August 27, 2010

Feds Debut Kinder, Gentler Horizontal Merger Guidelines

On August 19, 2010 – after 18 years, including a year-long revision process – the DOJ and FTC finally released a new – and kinder, gentler – version of the Horizontal Merger Guidelines.

The Guidelines, originally adopted in 1968 and previously revised in 1992, “outline the principal analytical techniques, practices and the enforcement policy of the [DOJ and FTC] with respect to mergers . . . involving actual or potential competitors . . . under the antitrust laws.”  

The revision process, started in September 2009, involved a series of workshops, public comment and proposed refinements.  The result is a set of revamped Guidelines that differ from the 1992 version in several ways.  In general, they reflect a more tolerant approach to mergers, stressing the need to “avoid unnecessary interference with . . . competitively beneficial” mergers; raising the concentration thresholds (HHI’s) that warrant further scrutiny of a merger; and explicitly clarifying that coordinated effects can, in fact, be legal.    

The revised guidelines also include several new features.   One, “Evidence of Adverse Competitive Effects,” identifies evidence helpful in evaluating mergers.  It includes effects of consummated mergers; direct comparisons to events such as mergers, exit, expansion or entry that have occurred in the relevant market; competition between the merging firms; and a merger’s impact on “disruptive” firms that benefit consumers, e.g., through price cutting or innovation.  Other additions include discussions of how the agencies evaluate monopsony power, mergers of competing buyers, and partial acquisitions. 

The 2010 Merger Guidelines replace the 1992 Guidelines.  They do not, however, replace the agencies’ Commentary on the Guidelines issued in 2006.  Nor do they replace the Bank Merger Competitive Review guidelines developed in 1995.

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Categories: Antitrust Enforcement

    August 23, 2010

    NOT DEAD YET: Third Circuit Almost, But Not Quite, Kills Massive Suit Against Insurers

    The Third Circuit has affirmed the dismissal of most of the claims in a massive antitrust class action against most of America’s biggest insurance companies.
     
    Due to their failure to meet heightened pleading requirements, the plaintiffs in In re: Employee Benefit Insurance Brokerage Antitrust Litigation will not be able to pursue their claims of per se violations of Section 1 of the Sherman Act.  The plaintiffs alleged that insurance brokers funneled work to insurers in exchange for payments.  But the Third Circuit held that a piece of the complaint, which deals with conduct involving the Marsh & McLellan insurance broker firm, may proceed. 
     
    According to Judge Anthony Scirica’s opinion for the court, the plaintiffs’ allegations “do not provide plausible grounds to infer a horizontal agreement” between the insurers to protect each others’ business that would qualify as a per se Section 1 violation.  Under the heightened pleading standards that antitrust complaints must satisfy, even though “[p]laintiffs have pled facts showing that brokers deceptively steered their clients to preferred insurer-partners in order to obtain contingent commission payments from those partners, but this in itself is insufficient to plausibly imply a horizontal conspiracy.”  Pointedly, the opinion denies that “defendants’ alleged treatment of insurance purchasers was praiseworthy – or even lawful.”
     
    At the same time, the opinion kept alive the allegations involving Marsh & McLellan.  There, the complaint contained allegations of bid-rigging that constitute “something more than merely parallel behavior” among the defendants.  The opinion similarly kept alive RICO allegations involving Marsh & McLellan, but dismissed all other RICO claims.
     
    The opinion weighs in at exactly 200 pages, and includes 13 pages that merely name the lawyers involved.  That might be an appropriate length for litigation that the court called “extraordinarily complex.”  As the Third Circuit noted, the district court dismissed the plaintiffs’ complaints three times, even after allowing multiple rounds of amendments. 
    And while the appeals court reversed part of the District Court Judge Garrett Brown’s dismissal, the appeals judges also went out of their way to compliment Judge Brown’s “patient and meticulous analysis.”  No doubt, all parties hope that he will continue to offer more of the same on remand.

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    Categories: Antitrust Litigation

      August 16, 2010

      Gambling Company Rolls Dice On Lawsuit And Comes Up Snake-Eyes

      Thanks to a Nevada federal judge that dismissed its antitrust suit, casino payment company Sightline Payments, LLC, might be experiencing some fear and loathing in Las Vegas. 

      In March, Sightline sued its larger competitor, Global Cash Access Holdings, Inc., under Sections 1 and 2 of the Sherman Act, and under Section 7 of the Clayton Act.  Both companies offer services to provide cash access at casinos.  According to Sightline’s complaint, “[i]n 2008 alone [Global Cash] processed over 80 million transactions and put more than $21 billion into the hands of gaming patrons.”  Sightline’s complaint continues that Global Cash violated antitrust laws through a series of actions, including acquisitions, restrictive agreements with casinos in Las Vegas and Atlantic City, patent abuse, and disparagement of Sightline.  It sued for $300 million, plus costs and fees.  Interestingly, the head of Sightline previously served as Global Cash’s chief executive, and also was one of its founders.

      In dismissing Sightline’s suit on August 9, Judge Philip Pro held that Sightline did not allege that Global Cash used its market share to engage in monopoly pricing or that Global Cash’s alleged disparagement of Sightline contained any falsehoods.  Regarding Global Cash’s restrictive agreements, Judge Pro wrote that “[a]n agreement between a manufacturer and a distributor to establish an exclusive distributorship does not, standing alone, violate antitrust law unless the agreement is intended to, or actually does harm competition in the relevant market.”   Sightline’s complaint, he continued, did not allege facts to meet that standard.

      According to press reports, Sightline plans to roll the dice again by appealing the dismissal.  It looks like the company hopes its lawsuit won’t be leaving Las Vegas’ courts anytime soon.

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      Categories: Antitrust Litigation

        August 13, 2010

        Magazine Wholesaler’s Collusion Case Felled By Twombly

        Judge Paul Crotty of the U.S. District Court for the Southern District of New York dismissed with prejudice an antitrust suit brought by bankrupt magazine wholesaler Anderson News LLC against a host of single-issue magazine publishers. 

        Crotty ruled that Anderson’s allegations of a broad industry-wide conspiracy did not meet the plausibility standards set forth in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), saying that it was implausible that magazine publishers would conspire to deny retailers access to their own products. 

        Anderson had proposed a small surcharge on magazines in January 2009 with the goal of improving efficiency by giving suppliers a financial incentive to not ship extra copies, but Anderson claimed that in response the suppliers collectively pulled out of deals with Anderson, eliminating 80 percent of its business and its most popular titles, including People, Time and Sports Illustrated. 

        Anderson ceased business operations in February 2009, and sued in March 2009 accusing the publishers of conspiring to monopolize the U.S. wholesale single-copy magazine distribution market.  The defendants included American Media Inc., Bauer Publishing, Curtis Circulation, Distribution Services, Hachette Filipacchi, Kable News, Rodale Publishing, Time Inc. and Time Warner Retail. 

        This is yet another antitrust case felled by the new plausibility standard set forth in Twombly which requires plaintiffs to state a plausible (not merely possible or conceivable) claim for relief in order to survive a motion to dismiss. 

        Update: On August 17, 2010, Anderson News asked Judge Crotty to reconsider his decision dismissing the lawsuit.

        Anderson argues that Judge Crotty erred in concluding that the publishing companies had an economic self-interest in more wholesalers, not less.  Anderson claims that, to the contrary, the publishers had a powerful incentive to engage in their conspiracy, namely, to control the single-copy magazine distribution system so as to shift the increasing costs in the distribution system to retailers and consumers, and away from the defendant publishers and their national distributors.

        The case is Anderson News LLC et al. v. American Media Inc. et al., case number 1:09-cv-02227 (S.D.N.Y.).

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        Categories: Antitrust Law and Monopolies

          August 11, 2010

          Opposition Mounts Against Measure To Limit Interstate Wine And Beer Sales

          A bill introduced in the House this spring to allow states greater authority to regulate the interstate shipment of alcohol is facing growing opposition.

          In the latest declaration against the bill, the California Assembly last week unanimously passed Senate Joint Resolution 34, urging Congress to defeat H.R. 5034, the Comprehensive Alcohol Regulatory Effectiveness (CARE) Act of 2010.

          The CARE Act is a short measure – no more than 450 words, titles included – which would “reaffirm and protect the primary authority of States to regulate alcoholic beverages.”  The Act gives lip service to the bar against states discriminating against out-of-state producers – but only “without justification.”  The Act would eliminate existing law which requires that regulation of out-of-state shipments be only “to the same extent and in the same manner” as in-state production.  The law would also impose a “presumption of validity” upon state law, restricting legal challenges to state laws governing the interstate shipment of alcohol.

          The bill would allow states greater leeway to impose protectionist regulations and to block alcohol e-commerce while protecting traditional distributors.  The bill is supported by wholesalers of beer, wine and spirits who seek to protect the “three-tier system” in which wholesalers serve as middlemen between breweries, wineries, and distilleries and retailers. click here for more »

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          Categories: Legislative Updates

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