A Q&A guide to competition law in the United States.
The Q&A gives a high level overview of merger control, restrictive agreements and practices, monopolies and abuse of market power, and joint ventures. In particular, it covers relevant triggering events and thresholds, notification requirements, procedures and timetables, third party claims, exclusions and exemptions, penalties for breach, and proposals for reform.
To compare answers across multiple jurisdictions visit the Competition law Country Q&A tool.
This Q&A is part of the PLC multi-jurisdictional guide to competition and cartel leniency. For a full list of jurisdictional Competition Q&As visit www.practicallaw.com/competition-mjg.
For a full list of jurisdictional Cartel Leniency Q&As, which provide a succinct overview of leniency and immunity, the applicable procedure and the regulatory authorities in multiple jurisdictions, visit www.practicallaw.com/leniency-mjg.
Mergers and acquisitions are governed primarily by section 7 of the Clayton Act (15 USC § 18), which prohibits transactions that may substantially lessen competition or tend to create a monopoly.
The Department of Justice's Antitrust Division (DOJ) and the Federal Trade Commission (FTC) are primarily responsible for enforcing the federal anti-trust laws. State attorneys general (AGs) can also challenge mergers under federal and state anti-trust laws.
The Hart-Scott-Rodino Act (15 USC § 18a) (HSR Act) requires that transactions meeting specific size-of-party and size-of-transaction thresholds be notified to the federal agencies before closing and not close until certain statutory waiting periods have elapsed or been terminated. However, even transactions which do not require HSR notification are subject to review under section 7 of the Clayton Act and other anti-trust laws.
The HSR Act applies to:
Mergers.
Consolidations.
Acquisitions of voting securities, non-corporate interests and certain assets.
Formations of joint ventures and partnerships.
Acquisitions of certain exclusive licences.
A transaction must be notified to the DOJ and FTC if:
The value of the transaction exceeds US$68.2 million (as at 1 December 2011, US$1 was about EUR0.8) but is less than US$272.8 million and if:
one party has US$136.4 million or more in annual net sales or total assets; and
the other party has US$13.6 million or more in annual net sales or total assets.
The value of the transaction exceeds US$272.8 million.
The size of the transaction includes the value of voting securities and non-corporate interests, and in some circumstances the assets of the target held by the acquiring party prior to and as a result of the transaction.
The size of the parties is determined by the annual net sales or total assets of the ultimate parent entity of each party to the transaction.
These thresholds are revised annually to adjust for inflation.
The following transactions are exempt from notification:
Acquisitions of certain goods and real estate in the ordinary course of business.
Certain transactions made only for investment if the acquiring party holds 10% or less after the acquisition of the acquired party's voting shares.
Intra-person transactions (transactions where the same party controls the acquiring entity and at least one of the acquired entities).
Transactions involving foreign firms.
Acquisitions by certain government entities.
Acquisitions subject to review by other government agencies.
Formation of unincorporated entities where no acquiring party obtains control.
HSR notification is mandatory if the transaction meets the thresholds and is not exempt (see Question 2, Thresholds and Exemptions).
A transaction can be notified at any time after the parties reach a letter of intent or binding agreement or the acquiring firm publicly announces a tender offer. While there is no filing deadline, the statutory waiting period does not begin to run until the parties have correctly notified the DOJ and FTC.
Parties can seek informal guidance (on an anonymous basis) from the FTC's Premerger Notification Office (PNO) on pre-merger notification and filing requirements.
Both parties to a transaction, which meets the thresholds, must make an individual filing. However, for tender offers and formations of joint ventures only the acquiring party or parties must file.
Filings must be made with both the DOJ and FTC.
Filings must be submitted using the HSR Notification and Report Form (Form), which requires information on the:
Parties':
corporate structure;
nature of business; and
revenues.
Structure of the transaction.
The filing must also include (HSR Rules):
Any relevant agreements.
Various regularly prepared financials.
Materials, prepared by or for officers or directors, regarding the competitive aspects of the transaction (Item 4(c) documents).
Confidential Information Memoranda, materials prepared by third party advisors for officers or directors relating to competitive aspects of the sale of the acquired entity(s) or assets, and documents analysing the synergies and/or efficiencies of the transaction prepared by or for any officers or directors of the acquiring entity (Item 4(d) documents). This requirement is new as of August 2011 (see below).
The Form and HSR rules were revised in August 2011. The updated Form and instructions for notification are available from the PNO and at www.ftc.gov/bc/hsr/hsrform.shtm.
The acquiring party must pay a filing fee, determined by the transaction's size, which ranges from US$45,000 to US$280,000.
See Question 4, Initial waiting period.
Parties must wait 30 calendar days after filing (15 calendar days for cash tender offers and certain bankruptcy proceedings) before they can complete their transaction (HSR Act). The DOJ and FTC can grant early termination of the waiting period if the parties request this and the agencies choose not to investigate (see below).
Both the DOJ and FTC conduct a preliminary review of notified transactions. If both agencies choose to investigate further, they will decide through a clearance process which regulator will conduct the investigation. The decision is usually based on industry expertise.
During the initial waiting period, the reviewing agency can:
Request voluntary submissions of information, such as customer lists and marketing plans.
Interview executives of the notifying parties.
Contact relevant third parties, such as competitors, customers and suppliers.
The notifying parties can request meetings with the reviewing agency and submit position papers addressing the reasons for the transaction and its likely competitive effects.
If early termination is not granted, the reviewing agency can allow the waiting period to expire or issue a request for additional information and documents (second request).
A second request seeks further information, including data and documents. Requests can be substantial and the notifying parties can negotiate with the reviewing agency to narrow the scope, such as limiting the issues to be addressed or number of executives required to produce documents.
The reviewing agency has the right to:
Interview party executives and relevant third parties informally or under oath.
Issue voluntary request letters to third parties for information and documents.
Issue a compulsory process which requires the submission of documents by third parties.
Once the parties have substantially complied with the second request, the reviewing agency has a 30-day review period (ten days for cash tender offers and certain bankruptcy proceedings), to determine whether to:
Allow the parties to complete the transaction.
Enter into a consent order requiring the parties to take certain actions to alleviate anti-competitive concerns (see Question 8).
Seek a preliminary (DOJ and FTC) or permanent (DOJ only) injunction in federal court to block the transaction.
Initiate an administrative proceeding before an administrative law judge (ALJ) (FTC only).
The review period is often extended by the parties' consent.
In the absence of a preliminary injunction, the parties can close the transaction while a decision is pending in an administrative or judicial proceeding.
Failure to issue a second request or challenge the transaction does not prevent the DOJ or FTC from challenging a completed transaction. Additionally, state AGs and private parties can challenge completed transactions.
For an overview of the notification process, see flowchart, United States: merger notifications.
HSR notifications (and subsequent information submitted) must remain confidential under the HSR Act unless the parties request and are granted early termination. Early termination notices are published with the parties' names in the Federal Registrar and online at www.ftc.gov/bc/earlyterm/index.html. However, the existence of an investigation into a transaction can become clear to third parties interviewed by the reviewing agency (see Question 4).
All information provided by the parties pursuant to the HSR Act is confidential (see above, Publicity). Additionally, parties can take steps to avoid disclosure of confidential information during litigation (see below, Confidentiality on request).
All information provided by the parties pursuant to the HSR Act is automatically kept confidential (see above, Publicity). Information obtained through compulsory process must also be kept confidential.
The parties can seek a protective order to prevent disclosure of confidential information during litigation and, after the investigation is closed, can request the return or destruction of materials provided to the agencies.
Although there is no formal procedure for third parties to participate in merger investigations, the DOJ and FTC routinely contact third parties to conduct voluntary interviews and obtain information about the market and potential competitive effects of the transaction. The agencies can also use compulsory process to obtain oral testimony, documents and other information from third parties.
Third parties can request a meeting with the DOJ or FTC to express concerns and submit information to illustrate potential anti-competitive effects. In addition, third parties can comment on consent orders during the public comment period.
The DOJ and FTC usually cannot share information or documents related to an investigation with third parties.
Third parties have no right to be heard during the course of a government investigation but can independently challenge a transaction in court if they will suffer anti-competitive harm from the transaction.
A transaction is unlawful if it may result in a substantial lessening of competition or tend to create a monopoly (section 7, Clayton Act).
The DOJ and FTC have jointly issued Horizontal Merger Guidelines (Guidelines), available at www.ftc.gov/os/2010/08/100819hmg.pdf, which outline the framework and analytical techniques the agencies use in reviewing proposed transactions. The Guidelines are designed to detect mergers that may create or enhance the merged entity's market power to (§ 1, Guidelines ):
Increase prices.
Reduce output.
Diminish innovation.
Engage in exclusionary conduct toward competitors.
The agencies typically define the relevant anti-trust market(s) to determine the area(s) in which anti-competitive harm can occur and to calculate market shares and market concentration levels in those areas. The agencies can rely on evidence of anti-competitive effects to define the market(s) (§ 4, Guidelines).
Market definition is based on the customers' willingness and ability to substitute other products for either of the merging entities' product(s). The relevant market includes the:
Relevant product market. This includes a product of one merging firm that competes with a product of the other merging firm and the substitutes for that product.
Relevant geographic market. This is, generally, the geographic area where suppliers make sales, including all competing suppliers with facilities in that region, regardless of their customers' location. However, when suppliers can price discriminate based on their customers' location, such as when suppliers deliver the products to customers, the geographic market will be where customers are located.
Generally, the reviewing agency will assess whether anti-competitive effects are likely to result in the relevant market(s) from (§ 2, Guidelines):
Unilateral effects. This is the merged firm's ability to unilaterally engage in anti-competitive conduct as a result of the transaction, including increasing prices, reducing output, or diminishing innovation (§ 6, Guidelines).
Co-ordinated effects. This is the increased likelihood of co-ordination among remaining competitors to engage in anti-competitive conduct, such as explicit or implicit agreements to increase prices (§ 7, Guidelines).
To determine the likelihood of these anti-competitive effects, the agencies consider:
Actual effects of a completed merger.
Relevant events in the industry, such as other mergers.
The extent to which the merging firms are competitors.
Whether the merger removes a maverick firm (one that plays a disruptive role in the market) from the market.
The existence of powerful buyers that can constrain otherwise potential anti-competitive effects.
The enforcement agencies will consider whether new entry into the relevant market or expansion by existing competitors is timely, likely and sufficient to deter or counteract the likely anti-competitive effects from the merger. Entry analysis includes the history of actual entry into (or exit from) the relevant market and the effort and expense required to enter the market (§ 9, Guidelines).
The enforcement agencies will consider potential merger-specific efficiencies that will benefit customers and are unlikely to be obtained without the merger, such as reduced costs and the introduction of new products. However, efficiencies must be substantiated by the merging firms and verifiable by reasonable means (§ 10, Guidelines). An efficiencies defence alone will almost never justify an otherwise anti-competitive transaction.
The agencies will also consider whether the acquired entity is otherwise likely to fail, and its assets likely to exit the market, making the merger no more anti-competitive than if the acquired firm had been permitted to fail (§ 11, Guidelines). However, the failing firm defence very rarely succeeds.
The parties can negotiate a consent order with the reviewing agency to resolve anti-competitive concerns at any time during the investigation, including after the regulator has initiated litigation to block the transaction. Consent orders are subject to a public comment period and either judicial scrutiny (DOJ) or internal agency review (FTC).
Remedies which can be imposed as conditions of clearance include:
Structural. The most common structural remedy is the divestiture of assets of one of the overlapping businesses to create a viable new competitor in the relevant market. Divestitures can be coupled with behavioural remedies to further minimise harm to competition, including:
providing assistance to the purchaser of divested assets;
licensing assets;
entering or amending certain business agreements; and
implementing firewalls to prevent sharing of sensitive information between the merging parties.
Behavioural. In some cases, particularly vertical transactions, behavioural remedies alone can suffice, but the agencies are less confident in the ability of behavioural remedies to maintain competition in the market.
Alternatively, the parties can propose and implement a structural remedy which, if the reviewing agency accepts it, allows the transaction to proceed without a formal consent order. However, this "fix-it-first" remedy is not favoured by the agencies and is rarely used.
In June 2011, the DOJ issued revisions to the Antitrust Division Policy Guide to Merger Remedies, available at www.justice.gov/atr/public/guidelines/272350.pdf. The revisions do not alter the key principles or types of remedies applied by DOJ staff but are meant to reflect the DOJ's more recent approach to merger remedies, including greater use of conduct remedies to address anti-competitive concerns.
Failure to correctly notify the anti-trust authorities prevents the statutory waiting period from beginning to run.
Violations under the HSR Act can result in a civil fine of up to US$16,000 for each day of the violation, which can be imposed on reporting entities and individual officers and directors. In addition, if a completed transaction violates the HSR Act, the agencies can require a divestiture of voting securities or assets by the merged firm or rescission of the transaction. The federal government may enforce these penalties in a civil action.
See above, Implementation before approval or after prohibition.
The FTC, DOJ and state AGs must initiate litigation in court to prevent a proposed transaction from closing until after a final determination on the merits. The merging parties can appeal these federal district court decisions to the federal court of appeals. The FTC can also bring administrative proceedings before an ALJ, which can be appealed to the FTC's full Commission and then to the US Court of Appeals.
Third parties cannot appeal a decision in an action brought by an enforcement authority but can bring a private action to challenge the transaction (see Question 6).
The anti-trust laws authorise the relevant authorities to investigate and challenge potentially unlawful transactions. However, the agencies' failure to challenge a transaction or restrictive covenant in the merger agreement does not make such conduct lawful under the anti-trust laws. In addition, failure to object to a restrictive covenant does not prevent the DOJ, FTC, state AGs, or private parties from later challenging the provision in court.
Certain industries are regulated by federal and state agencies that share enforcement powers with the DOJ and FTC, including:
Railroads.
Energy and electricity providers.
Telecommunications companies.
Banks and other financial institutions.
Insurance companies.
National security.
These regulators can impose additional requirements on merging entities, including prior approvals and notifications.
Unreasonable restraints of trade are prohibited (section 1, Sherman Act, 15 USC § 1). This can be enforced under civil or criminal law by the DOJ and under civil law by state AGs. However, criminal penalties are generally reserved for clearly unlawful conduct. In addition, restrictive practices are subject to civil investigation by the FTC under section 5 of the FTC Act (15 USC § 45) and civil or criminal investigation by state AGs under state anti-trust laws. In addition, private parties who suffer direct anti-competitive harm from violations under section 1 of the Sherman Act can bring private actions for triple the amount of actual damages (treble damages) or injunctive relief (section 4B, Clayton Act).
Unlawful restraints of trade generally raise prices, diminish the amount or quality of output or affect market power. To determine whether conduct unreasonably restrains trade, one of two standards is applied:
Per se rule. Certain categories of naked restraints among horizontal competitors are deemed per se illegal because their effects almost always harm competition. These include horizontal price-fixing, bid-rigging and market allocation.
Rule of reason. The parties' conduct is analysed for its actual competitive effects and will be found unreasonable if its anti-competitive effects outweigh the pro-competitive benefits. This approach considers the relevant market conditions and the restraint's history, nature, and effect in a relevant market.
Violations under section 1 of the Sherman Act occur only where the restrictive practice results from an agreement between two or more entities. The agreement can be:
Formal or informal, including tacit agreements between parties.
Proven by direct or circumstantial evidence that tends to exclude the possibility that the entities acted independently.
Mere parallel conduct by multiple firms, even conscious parallelism after competing firms recognise it is in their best interests to avoid price competition, is not an agreement punishable under section 1 of the Sherman Act.
Agreements to engage in per se illegal restraints of trade will violate section 1 of the Sherman Act (see Question 13).
There are express statutory exemptions for certain industries and activities, including:
Insurance companies (where regulated by state laws).
Organised labour activities.
Agricultural co-operatives.
Export trade companies.
Professional sports leagues.
Air carriers.
Judicial exemptions from enforcement of the anti-trust laws include:
State action doctrine. This exempts action taken by state and local governments or private parties in accordance with state policy and subject to active state supervision.
Noerr-Pennington doctrine. This affords anti-trust immunity to efforts to influence government action, including agreements to seek legislation or file a lawsuit.
In addition, courts have provided implied immunity to certain activities where enforcement of the anti-trust laws would be incompatible with an existing federal regulatory scheme, such as regulation by the Securities Exchange Commission (see Credit Suisse v Billing, 551 US 264 (2004)).
There are no exclusions for de minimis restrictive agreements. However, enforcement authorities and courts can choose not to investigate or punish restrictive conduct unlikely to have a substantial effect on commerce or competition, such as where the agreeing parties have an insignificant share of market power.
A general five-year statute of limitations applies to criminal violations of the Sherman Act (15 USC § 3282(a)). The time period does not begin to run until the purpose(s) of the conspiracy have been achieved or abandoned.
Civil actions challenging restrictive practices, brought under the Clayton Act, are subject to a four-year statute of limitations (section 4B, Clayton Act). This time period begins to run when the cause of action accrues, generally when the claimant(s) suffers an anti-trust injury from the alleged violation. However, the time period may be suspended when:
Certain government anti-trust proceedings are pending (section 5(i), Clayton Act).
The defendant(s) has fraudulently concealed its violation.
There is no notification requirement for restrictive agreements or practices, and a party cannot obtain clearance from the government that proposed conduct is lawful. However, parties can limit their exposure to enforcement and damages (being potentially liable only for actual, not treble, damages) by voluntarily notifying the agencies of:
Joint ventures for research and development.
Standards development organisations engaged in standards development activity.
Under the DOJ's business review process and FTC's advisory opinion practice, parties can obtain a non-binding statement of the agency's enforcement intentions regarding proposed business conduct.
Not applicable.
The DOJ and FTC are the relevant authorities.
There is no official form for voluntary notification or informal guidance.
Not applicable.
The DOJ, FTC and state AGs can start investigations on their own initiative.
Third parties can challenge restrictive agreements by lodging a complaint with the enforcement agencies or filing a private action in court.
Third parties can make complaints to the government and are often permitted (or required) to provide information and documents to the reviewing agency. Third parties can also comment on proposed consent agreements before they are implemented (see Question 23).
Third parties have no right to access confidential documents obtained during the course of an investigation.
Third parties have no right to be heard during the course of an investigation but may independently challenge restrictive agreements in court if they will suffer anti-competitive harm from that conduct.
There is no set procedure for investigating restrictive conduct and the duration of an investigation depends on the type of conduct at issue and whether the investigation is civil or criminal. At any time during the investigation, the parties can attempt to negotiate and enter a consent agreement with the reviewing agency to avoid litigation (see Question 23).
Once an enforcement authority elects to investigate restrictive conduct and clears the investigation with the other agency, the regulator can conduct a preliminary investigation, including requests for voluntary submissions from and interviews with the target firms and relevant third parties.
If the agency believes an anti-trust violation may have been committed, it can proceed to a formal investigation using a compulsory process to obtain documents, testimony, and answers to interrogatories.
Following a completed investigation, the reviewing agency can bring a civil action for injunctive relief in court or before an ALJ (FTC only). The full litigation and appeal process can take years.
If the DOJ decides that criminal prosecution is appropriate, the agency can open a grand jury investigation and obtain discovery through grand jury subpoenas and other discovery tools. The DOJ may then seek an indictment from the grand jury, enter a plea agreement, or terminate the investigation.
The enforcement agencies or the parties can disclose the existence of an anti-trust investigation. However, investigations generally remain private and confidential until the reviewing agency terminates the investigation, files a complaint, or the parties release a public statement regarding the investigation.
Information submitted to the enforcement authorities is protected from public disclosure by statute. However, information or documents can be disclosed in connection with litigation or an administrative proceeding. In a criminal investigation by the DOJ, Rule 6(e) of the Federal Rules of Criminal Procedure requires that grand jury proceedings and information disclosed in these proceedings be kept confidential. However, the rule does not prevent witnesses from disclosing information.
To prevent disclosure of voluntarily submitted information without prior notice by the government, the parties can:
Request written assurance from the DOJ that the information will be kept confidential.
Mark information as confidential to the DOJ and FTC.
During litigation, the parties may seek a protective order to prevent disclosure of commercially sensitive information, however, courts generally favour more liberal disclosure.
In addition to requests for voluntary submissions of documents and informal interviews, the enforcement agencies can issue subpoenas or civil investigative demands requiring the production of documents, responses to interrogatories and oral testimony from target entities and third parties. If an enforcement authority commences litigation, it can then use the broad discovery allowed under the Federal Rules of Civil Procedure and corresponding state rules.
The DOJ and state AGs can also obtain information through:
Grand jury subpoenas.
Search warrants.
Wiretaps.
Electronic surveillance.
The reviewing agency can enter into a consent order requiring the parties to discontinue the restrictive practice at any time. Consent order agreements proposed by the FTC are subject to a 30-day public comment period before the Commission's vote to issue the order. Consent decrees proposed by the DOJ must be approved by the Assistant Attorney General (AAG), accompanied by a competitive impact statement, and filed in federal district court. Consent decrees are then published in the Federal Registrar and subject to a 60-day public comment period. Following the public comment period, the court must find the settlement to be in the public's best interest before entering the decree. In both cases, parties to consent agreements do not admit liability.
The DOJ often enters into plea bargaining discussions. A plea agreement must be approved by the AAG and accepted by a federal district court to become effective.
Many state AGs have similar procedures for settling anti-trust investigations.
If an ALJ decides that section 5 of the FTC Act has been violated, the FTC can issue a cease and desist order requiring termination of the restrictive conduct. The FTC can, but rarely does, seek disgorgement or restitution in court. The DOJ and state AGs cannot issue orders, but can seek civil remedies or criminal sanctions by initiating litigation in court. In addition, all enforcement authorities can enter into consent agreements with the target parties.
The following fines can be imposed on the participating companies:
A civil penalty of up to US$16,000 can be imposed for each violation, or each day of a continuing violation, of an FTC cease and desist order by initiating litigation.
Criminal penalties of up to US$100 million for corporations and US$1 million for individuals can be imposed for violations under section 1 of the Sherman Act prosecuted in court by the DOJ.
Under federal law, the statutory maximum fine can be exceeded and a fine of up to twice the amount of financial gain to parties to the agreement or harm suffered by victims can be imposed.
Individuals can be subject to:
Criminal fines of up to US$1 million and a prison sentence of up to ten years for violation of section 1 of the Sherman Act.
Civil liability exists for violations of an FTC cease and desist order in which the individual was personally named. However, individuals are not often the target of civil investigations.
In the case of criminal anti-trust enforcement, the DOJ offers leniency to corporations and individuals if certain requirements are met. This includes:
Corporate leniency. The DOJ grants leniency to a corporation (and its current directors, officers and employees) that:
reports illegal anti-trust activity before an investigation is initiated or information is received from another source, if the corporation promptly terminated its part in the illegal activity;
provides continuing and complete co-operation throughout the investigation; and
was not the sole ringleader in performance of the illegal activity.
Leniency can be available after an investigation has begun if the corporation is the first party to come forward and the DOJ does not yet have incriminating evidence against the corporation.
Individual leniency. Individuals who approach the DOJ on their own behalf will be awarded leniency if:
the DOJ has not yet received the information from another source;
the individual provides continuing and complete co-operation through the investigation; and
the individual was not the sole ringleader in carrying out the illegal activity.
Persons who qualify for leniency can also be entitled to limited exposure to civil damages of only actual damages rather than treble damages.
Where an agreement contains a provision that violates the anti-trust laws, the entire agreement can be enjoined in court or terminated by a cease and desist order.
Third parties who have suffered an anti-trust injury can bring a private action for treble damages or injunctive relief, as well as costs and legal fees (section 4B, Clayton Act).
Excluding provisions for treble damages, private anti-trust actions are subject to the same procedural rules applied in other civil litigations.
Class actions are permissible if the criteria for class certification are satisfied.
The DOJ and state AGs must initiate litigation to obtain civil relief or impose criminal sanctions for anti-trust violations. Court orders can be challenged on appeal to the appropriate appellate court. ALJ decisions in actions brought by the FTC can be appealed to the Commission. The Commission's final decisions can be appealed to the US Court of Appeals and, ultimately, to the US Supreme Court.
Third parties cannot appeal a decision in an action brought by an enforcement authority but can bring a private action to challenge the restrictive conduct (see Question 18).
Unlawful monopolisation is subject to civil and criminal investigation and prosecution by the DOJ under section 2 of the Sherman and by state AGs under state anti-trust laws. However, criminal investigations under section 2 of the Sherman Act are rare. Monopoly-related conduct is also subject to civil investigation by the FTC under section 5 of the FTC Act. In addition, third parties directly harmed by anti-competitive conduct can bring private actions for civil remedies (section 4B, Clayton Act).
The following are prohibited (section 2, Sherman Act):
Monopolisation. A violation exists if the defendant:
possesses monopoly power in the relevant market; and
has engaged in exclusionary conduct to obtain or preserve monopoly power.
Attempted monopolisation. A violation exists if the defendant has engaged in exclusionary conduct with the specific intent of obtaining a monopoly resulting in a dangerous probability of obtaining monopoly power.
Conspiracy to monopolise. A violation exists if:
two or more entities enter a combination or conspiracy;
there is specific intent to monopolise; and
an overt act is taken in furtherance of this conspiracy.
Only monopoly power obtained or preserved through anti-competitive conduct, with no legitimate business justification, violates the anti-trust laws. Not all monopolies are unlawful, such as those obtained through:
Superior business acumen.
A superior product.
A historical accident.
Courts define monopoly power as the ability to maintain prices above a competitive level or exclude competitors from the relevant market. Monopoly power can be proven by:
Direct evidence of control over prices.
Direct evidence of exclusion of competitors.
Indirect evidence such as market share, high barriers to entry and specific market characteristics.
Courts have generally found that a defendant having a market share in excess of 70% is prima facie evidence of monopoly power in the relevant market, especially where there are high barriers to entry or increased competitor output. Where a defendant has a market share of 50% or less, courts rarely find that monopoly power exists. In attempted monopoly cases, courts:
Generally find a dangerous probability of monopoly power where the defendant possesses a market share of 50% or more.
Are unlikely to find a violation where the defendant's market share is between 30% and 50%.
Almost never find a violation where the defendant's market share is less than 30%.
The following types of abusive conduct have been found to violate section 2 of the Sherman Act:
Refusal to deal. The refusal to do business with certain suppliers or customers. However, in Verizon Communications Inc v Law Offices of Cutis V Trinko, LLP, 540 US 398 (2004)), the Supreme Court concluded that suppliers have no general duty to deal with competitors and, therefore, refusals to deal violate section 2 of the Sherman Act only in limited circumstances, such as where a firm terminates an existing voluntary, and presumably profitable, business agreement without a valid business justification.
Exclusive dealing. Agreements requiring a buyer to purchase all or almost all of its supplies from one supplier, where that supplier possesses a significant share of the relevant market.
Tying arrangements. Tying the purchase of one product to the purchase of another.
Predatory pricing. Pricing below an appropriate measure of cost where the party has a reasonable prospect of recovering its losses by subsequently driving out competition and raising prices.
Misuse of government processes. This may include influence over a standard-setting organisation or government standards, bringing sham litigation against a competitor to harm the competitor's ability to do business or fraudulently obtaining government protection from competition.
Tortious conduct. Tortious or otherwise illegal conduct that disparages competitors and significantly impedes competition.
There are various statutory exemptions available for various industries and activities (see Question 15).
Parties cannot obtain clearance from the regulators through notification. Parties may obtain informal guidance from the DOJ or FTC, however, such requests are uncommon (see Question 17).
The procedure is the same as for restrictive agreements and practices (see Questions 18 to 20 and 22).
The regulators' powers are the same as for restrictive agreements and practices (see Question 22).
The available penalties and orders are the same as for restrictive agreements and practices (see Question 24).
Third parties' rights are the same as for restrictive agreements and practices (see Question 25).
Not applicable.
There is no formal legal definition of a joint venture, however, the FTC and DOJ's Antitrust Guidelines for Collaborations Among Competitors defines a competitor collaboration as "a set of one or more agreements, other than merger agreements, between or among competitors to engage in economic activity, and the economic activity resulting therefrom". These guidelines are available at www.ftc.gov/os/2000/04/ftcdojguidelines.pdf.
Formations of joint ventures are analysed under the Guidelines to determine whether they may substantially lessen competition, or tend to create a monopoly in violation of section 7 of the Clayton Act (see Question 7).
Joint venture agreements are also subject to review under section 1 of the Sherman Act prohibiting unreasonable restraints of trade. However, agreements between participants of an efficiency-enhancing joint venture are analysed under the rule of reason, and not deemed per se illegal, if they are reasonably related and necessary to achieve the pro-competitive benefits of the enterprise (see Question 13). Therefore, in Texaco Inc v Dagher, 547 US 1 (2006), the Supreme Court held that the internal pricing decisions of a pro-competitive and legitimate joint venture cannot be deemed per se unlawful price-fixing.
A joint venture is also subject to enforcement under section 2 of the Sherman Act if it unilaterally engages in exclusionary conduct to obtain or maintain monopoly power. However, in American Needle, Inc v Nat'l Football League, 130 S Ct 2201 (2010), the Supreme Court held that because the 32 football teams comprising the NFL are independently managed and in competition with each other for business, they are separate economic entities and agreements between them are subject to review under section 1 of the Sherman Act rather than section 2.
The US has formal bilateral anti-trust co-operation agreements and informal understandings with foreign countries to obtain co-operation in anti-trust enforcement matters. However, information obtained by enforcement agencies under the HSR Act or through compulsory process remains protected from disclosure and cannot be shared with foreign enforcement agencies without the information provider's waiver.
The US has also entered into bilateral mutual legal assistance treaties with foreign countries for co-operation in criminal anti-trust law enforcement. The US agencies also participate in the Competition Committee of the Organisation for Economic Co-operation and Development (OECD) and the International Competition Network.
During the past two years, US anti-trust laws and policy have seen meaningful changes including:
The revised Horizontal Merger Guidelines issued in August 2010.
The revised Antitrust Division Policy Guide to Merger Remedies issued in June 2011.
Changes to the HSR Form and HSR regulations announced in July 2011.
In addition, in October 2011, the DOJ and FTC issued a joint Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program. This statement addressed the agencies' policy on accountable care organisations (ACOs) (organisations of healthcare providers), including application of rule of reason analysis to an ACO's joint contracting activities and expedited voluntary anti-trust review of newly formed ACOs.
There are currently no new proposals to further reform US anti-trust laws in the immediate future.
Head. Sharis A Pozen (Acting Assistant Attorney General)
Contact details. 950 Pennsylvania Avenue, NW
Washington, DC 20530
United States
T +1 202 514 2401
F +1 202 616 2645
E antitrust.atr@usdoj.gov
W www.justice.gov/atr/index.html
Outline structure. The DOJ is headed by the Assistant Attorney General (AAG) who is nominated by the President and confirmed by the Senate.
The DOJ has 14 litigating sections (including seven field offices), three economic sections, the Appellate Section, the Legal Policy Section, the Foreign Commerce Section and the Executive Office.
The AAG is supported by five Deputy AAGs responsible for:
Economic analysis.
International enforcement.
Criminal enforcement.
Regulatory matters.
Civil enforcement.
Responsibilities. The Antitrust Division is primarily responsible for civil and criminal enforcement of the federal anti-trust laws.
Procedure for obtaining documents. Many public documents can be accessed from the DOJ's website, including Business Review letters, case filings, guidelines and policy statements, and press releases.
Head. Jonathan Leibowitz (Chairman)
Contact details. 600 Pennsylvania Avenue, NW
Washington, DC 20580
T +1 202 326 3300
E antitrust@ftc.gov
W www.ftc.gov
Outline structure. The FTC is led by five Commissioners, including the Chairman, who are nominated by the President and confirmed by the Senate. The FTC comprises:
Bureau of Competition (BC).
Bureau of Consumer Protection.
Bureau of Economics.
Seven regional offices.
The BC, responsible for investigating potential anti-trust violations, is headed by one director and several deputy directors and comprises:
Premerger Notification Office.
Four merger divisions.
Anti-competitive Practices Division.
Health Care Division.
Compliance Division.
Responsibilities. The FTC is responsible for civil enforcement of the FTC Act, including preventing unfair methods of competition (anti-trust violations) and unfair and deceptive acts or practices (consumer protection violations).
Procedure for obtaining documents. The FTC's website makes available many public documents including advisory opinions, case filings, guidelines and policy statements, HSR guidance and informal interpretations, press releases, and studies.
T +1 212 455 7681
F +1 212 455 2502
E agoldstein@stblaw.com
W www.stblaw.com
Qualified. New York, 1992
Areas of practice. Anti-trust; litigation.
Recent transactions
T +1 212 455 3578
F +1 212 455 2502
E alevine@stblaw.com
W www.stblaw.com
Qualified. New York, 2011
Areas of practice. Anti-trust; litigation.
