November 21, 2011

European Commission Rolls Out Investigation Of Bearings Makers

The European Commission recently raided SKF AB, Schaeffler Group, and the offices of other European rolling bearings makers to investigate whether they violated European antitrust rules.

The companies manufacture bearings for the automotive and aerospace industries. 

The Commission is investigating whether the companies violated European Union (“EU”) laws prohibiting cartels and restrictive business practices by allegedly entering into agreements which fixed the prices for ball-bearings.  The Commission noted that the inspections are part of a preliminary investigation and do not mean that the companies have committed any anticompetitive behavior. 

SKF, the world’s largest rolling bearings manufacturer, said its offices in Gothenburg, Sweden and Schweinfurt, Germany were visited by EU Officials. 

SKF and Schaeffler are both cooperating with the investigation.

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Categories: Antitrust and Price Fixing, Antitrust Enforcement, International Competition Issues

    November 15, 2011

    Federal Court Pulls The Plug On Digital Tax Preparation Merger

    A federal judge in the United States District Court for the District of Columbia has granted the United States’ motion for a permanent injunction enjoining H&R Block’s proposed acquisition of its digital tax preparation competitor, 2SS Holdings, Inc., the company offering TaxACT.  

    Judge Howell’s order in United States v. H&R Block, Inc., Civ. No. 11-00948 (BAH), unequivocally found that the proposed acquisition violates Section 7 of the Clayton Act.  The court based its decision on evidence including “documents and factual and expert testimony presented at an evidentiary hearing, the applicable law, and the parties’ legal memoranda and arguments ….”

    Although the Memorandum Opinion containing the court’s reasoning has been filed under seal to allow the parties to redact confidential information, the result is plain: H&R Block and 2SS are to remain distinct entities.

    The proposed acquisition was entered into on October 13, 2010.  H&R Block agreed to pay $287.5 million in cash for 2SS. 

    In a complaint filed in May 2011, the U.S. Department of Justice (“DOJ”) alleged that the three largest companies in the digital do-it-yourself tax preparation products market “service approximately 90% of all consumers,” and that the proposed acquisition of 2SS by H&R Block would create a duopoly by uniting the second and third largest providers.  The DOJ named Intuit, Inc., maker of TurboTax, as the industry leader.

    In defining the relevant product market, the DOJ claimed that because “[t]here are no reasonable product alternatives” to digital do-it-yourself tax preparation products, the product market should exclude “pen-and-paper” tax preparation or other services that offer tax preparation assistance, such as the H&R Block storefronts. 

    Ultimately, the court was persuaded by the DOJ’s arguments and enjoined the merger.

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    Categories: Antitrust Enforcement, Antitrust Litigation

      November 10, 2011

      Class Action Accuses Dairy Producers Of Reducing Herds To Increase Milk Prices

      A class action filed in the Northern District of California on behalf of U.S. consumers of milk and other dairy products is alleging that dairy producers prematurely slaughtered more than half a million cows to drive up the prices of dairy products.

      The plaintiffs in Matthew Edwards et al., v. National Milk Producers Federation, aka Cooperatives Working Together et al. allege that from 2003 to 2010 several dairy companies and trade groups, including Land O’Lakes, Dairy Farmers of America, Agri-Mark, Dairylea, National Milk Producers Federation, and Cooperatives Working Together (“CWT”), engaged in the premature slaughter of cows as part of a scheme to raise the price of milk and other dairy products by decreasing the supply of milk. 

      The plaintiffs claim that defendants manipulated the supply of milk which led to higher prices through “herd retirements” coordinated by the CWT.

      Dairy farmers in every state participate in CWT, producing almost 70% of the nation’s milk.  Dairy farmers submit bids for the price at which they sell their herds for slaughter through the retirement program.  The plaintiffs allege that more than 500,000 healthy cows were slaughtered prematurely under the program which reduced the supply of milk by approximately 10 billion pounds and resulted in a $9.55 billion total increase in the price of milk.

      CWT members say that the program, which ended in 2010, was created to assist dairy farmers who were losing money and that the program operated in full compliance with the antitrust laws.

      The dairy price-fixing class action lawsuit is brought on behalf of U.S. consumers who purchased milk and other dairy products (including cream, half & half, yogurt, cottage cheese, cream cheese and sour cream) from 2004 through the present.

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      Categories: Antitrust and Price Fixing, Antitrust Litigation

        November 4, 2011

        It’s Not “Over Easy” For Remaining Defendants In Egg Antitrust Litigation

        After denying four of six motions to dismiss just three weeks earlier, a federal judge in the Eastern District of Pennsylvania denied an additional motion to dismiss that was primarily aimed at limiting the scope of discovery in the In re Processed Egg Products Antitrust Litigation.

        The plaintiffs allege that Defendant egg producers and trade groups engaged in a conspiracy to manipulate the supply of, and thereby fix prices for, domestically sold eggs in violation of section 1 of the Sherman Act.  Plaintiffs charge that defendants’ objective was to take advantage of consumers’ “relatively inelastic” demand for eggs as well as the fact that eggs are commodities and have no market substitutes.

        Ruling on the prior motions to dismiss on September 26, 2011, District Judge Gene E.K. Pratter granted the motions to dismiss of Hillandale Gettysburg L.P., Hillandale Farms Inc., Hillandale Farms East, Inc. and the United Egg Association while denying the remaining four motions to dismiss.

        The question before the court was whether plaintiffs adequately alleged particularized facts that each defendant was a participant in the conspiracy.

        The court rejected attempts by the plaintiffs to implicate certain defendants by use of the generic reference “defendants” where there were no particularized facts pertaining to a specific defendant within the complaint.

        After the court found the existence of sufficient facts that explicitly detailed the participation of the four defendants whose motions were denied, the defendants again moved, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, for the court to enter an order dismissing any claim that defendants engaged in a conspiracy to reduce the production, or raise the price, of “egg products” based on a theory that the only purported conspiracy for which any facts are alleged is a conspiracy to reduce the supply of “shell eggs.”

        Defendants complained that the complaint’s references to “egg products” might be an entree for plaintiffs to expand the scope of discovery to information not relevant to the case.  The court, however, was not persuaded.

        Judge Pratter denied this additional motion noting that Rule 12(b)(6) should not be used to chisel issues for trial.  Additionally, Judge Pratter found that defendants did not adequately show why the well-pled facts supporting the conspiracy to reduce the supply of “shell eggs” would not also suffice to support a conspiracy to reduce the supply of “egg products” or why they should be considered separate markets.

        In denying defendants’ motion, Judge Pratter ruled it more prudent for defendants to address their concerns through pretrial devices which provide a more appropriate means for circumscribing the scope of discovery and defining the issues.

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        Categories: Antitrust and Price Fixing, Antitrust Litigation

          November 1, 2011

          Europeans And Feds Overhaul Trans-Atlantic Antitrust Enforcement

          October was a busy month for European and U.S. antitrust enforcers, who revised “best practices” aimed at enhancing the efficiency of antitrust investigations on both sides of the Atlantic.

          First, on October 14, 2011, the U.S. Department of Justice, the Federal Trade Commission and the European Commission (the “EC”) issued an updated set of “best practices” that they use to coordinate merger reviews under their concurrent jurisdictions.  Three days later, the EC announced another set of revised best practices regarding its unilateral review of alleged anticompetitive conduct.

          The revised practices regarding merger reviews are the latest development in a joint effort by the U.S. and the EC, started in 1991, “to promote cooperation and coordination and lessen the possibility or impact of differences … in the application of their [respective] competition laws.”  In 2002, they jointly issued their first set of best practices on concurrent merger reviews.

          The trans-Atlantic antitrust enforcers have now revised those practices, “confirming” the 2002 version and building on the “experience gained” since they were issued. 

          The most significant enhancement is the emphasis on the role of merging parties in facilitating cooperation.  For example, the revised practices encourage parties to authorize the agencies to share information, and to execute confidentiality waivers to enable such sharing.

          The practices also advise parties to coordinate the timing of their filings with the various agencies, warning that if a final decision in one jurisdiction is reached before filing has taken place in the other, any possibility of meaningful cooperation between the agencies will have been excluded.

          In addition, the practices implore the agencies to do their part to improve coordination.  For instance, they advise the agencies to:   

          • contact one another promptly upon learning of a merger that may require simultaneous review;  

          • align the timing of their investigations;

          • engage in inter-agency consultations, particularly at “key stages” such as before issuing a second request, negotiating remedies, or deciding to prohibit a merger;

          • sharing information such as draft discovery requests and their analyses of market definition, competitive effects and other relevant issues; and

          • permitting parties to give joint presentations, interviews and document submissions to the agencies.

          The revision notes the particular value of cooperating with respect to remedies, and includes an expanded discussion of how coordination can be improved in that regard.  For instance, it advises the agencies to “keep one another informed” of remedy discussions, “share draft remedy proposals,” and generally ensure that their remedies “do not impose inconsistent or conflicting obligations.”  The revised practices also encourage improvement of coordination with authorities in other nations.  For example, they advise parties to inform the U.S. and EU of any actual or anticipated outside review, and they advise the agencies to “seek to cooperate with [such] other authorities….” 

          Like the revised best practices on merger review, the EC’s recently-revised best practices for unilateral antitrust proceedings also aim to promote efficiency.  They follow a 2010 draft and were developed through “public consultation and practical experience.”  Significant improvements over the 2010 draft include advising the EC to:     

          • inform parties of the parameters for potential fines;

          • extend “state of play meetings” to cartel cases and complainants in certain circumstances;

          • provide enhanced access  to “key submissions” such as economic studies; and

          • publish rejection of complaints.

          The EC has also expanded the role of the independent Hearing Officer, who is responsible for guarding the procedural rights of the parties being reviewed.  Among other changes, the Hearing Officer can now resolve issues regarding attorney-client privilege and questions that might force parties to admit to violations.

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          Categories: Antitrust Enforcement, International Competition Issues


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