Mergers and Acquisitions Update
Merger Enforcement Is Alive and Well at the Department of Justice
David L. Meyer, Deputy Assistant Attorney General for Civil Enforcement, November 15, 2007 www.usdoj.gov/atr/public/speeches/227713.htm
FTC Performance and Accountability Report-
Fiscal Year 2007 (“PAR 2007”)
*Pages 3 and 6
Reasons for fewer challenges:
* Pages 6 and 7
“The effectiveness and efficiency of our review processes is not always completely transparent to the outside world. Because the outcome of our merger review does not hinge on HHI calculations or any other objective or readily observable benchmark, the time and effort we will need to conduct an investigation is not perfectly predictable when a transaction is proposed.”
* Pages 7 and 8
Role of Concentration
With respect to the Whirlpool/Maytag transaction:
“There never was any question that the transaction would increase concentration in a concentrated market, but I should not have to remind anyone that merger analysis has come quite far from the days when concentration figures alone were a good predictor of anticompetitive harm. No sensible proponent of antitrust enforcement could seriously favor a return to the days when merger analysis stopped there, and mergers were routinely blocked just because they would increase concentration in a highly concentrated market.”
* Page 8
Vulcan Materials Acquisition of Florida Rock Industries
Comscope’s Acquisition of Andrew Corp.
Civil Contempt Against Cal Dive International, Inc. (November 26, 2007)
Civil Contempt Against ALLTEL Corporation
(December 3, 2007)
In Matters In Which HSR Second Requests
parties to withdraw 5 transactions.
*PAR 2007 at 54
“Given the agency’s scarce resources and given that the
FTC and DOJ jointly enforce the antitrust laws, the FTC
directs much of its attention and resources to certain
segments of the economy that are particularly important to
consumers and in which it has particular expertise. These
include energy, health care, pharmaceuticals, real estate,
In FY2007, FTC challenged:
and medical devices industries
*PAR 2007 at 52, 57
Schering-Plough’s Acquisition of Organon BioSciences N.V.:
A & P’s Acquisition of Pathmark Stores
“When it comes to intervening in markets, increased output is not always optimal.”
Maintaining our Focus at the FTC: Recent Developments
and Future Challenges in Protecting Consumers and
Competition, FTC Chairman Deborah Platt Majoras,
November 15, 2007.
Acquisition of Midwest Air Group, Inc. by private equity group TPG Capital LP
Google’s Acquisition of DoubleClick:
Chief Administrative Law Judge McGuire’s DecisionIn the Matter of Realcomp II Ltd., Docket No. 9320 (www.ftc.gov/os/adjpro/d9320/071213decision.pdf)
Criminal Enforcement Update
Type A (Before an investigation has begun)
DOJ will grant leniency if a corporation comes forward before the Division has initiated an investigation and:
Type B (After an investigation has begun)
DOJ, in certain circumstances will grant leniency to a corporation, even if an investigation has already begun, if:
The Trial Court’s Ruling in Dismissing the Indictment
The [Antitrust] Division has failed to produce any credible evidence that Stolt-Nielsen’s participation in the customer allocation conspiracy continued past March 2002. Nor has the Division proposed a conceivable personal motive for the misconduct it alleges, as there is no indication that either Cooperman or Wingfield stood to profit in any way from continued anticompetitive activity. Indeed, it would defy logic for executives such as [individual defendants] Wingfield and Cooperman to risk their careers to continue a criminal conspiracy that had been exposed publicly and repudiated by their company’s revised Antitrust Compliance Policy. With the exception of Jansen, who the Division ultimately attempted to treat as a hostile witness, the only testimony adduced in favor of the Division’s version of the events of March-November 2002 was the testimony of a Jo Tankers employee and a number of Odfjell employees whose accounts were fraught with contradiction and uncorroborated by documentary evidence. Each Odfjell and Jo Tankers witness testified in return for individual or corporate cooperation agreements that promised immunity or a reduced sentence in exchange for testimony against Defendants. Each witness thus had a strong motive to seek leniency from the Division and to retaliate against a competitor that had implicated him in a criminal conspiracy. [Italics added]
There are two very important lessons to take away from this case for in-house counsel
1. Deal with potential misconduct quickly
2. Effective compliance is necessary to
protect the company.
The main issue in this case was whether and when SN effectively stopped its illegal conduct.
In the SN case, the government did not believe that SN had effectively stopped the illegal behavior. However, SN had taken corrective measures to stop the behavior and had created a strong record that it had acted properly. The trial court relied on this record in dismissing the case.
When a company becomes aware of potential illegal activity, the actions it initially takes can often play a defining role in the eventual outcome. You need to immediately come up with a plan on how to stop the illegal behavior and minimize risk for the company in the future.
- Ascertain the relevant facts as quickly as possible.
- Determine whether outside counsel is needed to launch an internal investigation
- Evaluate whether employees alleged to have violated the law may continue their employment
- Eliminate the risk of document destruction or other types of obstruction
- Determine what Sarbanes-Oxley obligations are created
Even if you are not stopping potentially illegal behavior with amnesty in mind, there are many other reason to do so.
- SOX reasons
- Private actions
AGAIN, what the company does immediately after discovering alleged misconduct is critical to the final outcome.
In the trial court’s decision dismissing the case, the court looked at SN’s compliance program as proof that it had effectively stopped the illegal behavior. The court found that the company’s compliance program did what it was supposed to do; it put an end to competitor contacts and brought vigorous competition back to the market.
While it would have been better for SN to have an effective compliance program from the outset, SN’s compliance program played an important role in saving them from criminal liability.
The SN compliance program was effective because it was thorough and focused on areas that were particularly problematic. Effective compliance program focus extra attention on areas where the greatest danger exists. The SN compliance program reflected the definition of effective compliance found in Chapter 8 of the US Sentencing Guidelines (the government’s definition of effective compliance).
At the end of the day, SN’s compliance program provided a clear benefit to the company even though it was not started until after the bad behavior had taken place. The lesson here is clear: it is never to late to start an effective compliance program.
FTC Recent Activity counsel?
1. Do Not Call Violations
A) Settlements Announced in November 2007
Craftmatic - $4.4 million
ADT - $2 million (two of ADT’s authorized dealers also paid penalties of $20,000 and $25,000)
Ameriquest - $1 million
Guardian Communications - $150,000 but $7.8 million civil penalty suspended due to inability to pay
B) Settlements in recent years
DirecTV - $5.3 million in December 2005 (largest ever)
Bookspan - $680,000 in February 2006
Flagship Resort Development - $526,000 in February 2005
Cutting Edge Marketing - $345,000 in September 2005
Columbia House - $300,000 in July 2005
FTC Recent Activity (cont.) counsel?
C) 145 million numbers on the DNC Registry
D) Safe Harbor under Telemarketing Sales Rule
Established Business Relationship – (a) Purchase within prior 18 months, or (b) inquiry within prior 3 months.
Surveys, political groups, and charities.
F) Auto-Dialers and Abandoned Calls
Call is considered abandoned if sales representative does not pick up within 2 seconds of answering.
No violation if telemarketer can assure that 3% or less of calls are abandoned. Some states (e.g. Florida) have no such safe harbor. The FTC is aware of this dichotomy.
5. Privacy Breaches
FTC examining under unfairness theory rather than deception theory.
June Ann has acted as litigation counsel and has provided antitrust counseling and compliance programs for companies representing a broad range of businesses including entertainment, utilities, transportation, communications, healthcare, mining, agriculture, construction, and manufacturing and has served as antitrust counsel to trade and professional groups. On behalf of numerous clients, she has dealt with the Antitrust Division of the U.S. Department of Justice, the Federal Trade Commission, and state attorneys general in connection with merger/acquisition investigations, civil antitrust investigations, and criminal antitrust grand jury investigations. She has served as Chairman of the Antitrust Section of the Georgia Bar Association and Programs and Publications Chairman of The Antitrust Section of the Federal Bar Association. June Ann maintains offices in both Atlanta and Washington, D.C.
E-mail: [email protected]
Nate represents corporations, financial institutions, investment firms and individuals in all
aspects of criminal investigations and litigation, both pre- and post-indictment, as well as
in complex civil litigation, including class, shareholders and whistleblower actions in
federal and state courts. Nate represents clients before the Department of Justice, the
Securities & Exchange Commission, the Federal Trade Commission, the National
Association of Securities Dealers, the Department of Defense, the United States
Congress, and other federal and state regulators. He has also conducted
numerous internal investigations, advised with respect to corporate governance issues,
and been involved in the implementation of compliance codes.
Nate has particular expertise in counseling and defending clients involved in criminal
antitrust investigations in a variety of industries, such as defense, pharmaceuticals,
energy, chemicals, home products and technology. He also represents clients in all
types of civil antitrust litigation on both the federal and state levels. Nate also dedicates a
portion of his practice to providing antitrust compliance training and advice.
E-mail: [email protected]
Charles' practice is concentrated on trade regulation and commercial
litigation. He has represented numerous manufacturers, distributors, retailers, financial
institutions and service providers in investigations by federal, state and municipal
regulatory agencies. He has represented clients in proceedings brought by State
Attorneys General in more than twenty states as well as by the FTC. He is also an
experienced commercial litigator. He routinely appears in both state and federal courts. He
has defended numerous class actions relating to a wide variety of consumer and
Charles was the Assistant Commissioner of the Department of Consumer Affairs for the
City of New York. He also served as the Consumer Advocate for the City. Mr. Greenman
has served as Chairman of the Robinson-Patman Act Subcommittee of the New York
State Bar Association and Chairman of the Committee on Consumer
Affairs of the New York County Lawyers’ Association.
E-mail: [email protected]