My article on the ten things to do if you ever receive a DOJ antitrust subpoena is now up over at InHouse Blog.
According to this Bloomberg article, the DOJ’s recent suit to block Anheuser-Busch’s proposed takeover of Grupo Modelo SAB is the seventh civil DOJ antitrust case currently in litigation — the most ever at one time. As reported by Bloomberg:
“It represents an attitude of more skepticism of the efficiency benefits of merging that are often claimed by the parties in the transaction,” said John Connor, a professor of industrial economics at Purdue University. “There’s been a greater willingness to challenge mergers than there was” in the administration of former President George W. Bush.
The Washington Post last week ran an article covering this topic entitled “In Silicon Valley, fast firms and slow regulators.”
The Post quoted Ed Black, president of the Computer & Communications Industry Association, a trade group that supported the Justice Department’s case against Microsoft: “In tech, market definitions are difficult because companies are changing so fast, and that makes antitrust a blunt tool.”
The issue of “over-enforcement” is a perennial one. But it’s hard to figure out if, as a global matter, over-enforcement really exists.
Let’s stipulate that from the perspective of an omniscient market observer, there is some optimal level of antitrust enforcement, “O.”
The problem is that it is very, very difficult to objectively determine that overall, actual enforcement exceeds (or fails to meet) “O.”
Antitrust issues and cases are highly fact-specific, and often require detailed and painstaking investigation. That’s part and parcel of enforcement. And while one can argue that in any given investigation, enforcement is either appropriate or not, it’s quite difficult to say that overall enforcement levels are not optimal. Only with 20/20 hindsight from some future vantage point is it really feasible to make such a pronouncement.
Dominant firms, all things being equal, tend to think that enforcement is overly robust. Their competitors naturally tend to disagree. Although sometimes it is obvious who is right, often it’s not. That’s what investigations, pretrial proceedings, motions to dismiss, and settlement discussions are for.
I’ve posted a new file in the Downloads section – a short paper on “Ten Things To Do When Your Company Receives a DOJ Grand Jury Subpoena.” This is a somewhat newer version of my “Nine Things To Do” article. It covers many of the same basic points in a slightly more concise way.
If you haven’t checked out the Downloads section yet, now’s a good time to do so. Just click the Downloads navigation button in the menu bar above. Or you can click here.
On May 3, the U.S. DOJ announced that an executive of South Korean-based Hyosung Corporation agreed to plead guilty and to serve time in a U.S. prison for obstruction of justice charges in connection with an automated teller machine (ATM) merger investigation conducted by the Antitrust Division, the Department of Justice announced today.
According to a two-count felony charge filed in the U.S. District Court in Washington, D.C., Kyoungwon Pyo, in his role as senior vice president for corporate strategy of Hyosung Corporation, an affiliate of Nautilus Hyosung Holdings Inc. (NHI), altered and directed subordinates to alter numerous existing corporate documents before they were submitted to the Department of Justice and the Federal Trade Commission (FTC) in conjunction with mandatory premerger filings. The department said that Pyo’s actions took place in or about July and August 2008. At the time, the department was investigating Korea-based NHI’s proposed acquisition of Triton Systems of Delaware Inc. NHI abandoned the proposed acquisition of competitor Triton Systems before the Antitrust Division reached a decision determining whether to challenge the transaction.
After receiving the premerger filings, the Antitrust Division opened a civil merger investigation of the proposed acquisition. The department said that in or about August and September 2008, Pyo falsified additional documents in response to a document request from the Antitrust Division with the intention of impairing their integrity and availability for use in an official proceeding. The department said that, among other things, the alterations misrepresented and minimized the competitive impact of the proposed acquisition.
NHI was previously charged with obstruction of justice, which carries a maximum criminal fine for a corporation of $500,000 per count. In October 2011, NHI pleaded guilty and paid a $200,000 criminal fine for its role in the obstruction of justice charges. According to Pyo’s plea agreement, which is subject to court approval, Pyo has agreed to serve five months in prison.
Moral of the story: it is vitally important when dealing with the U.S. DOJ to maintain the utmost level of transparency and candor.
In a November 17 speech, Acting Assistant Attorney General Sharis A. Pozen provided an overview of DOJ’s 2011 antitrust activity.
In Fiscal Year 2011, DOJ and FTC received 1,450 Hart-Scott-Rodino merger filings, up from 1,166 in 2010. (Perhaps this is good news for the economy.)
DOJ filed 90 criminal cases, the highest number in the last 20 years. It agreed to over $250 million in fines, charged 27 companies, and 82 individuals. Courts imposed jail terms on 21 individuals.
DOJ was fairly active in civil non-merger enforcement work, including its ongoing American Express litigation, the Blue Cross Blue Shield of Michigan case (concerning most favored nation clauses with hospitals), and settlements with MasterCard and Visa over merchant rules.
AAG Pozen also reviewed the 2010 Horizontal Merger Guidelines, noting that the DOJ has defined relevant markets in all public cases since the new guidelines were released, and opining that the Guidelines have not displaced traditional or predictable merger analysis.
The speech is available here.