Antitrust Lawyer Blog Commentary on Current Developments

Articles Tagged with Antitrust Division

On September 21, 2017, the DOJ’s Antitrust Division issued a business letter stating that it would not challenge a proposal by The Clearing House Payments Company LLC (“TCH”), a joint venture of 24 U.S. banks, to create and operate a new payment system that will enable the real-time transfer of funds between depository institutions, at any time of the day, on any day of the week.

According to TCH, it claims that it will create and operate the Real Time Payment system (“RTP”) – a new payment rail that will provide for real-time funds transfers between depository institutions – and in turn, RTP will allow depository institutions to enable faster fund transfers for their end-user customers.

According to TCH, RTP will not interfere with the continued use and operation of existing payment rails, including automated clearing house, wire, and check clearing houses.  RTP will also incorporate additional features that existing payment rails do not offer, such as enhanced messaging capabilities.

Andre P. Barlow
Few missions are as important to the U.S. Department of Justice’s Antitrust Division as preventing anti-competitive mergers or permitting them with adequate conditions to prevent competitive harm. After all, a merger is forever — fixing it after the fact is too messy.

The DOJ is currently investigating Anheuser-Busch InBev SA/NV’s (“ABI”) acquisition of SABMiller PLC, the largest beer merger in history, as well as its proposed divestiture of SABMiller’s interest in the MillerCoors LLC Joint Venture to Molson Coors Brewing Company. These proposed transactions lock in place the two largest beer competitors in the United States while fundamentally changing the dynamics in the beer industry for smaller brewers, distributors, wholesalers and retailers. While ABI maintains that the proposed transactions do not change the competitive landscape, the DOJ knows better.

Indeed, the DOJ’s recent approach in approving Charter Communications Inc.’s acquisition of Time Warner Cable Inc. (“TWC”) and its related acquisition of Bright House Networks LLC to create New Charter, the merged firm, is instructive. Despite no geographic overlap in any local market, the DOJ required comprehensive behavioral conditions to prevent New Charter from engaging in future anti-competitive conduct against its smaller rivals. The DOJ should take the same tough and sophisticated approach to protecting consumers from the much larger ABI/SABMiller merger and the new ownership by Molson Coors, which will create two beer giants that will dwarf its rivals.

On April 25, 2016, the DOJ entered into settlement agreement approving Charter Communications, Inc.’s (“Charter”) acquisition of Time Warner Cable Inc. (“TWC”) and its related acquisition of Bright House Networks, LLC to create New Charter as long as the parties agreed to certain behavioral conditions.

DOJ’s Vertical Concerns Related to the Creation of New Charter

New Charter became the second largest cable company and third largest Multichannel Video Programming Distributor (“MVPD”).  MVPDs include cable companies such as Comcast, TWC and Charter, but also direct broadcast satellite providers (i.e., DirectTV and Dish Network) and telephone companies like AT&T and Verizon.

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.

The key to closing transactions that raise straightforward antitrust concerns in a relatively short time frame is the antitrust counsel’s and the merging parties’ ability to effectively cooperate with the Antitrust Division staff tasked with reviewing the transaction.

A.    Martin Marietta/Texas Industries

On June 26, 2014, the Antitrust Division approved Martin Marietta Materials, Inc.’s $2.7 billion acquisition of Texas Industries on the condition that Martin Marietta divest a quarry in Oklahoma and two Texas rail yards used by it to distribute aggregate in the Dallas area.

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 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.

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.