As reflected in the December 2023 merger guidelines, the Federal Trade Commission and the US Department of Justice have changed the way they think about out-of-market effects, i.e., competitive effects that arise outside the relevant market.
In this Law360 article, Lisa Rumin and Anthony Ferrara unpack this new approach, which was prominently demonstrated during the JetBlue Airways-Spirit Airlines merger, and provide practical considerations on the implications for firms contemplating mergers and acquisitions.
The American Bar Association Antitrust Law Section’s annual Spring Meeting concluded on April 12. The annual Spring Meeting featured updates from federal, state and international antitrust enforcers and extensive discussion on priority antitrust issues affecting various industries. In this article, we highlight takeaways from the final two days of the Spring Meeting.
The American Bar Association Antitrust Law Section’s annual Spring Meeting is underway in Washington, DC. The annual Spring Meeting features updates from federal, state and international antitrust enforcers and extensive discussion on priority antitrust issues affecting various industries. In this article, we highlight the key takeaways from the first portion of the Spring Meeting.
Google LLC and Alphabet Inc. (Google) moved to dismiss a third successive complaint that alleged it tied the sales of Maps, Routes and Places application programming interface (API) services to one another. A basic tying claim involves a seller leveraging its market power in one product (the “tying” product) to force sales and gain market share over a different product (the “tied” product).
Following the dismissal of an initial complaint filed in 2022, the plaintiffs filed an amended complaint alleging Google created a “three-way” tying arrangement by conditioning the sale of one API service (e.g., Maps) on the required purchase of the two other services (e.g., Routes and Places) through its contractual terms of service.
The plaintiffs alleged that the tying product could be any of the three APIs and that Google had market power in all three. Whichever plaintiffs bought first was the tying product, and the other two were tied products – allegedly locked in by forced sale or prohibition on use of competitor APIs as a condition of the first sale.
The court granted Google’s motion to dismiss because the plaintiffs did not explain how a product could be both a tying product (requiring market power) and the tied product (lacking market power) depending simply on the order of the sales.
In their second amended complaint, the plaintiffs abandoned the three-way tying claim, instead bringing a basic tying claim with Maps as the tying product and Routes and Places as the tied products. Google has again moved to dismiss the complaint.
THE DETAILS
Maps, Routes and Places APIs are interrelated but separately licensed services that appear alongside each other in mapping applications like Google Maps.
In response to the first amended complaint, Google argued that the plaintiffs did not explain how a product could be both a tying and a tied product depending on the order of sale, given the inherent conflicts in market power required of each.
Google also argued that it had broad rights to dictate the terms of use and display of its mapping services, including a right to protect and control user experience through restricting use of its mapping API services in conjunction with or in proximity to non-Google mapping API services, relying in part on a case called Sambreel. 906 F. Supp. 2d at 1073 (S.D. Cal. 2012).
The US Department of Justice Antitrust Division (DOJ) intervened, filing a Statement of Interest urging the court to reject Google’s interpretation of Sambreel as establishing an “unqualified right” over the use and display of its services. The DOJ did not take a position on whether the claim should survive otherwise.
The court agreed with the DOJ, holding that Google’s interpretation of “control” is too broad and could justify any tying arrangement as an exercise of a supplier’s right to determine or dictate the terms on which its product or service was used.
The court also found that the plaintiffs failed to explain how a product could be either a tying [...]
Vertical mergers are inherently more difficult for the government to litigate than horizonal mergers. After not litigating a vertical merger case since the 1970s, the Federal Trade Commission and the US Department of Justice have recently tried several matters.
In this Westlaw Today article, Jon Dubrow, Stephen Wu, Matt Evola and Bailey Sanders discuss key insights from these cases and provide useful guidance for companies contemplating such transactions.
When it comes to antitrust criminal enforcement, 2023 will be remembered as the year when the US Department of Justice’s (DOJ) Antitrust Division redefined and tested the outer boundaries of its authority. This report looks back at the key events from the DOJ’s year in criminal antitrust enforcement.
Here’s a glimpse of what’s inside:
Despite four straight losses and a voluntary dismissal in labor market cases, the DOJ remains undeterred in bringing additional criminal wage-fixing and no-poach suits.
DOJ’s Procurement Collusion Strike Force secured several guilty pleas and stiff penalties in 2023 and will most likely continue pursuing aggressive investigative and litigation strategies moving forward.
The nearly decade-long investigation of the generic drug industry appears to be ending after the DOJ recently resolved and dismissed the remaining cases.
Deputy Attorney General Lisa Monaco highlighted cybersecurity, tech and national security as areas of heightened risk and thus heightened scrutiny, so corporations in these markets should take heed of the DOJ’s emphasis on corporate compliance in 2024.
The Federal Trade Commission (FTC) and the US Department of Justice (DOJ) are updating their standard preservation notices and instructions for responding to all manner of discovery (e.g., second requests, voluntary access letters, compulsory process, etc.). The update will alert parties to the steps that must be taken to preserve communication from popular business collaboration tools and “ephemeral messaging platforms” like Slack, Microsoft Teams and Signal.
These platforms are typically set to delete communication data automatically and may lack appropriate capabilities for preserving and extracting data even when a preservation notice is issued. While these tools have become central features in the modern business landscape, the Agencies’ announcement is designed to clearly set out the expectation that companies and individuals will adhere to preservation requirements. Parties could be subject to criminal obstruction of justice charges if they fail to comply.
Highlighting the very serious concern these tools raise in the DOJ’s view, Manish Kumar, Deputy Assistant Attorney General for the DOJ’s Antitrust Division, asserted that ephemeral messaging platforms are “designed to hide evidence.”
WHAT HAPPENED
On January 26, 2024, the DOJ and FTC (the Agencies) announced an update to their preservation notices and instructions for responding to all manner of discovery to “address the increased use of collaboration tools and ephemeral messaging platforms in the modern workplace” and “reinforce longstanding obligations requiring companies to preserve materials during the pendency of government investigations and litigation.”
The Agencies recognize that ephemeral chat messaging is becoming an increasingly important feature of the modern business landscape, and they have sought to collect ephemeral messaging data in the past. However, because these platforms are typically set to delete messages automatically and may lack clear solutions for preserving data, the Agencies have run into dead ends trying to collect such data in prior cases. Indeed, Manish Kumar, Deputy Assistant Attorney General for the DOJ’s Antitrust Division stated that “these updates to our legal process will ensure that neither opposing counsel nor their clients can feign ignorance when their clients or companies choose to conduct business through ephemeral messages.”
This new preservation language will be included in all DOJ and FTC preservation letters, second request specifications, voluntary access letters, compulsory legal process and grand jury subpoenas going forward.
While the new language changes are a continuation of the Agencies’ existing preservation policies, they will highlight parties’ obligations with respect to ephemeral messaging data specifically, potentially making it easier for the Agencies to seek sanctions and other recourse against companies who fail to preserve such data.
Indeed, the Agencies’ announcement cites a prior case where civil spoliation sanctions resulted from a target’s failure to properly preserve ephemeral messaging data. Likewise, the FTC has also signaled its willingness to refer cases to the DOJ Antitrust Division’s Criminal Liaison Unit for criminal obstruction charges in certain cases.
WHAT THIS MEANS
The Agencies have recognized in recent cases that relevant business communications that used to happen over email are [...]
On January 22, 2024, the Federal Trade Commission (FTC) announced increased jurisdictional thresholds, increased filing fee thresholds and filing fee amounts for merger notifications made pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act).
Merger Notification Threshold Changes
The HSR Act compels transacting parties to notify the FTC and US Department of Justice (DOJ) of their intent to consummate a transaction if such a transaction meets or exceeds certain jurisdictional thresholds, barring an exemption. The adjusted thresholds apply to all transactions that close on or after the effective date, which will be 30 days after the notice is published in the Federal Register.
The FTC amends the merger notification jurisdictional thresholds on an annual basis based on changes in the gross national product (GNP).
The base statutory size-of-transaction threshold, the lowest threshold requiring notification, will increase to $119.5 million.
The upper statutory size-of-transaction test, requiring notification for all transactions that exceed the threshold (regardless of the size-of-person test being satisfied), will increase to $478 million.
The statutory size-of-person lower and upper thresholds (which apply to deals valued above $119.5 million but not above $478 million) will increase to $23.9 million and $239 million, respectively.
Merger Filing Fee Increases
Following the passage of the Merger Filing Fee Modernization Act, the FTC is required to revise filing fee thresholds and filing fee amounts each year. Filing fee threshold changes are based on the percentage change in GNP, and filing fee amounts are based on the percentage increase, if any, in the Consumer Price Index (CPI). As with the merger notification thresholds, the filing fee threshold and filing fee amount adjustments take effect 30 days after publication of the notice in the Federal Register.
The revised filing fee thresholds and filing fee amounts are provided in the table below.
A three-judge panel from the US Court of Appeals for the Fourth Circuit overturned an executive’s bid-rigging antitrust conviction, holding that the district court erred in applying the per se standard to the executive’s alleged bid-rigging conduct.
The executive, Brent Brewbaker, rigged bids between his former employer, Contech, and its distributor, Pomona Pipe Products. The Fourth Circuit found that while Contech and Pomona both submitted competing bids for North Carolina Department of Transportation (NCDOT) projects, and Contech coordinated with Pomona to make Contech’s bids slightly higher priced, this conduct could not be deemed inherently unlawful under prior precedent because the entities had a manufacturer-distributor arrangement and were not simply direct competitors. In particular, the Fourth Circuit noted that manufacturer-distributor relationships such as the one between Contech and Pomona do not inherently lead to anticompetitive harm and may enhance competition.
Therefore, given the kind of relationship Contech and Pomona had, the Fourth Circuit held that the district court should have analyzed the conduct under the rule of reason to weigh the competitive implications of the parties’ agreement and conduct.
BACKGROUND
Contech manufactured and sold aluminum products.
Pomona distributed Contech’s aluminum products and was Contech’s exclusive dealer in North Carolina.
NCDOT used a bidding process for aluminum structure projects throughout the state. These projects required both the aluminum product and the services to install the aluminum structures.
Contech, Pomona and a third company were the consistent bidders for the NCDOT projects.
When either Contech or Pomona won a bid for a project, each would fulfill its contract using the other’s supply or services. Pomona, therefore, served as Contech’s “dealer” with Contech supplying Pomona the aluminum it needed to use in the projects Pomona eventually won; vice versa, Pomona provided necessary services to Contech when Contech won a bid. Neither Contech nor Pomona could win a bid without the products or services of the other.
In 2019, Brewbaker took charge of Contech’s bidding for these NCDOT projects and began intentionally submitting losing bids to enable Pomona to win by first asking for Pomona’s total bid price and then adding a markup to Contech’s bid price before submitting the bid to NCDOT.
DOJ alleged that Contech and Pomona engaged in bid rigging because they directly competed against each other’s separate bids. Brewbaker and Contech were indicted for violating Section 1 of the Sherman Act and conspiracy to commit mail and wire fraud.
Contech pleaded guilty to bid rigging and one fraud count.
Brewbaker proceeded to trial, and the district court convicted him of bid rigging and five other fraud-related counts (which were not overturned by the Fourth Circuit), upon concluding that Contech and Pomona’s conduct fell squarely within the definition of antitrust “bid rigging” under Section 1 of the Sherman Act.
HOW THE DECISION WAS REACHED
The Fourth Circuit explained that the rule of reason standard is the default framework used to scrutinize most business practices under the antitrust laws. It weighs [...]
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