In 2012, the Antitrust Division (Division) of the U.S. Department of Justice won several significant convictions, both at trial and through guilty pleas, while the merger enforcement efforts of the Division and the Federal Trade Commission (FTC) blocked or modified a handful of transactions. Elsewhere, the European Commission's (EC's) cartel program continued unabated, while the EC blocked one of the most closely watched mergers of the year.
Criminal Cases and Investigations
- TFT-LCD Price-Fixing Trial: After an eight-week jury trial, the Division obtained price-fixing convictions against AU Optronics, a Taiwanese LCD manufacturer; its U.S. subsidiary; and two of its senior executives. Judge Susan Illston of the U.S. District Court for the Northern District of California subsequently levied a $500 million fine against the company, the largest antitrust fine imposed since Hoffmann La Roche pleaded guilty to fixing the price of numerous vitamins in 1999.
- Automobile Parts Investigation: The Division continues to investigate and prosecute corporate and individual defendants as part of its ongoing investigation into alleged bid rigging and price fixing in the automobile parts industry. Eight corporate defendants and 12 executives agreed to plead guilty to criminal antitrust charges in 2012. A ninth corporate defendant had previously pled guilty in 2011.
- Municipal Bond Investigation: In 2012, the Division's multiyear investigation into alleged bid rigging in the municipal bonds derivatives market resulted in three individuals pleading guilty to Sherman Act violations and six more being convicted at trial for wire fraud and conspiracy charges related to alleged bid rigging in the market for municipal bond contracts and derivatives. A total of 19 current and former executives and one corporate defendant have pleaded guilty or been convicted of charges related to the investigation.
- Apple/E-Book Publisher Litigation: The Division filed suit against five of the largest book publishers for allegedly conspiring to reduce competition in the market for e-books. The allegations arose out of bilateral agreements between Apple and the publishers that adopted an agency pricing model, under which Apple received "most-favored nation" status for e-book prices. Four of the publishers subsequently reached settlements with the DOJ in which they agreed to (1) terminate their agreements with Apple and (2) not enter into any agreements constraining retailers' pricing discretion for at least two years. The DOJ is still litigating the case against the other publisher.
- FTC v. Watson Pharmaceuticals, Inc.: The U.S. Court of Appeals for the Eleventh Circuit ruled against the FTC in its latest challenge to so-called "reverse payment" or "pay for delay" settlements in the pharmaceutical industry. Under the standard adopted by the Eleventh Circuit, reverse payment settlements are presumptively legal under the antitrust laws as long as the resulting period of exclusion is narrower in breadth and/or shorter in duration than that granted by the presumptively legitimate patents. The Eleventh Circuit's decision is unlikely to be the last word on this matter because the U.S. Supreme Court has granted certiorari in the case.
- Credit Card Interchange Fee Settlement: Visa Inc., MasterCard Inc., and several large banks reached a tentative $7.2 billion settlement with retailers to settle a long-running antitrust case alleging that the credit card companies and banks conspired to fix the price of "swipe fees" that retailers paid for each transaction. If the settlement receives final approval from the U.S. District Court for the Eastern District of New York, it will be the largest antitrust settlement in history.
Mergers and Acquisitions
- 3M and Avery Dennison: 3M Company, maker of the ubiquitous Post-it® Note, shelved its plan to acquire label maker Avery Dennison's office and consumer products division in light of threatened litigation by the Antitrust Division. 3M had offered $550 million for the division. According to the Division, the two companies directly compete in the market for consumer and business labels, and the proposed merger would have resulted in 3M's controlling 80% of the market for labels and sticky notes.
- Integrated Device Technology and PLX Technology: The FTC filed an administrative complaint seeking to enjoin the merger of two electronic component manufacturers. According to the FTC, the $330 million merger would have limited competition in the market for PCIe switches, which are used in a variety of consumer electronics and computers. The two companies subsequently abandoned the transaction.
- Deutsche Boerse and NYSE Euronext: The EC blocked Deutsche Boerse's $9.5 billion acquisition of NYSE Euronext. According to the EC, the merged company would have a near monopoly in European derivatives traded on financial exchanges. The parties claimed that the EC relied upon an unrealistic and narrow definition of the market for derivatives. Although the parties abandoned the transaction, Deutsche Boerse has appealed to the European Court of Justice.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis attorneys:
Harry T. Robins
Kent M. Roger
Izzet M. Sinan