Antitrust Lawyer Blog

Commentary on Current Developments

On February 28, 2017, U.S. District Judge Emmet Sullivan ruled that Pennsylvania and the District of Columbia AGs were not entitled to $175,000 in legal fees for their efforts in the Federal Trade Commission’s (“FTC”) challenge to Staples Inc.’s proposed acquisition of Office Depot.

The FTC clearly took the lead and won a preliminary injunction under the more lenient standard under 13(b) of the FTC Act.  After winning the preliminary injunction not a permanent injunction under the Clayton Act, Staples and Office Depot abandoned their merger plans.

Pennsylvania and D.C. argued they were entitled to fees under a provision of the Clayton Act that allows for the reimbursement of legal costs when the plaintiff “substantially prevails.” Staples’ lawyers painted the AGs as mere spectators and argued that they should not be entitled to legal fees for two reasons.  First, they did not win under the Clayton Act and second, the fees were unreasonable.

Anthem Cigna Merger Blocked

February 8, 2017

On February 8, 2017, Judge Jackson blocked Anthem Inc.’s (“Anthem”) acquisition of Cigna Corp. (“Cigna”) finding that the merger would likely harm competition.  The district court wholly refuted the parties’ argument that efficiencies would be pro-consumer and a counter-weight to potential competitive problems.  U.S. District Court Judge Amy Berman Jackson also recognized the highly abnormal relationship between Anthem and Cigna, saying the Department of Justice’s Antitrust Division (“DOJ”) was not the only party in the case raising questions about the merger.

On February 16, 2017, Maureen K. Ohlhausen, Acting Chairman of FTC, announced that she appointed Abbott (Tad) Lipsky, a partner at the law firm of Latham & Watkins LLP, to be the Acting Director of the FTC’s Bureau of Competition, effective March 6, 2017.

Lipsky brings with him over 40 years of experience in antitrust law.  He started his legal career as an attorney in the Antitrust Division of the U.S. Department of Justice (“DOJ”), where he focused on deregulation and enhancing competition and antitrust enforcement in certain regulated sectors of the economy, including the aviation, transportation and energy industries.  Following a break from government service, he returned to the DOJ in 1981 upon his appointment as Deputy Assistant Attorney General to President Reagan’s first Assistant Attorney General, William F. Baxter.  At Latham & Watkins, Lipsky’s practice focused on a range of antitrust matters in many countries around the world.  He is co-chair of the Antitrust Section of the American Bar Association’s (“ABA”) International Task Force, and most recently served on the Antitrust Section’s Presidential Transition Task Force.  Lipsky previously served as the chief global antitrust counsel to the Coca-Cola Company from 1992-2002.  He holds a Bachelor’s degree in Physics cum laude from Amherst College, an M.A. in Economics from Stanford University, and a J.D. from Stanford Law School.

As part of these staff changes, Acting Chairman Ohlhausen appointed Alan Devlin as Acting Deputy Director of the Competition Bureau.  Devlin previously served as an Attorney Advisor to Acting Chairman Ohlhausen.  Devlin, who joined the FTC in 2015 from the law firm of Latham & Watkins, teaches antitrust as an Adjunct Professor at Georgetown University Law Center.  And Chairman Ohlhausen also appointed Svetlana S. Gans, a former Attorney Advisor and litigation attorney within both the Bureaus of Consumer Protection and Competition, as her Chief of Staff.  Gans joined the FTC in 2010 from private practice, where she focused on antitrust and consumer protection matters, with previous experience at the DOJ’s Antitrust Division.

On February 16, 2017, the United States Federal Trade Commission (“FTC”) announced that energy infrastructure companies Enbridge Inc. (“Enbridge”) and Spectra Energy Corp (“Spectra”) agreed to settle FTC charges that the proposed $28 billion merger of Enbridge and Spectra likely would harm competition in the market for pipeline transportation of natural gas in three production areas off the coast of Louisiana.

According to the FTC’s complaint, the merger likely would reduce natural gas pipeline competition in three offshore natural gas producing areas in the Gulf of Mexico – Green Canyon, Walker Ridge and Keathley Canyon – leading to higher prices for natural gas pipeline transportation from those areas.  In portions of the affected areas, the FTC alleged, the merging parties’ pipelines are the two pipelines located closest to certain wells and, as a result, are likely the lowest cost pipeline transportation options for those wells.

Under the settlement with the FTC, the companies have agreed to behavioral conditions that will preserve competition in those areas.  Enbridge is the sole owner and operator of the Walker Ridge Pipeline.  Through its indirect stake in DCP Midstream Partners, LP (“DCP”), Houston-based Spectra indirectly owns a 40% interest in the Discovery Pipeline.  According to the FTC, the proposed merger will give Enbridge an ownership interest in both pipelines, which will give it access to competitively sensitive information of the Discovery Pipeline, as well as significant voting rights over the Discovery Pipeline.  Access to its competitor’s competitively sensitive information and significant voting rights would provide Enbridge with the incentive and opportunity to unilaterally increase pipeline transportation costs for natural gas producers located in the affected areas.  The exchange of information also may increase the likelihood of tacit or explicit anticompetitive coordination between the Walker Ridge Pipeline and the Discovery Pipeline.

On February 3, 2017, the U.S. Federal Trade Commission (“FTC”) released a study entitled “The FTC’s Merger Remedies 2006-2012” (“Remedy Study”). The Remedy Study, a report of the FTC’s Bureaus of Competition and Economics, examines 89 merger orders affecting 400 markets, with 79 divestitures to 121 buyers, and evaluates 50 of those orders using a case study method.  To conduct the Remedy Study, the FTC interviewed nearly 200 businesses in a wide range of industries.

The Remedy Study confirms that the FTC’s practices related to designing, drafting and implementing its merger remedies are generally effective.  At the same time, the Remedy Study identifies a number of shortcomings that the FTC needs to address to improve the remedy process.

Some of the key findings and adjustments include:

On February 3, 2017, Maureen Ohlhausen, Acting Chair of the Federal Trade Commission (“FTC”) gave a speech entitled “The FTC’s Path Ahead”. She said her antitrust philosophy is that she believes “in the power of the markets-when free of restraints and unnecessary regulations-to provide the best outcomes for consumers.” She believes in the “rigorous application of economic theory” for informing enforcement decisions.  She vows to challenge anticompetitive mergers.  She spoke about having an evidence based approach to antitrust enforcement and that the FTC should avoid against uncritically accepting a single piece of empirical work such as John Kowka’s claim that divestitures fail to protect competition.  He applauded him for his time but then criticized his work.  She said the Remedy Study demonstrates that the FTC’s remedies have worked well in most cases but acknowledged some imperfections exist.  She noted that every divestiture of an ongoing business succeeded and that 80% of all remedies succeeded.

On January 18, 2017, the Justice Department’s Antitrust Division (“Antitrust Division”) announced a $600,000 civil settlement against Duke Energy for illegal “gun-jumping” violations of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”).

The HSR Act requires that parties to certain acquisitions notify the antitrust enforcement agencies and observe a waiting period before consummating the transaction or transferring beneficial ownership of a business.  Duke Energy prematurely obtained beneficial ownership over a power plant through a tolling agreement before filing its HSR pre-notification form and observing the HSR waiting period.

Background

About a week before taking office, President-elect Trump had two high level meetings with CEOs of companies that are involved in significant acquisitions currently under antitrust review by the Department of Justice’s Antitrust Division.  The meetings raise questions about the integrity and independence of the DOJ’s merger reviews going forward under a Trump administration. 


AT&T/Time Warner

On January 12, 2017, AT&T Inc. (“AT&T”) Chief Executive Officer Randall Stephenson said that in his meeting with President-elect Donald Trump they touched on job creation, investment and competition, but he noted that AT&T’s merger with Time Warner Inc. (“Time Warner”) did not come up.  We find that hard to believe given President-elect Trump’s open reservations about the transaction and his ongoing battle with CNN.

On January 13, 2017, United States Federal Trade Commission (“FTC”) Chairwoman Edith Ramirez announced her resignation from the FTC, effective February 10, 2017.  This would leave the agency with two commissioners.  One Republican and one Democrat, Terrell McSweeny.  It is expected that the new interim FTC Commissioner will be Republican Maureen Ohlhausen.

On October 26, 2016, the DOJ announced that it will require Westinghouse Air Brake Technologies Corporation (“Wabtec”) to divest Faiveley Transport North America’s (“Faiveley”) entire U.S. freight car brakes business in order for Wabtec to proceed with its proposed approximately $1.8 billion acquisition of Faiveley Transport S.A. and Faiveley Transport North America.

The acquisition as originally proposed would have eliminated Faiveley as one of only three major companies that supplies freight car brake components in the United States and eliminated Faiveley as a pipeline competitor in the development, manufacture and sale of freight car control valves – essentially freezing a century-old duopoly in that market.

The proposed settlement includes a divestiture of Faiveley’s entire U.S. freight car brakes business which develops, manufactures and sells freight car brake systems and components including: air brake control valves, hand brakes, slack adjusters, truck-mounted brake assemblies, empty load devices and brake cylinders.  The divestiture also includes Faiveley’s FTEN control valve, a freight car brake control valve under development that will be available for full commercialization after approval from the Association of American Railroads. The DOJ required the sale to be made to a single buyer to be approved by the Antitrust Division.