering consumers discounts, rewards and information about card costs, ultimately resulting in consumers paying more for their purchases.
On August 19, 2010, the FTC and the DOJ issued the 2010 Horizontal Merger Guidelines, which are available on the FTC’s website at http://www.ftc.gov/os/2010/08/100819hmg.pdf. The five-step analytical process outlined in the 1992 Horizontal Merger Guidelines—market definition, competitive effects, entry, efficiencies, and failing firm defense—has been replaced with a more flexible approach to competitive effects analysis. That being said, each individual element still continues to play a role in the revised merger review process.
On March 8, 2010, Blue Cross Blue Shield of Michigan's (Blue Cross-Michigan) subsidiary, Blue Care Networks of Michigan, abandoned its attempt to purchase Physicians Health Plan of Mid-Michigan (PHP) after the Department of Justice and the Michigan Attorney General informed the companies that they would file an antitrust lawsuit to block the acquisition.
On February 22, 2010, the DOJ entered into a settlement with KeySpan Corporation that requires KeySpan to pay $12 million for violating the antitrust laws by entering into an agreement restraining competition in the New York City electricity capacity market. The DOJ alleged that the financial derivative agreement likely resulted in a price increase for retail electricity suppliers and, in turn, an increase in electricity prices for consumers.
On January 25, 2010, the Department of Justice entered into a settlement agreement with Ticketmaster Entertainment Inc. that allowed it to complete its acquisition of Live Nation, Inc. The settlement agreement required Ticketmaster to license its ticketing software, divest ticketing assets and subject itself to anti-retaliation provisions in order to proceed with its proposed merger with Live Nation. The proposed settlement is designed to protect competition for primary ticketing, which will in turn maintain incentives for innovation and discounting.
On January 20, the Department of Justice reached a settlement with the Daily Gazette Company and MediaNews Group Inc. (now known as Affiliated Media Inc.), that requires the companies to restructure their newspaper joint operating arrangement (JOA) and take other steps to remedy the anticompetitive effects of the 2004 transaction, which was originally challenged by the DOJin May 2007.
On October 13, 2009, Arctic Glacier International (“AGI”) and three of its former executives, Frank Larson (former senior VP of operations), Keith Corbin (former VP of sales), and Gary Cooley (former VP of sales and marketing), pled guilty for their role in a conspiracy to allocate customers of packaged-ice in the Detroit metropolitan area and southeastern Michigan. The company agreed to pay a criminal fine of $9 million.
On September 22, the Department of Justice ("DOJ") and the Federal Trade Commission ("FTC") announced that they will solicit public comment and hold joint public workshops to explore the possibility of updating the Horizontal Merger Guidelines that are used by both agencies to evaluate the potential competitive effects of mergers and acquisitions.
On September 18, the DOJ presented its a statement of its views regarding the proposed class action settlement between the American Association of Publishers and Google. As the parties continue to modify the settlement agreement, the DOJ issued a statement of interest to the court to provide the court with the Antitrust Division's concerns relating to a potential settlement.
On August 25, 2009, Epson Imaging Devices Corporation (“Epson”), a Japanese electronics manufacturer, pled guilty for its role in a conspiracy to fix prices in the sale of Thin Film Transistor-Liquid Crystal Display (“TFT-LDC”) panels and agreed to pay a fine of $26 million.
TFT-LCD panels are used in computer monitors, notebooks, televisions, mobile phones, and other electronic devices. Worldwide sales in 2006 were $70 billion.
Specifically, Epson’s subsidiary Seiko Epson Corporation participated in a conspiracy to fix prices of TFT-LCD panels sold to Motorola for use in Motorola Razr mobile phones from the fall of 2005 to the middle of 2006.
DOJ SETTLES WITH MICROSEMI TO RESTORE COMPETITION IN SEMICONDUCTOR DEVICES USED IN MILITARY AND SPACE APPLICATIONS
On August 20, 2009, the DOJ announced that it reached a proposed settlement with Microsemi Corporation requiring the company to divest all of the assets that it acquired from Semicoa Inc. on July 14, 2008. The DOJ investigated the consummated acquisition and filed a civil antitrust suit to force Microsemi to divest the Semicoa assets to restore competition on December 18, 2008. Without this settlement agreement to divest, there would be little or no competition in the development, manufacture and sale of certain semiconductor devices used in military and space programs essential to the security of the United States.
On August 20, 2009, Oracle announced that the DOJ closed its investigation of Oracle's acquisition of Sun. The DOJ issued a second request to further investigate the transaction in late June. The DOJ ended its investigation approximatley two months after issuing the second request without requiring any remedy.
On August 19, 2009, Wen Jun (“Tony”) Cheng, a former assistant vice president of sales and marketing at a large Taiwanese color display tube (CDT) manufacturing company, was indicted at U.S. District Court in San Francisco for his role in a global conspiracy to fix prices of CDTs. CDTs are a type of cathode ray tube used in computer monitors and other specialized applications
On August 5, 2009, Attorney General Eric Holder and Agriculture Secretary Tom Vilsack announced that the Department of Justice and the U.S. Department of Agriculture ("USDA") will hold joint public workshops to explore competition issues affecting the agriculture industry and the appropriate role for antitrust enforcement in agriculture. These are the first joint DOJ/USDA workshops ever to be held to discuss competition and regulatory issues in the agriculture industry.
On July 30, 2009, the DOJ announced that it reached a settlement that will require Sapa Holding AB and Indalex Holdings Finance Inc. to divest a North Carolina aluminum sheathing facility in order to proceed with Sapa's proposed $150 million acquisition of Indalex. According to the complaint, the transaction would substantially lessen competition for the manufacture and sale of aluminum sheathing (coiled extruded aluminum tubing) used in the manufacture of high frequency coaxial cable in the United States, resulting in increased prices and reduced quality, service and innovation, had the parties not agreed to the divestiture.
On June 23, 2009, John C. Malone, the chairman of the board of Liberty Media Corporation and the chief executive officer of Discovery Holding Co. (“Discovery”), agreed to pay a penalty of $1.4 million for violating premerger reporting and waiting requirements of the Hart-Scott-Rodino (“HSR”) Act of 1976 when acquiring Discovery.
On May 3,2004, the Department of Justice's ("DOJ") Antitrust Division, at the request of the Federal Trade Commission ("FTC"), filed two civil suits against alleged violators of pre-merger notification filing requirements under the Hart-Scott-Rodino ("HSR") Act of 1976. The HSR Act imposes notification and waiting period requirements on individuals and companies over a certain size before they can consummate acquisitions of stock or assets valued at more than $50 million. The purpose of the HSR Act is to provide federal antitrust enforcement agencies an opportunity to investigate proposed transactions and determine whether the transactions would violate the antitrust laws. If the reviewing agency determines that a transaction violates the antitrust laws, it may seek to block that transaction before the waiting period expires. Therefore, the antitrust agencies take HSR violations very seriously, even ones where no competition overlaps exist. Indeed, a party is subject to a maximum civil penalty of $11,000 a day for each day it is in violation of the HSR Act.
On May 11, 2009, Christine A. Varney, Assistant Attorney General in charge of the Department's Antitrust Division, delivered her first speech at an event sponsored by the Center for American Progress. The speech, entitled "Vigorous Antitrust Enforcement in this Challenging Era," confirms that the new administration intends be much more active role than the Bush administration in terms of antitrust enforcement. Her speech primarily focused on the Department's approach to enforcing Section 2 of the Sherman Act, which prohibits monopolization or attempts to monopolize.
On May 4, 2009, the Department of Justice (“DOJ”) reached a settlement with Consolidated Multiple Listing Service, Inc. (“CMLS”) that requires CMLS to change its rules to allow for increased competition between low-priced, innovative real estate brokers compete with traditional real estate brokers in the Columbia, South Carolina market.
On April 27, 2009, Bock Kwon, a high level executive at LG Display Co. Ltd. (“LG”) pled guilty, agreed to serve one year in prison in the United States and pay a criminal fine of $30,000 for his role in a conspiracy to suppress and eliminate competition in the Thin Film Transistor-Liquid Crystal Display (TFT-LCD) industry by fixing prices of TFT-LCD panels.
On April 22, 2009, the Department of Justice’s Antitrust Division announced its leadership team. The new team includes the Chief of Staff, four Deputy Assistant Attorneys General, a Special Counsel for Competition Policy. Two Deputy Assistant Attorney Generals will oversee civil matters, one Deputy Assistant Attorney General will oversee economic analysis and one Deputy Assistant Attorney General will oversee international, policy and appellate issues.
On April 8, 2009, Stephen E. McAnulty, a former owner of an asbestos monitoring contractor that provided services to New York Presbyterian Hospital (“NYPH”), pled guilty to making false statements to agents and representatives of the Federal Bureau of Investigation and Department of Justice’s Antitrust Division.
On April 2, 2009, Durwanda Elizabeth Morgan Heinrich, a dirt, sand, and gravel subcontractor, and Kern Carver Bernard Wilson, a former contract employee of the U.S. Army Corps of Engineers were convicted on charges of conspiring to commit bribery. Additionally, Heinrich was found guilty of two counts of offering a bribe to a public official and Wilson was found guilty of one count of demanding and agreeing to accept a bribe as a public official.
On March 31, 2009, Sakae Someya, an executive at Hitachi Displays, Ltd. (“Hitachi”) was charged for participating in a conspiracy to suppress and eliminate competition in the Thin Film Transistor-Liquid Crystal Display (“TFT-LCD”) industry by fixing prices of TFT-LCD panels sold to Dell, Inc (“Dell”) for its use in notebook and desktop computers.
On March 10, 2009, Hitachi Displays, Ltd (“Hitachi”), a subsidiary of Hitachi Ltd (a Japanese electronics manufacturer), pled guilty and agreed to pay a fine of $31 million for its role in a conspiracy to fix the prices of Thin Film Transistor-Liquid Crystal Display panels (“TFT-LCD”) sold to Dell Inc. (“Dell”).
On February 20, 2009, JBS and National Beef announced the abandonment of the JBS/National Beef transaction. The Antitrust Division filed an antitrust lawsuit in the U.S. District Court in Chicago to block the proposed acquisition, alleging that the deal would result in lower prices paid to cattle suppliers and higher beef prices for consumers. At that time, Attorneys General of Colorado, Iowa, Kansas, Minnesota, Missouri, Montana, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Texas and Wyoming joined the Department's lawsuit. On Nov. 7, 2008, the states of Arizona, Connecticut, New Mexico and Mississippi joined the lawsuit as well.
On January 15, 2009, Chang Suk (“C.S.”) Chung, former Vice President of Monitor Sales for LG Display Co. Ltd. (“LG”), Chieng-Hon Lin (“Frank”), former Chairman and Chief Executive Officer for Chunghwa Picture Tubes Ltd. (“Chunghwa”), Chih-Chun Liu (“C.C.”), former Vice President of LCD Sales for Chunghwa, and Hseuh-Lung Lee (“Brian”), former executive of Chunghwa, all pled guilty to their roles in a global conspiracy to fix prices in the sale of Thin Film Transistor-Liquid Crystal Display (“TFT-LCD”) panels. They also agreed to serve jail time and pay criminal fines.
On January 14, 2009, AT&T Inc. (“AT&T”) entered into a civil settlement worth $2 million with the Department of Justice (“DOJ”) to settle charges that AT&T was in contempt of a March 2008 consent decree AT&T entered into during its acquisition of Dobson Communications Corporation (“Dobson”).
On January 14, 2009, AT&T Inc. (“AT&T”) entered into a civil settlement worth $2 million with the Department of Justice (“DOJ”) to settle charges that AT&T was in contempt of a March 2008 consent decree AT&T entered into during its acquisition of Dobson Communications Corporation (“Dobson”).
On December 18, 2008, the Department of Justice (“DOJ”) filed an antitrust lawsuit against Microsemi Corporation (“Microsemi”) alleging that Microsemi’s acquisition of Semicoa Inc.’s (“Semicoa”) assets has reduced or eliminated competition for the development, manufacture, sale of certain semiconductor devices used by the U.S. military and space programs, resulting in the increase in the price of these products and a potential decline in quality.
On December 15, 2008, ESL Partners (“ESL”) of Greenwich, Conn., and ZAM Holdings (“ZAM”) of New York City, two investment funds with holdings in numerous companies, will pay $525,000 and $275,000, respectively, in civil penalties for violating antitrust pre-merger notification requirements under the Hart-Scott-Rodino Act of 1976 (“HSR Act”).
On December 3, 2008, the Department of Justice (“DOJ”) required Republic Services Inc. (“Republic”) and Allied Waste Industries Inc. (“Allied”) to divest to divest 87 commercial waste collection routes, nine landfills and 10 transfer stations for Republic’s $4.5 billion acquisition of Allied to proceed.
On November 14, 2008, the Department of Justice (“DOJ”) required Inbev N.V./S.A. (“Inbev”) to divest its subsidiary Labatt USA (“Labatt”) in order for Inbev’s $52 billion acquisition of Anheuser-Busch Companies Inc (“Anheuser-Busch”) to proceed. Along with the divestiture, Inbev must sell its license to brew, market, promote, and sell the Labatt brand of beer for consumption in the United States to a DOJ-approved purchaser.
On November 5, 2008, Yahoo! Inc. (“Yahoo!”) and Google Inc. (“Google”) ended their advertising agreement after the Department of Justice (“DOJ”) said that it would file an antitrust lawsuit to block the implementation of the agreement. According to the DOJ, both companies account for 90 percent of the Internet search advertising and Internet search syndication. As such, the agreement would harm competition in each of the relevant markets.
On October 30, 2008, the Department of Justice (“DOJ”) required Verizon Communications Corp. (“Verizon”) to divest assets in 100 locations in 22 States for its acquisition of Alltel Corp. (“Alltel”) to proceed. The divestitures cover the States of Alabama, Arizona, California, Colorado, Georgia, Idaho, Illinois, Iowa, Kansas, Minnesota, Montana, Nebraska, Nevada, New Mexico, North Carolina, North Dakota, Ohio, South Carolina, South Dakota, and Virginia.
On October 21, 2008, the Department of Justice (“DOJ”) decided not to challenge a joint licensing agreement by RFID Consortium LLC (“RFID”) for patents to comply with ultra high frequency radio frequency identification (“UHF RFID”) technology, which has a variety of uses including airline baggage tracking, retail product inventory and ticketing for events. RFID is a group of companies that hold at least one essential UHF RFID patent. According to the DOJ, the proposal could result in cost savings and greater access to the technology, ultimately benefitting competition and consumers.
On October 20, 2008, the Department of Justice (“DOJ”) filed a civil antitrust lawsuit to prevent JBS’s proposed acquisition of National Beef Packing Company LLC (“National”). JBS is the world’s largest beef packer and the third largest in the United States with annual sales in the United States exceeding $6 billion. National is the fourth largest beef packer in the United States with annual beef sales of about $5 billion.
On August 28, 2008, the Department of Justice (“DOJ”) approved Raycom Media, Inc.’s (“Raycom”) acquisition of Richmond NBC affiliate, WWBT-TV from Lincoln Financial Media Company (“Lincoln”) after entering into a settlement agreement requiring Raycom to divest its Richmond CBS affiliate WTVR-TV to resolve antitrust concerns. This acquisition would have resulted in Raycom owning two of the top four local broadcast stations, in terms of advertising revenue.
N.J. WASTEWATER TREATMENT SUPPLY COMPANY OWNER AND A CONTRACTS ADMINISTRATOR PLEAD GUILTY TO BID RIGGING, FRAUD AND TAX OFFENSES
On July 23, 2008, JMJ Environmental Inc. (“JMJ”), a wastewater treatment company, its owner, John Drimak Jr., and Norman Stoerr, a former contracts administrator, pled guilty to various counts of bid rigging, fraud, and tax evasion. These charges were all in connection with sub-contracts for wastewater treatment services at two Environmental Protection Agency (“EPA”) designated Superfund Sites, Federal Cresote in Manville, NJ and Diamond Alkali in Newark, NJ.
DOJ REQUIRES DIVESTITURE IN SIGNATURE’S ACQUISITION OF HAWKER BEECHCRAFT’S FLIGHT SUPPORT SERVICE BUSINESS
On July 3, 2008, the Department of Justice (“DOJ”) entered into a settlement agreement allowing Signature Flight Support Corporation to acquire Hawker Beechcraft’s (“Hawker”) fixed based operations (“FBO”). The settlement agreement requires Signature to divest its flight support service assets.
On July 1, 2008, the Department of Justice’s (“DOJ”) Antitrust Division decided to allow External Compliance Officer Inc., a New Jersey based anti-money laundering consulting company, to create a database that would allow money transmitters to better understand the backgrounds of prospective agents. A money transmitter is a company that provides electronic money transfer services to individuals. An agent receives and processes money from senders and distributes the funds to recipients.
On July 1, 2008, Visa Inc. rescinded a rule that required merchants to treat Visa-branded debit cards differently when used as a PIN-debit card (and processed via non-Visa networks) from the same cards when used as signature debit cards and processed on the Visa network. The rule was rescinded in response to the Department of Justice’s (“DOJ”) Antitrust Division’s investigation. Rescinding the rule allows affiliated banks to provide merchants the option of waiving the entry of a PIN for most non-Visa debit transactions initiated from Visa branded debit cards. Before the investigation, Visa prohibited banks from allowing its merchants to waive the PIN, even for “small ticket” transactions ($25 or less) from a non-Visa PIN network. The DOJ’s Antitrust Division began investigating the effects of this regulation on competition in the debit card industry.
MAJOR INTERNATIONAL AIRLINES PLEAD GUILTY AND AGREE TO PAY FINES FOR THEIR ROLE IN MAJOR CONSPIRACY TO FIX AIR CARGO RATES
On June 26, 2008, five major international airlines including Socit Air France (Air France), Cathay Pacific Airways Limited (Cathay), Koninklijke Luchtvaart Maatschappij N.V. (KLM Royal Dutch Airlines), Martinair Holland N.V. (Martinair), and SAS Cargo Group A/S (SAS) pled guilty and agreed to pay fines for their role in a major international conspiracy to fix prices for cargo shipments to and from the United States.
On June 17, 2003, Home City Ice Company pled guilty to conspiracy in allocating packaged-ice customers and territories among its co-conspirators. The DOJ alleged that Home City along with its co-conspirators suppressed competition by allocating customers and territories in the Detroit Metropolitan area and southeastern Michigan amongst themselves. This conspiracy took place between January 2001 and July 2007.
On June 10, 2008 the Department of Justice (“DOJ”) along with the State of Vermont entered into a settlement agreement that would allay their concerns that Verizon Communication Corp.’s (“Verizon”) acquisition of Rural Cellular Corp. (“RCC”) for $2.7 billion as proposed is anticompetitive. To resolve antitrust concerns, the DOJ required Verzion to divest assets in six different geographic locations in Vermont, New York and Washington. Verizon and RCC provide service to approximately 60 percent of the consumers in those areas. The Department said that the transaction as originally proposed would have substantially lessened competition to the detriment of consumers of mobile wireless telecommunications services in those areas, potentially resulting in higher prices, lower quality and reduced network investments.
On June 5, 2008, the Department of Justice (“DOJ”) approved a joint venture between SABMiller plc and Molson Coors Brewing Company which combined their operations in the United States and Puerto Rico. While the transaction combined two of three largest U.S. brewers in the United States, the DOJ’s Antitrust Division did not find any evidence that this joint venture would reduce competition.
On May 28, 2008, the Department of Justice blocked a proposed $750 million acquisition of Houghton Mifflin Harcourt Publishing Company's College Division (“HM College”) by Cengage Learning, Inc (“Cengage”). The DOJ required the divestiture of Cengage’s assets related to the textbooks and education materials of 14 of its college level courses. The textbooks ranged from topics on foreign languages to business.
On May 27, 2008, the Department of Justice (“DOJ”) reached a settlement with the National Realtors Association (“NAR”) that requires NAR to allow internet-based real estate brokers to compete with traditional real estate brokers. NAR is a trade association of 1.2 million real estate members.
DOJ FILES LAWSUIT AGAINST CONSOLIDATED MULTIPLE LISTING SERVICES CHARGING THAT ITS RULES ARE ANTICOMPETITIVE
On May 2, 2008, the Department of Justice (“DOJ”) filed a civil antitrust lawsuit against the Consolidated Multiple Listing Services (“CMLS”) of Columbia, SC. The lawsuit, filed at the U.S. District Court in Columbia, SC, alleges that the CMLS’s rules regarding who can be a member and how those brokers must conduct their business stifles competition. These rules prevent local real estate brokers as well as rival brokers from outside of Columbia from providing innovative options that would provide better services to consumers.
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.
MONTANA BOARD OF REALTY REGULATION REPEALS RULE PROHIBITING REAL ESTATE BROKERS TO OFFER REBATES TO CONSUMERS
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.
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.
On March 5, 2008, Altivity Packaging LLC (“Altivity”) and Graphic Packaging International Inc. (“Graphic”) entered into a settlement agreement with the DOJ that they will divest two paperboard mills—one in Indiana and the other in Pennsylvania—in order to proceed with their proposed $1.75 billion merger. The Antitrust Division stated that the merger, as originally proposed, would have substantially lessened competition in the production and sale of a type of paperboard used to make folding cartons for consumer and commercial packaging, including cereal boxes. If for any reason divestiture of the Philadelphia CRB mill is not accomplished, the proposed settlement would require the sale of Altivity's Santa Clara, California mill.
On March 4, 2008, the DOJ reached a settlement that will require Cookson Group plc and Foseco plc to divest Foseco's U.S. carbon bonded ceramic (“CBC”) business in order to proceed with Cookson's proposed $1 billion acquisition of Foseco. Allegedly, the transaction, as originally proposed, would substantially lessen competition in the United States for certain CBCs used in the continuous casting steelmaking process, resulting in increased prices and reduced service and innovation.
On February 25, 2008, UnitedHealth Group Inc. (“United”) and Sierra Health Services Inc. (“Sierra”) entered into a settlement agreement that required United to divest assets relating to United's Medicare Advantage business in the Las Vegas area in order to proceed with United's acquisition of Sierra. Allegedly, the transaction, as originally proposed, would have created a combined company controlling 94 percent of the Medicare Advantage health insurance market in the Las Vegas area and resulted in higher prices, fewer choices, and a reduction in the quality of Medicare Advantage plans purchased by senior citizens in the Las Vegas area.
On February 19, 2008, the Antitrust Division entered into a settlement agreement requiring The Thomson Corporation (“Thomson”) to sell financial data and related assets in three markets for financial data in order to proceed with Thomson's proposed $17 billion acquisition of Reuters Group PLC (“Reuters”).
On February 13, 2008, the DOJ entered into a settlement agreement with Clear Channel, the largest operator of radio stations in the United States, to divest radio stations in four cities in order for a group of private equity investors led by Bain Capital (“Bain”) and Thomas H. Lee Partners (“THL”) to proceed with their acquisition of a controlling interest in Clear Channel. The divestitures were required to assure continued competition in markets where the transaction would otherwise result in a significant loss of competition.
On January 24, 2008 the DOJ announced that it will require Pearson Plc to divest assets relating to three clinical testing markets in order to proceed with Pearson's proposed $950 million acquisition of Harcourt Assessment. The DOJ claimed that the deal would have resulted in higher prices to purchasers of clinical tests, including many school districts, and would likely have impaired the launch of a competitive new test for adult abnormal personality disorders. The products to be divested are clinical tests that are used by psychologists, speech-language pathologists, and clinicians to diagnose persons who have or are at risk of developing certain disorders or disabilities.
On October 24, 2007, the Department of Justice (“DOJ”) announced that it will require two of the nation's largest newsprint manufacturers – Abitibi-Consolidated Inc. and Bowater Inc.– to divest a newsprint mill in Arizona. As originally laid out, the DOJ alleged that the $1.6 billion transaction would have considerably hampered competition in the production and sale of newsprint in North America.
On November 13, 2007, the Department of Justice announced that it reached a settlement that will require Vulcan Materials Company and Florida Rock Industries Inc. to divest eight quarries that produce coarse aggregate in Georgia, Tennessee and Virginia and one distribution yard in Virginia in order to proceed with their proposed $4.6 billion merger. The Department claimed that the original proposed acquisition likely would result in higher prices for purchasers of coarse aggregate in certain areas.
On September 27, FirstGroup plc entered into a settlement agreement with the DOJ for First Group to sell off a large school bus contract and associated assets in Alaska in order to progress with its acquisition of Laidlaw International Inc. Without the settlement agreement, the DOJ believed the transaction raised competition concerns in the provision of school bus transportation in Anchorage, Alaska. First Group and Laidlaw contract with school districts throughout the United States to provide school bus transportation services.
On September 20, 2007, Mr. Jacobi, the president and owner of Jacobi Industries Inc., pled guilty to a felony charge of conspiring to rig bids on U.S. Department of Defense (“DOD”) contracts for military tiedown equipment and cargo securing systems. Under the plea agreement, Mr. Jacobi agreed to pay a criminal fine of $20,000, and to cooperate with the Department's ongoing criminal investigation. Mr. Jacobi could also serve up to six months in prison.
On September 17, Thomas O. Barnett, Assistant Attorney General for the Department's Antitrust Division, issued a statement scrutinizing the Court of First Instance of the European Communities (“CFI) decision to affirm the substance of the European Commission's (“EC”) March 2004 decision against Microsoft. Mr. Barnett said that “in light of the United States' own antitrust case and judgment against Microsoft, and the importance of the computer industry to consumers and to the global economy, the United States has a particular interest in the CFI’s decision.” He expressed concern that “the standard applied to unilateral conduct by the CFI, rather than helping consumers, may have the unfortunate consequence of harming consumers by chilling innovation and discouraging competition.” He reiterated that there appeared to be a common disconnect between U.S. antitrust enforcement and European antitrust enforcement. "In the United States, the antitrust laws are enforced to protect consumers by protecting competition, not competitors. In the absence of demonstrable consumer harm, all companies, including dominant firms, are encouraged to compete vigorously. U.S. courts recognize the potential benefits to consumers when a company, including a dominant company, makes unilateral business decisions, for example to add features to its popular products or license its intellectual property to rivals or to refuse to do so.” There is a perception that European antitrust regulators are more willing to accept arguments from competitors and seek enforcement remedies that help competitors rather than consumers. The U.S. antitrust agencies are more skeptical of competitor complaints. Mr. Barnett also commented that the DOJ “looks forward to continuing its wide-ranging and positive relationship with the EC on antitrust matters.”
FORMER SALES REPRESENTATIVE IN CALIFORNIA CONVICTED FOR ROLE IN SCHEMES TO DEFRAUD THE FEDERAL E-RATE PROGRAM
On September 14, a federal grand jury in San Francisco convicted Judy Green, of Temecula, California, a former sales representative for her role in schemes to defraud the federal E-Rate program. Ms. Green was convicted on all charges in a 22-count indictment involving fraud, collusion, aiding and abetting, and conspiracy in connection with E-Rate projects at schools in seven states — Arkansas, California, Michigan, New York, Pennsylvania, South Carolina, and Wisconsin.
COMMERCIAL REFRIGERATION COMPANY AND EXECUTIVE INDICTED FOR RIGGING BIDS ON CONTRACTS TO SAFEWAY GROCERY STORES IN ARIZONA
On August 14, 2007, the DOJ announced that a federal grand jury in Phoenix returned an indictment charging a commercial refrigeration company and its co-owner with participating in a conspiracy to rig bids on contracts for the installation of commercial refrigeration equipment in Safeway Inc. grocery stores in the Phoenix metropolitan area.
The indictment, filed in the U.S. District Court in Phoenix, charged Alliance Mechanical LLC and its co-owner Kendall Pope, with participating in the conspiracy, which began in January 2005 and continued until May 16, 2005. At the time of the conspiracy, Mr. Pope also served as president of Alliance Mechanical LLC, a company engaged in the installation of commercial refrigeration in the Phoenix metropolitan area and elsewhere. Mr. Pope allegedly participated in the conspiracy with James Govostes, a former manager of another commercial refrigeration company.
On August 7, 2007, the DOJ announced that William Alan Potts, the vice president of a Virginia marine products company agreed to plead guilty, serve a sentence and pay a criminal fine for his role in a conspiracy to rig bids and allocate customers with respect to marine products purchased by the U.S. Navy, the U.S. Coast Guard, and other public and private entities.
Mr. Potts allegedly participated in a conspiracy between December 2000 and May 2003 to allocate customers and rig bids for contracts to sell plastic marine pilings. Plastic marine pilings are substitutes for traditional wood timber pilings. They are often used in port and pier construction projects where durability and environmental considerations make them an alternative to traditional wood pilings. The conspirators discussed and agreed among themselves which of them would win contracts from the Department of Defense, the Department of Homeland Security and others. Mr. Potts is the fourth executive to agree to plead guilty in the DOJ’s ongoing antitrust investigation in the marine products industry. As part of his plea agreement, he agreed to cooperate with the DOJ’s ongoing investigation. His previous and continuing cooperation will be considered by the court at sentencing.
On August 6, 2006 the DOJ’s Antitrust Division requested a federal judge in Washington, D.C. to appoint a trustee to sell Mittal Steel Company N.V.’s Sparrow Point facility that’s located near Baltimore to resolve antitrust concerns related to Mittal’s proposed acquisition of Arcelor S.A. The acquisition as originally proposed would substantially lessen competition in the market for tin mill products in the eastern United States. Tin mill products are finely rolled steel sheets normally coated with tin or chrome, and are used primarily in the manufacture of sanitary food cans and general line cans used for aerosols, paints and other products. The Department then filed a proposed consent decree, which resolved the competitive concerns. The court entered the consent decree on May 23, 2007, and required Mittal to divest a steel mill that supplied tin mill products to the eastern United States.
On August 1, 2007 the DOJ’s Antitrust Division announced that British Airways Plc and Korean Air Lines Co. both pled guilty and individually agreed to pay $300 million each in criminal fines for their roles in conspiracies to fix the prices on passenger and cargo flights.
The DOJ stated that passengers who flew on British Airways flights between the United Kingdom and the United States during the charged period paid more for their tickets as a result of the illegal cartel. In 2004, British Airways' fuel surcharge for round-trip passenger tickets was around $10 per ticket. By the time the passenger conspiracy was cracked in 2006, the surcharge was nearly $110 per ticket¬. During the air cargo conspiracy, British Airways' fuel surcharge on shipments to and from the United States changed more than 20 times and increased from 4 cents per kilogram of cargo shipped to as high as 72 cents per kilogram.
On June 19, the DOJ reached an agreement with Microsoft Corporation to resolve a complaint by Google regarding Microsoft’s desktop search function in Windows Vista. In a joint filing with the court, the DOJ, 17 state Attorneys General, and the District of Columbia said that the agreement, which aims to promote user choice, will resolve any issues the complaint may raise under the final judgments. The desktop search functionality in Vista, known as “Instant Search,” allows users to enter a search query into a text box and receive a list of results from the user’s hard drive that contain the search term.
The Antitrust Division made its views known as part of a six-month joint status period to Judge Colleen Kollar-Kotelly of the U.S. District Court for the District of Columbia. The report filed with the court is the eighth such report filed since the court entered the final judgments in November 2002.
Justice Department Reaches Agreement Requiring Divestitures in Merger of First Busey Corporation and Main Street Trust Inc.
On June 12, the DOJ, First Busey Corporation, a financial holding company headquartered in Urbana, Illinois, with approximately $2.5 billion in assets, and Main Street Trust Inc., a financial holding company headquartered in Champaign, Illinois with about $1.6 billion in assets, entered into a settlement where the parties agreed to sell five branch offices with approximately $110 million in deposits in Champaign County, Illinois, in order to resolve antitrust concerns about the companies’ pending merger. Without the divestitures, the DOJ concluded, the merger likely would adversely affect competition in the local markets for commercial banking and retail banking services. The proposed merger will combine two major local banks based in central Illinois, Busey Bank of Urbana and Main Street Bank & Trust of Champaign. The merged bank will have approximately $3.6 billion in assets and $2.7 billion in total deposits.
Statement of the Department of Justice Antitrust Division on Its Decision to Close Its Investigation of Chicago Mercantile Exchange Holdings Inc.’s Acquisition of CBOT Holdings Inc.
On June 11, the DOJ issued a statement after announcing the closing of the investigation of CBOT Holdings Inc. by Chicago Mercantile Exchange Holdings Inc. After an extensive investigation of both the Chicago Mercantile Exchange’s (“CME”) proposed acquisition of CBOT and the 2003 agreement under which CME provides clearing services to CBOT, the Antitrust Division determined that the evidence did not indicate that either the transaction or the clearing agreement is likely to reduce competition substantially. More specifically, the Division determined that although the two exchanges account for most financial futures (and in particular, interest rate futures) traded on exchanges in the United States: their products are not close substitutes and seldom compete head to head, but rather provide market participants with the means to mitigate different risks; and they are, absent the merger, unlikely to introduce new products that compete directly with the other’s entrenched products, in part due to the difficulty of overcoming an incumbent exchange’s liquidity advantage in an established futures contract.
International Competition Network Presents Report on Unilateral Conduct and Announces Merger Convergence Project
On June 1, the DOJ announced the launch of a report on unilateral conduct laws, the initiation of a project to develop recommendations on substantive merger analysis, and the sixth annual International Competition Network (“ICN”) conference in Moscow took significant steps toward strengthening antitrust convergence.
On May 31, the Monsanto Company and Delta & Pine Land Company (“DPL”) were required to divest a significant seed company, multiple cottonseed lines, and other valuable assets in order to proceed with their $1.5 billion merger. Monsanto was also required to change certain license agreements as a condition for proceeding with its acquisition of DPL. The DOJ said that the transaction, as originally proposed, would have caused higher prices to U.S. farmers for traited cottonseed and would have blocked or delayed development of traits for cottonseed that would compete with Monsanto. Traited cottonseed is seed that has been genetically modified to include highly desirable characteristics, such as resistance to insects or tolerance to herbicides.
On May 22, the DOJ filed a civil antitrust lawsuit that required the Daily Gazette Company and MediaNews to undo their transaction and restore the competition that existed before May 2004, alleging that the Daily Gazette Company violated the antitrust laws when it acquired the Daily Mail newspaper from MediaNews. Daily Gazette Company is a privately-held corporation based in Charleston, West Virginia. MediaNews Group is based in Denver and is the fourth largest newspaper company in the United States.
Texas Hedge Fund Manager Will Pay Civil Penalty for Violating Antitrust Premerger Notification Requirements
On May 21, Mr. James D. Dondero, a Texas hedge fund manager, entered a settlement with the DOJ where he agreed to pay $250,000 for alleged charges of violating premerger reporting requirements.
According to the complaint, Mr. Dondero acquired stock of Motient Corp. (“Motient”), based in Reston, Virgina, where he served on the board of directors in February 2005, before complying with the antitrust premerger notification and waiting period requirements of the HSR Act. As a result of exercising the options, Dondero and the investment fund that he controlled, Highland Capital Management L.P. (“Highland”), held voting securities of Motient valued in excess of the $50 million HSR reporting threshold.
On May 8, the DOJ reached a settlement with Allied Waste Industries Inc., the second largest non-hazardous solid waste management company in the United States, with annual revenues of $6 billion. Allied agreed to pay $125,000 for its alleged violations of a 2000 consent decree entered in connection with Allied’s acquisition of Browning-Ferris Industries Inc. (“BFI”). The $125,000 payment to the United States includes reimbursement to the government for the cost of its investigation into Allied’s alleged violations.
U.S. Department of Justice and Federal Trade Commission Issue Report on Competition in the Real Estate Brokerage Industry
On May 8, the DOJ and the FTC issued a joint report, “Competition in the Real Estate Brokerage Industry,” to inform consumers and others involved in the industry about important competition issues involving residential real estate, including the impact of the Internet, the competitive structure of the real estate brokerage industry, and obstacles to a more competitive environment.
Statement of the Department of Justice Antitrust Division on its Decision to Close Its Investigation of Smithfield Inc.’sAcquisition of Premium Standard Farms Inc.
On May 4, after an investigation, the Antitrust Division determined that Smithfield’s proposed acquisition of Premium Standard Farms was not likely to harm competition, consumers or farmers.
The Division’s investigation of the merger of these pork packers and processors focused on fresh and processed pork, the purchase of hogs from farmers, and the purchase of services from farmers who raise hogs owned by the merging parties. Based on the evidence obtained during its extensive investigation, the Division found that the merged firm would continue to face significant competition in the sale of fresh and processed pork from its national competitors Tyson, Swift, Excel/Cargill, Hormel and Seaboard Foods. Additionally, farmers who sell hogs or hog-raising services to the merged firm would have competitive alternatives that would deter the merged firm from lowering prices paid to the farmers. Although the Antitrust Division did not take any action, the long investigation indicates that the Antitrust Division will spend time investigating these deals.