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.

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.