The Trump DOJ’s View on Merger Enforcement and Remedies Explained

President Trump’s head of the Department of Justice’s Antitrust Division, Makan Delrahim, recently explained that the division will cut back on behavioral commitments such as consent orders regulating conduct and will instead rely more on structural changes such as divestitures to remedy merger concerns. This could signal significant changes in how the DOJ resolves concerns with proposed mergers going forward.

In one of his first remarks on antitrust policy since his confirmation, Assistant Attorney General Delrahim delivered a speech on November 16 regarding the relationship between antitrust enforcement and the Trump administration’s focus on limiting government regulation of business. Delrahim explained on a theoretical level that effective antitrust enforcement lessens the need for market regulations and that behavioral commitments – often consent orders that regulate the post-merger conduct of parties – represent government oversight on what preferably should be a free market. He also identified several practical problems with behavioral commitments:

  • They are difficult to structure, especially their length, because short remedies may be mere “Band-Aids” and long remedies may become obsolete (Delrahim referenced a judgment regulating the Horseshoers Association that is still in effect).
  • They are hard to oversee, as they may require monitoring the granular, day-to-day operations of businesses to assess compliance.
  • They are challenging to enforce because the DOJ often lacks the resources to do so effectively.

Emphasizing that behavioral remedies should be viewed with skepticism for these and other reasons, Delrahim stated that the DOJ will instead focus on structural remedies to remedy merger concerns. He supported this pronouncement with reference to the DOJ’s 2004 Remedies Guidelines that stated conduct remedies generally are not favored in merger cases. (No reference was made to the DOJ’s 2011 guidelines that state conduct remedies can be an effective method of dealing with competition concerns.)

While expressing preference for structural remedies, Delrahim left open the possibility of the DOJ accepting some behavioral commitments. He explained that behavioral remedies should avoid taking pricing decisions away from markets, and should be simple and administrable by the DOJ. He further explained that such remedies must “completely cure the anticompetitive harms.” He said the DOJ would accept these remedies only when it has a “high degree of confidence that the remedy does not usurp regulatory functions for law enforcement.” Overall, convincing the DOJ to accept behavioral remedies will be a “high standard to meet,” according to Delrahim.

Delrahim’s explanation of the DOJ’s present regard for behavioral commitments may signal changes in how the DOJ resolves concerns with proposed mergers. In recent years, the DOJ accepted behavioral remedies to resolve competitive concerns in several high-profile deals, with the 2011 joint venture among Comcast and NBC Universal, the 2011 acquisition of ITA Software by Google, and the 2010 TicketMaster/Live Nation merger among the most notable. But Delrahim’s speech suggests that the Trump administration DOJ would not have accepted these remedies. How much, if at all, the DOJ changes its approach to resolving competitive concerns will be seen as it considers pending mergers in the coming months.

Supreme Court to Decide First Antitrust Case in Two Years

On Oct. 16, the U.S. Supreme Court granted certiorari in United States v. American Express, the court’s first antitrust case of the 2017 term and the first antitrust case they have reviewed since 2015. The American Express case presents complex questions about the legality of anti-steering provisions in agreements between credit card companies and the merchants that agree to accept their cards. It also presents the Supreme Court with an opportunity to provide real guidance for the first time on the application of the rule of reason, which is used to assess the anticompetitive effects of a “contract, combination … or conspiracy in restraint of trade” under the Sherman Act. This case will also be the first antitrust case which antitrust expert Justice Neil Gorsuch will join.

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Antitrust Partner Dan Foix Presents at AAI Conference

Danyll Foix, an antitrust partner in BakerHostetler’s Washington, DC office, will be a speaker at the 11th Annual Private Enforcement Conference of the American Antitrust Institute on November 7, 2017.

Foix will join a panel discussion of “Agriculture Antitrust Class Actions,” which will review recent private enforcement actions in agricultural industries, consider challenges specific to such cases, and discuss relevant structural remedies beyond monetary relief.

Following the panel discussion, Senator Amy Klobuchar (D-MN), Ranking Member, Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, is scheduled to deliver a keynote address.

Additional information, including registration information, is available at AAI’s website.

 

Presidential Powers and Antitrust Politics: Part Three

In July and August, we discussed the president’s role in setting antitrust policy at the Department of Justice, Antitrust Division. Specifically, we pointed out that presidents routinely face competing domestic and foreign policy challenges that require a delicate balance and flexible approach to antitrust enforcement. For example, President John F. Kennedy directed the DOJ to investigate the steel industry for price fixing because of concerns about labor strikes and monetary inflation. Likewise, President Harry S. Truman chose not to pursue criminal antitrust charges against the oil industry because of national security concerns, specifically the threat of a political coup in Iran and concerns that the Soviet Union would encroach American interests in the Middle East. Therefore, we concluded that the Antitrust Division has not historically (and should not be constitutionally) completely independent from the White House. Read Full Article >>

Reprinted with permission from the September 29, 2017 issue of The Legal Intelligencer.  Copyright 2017.  ALM Media Properties, LLC.  Further duplication without permission is prohibited.  All rights reserved.

Recent Investigation Closing Suggests FTC’s Process Reforms Might Be Meaningful

Back in April, we reviewed several new initiatives within the Federal Trade Commission (FTC) focused on eliminating “wasteful, legacy regulations and processes that have outlived their usefulness,” including “process reforms” for civil investigatory demands (CIDs) for reviewing and closing some investigations. Now, six months later, we thought it useful to consider whether these new initiatives have been meaningfully applied to investigations.

Since announcing its process reforms, the FTC has attributed the closing of only one investigation to the reforms. This previously nonpublic investigation reportedly began six years ago. In a press release on the closing, Acting Chairman Maureen K. Ohlhausen explained: “Matters that ultimately do not merit enforcement action can and should be closed promptly.” Continue Reading

‘Tryin’ to Loosen My Load’ – FTC’s New CID Process May Reduce Your Antitrust Investigation Burden*

In April we reviewed several new initiatives within the Federal Trade Commission (FTC) focused on eliminating “wasteful, legacy regulations and processes that have outlived their usefulness,” in the words of FTC Acting Chair Maureen K. Ohlhausen. As part of these initiatives, the FTC recently announced that its Bureau of Consumer Protection will be implementing “process reforms” for civil investigatory demands (CIDs), and they also could lighten the burden of responding in antitrust investigations.

According to the FTC’s press release, process reforms to be implemented by the Bureau of Consumer Protection include:

  • Providing plain-language descriptions of the CID process and developing business education materials to help small businesses understand how to comply.
  • Adding more detailed descriptions of the scope and purpose of investigations to give companies a better understanding of the information the agency seeks.
  • Where appropriate, limiting the relevant time periods to minimize undue burden on companies.
  • Where appropriate, significantly reducing the length and complexity of CID instructions for providing electronically stored data.
  • Where appropriate, increasing response times for CIDs (for example, often 21 days to 30 days for targets, and 14 days to 21 days for third parties) to improve the quality and timeliness of recipient compliance.

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Presidential Powers and Antitrust Politics: Part One

In June, we discussed the Trump administration’s candidate for the top post in the Department of Justice’s Antitrust Division: Makan Delrahim. During Delrahim’s confirmation hearing, Sen. Amy Klobuchar pressed him, “What would you do, if you’re in this job, if the president, or the vice president, or a White House staffer calls, and wants to discuss a pending investigation of an antitrust matter?” Delrahim responded, “The role of the assistant attorney general for antitrust is a law enforcement function,” and that “politics will have no role in the enforcement of the antitrust laws.” Delrahim’s comment appeared to placate Klobuchar’s present concerns about White House intercession or interference in pending antitrust investigations, although a confirmation vote by the full Senate is still pending. However, viewed historically, the constitutional role of the executive branch and the president in particular in dictating, directing and controlling antitrust enforcement policy is far more complex and nuanced. As is often the case, history provides the necessary context to answer thorny constitutional questions. Continue Reading

The ‘Failing Firm’ Defense and How Not to Lose It, Article Explains

Law360 featured an insightful article today on a recently unsealed court opinion blocking the $367 million merger of rival nuclear waste processing companies.

The court blocked the merger, while rejecting the parties’ argument that the deal should be approved because otherwise the acquired firm would collapse and the market would suffer. The merging companies did not meet the stringent requirements for raising this “failing firm” defense, the court ruled, because they had not shown the lack of other buyers that would not pose competitive concerns.

The article cited BakerHostetler partner Danyll W. Foix as explaining:

the opinion offers a lesson to competition attorneys and their clients, Foix said. Companies with a reason to believe that they may raise a failing firm defense in the future should make a legitimate and well-documented effort to seek out alternative offers, he said.
You need to confirm whether there are other buyers in the market, Foix said.
Of course, that may be easier said than done, Foix said. The bid solicitation process may take a year or longer, and by definition failing firms may not have that kind of time on their hands, he said.

The opinion is United States v. Energy Solutions Inc., et al., Civ. No. 16-1056-SLR (D. Del. June 21, 2017).

DOJ’s Possible Antitrust Chief’s Senate Confirmation Hearing

Last month, we discussed Makan Delrahim’s background, including his experience litigating antitrust and intellectual property matters at the Department of Justice during the George W. Bush administration and his extensive lobbying work at Brownstein, Hyatt, Farber and Schreck. On May 10, senators from the Senate Judiciary Committee held a hearing and asked Delrahim about several matters that pose potential challenges should he be confirmed as assistant U.S. attorney of the Antitrust Division of the DOJ. For the most part, Delrahim provided candid answers, at one point even offering, “I’m an open book on this issue.” Three discussions were ­particularly insightful.

PLEDGED TO RECUSE HIMSELF FROM PAST MATTERS

As we noted in last month’s article, Delrahim faces a number of potential conflicts if confirmed to the Antitrust Division. From August 2005 to January 2017, Delrahim lobbied on behalf of a number of large corporate clients facing controversial merger review such as health insurer Anthem in its proposed (and now defunct) combination with rival Cigna. Delrahim also represented clients in other high-profile transactions including AMC Entertainment in its merger with Loews Cineplex Entertainment; T-Mobile in its merger with MetroPCS Communications; US Airways in its failed merger with Delta Airlines; and Comcast in its merger with NBC Universal, as well as other corporate clients such as Microsoft, Oracle, Apple, Qualcomm, Pfizer, Neiman Marcus, Merck and Johnson & Johnson. Continue Reading

Hospital Seeks Second Opinion on Certifying Class with Uninjured Members

Ten years into litigation, a hospital has moved to decertify a class of plaintiffs who claim the hospital’s merger caused them to overpay for medical services. Arguing there is insufficient proof that class members were harmed, the hospital’s motion invites the court to jump into the fray about whether classes may be certified when they include members who were not actually injured.

Defendant NorthShore University HealthSystem and Highland Park Hospital, both located near Chicago, merged in 2000. After the Federal Trade Commission pursued a post-merger challenge in 2004 for alleged violations of Section 7 of the Clayton Act, a putative class of hospital patients filed suit in 2008 claiming the merger caused them to pay inflated prices for inpatient and outpatient hospital services. The District Court initially denied a motion to certify a class of patients who had paid for NorthShore’s services, but the Seventh Circuit vacated that denial in 2012 – see Messner v. NorthShore Univ. HealthSystem, 669 F.3d 802 (7th Cir. 2012) – and on remand the District Court then certified the class in 2013. Continue Reading

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