Antitrust Update for the ABA Corporate Counseling Committee September 2011
Discussion Outline Litigation Update Civil Agency Update Criminal Agency Update European Union Update
Litigation Barak Bassman (Presenter) LITIGATION UPDATE
Foreign Trade Antitrust Improvements Act Minn-Chem, Inc. v. Agrium, Inc. (7 th Cir. Sept. 23, 2011) FTAIA generally exempts foreign conduct from US antitrust law Exceptions Conduct involving US import commerce Conduct that has a direct, substantial, and reasonably foreseeable effect on domestic or import commerce
Foreign Trade Antitrust Improvements Act Minn-Chem, Inc. v. Agrium, Inc. (7th Cir. Sept. 23, 2011) Plaintiffs alleged conspiracy to fix the price of potash (fertilizer ingredient) Alleged conspirators based in Canada, Russia, and Belarus Alleged collusive conduct in Brazil, China, and India that allegedly in turn impacted US prices
Foreign Trade Antitrust Improvements Act Minn-Chem, Inc. v. Agrium, Inc. (7 th Cir. Sept. 23, 2011) Seventh Circuit reversed denial of motion to dismiss Declined to address question of whether FTAIA is jurisdictional because result would be the same under Rule 12(b)(1) or Rule 12(b)(6)
Foreign Trade Antitrust Improvements Act Minn-Chem, Inc. v. Agrium, Inc. (7 th Cir. Sept. 23, 2011) Import commerce exception inapplicable because alleged conspiracy did not target US import goods Direct effects exception inapplicable No specific factual allegations explaining how foreign prices directly impact US market Ripple effects of foreign commerce too indirect and speculative
Antitrust Injury and Exclusive Dealing Sterling Merchandising, Inc. v. Nestle, S.A. (1 st Cir. Sept. 1, 2011) Plaintiff ice cream distributor in Puerto Rico alleged that larger rival attempted to monopolize market for ice cream distribution through anticompetitive merger, exclusive dealing agreements with buyers, and price increases to plaintiff from rival s upstream corporate affiliate
Antitrust Injury and Exclusive Dealing Sterling Merchandising, Inc. v. Nestle, S.A. (1 st Cir. Sept. 1, 2011) First Circuit affirmed summary judgment for defendants No antitrust injury No evidence of increased prices or reduced output Plaintiff s sales, profits, and market share increased
Antitrust Injury and Exclusive Dealing Sterling Merchandising, Inc. v. Nestle, S.A. (1 st Cir. Sept. 1, 2011) No duty for upstream affiliate to maintain discounted prices Exclusive dealing agreements were not anticompetitive Foreclosed less than 30% of market 1 to 2 year duration Frequent turnover
Filed Rate Doctrine In re Hawaiian and Guamanian Cabotage Antitrust Litig. (9 th Cir. Sept. 29, 2011) Plaintiffs-shippers sued defendantscarriers for allegedly fixing prices on domestic ocean trade involving Hawaii and Guam Ninth Circuit affirmed dismissal under Rule 12(b)(6) based upon filed rate doctrine
Filed Rate Doctrine In re Hawaiian and Guamanian Cabotage Antitrust Litig. (9 th Cir. Sept. 29, 2011) Filed rate doctrine bars damages actions under federal antitrust law challenging rates authorized by an administrative agency Carriers in noncontinguous domestic trade must file rates with the Surface Transportation Board ( STB ) which can act to prescribe unreasonable rates STB does not require rates to be filed, but monitors rates through complaint process
Filed Rate Doctrine In re Hawaiian and Guamanian Cabotage Antitrust Litig. (9 th Cir. Sept. 29, 2011) Filed rate doctrine compels dismissal even though no rates are filed and there is no meaningful agency review Question is only whether agency has abdicated its rate-making authority Acknowledges split with Eleventh Circuit, which requires actual filing of rates
Filed Rate Doctrine In re Hawaiian and Guamanian Cabotage Antitrust Litig. (9 th Cir. Sept. 29, 2011) Rejected argument that antitrust laws apply to rates within the zone of regulatory reasonableness Congress was presumptively aware of the filed rate doctrine when statute was enacted
Pleading Standard Gulf Coast Hotel-Motel Assoc n v. Mississippi Gulf Coast Golf Course Assoc n (5 th Cir. Sept. 27, 2011) Plaintiff hotel association alleged that defendant golf clubs charged inflated prices for plaintiff s golf course voucher program to pressure plaintiff not to deal with defendants rivals District Court dismissed because of the lack of factual allegations showing effect on interstate commerce Fifth Circuit reversed
Pleading Standard Gulf Coast Hotel-Motel Assoc n v. Mississippi Gulf Coast Golf Course Assoc n (5 th Cir. Sept. 27, 2011) Fifth Circuit acknowledged Complaint was sparse Nevertheless, allegations that golf course vouchers were marketed to out of state tourists sufficient to plead effect on interstate commerce
Agency - Civil Barbara Sicalides (Presenter) CIVIL AGENCY UPDATE
DOJ - AT&T/T-Mobile September 16 th DOJ filed Amended Complaint September 30 th, DOJ filed Second Amended Complaint to block AT&T s proposed $39 billion acquisition of T-Mobile from Deutsche Telekom Amendments added 7 states (CA, IL, MA, NY, OH, PA, WA) and Puerto Rico Letter of support submitted by 11 states (AL, AK, GA, KY, MI, MS, ND, SD, UT, WV, WY)
DOJ Morgan Stanley Morgan Stanley to disgorge $4.8 million Agreement with KeySpan restraining competition in NYC electricity capacity market Morgan simultaneously entered into off-setting derivatives with Astoria Generating and with KeySpan Agreements effectively transferred to KeySpan a financial interest in its largest competitor s Astoria -- capacity, ensured that KeySpan would withhold substantial output from capacity market, and increased prices
DOJ Cumulus Media Cumulus Media Acquisition of Citadel Divestiture required 2 central PA stations and 1 Flint, MI station Head-to-head competitors for radio advertising buys in both local markets Divestitures lower Cumulus Media s share to less than 40%
FTC - DaVita DaVita s proposed $689 million acquisition of DSI Divestiture and provisions to ensure divested clinics able to compete effectively 16 local markets where transaction would result in DaVita monopoly or where competitors would go from 3 to 2 6 local markets where combined company would have large share
FTC Filing Fees Senate Appropriations Proposal Includes higher premerger filing fees Awaiting vote in Senate House Companion Bill
FTC Energy Price Report Bureau of Economics issues new report on gasoline prices and the petroleum industry Separate FTC investigation of possible antitrust violations and market manipulation by refineries
FTC Energy Price Report Findings: Price trends since 2005 World oil production levels OPEC s ability to affect prices Refinery capacity Speed of price adjustments
FTC Commissioner's Perspective Private Litigation Commissioner Rosch s International League of Competition Law Speech Private enforcement may hinder government enforcement Private enforcement and courts frustrate counseling Incentives of private enforcers not necessarily aligned with consumer interests
Agency - Criminal Laura Shores (Presenter) Criminal Agency Update
First Charges in Optical Disk Drive and Auto Parts Investigations Optical Disk Drives: Hitachi-LG Storage pled guilty to rigging bids made to Dell, HP, and Microsoft, and agreed to $21.1M fine Also pled to one count of wire fraud Automobile Parts: Furukawa Electric Co. pled guilty to price fixing, bid rigging in connection with sale of wire harnesses and related parts $200M fine 19 th fine over $10M 3 executives, all Japanese citizens, agree to jail time in the US ranging from a year and a day to 18 months
Additional Charges in Ongoing Investigations Freight Forwarding Foreclosure Auctions Marine Hose Refrigerant Compressors
Freight Forwarding 7 additional companies pled guilty in September, bringing total corporate pleas to 13 and total fines of nearly $100M
Foreclosure Auctions Two more individuals pled in September, bringing total to 10 Pled to mail fraud as well as antitrust violation
Marine Hose Bridgestone pled guilty to bid-rigging and FCPA violation; agreed to pay $28M fine 5 th company charged; 9 individuals prosecuted to date Fine considerably lower due to cooperation and extensive remediation
Refrigerant Compressors Danfoss Group subsidiary pled to price fixing in October; $3M fine; 3 rd company to plead Three former executives of Panasonic, a Whirlpool subsidiary, and Tecumseh Products indicted in September; first individuals to be charged
Recent Developments in the AU Optronics Case (LCD) Trial set for November First criminal case involving a corporate defendant to go to trial in over a decade Significant ruling on government s burden of proof under the Alternative Fine Statute
Recent Developments in the AU Optronics Case (LCD) Alternative Fine Statute permits fines in excess of statutory maximum up to twice the gain or loss DOJ alleged loss of $500M and sought fines of up to $1B ten times the $100M statutory maximum
Recent Developments in the AU Optronics Case (LCD) DOJ moved for a bifurcated proceeding guilt phase before jury and penalty phase before judge Sought to avoid complex expert testimony Wanted preponderance of the evidence standard Judge Illston (N.D. Cal.) denied motion, holding that Sixth Amendment requires government to prove loss under Alternative Fine Statute to jury beyond a reasonable doubt
Hammond Recidivism Speech Scott Hammond: Recidivism Eliminated: Cartel Enforcement in the United States Since 1999 Response to article in Competition Policy Int l by Prof. John Connor asserting that cartel recidivism is increasing rapidly due to flaws in anti-cartel enforcement
Hammond Recidivism Speech No new policy Elaborate critique of Connor s analysis: Misuses the word recidivism Miscalculates the number of cartels Unjustifiably uses 1990 as the starting date
Hammond Recidivism Speech Hammond proffers his own analysis: Defines recidivism as instances where a defendant joins a new cartel after conviction Uses July 23, 1999 as the starting date Finds no instances of recidivism Attributes that to imposition of meaningful prison terms for both US and non-us individuals
EU Update Jeremy Heep (Presenter) EU UPDATE
No Leniency Without Full Cooperation 30 million fine against Deltafina SpA, tobacco processor upheld First in, but no full, continuous and expeditious cooperation Told competitors it had lodged leniency application, thus putting investigation at risk
New Dawn Raids On September 21, the Commission conducted dawn raids of natural gas companies throughout Central and Eastern Europe. Russian company Gazprom, a significant supplier to Europe, was included in raids. The investigation is a first for some of the member states. [Separately, the EU recently passed rules to facilitate oversight of natural gas contracts.]
New Standard Setting Investigation On September 26, Commission launched investigation into efforts by banks to create an integrated online payment system. The European Payments Council is leading the effort as part of the Single Euro Payments Area Project. The Commission is concerned the integrated system not unnecessarily restrict opportunities for non-participants.
Continued Expansion of Criminal Laws Ireland passes Competition (Amendment) Bill 2011 which increases criminal liability for competition crimes. Maximum prison sentence jumps from 5 to 10 years. No probation for some offenses. Offenders potentially barred from sitting as company directors. The legislation will provide more effective deterrent and punishment [and] make a difference in the fight to bring down costs and ultimately heal our economy. Minster for Jobs, Enterprise and Innovation
European Court of Justice Football Association Premier League and Others v. QC Leisure and Others (Case C-403/08) and Karen Murphy v. Media Protection Services Ltd (Case C-429/08). Court holds system of territorial licenses in football broadcasts is contrary to EU competition law if such licenses agreements prohibit supply of decoder cards. Further, national legislation which prohibits sale, import or use of foreign decoder cards is contrary to freedom to provide services and not justifiable in light of objectives of protection of IP rights or encouraging public to live attendance at football games.
Fines Reduced For Parent Companies European Courts Continue to Limit Commission Penalties Koninklijke Grolsch NV v. Commission (Case T-234/07). In 2007, the Commission fined Dutch brewers over 273 million for cartel participation. General Court annulled the fine as to Koninklijke finding insufficient evidence to hold the parent liable for subsidiary s participation.
Fines Reduced For Parent Companies European Courts Continue to Limit Commission Penalties Arkema SA v. Commission (Case C-520/09 P) and Elf Aquitaine v. Commission (Case C-521/09 P). In 2005, the Commission fined Elf Aquitaine and its subsidiary, Arkeme, 45 million for cartel participation in a chemicals market. Court of Justice annulled the fine as to parent only, also holding insufficient evidence to hold parent liable for subsidiary s participation.
Google Investigation Update EU Competition Commissioner Joaquin Almunia stated that the Commission s current dominance probe required special care. Underlying allegations involve treating rival search engines unfavorably.
Participants Barak A. Bassman 215.981.4771 bassmanb@pepperlaw.com Jeremy Heep 215.981.4972 heepj@pepperlaw.com Laura Shores 215.981.4003 shoresl@pepperlaw.com Barbara T. Sicalides 215.981.4783 sicalidesb@pepperlaw.com