Antitrust Lawyer Blog Commentary on Current Developments

Articles Posted in DOJ Antitrust Highlights

On January, 17, 2020, smaller rivals such as PopSockets, Basecamp, Sonos, and Tile testified to the the House antitrust subcommittee about how they have been bullied by big tech giants such as Google, Apple, Facebook, and Amazon and called for swift action.

According to the New York Times, the smaller rivals, which have largely been publicly quiet until the hearing, finally stepped up to the plate and sounded off on big tech at a hearing in Boulder, Colorado.  The Congressional subcommittee heard stories of technology giants wielding their massive footprints and platforms as weapons, allegedly copying smaller competitors’ features or tweaking their algorithms in ways that stifle competition.

The pleas for regulatory relief resonated with lawmakers, led by Rep. David N. Cicilline (Democrat – Rhode Island), the chairman of the House’s antitrust subcommittee. Cicilline noted that “it has become clear these firms have tremendous power as gatekeepers to shape and control commerce online.”

Employers and Human Resource personnel need a crash course in the antitrust laws and an understanding of the antitrust risks of entering into no-poach agreements.

What is a no-poach agreement? 

A no-poach agreement is essentially an agreement between two companies not to compete for each other’s employees, such as by not soliciting or hiring them. No-poach agreements, or agreements not to approach other companies’ employees to hire, are generally considered illegal under the antitrust laws.  When companies make agreements not to compete for each other’s employees, they are restraining commerce because they are not allowing working people to freely change jobs to potentially make more money or move to another location if they wish to. It is illegal for companies or other entities to make these agreements, but it happens more often than you would think – just like the case with Seaman v. Duke University.

On September 4, 2019, the DOJ filed an antitrust lawsuit in the Northern District of Ohio to block Novelis Inc.’s proposed acquisition of Aleris Corporation.

Complaint

The DOJ alleges that the acquisition would substantially lessen competition in the North American market for rolled aluminum sheet for automotive applications, commonly referred to as aluminum auto body sheet.  The complaint explains that steel companies are developing lighter, high strength steel varieties for the auto industry. But as Novelis has observed, high strength steel “is largely replacing existing mild steel” and “cannibalizing the existing material” (i.e., traditional steel). The threat of substitution from aluminum to high strength steel is, as Aleris confirms, “limited.”  The price of aluminum auto body sheet is three or four times more expensive than traditional steel.  The complaint further alleges that the transaction would combine two of only four North American producers of aluminum auto body sheet.  The other two suppliers’ capacity is mostly committed to automakers.  Thus, other automakers rely on Novelis and Aleris to produce aluminum body sheet for automobiles to make cars lighter, more fuel-efficient, safer and more durable.

On August 27, 2019, two U.S. senators asked the DOJ to investigate the state of competition in the ticketing business, and to extend the DOJ’s consent agreement with Live Nation Entertainment (“Live Nation”), the industry giant that owns Ticketmaster.

Background

In a letter to Makan Delrahim, the head of the DOJ’s Antitrust Division, Senators Richard Blumenthal (D-CT) and Amy Klobuchar (D-MN) described the ticket industry as “broken” and they lamented the “exorbitant fees and inadequate disclosures” in the ticket buying process.

On August 20, 2019, the DOJ filed a civil antitrust lawsuit in the U.S. District Court for the District of Delaware seeking to block Sabre Corporation’s (“Sabre”) $360 million acquisition of Farelogix, Inc. (“Farelogix”).

Complaint

The DOJ alleges that Sabre and Farelogix compete head-to-head to provide booking services to airlines.  Booking services are IT solutions that allow airlines to sell tickets and ancillary products through traditional brick-and-mortar and online travel agencies to the traveling public.  The DOJ alleges that the acquisition would eliminate competition that has substantially benefited airlines and consumers in both the traditional and online markets.  The complaint further alleges that the transaction would allow Sabre, the largest booking services provider in the United States, to eliminate a disruptive competitor that has introduced new technology to the travel industry and is poised to grow significantly.

On August 20, 2019, it was reported that the states are set to join forces to investigate Big Tech.

On the same day, Assistant Attorney General Makan Delrahim of the Antitrust Division of the U.S. Department of Justice (“DOJ”) said the DOJ is working with a group of more than a dozen state attorneys general as it investigates the market power of major technology companies.  Delrahim said at a tech conference that the government is studying acquisitions by major tech companies that were previously approved as part of a broad antitrust review announced in July of major tech firms with significant market power.  “Those are some of the questions that are being raised… whether those were nascent competitors that may or may not have been wise to approve,” he said.

On July 23, the DOJ said it was opening a broad investigation into whether major digital technology firms engaged in anticompetitive practices, including concerns raised about “search, social media, and some retail services online.”  The investigations appear to be focused on Alphabet Inc.’s Google, Amazon.com, Inc. and Facebook, Inc. (“Facebook”), as well as potentially Apple Inc.

Senate Democrats Aim at Strengthening Antitrust Enforcement

On Friday, February 1, Senator Amy Klobuchar re-introduced two bills aimed at strengthening antitrust enforcement.

The co-sponsors include Senators Ed Markey (Dem-Massachusetts), Richard Blumenthal (Dem-Connecticut), Dick Durbin (Dem-Illinois) and Corey Booker (Dem-New Jersey).

The government shutdown is likely to delay FTC merger reviews, but the Department of Justice’s (“DOJ”) Second Request investigations will likely proceed as they normally do albeit with less staff.  Although the FTC’s Premerger Notification Office (PNO) and the DOJ’s Premerger Office remain open during regular hours to receive HSR filings, the FTC PNO will be operating with a limited staff and is unavailable to provide guidance about the administration of the HSR Act.  All merging parties have to wait the full initial waiting period before obtaining antitrust clearance, because the PNO is not granting early termination of waiting periods during the shutdown.

The staff attorneys who run investigations and negotiations at the Commission are out of the office, which means that parties are simply waiting while everything is on hold.  HSR waiting periods will continue to run during a government shutdown.  DOJ and FTC staff will continue to review premerger filings and conduct investigations to determine whether to challenge reported transactions under the antitrust laws.  Second Requests will continue to be issued and, if engaged in merger litigation, FTC and DOJ attorneys will notify opposing parties and the courts of the government shutdown and attempt to negotiate timing extensions and suspensions. If such relief is not available, they will continue to litigate the matter.

The DOJ and the FTC both issued contingency plans indicating that certain employees connected to antitrust enforcement within the Antitrust Division of the DOJ and the Bureau of Competition at the FTC will be excepted from the furlough and will continue to conduct antitrust enforcement activities.

On August 2, 2018, the DOJ’s Antitrust Division announced that it would begin a review of legacy consent decrees “regulat[ing] how certain movie studios distribute films to movie theatres.”  The Paramount Consent Decrees have been in place for almost 70 years.  U.S. v. Paramount, 334 U.S. 131 (1948).  The Supreme Court decision forced major studios to sell their theater chains. Since that ruling, the Paramount decrees, have governed the way that studios do business with exhibitors. The decrees have prohibited certain “motion picture distribution practices, including block booking (bundling multiple films into one theatre license), circuit dealing (entering into one license that covered all theatres in a theatre circuit), resale price maintenance (setting minimum prices on movie tickets), and granting overbroad clearances (exclusive film licenses for specific geographic areas).”

The DOJ has indicated its review will take into account the changes in the identity of movie theatre owners, the increased number of movie theaters in a geographic area, the increased number of screens in movie theaters, and increased number of viewing platforms available to consumers.  The review is part of the Antitrust Division’s initiative to terminate long-standing antitrust judgment, including many that have no termination date.

“The Paramount Decrees have been on the books with no sunset provisions since 1949. Much has changed in the motion picture industry since that time,” Makan Delrahim, the DOJ’s antitrust chief, said in a statement. “It is high time that these and other legacy judgments are examined to determine whether they still serve to protect competition.” 

On June 27, 2108, the Department of Justice’s Antitrust Division announced that The Walt Disney Company (“Disney”) agreed to divest 22 regional sports networks (“RSNs”) to resolve antitrust concerns with its approximately $71 billion acquisition of certain assets from Twenty First Century Fox (“21CF”).

Speedy Antitrust Approval

DOJ’s announcement of the settlement agreement is noteworthy because of the speed at which Disney was able to negotiate a remedy to a combination that raised a number of antitrust issues.  Though the parties received second requests on March 5, 2018, and Disney had only recently entered into a new agreement with 21CF on June 20, 2018, the DOJ and Disney were able to negotiate a divestiture worth approximately $20-23 billion within 6 months of review and 4 months after issuing information requests.  The dollar value of the Disney/21CF divestiture will likely double what the DOJ characterized as the largest divestiture in history in Bayer/Monsanto.