Thursday, January 03, 2008

DOJ’s 2007 Antitrust Enforcement Focused on Anti-Cartel, Merger Activity

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

Thomas O. Barnett, Assistant Attorney General in charge of the Department of Justice Antitrust Division, has stated that the “detection, prosecution, and deterrence of cartel offenses . . . continue to be the highest priority of the Antitrust Division.”

During Fiscal Year (FY) 2007, the Antitrust Division identified a number of milestones in anti-cartel enforcement, including: (1) the highest total number of jail days (31,391) imposed in any given year; (2) the second highest amount of total criminal fines ($630 million) obtained by the Antitrust Division in a single year; and (3) the highest number of pending grand jury investigations (135) since 1992. FY 2007 ran through September.

The year also saw record jail sentences imposed on foreign nationals for violating U.S. antitrust laws. In December 2007, the Antitrust Division announced that three United Kingdom nationals agreed to serve record-setting prison sentences for participating in a conspiracy to rig bids, fix prices, and allocate market shares of marine hose—the flexible rubber hose that is used to transport oil between tankers and storage facilities and buoys.

Since FY 2007 ended in September, the Antitrust Division has announced 10 additional cases in industries or sectors where investigations into anticompetitive activity were already ongoing, such as marine hose, air transportation, and government contracts with the U.S. Navy, Department of Defense, and public schools.

Merger Enforcement

In the past year, the Assistant Attorney General was forced to defend the Antitrust Division's enforcement efforts on Capitol Hill. In a March antitrust subcommittee hearing, Senator Herb Kohl (Wisconsin) contended that there has been an “alarming decline” in antitrust enforcement under the Bush administration, particularly in the area of mergers.

One of the most notable mergers of 2007—the proposed acquisition of CBOT Holdings Inc. by Chicago Mercantile Exchange Holdings Inc.—was cleared by the Antitrust Division without conditions. The two exchanges accounted for most financial futures (and in particular, interest rate futures) traded on exchanges in the United States.

Commentators questioned whether the Antitrust Division went far enough in seeking relief against other transactions. Last summer, the Antitrust Division approved Monsanto's $1.5 billion proposed merger with Delta and Pine Land Co. after requiring divestiture of a seed company, multiple cottonseed lines, and other assets (CCH Trade Regulation Reporter ¶50,944).

The Antitrust Division challenged proposed combinations in the telecommunications industry in 2007, including AT&T Inc.'s $2.8 billion acquisition of Dobson Communications Corporation (CCH Trade Regulation Reporter ¶50,948) and CommScope Inc.'s $2.6 billion acquisition of Andrew Corporation ( CCH Trade Regulation Reporter ¶50,950).

Also in 2007, the federal district court in Washington, D.C. finally approved two separate consent decrees resolving Antitrust Division concerns over the mergers that consolidated four of the nation's largest telecommunications companies—SBC Communications, Inc., AT&T Corp.,Verizon Communications, Inc., and MCI, Inc—into two firms. The deals were announced in 2005.

Notable Setbacks

Two notable setbacks for the Antitrust Division in 2007 were the acquittal of Stora Enso North America Corporation of charges that it conspired to fix magazine paper prices and the dismissal of an indictment against London-based Stolt-Nielsen S.A., two of its subsidiaries, and two company executives for conspiring to restrain trade in the parcel tanker shipping industry.

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