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Arguing that companies increasingly are turning to joint ventures instead of mergers, Assistant Attorney General Charles James said Tuesday that the Department of Justice’s antitrust division plans to subject these collaborations to even tougher scrutiny. “Joint ventures are a high priority for the division,” James told the American Bar Association’s antitrust section. The Justice Department is actively investigating joint ventures in the online media, financial services and electronic airline ticketing sectors, he said. James declined to identify the companies being probed or say when the government expects to complete its investigations. Joint ventures are troubling if they substantially alter how companies compete in the market much like a merger would, James said. Responding to questions after the speech, James said the antitrust division begins its joint venture analysis by examining whether the collaboration would produce economic efficiencies. If it does not produce efficiencies, then the antitrust division would argue that it is a per-se violation of � 1 of the Sherman Act. That means the deal is blatantly illegal, and the government does not have to prove competitive harm. For joint ventures that do result in some efficiencies, the antitrust division must determine if the collaboration is “meaningful” and if efficiencies outweigh any anti-competitive harms, he said. This, he warned, is difficult. “Joint venture law puts a high burden on the government,” he said. Making their annual pilgrimage to the ABA annual meeting, James and Federal Trade Commission Chairman Timothy Muris gave spirited defenses of their enforcement records for the past year, an apparent response to the rumblings among some antitrust lawyers that the agencies are less aggressive than their Clinton administration predecessors. The antitrust division has challenged 19 mergers in the last year, losing one case. In his prepared remarks, James said five were resolved with consent decrees, seven involved so-called fix-it first remedies where the companies altered the deals and six were abandoned. It also has brought two “gun-jumping” cases, one on behalf of the FTC, against companies charged with proceeding with mergers plans before receiving regulatory clearance. Major antitrust investigations now pending include the EchoStar Communications Corp.-DirecTV Inc., Comcast Corp.-AT&T Broadband, Northrop Grumman Corp.-TRW Inc. and Univision-Hispanic Broadcasting Corp. The lawyers, James quipped, should drum up more business if they want to see the agencies bring more cases. “You folks are not doing your jobs,” he said. “Why are you sitting here listening to me? Let’s get on with it.” Muris said the FTC has brought 22 merger enforcement actions, though the significant decline in deals has caused the agency to shift some resources from merger reviews to other areas of antitrust enforcement. It has held workshops on merger remedies, second requests, electronic records and financial records, Muris said. The agency also remains on track to offer electronic filing of Hart-Scott-Rodino Act notices next year, he said. “We are busy and it is an exciting time,” he said. Muris also indicated the FTC is willing to bring challenges against vertical mergers, referring to deals where a company combines with a supplier. Some had argued that the agency would not touch these cases during a Republican administration. The FTC challenged Cytyc Corp.’s acquisition of Digene Corp. because it would result in immediate competitive harm to a new entrant in the cervical cancer testing market, he said. Next year the antitrust division expects to expand its reliance on the “coordinated effect” theory of merger analysis. This holds that some deals are anti-competitive because they would permit the remaining players in the market to collaboratively raise prices. It has fallen out of favor in recent years with the government relying primarily on the unilateral effect theory, which holds that a deal is anti-competitive if the merged company could profitably raise prices. So-called unilateral effects in mergers are easier to prove empirically with economic data. James said the division has no plans to abandon unilateral effects cases. “We are not here to talk about how we are killing unilateral effects,” he said. Rather, the coordinated effects theory provides another avenue to attack deals that would otherwise escape scrutiny, he said. Copyright �2002 TDD, LLC. All rights reserved.

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