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Beware the Regulatory Pipeline
"The pipeline is fullthere doesn't seem to be an end in sight." That was the message from Scott Hammond, the deputy assistant attorney general for criminal enforcement at the U.S. Department of Justice's antitrust division. He was speaking in March to a packed ballroom at the American Bar Association's spring antitrust meeting in Washington.
The division's civil side has been busy as well. Since April 2011, Justice Department lawyers have filed 16 enforcement actions, up from six merger enforcement actions the prior year, reported Deputy Assistant Attorney General Leslie Overton. Another 12 transactions were abandoned or restructured in response to department concerns, up from six the prior year. "There has been very active, vigorous enforcement of antitrust laws on the civil side," Overton said.
The highest-profile suit of the year was the department's challenge of the $39 billion merger of AT&T Inc. and T-Mobile USA. When the suit was filed in August 2011, AT&T said it was "surprised" by the action, and that there was "no indication" that a challenge would be forthcoming.
Joseph Wayland, now acting head of the division, was the lead litigator in the suit, and he disputed that assertion. "We had a robust dialogue with the parties," he said, noting that the suit was filed five months after Justice was notified of the merger. "That's a long time.
"The idea that we moved more quickly than others expected," he continued, "shouldn't be taken as any sign that we weren't serious about what we did." First they had to decide whether the transaction would reduce competition: "Once we reached that conclusion, after considering the parties' arguments very carefully, that's when we brought the complaint." They aim for speed, he added, to remove uncertainty in the market.
Wayland was appointed acting head of the division in April, while the administration awaited Senate approval of Arnold & Porter's William Baer as the permanent selection.
Another highlight came in March, when a federal jury in San Francisco convicted Taiwan liquid crystal display maker AU Optronics Corp. and two top former executives for their participation in a five-year conspiracy to fix the prices of liquid crystal display panels. Hammond called the verdict "very significant," in part because it was the first time Justice "had to prove overcharge to a jury beyond a reasonable doubt." He predicted that the case will have a deterrent effect on international cartels: "In the future, any company will have to consider AU's fate."
Hammond was also questioned about the ongoing investigation into price-rigging and bid-fixing in the auto parts industry, which he said was "frankly massive. It may be the biggest [investigation] ever undertaken" by the antitrust division.
To date, three Japanese suppliers of automotive components and eight Japanese executives have pleaded guilty, and the companies have agreed to pay a total of $748 million in criminal fines, including the second-largest criminal fine ever for an antitrust violation. Hammond said the case also resulted in the longest sentence for an individual who voluntarily surrendered to U.S. jurisdiction.
Department lawyers also successfully sued to block H&R Block Inc.'s acquisition of TaxACT last year. Wayland said the antitrust division viewed the decision to sue as "a no-brainer." The transaction would have resulted in a duopoly and eliminated a maverick competitor with a low-priced model. "We were very satisfied with the court's opinion," he said, as well as its "embrace" of the government's new merger guidelines.
Wayland also touched on Justice's approval in March of a $4.5 billion bid by a consortium of companies, including Apple Inc., Microsoft Corp., and RIM, for Nortel's patent portfolio. The acquisition included standard essential patents, and Wayland said the department had "particular concern about holders of [standard essential patents] using them to unfairly disadvantage competitors." In this transaction, Wayland said, Justice concluded that "market dynamics were unlikely to be affected." But he cautioned, "We'll be very, very careful in scrutinizing how companies use" these patents.
On the international front, special adviser Rachel Brandenberger said that the Justice Department is "seeking to intensify international cooperation with many [antitrust] agencies around the world to establish what we like to call 'pick up the phone' relationships, where we're jointly thinking and working together on matters." She noted that a memorandum of understanding on antitrust issues with India was coming "soonmaybe very soon."
The department and the Federal Trade Commission signed such a memorandum with China last July, adding additional guidance in November. The antitrust relationship between the two countries "continues to build," Brandenberger said.