The Department of Justice (DOJ) and six broadcast television companies reached settlements last week after the DOJ claimed that the companies shared competitively sensitive information that allowed the parties to alter the way prices were set in the television spot advertising market. Assistant Attorney General Makan Delrahim explained in a speech at the ABA Antitrust Section Fall Forum on November 15 that the government’s investigation was triggered by information produced in the merger investigation of two of the defendants, Sinclair and Tribune, which was abandoned earlier this year. The case has important implications for companies and serves as a cautionary tale related to information sharing.

WHAT HAPPENED:

  • The investigation reportedly began from DOJ’s review of the $3.9 billion proposed acquisition of Tribune by Sinclair earlier this year. The parties abandoned the merger this past summer after the Federal Communications Commission (FCC) referred the matter to an administrative law judge and delayed approval.
  • On November 13, DOJ filed a complaint and competitive impact statement against six television broadcast station companies, each of whom sells spot advertising to advertisers in the US or owns and operates broadcast television stations. With the complaint, DOJ simultaneously filed six proposed settlements with defendants.
  • The complaint alleges that the defendants and other broadcasters reciprocally exchanged revenue pacing information and other forms of competitively sensitive sales information in specific designated marketing areas in real time for each individual competitor. Pacing information shows a station’s remaining advertising inventory and that station’s performance compared to the market.
  • DOJ claimed that the information sharing occurred both directly between parties and through Sales Reps Firms, who represent broadcast stations in negotiations with advertisers or advertisers’ agents over spot advertising. This indirect sharing occurred despite the existence of firewalls to prevent coordination and information sharing between sales teams at the Sales Reps Firms representing competing stations. DOJ claimed that the exchanges occurred with defendants’ knowledge and frequently at defendants’ instruction.
  • As a result of the information sharing, DOJ argued that the stations were able to understand the availability of spot advertisement inventory on competitors’ stations in real time. DOJ also argued that the stations used the information to anticipate whether other companies would raise, maintain, or lower prices for spot advertising. The information exchanges therefore “distorted the normal price-setting mechanism in the spot advertising market and harmed the competitive process” and were unreasonable restraints of interstate trade and commerce.
  • The settlements that are proposed by DOJ prohibit defendants from sharing competitively sensitive information directly or indirectly. The settlements require defendants to institute antitrust compliance officers, and compliance and reporting programs, and to fully cooperate in the DOJ’s ongoing investigation. The final judgments are set to expire seven years from the date of entry, but give DOJ the ability to terminate after five years.
  • The proposed settlements indicate that DOJ recognizes certain allowable exchanges of information. DOJ explains that aggregated competitively sensitive information may be communicated if it is handled by a fully independent third party, so long as the information is historical total revenue or other geographic or characteristic information, and is sufficiently aggregated so it does not allow recipients to identify the specifics.

WHAT THIS MEANS:

  • This case is an example of DOJ strictly enforcing the rules on information sharing between competitors. The proposed settlements clarify that high-level, aggregated, historical information may be shared, but not real-time information about individual competitors.
  • DOJ is not retracting its position on exchanges of price and cost information that fall in the “antitrust safety zone” described in the 1996 Statement of DOJ and Federal Trade Commission (FTC) Enforcement Policy on Provider Participation in Exchanges of Price and Cost Information. In that statement, DOJ and FTC together outlined that surveys managed by third parties, that contain information greater than 3 months old, and that have at least five providers reporting, with no individual representing more than 25 percent of the data, can be shared without challenge though the surveys include prices for services, wages, salaries, or other sensitive information. These guidelines were not followed in the case at hand, which illustrates the importance of staying in the “safety zone.”
  • The matter also demonstrates how a merger investigation can lead to a collateral investigation and significant consequences for the parties.
  • Companies, especially those in consolidated industries such as the television broadcasting business here, are best served by confirming that all parties understand the guidelines regarding information sharing, and instituting antitrust compliance programs to ensure that guidelines are followed.

by Stefan M. Meisner

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
http://www.justice.gov/atr/public/press_releases/2011/270086.htm

Law 360 article
http://www.law360.com/competition/articles/240355?utm_source=newsletter&utm_medium=email&utm_campaign=competition

by Jon B. DubrowGregory E. Heltzer, Blake H. Winbourne and Carrie G. Amezcua

The U.S. Federal Trade Commission and the U.S. Commodity Futures Trading Commission signed a memorandum of understanding that will facilitate the sharing of non-public information for “official law enforcement purposes,” and increase investigation risks for firms.

To read the full article, please visit: http://www.mwe.com/info/news/ots0411i.htm.

by Philipp Werner

Following a 2007 cartel decision of the Greek competition authority imposing a total fine of EUR 48.3m on seven companies for information sharing, price fixing and retail price maintenance, a Greek court handed down a criminal judgment yesterday (12 April 2011), imposing fines of 9,000 euros on each of the three managers of one of the firms. The case was brought by the public prosecutor.

While the amount of the fines is relatively low, this appears to be the first such criminal conviction in Greece. It shows that the criminalisation of antitrust laws in Europe gains ground.

The Greek law applicable at the time of the infringement made provision only for pecuniary sanction but has changed since and now includes the possibility of prison sentences.