Civil Enforcement

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JUSTICE DEPARTMENT FILES LAWSUIT AGAINST EBAY INC.
OVER AGREEMENT NOT TO HIRE INTUIT INC. EMPLOYEES

Agreement Deprived Employees of Better Salaries and Job Opportunities

WASHINGTON — The Department of Justice filed a civil antitrust lawsuit today against eBay Inc., alleging that it violated antitrust laws when it entered into an agreement not to recruit or hire Intuit Inc.’s employees.  The department said that the agreement eliminated a significant form of competition to the detriment of affected employees who were likely deprived of access to better job opportunities and salaries.

The department’s Antitrust Division worked closely with the Office of the Attorney General of the State of California, which conducted its own investigation and filed a similar lawsuit today.

The department filed its lawsuit in U.S. District Court in the Northern District of California, in San Jose.  The lawsuit seeks to prevent eBay from adhering to or enforcing the agreement and from entering into any similar agreements with any other companies.  Intuit is already subject to a settlement prohibiting it from entering into such agreements as part of an earlier case with the department.

The department alleges the agreement, which was enforced at the highest levels of each company, barred either firm from soliciting each other’s employees, and for over a year barred at least eBay from hiring any employees from Intuit at all.  In court papers, the department alleges that Meg Whitman, then eBay’s CEO, and Scott Cook, Intuit’s founder and executive committee chair, were intimately involved in forming, monitoring and enforcing the anticompetitive agreement.  Cook was serving as a member of eBay’s board of directors at the same time he was making complaints about eBay’s recruiting of Intuit employees.

“eBay’s agreement with Intuit hurt employees by lowering the salaries and benefits they might have received and deprived them of better job opportunities at the other company,” said Joseph Wayland, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.  “The Antitrust Division has consistently taken the position that these kinds of agreements are per se unlawful under the antitrust laws.”

According to the complaint, beginning no later than 2006, and lasting at least until 2009, eBay and Intuit entered an illegal agreement that restricted their ability to actively recruit employees from the other company, and for some period of time even restricted at least eBay from hiring any employees at Intuit.  In 2007, the pact evolved into an agreement that eBay would not recruit Intuit’s employees.  eBay’s recruiting personnel were instructed to not pursue potential applications that came from Intuit and to throw away such resumes, the department said.

As stated in the department’s complaint, eBay and Intuit are direct competitors for employees, including specialized computer engineers and scientists covered by the agreements at issue in the case.

The department said it was not necessary to name Intuit in today’s complaint because the company had previously been named in the division’s September 2010 lawsuit and settlement, and the relief the department obtained in the previous settlement is sufficient to prevent Intuit from entering into these types of agreements.  In September 2010, the Antitrust Division filed a lawsuit against six high technology companies–Adobe Systems Inc., Apple Inc., Google Inc., Intel Corp., Intuit Inc. and Pixar–over a series of bilateral agreements not to solicit each other’s employees.  All six companies entered into a settlement which prohibited them from entering agreements to refrain from, or pressure others to refrain from, soliciting, recruiting, or otherwise competing for another firm’s employees. The Antitrust Division also filed a lawsuit against Lucasfilm in December 2010 for entering into a similar agreement with Pixar, and Lucasfilm entered into a similar settlement.  The eBay case grew out of the same investigation.

eBay is a Delaware corporation with its principal place of business in San Jose. In 2011, eBay had revenues of $11.7 billion.

Intuit is a Delaware corporation with its principal place of business in Mountain View, Calif.  In 2011, Intuit had revenues of $3.85 billion. 

 

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JUSTICE DEPARTMENT SETTLES CIVIL CONTEMPT CLAIM
AGAINST EXELON CORPORATION

Exelon Agrees to Pay $400,000

WASHINGTON — Exelon Corporation has agreed to pay $400,000 as part of a civil settlement with the Department of Justice that resolves Exelon’s alleged violations of two court orders entered in connection with Exelon’s acquisition of Constellation Energy Group.

The Department of Justice’s Antitrust Division yesterday filed a petition in the U.S. District Court for the District of Columbia asking it to find Exelon in civil contempt of a consent decree and a related order. At the same time, the department filed a settlement agreement and order, subject to court approval, that would resolve the department’s concerns. The payment to the United States represents disgorgement of profits gained through Exelon’s alleged violations and reimbursement to the department for the cost of its investigation.

“In order for the Antitrust Division’s settlements to be effective in preserving competition and protecting consumers, companies must fully adhere to the terms of their court-ordered agreements,” said Joseph F. Wayland, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The Antitrust Division will vigorously prosecute those who enter into agreements with the department and do not comply with their legal obligations. ”

Under the consent decree filed in December 2011, Exelon was required to sell three electricity plants in Maryland—Brandon Shores and H.A. Wagner in Anne Arundel County, Md. and C.P. Crane in Baltimore County, Md. — in order to proceed with its $7.9 billion merger with Constellation. Exelon was required to abide by a hold separate stipulation and order that placed restrictions on Exelon’s conduct between the time Exelon closed its acquisition of Constellation and the time it completed the plant divestitures required by the consent decree. The hold separate required Exelon, during this period, to bid certain of its electricity generating plants at or below cost to ensure that Exelon would not be able to raise market prices for electricity. In consenting to entry of the hold separate and the consent decree, Exelon specifically agreed to “take all steps necessary to comply” with its legal obligations.

According to the petition filed by the department, Exelon failed to fulfill its obligations under the two court orders. The petition alleges that Exelon submitted certain offers for sales of electricity during this period at above-cost prices and that Exelon failed to take all necessary steps to ensure that its offers would comply with the hold separate’s requirements. Exelon claims, and the United States does not dispute, that Exelon’s above-cost offers were inadvertent.

In determining the disgorgement amount, the United States took into account that Exelon, upon recognizing that it had made above-cost offers, took appropriate remedial steps, including notifying the United States and market regulators (i.e. the Federal Energy Regulatory Commission and the Maryland Public Service Commission, both of which also approved Exelon’s acquisition of Constellation), implementing measures to ensure that no additional above cost-offers occurred, and agreeing with the market regulators to return any incremental revenues Exelon earned from, and to redress any market harm caused by, its above-cost offers. The $400,000 payment is separate and above the payments Exelon is making to the market regulators.

Exelon is incorporated in Pennsylvania and has its headquarters in Chicago. Exelon owns the PECO utility of Philadelphia and the Commonwealth Edison utility of Chicago. With its acquisition of Constellation Energy Group Inc. , Exelon now owns the BG&E utility of Baltimore. Exelon had $18.9 billion of revenues in 2011.

 

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THURSDAY, NOVEMBER 15, 2012
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JUSTICE DEPARTMENT REQUIRES DIVESTITURES IN STAR ATLANTIC’S
ACQUISITION OF VEOLIA

Settlement Preserves Competition in Northern New Jersey,
Central Georgia and the Macon, Ga., Metropolitan Area

WASHINGTON — The Department of Justice announced today that it has reached a settlement that will require Star Atlantic Waste Holdings L.P. and Veolia ES Solid Waste Inc. to divest commercial waste collection or disposal assets in northern New Jersey, central Georgia, and the Macon, Ga., metropolitan area in order to proceed with Star Atlantic’s proposed $1.9 billion acquisition of Veolia.  The department said that the transaction, as originally proposed, would have resulted in higher prices for the collection of municipal solid waste from commercial businesses or the disposal of waste in these areas.

The Department of Justice’s Antitrust Division filed a civil antitrust lawsuit today in U.S. District Court in Washington, D.C., to block the proposed transaction.  At the same time, the department filed a proposed settlement that, if approved by the court, will resolve the lawsuit and the competitive concerns.

“Without the divestitures required by the department, consumers in northern New Jersey, central Georgia and the Macon metropolitan area would have been harmed by a reduction in competition for commercial solid waste collection or disposal,” said Joseph Wayland, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.  “This remedy ensures that the benefits of competition–namely, lower prices and better service–will be preserved in these areas.”

According to the complaint, the transaction, as originally proposed, would have substantially lessened competition in commercial waste collection or disposal services in the geographic areas of northern New Jersey, central Georgia and Macon.  In each of these areas, Star Atlantic and Veolia are two of only a few significant firms providing commercial waste collection or municipal solid waste disposal services.  The acquisition would have eliminated a major competitor in each of these areas and resulted in higher prices and poorer service for consumers.

Under the terms of the proposed settlement, Star Atlantic and Veolia will divest three specified transfer stations in northern New Jersey; a landfill and two transfer stations in central Georgia; and three commercial waste collection routes in the Macon metropolitan area.  Each asset to be divested is currently owned by Veolia.  To maximize the potential operational effectiveness of each purchaser of the divestiture assets, Star Atlantic and Veolia must divest to a single buyer the three transfer stations in northern New Jersey.  Likewise, they must divest to a single purchaser the designated Georgia transfer stations and landfill and the specified commercial waste routes in the Macon metropolitan area.

Star Atlantic is a privately owned Delaware limited partnership with its headquarters in New York City.  Star Atlantic provides small container commercial waste collection and/or municipal solid waste disposal services in Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina and Tennessee through its subsidiary, Advanced Disposal Services Inc., and in Massachusetts, Vermont, New York, New Jersey, Pennsylvania, Maryland and West Virginia through its subsidiary, Interstate Waste Services Inc.  Star Atlantic is one of the nation’s largest municipal solid waste hauling and disposal companies by revenue, and had estimated total revenues of $563 million in 2011.

Veolia Environnement S.A. is a French corporation headquartered in Paris.  Its wholly owned U.S. subsidiary, Veolia ES Solid Waste Inc., provides small container commercial waste collection and/or municipal solid waste disposal services in Florida, Georgia, Alabama, Kentucky, Missouri, Illinois, Minnesota, Wisconsin, Michigan, Indiana, Pennsylvania and New Jersey.  Veolia ES Solid Waste Inc. is also one of the nation’s largest solid waste hauling and disposal companies by revenue, and had estimated total revenues of $818 million in 2011.

As required by the Tunney Act, the proposed settlement, along with a competitive impact statement, will be published in the Federal Register.  Any person may submit written comments concerning the proposed settlement during a 60-day comment period to Maribeth Petrizzi, Chief, Litigation II Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 8700, Washington, D.C. 20530.  At the conclusion of the 60-day comment period, the court may enter the final judgment upon a finding that it serves the public interest.

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JUSTICE DEPARTMENT STATEMENT ON ENTERGY CORP.’S TRANSMISSION
SYSTEM COMMITMENTS AND ACQUISITION OF KGEN POWER CORP.’S
PLANTS IN ARKANSAS AND MISSISSIPPI

Department Will Not Challenge Entergy’s Proposed Acquisitions of Hinds and Hot Spring Power Plants; Investigation into Alleged Exclusionary Conduct Remains Open

WASHINGTON — The Department of Justice’s Antitrust Division issued the following statement today regarding Entergy Corp.’s commitments to join a regional transmission organization (RTO) and divest its transmission system; Entergy’s proposed acquisitions of the Hinds and Hot Spring generating facilities in Mississippi and Arkansas, respectively, from KGen Power Corporation; and the division’s open investigation into Entergy’s alleged anticompetitive conduct:

“After a thorough review, and in light of the forthcoming changes in Entergy’s service area, the Antitrust Division has determined that Entergy’s acquisitions of KGen’s power plants in Jackson, Miss., and Hot Spring County, Ark., are unlikely to substantially lessen competition, and is closing its investigation into the proposed transactions.

“In addition to the merger investigation of the KGen transactions, the division has been examining allegations that Entergy has engaged in exclusionary conduct in its four-state utility service area spanning parts of Arkansas, Louisiana, Mississippi and Texas.  That investigation remains open.  The conduct investigation has focused on whether certain of Entergy’s power generation dispatch, transmission planning and power procurement practices constitute exclusionary conduct under Section 2 of the Sherman Act.

“If Entergy follows through on its transmission system commitments, the Antitrust Division’s concerns will be resolved.

“The division has been investigating the effect of several of Entergy’s practices on competition and barriers to entry.  The division has also evaluated professed efficiency and regulatory justifications, which have not been persuasive.

“Specifically, the division has been exploring whether Entergy has harmed consumers by exercising its control over its transmission system and dominant fleet of gas-fired power plants to exclude rival operators of low-cost combined-cycle gas turbine (CCGT) power plants from competing to sell long-term power.  In particular, the division has been evaluating whether Entergy’s practices have effectively foreclosed these more efficient rivals from obtaining long-term firm transmission service, a necessary input for selling long-term power products to wholesale customers in the Entergy service area.  As part of the conduct investigation, the division has also been reviewing the competitive impact of, and circumstances surrounding, Entergy’s serial acquisition of rivals’ CCGT power plants, including the KGen plants.

“Since the division began its investigation, Entergy announced that it intends to join the Midwest Independent Transmission System Operator (MISO) RTO and has entered into an agreement to divest its electric transmission business to ITC Holdings Corp. (ITC), an independent transmission company.  In recent months, Entergy has initiated the state and federal regulatory processes in support of these significant structural changes, secured conditional MISO approval from several state regulators, and committed its utilities to a target MISO integration date of December 2013.

“Entergy’s commitments to obtain membership in an RTO and divest its transmission system to a third party with the incentive to make efficient transmission investments are significant steps towards restoring competition in the Entergy service area.  If Entergy follows through on its commitments, these measures will address the Antitrust Division’s concerns by eliminating Entergy’s ability to maintain barriers to wholesale power markets, ensuring that all Entergy service area generation is dispatched independently and at lowest cost, increasing market transparency and oversight, and properly aligning incentives for the construction of transmission.  Such measures will also directly benefit consumers, who will ultimately enjoy lower electricity prices and improved reliability as a result of RTO integration and the transmission system divestiture.  The division does not endorse any particular RTO or independent transmission company.

“The division will closely monitor developments, and in the event that Entergy does not make meaningful and timely progress, the division can and will take appropriate enforcement action, if warranted.”

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THURSDAY, SEPTEMBER 27, 2012
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DEPARTMENT OF JUSTICE AND FEDERAL TRADE COMMISSION SIGN
MEMORANDUM OF UNDERSTANDING WITH INDIAN COMPETITION
AUTHORITIES

Memorandum Provides for Increased Cooperation and Communication

WASHINGTON — The U.S. Department of Justice and Federal Trade Commission (FTC) signed an antitrust memorandum of understanding (MOU) with the Government of India Ministry of Corporate Affairs and the Competition Commission of India (CCI) today to promote increased cooperation and communication among competition agencies in both countries.  The ceremony took place in Washington, D.C.

The MOU was signed by Acting Assistant Attorney General Joseph Wayland of the Department of Justice’s Antitrust Division, Chairman Jon Leibowitz of the FTC, Indian Ambassador to the United States Nirupama Rao on behalf of the Indian Ministry of Corporate Affairs and CCI Chairman Ashok Chawla.

“We value our relationship with the Indian Ministry of Corporate Affairs and the Competition Commission of India.  We know that this memorandum of understanding will enhance that relationship in the years ahead, as we work together to ensure that markets are open and competitive, by identifying and remedying anticompetitive behavior,” said Acting Assistant Attorney General Wayland.

Commenting on the signing, Chairman Leibowitz said, “We are delighted to enter into this memorandum of understanding with the Indian Ministry of Corporate Affairs and the Competition Commission of India.  It will strengthen the already excellent relations among the U.S. and Indian competition authorities by further facilitating cooperation on policy and enforcement matters.”

Key provisions of the MOU address the following

  • Cooperation – The MOU provides that the U.S. antitrust agencies and Indian authorities will work to keep each other informed of significant competition policy and enforcement developments in their jurisdictions, and establishes a framework for technical cooperation.  The MOU also recognizes that when the U.S. and Indian competition agencies are investigating related matters, it may be in their common interests to cooperate.

 

  • Communication – The MOU establishes a framework for the U.S. antitrust agencies and the Indian competition authorities to consult on matters of competition enforcement and policy.  It also contemplates periodic meetings among officials to exchange information on policy and enforcement priorities.

The MOU is a framework for voluntary cooperation and will not change existing law in either country.  India adopted its modern competition law in 2002, and the law’s main provisions were put into effect between 2009 and 2011.

For Release: 8/21/2012

Puerto Rican Pharmacy Cooperative Settles Price-Fixing Charges

FTC Settlement Stops Group’s Alleged Anticompetitive Behavior

A Puerto Rican cooperative of pharmacy owners, Cooperativa de Farmacias Puertorriquenas, known as “Coopharma,” has agreed to settle Federal Trade Commission charges that it harmed competition by negotiating, entering into, and implementing agreements among its member pharmacies to fix prices on which they contract with insurers and pharmacy benefit managers.

According to the FTC, Coopharma’s actions over the past five years have led to higher prices for Puerto Rico’s health care consumers. In settling the charges, Coopharma has agreed not to engage in such conduct in the future. The case is the latest example of the FTC’s work to protect consumers from higher costs and decreased innovation in the health care sector.

Coopharma consists of approximately 300 pharmacy-owner members who own more than 350 pharmacies in Puerto Rico. Its members represent at least one-third of all pharmacies in Puerto Rico, and have a particularly strong presence on the western side of the island.

The FTC charges that since at least 2007, Coopharma has violated federal antitrust laws by collectively negotiating with more than 10 payers over reimbursement rates, and signing seven single-signature “master contracts” on behalf of its member pharmacies. In addition, the FTC alleges that the threat of collective action by Coopharma members led two payers to pay higher rates to the group’s members through their individual pharmacy contracts. Coopharma’s actions caused substantial harm to Puerto Rican health care consumers, the FTC charges, without any offsetting efficiencies.

The proposed consent order resolves the FTC’s concerns relating to Coopharma’s conduct and is designed to prevent its recurrence. It prohibits Coopharma from entering into or facilitating agreements between or among any pharmacies:

  • to negotiate on behalf of any pharmacy with any payer;
  • to refuse to deal or threaten to refuse to deal with any payer;
  • to include any term, condition, or requirement upon which any pharmacy deals, or is willing to deal, with any payer, including, but not limited, price terms; or
  • not to deal individually with any payer or not to deal with any payer other than through Coopharma.

The proposed order also prohibits Coopharma from facilitating information exchanges between pharmacies regarding whether, or on what terms to contract with a payer, and it bars attempts to engage in any of the conduct prohibited by the order. It also bars Coopharma from encouraging, suggesting, advising, pressuring, inducing, or trying to induce anyone to engage in the prohibited conduct.

Finally, the proposed order allows payers to terminate their contracts with Coopharma without penalty, and requires Coopharma to notify each pharmacy that provides services through that contract of the termination. It also subjects Coopharma to provisions designed to ensure its compliance with the proposed order, which will expire in 20 years.

The Commission vote to accept the consent agreement and proposed consent order for public comment was 5-0. The FTC will publish a description of the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through September 20, 2012, after which the Commission will decide whether to make the proposed consent order final.

Interested parties can submit written comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section.Comments can be submitted electronically. Comments in paper form should be mailed or delivered to: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the respondent has actually violated the law. A consent order is for settlement purposes only and does not constitute an admission by the respondent that the law has been violated. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to [email protected], or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., Room 7117, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

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THURSDAY, NOVEMBER 15, 2012
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JUSTICE DEPARTMENT REQUIRES DIVESTITURES IN STAR ATLANTIC’S
ACQUISITION OF VEOLIA

Settlement Preserves Competition in Northern New Jersey,
Central Georgia and the Macon, Ga., Metropolitan Area

WASHINGTON — The Department of Justice announced today that it has reached a settlement that will require Star Atlantic Waste Holdings L.P. and Veolia ES Solid Waste Inc. to divest commercial waste collection or disposal assets in northern New Jersey, central Georgia, and the Macon, Ga., metropolitan area in order to proceed with Star Atlantic’s proposed $1.9 billion acquisition of Veolia.  The department said that the transaction, as originally proposed, would have resulted in higher prices for the collection of municipal solid waste from commercial businesses or the disposal of waste in these areas.

The Department of Justice’s Antitrust Division filed a civil antitrust lawsuit today in U.S. District Court in Washington, D.C., to block the proposed transaction.  At the same time, the department filed a proposed settlement that, if approved by the court, will resolve the lawsuit and the competitive concerns.

“Without the divestitures required by the department, consumers in northern New Jersey, central Georgia and the Macon metropolitan area would have been harmed by a reduction in competition for commercial solid waste collection or disposal,” said Joseph Wayland, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.  “This remedy ensures that the benefits of competition–namely, lower prices and better service–will be preserved in these areas.”

According to the complaint, the transaction, as originally proposed, would have substantially lessened competition in commercial waste collection or disposal services in the geographic areas of northern New Jersey, central Georgia and Macon.  In each of these areas, Star Atlantic and Veolia are two of only a few significant firms providing commercial waste collection or municipal solid waste disposal services.  The acquisition would have eliminated a major competitor in each of these areas and resulted in higher prices and poorer service for consumers.

Under the terms of the proposed settlement, Star Atlantic and Veolia will divest three specified transfer stations in northern New Jersey; a landfill and two transfer stations in central Georgia; and three commercial waste collection routes in the Macon metropolitan area.  Each asset to be divested is currently owned by Veolia.  To maximize the potential operational effectiveness of each purchaser of the divestiture assets, Star Atlantic and Veolia must divest to a single buyer the three transfer stations in northern New Jersey.  Likewise, they must divest to a single purchaser the designated Georgia transfer stations and landfill and the specified commercial waste routes in the Macon metropolitan area.

Star Atlantic is a privately owned Delaware limited partnership with its headquarters in New York City.  Star Atlantic provides small container commercial waste collection and/or municipal solid waste disposal services in Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina and Tennessee through its subsidiary, Advanced Disposal Services Inc., and in Massachusetts, Vermont, New York, New Jersey, Pennsylvania, Maryland and West Virginia through its subsidiary, Interstate Waste Services Inc.  Star Atlantic is one of the nation’s largest municipal solid waste hauling and disposal companies by revenue, and had estimated total revenues of $563 million in 2011.

Veolia Environnement S.A. is a French corporation headquartered in Paris.  Its wholly owned U.S. subsidiary, Veolia ES Solid Waste Inc., provides small container commercial waste collection and/or municipal solid waste disposal services in Florida, Georgia, Alabama, Kentucky, Missouri, Illinois, Minnesota, Wisconsin, Michigan, Indiana, Pennsylvania and New Jersey.  Veolia ES Solid Waste Inc. is also one of the nation’s largest solid waste hauling and disposal companies by revenue, and had estimated total revenues of $818 million in 2011.

As required by the Tunney Act, the proposed settlement, along with a competitive impact statement, will be published in the Federal Register.  Any person may submit written comments concerning the proposed settlement during a 60-day comment period to Maribeth Petrizzi, Chief, Litigation II Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 8700, Washington, D.C. 20530.  At the conclusion of the 60-day comment period, the court may enter the final judgment upon a finding that it serves the public interest.

 

 

 

 

 

For Your Information: 08/20/2012

FTC Submits Brief for the Petitioner with U.S. Supreme Court in Phoebe Putney Hospital Merger Case

The Federal Trade Commission has submitted its Brief for the Petitioner with the U.S. Supreme Court in Phoebe Putney Health System, Inc., a case in which the FTC challenged the proposed merger of Phoebe Putney Health System and Palmyra Park Hospital in Albany, Georgia.

The FTC filed a complaint in April 2011 to block the transaction, alleging that it will reduce competition significantly and allow the combined Phoebe/Palmyra to raise prices for general acute-care hospital services charged to commercial health plans, substantially harming patients and local employers and employees.

A key issue before the Court is the “state action” doctrine, under which federal antitrust laws do not apply to the anticompetitive conduct of certain public entities created by a state if the conduct is authorized as a part of a state policy to displace competition, and that policy is clearly articulated and affirmatively expressed in state law.

As part of its complaint, the FTC alleges that Phoebe structured the deal in a way that attempts to use the Hospital Authority of Albany-Dougherty County to shield the anticompetitive acquisition from federal antitrust scrutiny under the state action doctrine.

The Brief for the Petitioner can be found on the FTC’s website and as a link to this press release. (FTC File No. 111-0067, Docket No. 9348; the staff contact is Imad D. Abyad, Office of General Counsel, 202-326-2375).

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics.  Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

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For Release: 08/06/2012

FTC Order Will Restore Competition for Adult Cardiology Services in Reno, Nevada

Two Renown Health Acquisitions Gave it 88 Percent of the Cardiology Market

Renown Health, the largest provider of acute care hospital services in northern Nevada, will release its staff cardiologists from “non-compete” contract clauses, allowing up to 10 of them to join competing cardiology practices. Renown Health has agreed to settle Federal Trade Commission charges that its recent acquisitions of two local cardiology groups reduced competition for the provision of adult cardiology services in the Reno area.

Renown Health, based in Reno, Nevada, operates general acute care hospitals and commercial health plans serving the Reno area. Before the recent acquisitions, virtually all of the cardiologists in the Reno area were affiliated with two medical groups – Sierra Nevada Cardiology Associates (SNCA) and Reno Heart Physicians (RHP).

In late 2010, Renown Health agreed to acquire SNCA’s medical practice and hire its 15 cardiologists practicing in the Reno area. Before this, Renown Health did not employ any cardiologists, and the acquisition positioned it as a direct competitor of RHP. In March 2011, Renown Health acquired RHP and hired its 16 Reno-area cardiologists. According to the FTC’s complaint, other than the physicians associated with SNCA and RHP, there are very few cardiologists practicing in the Reno area. Accordingly, the FTC alleged, competition for adult cardiology services was effectively eliminated.

In addition, the contracts between Renown Health and the newly hired cardiologists included “non-compete” provisions, which effectively prevented them from joining medical practices that competed with Renown Health. As a result of the acquisitions and non-compete clauses, the FTC contends, Renown Health currently employs 88 percent of the cardiologists in the Reno area.

According to the FTC’s complaint, Renown Health’s acquisitions of SNCA’s and RHP’s medical practices created a highly concentrated market for the provision of adult cardiology services in the Reno area, in violation of federal law. The complaint alleges that the consolidation of the competing practices into a single cardiology group controlled by Renown Health led to the elimination of competition based on price, quality, and other terms. In addition, according to the complaint, the consolidation increased the bargaining power that Renown Health has with insurers, and this may lead to higher prices for adult cardiology services in the Reno area.

The proposed order settling the FTC’s charges is designed to remedy the anticompetitive effects of Renown Health’s acquisitions of SNCA and RHP, and to restore competition for cardiology services in the Reno area. Renown Health has agreed to an order temporarily suspending the non-compete provisions currently in place with its cardiologists. During this time, the former SNCA and RHP cardiologists now working for Renown Health will be able to seek other employment, including positions with other hospitals in the Reno area.

Under the proposed order, the non-compete provisions will be suspended for at least 30 days while the FTC considers public comments it receives on the order. During this time, former SNCA and RHP cardiologists may contact other employers about leaving Renown Health, and will notify a special monitor appointed by the FTC to ensure they are included in a group of up to 10 cardiologists that will be allowed to join competing groups. After the FTC finalizes the consent order, another 30-day release period will begin, during which other cardiologists may leave Renown Health, provided certain conditions are met, including the requirement that they intend to continue to practice in the Reno area for at least one year.

At any time during this period, Renown Health can ask the FTC to end the release order if 10 of its cardiologists have left for competing practices. If fewer than six cardiologists have decided to leave Renown Health after the end of this release period, Renown Health will continue to suspend the non-compete provisions until at least six cardiologists have accepted offers with competing practices in the Reno area.

The State of Nevada, through its Attorney General, worked with FTC staff to investigate and resolve this matter. The Attorney General has filed a complaint similar to the FTC’s and has entered into an agreement with Renown Health similar to the FTC’s proposed settlement. The state agreement is subject to court approval.

The Commission vote to accept the consent agreement package containing the proposed consent order for public comment was 5-0. The FTC will publish a description of the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through September 5, 2012, after which the Commission will decide whether to make the proposed consent order final.

Interested parties can submit written comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section.Comments can be submitted electronically by clicking here. Comments in paper form should be mailed or delivered to: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the respondent has actually violated the law. A consent order is for settlement purposes only and does not constitute an admission by the respondent that the law has been violated. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics.  Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

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For Release: 04/30/2012

NATIONAL EXPRESS AND PETERMANN TO SELL OFF SCHOOL BUS

CONTRACTS IN TEXAS AND WASHINGTON TO RESOLVE ANTITRUST CONCERNS

Divestitures Will Ensure Continued Competition for School Bus Contracts

WASHINGTON — In order to resolve antitrust concerns, National Express Corporation and Petermann Partners Inc. will divest several school bus contracts and associated assets in the states of Washington and Texas in order to proceed with their proposed merger, the Department of Justice announced today. National Express and Petermann contract with school districts throughout the United States to provide school bus services.The parties have agreed to sell eight school bus transportation contracts in the states of Texas and Washington to Student Transportation of America Inc. (STA). The divested assets include transportation contracts in the school districts of Battle Ground and Hockinson in Washington and the school districts of Bastrop, Boyd, Eagle Mountain-Saginaw, Leander, Manor and Terrell, as well as Dallas-based KIPP Truth Academy, in Texas.“The sale of the assets will help ensure continued competition for school bus contracts, which will benefit taxpayers in Texas and Washington,” said Acting Assistant Attorney General Joseph Wayland in charge of the Department of Justice’s Antitrust Division.The parties have committed to completing the divestitures within 30 days, or to have a court monitor the divestitures at that time. The school boards and entities whose contracts are being divested are in the process of approving the transfer of the contracts.The Antitrust Division conducted its investigation working closely with the Washington and Texas State Attorney Generals’ offices, which simultaneously conducted their own investigations.National Express Corporation, a subsidiary of National Express Group PLC of the United Kingdom, is based in Warrenville, Ill. It has revenues of more than $700 million. Petermann Partners, headquartered in Cincinnati, has revenues of approximately $150 million.

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For Release: 04/11/2012

JUSTICE DEPARTMENT REACHES SETTLEMENT WITH THREE OF THE LARGEST BOOK PUBLISHERS AND CONTINUES TO LITIGATE AGAINST APPLE INC. AND TWO OTHER PUBLISHERS TO RESTORE PRICE COMPETITION AND REDUCE E-BOOK PRICES

Department Settles with Hachette, HarperCollins and Simon & Schuster; Litigates Against Apple, Macmillan and Penguin to Prevent Continued

Restrictions on Price Competition

WASHINGTON — The Department of Justice announced today that it has reached a settlement with three of the largest book publishers in the United States– Hachette Book Group (USA), HarperCollins Publishers L.L.C. and Simon & Schuster Inc.–and will continue to litigate against Apple Inc. and two other publishers–Holtzbrinck Publishers LLC, which does business as Macmillan, and Penguin Group (USA)–for conspiring to end e-book retailers’ freedom to compete on price, take control of pricing from e-book retailers and substantially increase the prices that consumers pay for e-books. The department said that the publishers prevented retail price competition resulting in consumers paying millions of dollars more for their e-books.The civil antitrust lawsuit was filed in U.S. District Court for the Southern District of New York against Apple, Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster. At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the department’s antitrust concerns with Hachette, HarperCollins and Simon & Schuster, and would require the companies to grant retailers–such as Amazon and Barnes & Noble–the freedom to reduce the prices of their e-book titles.”As a result of this alleged conspiracy, we believe that consumers paid millions of dollars more for some of the most popular titles,” said Attorney General Eric Holder. “We allege that executives at the highest levels of these companies–concerned that e-book sellers had reduced prices–worked together to eliminate competition among stores selling e-books, ultimately increasing prices for consumers.””With today’s lawsuit, we are sending a clear message that competitors, even in rapidly evolving technology industries, cannot conspire to raise prices,” said Acting Assistant Attorney General Sharis A. Pozen in charge of the Department of Justice’s Antitrust Division. “We want to undo the harm caused by the companies’ anticompetitive conduct and restore retail price competition so that consumers can pay lower prices for their e-books.”The department’s Antitrust Division and the European Commission cooperated closely with each other throughout the course of their respective investigations, with frequent contact between the investigative staffs and the senior officials of the two agencies. The department also worked closely with the states of Connecticut and Texas to uncover the publishers’ illegal conspiracy.According to the complaint, the five publishers and Apple were unhappy that competition among e-book sellers had reduced e-book prices and the retail profit margins of the book sellers to levels they thought were too low. To address these concerns, they worked together to enter into contracts that eliminated price competition among bookstores selling e-books, substantially increasing prices paid by consumers. Before the companies began their conspiracy, retailers regularly sold e-book versions of new releases and bestsellers for, as described by one of the publisher’s CEO, the “wretched $9.99 price point.” As a result of the conspiracy, consumers are now typically forced to pay $12.99, $14.99, or more for the most sought-after e-books, the department said.The department alleges the conspiracy began in the summer of 2009. CEOs from the publishing companies met privately as a group about once per quarter. The meetings took place in private dining rooms of upscale Manhattan restaurants and were used to discuss confidential business and competitive matters, including Amazon’s e-book’s retailing practices.The complaint states that the companies accomplished their conspiracy by agreeing to stop the longstanding practice of selling e-books, as they long sold print books, on wholesale to bookstores, and leaving it to the bookstores to set the price at which they would sell the e-books to consumers. Through their conspiracy, the companies imposed a new model under which the publishers seized e-book pricing authority from all of their retail bookstores and raised prices for e-books.

As stated in the department’s complaint, one publisher’s CEO said, “Our goal is to force Amazon to return to acceptable sales prices through the establishment of agency contracts in the USA. . . . To succeed our colleagues must know that we entered the fray and follow us.”

The publishers also agreed with Apple to pay Apple a 30 percent commission for each e-book purchased through Apple’s iBookstore and promised, through a retail price-matching most favored nation (MFN) provision, that no other e-book retailer would sell an e-book title at a lower price than Apple.

As stated in the department’s complaint, Apple’s then-CEO Steve Jobs said, “the customer pays a little more, but that’s what you [publishers] want anyway.”  Based on the commitments to Apple, the publishers imposed agency terms, over some objections, on all other e-book retailers.  As a result, no e-book retailer is able to compete by using its commission to discount or reduce the price that the publishers set for their e-book titles or offer any special sales promotions to encourage consumers to purchase those e-books. The department said that the intent and effect of the publishers’ contracts with Apple was to raise the prices that consumers nationwide pay for e-books.

Under the proposed settlement agreement with Hachette, HarperCollins and Simon & Schuster, they will terminate their agreements with Apple and other e-books retailers and will be prohibited for two years from entering into new agreements that constrain retailers’ ability to offer discounts or other promotions to consumers to encourage the sale of the publishers’ e-books.  The settlement does not prohibit Hachette, HarperCollins and Simon & Schuster from entering new agency agreements with e-book retailers, but those agreements cannot prohibit the retailer from reducing the price set by the publishers.

The proposed settlement agreement also will prohibit Hachette, HarperCollins and Simon & Schuster for five years from again conspiring with or sharing competitively sensitive information with their competitors. It will impose a strong antitrust compliance program on the three companies, which will include a requirement that each provide advance notification to the department of any e-book ventures they plan to undertake jointly with other publishers and that each regularly report to the department on any communications they have with other publishers. Also for five years, Hachette, HarperCollins and Simon & Schuster will be forbidden from agreeing to any kind of MFN that could undermine the effectiveness of the settlement agreement.

The ongoing litigation against Apple, Macmillan and Penguin seeks to restore price competition among e-book retailers in the sale of the litigating publishers’ e-books. Under the existing agency agreements, Macmillan and Penguin prohibit e-book retailers from exercising any pricing discretion on their titles, and Apple is freed from any price competition with other retailers in selling those e-books.

Hachette Book Group USA has its principal place of business in New York City. It publishes e-books and print books through its publishers such as Little, Brown and Company and Grand Central Publishing.

HarperCollins Publishers, L.L.C. has its principal place of business in New York City. It publishes e-books and print books through publishers such as Harper and William Morrow.

Macmillan has its principal place of business in New York City. It publishes e-books and print books through publishers such as Farrar, Straus and Giroux, and St. Martin’s Press. Verlagsgruppe Georg von Holtzbrinck GmbH owns Holtzbrinck Publishers LLC, which does business as Macmillan, and has its principal place of business in Stuttgart, Germany.

Penguin Group (USA) Inc. has its principal place of business in New York City. It publishes e-books and print books through publishers such as The Viking press and Gotham Books. Penguin Group (USA) Inc. is the U.S. subsidiary of The Penguin Group, a division of Pearson plc, which has its principal place of business in London.

Simon & Schuster Inc. has its principal place of business in New York City. It publishes e-books and print books through publishers such as Free Press and Touchstone.

Apple Inc. has its principal place of business in Cupertino, Calif. Among many other businesses, Apple distributes e-books through its iBookstore.

The proposed settlement, along with the department’s competitive impact statement, will be published in the Federal Register, as required by the Antitrust Procedures and Penalties Act. Any person may submit written comments concerning the proposed settlement within 60-days of its publication to John R. Read, Chief, Litigation III Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, NW, 4th Floor, Washington, DC 20530. At the conclusion of the 60-day comment period, the court may enter the final judgment upon a finding that it serves the public interest.

The court will determine a pretrial schedule for the case against Apple, Macmillan and Penguin once the companies file their responses to the government’s lawsuit.

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For Release: 04/10/2012

STATEMENT OF THE DEPARTMENT OF JUSTICE’S ANTITRUST DIVISION ON ITS DECISION TO CLOSE ITS INVESTIGATION OF HIGHMARK’S AFFILIATION AGREEMENT WITH WEST PENN ALLEGHENY HEALTH SYSTEM

 

WASHINGTON — The Department of Justice’s Antitrust Division issued the following statement today after announcing the closing of its investigation into Highmark’s affiliation agreement with West Penn Allegheny Health System (WPAHS). Highmark is the Blue Cross and Blue Shield licensee in western Pennsylvania and WPAHS is the second-largest hospital network in the Pittsburgh region:”After a thorough review of the affiliation agreement and other evidence collected by the Antitrust Division in its investigation, the division has determined that the affiliation agreement likely will not reduce competition in the markets for hospital, physician or health insurance services.”The proposed affiliation holds the promise of bringing increased competition to western Pennsylvania’s health care markets by providing WPAHS with a significant infusion of capital and increases the incentives of market participants to compete vigorously.”The affiliation agreement is a vertical combination of Highmark, the region’s dominant health insurance company, and WPAHS. Highmark does not own any hospital assets and owns only a small number of physician groups, and WPAHS does not compete in the health insurance markets. The affiliation agreement between Highmark and WPAHS will not eliminate any material horizontal competition between the parties.”Vertical agreements, such as the affiliation agreement, can reduce competition by limiting entry or expansion by third parties. Such effects are unlikely here for several reasons. The hospital market in the Pittsburgh region is highly concentrated. Other than WPAHS, the only other significant hospital network is the University of Pittsburgh Medical Center (UPMC), the region’s dominant hospital network. In the absence of the affiliation agreement, Highmark would likely not sponsor expansion by a hospital network other than WPAHS because there is no other significant network with which Highmark could partner.”WPAHS on its own likely would not have promoted entry or expansion by other health insurers. WPAHS has previously tried to sponsor entry by national insurers and largely failed. The affiliation agreement is not likely to reduce WPAHS’s incentive to offer competitive rates to insurers other than Highmark because WPAHS has strong incentives to increase its patient volume.”Finally, the affiliation agreement likely will not facilitate horizontal collusion by health plans because new entrant national insurers are for the first time in many years aggressively attempting to reduce Highmark’s dominant market share.”The division remains mindful that vertical acquisitions and affiliations between health insurers and hospitals with market power can potentially reduce competition. The division will continue to monitor developments in the Pittsburgh health care market as part of our broader commitment to vigilantly enforce the antitrust laws and thereby protect competition in our nation’s health care markets.”

Background

In November 2011, Highmark and WPAHS formalized an affiliation agreement under which a new nonprofit parent company will hold all the corporate membership rights in both Highmark and WPAHS. Highmark has agreed to make a financial commitment of up to $475 million to WPAHS.

Market Overview

High concentration levels have long marked the hospital, physician and health insurance markets in western Pennsylvania. On the insurance side, Highmark maintains shares exceeding 60 percent. On the hospital side, and among certain physician specialties, the UPMC wields a similar degree of market power. These high shares have been stable for many years and have not been upset by either new entry or expansion of smaller market participants.

Recently, there have been developments which could increase competition in both the health insurance and hospital markets. For instance, national insurers recently obtained contracts from UPMC that are significantly more competitive than their prior arrangements, improving their prospects of bringing increased competition to the area’s health insurance markets. And the capital that Highmark will contribute to West Penn under the affiliation agreement will likely make West Penn a stronger competitor to UPMC.

The signs of increased competition are appearing just as an existing long-term contract between Highmark and UPMC comes up for renewal. Long-term contracts between dominant hospitals and insurers can dull their incentives to compete, leading to higher prices and fewer services. If a dominant hospital is guaranteed a predictable revenue stream for many years from a dominant insurer, then the hospital may be less likely to promote the growth of new insurers by offering them competitive rates. Similarly, if a dominant health insurer is guaranteed rates from a dominant hospital for an extended period, then the insurer may be less likely to promote competition in the hospital market by investing in more affordable hospitals.

Not all contracts between dominant hospitals and insurers are anticompetitive. Contracts with shorter terms can provide significant benefits to consumers by providing consumers with more options, while at the same time encouraging dominant hospitals to promote competition among health insurers, and encouraging dominant health insurers to promote competition among hospitals. The foreseeable expiration of the contracts increases the need for both the dominant hospital and the insurer to have alternatives to their dominant counterparts. In the circumstances here, it appears that the long-term contract between Highmark and UPMC did diminish the incentives of each to compete and expand competition in these highly concentrated health insurance and hospital markets.

This affiliation agreement between WPAHS and Highmark, along with recent market entry, may help to bolster incentives to expand competition. Increased competition in the insurance and hospital markets can increase consumers’ access to affordable healthcare services by lowering health plan and hospital prices and improving transparency, which enables consumers to make more informed choices. In addition, we recognize that other considerations, including access to unique healthcare facilities, may require other policy and enforcement measures outside the purview of antitrust analysis.

The Antitrust Division’s Closing Statement Policy

The division provides this statement under its policy of issuing statements concerning the closing of investigations in appropriate cases. This statement is limited by the division’s obligation to protect the confidentiality of certain information obtained in its investigations. As in most of its investigations, the division’s evaluation has been highly fact-specific, and many of the relevant underlying facts are not public. Consequently, readers should not draw overly broad conclusions regarding how the division is likely in the future to analyze other collaborations or activities, or transactions involving particular firms. Enforcement decisions are made on a case-by-case basis, and the analysis and conclusions discussed in this statement do not bind the division in any future enforcement actions. Guidance on the division’s policy regarding closing statements is available at www.justice.gov/atr/public/closing/index.html.

 

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For Release: 02/15/2012

JUSTICE DEPARTMENT SETTLEMENT REQUIRES GUNNISON ENERGY AND SG INTERESTS TO PAY THE UNITED STATES A TOTAL OF $550,000 FOR ANTITRUST AND FALSE CLAIMS ACT VIOLATIONS

Action is First Justice Department Challenge to an Anticompetitive Bidding Agreement for
Bureau of Land Management Mineral Rights Leases

 

WASHINGTON — The Department of Justice today announced that it has reached a settlement with Gunnison Energy Corporation (GEC), SG Interests I Ltd. and SG Interests VII Ltd. (SGI) that requires the companies to pay a total of $550,000 to the United States for antitrust and False Claims Act violations related to an agreement not to compete in bidding for four natural gas leases sold at auction by the U.S. Department of Interior’s Bureau of Land Management (BLM). Today’s action marks the first time the Department of Justice has challenged an anticompetitive bidding agreement for mineral rights leases.The department’s Antitrust Division today filed a civil antitrust complaint in U.S. District Court for the District of Colorado, and at the same time filed a proposed settlement that, if approved by the court, would resolve the lawsuit. The complaint alleges that the agreement between GEC and SGI restrained trade in violation of Section 1 of the Sherman Act.“Today’s unprecedented antitrust enforcement action involving illegal bidding at Bureau of Land Management auctions, demonstrates the U.S. government’s resolve to ensure there is vigorous competition for federal oil and gas rights,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “At a time of budgetary constraint, it is crucial that the federal government receive the most competitive prices for these important leases, which ultimately benefits American taxpayers.”According to the complaint, GEC and SGI were separately developing natural gas resources in Western Colorado. In 2005, GEC and SGI entered into a written agreement under which they agreed that only SGI would bid at the auctions and then assign an interest in the acquired leases to GEC. The department determined that the agreement was not part of any procompetitive or efficiency-enhancing collaboration.As a result of the agreement between GEC and SGI, the United States received less revenue from the sale of the four leases than it would have had SGI and GEC competed at the auctions. The United States has the legal ability to obtain monetary damages when it has been injured by an antitrust violation. The proposed settlement provides that GEC and SGI each pay $275,000 to the United States to resolve the antitrust violations.The payments will also resolve civil claims that the United States has under the False Claims Act against GEC and SGI for making false statements to the government in connection with the agreement not to compete. The U.S. Attorney’s Office for the District of Colorado has entered into separate settlement agreements with the companies to resolve these claims.BLM is responsible for issuing leases for oil and gas exploration and development on lands owned or controlled by the federal government. BLM provides notice of parcels to be leased and then auctions a lease for each parcel. The winning bidder is required to certify that its bid was not the product of collusion with another bidder.“BLM relies on competition among bidders at onshore oil and gas auctions to ensure that the United States receives a fair and competitive price for its leases,” said BLM Director Bob Abbey. “We are hopeful that the outcome of this case will deter anticompetitive and fraudulent conduct at BLM auctions.”

The United States’ investigation resulted from a whistleblower lawsuit filed under the qui tamprovisions of the False Claims Act. Those provisions allow for private parties to sue on behalf of the United States. They also give the United States time to investigate to decide whether to take over prosecution of the allegations or allow the whistleblower to proceed. The whistleblower is entitled to receive a portion of any recovery.

GEC, an affiliate of Oxbow Corporation, is a Delaware corporation with its principal place of business in Denver. SGI is Texas limited partnerships with their headquarters in Houston. The managing partner of both limited partnerships is Gordy Oil Company, a Texas corporation.

The proposed settlement, along with the department’s competitive impact statement, will be published in The Federal Register, as required by the Antitrust Procedures and Penalties Act. Any person may submit written comments concerning the proposed settlement within 60 days of its publication to William H. Stallings, chief, Transportation, Energy and Agriculture Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 8000, Washington, D.C. 20530. At the conclusion of the 60-day comment period, the court may enter the settlement upon a finding that it serves the public interest.

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FOR IMMEDIATE RELEASE
MONDAY, FEBRUARY 13, 2012
WWW.JUSTICE.GOV

AT
(202) 514-2007
TTY (866) 514-5309

STATEMENT OF THE DEPARTMENT OF JUSTICE’S ANTITRUST DIVISION ON
ITS DECISION TO CLOSE ITS INVESTIGATIONS OF GOOGLE INC.’S
ACQUISITION OF MOTOROLA MOBILITY HOLDINGS INC. AND THE
ACQUISITIONS OF CERTAIN PATENTS BY APPLE INC.,
MICROSOFT CORP. AND RESEARCH IN MOTION LTD.

WASHINGTON — The Department of Justice’s Antitrust Division issued the following statement today after announcing the closing of its investigations into Google Inc.’s acquisition of Motorola Mobility Holdings Inc., the acquisitions by Apple Inc., Microsoft Corp. and Research in Motion Ltd. (RIM) of certain Nortel Networks Corporation patents, and the acquisition by Apple of certain Novell Inc. patents:

“After a thorough review of the proposed transactions, the Antitrust Division has determined that each acquisition is unlikely to substantially lessen competition and has closed these three investigations. In all of the transactions, the division conducted an in-depth analysis into the potential ability and incentives of the acquiring firms to use the patents they proposed acquiring to foreclose competitors. In particular, the division focused on standard essential patents (SEPs) that Motorola Mobility and Nortel had committed to license to industry participants through their participation in standard-setting organizations (SSOs). The division’s investigations focused on whether the acquiring firms could use these patents to raise rivals’ costs or foreclose competition.

“The division concluded that the specific transactions at issue are not likely to significantly change existing market dynamics.

“During the course of the division’s investigation, several of the principal competitors, including Google, Apple and Microsoft, made commitments concerning their SEP licensing policies. The division’s concerns about the potential anticompetitive use of SEPs was lessened by the clear commitments by Apple and Microsoft to license SEPs on fair, reasonable and non-discriminatory terms, as well as their commitments not to seek injunctions in disputes involving SEPs. Google’s commitments were more ambiguous and do not provide the same direct confirmation of its SEP licensing policies.

“In light of the importance of this industry to consumers and the complex issues raised by the intersection of the intellectual property rights and antitrust law at issue here, as well as uncertainty as to the exercise of the acquired rights, the division continues to monitor the use of SEPs in the wireless device industry, particularly in the smartphone and computer tablet markets. The division will not hesitate to take appropriate enforcement action to stop any anticompetitive use of SEP rights.”

BACKGROUND

Google/ Motorola Mobility

On Aug. 25, 2011, Google entered into an agreement to acquire Motorola Mobility, a manufacturer of smartphones and computer tablets and the holder of a portfolio of approximately 17,000 issued patents and 6,800 applications, including hundreds of SEPs relevant to wireless devices that Motorola Mobility committed to license through its participation in SSOs.

Rockstar Bidco

Rockstar Bidco, a partnership that includes, among others, RIM, Microsoft and Apple, was formed to acquire patents at the June 2011 Nortel bankruptcy auction, and to license and distribute them to certain partners. Nortel’s portfolio of approximately 6,000 patents and patent applications includes many SEPs that Nortel committed to license through its participation in SSOs and that are relevant to wireless devices (the Nortel SEPs).

Apple/Novell

Apple also proposes to acquire patents held by CPTN Holdings LLC, formerly owned by Novell, following CPTN’s acquisition in April 2011 of those patents on behalf of Apple, Oracle Corporation and EMC Corporation. As a member of the Open Invention Network (OIN), Novell committed to cross-license its patents on a royalty-free basis for use in the open source “Linux system,” a defined term in the OIN.

Competitive Landscape

Google, Apple, Microsoft and RIM have each developed mobile operating systems for smartphones and tablets. Apple and RIM manufacture and sell the smartphones and tablets that run on their proprietary mobile operating systems. In contrast, Microsoft licenses its proprietary mobile operating systems, Windows Phone 7 and Windows Mobile, to non-affiliated wireless handset original equipment manufacturers (OEMs). Google, in turn, sponsors Android, a mobile operating system that it distributes to OEMs without monetary charge under an open source license. These operating systems provide platforms for a variety of products and services offered by competing handset and tablet manufacturers, as well as, application developers.

At the end of 2011, Google’s Android accounted for approximately 46 percent of the U.S. smartphone operating system platform subscribers and Apple’s iOS was used by about 30 percent of subscribers. RIM and Microsoft accounted for approximately 15 percent and 6 percent of the share of smartphone subscribers, respectively.

Apple’s iPad is the leading tablet in the market, although the recently introduced Android-based tablets are rapidly gaining share. Thus far, tablets running RIM’s and Microsoft’s operating systems have a minimal presence in the marketplace.

The Importance of Standard Setting in the Wireless Industry

Today’s wireless device industry, which includes smartphones and tablets, relies on complex operating systems that allow seamless interaction with wireless communications technologies while providing audio, video and computer functionalities.

To facilitate seamless interoperability, industry participants work through SSOs collectively to develop technical standards that establish precise specifications for essential components of the technology. For example, wireless devices typically implement a significant number of telecommunication and computer standards, including cellular air interface standards (e.g., 3G and 4G LTE standards), wireless broadband technologies (e.g., WiFi and WiMax) and video compression technologies (e.g., H.264). As with other industries, these standards facilitate compatibility among products and provide consumers with a wider range of products and capabilities than would otherwise be available.

Often, many technologies adopted by the SSOs fall within the scope of existing patents or patent applications. Once a patent is included in a standard, it becomes essential to the implementation of that standard, thus the term “Standard Essential Patent.” After industry participants make complementary investments, abandoning the standard can be extremely costly. Thus, after the standard is set, the patent holder could seek to extract a higher payment than was attributable to the value of the patented technology before the standard was set. Such behavior can distort innovation and raise prices to consumers. A comparable harm may also arise in situations outside of the SSO context where a patent holder’s prior actions, such as open source commitments, lead others to make complementary investments (See U.S. Department of Justice and Federal Trade Commission, Antitrust Enforcement & Intellectual Property Rights: Promoting Innovation and Competition, April 17, 2007 at 35-6).

Most SSOs therefore require the owners of patents essential to the proposed standard that are participating in the SSO’s standard-setting activities to make disclosure and licensing commitments with respect to their essential patents. These commitments are intended to reduce the subsequent inappropriate use of the patent rights at issue, and thus prevent disputes that can inhibit innovation and competition. One common licensing requirement is to require SSO members to commit to license patented technologies essential to a standard on reasonable and nondiscriminatory (RAND) terms (for SSOs based in the United States) or on fair, reasonable and nondiscriminatory (FRAND) terms (for SSOs based outside the United States) (collectively F/RAND). In practice, however, SSO F/RAND requirements have not prevented significant disputes from arising in connection with the licensing of SEPs, including actions by patent holders seeking injunctive or exclusionary relief that could alter competitive market outcomes.

ANALYSIS

The division’s investigations regarding the acquisitions of the Motorola Mobility and Nortel SEPs focused on whether the acquiring firms would have the incentive and ability to exploit ambiguities in the SSOs’ F/RAND licensing commitments to hold up rivals, thus preventing or inhibiting innovation and competition (The division’s analysis was limited to SEPs encumbered by F/RAND commitments). Such hold up could include raising the costs to rivals by demanding supracompetitive licensing rates, compelling prospective licensees to grant the SEP holder the right to use the licensee’s differentiating intellectual property, charging licensees the entire portfolio royalty rate when licensing only a small subset of the patent holder’s SEPs in its portfolio, or seeking to prevent or exclude products practicing those SEPs from the market altogether. In this analysis, the critical issue is whether the patent holder has the incentive and ability to hold up its competitors, particularly through the threat of an injunction or exclusion order. The division’s analysis focused on how the proposed transactions might change that incentive and ability to do so.

The division concluded that each of the transactions was unlikely to substantially lessen competition for wireless devices. With respect to RIM’s and Microsoft’s acquisition of Nortel patents, their low market shares in mobile platforms would likely make a strategy to harm rivals either through injunctions or supracompetitive royalties based on the acquired Nortel SEPs unprofitable. Because of their low market shares, they are unlikely to attract a sufficient number of new customers to their mobile platforms to compensate for the lost patent royalty revenues. Moreover, Microsoft has cross-license agreements in place with the majority of its Android-based OEM competitors, making such a strategy even less plausible for it.

Apple’s and Google’s substantial share of mobile platforms makes it more likely that as the owners of additional SEPs they could hold up rivals, thus harming competition and innovation. For example, Apple would likely benefit significantly through increased sales of its devices if it could exclude Android-based phones from the market or raise the costs of such phones through IP-licenses or patent litigation. Google could similarly benefit by raising the costs of, or excluding, Apple devices because of the revenues it derives from Android-based devices.

The specific transactions at issue, however, are not likely to substantially lessen competition. The evidence shows that Motorola Mobility has had a long and aggressive history of seeking to capitalize on its intellectual property and has been engaged in extended disputes with Apple, Microsoft and others. As Google’s acquisition of Motorola Mobility is unlikely to materially alter that policy, the division concluded that transferring ownership of the patents would not substantially alter current market dynamics. This conclusion is limited to the transfer of ownership rights and not the exercise of those transferred rights.

With respect to Apple/Novell, the division concluded that the acquisition of the patents from CPTN, formerly owned by Novell, is unlikely to harm competition. While the patents Apple would acquire are important to the open source community and to Linux-based software in particular, the OIN, to which Novell belonged, requires its participating patent holders to offer a perpetual, royalty-free license for use in the “Linux-system.” The division investigated whether the change in ownership would permit Apple to avoid OIN commitments and seek royalties from Linux users. The division concluded it would not, a conclusion made easier by Apple’s commitment to honor Novell’s OIN licensing commitments.

In its analysis of the transactions, the division took into account the fact that during the pendency of these investigations, Apple, Google and Microsoft each made public statements explaining their respective SEP licensing practices. Both Apple and Microsoft made clear that they will not seek to prevent or exclude rivals’ products from the market in exercising their SEP rights.

Apple outlined its view of F/RAND in a letter to the European Telecommunications Standards Institute (ETSI) on Nov. 11, 2011, stating among other things:

“A party who made a FRAND commitment to license its cellular standards essential patents or otherwise acquired assets/rights from a party who made the FRAND commitment must not seek injunctive relief on such patents. Seeking an injunction would be a violation of the party’s commitment to FRAND licensing.” (emphasis supplied)

Microsoft stated publicly on Feb. 8, 2012, among other things:

“This means that Microsoft will not seek an injunction or exclusion order against any firm on the basis of those essential patents.”

If adhered to in practice, these positions could significantly reduce the possibility of a hold up or use of an injunction as a threat to inhibit or preclude innovation and competition.

Google’s commitments have been less clear. In particular, Google has stated to the IEEE and others on Feb. 8, 2012, that its policy is to refrain from seeking injunctive relief for the infringement of SEPs against a counter-party, but apparently only for disputes involving future license revenues, and only if the counterparty: forgoes certain defenses such as challenging the validity of the patent; pays the full disputed amount into escrow; and agrees to a reciprocal process regarding injunctions. Google’s statement therefore does not directly provide the same assurance as the other companies’ statements concerning the exercise of its newly acquired patent rights. Nonetheless, the division determined that the acquisition of the patents by Google did not substantially lessen competition, but how Google may exercise its patents in the future remains a significant concern.

For these reasons the division continues to have concerns about the potential inappropriate use of SEPs to disrupt competition and will continue to monitor the use of SEPs in the wireless device industry, particularly as they relate to smartphones and computer tablets. The division’s continued monitoring of how competitors are exercising their patent rights will ensure that competition and innovation are unfettered in this important industry.

All three of the transactions highlight the complex intersection of intellectual property rights and antitrust law and the need to determine the correct balance between the rightful exercise of patent rights and a patent holder’s incentive and ability to harm competition through the anticompetitive use of those rights.

Agency Cooperation

During the course of its investigation of the Google/Motorola Mobility transaction, the Department of Justice cooperated closely with the European Commission. In addition, the Department of Justice had discussions with the Australian Competition and Consumer Commission, Canadian Competition Bureau, Israeli Antitrust Authority and the Korean Fair Trade Commission. In connection with the investigations relating to the Nortel patent assets, the division worked closely with states of New York and California and with the Canadian Competition Bureau.

The Antitrust Division’s Closing Statement Policy

The division provides this statement under its policy of issuing statements concerning the closing of investigations in appropriate cases. This statement is limited by the division’s obligation to protect the confidentiality of certain information obtained in its investigations. As in most of its investigations, the division’s evaluation has been highly fact-specific, and many of the relevant underlying facts are not public. Consequently, readers should not draw overly broad conclusions regarding how the division is likely in the future to analyze other collaborations or activities, or transactions involving particular firms. Enforcement decisions are made on a case-by-case basis, and the analysis and conclusions discussed in this statement do not bind the division in any future enforcement actions. Guidance on the division’s policy regarding closing statements is available at: www.usdoj.gov/atr/public/guidelines/201888.htm.

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JUSTICE DEPARTMENT REQUIRES MILL DIVESTITURES IN INTERNATIONAL
PAPER’S ACQUISITION OF TEMPLE-INLAND

Without Divestitures Consumers Would Pay More for Containerboard and Corrugated Boxes; Divestitures Affect Mills in Central California, Tennessee and Possibly Kentucky

WASHINGTON — The Department of Justice announced today that it will require International Paper Company and Temple-Inland Inc. to divest three containerboard mills in order to proceed with their $4.3 billion merger.  The department said that the merger, as originally proposed, would have substantially lessened competition in the production and sale of containerboard, the type of paper used to make corrugated boxes, in the United States.

The department’s Antitrust Division filed a civil antitrust lawsuit today in U.S. District Court in Washington, D.C., to block the proposed transaction.  At the same time, the department filed a proposed settlement that, if approved by the court, will resolve the lawsuit by requiring International Paper and Temple-Inland to divest three containerboard mills to resolve the competitive concerns alleged in the lawsuit.

“Corrugated boxes made from containerboard are used to ship more than 90 percent of all goods nationwide,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.  “With the mill divestitures, the transaction can proceed and American consumers and businesses across the country can be assured that competition is preserved in this important industry that is vital to the U.S. economy.”

According to the complaint, International Paper and Temple-Inland are, respectively, the largest and third-largest producers of containerboard in North America.  The merger, as originally proposed, would have produced a single firm in control of approximately 37 percent of North American containerboard capacity.

The department said that by combining the containerboard capacity of International Paper and Temple-Inland, the proposed merger would significantly expand the volume of containerboard over which International Paper would benefit from a price increase, and likely would have led International Paper to strategically reduce its output of containerboard in order to increase the market price.

The proposed settlement requires the divestiture of Temple-Inland’s containerboard mills in Waverly, Tenn., and Ontario, Calif., and either International Paper’s containerboard mill in Oxnard, Calif., or International Paper’s containerboard mill in Henderson, Ky., but not both of those mills.  Collectively, the divestitures account for approximately 950,000 tons of containerboard capacity.  The department’s Antitrust Division must approve the purchaser or purchasers of the divested mills.

International Paper is a New York corporation headquartered in Memphis, Tenn.  International Paper owns and operates 12 containerboard mills and 133 box plants that convert containerboard into corrugated boxes in the United States.  In 2010, International Paper reported revenues of approximately $25.2 billion, with its North American Industrial Packaging Group, which produces containerboard and corrugated products, accounting for $8.4 billion.

Temple-Inland is a Delaware corporation headquartered in Austin, Texas.  Temple-Inland owns and operates seven containerboard mills and 53 box plants in the United States.  In 2010, Temple-Inland reported revenues of approximately $3.8 billion, with its corrugated-packing business accounting for approximately $3.2 billion.

The proposed settlement, along with the department’s competitive impact statement, will be published in the Federal Register, as required by the Antitrust Procedures and Penalties Act.  Any person may submit written comments concerning the proposed settlement within 60 days of its publication to Joshua H. Soven, Chief, Litigation I Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 4100, Washington, D.C. 20530.  At the conclusion of the 60-day comment period, the court may enter the settlement upon a finding that it is in the public interest.

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FOR IMMEDIATE RELEASE
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JUSTICE DEPARTMENT DISMISSES ANTITRUST LAWSUIT AGAINST DEUTSCHE BÖRSE AND NYSE EURONEXT

Companies Abandon Proposed Merger

WASHINGTON — The Department of Justice today announced that it filed a notice with the U.S. District Court for the District of Columbia to dismiss its antitrust lawsuit regarding the potential merger of Deutsche Börse AG and NYSE Euronext. The department said that the lawsuit and proposed settlement are no longer necessary since the parties have formally abandoned their plans to merge.

Background

On Dec. 22, 2011, the department filed an antitrust lawsuit in U.S. District Court for the District of Columbia, alleging that the transaction as originally proposed would have substantially lessened competition for displayed equities trading services, listing services for exchange-traded products, including exchange-traded funds, and real-time proprietary equity data products in the United States. At the same time, the department filed a proposed settlement of the lawsuit that would preserve competition in the United States by requiring Deutsche Börse to direct its subsidiary, International Securities Exchange Holdings Inc., to sell its 31.5 percent stake in Direct Edge Holdings LLC, the fourth largest stock exchange operator in the United States, and agree to other restrictions.

The European Commission recently prohibited the transaction due to the proposed deal’s effect on European consumers. The department’s Antitrust Division and the European Commission communicated extensively throughout the course of their respective investigations, with frequent contact between the leadership and investigative staffs, aided by waivers provided by the merging parties.

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