DOJ Archives - ANTITRUST ALERT

DOJ

Seven Corporate Directors Resign: DOJ Ramps Enforcement Against Board Members Serving on Competitors’ Boards

by Glenna Siegel, Gregory E. Heltzer and Jon B. Dubrow | Oct 21, 2022 | DOJ Developments

WHAT HAPPENED

Seven directors resigned from corporate boards following promises of enforcement of Clayton Act Section 8 (15 U.S.C. § 19) by the US Department of Justice (DOJ), Antitrust Division (the Division), the Division announced Wednesday.
The directors served on the boards of corporations that the DOJ asserted competed in a variety of sectors, including information technology, software, and manufacturing.

WHAT’S THE LEGAL CONCERN

Section 8 prohibits “interlocking directorates” (per se violation), which occur when the same individual serves simultaneously as an officer or director of two competing companies (direct interlocks) or when different individuals on boards of competing companies act on behalf of and at the direction of a single firm (indirect interlocks through deputization). In its press release, the DOJ noted that some of the interlocks arose because a private equity firm appointed different personnel to the boards of competing companies.
The goal of Section 8 and the DOJ action is to decrease potential opportunities for the exchange of sensitive information between competitors and the risk of anticompetitive conduct more generally.
Exemptions might apply. There are de minimis exemptions if a) the competing sales are less than $4.1 million (threshold updated annually); b) the competing sales of either corporation represent less than 2% of its total sales; or c) the competing sales of each corporation are less than 4% of its total sales. A careful analysis (similar to that done in merger analysis) is necessary to determine whether an exemption might apply.
Not just corporations? While the plain language of Section 8 refers to interlocks involving “corporations,” the DOJ has stated its view that Section 8 also covers interlocks between non-corporate entities, such as LLCs (this is an open area of law).
Not just the same person? While the plain language of Section 8 states that it applies when the same “person” sits on the board or acts as an officer of two competitors, the DOJ interprets Section 8 broadly to mean that two different individuals appointed by a common entity cannot serve on boards of competitors because the entity is a “person” and is serving on the boards through its designees.

WHAT ARE THE RISKS

Interlocks can create significant antitrust risk. While the DOJ’s concerns with interlocks seem to be assuaged with the quick removal of the Corporate Director identified, interlocks have served as the factual underpinning for antitrust conspiracy claims. Therefore, companies should be proactive in eliminating problematic interlocks, as the interlock combined with parallel action by competitors in an industry could serve as the factual basis for long and costly conspiracy investigations or litigation and could support complaint allegations to defeat a Twombly-based motion to dismiss.

ANTICIPATE CONTINUED ENFORCEMENT

While the resignations are not novel, they represent a major amplification of corporate responses to what Assistant Attorney General Jonathan Kanter has described as “an extensive review of interlocking directorates across the entire economy” and [...]

Continue Reading

Antitrust M&A Snapshot | Q2 2022

by Claire Danberg, Karolien Van der Putten, Jon B. Dubrow, Joel R. Grosberg, Lisa P. Rumin and Hendrik Viaene | Sep 26, 2022 | Consumer Protection/Privacy, DOJ Developments, EC Developments, EU Developments, FTC Developments, Healthcare Antitrust, Mergers & Acquisitions, Monopolization/Abuse of Dominance

In the United States, parties continue to be cautious in litigating challenged transactions. Since January 2021, the US Federal Trade Commission (FTC) and Department of Justice (DOJ) filed lawsuits (or threatened to sue) to block 16 transactions. Of those transactions, 12 were abandoned and six are in various stages of litigation. The data suggest that the FTC’s and DOJ’s aggressive merger enforcement policy is raising the stakes for parties to potential mergers and acquisitions, including an increased willingness by the agencies to litigate potentially problematic transactions.

Between May 6 and June 3, 2022, the European Commission (Commission) held a public consultation to seek views on the draft revised Merger Implementing Regulation (Implementing Regulation) and the Notice on Simplified Procedure. This consultation was launched in the context of the Commission’s review process of the procedural and jurisdictional aspects of EU merger control.

On April 20, 2022, the UK government proposed new measures to boost consumer protection rights and competition rules. In particular, the UK government’s reforms aim to strengthen the Competition & Markets Authority’s (CMA) powers and alleviate burdens on smaller companies.

Access the full issue.

Cartel Corner | August 2022

by Justin P. Murphy, Paul M. Thompson, Han Cui, Alexandra Lewis and Reese Poncia | Aug 31, 2022 | Agriculture, Cartel Enforcement, Consumer Protection/Privacy, DOJ Developments, FTC Developments, Monopolization/Abuse of Dominance

Without question, 2022 has been a remarkably busy time for the US Department of Justice’s (DOJ’s) Antitrust Division (Division). Over just a few months, the Division rolled out meaningful revisions to its leniency policy aimed at encouraging prompt reporting of criminal violations, announced that it will (for the first time in nearly 50 years) bring criminal monopolization cases under Section 2 of the Sherman Act, continued to increase enforcement resources, and brought a number of new cases and obtained multiple guilty pleas.

However, activity does not always mean success. If there is any theme that defines the Division’s efforts over the last quarter, it is this: If at first you don’t succeed, try, try again. That is exactly what the Division has done. It tried two labor markets cases, ultimately losing both on a new and untested legal theory. And, over strong objections from a district court, the Division pursued an unprecedented third trial against those in the broiler chicken industry, resulting in a full acquittal for all defendants. None of this, however, has deterred the Division from continuing to pursue new investigations and bring new cases under novel legal theories.

In this installment of Cartel Corner, we examine recent and significant developments in antitrust criminal enforcement and profile what the Division has highlighted as its key enforcement priorities. If the past is prologue, we are bound to see more aggressive antitrust enforcement in the months to come, testing the boundaries of current antitrust law. Whether the Division can ultimately shift those boundaries, however, remains to be seen.

Access the full report.

Antitrust M&A Snapshot | Q1 2022

by Anthony S. Ferrara, Hannelore Wiame, Jon B. Dubrow, Joel R. Grosberg and Lisa P. Rumin | May 6, 2022 | DOJ Developments, EC Developments, EU Developments, French Developments, FTC Developments, Healthcare Antitrust, Mergers & Acquisitions

In the United States, antitrust agencies continue with their aggressive merger enforcement posture. The agencies challenged four transactions this quarter, including multiple vertical mergers. The agencies are increasingly skeptical of merger remedies, including behavioral remedies and divestitures. The Federal Trade Commission (FTC) and the Department of Justice (DOJ) are working together to update the current Horizontal Merger Guidelines. The updated guidelines will likely signal a more aggressive enforcement posture.

The European Commission (Commission) blocked one transaction in Phase II and cleared two transactions. Three transactions were abandoned after the Commission initiated a Phase II investigation. The Commission made use of partial referrals to member state national competition authorities in two cases. It also ordered Hungary to withdraw its decision to prohibit Vienna Insurance Group’s (VIG) acquisition of AEGON Group’s Hungarian subsidiaries on foreign direct investment grounds, holding that Hungary’s prohibition decision infringed Article 21 of the EU Merger Regulation.

In the United Kingdom, the first quarter of 2022 also saw a number of Phase II investigations. Specifically, the Competition and Markets Authority (CMA) cleared one transaction in Phase II and blocked two other transactions in Phase II. One transaction was abandoned after the CMA initiated a Phase II investigation. The CMA blocked the merger of Cargotec and Konecranes just one month after the EC cleared the transaction subject to commitments in Phase II. The parties abandoned the transaction following the CMA’s decision.

Access the full issue.

DOJ Faces Setbacks in Labor Market Prosecutions but Remains Determined

by Anthony S. Ferrara | Apr 26, 2022 | Cartel Enforcement, DOJ Developments, FTC Developments, Healthcare Antitrust

WHAT HAPPENED

On back-to-back days this month, defendants charged and prosecuted by the US Department of Justice’s Antitrust Division (the DOJ) were acquitted on all Sherman Act charges in first-of-their-kind criminal antitrust trials involving labor markets.
On April 14, 2022, in United States v. Jindal, a federal jury in the US District Court for the Eastern District of Texas found two defendants not guilty of violating the Sherman Act by agreeing with competitors on wages they would pay their employees. The jury found one of the defendants guilty of obstructing a Federal Trade Commission (FTC) investigation by making false and misleading statements to the FTC and concealing information.
The following day, in United States v. DaVita, Inc., a Colorado federal jury acquitted DaVita, Inc. and its former chief executive on all counts of violating the antitrust laws by entering into non-solicit agreements with other employers.
The Jindal case was the DOJ’s first attempt to criminally prosecute so-called alleged “wage-fixing” agreements. Similarly, the DaVita case was DOJ’s first criminal trial targeting alleged no-poach or non-solicit agreements between employers.
Historically, the DOJ pursued enforcement of alleged anticompetitive labor market practices in the civil context rather than criminally. But in 2016, the DOJ did an about-face and warned employers in its 2016 Antitrust Guidance for Human Resource Professionals that it intended to proceed criminally against “naked wage-fixing or no-poach agreements” between horizontal competitors in labor markets. The DOJ’s efforts to investigate and criminally prosecute such agreements under this new policy started ramping up publicly in late 2020.
The DOJ filed an indictment against Jindal in December 2020 and a superseding indictment against Jindal and another defendant in April 2021. The DOJ alleged that the defendants participated in a conspiracy to lower the rates paid to physical therapists and physical therapist assistants in north Texas. A few months later, in July 2021, the DOJ filed an indictment against DaVita and its former CEO, alleging that they conspired with competitors in the healthcare industry not to solicit each other’s employees. The DOJ returned a superseding indictment in November 2021.
In both cases, the district courts denied the defendants’ motions to dismiss. The Jindal court held—for the first time ever—that an alleged wage-fixing conspiracy could constitute a per se criminal violation of the Sherman Act. Similarly, the DaVita court held that no-poach and non-solicit agreements could constitute per se violations—but only if the alleged naked agreements allocate the employment market. The DaVita court refused to announce a blanket rule that all no-poach or non-solicit agreements are subject to per se
Despite these rulings, the juries in both cases ultimately acquitted the defendants of all antitrust charges brought by the DOJ.

WHAT’S NEXT

The DOJ remains committed to investigating and criminally prosecuting wage-fixing and no-poach agreements despite these early setbacks. Since the Jindal indictment in December 2020, the DOJ has [...]

Continue Reading

Views and Lessons from the Trenches of the First Criminal No-Poach Trial

by Jeffrey Stone, Justin P. Murphy and Daniel R. Campbell | Apr 22, 2022 | DOJ Developments

In a landmark case of first impression, the US Department of Justice’s (DOJ) Antitrust Division (Division) indicted and brought to trial a federal criminal prosecution alleging agreements between DaVita, Inc., its former CEO Kent Thiry and other companies not to solicit each other’s employees. The case was the first criminal trial of its kind in the Division’s recent efforts to expand Sherman Act liability under Section 1 to include so-called no-poach and non-solicit agreements. Following an eight-day jury trial and two days of deliberation, a Denver jury acquitted Thiry and DaVita on all counts of the unprecedented “no-poach” conspiracy. As the district judge himself succinctly put it to the jury: this case was “a unique case in the field of antitrust law.”

This criminal prosecution in the labor markets reflects a novel and aggressive stance on expanding Sherman Act criminal liability. In pursuit of this policy shift, the Division is trying to jam a square peg into a round hole by characterizing non-solicit and no-poach agreements as per se market allocation agreements. The per se rule creates a judicial shortcut of sorts that makes it easier for the government to prosecute classic cartel conduct such as price-fixing and bid rigging. This case, and related cases, are the first time the per se shortcut has been used in a so-called labor market allocation case. This unprecedented litigation created a watershed moment for the Division’s views that non-solicit and no-poach agreements are per se illegal. The complete acquittal of both defendants and the rulings of the district judge before trial cast doubt on whether the per se standard is appropriate for “no-poach” agreements and whether such agreements should be prosecuted criminally at all.

WHERE DID THIS COME FROM?

Historically, the Division pursued enforcement of alleged anticompetitive labor market practices in the civil context, meaning fines for companies and individuals. In fact, that was the approach the Division took with no-poach and no cold call agreements entered into by major technology and railway companies. The Division engaged in a volte-face and declared it would criminally prosecute such labor market agreements for the first time in October 2016. Without an intervening act of Congress, executive order or ruling by any court, the Division warned that going forward it intended to proceed criminally against “naked wage-fixing or no-poach agreements” between horizontal competitors in the labor market. The Division declared that investigating alleged “naked wage-fixing or no-poach agreements” was a top priority. Ignoring concerns related to the separation of powers, the Division unilaterally cited its discretion and put the full weight of the government into labor market no-poach agreements. That momentum accelerated in December 2020 and continued throughout 2021, with the Division bringing 12 criminal cases against nine individuals and three companies. In short, aggressive and expansive antitrust enforcement from the DOJ is now the new normal.

DOJ SEEKS TO CREATE A NEW CATEGORY OF PER SE LIABILITY AND USES DAVITA AND THIRY AS A TEST CASE

The Division returned a superseding indictment against DaVita, Inc. and Kent Thiry on November 4, [...]

Continue Reading

Heard on Day Two and Three of 2022 Antitrust Law Spring Meeting

by Lisa P. Rumin, Han Cui, Claire Danberg, Anthony S. Ferrara, Graham Hyman and Zachary Sproull | Apr 12, 2022 | Cartel Enforcement, Consumer Protection/Privacy, DOJ Developments, FTC Developments, Healthcare Antitrust, Joint Ventures/Competitor Collaboration, Mergers & Acquisitions, Monopolization/Abuse of Dominance

On April 7 and 8, 2022, the American Bar Association’s Antitrust Law Section wrapped up its annual Spring Meeting. The event featured updates and remarks from several antitrust enforcers, including FTC Chair Lina Khan and US Assistant Attorney General for the Antitrust Division Jonathan Kanter. In this post, we share key takeaways from the final two days of the Spring Meeting.

FTC and DOJ Will Stay Focused on Litigation: Top officials at both US antitrust agencies highlighted the agencies’ full dockets and noted that litigation to enforce the antitrust laws will remain a top priority.

Three Directors from the Federal Trade Commission (FTC)—Holly Vedova, the Director of the Bureau of Competition; Samuel A.A. Levine, Director of Bureau of Consumer Protection; and Elizabeth Wilkins, Director of Office of Policy Planning—all emphasized that the FTC will work as one team and will not hesitate to initiate litigation.
Vedova noted the FTC’s recent success in several transactions being abandoned after the FTC initiated litigation. She expressed that the Bureau of Competition’s main focus will be litigation, where she believes her bureau will be most effective. Khan echoed these sentiments while speaking on a separate panel, emphasizing that two recently abandoned transactions were in the context of challenges to vertical transactions and that such challenges will continue to be a priority at the FTC.
Likewise, Kanter noted that the Department of Justice (DOJ) is not afraid to take on big cases or big companies and will not be afraid to litigate. He said the DOJ is just getting started and reiterated that the DOJ has more active cases than it has had in recent years.

Agencies Will Closely Scrutinize Potential Remedies in M&A: Both FTC and DOJ officials emphasized they will continue to examine the effectiveness of remedies and will only pursue strong remedies.

Kanter said that divestiture remedies will be the rare exception and will no longer be the norm. He further cautioned merging parties to avoid engaging in “regulatory arbitrage” and trying to leverage investigation outcomes in one jurisdiction against another because global cooperation among antitrust enforcers is high.
Vedova also indicated that the Bureau of Competition has no appetite for weak or uncertain settlements, especially those involving behavioral remedies, which have proven ineffective. The FTC will require meaningful structural relief to resolve competition concerns regarding a transaction.
Parties should also not expect the FTC to engage in long settlement discussions due to the unprecedented volume of merger reviews. Vedova noted that staff’s time is valuable and is much better spent preparing for litigation rather than negotiating remedies. She further indicated that the FTC will not engage in remedy discussions unless the Hart-Scott-Rodino (HSR) clock is stopped and timing agreements are tolled.
State attorneys general will similarly evaluate remedies and, if necessary, pursue additional remedies than those sought by federal antitrust enforcers. For example, in a recent dialysis acquisition, the state of Utah sought divestiture of a fourth clinic above the three divestitures required to [...]

Continue Reading

Heard on Day One of 2022 Antitrust Law Spring Meeting

by Lisa P. Rumin, Anthony S. Ferrara, Reese Poncia, Alexandra Lewis, Graham Hyman, Joshua W. Eastby and Han Cui | Apr 7, 2022 | Cartel Enforcement, DOJ Developments, FTC Developments, Healthcare Antitrust, Joint Ventures/Competitor Collaboration, Mergers & Acquisitions, Monopolization/Abuse of Dominance

This week, the American Bar Association’s Antitrust Law Section kicked off its annual Spring Meeting in Washington, DC, which features updates from the antitrust enforcers and substantive discussions on today’s most pressing antitrust issues. In this post, we share key takeaways from the first day of the Spring Meeting.

Agencies Continue to Be Hostile to M&A: Republican Federal Trade Commission (FTC) Commissioners Noah Phillips and Christine Wilson emphasized that the prevailing view under Democratic leadership at the antitrust agencies is that mergers provide no value and only carry costs.

Progressive leadership wants to “throw sand in the gears” to prevent deals from being proposed altogether. Recent policy changes are aimed at creating uncertainty, heightening risk and raising the transaction costs of doing deals to slow the pace of M&A activity.
Despite this, there was a precipitous drop in the number of FTC merger enforcement actions in the final year of the Trump administration (31) compared to the first year of the Biden administration (12).
There is no indication that early termination for Hart-Scott-Rodino (HSR) pre-merger notification filings will be reinstated.
“Close At Your Peril” letters are another tactic the agencies are using to heighten deal risk and deter parties from pursuing or consummating transactions, even though the antitrust agencies have always had the authority to investigate and challenge consummated transactions.
Many panelists commented on the lack of transparency between agency staff and merging parties on recent transactions. If the lack of transparency persists, it may create due process issues and problems for timing agreements that merging parties typically negotiate with staff.
The antitrust agencies are increasingly skeptical of the efficacy of structural and behavioral remedies to resolve competition concerns regarding a transaction. The Department of Justice (DOJ) Antitrust Division’s Principal Deputy Assistant Attorney General Doha Mekki said merging parties should expect the DOJ to reject “risky settlements” more often and instead seek to block transactions outright. Mekki said literature has shown that many merger settlements failed to protect competition.

Increased Antitrust Litigation Is on the Horizon: DOJ officials said companies should expect an increase in antitrust litigation on both civil and criminal matters.

The DOJ Antitrust Division has more cases in active litigation than it has had at any time in recent history. It currently has six active litigations involving civil matters and 21 ongoing litigations involving criminal matters.
The Antitrust Division is not considering cost as a gating factor for bringing new cases. Instead, it is bringing cases where it deems necessary to uphold the law and preserve competition. The DOJ is hiring more attorneys and using shared DOJ resources to support the increased rate of litigation.
The DOJ is also seeking faster access to the courts. Mekki indicated that in cases where potential anticompetitive harm resulting from a transaction is clear, the agency may file suit while an investigation remains pending and before merging parties have certified substantial compliance.

Updated Merger Guidelines Are Coming: Officials from both the FTC and [...]

Continue Reading

Cartel Corner | March 2022

by Justin P. Murphy, Paul M. Thompson, Han Cui, Joshua W. Eastby, Anthony S. Ferrara, Alexandra Lewis and Reese Poncia | Mar 21, 2022 | Agriculture, Cartel Enforcement, Consumer Protection/Privacy, DOJ Developments, FTC Developments, Healthcare Antitrust, Monopolization/Abuse of Dominance

The US Department of Justice’s (DOJ) Antitrust Division (Division) has continued to actively investigate and pursue alleged criminal violations of antitrust laws and collusive activity in government procurement. US Attorney General Merrick Garland noted in a March 2022 speech at the ABA Institute on White Collar Crime that the Division ended last fiscal year “with 146 open grand jury investigations—the most in 30 years.” As we near the end of the first quarter of 2022, the Division has a record number of criminal cases either in trial or awaiting trial.

In this installment of Cartel Corner, we examine and review recent and significant developments in antitrust criminal enforcement and profile what the Division has highlighted as its key priorities for enforcement. For 2022 and beyond, those priorities are—and likely will remain—identifying and aggressively pursuing alleged violations involving the labor markets, consumer products, government procurement, and the generic pharmaceutical industry.

Access the full report.

Recent Treasury Department Report Emphasizes Fostering Competition in Labor Markets

by Joshua W. Eastby and Stephen Wu | Mar 15, 2022 | Agriculture, Cartel Enforcement, DOJ Developments, Healthcare Antitrust, Joint Ventures/Competitor Collaboration, Monopolization/Abuse of Dominance

Continuing the recent string of actions across the Biden administration in response to the July 2021 Executive Order on “Promoting Competition in the American Economy,” on March 7, 2022, the US Treasury Department (Treasury) released a report titled “The State of Labor Market Competition,” and on March 10, 2022, the US Departments of Justice (DOJ) and Labor (DOL) announced a Memorandum of Understanding (MOU) to strengthen and coordinate enforcement efforts in labor markets. These developments highlight the administration’s continuing focus on anticompetitive conduct in the labor markets at both the local and national levels and warrant careful attention by employers of all sizes and in all industries.

Treasury Report In Depth

Treasury’s report sets out to “summarize the prevalence and impact of uncompetitive firm behavior in labor markets.”
It focuses on both inter-employer conduct—such as the sharing of wage information, entering into no-poach agreements and outright conspiracies to fix wages—and employer-employee conduct—like forcing workers to sign non-compete agreements, mandatory arbitration agreements and class action waivers, misclassification of employees as independent contractors and opacity surrounding employees’ compensation rates—as being potentially anticompetitive and contributing to the imbalance of power between employers and employees in labor markets.
The structures of various labor markets, including overall low rates of unionization, “fissuring” of workplaces as a wide variety of job functions (e.g., janitorial or food services) are outsourced from in-house employees to external contractors, and occupational licensing requirements imposed by federal, state, and/or local governments, are highlighted as having overall negative effects on the competitiveness of various labor markets.
The report estimates that employers’ market power is responsible for approximately 20% lower wages compared to a fully competitive labor market, and notes that the harms that flow from a lack of labor market competition disproportionately impact lower-income occupations, women and people of color.
The report concludes by emphasizing that adverse effects on workers as a result of limited competition in labor markets have broader effects on the labor markets, the firms that participate in them and the economy as a whole.
Finally, the report specifically examines the labor markets in the healthcare, agricultural and minor-league baseball industries, and it outlines the Biden administration’s efforts to increase competition and deter and punish anticompetitive conduct in labor markets across the country.

The Memorandum of Understanding (MOU)

The DOJ and DOL’s MOU likewise emphasizes the shared “interest in protecting workers who have been harmed or may be at risk of being harmed as a result of anticompetitive conduct,” as Assistant Attorney General Jonathan Kanter noted in the joint press release announcing the MOU, “[p]rotecting the right of workers to earn a fair wage is core to the work of both our agencies, and it will continue to receive extraordinary vigilance from the Antitrust Division.”
The MOU states the DOJ’s and DOL’s intent to “share enforcement information, collaborate on new policies, and ensure that workers are protected from collusion and unlawful employer behavior.”

Older Posts »

« Newer Posts

BLOG EDITORS

Gregory E. Heltzer

BLOG EDITORS

STAY CONNECTED

TOPICS

ARCHIVES

RECENT POSTS