Antitrust Lawyer Blog Commentary on Current Developments

Articles Posted in Civil Non-Merger Highlights

On November 10, 2014, President Obama forcefully stated his position on net neutrality.  While acknowledging that the FCC is the agency that has the authority to create new rules protecting net neutrality, President Obama stated that the FCC should create “the strongest possible rules” to stop “paid prioritization” and other actions that favor the transmission of certain content.  President Obama believes all content providers should be treated equally.  Therefore, he is not in favor of the deals that Netflix cut with Comcast, Verizon, AT&T and Time Warner Cable earlier this year.  Indeed, President Obama does not believe that the cable company or phone company should act as a gatekeeper.

President Obama lists four bright-line rules:

  • No blocking. If a consumer requests access to a website or service, and the content is legal, your ISP should not be permitted to block it. That way, every player — not just those commercially affiliated with an ISP — gets a fair shot at your business.

On November 10, 2014, the American Antitrust Institute (“AAI”) announced that Diana Moss will succeed founder Albert Foer as President and CEO of the leading competition advocacy group, effective January 2015.

“I speak for the entire AAI Board of Directors in enthusiastically welcoming Diana as our new President and CEO as of this coming January. She is ideally positioned to build on Bert’s powerful 17-year legacy and to take the AAI in new directions over the years ahead,” said Robert Skitol, Chairman of the AAI Board of Directors.

Dr. Moss was selected from a pool of prestigious candidates after a national search.  “I am honored, and grateful to the AAI Board for the opportunity to lead this really exceptional organization,” said Moss. “We’re moving into the next AAI “generation” with a talented staff and valuable, respected advisors that have helped us promote a unique and successful advocacy, research, and education agenda,” she added.

On September 17, the Senate Judiciary Committee held a hearing — “Why Net Neutrality Matters: Protecting Consumers and Competition Through Meaningful Open Internet Rules.”  The witnesses were:

·            Brad Burnham – Managing Partner, Union Square Ventures

·            Ruth Livier – Writer, Independent Producer, and Actress

On September 10, 2014, the House Judiciary Committee passed legislation to eliminate certain discrepancies between merger reviews conducted by the Federal Trade Commission and Department of Justice.

The Standard Merger and Acquisition Reviews Through Equal Rules Act (SMARTER Act), H.R. 5402, introduced by Rep. Blake Farenthold (R-TX), would codify certain recommendations included in a 2007 report by the Antitrust Modernization Commission. Under existing law, the rules for reviewing a merger or acquisition differ depending on whether the FTC or the DOJ reviews the merger. The SMARTER Act would reduce differences in the merger review process.

The proposed legislation would streamline merger reviews and various other antitrust procedures that, under current law, differ between whether the DOJ or FTC is conducting the review.  The legislation would amend the Clayton Act and the Federal Trade Commission Act to provide the antitrust agencies with consistent processes when moving to block a merger.  Officials are looking to extend the same powers held by the DOJ to the FTC.  The bill also eliminates the FTC’s power to initiate an administrative proceeding to challenge a merger; that power would be preserved in other contexts, but in regards to a merger the FTC would need to file a complaint in federal district court to block a deal, the same process currently followed by the DOJ.

In a September 4, 2014 speech, Federal Communications Commission (“FCC”) Chairman Tom Wheeler expressed concerns about the lack of broadband competition in the United States.

Chairman Wheeler explained that access to a 25 Mbps connection is becoming essential (or “table stakes”) to consumers with a majority of Americans having access to 100 Mbps or higher connections. However, “just because most Americans have access to next-generation broadband doesn’t mean they have competitive choices.”  Indeed, Chairman Wheeler believes that most Americans really have no competitive choices.  Chairman Wheeler applauded Google and AT&T’s introductions and plans to introduce gigabit broadband to markets around the country, but worried that characterizing competition in many markets as a duopoly “overstates the case” because of the lack of competitive opportunities open to consumers.

To address these concerns, Chairman Wheeler explained the FCC’s Agenda for Broadband Competition, which includes four broad principles: (i) protect existing competition; (ii) encourage greater competition where possible; (ii) create competition where it does not exist in a meaningful way; and (iv) promote broadband deployment where competition cannot be expected to exist.  Through the application of these principles, Chairman Wheeler hopes to improve broadband performance, promote competition, and encourage innovation.

On September 3, 2014, the FCC announced it reached a settlement with Verizon for $7.4 million.

The settlement ending an investigating into Verizon’s alleged misuse of customer information. The FCC’s Enforcement Bureau was investigating Verizon’s alleged failure to notify approximately two million new customers of their privacy rights.  Specifically, Verizon allegedly failed to provide to  new customers instructions for how to opt-out from alleged Verizon’s use of their personal information for marketing purposes.  As part of the settlement, Verizon must inform all new customers of their opt-out rights on every bill for three years.

The $7.4 million settlement is the largest in FCC history for a settlement of an investigation related solely to the privacy of telephone customers’ personal information.

Berkshire Hathaway Agrees to Pay $896,000 Maximum Civil Penalty for HSR Violation

On August 20, 2014, the Federal Trade Commission (“FTC”) announced that Berkshire Hathaway Inc. (“Berkshire”) agreed to pay a civil penalty of $896,000, the maximum civil penalty that could have been imposed, for its alleged violation of the premerger notification and filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”) in connection with its 2013 acquisition of voting securities of USG Corporation, which was allegedly its second HSR violation after a promise to impose an HSR compliance program.

First HSR Mistake

On July 14, 2014, New York State Attorney Eric Schneiderman announced that Casella Wastes (“Castella”), a waste management company based in Vermont but also serving New York, agreed to change its existing contracting practices in the face of antitrust scrutiny.

Casella was found to have unlawfully restricted competition through its acquisition of smaller competitors and restriction on contract terms that ties customers to its services. These contracts involved the collection and disposal of solid waste from dumpsters.  Casella’s contracts required that it serve as the sole provider to all of a customer’s waste disposal needs for at least five years. Early termination of the contract would cost the customer the equivalent of six times the amount on their monthly bill.  In addition, Casella also reserved the right to match competing offers from rivals, effectively discouraging competitors from bidding for Casella’s business.

The terms of the settlement reduced the customer’s burden of terminating a Casella contract: the customer is now only expected to pay the equivalent of two months of service if the contract is within its first year, and the equivalent of one month of service if the contract is beyond the first year.  In addition, Casella’s contract length is also to be capped at two years.

On July 14, SignatureMD, a concierge medicine provider, sued its competitor, MDVIP, in federal court over allegations that the latter’s business practices violated the Sherman Antitrust Act, as well as California’s antitrust and unfair competition statutes in the Cartwright Act.

According to the lawsuit, MDVIP, the largest provider of concierge medicine in the United States that boasts 200,000 members and 700 physicians, tied doctors with “evergreen” contracts that cost $1 million to terminate, prevented doctors from seeing any patients who are not MDVIP members, and even stops doctors from switching allegiance to different concierge medicine providers for at least two years after their contract with MDVIP expires.

SignatureMD claims that MDVIP enjoys a 70 percent share of the concierge medicine membership program market and a 65 percent to 100 percent share in major cities and local markets across the country. Combined with MDVIP’s restrictive practices, SignatureMD argues, rival concierge medicine providers can no longer compete with it effectively. SignatureMD is seeking an injunction, damages and costs from MDVIP.

On July 11, 2014, Germany’s association of booksellers announced that European Union (“EU”) officials contacted them regarding its dispute with The booksellers have already asked German antitrust authorities to investigate Amazon, alleging that the online retailer is delaying the shipment of one of its member, Bonnier AG’s books over a dispute on the price of the publisher’s e-books.

Amazon, in response, stated that Bonnier AG wanted Amazon to charge prices for its e-books that would have been higher than its hard-copy books. According to Amazon, their regular course of action is to charge lower prices for e-books compared to the hard copies. Amazon has been caught in similar disputes, including one with French publisher Hachette Book Group. Amazon is thought to be attempting to boost its margins in its e-books division by negotiating lower prices from publishers.

Similar cases may give prediction to Amazon’s course of action in the face of antitrust investigation. In 2012, Apple Inc. and four publishers changed the pricing model for e-books in Europe in the face of scrutiny from EU antitrust authorities. They were suspected to have conspired to keep Amazon from charging less for e-books.