by Jon B. Dubrow and Shauna A. Barnes
The U.S. Department of Justice’s recent action challenging a joint bidding arrangement for natural gas leases highlights the antitrust risks of joint bids. This newsletter describes considerations parties considering joint bids can take to evaluate and potentially manage their antitrust risks.
To read the full article, click here.
In December 2011, the United States Department of Justice (DOJ) announced that a public company chief executive officer (CEO) will pay a $500,000 civil penalty to settle charges that he violated Hart-Scott-Rodino Act (H-S-R Act) premerger reporting and waiting period requirements. The DOJ, acting at the request of the Federal Trade Commission, charged the executive for failing to satisfy the H-S-R Act’s requirements before acquiring common stock under the company’s stock-based compensation program. The CEO allegedly exceeded the H-S-R Act filing threshold ($59.8 million when the alleged violation occurred) upon the vesting of outstanding restricted stock units awards and the reinvestment of dividends and short term interest through his 401(k) account.
Violations of the H-S-R Act’s reporting and waiting period requirements are subject to fines of up to $16,000 per day. The DOJ’s recent enforcement action illustrates the potentially costly consequences of a failure to consider H-S-R Act compliance in connection with investment planning for corporate executives (and other individuals) who will hold or acquire stock valued in excess of the H-S-R Act’s notification threshold (currently $66 million and moving to $68.2 million effective February 27, 2012), and that violations may occur under somewhat obscure circumstances. In this connection, it is also important to remember that the relevant valuation is determined by reference to the total value of the voting securities that will held following any given acquisition of shares. Thus, for example, if an executive already holds shares valued at $65,999,999, a reporting obligation could be triggered by acquiring just one additional share. Likewise, if the executive’s existing holding has already crossed the $66 million valuation threshold through appreciation, any further acquisitions could trigger a reporting obligation.
by Jeffrey W. Brennan, Ashley McKinney Fischer, David Marx, Jr. and Hillary A. Webber
On October 20, 2011, the Federal Trade Commission and Department of Justice issued a final policy statement on accountable care organizations (ACOs) participating in the Medicare Shared Savings Program (MSSP). Significantly, the Agencies eliminated mandatory antitrust review of certain ACOs seeking to participate in the MSSP, but declined to adopt other stakeholder recommendations.
To read the full article, please visit: https://www.mwe.com/info/news/ots1111c.htm.
by Jon B. Dubrow and Carla A. R. Hine
In recent years, the Federal Trade Commission (FTC) and the Department of Justice (DOJ)—the two US agencies responsible for reviewing and challenging transactions that may lessen competition—have increasingly challenged non-reportable and consummated transactions. There have been several such challenges so far in 2011, and at least nine in 2010 (all but one of which resulted in a settlement).
To read the full article, click here.
by Jon B. Dubrow, Joseph F. Winterscheid and Carla A. R. Hine
Companies should begin regularly collecting required data—in particular revenues by North American Industry Classification System code and information about “associates”—in advance of need to file Hart-Scott-Rodino notification.
To read the full article, click here.
by Frank Schoneveld and Joseph F. Winterscheid
On June 24, 2011, Assistant Attorney General Christine Varney announced that the U.S. antitrust enforcement agencies will be signing a cooperation agreement with their Chinese counterparts. As a consequence, companies can now expect to see the Chinese authorities participating in coordinated “dawn raids” and related cooperative enforcement initiatives with the U.S. and EU antitrust enforcers in international cartel cases.
To read the full article, click here.
by William Diaz
The head of the United States Department of Justices’s (DOJ) Antitrust Division, Christine Varney, gave a speech to the Chamber of Commerce on June 24, 2011. One of the topics she discussed involved IP/antitrust issues regarding standard-setting organizations (SSOs). Provided below is the excerpt from her remarks dealing with this topic. While her remarks do not signify a change in the way the DOJ analyzes SSOs, they serve as a reminder that the DOJ is vigilant of anticompetitive practices related to standard-setting.
Christine Varney’s Remarks on SSOs:
One issue that arises in the context of civil non-merger enforcement, and which I understand is of considerable interest to the business community, is the application of the antitrust laws to standard setting. I have examined standard setting since my days as a Federal Trade Commissioner, when I voted to challenge Dell Computer Corporation’s anticompetitive conduct in a Standard Setting Organization (SSO). The FTC alleged that Dell—as a member of an SSO—restricted competition in the personal computer industry and undermined the standard-setting process by threatening to exercise undisclosed patent rights against computer companies that had adopted the standard. In that settlement, the FTC made clear that the antitrust laws do not allow firms to commit to an open standard, and only after the standard is adopted, assert patent rights to block use of the design or increase prices.
However, if structured appropriately, standards promulgated by an SSO can be permissible under the antitrust laws. As you well know, standard setting creates enormous benefits for businesses and consumers, including reducing production costs and fostering public health and safety. The Division has expressed this support for SSOs in a joint report with the FTC, in business review letters and in speeches.
I personally support the role of standard setting in promoting innovation as long as such standards comply with the basic and fundamental principles of the antitrust laws. This requires that standards be open and published, with clear disclosure and license rules, and should be apportioned fairly and efficiently, with no company able to distort the process. In addition, standards should be limited to technical and operational functions that support individual business decisions—not thwart the competitive process by enabling collective and collusive business decisions. The best SSO framework may vary by industry, but these fundamental principles remain.
To view Christine Varney’s full comments, please click here.
by Joel R. Grosberg and Megan Morley
The DOJ has released an updated merger remedies guide that provides an overview on how the DOJ Antitrust Division staff will analyze proposed remedies in merger matters. The revised guide places an increased emphasis on behavioral or conduct remedies to address issues raised by vertical transactions.
To view the full article, click here.
by Gregory E. Heltzer and Carrie G. Amezcua
On May 10, the U.S. Department of Justice (DOJ) filed a civil lawsuit against George’s Inc. to block its $3M acquisition of Tyson Foods Inc.’s, Harrisonburg, Virginia chicken processing plant, showing that deals of all sizes face scrutiny. This case also continues the trend of challenges to non-reportable transactions by both the DOJ and FTC, as well as the DOJ’s current focus on the agriculture sector. It is also notable because the DOJ is alleging that the merger leads to monopsony power, a relatively rare allegation, but one that is increasingly used in challenging deals in the agriculture business.
The DOJ began investigating the acquisition when it was announced in mid-March, and issued Civil Investigative Demands to the parties on April 18, 2011. Despite their awareness of the DOJ’s concerns and ongoing data and document productions, the parties consummated the deal.
George’s and Tyson are two of only three chicken processors in the Shenandoah Valley. Chicken processors process and distribute "broilers," which are chickens raised for meat products. The processors compete for contracts with growers, who care for and raise chicks from the time they are hatched until the time they are ready for slaughter.
In its complaint, the DOJ alleges that the relevant product market is the "purchase of broiler grower services from chicken farmers." The DOJ then asserts that, following the proposed merger, chicken farmers would have only a single processor to sell their growing services to – in part because the only other processor in the 50-75 mile range, Pilgrim’s Pride, is at capacity. The DOJ alleges that the consolidation would not only harm grower’s contract prices but also lead to inferior contract terms on other, non-price factors. The DOJ argues that the relevant geographic market is limited to the Shenandoah Valley because of transportation costs for feed and live birds.
The full complaint can be found on the DOJ website: https://www.justice.gov/atr/cases/f270900/270983.pdf.
Yesterday, the U.S. Department of Justice announced that CPTN Holdings, LLC, a joint venture owned equally by Microsoft Corp., Apple, Inc. , Oracle Corp., and EMC Corp, has agreed to modify its agreement to acquire certain patents from Novell, Inc. in order to allay antitrust concerns raised by the transaction. The Department had expressed concerns that the original deal would threaten the ability of open source software to innovate and compete in critical software markets. The modifications to the deal will allow it to go forward, but the Department emphasized that it will continue to monitor distribution of the patents to ensure continued competition. The transaction also received antitrust clearance from Germany’s Federal Cartel Office. The German and American authorities cooperated closely on the matter, aided by waivers from the parties that allowed information sharing between the two agencies. Regulators are increasingly attuned to the effects of intellectual property transactions on competition.
For more information on the CPTN Holdings, LLC transaction, you may find the following links useful:
Department of Justice Press Release
https://www.justice.gov/atr/public/press_releases/2011/270086.htm
Law 360 article
https://www.law360.com/competition/articles/240355?utm_source=newsletter&utm_medium=email&utm_campaign=competition
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