Zipcar Inc., the worldwide leader in car-sharing with over 500,000 members and 8,000 vehicles, was granted approval in its bid to acquire Streetcar Limited, a leading car-sharing company in the UK.  The Competition Commission, the UK’s independent public body responsible for investigating mergers, found it unlikely that the merger would lead to a decrease in competition, thereby permitting the acquisition to advance.

On April 21, 2010, Zipcar acquired all of the issued share capital of Streetcar.  Given the size of these two companies in the relevant market, the UK’s antitrust watchdog, the Office of Fair Trading, referred the matter to the Competition Commission for investigation and report, pursuant to the Enterprise Act of 2002.

Car-sharing companies, or car clubs, allow members to access available vehicles 24 hours a day, without the hassles or high costs of car ownership.  A recent article found at www.prnewswire.com cites an independent study commissioned by Zipcar for the proposition that “Millennials” (18 to 34-Year Olds) are generally driving less and seeking alternative access to automobiles.  Car-sharing companies may satisfy this growing demand.

The Competition Commission found that notwithstanding the merger of two large competitors in the relevant market, the industry was poised for substantial growth and entry.  “All, else being equal, a growing market will encourage new entrants, as new entrants can gain members without having to win them away from existing relationships with other car club operators,” the Provisional Findings Report states. 

The Report made particular note of the relatively low barriers to entry given that car-sharing companies are “not high-fixed-cost businesses relative to the size of the market.”  The likelihood and magnitude of entry would compensate for any foreseeable loss of competition.

The Competition Bureau filed a complaint in Ontario Superior Court of Justice against Rogers Communications Inc. alleging that the advertising of its Chatr discount cell phone and text service violates the misleading advertising provisions of the Competition Act.  The Bureau is asking for an injunction to stop the advertising campaign and an administrative monetary penalty of $10 million dollars.

The Rogers ad campaign at issue claims that Chatr subscribers will experience “fewer dropped calls than new wireless carriers” and have “no worries about dropped calls.”  However, the Bureau’s two month investigation, prompted by competitor WIND Mobile’s complaint, found “no discernible difference in dropped call rates between Rogers/Chatr and new entrants.” 

Commissioner of Competition Melanie Aitken reiterated that the Bureau is taking misleading advertising “very seriously,” especially when the advertising discredits “new entrants attempting to gain a foothold in the market.”  A link to the Bureau’s press release is found here.

Of all the substantive areas of American law, antitrust is perhaps the one that most aggressively reaches foreign conduct.  Ever since the Second Circuit’s 1945 Alcoa opinion (United States v. Aluminum Co. of America, 148 F.2d 416), courts and Congress have recognized that foreign conduct, when it affects U.S. commerce, can violate U.S. antitrust laws.  Thus U.S. antitrust regulators sometimes seek evidence of foreign conduct as they weigh whether to bring charges.  A recent decision demonstrates the extent to which, in today’s globalized economy, courts will enforce such pre-lawsuit investigative requests by regulators.

The decision is the October 29, 2010 Order of the United States District Court for the District of Columbia in Federal Trade Commission v. Church & Dwight Co., Inc.  The U.S. Federal Trade Commission (“FTC”) is investigating Church & Dwight (“C&D”), the maker of Trojan condoms, for monopoly maintenance or attempted monopolization in the U.S. condom market – specifically by agreeing to provide retailers with rebates or discounts in exchange for certain display arrangements.  The FTC is considering whether such agreements, if they exist, violate Section 5 of the Federal Trade Commission Act.

The FTC served C&D with a subpoena and a Civil Investigative Demand (“CID”) for documents regarding C&D’s incentive programs for retailers.  C&D refused to comply.  Citing relevance and burden, it challenged several aspects of the requests, including one for documents from C&D’s Canadian subsidiary.  These documents were not relevant, C&D argued, because the FTC’s inquiry was limited to whether C&D monopolized condom sales or distribution “in the United States.”

The Court held that the Canadian evidence was relevant to the investigation.  First, the Court held, the relevance standard governing enforcement of the FTC’s requests is quite liberal: it is satisfied so long as the FTC’s relevance arguments are not “obviously wrong.”  Here, the FTC contended that the Canadian documents were relevant because they may reveal the effects of C&D’s sales practices on its market shares.  C&D has a far lower share in Canada than in the U.S., the FTC argued, and the Canadian documents may shed light on whether different sales practices in the two countries produced this result.  The Court sided with the FTC, finding its argument “not obviously wrong.”  In doing so, the Court observed that the Canadian subsidiary’s conduct could have helped C&D secure a monopoly in the U.S., or could otherwise shed light on the investigation.  In light of such possibilities “in a globalized economy,” the Court held, a federal regulator must be able to investigate foreign subsidiaries.

As to burden, the Court first held that C&D did not adequately show that the burden would be impermissible.  The Court held that C&D was required to show that the FTC’s inquiry would threaten to “unduly disrupt or seriously hinder” C&D’s business operations.  C&D offered no affidavit or other evidence to support such a finding.  The Court also suggested that C&D try to reduce the burden of producing Canadian documents by agreeing with the FTC on electronic search terms to use in screening them.

For companies with U.S. and foreign offices, Federal Trade Commission v. Church & Dwight Co., Inc. perhaps teaches a simple lesson: when an agency requests documents from the foreign office, legitimate burden objections will go further than relevance arguments in shielding foreign documents.  As this decision suggests – and many others spell out more fully – a company that can provide strong, detailed evidence of the burden that it would suffer from production of foreign documents may be spared from compliance.  As the ever-globalizing commercial world makes relevance challenges less and less compelling, a burden challenge may be the last best hope for a company seeking to shield its foreign documents from U.S. regulators.

The decision is available here.

Beer giants Anheuser-Busch Companies, Inc. and InBev, NV/SA didn’t exactly meet at a bar, but they can go ahead and merge.  The Eighth Circuit, affirming a lower court’s decision, on October 27 held that there’s no reason to roll back the consummated merger under Sections 7 and 16 of the Clayton Act. 

Until their merger in 2008, each company was already huge:  Belgium-based InBev was the largest brewer in the world, and St-Louis-based Anheuser-Busch, was the largest brewer in the United States.  Other major players in this industry included SABMiller, Heineken, Carlsberg and Molson Coors.  Following up on concerns from the Department of Justice, InBev and Anheuser agreed to divest Labatt US, the InBev subsidiary which imported that Canadian beer into the U.S.

Despite the Department of Justice’s approval, Missouri beer drinkers moved for a preliminary injunction to block the merger asserting that it violated Sections 7 of the Clayton Act.  The United States District Court for the Eastern District of Missouri denied the plaintiffs’ motion for a preliminary injunction, on November 18, 2008 and the merger was consummated that same day.  Finally, in August 2009, the District Court granted the companies’ motion to have the entire case dismissed.

The Eighth Circuit affirmed.  It held that the beer consumer plaintiffs, as indirect purchasers, could only sue for injunctive relief, and since they failed to stop the merger, the only equitable relief available to them was divestiture.  The Court continued, however, that divestiture is a “drastic” remedy that courts hesitate to use.  And plaintiffs’ failure to act diligently in seeking Section 7 relief, by waiting nearly two months after the merger announcement to file their lawsuit and filing their motion for preliminary injunction less than 10 days before the anticipated closing date, weighed against ordering a divestiture.   Since the alleged antitrust injury was speculative and localized while divestiture would have widespread dramatic effects on the now combined companies, their employees and distributors, the Court declined to order additional divestitures.  Granting the appeal would have also resulted in discovery and trial that would have increased the cost of brewing and selling beer and ultimately increased the purchase price of beer – the very injury plaintiffs feared. 

The case, Ginsburg v. InBev NV/SA, No. 09-2990 (8th Cir. Oct. 27, 2010), is available here, and also on Westlaw at 2010 WL 4226533.  Plaintiffs asked for an en banc rehearing with the U.S. Court of Appeals for the Eighth Circuit last Wednesday.

On November 15, 2010, the Federal Trade Commission announced a settlement of its claims that the proposed acquisition of Psychiatric Solutions Inc. by Universal Health Services Inc. would violate antitrust laws by combining the two largest providers of acute inpatient psychiatric services in three geographic markets (Delaware, Puerto Rico, and Las Vegas), decreasing competition for such services (click here to view the FTC complaint).  In a press release issued Monday, the FTC described the settlement as “the latest example of the FTC’s ongoing efforts to promote competition in health care markets.”  A similar agreement with Nevada’s attorney general was also reached to settle a case filed in the federal district court in Nevada.   

As a result of the settlements, Universal Health Services can proceed with its $3.1 billion acquisition of Psychiatric Solutions.  The deal gives Universal Health Services 94 psychiatric facilities in addition to the 102 facilities it already owns.

Under the terms of the FTC settlement, Universal Health Services must sell 15 facilities in the three markets to FTC-approved purchasers.  Those sales must occur within nine months.  Copies of the FTC’s consent orders and unanimous decision approving the settlement are available by clicking here and here, respectively.  Public comments on the consent orders can be made electronically on the FTC’s website.  After December 15, 2010, the FTC will decide whether to make the consent orders final.

Today, the European Commission conditionally cleared a $1.76 billion (1.2 billion euro) acquisition by Unilever, an Anglo-Dutch company, of the Sara Lee Corporation household and body care division.  The clearance required a divestiture of Sara Lee’s Sanex brand and other related business in Europe due to a concern about anticompetitiveness in certain deodorant markets. 

“We had to ensure that the transaction would not lead to increased prices for consumers,” said Joaquín Almunia, the EC Vice President of Competition Policy.  “As Unilever offered a strong and clear-cut remedy to address the competition concerns in a number of deodorant markets, the Commission was able to clear the merger.” 

The investigation into the potential merger lasted five months, and the EC noted that Unilever had a “particularly strong” position in the European deodorant market due to its Axe, Dove, and Rexona brands.  The EC was particularly concerned about the merger’s possible effects on deodorant markets in Belgium, the Netherlands, Denmark, Ireland, Spain, Portugal and the United Kingdom. 

The EC noted that the merger could “remove an important competitive force and would likely have led to price increases.”  Thus, the Commission concluded that the divestiture of the Sara Lee Sanex brand and related business in Europe “offers a clear and workable remedy, sufficient to restore competition in all markets where the Commission had concerns.”   Unilever employs 163,000 people worldwide and sells a range of products that includes cosmetics, food, tea, and other goods.  Sara Lee employs 33,000 people worldwide and sells products that include, among other things, packaged food products, shoe polish, deodorant, and other products.

The parties notified the Commission of the proposed merger on April 21, 2010, and the Commission opened an investigation into it on May 31, 2010.

In addition to antitrust, Constantine Cannon has an environmental and sustainability practice and represents green technology companies profiting from wise resource use.  These different disciplines that we work in are reflected in a recent filing we noticed in the federal district court for Connecticut, Environmental Products Corp. (“Envipco”). v. Tomra of North America, Inc. (D. Conn. filed Nov. 4, 2010).

In Envipco, both plaintiffs and defendants are in the business of manufacturing and operating Reverse Vending Machines (RVMs), which collect deposit bottles and cans and refund the deposit.  The RVM company must then sort the containers of each manufacturer and return each one’s bottles and cans to it.  The suit alleges that a good pick-up service for the cans to return them to their manufacturers requires that each firm have a concentrated customer base and collection route, requiring a contract with at least one major supermarket chain in which the RVM company operates.  Envipco says that Tomra has entered into exclusive RVM contracts with 12 of 20 major supermarket chains that account for the majority of RVM use, foreclosing Evipco from a substantial portion of business in the bottle bill states that constitute the relevant market or markets.  Moreover, Tomra is alleged to have entered into equity-based partnerships with beverage manufacturers, precluding Envipco from a substantial portion of the can and bottle pickup business, forcing Envipco to turn to Tomra for that function in those places, and causing Envipco to lose underlying RVM business.  Envipco also alleges that Tomra engaged in deceptive billing practices to lure in customers and forged joint ventures with key players in the market, “denying competitors the ability to compete on a level playing field.”

The complaint also claims that Tomra is negotiating to buy another reverse vending company, Can & Bottle Systems Inc., that has monopoly power in Oregon.  Tomra and Envipco are alleged to be the only significant competitors in the U.S. in this particular market, with Tomra enjoying a 70 percent market share — or 77 percent, if the company is successful in its plans to acquire Can & Bottle.

Asserting claims under the Clayton Act and the Sherman Act, the complaint, citing to Tomra’s alleged monopoly power and market manipulation, seeks compensatory, punitive and treble damages and an order blocking Tomra from entering into long-term exclusive contracts with customers.

Businesses such as these that promote the effective use of bottle bills that recycle cans and bottles are a positive in the environmental marketplace.  The suit raises important antitrust concerns and we will monitor its progress.

The potential acquisition of telecommunication company Qwest by Internet provider CenturyLink has cleared another hurdle.  Integra, a competitive local exchange carrier that both uses and resells Qwest network services, had fought the proposed deal because of the potential effects on its existing connectivity agreements with Qwest.  However, with a settlement agreement in place that ensures its rights under those prior contracts, Integra dropped its opposition to the deal.

The merger deal, valued at more than $22 billion, would create one of the largest telecommunications companies in the United States, with an extensive broadband network as well as landline telephone and wireless networks.  Because the combined company would present a formidable competitive force, many competitors still oppose the deal, such as the wireless carrier Sprint and other local exchange carriers. 

Whether the Integra settlement agreement will act as template for future agreements remains to be seen.  The settlement agreement contains a number of concessions to Integra, including a guarantee that the combined company will not pass on merger expenses to Integra, a guarantee that Integra can prevent Qwest from making certain types of changes to its network, and the right for Integra to inquire into any deteriorations in Qwest network services. 

The merger must also be approved by both the Federal Communications Commission and several state regulators.  The Department of Justice and the Federal Trade Commission do not oppose the merger.

Last week, Italy’s competition enforcement agency, the Antitrust Authority, levied penalties against MasterCard and several Italian banks totaling more than $8.4 million for artificially raising interchange fees and passing those increases onto merchants and customers.  Interchange fees are fees paid by merchants to the banks that issue the debit or credit card to their customers (the “issuing” banks). 

After a 15-month investigation, the Antitrust Authority accused MasterCard and several issuing banks of using licensing agreements to raise and keep interchange fees high.  In addition, the merchant banks entered into agreements that prevented them from comparing MasterCard’s fees to those of other credit cards.  During this time, Visa’s interchange fee was 30% below MasterCard’s fee.

In addition to fines, MasterCard’s issuing banks will now have to provide a financial justification for their interchange fees, and the issuing banks might have to renegotiate their merchant contracts.

While the three most important things about real estate may be location, location and location, Canadian antitrust enforcers are telling real estate brokers that competition is also important.

The Competition Bureau of Canada has entered into a consent agreement with the Canadian Real Estate Association (CREA) settling the Bureau’s claims that the rules imposed by the CREA limited consumer choice and prevented innovation in the market for residential real estate services.

CREA is a trade association whose membership includes more than 100 Canadian real estate boards and approximately 90% of licensed real estate brokers in Canada.

In February 2010, the Canadian Commissioner of Competition made an application to the Competition Tribunal alleging that CREA had “substantial and complete control over the supply of residential real estate brokerage services throughout Canada” through the Multiple Listing Service (MLS).  The application sought to enjoin “exclusionary restrictions” by CREA that were affecting real estate brokers and agents who sought to provide less than a full package of brokerage services.

According to the Commissioner, MLS was the “only comprehensive listing of homes for sale in Canada,” with no adequate substitutes.  CREA imposed restrictions on the use of the MLS and required that its members periodically certify compliance with CREA’s rules and regulations.

Some of the alleged exclusionary restrictions required listing realtors to always act as agents for property sellers, disallowed agents from merely posting property information on the MLS system without using MLS’ other services, and provided that only the listing realtor’s name and contact information appear in publicly accessible websites.  The Commissioner determined that these rules restricted the ability of consumers to choose real estate services, while forcing them to pay for services they did not need.  The rules also allegedly prevented real estate agents from offering more innovative service and pricing options to consumers.