Antitrust Lawyer Blog Commentary on Current Developments

Articles Tagged with DOJ

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.

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 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.

On March 15, 2018, the Department of Justice’s Antitrust Division filed a modified proposed final judgment (“MPFJ”) and responded to amici briefs filed in the Antitrust Procedures and Penalties Act (“Tunney Act”) proceedings regarding the DOJ’s settlement agreement that allowed Anheuser Busch InBev SA/NV’s (“ABI”) to acquire SABMiller.  In other words, the consent decree that was signed on July 20, 2016 between the Obama DOJ and the merging parties has yet to be approved by a federal court. One would think that the DOJ would move quicker on finalizing a consent decree that allowed the largest beer merger in history proceed.  But, here we are just about at the two-year mark without a finalized decree.

The DOJ permitted the merger of the two largest global brewers, which without a remedy threatened to reduce head-to-head competition between Anheuser Busch InBev SA/NV’s (“ABI”) and MillerCoors in local markets throughout the country.  The DOJ alleged that the elimination of competition between ABI and MillerCoors would increase ABI’s incentive and ability to disadvantage its remaining rivals – in particular, brewers of high-end beers that serve as an important constraint on ABI’s ability to raise its beer prices – by limiting or “impeding the distribution” of their beers, likely resulting in increased prices and fewer choices for consumers.   This allegation is significant because “effective distribution is important for a brewer to be competitive.”

To resolve these competitive concerns, the DOJ’s Proposed Final Judgment required the divestiture, which permanently cemented a duopoly where two suppliers exert control over approximately 85-90% of the distributors in the United States.  The DOJ further acknowledged in its Competitive Impact Statement (“CIS”) that ABI and Molson Coors have business arrangements and contacts throughout the world and that the divestiture may actually facilitate coordination.  Because of the increased likelihood of coordinated anticompetitive effects, the DOJ alleged that the merger “would increase ABI’s incentive and ability to disadvantage its beer rivals by impeding the distribution of its beers.”  Accordingly, the DOJ sought behavioral remedies, which are designed to keep beer distribution independent and open as well as to level the playing field for ABI’s high end rivals.

On June 18, 2018, T-Mobile and Sprint filed initial papers with the FCC.  The parties made a number of arguments on why their deal should pass regulatory muster.

First, T-Mobile and Sprint argue that they need the deal to compete with the Big Two (AT&T and Verizon) – the combined firm would be able to take advantage of efficiencies and economies of scale to bring technological innovations (5th generation (5G)) to the market faster to provide customers with better broadband services at a lower cost.  Thus, customers would benefit from the merger through lower prices and investments to their network.  The parties basically acknowledge that it is a four to three deal.

Second, the parties argue that the wireless market is no longer as concentrated because an abundance of competition exists or will exist in the near future as cable companies, Google, and others are increasingly entering this space. Even using current technologies, Comcast has rolled out low-cost wireless service to its cable customers that rides on Verizon’s network.  So the argument goes that this isn’t a case of going from 4 to 3 wireless companies – there are now at least 7 or 8 big competitors in this converging market.  There is a lot of reasons why long time staffers at the FCC and DOJ might be skeptical of this claim.

On May 29, 2018, the DOJ approved Bayer’s acquisition of Monsanto with a $9 billion asset divestiture.

Background

In September 2016, Bayer agreed to acquire Monsanto.  Bayer and Monsanto overlapped in the research, development, and marketing of seeds, crop protection chemicals, and related agricultural products.  The principal areas of competitive concern related to the seeds business.  The seeds and crop protection businesses are highly concentrated in the United States so from the get go Bayer knew that it needed to propose a comprehensive and complex remedy to resolve the antitrust concerns.

On May 21, 2018, Treasury Secretary Steven Mnuchin urged the DOJ to review the power that large technology firms such as Google have over the U.S. economy.  A “60 Minutes” segment on Sunday devoted to assertions that Alphabet Inc.’s Google wields a destructive monopoly in online search hammered home the notion of the company’s dominance during a time of heightened public concern with technology giants.  The report didn’t include new allegations about the company.  “These issues deserve to be reviewed carefully,” Mnuchin said in a CNBC interview in response to a question about the CBS News report.  “These are issues the Justice Department needs to look at seriously, not for any one company, but as these technology companies have a greater and greater impact on the economy.”

The report highlighted how critics and rivals, such as Yelp Inc., are trying to bring Europe’s antitrust approach to Google to the United States.  Margrethe Vestager, the European Union competition commissioner, told CBS that she is intent on stopping Google’s “illegal behavior” in web search, suggesting that the EC isn’t appeased by the company’s proposed solution for the hefty charges the EU filed last year.  “You have to look at the power they have and it’s something the Justice Department I hope takes a serious look at,” Mnuchin said, though he added that “issues of monopolies are out of my lane” and that it’s up to the DOJ to review antitrust violations.

CBS featured guests who argued Google abuses its dominance in search and search advertising.  It didn’t show any evidence that U.S. lawmakers or enforcement agencies will target the company or mention the potential cases Vestager is pursuing against Google for its Android mobile software and advertising business.

More Fallout From The Ill-Advised Tuna Merger

On May 16, 2018, the Department of Justice (“DOJ”) announced that a federal grand jury returned an indictment against Christopher Lischewski, the President and CEO of Bumble Bee Foods LLC (“Bumble Bee”), for participating in a conspiracy to fix prices for packaged seafood sold in the United States.

The indictment, filed in the U.S. District Court for the Northern District of California in San Francisco, charges Lischewski with participating in a conspiracy to fix prices of packaged seafood beginning in or about November 2010 until December 2013.  The one-count felony indictment charges that Lischewski carried out the conspiracy by agreeing to fix the prices of packaged seafood during meetings and other communications.  The co-conspirators issued price announcements and pricing guidance in accordance with these agreements.