Under the Obama Administration, the Antitrust Division of the Department of Justice (DOJ) and the Federal Trade Commission (FTC) have not hesitated to litigate antitrust merger and conduct cases. Settlements in several recent high-profile antitrust matters (e.g., US Airways/American Airlines, Anheuser-Busch InBev/Grupo Modelo, Honeywell/Intermec, Nielsen/Arbitron, and major book publishers) highlight that the government enforcement agencies are willing to resolve antitrust cases before or during litigation.
Recent speeches by officials from the DOJ and the FTC emphasized the role of remedies in civil and criminal cases, and provided guidance to companies regarding the settlement process. Both officials noted that their guidance generally is applicable to matters before both the DOJ and FTC because the agencies are well aligned with respect to remedies.
FTC Bureau of Competition Director Deborah Feinstein, in a recent speech on the significance of consent order remedies, elaborated on the benefits to resolving matters through settlement rather than litigation. In her view, consent orders have the benefit of reaching a resolution quicker and with more certainty, and settlements are less resource intensive for the government, the companies involved and third parties. Also, the government can tailor the remedy to the facts more specifically in the settlement context, compared to what a court can do in the litigation context.
Feinstein stated that parties can initiate settlement discussions at any point during an investigation, and that ongoing dialogue with the agency staff regarding the contours of an acceptable settlement can reduce surprises and last-minute impasses. She addressed a “myth” that a settlement implies that the government’s case was not strong. In contrast, in her view, the stronger the government’s case, the more likely it is that parties are willing to enter into settlement discussions. Because an acceptable remedy must preserve or replace competition, the agencies have less room for negotiation than is the case in many corporate transactions. However, the agencies are willing to listen to parties’ settlement proposals, particularly when there is a credible buyer up front or in the wings, or a tailored conduct remedy would be procompetitive. In the mergers area, divestitures are the most common remedy; however, in certain instances licensing or other relief may resolve the agencies’ concerns. In conduct matters, the key components of remedies are: a cease and desist order; fencing-in terms to prevent recurrence; and reporting/monitoring requirements.
Significantly, Feinstein noted that matters the agencies investigate but decline to challenge (e.g. Office Depot/Office Max, Delta Air Lines/Virgin Atlantic Airways, T-Mobile/MetroPCS) also are instructive because the agencies publish information about these actions that provide insight into the agencies’ analysis of merger and non-merger investigations.
DOJ Assistant Attorney General Bill Baer also recently gave a speech on the importance of remedies to effective antitrust outcomes that echoed many of the concepts expressed by Feinstein. Baer stated that litigation is not the agencies’ preferred option, and that the government often can negotiate a settlement that resolves the agency’s competition concerns. However, he cautioned that negotiation takes time, so if companies wait until the last minute to begin settlement discussions, the result may be that the agency decides to litigate. In his view, once litigation has commenced, many cases end with a settlement or court-imposed remedy similar to what could have been achieved by settling prior to litigation.
In the merger area, Baer stated that an effective remedy usually includes a divestiture or other structural relief; an up-front buyer or likely buyers; a monitoring trustee; and any intellectual property or know-how needed by the buyer. In the civil conduct area, the remedy typically involves a permanent injunction that ends the violation, prevents recurrence, and restores competition. He noted that sometimes DOJ has obtained additional relief, including the imposition of internal compliance controls and appointment of an external compliance monitor in the recent Apple case, and the disgorgement of profits in the KeySpan matter. Further, he stated that the agencies will consider disgorgement as a potential remedy in both consummated merger and conduct cases.
In criminal antitrust matters, DOJ is guided by the federal Sentencing Guidelines and seeks sentences that reflect the seriousness of the offense, promote respect for the law, provide just punishment, afford deterrence, protect the public, and offer an opportunity for rehabilitation. He noted that for the first time as a condition of probation for antitrust violations, a court required corporate defendants, AU Optronics and its U.S. subsidiary, to develop and implement an antitrust and ethics compliance program, and retain an independent monitor to oversee the compliance program.
In sum, the agencies’ actions and speeches provide useful guidance to companies involved in antitrust investigations regarding the types of remedies available to the government, and explain why effective counsel often recommend proposing a remedy to end the investigation early in the process, when appropriate.