disgorgement

On March 16, 2015, the Department of Justice (“DOJ”) and New York State Attorney General announced that they reached a settlement with Coach USA Inc., City Sights LLC and their joint venture, Twin America LLC, to remedy competition concerns in the New York City hop-on, hop-off bus tour market. This case is noteworthy because it is the first time the DOJ’s Antitrust Division sought and obtained disgorgement in a consummated merger matter.

Background

In March of 2009, Twin America, LLC was formed by Coach USA, Inc. and City Sights, LLC. Coach USA and City Sights were operators of double-decker tour buses that had aggressively competed against each other to attract customers, which were and are for the most part, visitors/sightseers in New York city. Indeed, the Antitrust Division’s complaint alleged that prior to the formation of Twin America, LLC, Coach USA, the long-standing market leader through its “Gray Line New York” brand, and City Sights, a firm that launched the “City Sights NY” brand in 2005, accounted for approximately 99 percent of the hop-on, hop-off bus tour market in New York City. Between 2005 and early 2009, the two companies engaged in vigorous head-to-head competition on price and product offerings that directly benefited consumers.

On November 7, 2014, the Department of Justice’s Antitrust Division announced that it obtained a $5 million settlement with Flakeboard America Limited; its parent companies, Celulosa Arauco y Constitución S.A. and Inversiones Angelini y Compañía Limitada; and SierraPine for illegal pre-merger coordination in violation of the antitrust laws and of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”). The action underscores the Antitrust Division’s resolve to vigorously scrutinize the conduct of merging parties prior to consummation of the transaction.

Law Regarding Pre-Merger Coordination

There is a lot of excitement when companies plan a merger. Company executives do not want to lose any time because there is pressure to integrate and achieve the synergies of combining operations as soon as possible. Merging parties, however, must temper that enthusiasm, otherwise, they risk not only losing the transaction, but also being punished by the Antitrust Division.

Articles Tagged with disgorgement

DOJ Obtains Disgorgement of Profits for Illegally Consummated Merger

Antitrust Division Obtains $3.8 Million in Civil Penalties and Disgorgement of $1.15 Million for Illegal Pre-closing Conduct