Antitrust Lawyer Blog Commentary on Current Developments

Articles Tagged with DOJ

On Monday, October 26, 2015, in a joint statement, the Federal Trade Commission and the U.S. Department of Justice urged the state of Virginia to reform or repeal its certificate-of-need (CON) law.

CON laws typically require hospitals to obtain government approval before undergoing expansion projects or purchasing major assets, including hospital equipment.  Virginia is known to have one of the most restrictive CON laws in the country, and the antitrust enforcement agencies recently have addressed the possible negative effects such laws have on competition, stating that CON laws may impede on healthcare providers’ abilities to provide efficient and effective services for consumers and may hinder competition by creating barriers to entry, limiting consumer choice, and stifling innovation.

In the joint statement, the enforcement agencies cited several studies that show that CON laws have not been effective at controlling costs or improving quality for consumers and indicated that more targeted measures might better address such goals.  While Virginia has an established working group tasked with addressing the issues surrounding CON laws, no final decisions have been made on the status of the state’s current CON law.

On September 16, 2015, the Department of Justice’s Antitrust Division (“DOJ” or “Antitrust Division”) issued a statement regarding it decision to close its six month investigation of Expedia’s $1.3 billion acquisition of Orbitz. The decision means that Expedia can close its acquisition of Orbitz to combine two of only three online travel agencies (“OTAs”) in the United  States.

Second Request

The transaction was announced on February 12, 2015 and the Antitrust Division issued a second request on March 25, 2015.  The transaction drew antitrust scrutiny because it came on the heels of Expedia’s acquisition of Travelocity in a deal that was cleared via early termination of the Hart-Scott-Rodino (“HSR”) waiting period on January 14, 2015.  That transaction reduced the number of sizable OTAs in the United States from the four-to-three, and consolidated 56% of the market in the hands of the enlarged Expedia.  The DOJ scrutinized the Expedia/Orbitz deal because the transaction presented a three-to-two situation, in which the combined Expedia/Orbitz would possess a commanding 75% of the OTA space in the United States, leaving just Priceline as a sizable alternative with roughly 19% share of the space.

On April 27, 2015, the Department of Justice’s (“DOJ”) Antitrust Division released a statement regarding Applied Materials Inc. (“AMAT”) and Tokyo Electron’s (“TEL”) joint announcement that they abandoned their merger.  The Antitrust Division’s statement indicates that the transaction was blocked because the combination would have diminished innovation.  In other words, the Antitrust Division was concerned about the potential loss of head to head competition in the development of future cutting edge semiconductor products and made no allegation that the combined firm would have monopolized any existing or actual product market.  The Antitrust Division’s tough stance against AMAT indicates that it is willing to scrutinize and challenge deals that raise longer-term anticompetitive concerns related to future competition even if there is no past pricing evidence that may predict that the merger will result in higher prices regarding actual products.

Background

On September 24, 2013, AMAT and TEL announced a definitive agreement to merge via an all-stock combination, which valued the new combined company at approximately $29 billion.  The companies claimed that securing regulatory clearances should not be a problem because their product offerings were highly complementary with few overlaps.  Indeed, AMAT was strong in markets where Tokyo Electron was not and vice versa.  In areas, where they directly competed, the combined shares were low.  Nevertheless, the transaction would have combined AMAT, the largest semiconductor equipment supplier in the world, with TEL, the third largest equipment supplier.

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 December 11, 2015, the Department of Justice (“DOJ”) approved Continental AG’s $1.8 billion acquisition of Veyance Technologies with conditions.   The settlement agreements requires Continental to divest the North American commercial vehicle air springs business of Veyance and to waive an exclusivity requirement in its supply agreement to resolve a vertical antitrust concern.

The Antitrust Division was concerned that the merger of rivals in the supply of new and replacement air springs for commercial vehicles in North America would have eliminated one of only three significant suppliers of air springs.  Commercial vehicle air springs are used in trucks, trailers and buses to provide stability to the suspension system, keep the tires in contact with the road and provide comfort and reduced driver fatigue in cabins and seats.

The Antitrust Division was concerned that the creation of a virtual duopoly would have facilitated anticompetitive coordination between the two remaining suppliers and risked price increases and reductions in the quality of service by limiting availability or delivery options to original equipment manufacturers.  Similarly, the Antitrust Division was concerned that the proposed acquisition would have reduced the number of significant suppliers of replacement air springs to commercial vehicle owners, which likely would have lessened competition in the North American aftermarket for commercial vehicle air springs.

On November 3, 2014, the Department of Justice’s Antitrust Division challenged National CineMedia, Inc.’s (“NCM”) proposed acquisition of Screenvision by filing a lawsuit in federal court.  The transaction would have combined the only two significant cinema advertising networks in the United States.

Background  

On May 5, 2014, NCM, Inc. entered into the Merger Agreement to acquire Screenvision for $375 million.  NCM, Inc. is the managing member and owner of 45.8% of National CineMedia, LLC (“NCM”), the operator of the largest in-theatre digital media network in North America.  Following the merger, NCM, Inc. was to evaluate whether to contribute the Screenvision assets to NCM LLC.  Technically, it is not America’s largest cinema advertiser buying the industry’s second largest, but the largest member in the largest cinema advertiser making the purchase.  It is a distinction without a difference because the bottom line is the deal would have combined the only two significant cinema advertising networks.

On November 5, 2014, the DOJ announced that Embarcadero Technologies Inc. and CA Inc. terminated Embarcadero’s proposed acquisition of CA Inc.’s ERwin data modeling product suite.

Background

In March of 2014, Embarcadero Technologies announced that it would acquire CA Inc.’s ERwin data modeling suite. Data modeling software is used to view and streamline enterprise data, centralize data management and reduce data redundancies.

The Department of Justice’s Antitrust Division continues to send a strong message to individuals engaged in conspiracies to rig public real estate foreclosure auctions through criminal enforcement.  Punishing real estate investors engaged in illegal activity that harms struggling homeowners and financial institutions continues to be a priority for the Antirust Division.

Alabama Public Real Estate Auction Investigation

On October 31, 2014, the Antitrust Division announced that an Alabama real estate investor pleaded guilty for his role in a conspiracy to commit mail fraud related to public real estate foreclosure auctions held in southern Alabama.

On October 30, 2014, the Antitrust Division filed a complaint along with a proposed settlement agreement that allows Media General Inc.’s acquisition of LIN Media, LLC for $1.5 billion to be consummated, as long as the parties divest certain broadcast stations.

Background

Media General’s local broadcast stations and LIN’s stations in various designated marketing areas (“DMA”) around the country compete head-to-head in the sale of broadcast television spot advertising.  The Antitrust Division determined that Media General and LIN’s broadcast stations located in the Birmingham, Alabama, DMA; Savannah, Georgia, DMA; Mobile, Alabama/Pensacola, Florida DMA; Providence, Rhode Island/New Bedford, Massachusetts, DMA; and Green Bay/Appleton, Wisconsin, DMA competed head to head in the sale of broadcast television spot advertising to local and national advertisers.

On October 2, 2014, the Department of Justice’s Antitrust Division announced through a business review letter CyperPoint International, LLC’s cyber intelligence data-sharing platform known as TruSTAR, as proposed, does not raise antitrust concerns that would warrant a challenge.

Background

Earlier this year, the DOJ and the Federal Trade Commission issued a joint policy statement recognizing that private entities may share cyber threat information without running afoul of the antitrust laws.  In that policy statement, the agencies emphasized what competent antitrust counsel already knows — that the antitrust laws are not an impediment to legitimate private-sector initiatives to share specific information about cyber incidents and mitigation techniques to defend against cyber attacks.