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Mary Strimel advises and defends clients on mergers, acquisitions, criminal price-fixing, class actions and other antitrust investigations before the US Department of Justice, the US Federal Trade Commission, and state and federal courts. Her criminal and civil antitrust work has spanned a wide range of industries, including transportation, software, financial markets, data publishing, chemicals, pharmaceuticals, glass, industrial products, alcoholic beverages and telecommunications. Read Mary Strimel's full bio.

WHAT HAPPENED

The Department of Justice Antitrust Division (DOJ) implemented new provisions in merger consent decrees that:

  • Make it easier for DOJ to prove violations of a consent decree and hold parties in contempt;
  • Allow DOJ to apply for an extension of the decree’s term if the court finds a violation; and
  • Shift DOJ’s attorneys’ fees and costs for successful enforcement onto the parties.

DOJ has implemented these provisions in four decrees to date1, and has communicated that it will require the same in future decrees.

WHAT THIS MEANS

For merger decrees, by reducing its burden of proof for decree violations, DOJ is shifting additional risk to parties for divestitures that do not go as planned. Willfulness is not a required element of civil contempt2, so the change to the burden of proof is significant. Parties will need to be sure to commit to realistic divestiture timelines and asset packages that will not present undue implementation challenges.

For non-merger decrees, settling parties will need to remain vigilant against decree violations or even the appearance of them, as the DOJ has ratcheted up its ability to obtain large settlements and civil penalties for violations.

THE CHANGES

The DOJ states that its changes are driven by the principle that antitrust enforcement is law enforcement, not regulation3. Nonetheless, the main impact of the changes is to increase the risk and potential cost on merging parties.

Preponderance Is Now Enough: Reversing the “clear and convincing evidence” standard that has been in place for civil contempt cases since at least the 1960s4, DOJ is now requiring settling parties to agree that a preponderance of the evidence will be enough for a showing of civil contempt and for an appropriate remedy. DOJ states that under the old standard, the DOJ frequently had to engage in extensive discovery when faced with a violation, giving the parties an incentive to hold out from a resolution and “exacerbate the situation.”5 Under a preponderance of the evidence standard, it will be easier for the DOJ to bring an enforcement action without conducting a full CID investigation.

Fee-Shifting Now the Norm: The DOJ now requires the shifting of fees and costs to the parties in the event a violation is proven. DOJ states that fee-shifting provisions are standard fare in many private contracts. Their use by DOJ is designed to discourage violations of consent decrees and speed resolution of disputes.

DOJ Can Request Extension of Decrees: Settling parties must now agree that in the event a court finds a violation, DOJ can request a one-time extension of the decree’s term. The extension that DOJ can request is not time-limited, and the new language does not set forth a standard for when the court should grant DOJ’s request. For decrees that involve costly monitoring and affirmative compliance, this open-ended provision may greatly raise the cost of disputing an alleged violation.

CONCLUSION

The DOJ’s new provisions shift risk and cost to settling parties in the event of a dispute over alleged violations of a decree. Merging parties may disagree about whether these changes further the administration’s deregulatory agenda. Nonetheless, the changes are here to stay, and parties are advised to proceed with appropriate caution in (1) agreeing to realistic divestiture timelines and asset packages and (2) implementing comprehensive decree compliance programs to avoid investigation for an actual or perceived violation.


  1. See Competitive Impact Statement, U.S. v Vulcan Materials Company (Dec. 22, 2017); Competitive Impact Statement, U.S. v TransDigm Group Incorporated (Dec. 21, 2017); Competitive Impact Statement, U.S. v Parker-Hannifin Corporation (Dec. 18, 2017); Plaintiff United States’ and Defendant ABI’s Joint Motion and Memorandum for Entry of Modified Proposed Final Judgment, U.S. v. Anheuser-Busch InBev SA/NV, 1:16-cv-01483 (Mar. 15, 2018).
  2. See McComb v. Jacksonville Paper Co., 336 U.S. 187 (1949).
  3. Principal Deputy Assistant Attorney General Andrew C. Finch, Remarks to New York State Bar Association Antitrust Section, Jan. 25, 2018, available at https://www.justice.gov/opa/speech/file/1028896/download
  4. See, e.g., Schauffler ex rel. NLRB v. Local 1291, International Longshoremen’s Assoc., 292 F.2d 182 (3rd Cir. 1961).
  5. Supra note ii.

In the course of one week, two top level DOJ Antitrust officials in the Trump Administration separately spoke at panels and suggested the possibility of a sea change in federal antitrust law with respect to indirect purchaser lawsuits. The comments further reinforce the Administration’s active focus on antitrust issues.

WHAT HAPPENED:

  • Makan Delrahim, DOJ’s Assistant Attorney General in charge of the Antitrust Division (the Division), spoke at a conference organized by the Antitrust Research Foundation on January 19, 2018, and is reported to have stated that the Division was looking into the possibility of pursuing civil damages on behalf of taxpayers in antitrust price-fixing suits.
  • A few days later, on January 23, 2018, Andrew Finch, DOJ’s Principal Deputy Assistant Attorney General for Antitrust, spoke at a Heritage Foundation conference and reportedly stated that the Division was “looking at whether or not it might be worthwhile to revisit those rules and suggest the same to the Supreme Court,” referencing the landmark decision Illinois Brick Co. v. Illinois, which prohibits indirect purchasers from recovering antitrust damages under federal antitrust law.

Continue Reading THE LATEST: Trump DOJ’s Next Target: the Illinois Brick Indirect Purchaser Rule?

On November 29, 2017, a Japanese auto parts manufacturer and its US subsidiary defeated the US Department of Justice’s claims that the companies conspired with others to fix prices and rig bids for automotive body sealing products. The case involved a rare trial involving criminal antitrust charges. After 13 days of trial, a jury returned a not-guilty verdict for Tokai Kogyo Co. Ltd. and its subsidiary, Green Tokai Co. Ltd. Continue Reading.

Businesses and individuals in Texas, Florida, the Southeast, Puerto Rico and the Virgin Islands are preparing for a massive recovery and reconstruction effort in the wake of Hurricanes Harvey and Irma. The Antitrust Division of the Department of Justice (DOJ) and the Federal Trade Commission (FTC) have issued antitrust guidance that reiterates key principles of permissible and impermissible competitor collaboration and provides useful examples related to disaster recovery. Continue Reading Joint FTC / DOJ Guidance: Hurricanes Harvey and Irma

The US Department of Justice (DOJ) Antitrust Division’s criminal case against an heir location service provider collapsed when the US District Court for the District of Utah ruled that the government’s Sherman Act § 1 case was barred by the statute of limitations. The court held that the alleged conspiracy ceased when the alleged conspirators terminated their market division guidelines, and that continued receipt of proceeds tied to the alleged conspiracy did not extend the limitations period. The court further rejected DOJ’s argument that the case should be subject to the per se standard, instead finding the alleged anti-competitive agreement amongst competitors to be unique and subject to the rule of reason.

This ruling opens a crack in the line of Sherman Act per se cases, creating an opportunity for defendants to argue for rule of reason treatment where there are novel factual issues.

Continue Reading

On June 21, 2017, US District Judge Sue L. Robinson blocked EnergySolutions, Inc.’s proposed acquisition of Waste Control Specialists LLC (WCS), applying a strict standard for the “failing firm” defense to a merger challenge. The parties compete in the disposal of low level radioactive waste (LLRW). WCS had argued that it would be forced to exit the market due to heavy operating losses if the transaction were not approved. Judge Robinson’s recently released opinion provides insights into how aggressively a putative failing firm must shop its assets to third parties before it can qualify for the failing firm defense to an otherwise anticompetitive merger.

WHAT HAPPENED:

  • The US Department of Justice (DOJ) filed suit in November 2016 to enjoin the proposed acquisition of WCS by EnergySolutions, arguing that the merger would lead to a substantial lessening of competition in the LLRW disposal industry. DOJ alleged that EnergySolutions and WCS are the only significant competitors in this industry for the relevant geographic market.
  • The court found that the government easily established a prima facie case of anticompetitive effects by demonstrating that the proposed acquisition would create a firm controlling an exceedingly high percentage of the relevant market and result in a significant increase in market concentration. Judge Robinson identified two product markets: the disposal of higher-activity LLRW, and the disposal of lower-activity LLRW. In both markets she found that the relevant measures of concentration “blow past the presumptive barriers” for harm to competition, especially in regards to higher-activity LLRW where the transaction would result in a “merger to monopoly.” 
  • The defendants’ main defense to rebut the government’s prima facie case was that WCS was a “failing firm.” The failing-firm doctrine considers the possible harm to competition resulting from an acquisition preferable to the negative impact on competition, loss to stockholders, and negative effect on local communities that results when a company goes out of business. Judge Robinson’s opinion explains that in order to assert a valid failing firm defense, the defendants must show that WCS faces the “grave possibility of business failure” and that there was no “other prospective purchaser.” 
  • Judge Robinson avoided deciding the more difficult question concerning whether WCS indeed faced imminent business failure, finding instead that the defendants failed to demonstrate that EnergySolutions was the only available purchaser. According to Judge Robinson, WCS’s parent company failed to make the necessary “good faith efforts to elicit reasonable alternative offers” that would have lesser negative effects on competition. 
  • The opinion highlights the fact that once it was clear that the parent company was serious about selling all of WCS, the parent company had already agreed to several deal protection devices, such as a 30-day exclusivity period with EnergySolutions, and a “no-talk” provision in the merger agreement. WCS and its parent company thus did not respond to other companies that reached out to express interest in acquiring WCS after the transaction with EnergySolutions was announced.

WHAT THIS MEANS:

  • Judge Robinson’s application of the failing-firm doctrine is consistent with the approach taken in the joint Federal Trade Commission (FTC)/DOJ Horizontal Merger Guidelines, which require the failing firm to demonstrate that “it has made unsuccessful good-faith efforts to elicit reasonable alternative offers that would keep its tangible and intangible assets in the relevant market and pose a less severe danger to competition than does the proposed merger.” 
  • The opinion is also consistent with a March 2015 article, published by the FTC and discussed here, that addressed the agency’s application of the failing firm doctrine to the health care context. In the article, the FTC explained that the mere fact that the acquired firm may be clearly failing does not quell the FTC’s concerns. Rather, the agency will seek information from the failing firm regarding its search for alternative offers, and reach out to other prospective purchasers to see if they were contacted and whether they have interest in acquiring the failing firm.
  • As Judge Robinson’s opinion demonstrates, in the rare case where merging parties believe that the “failing-firm” defense may be available to rebut a presumption of anticompetitive effects, the owners of the failing company should make serious, good faith efforts to seek out alternative offers that pose less danger to competition than a proposed merger. Further, owners of the failing company should not agree to any deal protection devices or exclusivity periods with the acquiring firm. The failing company should be aware that in soliciting reasonable alternative offers, the 2010 Horizontal Merger Guidelines consider any offer to purchase the assets of the failing firm for a price above the liquidation value to be a reasonable alternative offer.

Noah Feldman-Greene, McDermott summer associate, also contributed to this Antitrust Alert post.

To date, the US Department of Justice Antitrust Division (DOJ) has obtained six corporate guilty pleas, three individual indictments and one individual guilty plea in its long-running investigation into price fixing of capacitors by primarily Japanese manufacturers. Capacitors are small electronic components that are found in nearly every device that is plugged in or powered by a battery.

WHAT HAPPENED

  • In a May 24 sentencing hearing, the DOJ took sharp criticism from Judge James Donato (NDCA) for what he called a “sweetheart deal” by DOJ in its plea agreement with Matsuo Electric Co. The plea called for payment of a $4.17 million fine to be paid over five years.
  • The deal, reached at the same time as an individual plea of Matsuo’s former sales manager Satoshi Okubo, was one that DOJ had touted, arguing that “[t]he simultaneous acceptance of responsibility by a company and the executive who supervised its involvement in the cartel demonstrates in a concrete way their future commitment to lawful conduct and an improved business culture.”
  • Judge Donato saw it another way, arguing that he “didn’t like the idea of corporations holding individuals out to dry in return for leniency.” This comment came in reference to the assertion that Okubo had been asked to serve a one-year prison term so the company would get a lesser sentence.
  • The court did not throw out Matsuo’s sentence altogether, but requested further details about the company’s financial resources so that it could decide whether to accept the corporate plea agreement, in particular the extended payment term. Okubo was sentenced in February.
  • In previous sentencings, Judge Donato had imposed terms of probation on the corporations exceeding those requested by DOJ.

Continue Reading Individual Accountability Likely to Continue for Cartel Enforcement

Companies are increasingly facing parallel proceedings involving government investigations and follow-on private litigation. These complex cases often involve competing interests between the parties that can influence a judge’s determination on discovery timing and process.

  • Private plaintiffs are incentivized to obtain as much information about the case as early as possible to support their allegations and avoid having the case dismissed on summary judgment.
  • Defendants hope to delay, or save altogether, the expenditure of potentially millions in discovery costs.

On July 6, 2016, Danone S.A. (Danone) agreed to acquire The WhiteWave Foods Company (WhiteWave) for $12.5 billion.

WhiteWave is the leading manufacturer of fluid organic milk in the United States and one of the top purchasers of raw organic milk. Danone is the leading US manufacturer of organic yogurt (Stonyfield). Nearly 90 percent of the raw organic milk used by Danone to manufacture organic yogurt is supplied via a strategic agreement by CROPP Cooperative (CROPP). As of 2009, the strategic supply agreement between Danone and CROPP also includes Danone providing CROPP with an exclusive license for the production and sale of Stonyfield branded fluid organic milk.

WhiteWave and CROPP are the two largest purchasers and top competitors for purchasing raw organic milk from farmers in the Northeast US. Additionally, WhiteWave, CROPP and Danone-CROPP are the only nationwide competitors for the sale of fluid organic milk to retailers and have a 91 percent share of nationwide branded fluid organic milk: Horizon (WhiteWave), Organic Valley (CROPP) and Stonyfield (Danone-CROPP). Continue Reading THE LATEST: Entanglements and Concentrated Markets Require Divestiture in the Dairy Industry

The US Department of Justice (DOJ) Antitrust Division (the Division) offers leniency to the first company to contact the Division and acknowledge participation in an antitrust conspiracy such as price-fixing, bid-rigging or market allocation. The Division’s leniency program requires the applicant to fully cooperate with the government’s investigation and to candidly acknowledge its wrongdoing, among other requirements. In return, the successful applicant receives a pass from corporate criminal exposure and also receives immunity for its officers, directors and executives.

The leniency program is the crown jewel of the Division’s enforcement regime because of its demonstrated success generating new cases. The program’s ability to attract applicants is based on its transparency and predictability. The level of trust required for companies to air their criminal wrongdoing to prosecuting authorities is not automatic. It has been earned over the years by a program that keeps its promises and works as designed. Therefore, changes to the program are closely watched by the defense bar for any perceived lessening of immunity coverage. Continue Reading THE LATEST: Acting AAG Clarifies Scope of Amnesty for Executives