Recent Enforcement Activities of the US Antitrust Agencies

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The two federal regulatory agencies charged with enforcing the federal antitrust laws, the Federal Trade Commission and the Antitrust Division of the Department of Justice (the FTC and the DoJ; collectively, the Agencies), have continued their recent efforts to improve the efficiency of the merger review process by identifying and quickly closing the books on mergers that do not threaten competition, while taking appropriate steps to investigate and, where necessary, remedy those mergers that pose a significant risk to competition. As the sole agency charged with criminal enforcement powers, the DoJ has also continued its recent trend of allocating significant resources and attention to prosecuting cartels.

Developments in civil antitrust enforcement

Merger enforcement by the numbers

The number of transactions reported to the Agencies pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1975 (the HSR Act or HSR) continues to increase from the historic lows that followed the substantial upward revision of the HSR notification thresholds in 2001 and is up over last year. In 2007,1 2,201 transactions were reported to the Agencies pursuant to the HSR Act, up from the 1,768 transactions reported the previous year.2 Over this time, the Agencies' more high-profile merger enforcement efforts received significantly more attention from the media and overall merger enforcement became a frequent subject of political debate during the presidential election process.
Contrary to popular belief, vigorous merger enforcement continues to be the rule in the US.3 Of course, in the US, Agency enforcement is not determinative as the Agencies lack the power to unilaterally block a proposed transaction. Indeed, the Agencies' recent enforcement patterns have been shaped by, as much as any other factor, the high degree of difficulty in winning an injunction in federal court. Nonetheless, looking beyond the number of merger challenges, it is evident that the Agencies continue to rigorously enforce the antitrust laws in the merger context. During 2007, the DoJ launched 81 investigations and issued 32 Second Requests. As a result of the DoJ's civil investigation of mergers, four actions were filed in District Court and eight transactions were either restructured or abandoned prior to the filing of a complaint as a result of an announced challenge.4 The FTC, in turn, issued 31 Second Requests, accepted 14 consent agreements, authorised three preliminary injunctions, and issued one administrative complaint. As a result of FTC's enforcement efforts, five transactions were abandoned by the parties.
Despite what may appear to be a low number of challenges, the Agencies' enforcement efforts remain constant. For example, DoJ has, on average, issued roughly 14 public challenges from a total number of 106 merger investigations over the past six years. Likewise, the numbers are consistent with historical averages on a percentage basis. Over the past seven years, with the exception of one outlier (2005), the percentage of public challenges issued from the total number of merger investigations launched has consistently remained between around 10 and 15 per cent.5


By the time that the Federal Communications Commission finally approved the XM/Sirius merger, the DoJ had long since declined to take enforcement action against the controversial transaction because:
the evidence [did] not demonstrate that the proposed merger [...] [was] likely to substantially lessen competition [...] because the evidence did not show that the merger would enable the parties to profitably increase prices to satellite radio customers for several reasons, including: a lack of competition between the parties in important segments even without the merger; the competitive alternative services available to consumers; technological change that is expected to make those alternatives increasingly attractive over time; and efficiencies likely to flow from the transaction that could benefit consumers.6
This result was not altogether surprising given the DoJ's enforcement history with regard to the entertainment industry.
In determining not to challenge the merger, the DoJ made several critical findings that ultimately compelled this result. First, the DoJ found that since XM and Sirius each require their customers to purchase their own proprietary equipment in order to access their service, there 'has never been significant competition' between the two services for existing customers.7 Second, the DoJ found that despite their head-to-head competition for the right to distribute their products and services through the car manufacturers, there was no evidence that competition between XM and Sirius affected customers' choices of which car to buy and that no significant competition between XM and Sirius for satellite equipment and service sold through car manufacturers was likely to exist for many years. Third, although the DoJ found that XM and Sirius did compete vigorously in the mass market retail channel to attract additional subscribers, the DoJ also found that the mass market retail channel was significantly declining and, therefore, becoming less important to XM and Sirius as a percentage of overall sales. Fourth, the DoJ ultimately accepted the parties' core argument regarding demand-side substitution - namely, that there are numerous alternatives for audio entertainment that would prevent the merged XM/Sirius from profitably raising prices post-closing (such as traditional AM/FM radio, HD radio, MP3 players and audio offerings delivered through wireless telephones).8 Finally, the DoJ also accepted the parties' argument that the transaction would result in material and significant efficiencies, finding the likely variable cost savings were substantial and that the merger would likely 'allow the parties to consolidate development, production, and distribution efforts on a single line of radios and thereby eliminate duplicative costs and realise economies of scale'.9
Given these findings, the DoJ concluded that the investigation did not support defining a market limited to two satellite radio firms, and the investigation did not establish that the combined firm could profitably sustain an increased price to satellite radio consumers.10 The DoJ's decision not to challenge XM/Sirius is in line with the DoJ's prior enforcement decisions in the entertainment sector stretching back to the Clinton administration.

Whole Foods

In February 2007, Whole Foods Market Inc announced its planned acquisition of Wild Oats Markets Inc. Whole Foods and Wild Oats are the two largest operators of what the FTC defined as premium, natural, and organic supermarkets (PNOS).11 Such stores 'focus on high-quality perishables, specialty and natural organic produce, prepared foods, meat, fish[,] and bakery goods; generally have high levels of customer services; generally target affluent and well educated customers [and] [...] are mission driven with an emphasis on social and environmental responsibility'.12 At the time of the transaction, Whole Foods and Wild Oats operated 194 and 110 grocery stores, respectively, primarily in the United States.
After the parties filed their HSR notifications, the FTC investigated the transaction and on 6 June 2007 sought a preliminary injunction in federal district court to enjoin the closing on the basis that the transaction would create monopolies in eighteen cities where Whole Foods and Wild Oats are the only PNOS alternatives.13 To support their claim, the FTC relied in part on e-mails and blog postings authored by Whole Foods' CEO John Mackey, suggesting that the purpose of the transaction was to eliminate a competitor and further claiming that other supermarkets were unable to compete with Whole Foods.14 The court denied the FTC's motion on 23 August 2007, concluding that PNOS was not a properly defined relevant market, as Whole Foods and Wild Oats compete within the broader market of grocery stores and supermarkets. Whole Foods and Wild Oats promptly consummated the transaction on 28 August 2007.15 The FTC, despite the closing, appealed.
On appeal, the Court of Appeals for the DC Circuit reversed the lower court's decision, concluding that 'a core group of particularly dedicated, "distinct customers", paying "distinct prices", may constitute a recognisable submarket [...] whether they are dedicated because they need a complete "cluster of products"[...] because their particular circumstances dictate that a product "is the only realistic choice"[...] or because they find a particular product "uniquely attractive" [...]'.16 The court noted that 'the FTC's evidence delineated a PNOS submarket catering to a core group of customers who have decided that natural and organic is important, lifestyle of health and ecological sustainability is important', and that Whole Foods and Wild Oats did not dispute that they 'provide higher levels of customer service than conventional supermarkets, a "unique environment", and a particular focus on the "core values" these customers espoused'.17
The court remanded the case back to the district court to determine whether the FTC was likely to succeed in establishing an anti-competitive effect within the FTC-defined PNOS market. Although the district court still has to make that determination, the Court of Appeals decision is a significant victory for the FTC, which had suffered a string of fairly high-profile defeats over the past few years.18

Non-merger civil enforcement

Over the past year, the Agencies have also been active in non-merger civil enforcement. The Agencies' recent focus has been on investigating and challenging alleged anti-competitive conduct in the health-care, energy, real estate, and technology sectors.
In particular, the FTC continues to closely examine unilateral conduct in the health-care sector and has initiated several enforcement actions concerning the introduction of generic drugs. Most recently, the FTC sought to enjoin Cephalon from allegedly preventing competition to Provigil, a brand name drug used to treat sleep disorders by paying four generic manufacturers to refrain from selling a generic version of Provigil until 2012. The FTC claims that Cephalon denied consumers access to lower-cost generics and forced consumers to pay hundreds of millions of dollars more a year. The FTC alleges in its complaint that the patent-litigation settlement agreements agreed to by Cephalon and the four generic manufacturers, which included the payment of more than US$200 million, constituted an abuse of monopoly power that is unlawful under section 5 of the FTC Act.19 The FTC also finally resolved its long-standing dispute with Barr Laboratories regarding its agreement with Warner Chilcott not to sell a lower-priced generic version of Warner Chilcott's branded Ovcon 35 contraceptive. In November 2007, Barr agreed not to enter into similar agreements with other branded pharmaceutical suppliers.20

Criminal enforcement of the US antitrust laws

Criminal enforcement by the numbers

The detection, prosecution and deterrence of cartel offences remain the DoJ's highest priorities. Indeed, the DoJ's vigorous criminal enforcement efforts reaped large rewards in 2007, setting new records for total jail days (31,391), average sentence (31 months) and percentage of defendants sentenced to jail (87 per cent of defendants charged). The DoJ also successfully won longer jail sentences for foreign individual defendants in cartel cases: 30 months (British national in the marine hose case); 24 months (British national in the marine hose case); 20 months (British national in the marine hose case); and 14 months (Korean national in the DRAM case and two French nationals in the marine hose case). In fact, during 2007, the average sentence imposed on foreign defendants in international cartel cases reached an all-time high of 12 months, nearly doubling the average for 2006. The DoJ also collected more than US$600 million in fines.21
Over the course of 2007, the DoJ prosecuted defendants in 37 cases alleging global price-fixing conspiracies in the air transportation and marine hose industries, as well as a number of high-profile domestic prosecutions involving the federal E-Rate programme and sewer rehabilitation industry. The DoJ's cooperative efforts with cartel enforcers across the globe scaled new heights in 2007, resulting in coordinated searches and unprecedented plea agreements in the marine hose investigation. The DoJ's workload is unlikely to decline any time soon. At the close of 2007, the DoJ had 135 pending grand jury investigations, including more than 50 investigations of suspected international cartel activity.22

Air Cargo

The DoJ continues to generate plea deals, fines, and jail time in the air cargo litigation. In August 2007, British Airways Plc pled guilty and was sentenced to pay a US$300 million criminal fine for conspiring to fix cargo rates for international air shipments. Korean Air Lines pled guilty and was also sentenced to pay US$300 million in criminal fines. The DoJ secured additional guilty pleas from Qantas Airways Limited, Japan Airlines, Cathy Pacific Airways Limited, Martinair Holland NV, Societe Air France, KLM Royal Dutch Airlines, and, most recently, SAS Cargo Group. To date, more than US$1.2 billion in criminal fines has been imposed. The highest-ranking cargo executive in the United States for SAS Cargo Group pled guilty and agreed to serve six months in jail, and a Qantas executive agreed to serve eight months in jail along with a guilty plea and fine.23

Marine Hose

The marine hose case is the latest in a series of multilateral enforcement efforts led by the DoJ. In marine hose, the DoJ, along with the FBI, arrested eight foreign executives from the United Kingdom, France, Italy and Japan in Houston and San Francisco and conducted multiple searches in the United States. On the same day, the European Commission and the UK Office of Fair Trading conducted dawn raids across Europe. The Japan Fair Trade Commission soon after searched locations in Japan. These coordinated raids and arrests have resulted, so far, in the indictment of 12 foreign executives, seven of whom have now pled guilty, with two agreeing to serve time in the United States and three recently sentenced to serve prison time in the UK. Additionally, corporate defendant Manuli Rubber Industries SpA agreed to pay a criminal fine of US$2 million.24

The Ian Norris case

While the marine hose case witnessed the first criminal sentences imposed under the UK's Competition Act, the US's efforts to extradite a British national Ian Norris for Sherman Act violations committed prior to the criminalisation of certain antitrust violations in the UK in 2002 remains in limbo. The US first sought extradition of Mr Norris, the former Morgan Crucible chairman, in 2005 shortly after he was indicted for colluding with competitors to rig the price of carbon components used in the automotive and transit industries between 1989 and 2000. Although a UK magistrate had initially ruled that Norris was extradictable to the United States, and the High Court had twice rejected Norris' appeal of that ruling, a recent decision from the House of Lords granted Mr Norris a reprieve. Back in Magistrates Court, Mr Norris suffered a setback when the magistrate ruled that although the price-fixing charges had been thrown out, Mr Norris could still be extradited over the obstruction of justice allegations. The court also rejected arguments that extradition would violate Mr Norris' rights under European human rights laws due to his age and health.25 Appeals will no doubt follow.


The past year witnessed the final resolution of the Stolt-Nielsen case,26 establishing the most important set of precedents regarding the DoJ's ability to revoke an amnesty agreement under its Corporate Leniency Program. In August 1998, Stolt-Nielsen and two of its competitors in the parcel tanker shipping industry, Odfjell Seachem and Jo Tankers, conspired to allocate customers among themselves. After reporting antitrust compliance concerns to management, Stolt-Nielsen's general counsel resigned in March 2002. In response, Stolt-Nielsen instituted a comprehensive antitrust compliance policy and conducted an audit of the company's activities.27 On 15 January 2003, Stolt-Nielsen entered into an amnesty agreement with the DoJ, effectively immunising both the company and its cooperating employees. In the agreement itself, Stolt-Nielsen represented that it 'took prompt and effective action to terminate its part in the anti-competitive activity being reported upon discovery of the activity', and further agreed 'to provide full, continuing and complete cooperation to the Antitrust Division in connection with the activity being reported'.28 As part of its required cooperation under the agreement, Stolt-Nielsen and its executives provided incriminating evidence that led to guilty pleas by their co-conspirators, which included prison sentences for culpable executives and criminal fines of over US$62 million.29
On 8 April 2003, and despite Stolt-Nielsen's significant assistance in the prosecution of other cartel members, the DoJ informed Stolt-Nielsen that, according to newly uncovered evidence demonstrating that Stolt-Nielsen had continued to participate in the conspiracy until as late as November 2002, the company had not taken 'prompt and effective action to terminate its part in the anti-competitive activity being reported upon discovery of the activity'. For this reason, the DoJ ultimately withdrew its grant of leniency to the company in March 2004.30
In response to this unprecedented action by the DoJ, Stolt-Nielsen sued to enjoin the DoJ from indicting its executives, demanding that its agreement with the DoJ be enforced. The district court granted the injunction, finding that the DoJ could not unilaterally revoke the grant of leniency.31 The Third Circuit reversed, holding that the DoJ 'has exclusive authority and absolute discretion to decide whether to prosecute a case'.32 The court, however, noted that Stolt-Nielsen could cite its agreement with the DoJ as an affirmative defence to any indictment. In analysing the merits of such a defence, the Third Circuit instructed the district court to effectively determine for itself when the anti-competitive conduct was discovered by Stolt-Nielsen and whether the company took 'prompt and effective action to terminate its part in the anti-competitive activity being reported'.33 Following the Third Circuit's ruling, the DoJ indicted Stolt-Nielsen on 26 September 2006. Stolt-Nielsen subsequently moved to dismiss. On 29 November 2007, the district court granted Stolt-Nielsen's motion, dismissing the indictment. Importantly, the court held that the DoJ had the burden of proving that Stolt-Nielsen had materially breached the agreement. The court found that the DoJ had not satisfied its burden of proof, noting that the DoJ had not proven that Stolt-Nielsen had 'failed to take prompt and effective action to terminate its part in the conspiracy upon discovery', or had otherwise breached the agreement.34 Specifically, the court found that by publishing a comprehensive antitrust compliance policy to its employees and conducting an antitrust audit, Stolt-Nielsen had effectively terminated its participation in the conspiracy. Indeed, the court dismissed the DoJ's evidence that Stolt-Nielsen's participation in the conspiracy had continued after March 2002 in any event.35 Moreover, the court noted that the DoJ had received valuable evidence from Stolt-Nielsen in exchange for amnesty, which the DoJ effectively used to win guilty pleas from Stolt-Nielsen's co-conspirators.36
On 21 December 2007, the DoJ announced that it would not appeal the court's ruling, ending this long-running saga.37 The DoJ has identified certain practices in its Corporate Leniency Program that may have led to the dispute with Stolt-Nielsen and its failure to revoke its grant of leniency in that case. Future applicants will no doubt face more rigorous language in the DoJ's Model Conditional Leniency Letter as well as some other subtle changes to the DoJ's practices. It is unlikely that the DoJ will significantly tamper with what has been an extremely successful tool in rooting out cartels, but changes on the margins can be expected.


1 Dates refer to the Agencies' fiscal year.
2 US Department of Justice, Antitrust Division Workload Statistics FY 1998-2007 (2007 Workload Statistics), available at
3 See David L Meyer, Deputy Assistant Attorney General for Civil Enforcement, Antitrust Division, US Department of Justice, 'Merger Enforcement Is Alive and Well at the Department of Justice,' ABA Antitrust Section Fall Forum, Washington, DC, 15 November 2007, available at
4 2007 Workload Statistics at 3.
5 2007 Workload Statistics at 3.
6 (the XM/Sirius Statement).
7 XM/Sirius Statement at 1.
8 XM/Sirius Statement at 1-3.
9 XM/Sirius Statement at 4.
10 XM/Sirius Statement at 3-4.
11 FTC v Whole Foods Market Inc, et al, Case No. 07-5276 (DC Cir. July 29, 2008), available at (Whole Foods).
12 FTC v Whole Foods Market Inc, 502 F. Supp.2d 1, 28 (D.DC 2007).
13 Whole Foods at 3.
14 Whole Foods at 3.
15 Whole Foods at 4.
16 Whole Foods at 16 (citing Brown Shoe Co v United States, 370 US 294, 325 (1962); United States v Phila. Nat'l Bank, 374 US 321, 356 (1963); SuperTurf, Inc v Monsanto Co, 660 F.2d 1275, 1278 (8th Cir. 1981); Nat'l Collegiate Athletic Ass'n v Bd of Regents of the Univ of Okla, 468 US 85, 112 (1984)).
17 Whole Foods at 17.
18 See, for example, J Thomas Rosch, Commissioner, Federal Trade Commission, 'Litigation Merger Challenges: Lessons Learned,' Bates White Fifth Annual Antitrust Conference, Washington, DC, 2 June 2008 (citing FTC v Arch Coal, Inc, 329 F.Supp.2d 109 (D.DC 2004); United States v Oracle, 331 F.Supp.2d 1098 (N.D. Cal. 2004); FTC v Whole Foods Market, Inc, 502 F.Supp.2d 1 (D.DC 2007); and FTC v Foster, 2007-1 Trade Cas. (CCH) ¶ 75,725 (D.N.M. 2007)), available at
19 FTC v Cephalon Inc, Civil Action No. 08-0244 (JDB), US District Court for the District of Columbia, available at
21 Thomas O. Barnett, 'Competition Enforcement in an Innovative Economy', 4th Annual Competition Policy Conference, 20 June 2008, available at (the 20/06/2008 Barnett Speech), at 9-11.
22 2007 Workload Statistics at 4.
25 Megan Murphy, 'Ex-Morgan Crucible chief faces extradition', Financial, 25 July 2008, available at
26 United States v Stolt-Nielsen SA, 524 F.Supp.2d 609 (E.D. Pa. 2007) (Stolt-Nielsen III).
27 Stolt-Nielsen III, 524 F.Supp.2d at 611-12.
28 Stolt-Nielsen III, 524 F.Supp.2d at 613.
29 Stolt-Nielsen III, 524 F.Supp.2d at 613-14.
30 Stolt-Nielsen III, 524 F.Supp.2d at 614.
31 Stolt-Nielsen SA v United States, 352 F.Supp.2d 553 (E.D. Pa. 2005).
32 Stolt-Nielsen SA v United States, 442 F.3d 177 (3d Cir. 2006) (Stolt-Nielsen II).
33 Stolt-Nielsen II, 442 F.3d at 187 n.7.
34 Stolt-Nielsen III, 524 F.Supp.2d at 616-17.
35 Stolt-Nielsen III, 524 F.Supp.2d at 617-18.
36 Stolt-Nielsen III, 524 F.Supp.2d at 627-28.

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