Companies involved in the government contracting industry should take note that the government is honing in on anticompetitive conduct affecting government procurements. The federal government has demonstrated an increased interest in this area, and companies should refresh and audit their compliance programs to avoid hefty civil and criminal penalties and potential prison terms for implicated employees.
THE LATEST: FTC’s New “Technology Task Force” Has Broad Mandate Including Review of Consummated Transactions
The US Federal Trade Commission’s (FTC) Bureau of Competition announced the launch of a new Technology Task Force that will investigate anticompetitive conduct, review past transactions, as well as contribute to pending merger reviews. The FTC’s investigation of consummated transactions will not be limited to large transactions that meet the HSR filing thresholds, but will also include so-called “non-reportable” transactions. The launch of this task force along with the ongoing FTC Hearings on Competition and Consumer Protection in the 21st Century is further evidence of US antitrust enforcers’ increasing focus on the technology sector.WHAT HAPPENED:
- On February 26, the FTC’s Bureau of Competition announced the creation of a Technology Task Force dedicated to monitoring competition in US technology markets. The mandate is expansive allowing for investigations of anticompetitive conduct, mergers and industry practices.
- Importantly, the task force is not only charged with aiding in the review of prospective mergers, but also investigating consummated mergers of any size. For consummated mergers, the task force has the authority to reconsider prior matters and seek the full set of remedies (e.g., divestiture, licensing, etc.) that would be available during the review of a prospective transaction.
- Patricia Galvan, currently the Deputy Assistant Director of the Mergers III Division, and Krisha Cerilli, currently Counsel to the Director, will lead the task force. Their team includes approximately 17 existing staff attorneys with experience in complex technological markets such as online advertising, social networking and mobile operating systems.
- Bureau of Competition Director Bruce Hoffman explained that “by centralizing [the FTC’s] expertise and attention, the new task force will be able to focus on these markets exclusively—ensuring they are operating pursuant to the antitrust laws, and taking action where they are not.”
- The launch of the Technology Task Force together with the ongoing FTC Hearings on Competition and Consumer Protection in the 21st Century highlights the FTC’s and DOJ’s increasing focus on maintaining “free and fair competition” in the technology sector.
- FTC Chairman Joseph Simons’s prior work at the FTC involved launching the Merger Litigation Task Force, which focused on hospital merger retrospectives, and sharpened the FTC’s approach in challenging health care transactions. This appears to be a similar move to sharpen the FTC’s knowledge and approach, but now directed at the technology sector.
- Technology companies that have recently completed mergers should take care not to draw scrutiny from antitrust enforcers.
- Typically, investigations of consummated transactions and anticompetitive conduct will begin with a review of publicly available materials before burdening targets with compulsory process and seeking information from customers, competitors and industry experts.
- Upon receiving information requests from the FTC, targets of the investigations should engage quickly to understand the scope and focus of the investigation. An information request likely means the FTC investigation has progressed beyond the initial phase.
- Industry participants (competitors, customers) could also receive significant information associated with FTC investigations. Those parties should also engage with the FTC quickly to jointly develop a reasonable plan for addressing [...]
THE LATEST: Collateral Risk in Merger Reviews
- 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.
THE LATEST: DOJ’s Packaged Seafood Probe Yields Conditional Leniency Applicant
On Monday, September 11, Tri-Union Seafoods LLC, the US subsidiary of Thai Union Group, announced it blew the whistle on competitors in the US Department of Justice’s (DOJ) investigation of the packaged seafood industry. The “Chicken of the Sea” canned tuna manufacturer also said it received conditional leniency from DOJ in exchange for its cooperation.WHAT HAPPENED:
- In 2015, DOJ began investigating the packaged seafood industry for anticompetitive conduct, including price fixing. DOJ’s investigation followed a failed merger between Thai Union and Bumble Bee Foods LLC.
- In May 2017, Bumble Bee pleaded guilty to violations of Sherman Act Section One. Bumble Bee agreed to fix the price of shelf-stable tuna fish from as early as the first quarter of 2011 through at least the fourth quarter of 2013. The company agreed to pay a $25 million fine, which was substantially reduced to protect the company from insolvency. Two Bumble Bee executives also pleaded guilty.
- In June 2017, a former StarKist Co. sales executive pleaded guilty to price fixing.
- Private plaintiffs filed class action complaints in October 2016 alleging antitrust violations in the packaged seafood industry. The private plaintiffs represent grocery retailers who sold packaged tuna to US consumers.
- Despite the significant costs of participating in DOJ’s Corporate Leniency Program, leniency recipients continue to receive significant value for their cooperation. Conditional leniency recipients like Tri-Union and their employees will not face criminal fines, jail time or prosecution.
- Full cooperation with DOJ’s program will place heavy demands on leniency applicants, including gathering and translating foreign documents, bringing foreign witnesses to the United States for interviews and testimony, and providing several attorney proffers.
- It is critical to have a robust compliance program in place to detect any potential or actual violations of antitrust law. Such a program will allow a company to investigate any potential misconduct and, if necessary, report it to DOJ. Time is of the essence when seeking leniency with DOJ’s Corporate Leniency Program.
- Companies contemplating acquisitions should consider whether any problematic antitrust conduct could arise during the merger review and result in a subsequent criminal investigation.