Wednesday, November 24, 2010

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.

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