Federal/State Antitrust Cooperation Continued in 2010

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

In 2010, the states joined with the federal antitrust agencies to challenge anticompetitive conduct in some of the year's most high profile antitrust enforcement actions.

Restrictive Credit Card Rules

A total of 20 states have now joined the Department of Justice Antitrust Division in challenging the allegedly restrictive rules of the three largest credit and charge card transaction networks in the United States. The Department of Justice and seven states originally filed their civil antitrust suit against Visa, MasterCard and American Express in October 2010. The complaint was amended in December to add the additional states. Visa and MasterCard have entered into proposed settlements; however, American Express has announced its intention to defend itself in court.

Acquisitions and Mergers

Illinois, Michigan, and Wisconsin also joined forces with the U.S. Department of Justice in an action against Dean Foods Company—the nation’s largest dairy processor—to undo the company's 2009 acquisition of Dean Foods and Foremost Farms USA's Consumer Products Division. The case is ongoing.

In other merger news, Ohio Attorney General Richard Cordray, co-chair of the Antitrust Committee of the National Association of Attorneys General, announced in September plans to open a preliminary review of the combination of Southwest Airlines and AirTran Airlines.

Health Care

The State of Michigan and the U.S. Justice Department filed suit in October against Blue Cross Blue Shield of Michigan, the largest provider of commercial health insurance in Michigan, over its use of “most favored nation” (MFN) clauses in contracts with hospitals across the state. The suit alleges that Blue Cross’s contracting practices violated Sec. 1 of the Sherman Act and Sec. 2 of the Michigan Antitrust Reform Act.

Also in the health care area, the State of Nevada reached a settlement with Universal Health Services, one of the nation’s largest hospital management companies, over its proposed acquisition of Psychiatric Solutions, Inc. Under a final judgment resolving the state's antitrust concerns, Universal Health Services was required to divest two local psychiatric hospitals, which also had to be divested under a separate FTC consent order.

Price Fixing

In 2010, the states resolved a number of price fixing actions. In September, a $25 million multi-state settlement involving an alleged price fixing conspiracy in the vitamins industry was announced. The suit, brought in 2009, asserted that 12 vitamin manufacturers had schemed to inflate the prices of 16 vitamins, causing government health care programs to overpay for those vitamins. Resolution of a long-running price fixing action brought by 33 states was announced in June. Six of the world’s top manufacturers of dynamic random access memory (DRAM) computer chips agreed to a $173 million settlement. The proposed settlement would resolve both of these litigations, as well as lawsuits by private plaintiffs

Ticketmaster/Live Nation Combination Gains Antitrust Approval

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

In order to proceed with its proposed acquisition of concert promoter Live Nation, Inc., ticket seller Ticketmaster Entertainment, Inc. will be required to license ticket software to Anschutz Entertainment Group (AEG) and divest a subsidiary ticketing business, Paciolan, to either Comcast-Spectacor or another suitable buyer. Ticketmaster has also agreed to subject itself to court-ordered restrictions on its behavior.

The remedies are intended to preserve the competition that Ticketmaster faced from Live Nation, a new ticketing entrant. By 2009, Live Nation, which was Ticketmaster’s largest customer for primary ticketing services, was providing primary ticketing services to more than 15 percent of the capacity at major U.S. concert venues, according to the Justice Department.

Federal, State, Canadian Antitrust Concerns

The concessions would resolve U.S., Canadian, and state antitrust concerns over the combination of Ticketmaster—the largest provider of ticketing services in the world—and Live Nation—the world’s largest promoter of live concerts.

The U.S. Department of Justice and 17 state attorneys general filed a civil antitrust lawsuit on January 25 in the federal district court in Washington, D.C., challenging the merger. At the same time, the federal and state enforcers filed a proposed consent decree, which if approved, would resolve the suit.

The Canada Competition Bureau announced the same day that a consent agreement was filed with the Competition Tribunal to resolve that country’s concerns over the combination. The Justice Department and Canada Competition Bureau said in statements that they cooperated closely throughout the investigation and worked together to obtain the same remedy to preserve competition in both countries.

Licensing Ticketing Software

The settlements require Ticketmaster to license a copy of its primary ticketing software to AEG. AEG is Live Nation’s principal competitor and an operator of some of the most important concert venues in the country. With a copy of the Ticketmaster software, AEG will be able to market a ticketing system that is an attractive choice to venues, according to the Justice Department. AEG will have incentives similar to Live Nation to provide better services at lower prices.

Within five years, AEG can purchase the Ticketmaster ticketing software, decide to create its own software, or partner with a ticketing company other than Ticketmaster. The Justice Department said that this remedy enhances short and long term competition in the primary ticketing market.

Divestiture of Subsidiary

The settlement requires Ticketmaster to divest more ticketing than it will gain through its acquisition of Live Nation, according to the Justice Department. The settlement requires the divestiture of the Paciolan assets within 60 days. Paciolan is used by hundreds of venues to sell tickets including major concert venues around the country.

Comcast-Spectacor, a sports and entertainment company with management relationships with a number of concert venues and ticketing experience, has already signed a letter of intent to purchase those assets. If the assets are not sold to Comcast-Spectacor, then they must be divested to a buyer suitable to the Department of Justice and the Canada Competition Bureau.

Behavioral Remedies

The settlements also contain conduct restrictions. According to the Justice Department, the settlement provides tough anti-retaliation provisions that will keep the merged company in check and put them under a court order for ten years.

“The linked structural and behavioral remedies in this settlement preserve and protect competition, while allowing the parties to achieve any consumer benefits that are associated with the merger, Christine A. Varney, Assistant Attorney General in charge of the Department of Justice Antitrust Division, said in remarks prepared for delivery at a January 25 briefing, announcing the settlement.

Details of the complaint and proposed consent decree in U.S. v. Ticketmaster Entertainment Inc. and Live Nation Inc., 1:10-cv-00139, appear here at the Daprtment of Justice Antitrust Division website. Further details will appear in CCH Trade Regulation Reporter.

Other Recent Merger Enforcement Activity

The Ticketmaster/Live Nation is the most high profile merger action announced recently by the Antitrust Division recently; however, there has been a recent uptick in merger-related developments at the agency.

On January 22, the Department of Justice, joined by three state attorneys general, filed an action in the federal district court in Milwaukee, challenging Dean Foods Company’s April 2009 acquisition of Foremost Farms USA’s Consumer Products Division.

The action is notable because the acquisition has been consummated and the transaction was not reportable under the Hart-Scott-Rodino Antitrust Improvements Act. The lawsuit not only seeks to undo the acquisition of the two dairy processing plants, but also seeks to require Dean Foods to notify the Justice Department at least 30 days prior to any future acquisition involving a milk processing operation.

Text of the complaint in U.S. v. Deans Foods Co. appears here on the Department of Justice Antitrust Division website.

A day earlier, the Antitrust Division announced that Smithfield Foods Inc. and Premium Standard Farms LLC agreed to pay $900,000 in civil penalties to settle “gun jumping” charges. A proposed consent decree, awaiting approval in the federal district court in Washington, D.C., would resolve charges that, while the merger was pending, Smithfield exercised operational control over a significant segment of Premium Standard’s business. The Justice Department is not challenging the underlying merger, which the companies closed in May 2007.

Further details regarding U.S. v. Smithfield Foods, Inc. appear here on the Department of Justice Antitrust Division website.

In another Justice Department action, which was filed in 2007, newspaper publishers Daily Gazette Company and MediaNews Group Inc. (now known as Affiliated Media Inc.) agreed to restructure a newspaper joint operating arrangement and take other steps to restore competition under the terms of a proposed consent decree filed in the federal district court in Washington, D.C.

The proposed consent decree and other documents in U.S. v. Daily Gazette Co. are available here on the Department of Justice Antitrust Division website.