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Fresh off its victory over Computer Associates International Inc., the Department of Justice is expanding its campaign against “gun-jumping,” Assistant Attorney General Charles James said Friday. More prosecutions, a study of gun-jumping issues and guidance to the bar are likely in the coming months, James said at the American Bar Association antitrust section spring meeting. Gun-jumping occurs when an acquirer asserts business control over the target before the deal receives antitrust clearance. Regulators view gun-jumping as a serious charge because the acquirer can gain inside information that might make it impossible to restore the previous competitive equilibrium if the deal is blocked. James’ comments come just five days after the antitrust division announced that Computer Associates and Platinum Technology International Inc., which CA acquired in 1999 for $3.5 billion, had agreed to pay $638,000 for violating the premerger waiting period. In a suit filed in September, the government charged that CA, an Islandia, N.Y., software company, restricted Platinum’s ability to offer discounts to customers while the Justice Department was still reviewing the merger. Besides the penalty, CA also agreed not to interfere with the ability of future acquisition targets to set prices. “That was an important case to send a signal,” James said. But lawyers at the ABA conference questioned how successful the Justice Department would be in thwarting gun-jumpers. “Enforcement officials for years have tried to clarify this area but it has proved very difficult,” said David Balto, a partner in the Washington, D.C., office of New York-based White & Case. The problem is that acquirers have a strong interest in protecting the value of a target company. That value could plummet if the target’s sales force starts cutting long-term deals at sweetheart rates, which appears to be CA’s worry in the Platinum deal. “It is a legitimate concern,” Balto said. “It is just that Computer Associates went a little too far.” James appeared on the last day of the ABA conference on a panel with Federal Trade Commission Chairman Timothy J. Muris, European Commission competition director Alexander Schaub and National Association of Attorneys General antitrust task force chairwoman Patricia Conners. Besides gun-jumping, James said the drop in mergers is permitting the division to focus on other anti-competitive activities, including joint ventures and other forms of competitor collaboration. “It is very important that the Justice Department be very active in scrutinizing these transactions,” he said. The division also is starting a “top-down” review of antitrust remedies that parallels a similar FTC initiative. The Microsoft Corp. antitrust case proves there is a wide difference of opinion when it comes to remedies, James said. But the antitrust chief is dubious about calls for a strict policy on remedies. “It is very important that the agency have the flexibility to have the remedy fit the offense,” he said. Muris declared the controversial merger clearance accord a major success, reading a memo to the conference from a senior FTC official reporting that for the first time in his career there are not any pending clearance disputes between the agencies. “This is great,” Muris said. “This is how we should do business.” Though not mentioning Senate Commerce Committee Chairman Ernest Hollings by name, Muris did attempt to rebut the senator’s primary complaint against the section of the accord that awards all media mergers to the Justice Department. Hollings has said the FTC should handle media mergers because it has broader power to impose conditions on deals than the Justice Department. Muris said the agency in the 1970s briefly tried to go beyond the antitrust laws in reviewing deals. “That expansive view almost killed the FTC,” Muris said, referring to congressional backlash that almost led to dismantling of the agency 30 years ago. Responding to a question regarding the FTC’s recent successful challenge to Libbey Inc.’s acquisition of Anchor Hocking, Muris said the agency is concerned with a section of the judge’s opinion that appears to permit companies to repeatedly amend merger agreements throughout the FTC review process, including after it authorizes a court challenge. “We will be looking for ways to address that,” he said. On Wednesday, FTC commissioner Mozelle Thompson said the agency is considering requiring a company involved in a deal to file an amended Hart Scott Rodino application every time it alters a merger agreement. Muris did not address that proposal. Schaub said the future of global antitrust enforcement resides in “convergence” of systems rather than “harmonization.” The difference is that convergence is merely an attempt to get various antitrust agencies to approach deals in similar ways, while harmonization requires them to employ the same rules. Harmonization might be better for global companies, but it is not politically realistic, he said. “I don’t think this will ever happen, so you have to look for the second best solution,” he said. One option is to encourage various geo-political blocks of countries to form mini-versions of the European Commission’s competition bureau. These entities would create the broad principles to govern antitrust enforcement in the member countries, Schaub said. Copyright (c)2002 TDD, LLC. All rights reserved.

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