Acting Antitrust Chief Defends U.S. Challenge to AT&T/T-Mobile Merger

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Sharis Arnold Pozen, Acting Assistant Attorney General in charge of the Department of Justice Antitrust Division, discussed civil antitrust enforcement efforts at the 38th annual Fordham Competition Law Institute’s international antitrust law and policy conference on September 7.

In what panel moderator A. Paul Victor called her “maiden speech” as newly appointed acting antitrust chief, Pozen talked about how civil non-merger enforcement was "alive and well" at the Antitrust Division.

Pozen had intended to focus her comments on non-merger enforcement, saying that she had said a lot about mergers recently. A week earlier, Pozen had delivered remarks at a press conference on the filing of the U.S. suit challenging AT&T Corporation’s proposed acquisition of T-Mobile USA Inc. Moreover, a trial had just begun in the Justice Department’s action to halt H&R Block Inc.’s proposed acquisition of 2SS Holdings, Inc., the maker of TaxACT do-it-yourself tax preparation software.

Horizontal Merger Guidelines

The official took issue with the suggestion that the Justice Department’s complaint in the AT&T/T-Mobile case did not reflect recent changes to the joint FTC/Justice Department Horizontal Merger Guidelines. Commentators have suggested that the Justice Department’s complaint in the case relies too heavily on market share analysis and structural presumptions.

In her remarks at Fordham, Pozen said that the complaint in the AT&T/T-Mobile case does in fact represent the approach taken in the Horizontal Merger Guidelines and current Antitrust Division practice. She reiterated that the combination is a four-to-three merger that takes out an innovator.

The Horizontal Merger Guidelines (CCH Trade Regulation Reporter ¶13,100), which were revised in August 2010, recognize the continuing need for market definition in merger analysis; however, the focus is on the competitive effects of a transaction. The analysis need not start with market definition, according to the revised guidelines.

There has also been speculation that Sprint Nextel’s private suit challenging the AT&T/T-Mobile transaction could represent an effort by Sprint to bolster a weak Justice Department case. Pozen refused to comment on the Sprint suit other than to say that Sprint’s case was also before Judge Ellen Huvelle. Pozen did not know whether the suits would be combined.

Further information about the Justice Department’s lawsuit to block the AT&T/T-Moble deal appears here in an August 31 posting on Trade Regulation Talk.

Non-Merger Enforcement

With respect to civil, non-merger enforcement, Pozen discussed a number of recently-filed cases in sectors that “affect consumers’ pocketbooks.” In the health care industry, she explained that the Antitrust Division filed its first lawsuit since 1999 challenging a monopolist with engaging in traditional anticompetitive unilateral conduct. United Regional Health Care System of Wichita Falls—the largest hospital in Wichita Falls—agreed to settle allegations that it unlawfully used contracts with commercial health insurers to maintain its monopoly for hospital services in violation of Section 2 of the Sherman Act.

Another action noted in the health care area was the Antitrust Division’s ongoing lawsuit against Blue Cross Blue Shield of Michigan, challenging the health insurer’s use of most favored nation (MFN) clauses in its provider agreements with various hospitals. The insurer has appealed a federal district court’s denial of its motion to dismiss (2011-2 Trade Cases ¶77,568), and the Justice Department has asked for dismissal of the appeal.

In another “key industry for consumers,” the Justice Department is pursuing claims against American Express, challenging payment card rules that allegedly restrict price competition at the point of sale. MasterCard and Visa have agreed to settle similar civil charges (2011-1 Trade Cases ¶77,529).

Pozen noted that the Antitrust Division is “vigilantly watching for signs of anticompetitive conduct across the economy.” She also pointed out that the Antitrust Division was willing to litigate to judgment if necessary. This point is reflected in the ongoing litigation against Blue Cross Blue Shield of Michigan and American Express.

International Cooperation, Coordination

The acting antitrust chief said that she worked closely with her predecessor, Christine Varney, setting antitrust priorities. Among these priorities is a commitment to international cooperation, which she intends to carry forward.

The recent Memorandum of Understanding between the Antitrust Division and FTC and China’s three antitrust agencies (CCH Trade Regulation Reporter ¶13,512) is a first step towards an enduring relationship, said Pozen. She noted that the federal antitrust agencies were pursuing a similar agreement with India, as that country develops its competition regime.

Pozen reminded practitioners that antitrust agencies around the globe are talking to each other. She noted that many parties recognize the benefits of international coordination in investigations and suggested that permitting the agencies to share information can be beneficial to all who are involved.

Antitrust Division Active in Health Care, Financial Sectors in 2010

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

With the nation focused on government efforts to overhaul the health care and financial services sectors in 2010, it is not surprising that two of the Department of Justice Antitrust Division's most notable enforcement actions last year were in these industries.

In October, the U.S. Justice Department and the Michigan Attorney General filed a civil action in the federal district court in Detroit against Blue Cross Blue Shield of Michigan, the largest provider of commercial health insurance in Michigan, over its use of “most favored nation” clauses in contracts with hospitals across the state.

Also in October, the U.S. Justice Department and seven states filed a civil antitrust suit in the federal district court in Brooklyn, New York, against the three largest credit and charge card transaction networks in the United States, challenging rules that allegedly restrict price competition at the point of sale.

MasterCard and Visa agreed to settle the charges under the terms of a proposed consent decree; however, American Express announced that it had no intention of settling the case.

The government’s investigation into anticompetitive and fraudulent conduct in the municipal bond industry continued in 2010 as well. Among the most recent developments in the investigation, the Justice Department announced in December that Bank of America agreed to pay a total of $137.3 million in restitution to federal and state agencies for its participation in a conspiracy to rig bids in the municipal bond derivatives market. The restitution was a condition of the bank’s admission into the Justice Department’s antitrust corporate leniency program.

Employee Recruiting, Agriculture

Jobs were also a major issue for Americans in 2010, and the Department of Justice took action to prohibit a number of high-tech companies from conspiring to restrict employee recruiting. In September, the Justice Department announced a settlement with six firms that allegedly agreed not to cold call any employee at the other company, a practice which prevented the companies from directly soliciting each other’s employees. In late December, a seventh company agreed under a proposed U.S. consent decree to refrain from engaging in similar practices.

The livelihood of farmers, ranchers, and other participants in the agricultural industry were considered at a series of workshops exploring competition issues in agriculture. The workshops, which were announced in August 2009 and held throughout 2010, included Department of Justice and Department of Agriculture leadership.

Merger Enforcement, Review

As at the FTC, the issuance of the revised joint Horizontal Merger Guidelines (CCH Trade Regulation Reporter ¶13,100) in August was among the major 2010 merger review and enforcement developments for the Antitrust Division. In addition, a number of high profile mergers were reviewed by the Justice Department in 2010.

In January 2010, the Antitrust Division approved the Ticketmaster/Live Nation acquisition, subject to structural and behavioral remedies. Another merger challenge that was filed at the start of the year remains ongoing. Last January, the Antitrust Division, along with state attorneys general from Illinois, Michigan and Wisconsin, challenged Dean Foods Company's April 2009 acquisition of Dean Foods and Foremost Farms USA's Consumer Products Division.

In August, the Justice Department approved the proposed merger of UAL Corporation, the parent of United Airlines, after the parties agreed to transfer slots at Newark Airport to Southwest Airlines. Now pending before the agency is Southwest's proposed acquisition of low-cost rival AirTran.

The Antitrust Division is also currently reviewing the proposed acquisition of U.S. global media and entertainment giant NBC Universal by Comcast Corporation. Regulatory approval of the Comcast-NBC combination was anticipated in January 2011.

Issuance of New Merger Guidelines Highlighted FTC's Accomplishments in 2010

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The FTC’s efforts to substantially revise the Horizontal Merger Guidelines for the first time since 1992 were among the agency’s major accomplishments of 2010.

Working with the Department of Justice Antitrust Division, the FTC issued new joint guidelines in August (CCH Trade Regulation Reporter ¶13,100). The issuance of the guidelines marked the culmination of a process that began in September 2009.

Merger Enforcement Actions

Last year also saw a number of notable merger enforcement actions brought by the Commission. The agency resolved more than a dozen merger challenges in 2010 through consent decrees. Among these was an administrative challenge to Dun & Bradstreet’s consummated acquisition of Quality Educational Data, its nearest rival in the education marketing business.

The FTC's focus on consummated mergers was evidenced by another administrative complaint issued in November. The agency challenged Laboratory Corporation of America’s already-completed acquisition of rival clinical laboratory testing company Westcliff Medical Laboratories, Inc. An administrative trial is set for May 2011.

Before the year ended, the Commission ordered complete divestiture in another administrative action involving a consummated merger. In December, the Commission announced that Polypore International, Inc. must divest assets of a rival manufacturer of battery components acquired in 2008.

The FTC's decision not to take action against Google with respect to the search engine's acquisition of the mobile advertising company AdMob was also a notable development. The Commission unanimously closed its investigation in May after determining that Apple was in a position to nullify any anticompetitive effects of the merger.

The agency also suffered a tough loss in a federal district court challenge to an acquisition in the pharmaceuticals industry in 2010. The federal district court in Minneapolis rejected an action brought by the agency along with the State of Minnesota against global pharmaceutical company Lundbeck, Inc., challenging its predecessor’s acquisition of drugs used to treat premature infants with a heart condition known as patent ductus arteriosus (PDA) (2010-2 Trade Cases ¶77,160). In October 2010, the FTC and State of Minnesota appealed the decision to the U.S. Court of Appeals in St. Louis.

Non-Merger Enforcement Efforts

Also in the pharmaceutical sector, the FTC continued its efforts to target “pay-for-delay” drug patent settlements in 2010. FTC Chair Jon Leibowitz has said that ending these settlements, under which a branded drug company compensates a generic competitor for not bringing its lower-cost drug to market for a certain period of time, is one of the agency's highest priorities.

Legislative efforts to address the conduct failed in 2010. However, the agency will likely weigh in again as private litigants seek U.S. Supreme Court review of a decision of the U.S. Court of Appeals in New York City (2010-1 Trade Cases ¶76,989) rejecting an antitrust challenge to a settlement in a patent infringement lawsuit involving the antibiotic ciprofloxacin hydrochloride (Cipro).

A number of other important non-merger enforcement efforts were highlights of 2010. The agency's August settlement with computer chip giant Intel Corporation after eight months of litigation over the company's alleged monopolistic conduct was one of the them. Last year, Transitions Optical, Inc., the maker of photochromic treatments that darken corrective lenses used in eyeglasses, also agreed to settle FTC charges that it used anticompetitive practices to maintain a monopoly.

Consumer Protection

On the consumer protection front, the FTC in 2010 continued to focus on deceptive practices aimed at financially-distressed consumers. It also proposed revised “green” marketing guides. As the year came to a close, the staff of the agency threw their support behind the implementation of a “do-not-track” mechanism for Internet users that would provide them with a method to opt-out from having their online activity tracked by data-gathering firms.

Antitrust Division’s Activities Preserve and Promote Competition: Agency Official

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter, and John W. Arden.

A report on the Department of Justice Antitrust Division's recent activities was presented by Carl Shapiro, the Deputy Assistant Attorney General for Economics at the Antitrust Division, on November 18 at the American Bar Association Section of Antitrust Law Fall Forum in Washington, D.C.

In prepared remarks entitled “Update from the Antitrust Division,” Shapiro focused on the Division’s attempts to preserve and promote competition through criminal enforcement, civil non-merger enforcement, competition advocacy, and merger enforcement (including an explanation of the new Horizontal Merger Guidelines).

Criminal Cases

Shapiro observed that during Fiscal Year 2010, the Antitrust Division concentrated on “rooting out and prosecuting cartels and other collusive agreements.” It filed 60 criminal cases, involving 84 corporate and individual defendants, and obtained fines in excess of $550 million. While the fines obtained were down from previous years, "the Division's commitment to criminal enforcement remains steadfast," Shapiro said.

He added that of the individual defendants sentenced, 76% were given prison time, including an average 10-month prison term for foreign nationals, whose incarceration continues to be a priority of the Division.

Civil Non-Merger Suits

Shapiro stated that reviewing and challenging anticompetitive conduct “is a critical component of the Division’s mission to preserve and promote competition.” During Fiscal Year 2010, the Division resolved competitive concerns with negotiated consent decrees in four civil non-merger cases—U.S. v. Smithfield Foods and Standard Farms LLC (2010-1 Trade Cases ¶76,880); U.S. v. Idaho Orthopedic Society(2010-2 Trade Cases ¶77,142); U.S. v. Adobe Systems, Inc. (CCH Trade Regulation Reporter ¶50,982); and U.S. v. KeySpan Corporation (CCH Trade Regulation Reporter ¶50,975).

In addition, the Division filed civil antitrust lawsuits against Blue Cross Blue Shield of Michigan and (together with seven states) against American Express, MasterCard, and Visa.

In the first suit, the Division challenged “most-favored nations” (MFN) clauses in Blue Cross’s agreements with hospitals that allegedly limit the discounts the hospitals can offer to Blue Cross’s competitors. These MFN clauses raise prices, prevent other insurers from entering the marketplace, and discourage hospital discounts, Shapiro said.

The second suit challenged rules, policies, and practices imposed by the three largest credit and charge card networks in the U.S. These rules “impede merchants from promoting or encouraging the use of a competing credit or charge card with lower acceptance fees,” he explained.

MasterCard and Visa were willing to resolve these antitrust concerns at the time the Division filed the compliant, agreeing to allow merchants to offer consumer discounts and rebates; express a preference for a particular credit card; promote particular cards through communications to customers; and communicate the cost incurred by the merchant when a consumer uses a particular credit card.

Litigation continues against American Express, which has stated its intention to fully litigate the matter.

Competition Advocacy

The official trumpeted the Antitrust Division's recent competition advocacy efforts, involving a wide range of industries and topics, including telecommunications, financial markets, health care, agriculture, and patents.

Shapiro highlighted the agency's involvement in a proposal by Delta and US Airways to swap more than 300 takeoff and landing slots at LaGuardia and Ronald Reagan Washington National Airport.

The Division filed formal comments with the Department of Transportation, supporting a proposed DOT order that would permit the slot transfers, subject to the carriers’ disposal of 14 pairs of “slot interests” at Ronald Reagan Washington National Airport and 20 pairs of slot interests at LaGuardia Airport to “eligible new entrant and limited incumbent carriers.”

The divestiture of these slot interests eased concerns that the transaction would have reduced competition between Delta and US Airways on a number of routes at the two airports, thereby harming consumers.

Merger Enforcement

According to Shapiro, Hart Scott Rodino filings reached only 716 for Fiscal Year 2009, down from 2,201 during Fiscal Year 2007. Newly released figures show a 50% increase in Fiscal Year 2010 to 1,170. About 1.9% of the filings resulted in a Department of Justice Second Request. The Division challenged 19 mergers.

Shapiro discussed the Antitrust Division's recent issuance of revised Horizontal Merger Guidelines. The guidelines were the product of a lengthy and collaborative process with the Federal Trade Commission. The primary motivation behind their creation was to “promote transparency by describing more accurately how the Agencies actually evaluate horizontal mergers.”

He illustrated the principles articulated in the revised Guidelines through an analysis of the agency's investigation into the proposed merger of United Airlines and Continental Airlines and of the agency's complaint challenging the merger proposal between Baker Hughes Inc. and BJ Services Company.

Text of the prepared remarks appears here on the Antitrust Division’s website.

Antitrust Chief Addresses New Merger Guidelines, Global Cooperation

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

At Georgetown’s Global Antitrust Enforcement Symposium in Washington, D.C. on September 21, Assistant Attorney General Christine A. Varney, chief of the Department of Justice Antitrust Division, delivered remarks concerning international cooperation in antitrust investigation and enforcement.

Varney began by discussing the issuance of revised Horizontal Merger Guidelines by the Antitrust Division and the FTC in August 2010. While the revised Guidelines “provide transparency into the agencies’ current enforcement analysis,” they “contain no surprises,” setting forth concepts and considerations that had long been central to the agencies’ merger review and incorporating much of the Commentary the agencies issued in 2006 for the then-extant Guidelines.

The revised guidelines merely reflected a refinement in approach to merger review to incorporate advances in economic learning and changes in business realities, according to Varney.

The assistant attorney general then focused on future global enforcement, providing the historical context of international cooperation, explaining the challenges of achieving convergence with other competition agencies around the world, describing the state of cooperation at present, and offering initial thoughts on the direction that cooperation efforts should take in the coming decade and beyond.

The efforts at convergence in the past decade have been “a very positive step,” she said, because convergence reinforces international case cooperation and helps businesses operate more efficiently. However, Varney acknowledged, convergence on everything was “unlikely,” owing to the wide range of competitive landscapes found in different jurisdictions.

“The Antitrust Division has been working hard to bring greater cooperation to international cooperation enforcement by facilitating discussion of important issues,building bilateral and multilateral relationships, and learning how best to coordinate investigations and remedies in a globalized age,” according to Varney.

Within these efforts has been a “special emphasis on encouraging procedural fairness and transparency, as evidenced by the agency’s involvement in two OECD Working Party roundtables focused on those topics.

Varney cited the combination of Cisco and Tandberg as an example of the Antitrust Division taking into account remedies secured by the European Commission (EC) in closing its own investigation. She noted that the Justice Department has also enhanced its relationships with numerous other competition enforcers, including China, Russia, and the EC.

Looking toward the next decade, Varney stated that the concept of convergence should focus on substantive legal and economic analysis, rather than uniformity of processes and procedures, because of the differing legal proceedings and traditions employed by the competition regimes around the world.

She observed that convergence has already largely occurred in some areas of competition thinking—such as price fixing, market allocations,and anticompetitive horizontal mergers—but not nearly as much in the substantive analysis of unilateral conduct.

Going forward,“we must above all focus our efforts on deep and meaningful dialogue and continued cooperation on the basic principles that the competition community has already accepted,” she concluded.

The complete text of Varney’s remarks,entitled “International Cooperation: Preparing for the Future,” appear here. The remarks will be reported at CCH Trade Regulation Reporter ¶ 50,260.

Federal Antitrust Agencies Issue Revised Guidance for Merging Competitors

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The Federal Trade Commission and the Department of Justice announced today the issuance of revised Horizontal Merger Guidelines. The guidelines are intended to outline for merging parties, courts, and antitrust practitioners how the federal antitrust agencies evaluate the likely competitive impact of mergers and whether those mergers comply with U.S. antitrust law.

The guidelines have not been thoroughly overhauled since 1992. The 1992 guidelines were updated in 1997 to include a discussion of merger-specific efficiencies that might justify approval of a transaction (CCH Trade Regulation Reporter ¶13,104).

At the outset, the revised guidelines explain that the agencies seek to identify and challenge competitively harmful mergers while avoiding unnecessary interference with mergers that are either competitively beneficial or neutral.

The focus is on the competitive effects of a transaction. The revised guidelines detail the categories and sources of evidence that the antitrust agencies consider informative in predicting the likely adverse competitive effects of a merger.

Role of Market Definition, Market Concentration

The analysis need not start with market definition, according to the revised guidelines. “Evidence of competitive effects can inform market definition, just as market definition can be informative regarding competitive effects,” the guidelines explain.

The draft guidelines, which were released on April 20, had been criticized by some commentators for failing to recognize the significance of market definition in merger analysis.

Among the comments from the American Bar Association Section of Antitrust Law in response to the draft guidelines was a suggestion that the guidelines make clear that market definition remained a necessary element of merger analysis under Sec. 7 of the Clayton Act in order to be consistent with judicial precedent.

On the other hand, the American Antitrust Institute concluded that the guidelines draft “rightly downplays the centrality of market definition to the enforcement process.”

Recognizing the continuing need for market definition in merger analysis, the revised guidelines update the thresholds that determine whether a transaction warrants further scrutiny by the agencies. The Herfindahl-Hirschman Index (HHI) measures for market concentration have been raised in order to be more consistent with current agency practice.

Approach of Enforcers

The heads of both the FTC and the Department of Justice Antitrust Division said the revised guidelines more accurately reflect the methods their staffs use to review mergers than the earlier guidelines.

“The revised guidelines better reflect the agencies’ actual practices,” said Christine Varney, Assistant Attorney General in charge of the Department of Justice Antitrust Division. “The guidelines provide more clarity and transparency, and will provide businesses with an even greater understanding of how we review transactions.” Text of Varney's statement appears here on the Department of Jusitice website.

In a statement released this afternoon, FTC Chairman Jon Leibowitz called the revised guidelines “a clear and systematic description of the techniques the FTC and the Antitrust Division of the Department of Justice use to review mergers, and a document that has received bi-partisan and unanimous support from the Commission.”

Commissioner J. Thomas Rosch, however, issued a statement saying that the guidelines “are still flawed both as a description of how the staff (at the Commission at least) conducts ex ante merger review and what the Agencies should tell courts about merger analysis.”

“These Guidelines do not describe the way that the Bureau of Competition and enforcement staff at the Commission proceed today,” Rosch continued. “They also do not reflect the way that the courts proceed.”

Rosch questioned an “overemphasis on economic formulae and models.” He expressed concern that the revised guidelines create “the misimpression that non-price factors are far less significant than price factors to the Commission” and “fail to offer a clear framework for analyzing non-price considerations.”

Significant Advancements

Despite the criticisms, Rosch concurred with the issuance of the guidelines in light of significant advancements made by the revised guidelines. Rosch said that the revised guidelines corrected a misimpression of the 1992 guidelines that proof of market structure and shares were “gating items” without which competitive effects cannot be considered.

“The revised guidelines properly consider competitive effects first, and market definition second, thereby making clear that while market definition is important to assessing competitive effects and that the market must be defined at some point in the process, ultimately merger analysis must rest on the competitive effects of a transaction,” the commissioner said.

Rosch also pointed to the revised guidelines’ list of empirical evidence that might illuminate a transaction’s competitive effects as a substantial contribution.

2006 Commentary

The revised guidelines note that the “Commentary on the Horizontal Merger Guidelines,” which the agencies jointly issued in 2006 (CCH Trade Regulation Reporter ¶50,208), remains a valuable supplement to the guidelines. Some of the revisions reflect refinements and changes previously identified in the commentary.

The revised Horizontal Merger Guidelines are available here on the FTC website. They will appear at CCH Trade Regulation Reporter ¶13,100.

Comment Period on Proposal to Revise Merger Guidelines Extended

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The FTC has extended the period for submitting public comments on a proposed revision of the Horizontal Merger Guidelines. At the request of several organizations that plan to submit comments, the agency has agreed to accept comments through June 4, 2010.

The updated guidelines, which outline how the federal antitrust agencies evaluate the likely competitive impact of mergers and whether those mergers comply with U.S. antitrust law, are being revised jointly by the FTC and Department of Justice.

The proposed Guidelines were issued on April 20, 2010, and the original comment period was set to expire on May 20, 2010.

Text of the proposed revised guidelines appear at CCH Trade Regulation Reporter ¶50,252 and here on the FTC website.

Details on the issuance of the guidelines appear in an April 20, 2010 posting on Trade Regulation Talk.

Agency Heads Discuss Revisions to Merger Guidelines at ABA Antitrust Meeting

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Antitrust practitioners reviewing proposed revisions to the federal antitrust agencies’ Horizontal Merger Guidelines should have a better understanding of current agency practice, according to federal antitrust enforcers speaking April 23 at an enforcement roundtable during the American Bar Association’s Section of Antitrust Law Spring Meeting in Washington, D.C.

The proposed revisions to the guidelines, which outline how the federal antitrust agencies evaluate the likely competitive effects of mergers in order to determine compliance with U.S. antitrust law, were released on April 20 in anticipation of the meeting. The proposed revised guidelines appear at CCH Trade Regulation Reporter ¶ 50,252.

Reflection of Agency Practice

Christine Varney, Assistant Attorney General in charge of the Department of Justice Antitrust Division, told meeting attendees at the enforcement roundtable that, while the proposed revised guidelines are not all that different in substance from the current 1992 guidelines, the 1992 guidelines do not reflect the actual practice at the agencies. This latest update is an effort to be transparent, according to Varney.

The antitrust chief reminded attendees that each transaction is viewed on the facts of that transaction. She noted the importance of direct evidence of a potential merger’s competitive effects in evaluating a merger. The role of direct evidence in merger analysis is reflected in the proposed updated guidelines, Varney said.

FTC Chairman Jon Leibowitz also described the proposed revisions to the guidelines as an effort to explain to practitioners and judges what the agencies are doing when evaluating the competitive effects of mergers.

Leibowitz discussed the role of direct evidence of competitive effects in actions challenging Evanston Northwestern Healthcare Corporation’s 2000 acquisition of Highland Park Hospital and Western Refining, Inc.’s proposed acquisition of rival energy company Giant Industries, Inc., in 2007. He suggested that the judge in the latter case took a mechanistic view of the Horizontal Merger Guidelines in rejecting the FTC’s request for a preliminary injunction blocking Western Refining’s acquisition of Giant Industries.

Market Concentration

The proposed updates also raise the Herfindahl-Hirschman Index (HHI) measures for market concentration in order to be more consistent with current agency practice, Leibowitz explained. As a result, mergers that would have appeared to be highly concentrated under the 1992 guidelines, based on HHI measures, would be considered only moderately concentrated under the proposed revised updates.

According to the guidelines, mergers that cause a significant increase in concentration and result in highly concentrated markets are presumed to be anticompetitive.

Merger Enforcement

Both agency heads took the opportunity to tout recent merger enforcement activity. Chairman Leibowitz said that the FTC was on “a little bit of a winning streak” in the merger enforcement area. He pointed to the decision of CCC Information Services Inc. to abandon its merger with Mitchell International Inc., in light of the agency’s challenge to the transaction.

The federal district court in Washington, D.C. had granted the FTC’s request for a preliminary injunction (PI) to block the transaction pending administrative litigation. The 2009 decision was the agency’s first PI win since 2003, according to the Commissioner.

Assistant Attorney General Varney discussed the Antitrust Division’s recent settlement with Ticketmaster Entertainment, Inc. In order to proceed with its proposed acquisition of concert promoter Live Nation, Inc., ticket seller Ticketmaster was required to license ticket software and divest a subsidiary ticketing business. In addition, behavioral remedies were imposed on Ticketmaster.

Varney told attendees that the agency’s preference was for structural relief, but that sometimes there is a need for both structural and behavioral remedies.

Canada Competition Bureau Merger Procedures

Canada Competition Commissioner Melanie Aitken, who was also on the roundtable panel, discussed recent changes to the merger review process north of the border. Aitken said that the changes “make for a far more effective merger review process.”

While she described the process as “Made in Canada,” Aitken noted that the reforms, which have to do with process and not substance, bring the merger review process more in line with U.S. practice. For instance, the two-stage review process replicates the second request process utilized by the federal antitrust agencies in the United States. Aitken said that the changes make coordination with her counterparts in the United States easier.

FTC Proposes Updates to Horizontal Merger Guidelines

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Following a series of joint public workshops held by the FTC and Department of Justice over the past six months, the FTC is seeking public comment on a proposed revision of the Horizontal Merger Guidelines.

The updated guidelines—which outline how the federal antitrust agencies evaluate the likely competitive impact of mergers and whether those mergers comply with U.S. antitrust law—are being revised jointly by the federal antitrust agencies.

The guidelines were issued by the two agencies in 1992 and were last revised in 1997 (CCH Trade Regulation Reporter ¶13,104). The revisions are designed to more accurately reflect the way the agencies currently conduct merger reviews, according to the FTC’s April 20 announcement.

For instance, the proposed guidelines state that “merger analysis does not consist of uniform application of a single methodology.” Rather, it is a fact-specific process through which the agencies use a variety of tools to analyze the evidence to evaluate competitive concerns. In addition, the proposed guidelines explain that “market definition is not an end in itself: it is one of the tools the Agencies use to assess whether a merger is likely to lessen competition.”

Many parts of the proposed guidelines reflect refinements and changes previously identified in the “Commentary on the Horizontal Merger Guidelines, which the agencies jointly issued in 2006 (CCH Trade Regulation Reporter ¶50,208).

According to the FTC, the proposed revision includes an updated section on coordinated effects, an updated explanation of the hypothetical monopolist test, and a simplified discussion of how the agencies evaluate market entry. The proposed guidelines also include new sections on powerful buyers, mergers between competing buyers, and partial acquisitions.

Public comments are being accepted until May 20, 2010. Details appear here at the FTC web site.

Review of Horizontal Merger Guidelines Likely to Result in Update: Antitrust Division Official

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

A joint review of the Horizontal Merger Guidelines by the federal antitrust agencies is likely to result in an update of the guidelines, said Molly S. Boast, Deputy Assistant Attorney General at the Department of Justice Antitrust Division, on February 8.

Boast made the remark during the Practising Law Institute’s “Antitrust & the Deal, 2010” program in New York City.

The Antitrust Division and the Federal Trade Commission are working together to determine whether the Guidelines (CCH Trade Regulation Reporter ¶13,104), which were issued in 1992 and revised in 1997 to add an efficiencies discussion, should be updated to reflect current practice and economic thinking.

The process has included five workshops, which were conducted over the last two months, as well as an internal review of staffers at the agencies.

A majority of the workshop participants and the staff—but not an overwhelming majority—have expressed a preference for an update, Boast noted. She did not offer a publication date for the update.

One of the goals of the guidelines is to provide transparency or insight into how the government conducts its merger analysis. According to Boast, the current guidelines do not reflect precisely how things are done at the agencies.

A consensus has developed around a need for a flexible analysis under the guidelines. There is a growing view that merger analysis should not be based on a rigid, sequential approach.Methods for determining market concentration could also be updated, according to Boast.

An update could revise the Herfindahl-Hirschman Index (HHI) thresholds to express accurately how the agencies use HHIs. There could be a move to deemphasize HHIs, the official suggested.

New Administration Signals New Enforcement Priorities for 2009 Antitrust Division

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

A new administration meant new leadership and new enforcement priorities at the Department of Justice Antitrust Division in 2009.

Former FTC Commissioner Christine A. Varney was confirmed by the Senate in April to serve as Assistant Attorney General in charge of the Department of Justice Antitrust Division. Soon thereafter, Varney took steps to reverse some of the policies set by the prior administration.

First, in May, Varney withdrew a September 2008, Antitrust Division report, entitled “Competition and Monopoly: Single-Firm Conduct Under Section 2 of theSherman Act” (CCH Trade Regulation Reporter ¶50,231), which examined whether and when specific types of single-firm conduct violate Section 2 of the Sherman Act.

The antitrust chief said that withdrawing the report “is a shift in philosophy and the clearest way to let everyone know that the Antitrust Division will be aggressively pursuing cases where monopolists try to use their dominance in the marketplace to stifle competition and harm consumers.”

Patent “Reverse Payments”

The current Antitrust Division has also taken a tougher stand on patent litigation settlements involving a “reverse payments.” In July, the Department of Justice filed a brief with the U.S. Court of Appeals in New York City, considering an action challenging a settlement agreement between drug maker Bayer AG and the generic defendant Barr Laboratories, Inc.

The Justice Department said that a patent litigation settlement involving a “reverse payment” to the alleged drug patent infringer in exchange for its agreement to withdraw its challenge to the patent and delay bringing its generic drug to market should be viewed as presumptively unlawful.

The move brings the Justice Department’s position closer to that espoused by the FTC on “pay-for-delay” patent settlement agreements between drug makers.

Horizontal Merger Guidelines

Another example of increased coordination between the Antitrust Division and the FTC was the September announcement to explore the possibility of revising the agencies’ joint horizontal merger guidelines. The agencies kicked off workshops in December to consider changes to the guidelines. The workshops will continue in January 2010.

Mergers and Acquisitions

Despite the Antitrust Division’s efforts to strengthen antitrust enforcement, the agency still faced criticism. Some in the tech sector took issue with the Justice Department’s decision in August not to challenge the merger of Oracle Corporation and Sun Microsystems Inc., which is valued at $7.4 billion.

Since the Justice Department’s announcement approving the deal, Oracle has offered some proposed remedies in an effort to satisfy the competition concerns of the European Commission regarding the maintenance of MySQL as an open source database in competition with Oracle’s proprietary databases following the merger.

Cartel Enforcement

In 2009, as in past years, the Justice Department continued to make cartel enforcement a priority. The Justice Department continued to obtain guilty pleas from companies and executives in connection with investigations into conspiracies to fix cargo rates for international air shipments and to fix prices for Thin Film Transistor-Liquid Crystal Display panels.

A new focus for the Antitrust Division in 2009 was bid rigging in the municipal bonds industry

Agency Heads Discuss Antitrust Convergence, Recent Developments

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Speaking on the topic of international convergence at Fordham University’s 36th Annual Conference on International Antitrust Law and Policy, the heads of the two federal antitrust agencies commented on increased convergence between their respective agencies.

Agencies “In Sync”

In his September 24 remarks, FTC Chairman Jon Leibowitz noted that the FTC and Department of Justice Antitrust Division were much more in sync in recent months, pointing to the recently announced decision for a joint review of the horizontal merger guidelines as an example.

Another indication of growing consensus between the agencies includes Assistant Attorney General Christine Varney’s decision to withdraw the Antitrust Division’s September 2008 report, entitled “Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act.”

When the Justice Department’s report was released last September, three of the four FTC members objected to it. According to Leibowitz, consistency at home will help efforts to promote international antitrust convergence.

Merger Review

Antitrust Division chief Varney noted that there has been a trend toward convergence in the area of merger review. Varney expressed her belief that “openness to others’ ideas and new approaches is critical to our efforts towards greater convergence.” This openness is reflected in the decision to hold joint Department of Justice/FTC workshops to review the horizontal merger guidelines, as well as the European Commission’s review of its merger review practices and remedies and subsequent 2004 issuance of guidelines regarding horizontal mergers and a 2005 Merger Remedies Study.

Varney also noted that, while there have been “strides towards convergence regarding the standards for single-firm conduct,” there was “a need to continue making progress on that front.” Varney pledged to work toward convergence, noting that a lack of unity regarding single-firm conduct standards presented significant issues for international businesses.

Varney’s September 24 speech is available here on the Department of Justice website.

Fines Imposed by the European Competition Commission

At a later session of the Fordham program, European Commission (EC) Competition Commissioner Neelie Kroes told attendees that fines are starting to deter cartel behavior. “Never, ever under-estimate the effect [of] large fines,” Kroes said. Despite the absence of the threat of jail terms for antitrust violations, “senior management across all sectors . . . are now starting to understand that we mean business.”

Kroes explained that fines were not deterrent in previous decades. “Now, taking better account of the economic impacts of abuses and cartels, we fine in order to deter, linking the fine to the relevant sales of the infringing company,” the official said. “If we catch recidivists—the French glass company Saint-Gobain is a good example—the fine increases are severe.”

Last November, Saint-Gobain was fined 896 million Euros for its role in an illegal market sharing agreement.

The fines are imposed without regard to the nationality of the company, according to Kroes. “I would like to point out that only 13 of the 180 companies fined by the European Commission in my term are based in the U.S.,” she added.

The Commissioner’s remarks appear here on the European Union’s “Europa” website.

FTC, Justice Department to Explore Updating Merger Guidelines

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The Horizontal Merger Guidelines, which are used by the federal antitrust agencies to evaluate the potential competitive effects of mergers and acquisitions, will be the subject of a series of upcoming public workshops.

The goal of the workshops will be to determine whether the Merger Guidelines accurately reflect the current practice at the Department of Justice and the FTC as well as to take into account legal and economic developments that have occurred since the last significant revision of the Merger Guidelines in 1992 (Trade Regulation Reporter ¶13,104). The agencies announced the workshops and request for public comment on September 22.

“The bulk of the Merger Guidelines is over 17 years old,” said FTC Chairman Jon Leibowitz in announcing the review. “The 1992 Guidelines explicitly stated that they would be revised from time to time. We think the time has come to do that.”

“In light of legal and economic developments that have occurred since the last major revision of the guidelines, it is an appropriate time for the antitrust agencies to conduct a review of the guidelines to determine whether any revisions should be made to better protect American consumers and businesses from anticompetitive mergers,” said Christine A. Varney, Assistant Attorney General in charge of the Department of Justice Antitrust Division.

“Having guidelines that offer more clarity and better reflect agency practice provides for enhanced transparency and gives businesses greater certainty when making merger decisions, resulting in a more competitive marketplace that benefits consumers,” she noted.

The first workshop will be held in Washington, D.C., on December 3, 2009, followed by workshops in Chicago, New York City, and San Francisco. A final workshop also will be held in Washington, D.C. in January 2010.

A September 22 news release on the workshops appears here on the FTC website. Further details appear here.