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Trump administration

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

by McDermott Will & Emery and Mary Strimel | Feb 2, 2018 | Cartel Enforcement, DOJ Developments, Private Litigation

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.

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Trump’s DOJ Challenges Merger Cleared during Waning Days of Obama Administration

by Gregory E. Heltzer and Joel R. Grosberg | Sep 27, 2017 | DOJ Developments, FTC Developments, Mergers & Acquisitions

WHAT HAPPENED

On December 1, 2016 Parker-Hannifin agreed to acquire Clarcor for $4.3 billion.
The merger agreement included a $200 million divestiture cap – that is, Parker-Hannifin was required, if necessary, to divest assets representing up to $200 million in net sales to obtain antitrust clearance.
The initial antitrust waiting period under the Hart-Scott-Rodino Act (HSR Act) expired on January 17, 2017.
Parker-Hannifin completed the acquisition on February 28, 2017.
Nearly seven months later on September 26, 2017, the DOJ filed suit in US District Court for the District of Delaware seeking to require Parker-Hannifin to divest either its or Clarcor’s aviation fuel filtration assets.
The DOJ did not include in its complaint an allegation or statement that the parties increased prices.
The DOJ press release indicates that the parties “failed to provide significant document or data productions in response to the department’s requests.” We believe that this refers to the DOJ’s post-closing investigation.
The DOJ did not suggest in its complaint or the press release that the parties failed to provide required documentation under the HSR Act (e.g., Item 4 documents). During the initial 30-day HSR waiting period, the parties are under no obligation to submit documentation or data to DOJ or FTC requests – all responses are voluntary.

WHAT THIS MEANS

Challenges to transactions after the HSR waiting period expired are rare and typically involve a situation where the parties failed to supply required documentation under the HSR Act.
Challenges post-HSR clearance are even rarer when the parties complied with their obligations under the HSR Act and supplied all required documentation (e.g., Item 4 documents).
The DOJ’s post-HSR clearance action demonstrates that the DOJ may still challenge a transaction post-closing if it later discovers a niche problematic overlap that it did not discover during the initial HSR waiting period.
While this challenge may be an aberration, it raises additional considerations when drafting risk allocation provisions in merger agreements for HSR reportable transactions because merger agreements do not typically account for a post-HSR clearance challenge from the DOJ or FTC.
DOJ action in this matter suggests the Trump administration is unlikely to be lax in its merger enforcement and will continue to analyze competition in narrow markets.

THE LATEST: American Guild of Organists Reaches Settlement Agreement with the FTC over Challenged Professional Association Rules

by Gregory E. Heltzer and Katharine M. O'Connor | May 31, 2017 | FTC Developments

The two current commissioners of the Federal Trade Commission (FTC) approved a final order and consent agreement with the American Guild of Organists (AGO) after a public comment period of two months. The FTC alleged that the AGO violated Section 5 of the Federal Trade Commission Act by agreeing to restrain competition among its organist and choral conductor members. Under the terms of the settlement, the AGO agreed to make certain changes to its rules and policies.

WHAT HAPPENED

The AGO represents approximately 15,000 member organists and choral directors in 300 chapters in the United States and abroad.
The FTC initiated an inquiry into the AGO’s practices in late 2015 after receiving complaints from consumers and organists regarding guild rules.
Specifically, the AGO’s rules required a customer seeking to hire a musician who was not dedicated as the “incumbent musician” in a particular area to pay both the “incumbent musician” in the area as well as the hired musician. The AGO’s Code of Ethics stated that members should “protect themselves” through contracts that secured fees even when not performing.
Also, the AGO published compensation schedules and formulas, instructing its membership to use the formulas to determine pricing in their region.
Finally, the AGO’s rules prohibited a member from soliciting employment from an organization already employing an “incumbent musician.”
The FTC’s complaint alleged that these actions restrained competition by encouraging a fixed pricing schedule between and among the AGO’s membership, and by preventing members from freely seeking or accepting employment. It also alleged that the AGO’s rules and guidelines likely raised prices for consumers seeking to employ organists for special occasions, as well as the organizations that employed organists.
The settlement requires the AGO to change its rules and Code of Ethics, and mandates that each chapter of the AGO certify compliance in order to remain in the organization. In particular, the AGO no longer can publicize or endorse any standardized or suggested prices or interfere with any member’s ability to seek work as an organist or choral conductor.

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McDermott Releases 1Q2017 Antitrust M&A Snapshot

by Jon B. Dubrow and Joel R. Grosberg | Apr 21, 2017 | DOJ Developments, EC Developments, EU Developments, FTC Developments, Mergers & Acquisitions

McDermott’s Antitrust M&A Snapshot is a resource for in-house counsel and others who deal with antitrust M&A issues but are not faced with these issues on a daily basis. In each quarterly issue, we will provide concise summaries of Federal Trade Commission (FTC), Department of Justice (DOJ) and European Commission (EC) news and events related to M&A, including significant ongoing investigations, trials and consent orders, as well as analysis on the trends we see developing in the antitrust review process.

Read McDermott’s 1Q2017 M&A Snapshot.

DOJ and SDNY US Attorney’s Office Indict Three Dealers in Foreign Currency Exchange Spot Market Conspiracy Case

by McDermott Will & Emery | Mar 28, 2017 | DOJ Developments, EC Developments

A grand jury has indicted three foreign currency exchange spot market dealers for alleged violations of the Sherman Act, 15 U.S.C. § 1, in a case brought jointly by the DOJ’s Antitrust Division and the US Attorney’s Office for the Southern District of New York (SDNY). The allegations in the case, United States v. Usher, et al., are that the three named defendants conspired to suppress and eliminate competition for the purchase and sale of Euro/US dollar (EUR/USD) currency pairs via price fixing and bid rigging.

The foreign currency exchange spot market (the “FX Spot Market”) enables participants to buy and sell currencies at set exchange rates. The FX Spot Market is an “over-the-counter” market conducted via direct customer-to-dealer trades, i.e., without an exchange. In the market, currencies are traded and priced in pairs, whereby one currency is exchanged for the other. When filling customer orders, dealers in the FX Spot Market do not serve in a broker capacity, but rather fulfill the orders via their own trading and speculation in the requested currency markets. Dealers employ traders to quote prices and engage in trades to fill customer orders. The dealers and their traders are able to access a separate virtual market, known as the interdealer virtual market, which enables currency trades amongst dealers. According to the Indictment, currency pair prices are set by a continuous auction in the interdealer virtual market, where “individual actions taken by competing traders—to bid or not bid, to offer or not offer, to trade or not to trade, at certain times, and using certain tactics—can cause or contribute to a change in the exchange rate shown in the [virtual trading] interface, and thus may benefit, harm, or be neutral to a competing trader.” The Indictment asserts that this is because the benchmarks used by the virtual market were calculated at particular times each day and were based on “real-time bidding, offering, and trading activity” on the virtual trading market.

The Indictment asserts that the defendants violated the Sherman Act by:

engaging in chat room communications whereby they discussed customer orders, trades, names and risk positions;
refraining from trading against each other’s interests;
coordinating bids for the purpose of fixing the price of the EUR/USD pair.

Defendants are alleged to have engaged in profitable EUR/USD transactions while acting to fix prices and rig bids for the EUR/USD product in the FX Spot Market. The Indictment further alleges that others were co-conspirators, suggesting that there may be cooperating witnesses and possibly further indictments to follow. Of note, however, recent Trump Administration changes to US Attorneys and DOJ Division Deputies and Chiefs may conceivably alter the course of this and any follow-on litigation. Regardless, over-the-counter markets have been a focus of antitrust lawsuits in recent years, most notably in the widely-covered Libor suits, and that trend is expected to continue.

THE LATEST: Further Efforts to Broaden the Scope and Impact for CFIUS Reviews of Foreign Acquisitions of US Businesses

by David Levine and Mary Strimel | Mar 17, 2017 | Agriculture, Mergers & Acquisitions

We reported earlier on the Committee on Foreign Investment in the United States (CFIUS) and its legal and practical authority to review M&A transactions for possible risks to US national security posed by foreign ownership of a US business. Sens. Cornyn (R-TX) and Schumer (D-NY) reportedly are working separately on legislation to strengthen CFIUS, which could directly affect some cross-border M&A. Sen. Cornyn’s proposed changes to CFIUS would target Chinese technology investments while Sen. Schumer’s bill would encourage CFIUS to look at economic implications as part of its review. These legislative efforts follow a bipartisan Congressional request in late Fall 2016 for the Government Accountability Office (GAO) to update its periodic analysis of CFIUS, urging the GAO to evaluate the possible expansion of factors considered by CFIUS in its M&A reviews to cover investment reciprocity and net economic benefits.

WHAT HAPPENED:

Now Sen. Debbie Stabenow (D-MI) and Sen. Chuck Grassley (R-IA) have introduced legislation that would add the Secretary of Agriculture and the Secretary of Health and Human Services as voting members of CFIUS. The bill would also direct CFIUS to consider matters of food security, access and safety when it reviews overseas acquisitions of US firms.

Though CFIUS may already consider food security as an element of national security, the new proposal would at a minimum enhance this factor. Stabenow said in a statement introducing the bill, “As foreign entities continue their aggressive acquisitions of US food and agriculture companies, it’s imperative that these transactions face additional scrutiny.”

WHAT THIS MEANS:

More broadly, the bipartisan legislative activity suggests an increased likelihood that CFIUS reform will gain traction in the Congress. Further support for broadening the scope and force of CFIUS may come from the Trump Administration, which would be consistent with its “America first” trade policy.

Any businesses with planned or pending cross-border M&A activity in the US, including those in the agribusiness sector, should monitor these developments.

THE LATEST: National Security Reviews of Foreign Ownership May Broaden

by David Levine and Mary Strimel | Feb 23, 2017 | Mergers & Acquisitions

The Committee on Foreign Investment in the United States (CFIUS, commonly pronounced “syphius”) reviews M&A transactions that may pose a risk to national security through foreign control of a US business. (See our recent article). CFIUS is composed of members from the Departments of Treasury (chair), Homeland Security, State, Defense and other agencies. It has the power to recommend to the President that a transaction be stopped, and is well known for its reviews of the Dubai Ports World and IBM/Lenovo deals, both of which it approved (though the former was terminated because of strong political opposition). By law, its process is fairly secretive, although it holds itself to tight deadlines for issuing final recommendations.

WHAT HAPPENED:

As reported February 21, Senators Cornyn (R-TX) and Schumer (D-NY) are separately working on legislation that would strengthen CFIUS’ hand in reviewing proposed acquisitions.
In the face of skyrocketing investment by Chinese companies in US firms, Senator Cornyn’s bill would require CFIUS to look harder at proposed Chinese acquisitions of US technology companies.
Reportedly, Senator Schumer’s bill would take a different tack, requiring CFIUS to consider economic implications in addition to national security concerns as part of its review. Currently CFIUS’ mandate is restricted to considering national security issues that may include national defense, technological leadership, critical infrastructure, foreign government influence and export controls compliance.

WHAT THIS MEANS:

Companies considering sensitive cross-border transactions involving US business should watch any proposed legislation closely.
The Trump Administration has not yet addressed these specific legislative ideas, but President Trump may be likely to support legislation that furthers his “Buy American, Hire American” theme.
Currently CFIUS can initiate review of a deal either by voluntary disclosure from the parties or on its own initiative, even post-closing. Thus, any legislation that broadens CFIUS’ mandate or that alters the voluntary nature of self-notifying, could add a significant regulatory burden to cross-border transactions.
CFIUS’ current investigative timeline of 30 days (initial review) plus 45 days (investigation if concerns exist) looks unlikely to change and will continue to provide some regulatory certainty for parties.

Flurry of Antitrust Merger Enforcement Actions as Obama Presidency Comes to a Close

by Jon B. Dubrow | Feb 2, 2017 | DOJ Developments, FTC Developments, Mergers & Acquisitions

The Federal Trade Commission (FTC) and Antitrust Division of the Department of Justice (DOJ) announced several antitrust enforcement actions in advance of the inauguration of President Trump, including settlements for failures to file under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act), a challenge to an unreportable deal and a settlement of a “gun-jumping” claim under the HSR Act. These cases illustrate the importance of compliance with the often complex reporting, waiting period and substantive aspects of antitrust laws in connection with acquisitions of various types, whether or not those acquisitions require premerger reporting. Failure to comply can result in significant financial penalties.

Two HSR “Failure to File” Settlements. On January 17, 2017, the FTC announced two settlements for failures to submit HSR filings and observe the statutory waiting period under the HSR Act prior to consummating acquisitions that met the relevant thresholds. The HSR Act requires notification of certain acquisitions of voting securities, assets and non-corporate interests if the value held as result of the transaction is in excess of certain notification thresholds and size of person thresholds (if applicable), and the transaction is not otherwise exempt. Parties to reportable transactions must observe the statutory waiting period prior to closing. If they fail to file, or otherwise do not observe the waiting period under the HSR Act, the parties may be liable for civil penalties of up to $40,654 per day (which was recently increased from $40,000, effective February 24, 2017).

In the first settlement, Ahmet Okumus agreed to pay $180,000 in connection with failing to notify for his purchases of voting securities of Web.com Group, Inc. (Web.com). According to the complaint, in September 2014, Okumus acquired voting securities of Web.com and as a result, held approximately 13.5 percent of the voting securities of Web.com. Okumus continued to acquire voting securities of Web.com through November 2014. Okumus did not file an HSR notification prior to making these acquisitions, relying on the “investment only” exemption, which exempts acquisitions resulting in holdings of 10 percent or less of the issued and outstanding voting securities if the shares are held solely for the purpose of investment (see 15 U.S.C. § 18a(c)(9) and 16 C.F.R. § 802.9). However, because Okumus held in excess of 10 percent, this exemption was not applicable. In late November of 2014, Okumus made a corrective filing that allowed him to acquire additional Web.com voting securities for approximately five years, provided that the value of the voting securities he held as a result of any acquisition did not exceed the $100 million (as adjusted) notification threshold. In a letter that accompanied his corrective filing, he indicated that the failure to file was inadvertent. The FTC did not seek civil penalties in that instance.

In June of 2016, Okumus began acquiring additional voting securities of Web.com. Later that month he acquired 236,589 voting securities of Web.com, and as a result of that acquisition, Okumus held voting securities valued (per the HSR rules) in excess of the $100 million (as [...]

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Musical Chairs at the FTC—Ohlhausen is New Acting Chairwoman

by McDermott Will & Emery | Jan 27, 2017 | FTC Developments, Mergers & Acquisitions

This month has seen significant changes in the landscape of federal leadership and the changes have now reached the Federal Trade Commission (FTC). On January 13, current Chair Edith Ramirez announced that she would resign from her position effective February 10, 2017. This Wednesday, January 25, the new administration designated Maureen Ohlhausen as Acting Chair. Ohlhausen, a Republican, was one of two remaining commissioners at the agency, along with Democrat Terrell McSweeny.

Ramirez served as a commissioner since 2010 and chair since early 2013 by designation of fellow Harvard Law Review member, President Obama. She spent her early career as a litigator with Quinn Emanuel and focused on antitrust, unfair competition and Lanham Act work. From the beginning of her tenure as chair, Ramirez developed a reputation as a hard-working and effective leader who was experienced, even-handed and not afraid to bring mergers to court. As a Latina and the daughter of Mexican immigrants, Ramirez was the first member of an ethnic minority to oversee the agency. During her tenure, she also secured a number of high-profile wins for the commission.

Ohlhausen has been a commissioner since 2012, though she started at the FTC’s General Counsel’s Office back in 1997. She has also worked as an advisor to former FTC Commissioner Orson Swindle and has been Deputy Director and then Director of the Office of Policy Planning. Ohlhausen stated at a Heritage Foundation antitrust conference this month that “all signs point to a new antitrust policy.” She discussed narrowing the scope of “Second Requests” in merger reviews by making them more targeted and therefore less burdensome. She also expressed a priority of greater protection for intellectual property rights, complaining that the agency has been too quick to accuse standard essential patent (SEP) holders of anticompetitive behavior when suing to defend their rights.

Meanwhile, the new administration’s position on merger activity hasn’t been clear. While in October 2016, Donald Trump described the AT&T-Time Warner deal as “a deal we will not approve in my administration because it’s too much concentration of power in the hands of too few,” and said that Comcast’s acquisition of NBC Universal “concentrates far too much power in one massive entity that is trying to tell the voters what to think and what to do,” he has subsequently chosen advisers on telecom and antitrust issues who appear to apply traditional antitrust analysis that is more merger-friendly than the prior administration.

Republican and Former Commissioner Joshua Wright leads the new administration’s transition of the FTC. The incoming administration will need to find three new commissioners for the five-member panel. At least one of the three must be a Democrat. The new appointments will be very important to follow for clients considering mergers in the near future.

Aerospace and Defense Series: Trump Administration—Potential for Increased Antitrust Leniency for Vertical Transactions in the Defense Industry

by McDermott Will & Emery and Jon B. Dubrow | Dec 1, 2016 | DOJ Developments, Mergers & Acquisitions

President-elect Donald Trump has called for a dramatic increase in defense spending including purchases of new ships and warplanes as well as the addition of tens of thousands of new troops. This increase in spending generally bodes well for the aerospace and defense industry and potentially signals a new era of growth for companies in this space. This article examines how M&A transactions are likely to be reviewed in a Trump administration, with particular focus on “vertical” transactions.

Read “Trump Administration—Potential for Increased Antitrust Leniency for Vertical Transactions in the Defense Industry”

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