United States: April – June 2018 Update

The second quarter of 2018 ushered in a trial defeat for the US Department of Justice (DOJ) and the beginning of a new era at the Federal Trade Commission (FTC). In June, Judge Richard J. Leon of the US District Court for the District of Columbia denied the DOJ’s requested injunction of the AT&T/Time Warner acquisition. The case marked the first litigated vertical challenge by the Antitrust Division in nearly 40 years. DOJ filed a notice of appeal of the district court’s decision. At the FTC, four new commissioners were sworn in in May, with a fifth to join upon the approval of current commissioner Maureen Ohlhausen to the US Court of Federal Claims. With the transition nearly complete, new FTC Chairman Joseph Simons announced plans to re-examine and modernize the FTC’s approach to competition and consumer protection laws, possibly charting a new course for FTC antitrust enforcement.

EU: April – June 2018 Update

In this quarter, we saw two significant developments concerning the issue of gun-jumping. First, the Court of Justice of the European Union (CJEU) clarified the scope of the gun-jumping prohibition, ruling that a gun-jumping act can only be regarded as the implementation of a merger if it contributes to a change in control over the target. Second, the European Commission (EC) imposed a €124.5 million fine on Altice for having breached the notification and the standstill obligations enshrined in the EUMR by gun-jumping. The EC also issued two clearance decisions following Phase II investigations in the area of information service activities and the manufacture of basic metals. Continue Reading Antitrust M&A Snapshot

WHAT HAPPENED

  • The Wall Street Journal has reported that the Antitrust Division of the Department of Justice (DOJ) is currently investigating whether advertising sales teams for competing television station owners engaged in anticompetitive conduct regarding communications on performance levels. Per the Journal’s reporting:
  • DOJ is investigating whether the purported communications led to higher rates for television commercials.
  • DOJ’s industry-wide investigation developed from its review of Sinclair Broadcast Group’s (Sinclair) proposed acquisition of Tribune Media (Tribune).
  • As part of the DOJ’s merger review, Sinclair and Tribune received a “Second Request.” Responding to a Second Request typically involves the production of a wide range of company documents regarding competition in the industry under investigation.
  • Many times in the past, merging parties’ Second Request responses have led to separate anticompetitive conduct cases. A few notable examples are provided below:
  • In April 2018, DOJ brought a civil complaint alleging that three rail equipment companies had no-poaching agreements that depressed salaries and competition for their employees. The agreements were discovered during the review of an acquisition involving two of the three companies.
  • In 2003, DOJ filed a civil antitrust lawsuit to block the acquisition of Morgan Adhesives Company by UPM-Kymmene and, at the same time, opened a criminal investigation into price-fixing conduct in the labelstock industry.

Continue Reading THE LATEST: Collateral Risk in Merger Reviews

The second quarter of 2018 proved to be an active one with a number of US Department of Justice (DOJ) investigations resulting in criminal charges against individual executives. However, the DOJ’s total criminal fines still fall below the highs reached in 2014 and 2015. In this period, the European Commission made one notable cartel decision, imposing fines on eight Japanese manufacturers of capacitors.

McDermott’s Cartel Snapshot presents the latest information about active antitrust investigations to inform defense representatives, in-house counsel and agency regulators of the latest compliance risks and private actions. Our highly rated team of competition lawyers has selected the most relevant US and EU cartel matters to support risk management assessments for international cartel defense and to provide insights for legal and business planning.

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The challenges that the government faces in litigating vertical mergers was illustrated in the DOJ’s recent loss in its challenge of AT&T’s proposed acquisition of Time Warner. The result provides guidance for how companies can improve their odds of obtaining antitrust approval for similar transactions.

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The recent FTC decision in the Northrop Grumman / Orbital ATK matter has shed light on the agency’s vertical merger enforcement policy and outlined a path to antitrust merger clearance for the Aerospace and Defense industry. The FTC’s June 5 consent decree shows behavioral remedies remain a viable solution if the parties can prove both that the DoD would benefit from the transaction and that those benefits would be lost if the agency required a divestiture.

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WHAT HAPPENED

In March, we discussed the US Department of Justice (DOJ) Antitrust Division’s move to update its standard consent decree language to enhance decree enforceability. Among other things, the changes:

  • Reduced the burden of proof for DOJ to demonstrate a decree violation in court, and
  • Shifted DOJ’s attorney’s fees to the losing party in the event that a decree enforcement action became necessary.

Now, DOJ Antitrust Division Assistant Attorney General Makan Delrahim has further intensified the Division’s compliance focus by announcing the creation of an Office of Decree Enforcement at the Division (Office). The Office would have “the sole goal to ensure compliance with, and enforcement of, [Antitrust Division] decrees.” Continue Reading THE LATEST: DOJ Continues Its Intense Focus on Decree Compliance

United States: January – March 2018 Update

One year into the Trump administration, the US antitrust agencies are finally starting to implement their enforcement policies. Most notably, trial began in the US Department of Justice’s (DOJ) challenge of the AT&T/Time Warner merger, which is the Antitrust Division’s first significant vertical challenge in several decades. Judge Richard J. Leon’s opinion in that case could alter the outlook for several other vertical transactions pending before the agencies. While the DOJ was preparing for trial, the Federal Trade Commission (FTC) was preparing for a transition to five new commissioners, who were approved by the Senate in April. It remains unclear whether the new, Republican-led FTC will be more moderate in its enforcement efforts, similar to prior Republican administrations, or will follow in the footsteps of President Trump’s DOJ, which has been surprisingly aggressive.

EU: January – March 2018 Update

The European Commission (EC) continued to be quite active in the first quarter of 2018, clearing five mergers. The most significant decision was the approval of a megamerger in the agrochemical sector—Bayer/Monsanto—where the parties submitted a remedy package that totalled over €6 billion. This remedy package included divestitures of research and development assets that addressed the EC’s concerns about innovation, similar to the EC’s Dow/DuPont clearance last year. In addition to Bayer/Monsanto, two other proposed acquisitions in the chemicals sectors fell through, most notably Celanese/Blackstone, due to excessive divestiture requests required by the Commission. Continue Reading Antitrust M&A Snapshot

On April 27, 2018, the United States Senate confirmed President Trump’s five nominees for Commissioners of the Federal Trade Commission (FTC). Three are Republicans: Chairman Joseph Simons, Noah Phillips and Christine Wilson, and two are Democrats: Rohit Chopra and Rebecca Slaughter. The Senate’s vote returns the FTC to a full complement of Commissioners for the first time under the Trump Administration. Of note to participants in the health care sector: the FTC shares civil antitrust law enforcement jurisdiction over the health care industry with the Department of Justice Antitrust Division, but takes the lead when it comes to the health care provider, pharmaceutical and medical device industries. Continue Reading THE LATEST: Health Care Antitrust Enforcement Remains a Top Priority for New FTC Commissioners

According to press reports, the Antitrust Division of the US Department of Justice (DOJ) is investigating several issues related to admission of students to institutions of higher learning.

  • In January, reports emerged that DOJ was investigating whether the National Association of College Admission Counseling’s (NACAC’s) ethical guidelines violate the antitrust laws. The DOJ appeared to be concerned about an agreement not to recruit students who have enrolled, registered, declared their intent or submitted deposits to other institutions. This could affect so-called early decision programs, under which students pledge to attend a particular school in return for early consideration of their applications. Although early decision programs have existed for many years, the DOJ could be concerned about schools putting “teeth” into such programs by agreeing with each other not to recruit or accept students who pledge to enroll at other schools.
  • In early April, the Wall Street Journal reported that the DOJ had sent letters to a number of colleges and universities asking that they preserve emails and other messages detailing agreements with other schools regarding their communications with one another about admitted students and how they might use that information. The request suggests that the DOJ could be concerned that schools are unlawfully coordinating with one another regarding admission of students, limiting competition among themselves for the highest-performing students.

The DOJ’s nascent activity follows in the footsteps of other antitrust cases in higher education that have alleged horizontal trade restraints. These cases have involved financial aid, faculty hiring and coordinated application processes. The nub of DOJ’s interest is that the Sherman Act requires higher education institutions to compete for students and faculty in much the same way as ordinary businesses must compete for their customers and workers. Courts have acknowledged that some aspects of higher education differ from ordinary commerce and are subject to less rigorous rules than other types of trade restraints. However, as to the core matters of competing for students and faculty, colleges and universities should strictly avoid agreements that limit rivalry among them.   Continue Reading DOJ Enforcement Update: Higher Education

Overview of Current Cartel Investigations

Antitrust enforcement remained active in 2017, with the US Department of Justice (DOJ) pursuing both new and long-developed investigations. However, total fines obtained by the DOJ declined sharply from recent years as the automotive parts and foreign exchange investigations wound down. At the end of 2017, and the start of 2018, the European Commission handed down decisions in a number of significant antitrust cartel investigations related to air freight, trucks, maritime carriers and several automotive parts.

US Developments

  • In November 2017, an Ohio jury acquitted two Japanese firms, Tokai Kogyo Co. Ltd. and Green Tokai Co. Ltd., of price fixing and bid rigging charges in the market for automotive body seals. This was the DOJ’s first auto parts case to go to trial and a potential bellwether for the attitude that US juries might take toward foreign defendants. The defense focused on evidence of intense price competition for the allegedly rigged components during the conspiracy period.
  • In the capacitors investigation, US District Court Judge James Donato of the Northern District of California caught the attention of the industry when he refused to accept the guilty pleas of three companies to horizontal price-fixing. According to the court, these negotiated corporate pleas were not sufficient to penalize the companies and prevent future price fixing agreements. The court called one agreement a “sweetheart deal” and stated that another negotiated plea was merely a “drop in the bucket.” Although the court later accepted open-ended “B” pleas in those cases, the court’s rejection of the traditional fixed-sentence “C” plea agreements may signal less deference to agencies with respect to negotiated plea agreements with companies.
  • Over the past few years, the DOJ has exercised greater leniency in sentencing defendants who claim an inability to pay a large fine, hewing to the principle that punishment and deterrence should not put companies out of business. For example, in the packaged seafood investigation, DOJ gave Bumble Bee Foods a $111 million reduction in penalty for inability to pay and cooperation credit. It is likely that the DOJ will continue to evaluate fines in light of companies’ ability to pay them, including companies in smaller industries such as the promotional products cases. However, companies should be aware that judges may not always accept inability-to-pay defenses. Notably, one reason for Judge Donato’s rejection of the capacitor guilty pleas related to his skepticism about one company’s assertion that it was unable to pay a higher fine.

EU Developments

  • The European Commission continues its investigation into anticompetitive behavior in the automotive parts sector. Most recently, the Commission imposed fines on manufacturers of occupant safety systems, spark plugs and braking systems, totaling €185 million. In each case, the companies agreed to settle with the Commission, which means that they received a fine reduction in exchange for admitting to the Commission’s objections.
  • The Commission imposed a record fine on a truck manufacturer which had decided not to settle with the Commission, contrary to the other participants in the cartel.
  • The Commission re-adopted its previous decision to impose fines on air cargo carriers, after its decision had been annulled by the General Court of the EU.
  • The European Commission confirmed in July 2017 that German car makers Volkswagen, Audi, Porsche, BMW and Daimler are “undergoing examination by the Commission.” The companies are believed to have cooperated on how to meet emissions standards for diesel vehicles. Volkswagen and Daimler are believed to have been among the first companies to cooperate with the European Commission. In October 2017, the Commission confirmed that it had carried out inspections at the premises of car manufacturers in Germany.

Read the full report here.