Articles Posted in Department of Justice

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Author: Steven J. Cernak

It happens all the time.  You read about a merger in your industry, maybe between two suppliers or competitors.  If the merger involves suppliers, maybe your sales rep makes a courtesy call.  You then get back to your business, preparing to adjust as necessary.  A short time later, you get a call.  Some attorney from the Federal Trade Commission or Department of Justice Antitrust Division is “conducting a non-public investigation” in your industry and you deduce that it is about the merger.  Is this normal?  What can — or should — you do next?

Relax.  That attorney most likely is just doing her job as part of the Hart-Scott-Rodino merger review process.  She is asking you to play a role in that process.  Most times, your role will be small as you act as a good corporate citizen and, perhaps, learn something about what is going on in your industry.  Still, you will want to seek assistance and take the right steps to ensure that your actions do not distract you from your daily business.

HSR Basics

To determine if a merger is good or bad for competition, the FTC and DOJ need information about the merging parties and the relevant industries.  For most large mergers, they gather that information through the Hart-Scott-Rodino (HSR) process.

HSR requires the parties to submit certain information and documents and then wait for approval before closing the transaction.  The FTC and DOJ then have 30 days to determine if they will allow the merger to proceed or seek much more detail through a “second request” for information.  A second request can take months, often over a year, to play out.  If the agency still has competition concerns at the end of the process, it can sue to block the merger.

Throughout the process, the reviewing agency will reach out to third parties — suppliers, experts, and, especially, customers — for relevant information to help the agency predict the potential effect of the proposed merger on competition.  That is where you come in.

Immediate Next Steps

After you get that call from the reviewing agency, it is a good idea to get with your friendly, neighborhood antitrust attorney.  That attorney can guide you through the process, saving you time in dealing with the agency attorney and helping you understand the specialized language of merger review.  (While covering hundreds of these matters in-house at General Motors, I often said that my role was to use my “automotive to antitrust” decoder ring for the good of both sides.)

At this point in the process, responding substantively to the agency call is voluntary; however, both the FTC and DOJ have processes that they can tap to compel cooperation if they think your information is key to their investigation.  As you will see below, cooperating with the request usually is not too burdensome and can be the better long-term decision.

If it is not obvious from the initial request, you should obtain assurances that this really is a third-party request and you are not the subject of the investigation.  Because HSR filings are confidential, the agency might not be able to explicitly confirm that they are investigating the merger; however, they can confirm if you are a subject of the investigation or merely a witness.

Then, you should do a quick check with the right people in your organization to ensure that there is no reason why the investigation might suddenly turn on you.  Did you recently try and fail to negotiate a merger with one of the companies?  Did you just finish some acrimonious negotiations where one of the companies accused you of acting anticompetitively?

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Author: Luis Blanquez

If you read our articles regularly, you know an antitrust compliance policy is a strong tool to educate directors and employees to avoid risks of anticompetitive conduct. Companies articulating such programs are in a better position to detect and report the existence of unlawful anticompetitive activities, and if necessary, be the first ones to secure corporate leniency from antitrust authorities.

Antitrust Compliance Programs in the US and the European Union

But make no mistake––not any antitrust compliance policy is sufficient to convince the Antitrust Division of the Department of Justice (DOJ) that you are a good corporate citizen. You must show the authorities how your compliance program is truly effective and meets the purpose of preventing and detecting antitrust violations.

And how do you do that? As a start, you should get familiar with the following key documents.

Make sure you read them carefully because they have significantly changed the way DOJ credits compliance programs at the charging stage; and how it evaluates them at the sentencing stage. But that’s not all. For the first time, they also provide public guidance on how DOJ analyzes compliance programs in criminal antitrust investigations.

In this article, we focus on the new DOJ Policy for incentivizing antitrust compliance, as well as the 2019 and 2020 Guidance Documents. We also provide an overview of the most recent Deferred Prosecution Agreements (DPAs) and indictments from DOJ.

If you also want to review the new changes to the Justice Manual, you can see them here. In a nutshell, the new revisions impact the evaluation of compliance programs at the charging and sentencing stage. In the past the Justice Manual stated that “credit should not be given at the charging stage for a compliance program.” That text has now been deleted. The new additions also impact DOJ processes for recommending indictments, plea agreements, and the selection of monitors.

If you discover or suspect your company is under investigation for antitrust violations, you should, of course, consider hiring your own antitrust attorney.

The 2019 DOJ New Policy for Incentivizing Antitrust Compliance

In the past, if a company did not win the race for leniency, the DOJ’s approach was to insist that it plead guilty to a criminal charge with the opportunity to be an early-in cooperator, and potentially receive a substantial penalty reduction for timely, significant, and useful cooperation. This all-or-nothing philosophy highlighted the value of winning the race for leniency. The new Policy departs from this approach.

In July 2019, the DOJ announced the new policy to incentivize antitrust compliance.

Antitrust News: The Department of Justice Wants You to Have a Strong Antitrust Compliance Policy

The new policy was presented by AAG Makan Delrahim on July 11, 2019, at the Program on Corporate Compliance and Enforcement at the New York University School of Law: Wind of Change: A New Model for Incentivizing Antitrust Compliance Programs. Delrahim explained that, unlike in the past, corporate antitrust compliance programs will now factor into prosecutors’ charging and sentencing decisions and may allow companies to qualify for deferred prosecution agreements (DPAs) or otherwise mitigate exposure, even when they are not the first to self-report criminal conduct.

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Author: Jarod Bona

The Coronavirus crisis has created an unusual situation for the world, but also for antitrust and competition law. People around the globe are trying to cooperate to solve and move past the crisis, but cooperation among competitors is a touchy subject under antitrust and competition laws.

Of course, cooperation between or among competitors isn’t unheard of, even during non-crisis times. Joint ventures are prevalent and often celebrated, companies will often license their technology to each other, and the existence of certain professional sport leagues, for example, depend entirely upon cooperation among competing and separately owned teams. Indeed, the Department of Justice Antitrust Division and FTC have published guidance (in 2000) on collaborations among competitors.

Human beings everywhere are working together to defeat the Coronavirus and that will require cooperation, sometimes even among and between competitors. It is unlikely that antitrust and competition law will get in the way of that. Indeed, the Antitrust Division of the Department of Justice issued a Business Review Letter confirming that certain competitors can cooperate “to expedite and increase manufacturing, sourcing, and distribution of personal-protective equipment (PPE) and coronavirus-treatment-related medication.”

At the same time, the foundations of antitrust and competition law—the “faith in the value of competition,” as articulated by the US Supreme Court in National Society of Professional Engineers—is the motor that will accelerate us toward solutions.

Private enterprise and the incentives inherent within it have created the foundations and the machinery to “science” our way out of this crisis. Over-coordination through a central planner will detract from that because we would lose the feature of massive a/b testing, or really a/b/c/d/e/etc. testing, that comes from a bottom-up, decentralized approach to creating and distributing resources.

So—at least in my opinion—antitrust and competition law should maintain their role in supporting competition during this crisis (and the FTC agrees with me). But—as is already true of antitrust and competition law—when there is a strong pro-competitive reason for cooperation among competitors, the courts and antitrust agencies can adjust to let that conduct go forward (and they have here).

And once we are past this crisis, I suspect that antitrust and competition law will become an even more popular area of discussion because of the likely greater concentration of markets resulting from government intervention.

In the meantime, here are some articles that our antitrust team has written about antitrust, competition, and the Coronovirus Crisis:

 

 

 

 

 

 

Also, Steven Cernak is heavily quoted in this article from MiBiz: Coronavirus price gouging spurs efforts to rein in ‘bad actor’ resellers.

Finally, we recommend that read the blog series from our friends at Truth on the Market entitled “The Law, Economics, and Policy of the Covid-19 Pandemic.” Lots of outstanding work by very smart people.

The other part of this, of course, is the economy. With stay-at-home orders throughout the country, there is a lot less commerce happening.

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Author: Steven Cernak

As we detailed in earlier posts (see here and here, for instance), the system established by the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) was designed to get sufficient information about impending mergers to the federal antitrust agencies so they could attempt to block anti-competitive ones before consummation.  The system has grown into a complex set of rules and interpretations.  Earlier this month, the antitrust agencies proposed two changes to those rules, one that would require more information from some acquiring parties and another that would eliminate the filing requirement for certain transactions deemed unlikely to be anti-competitive.

“Associates” Would Become “Persons”

HSR requires a buyer — “Acquiring Person,” in HSR parlance — to provide certain information about the entities it controls and its prior acquisitions for transactions that meet HSR’s reportability standards.  Under the definition of Persons, however, separate private equity investment funds under the same parent fund usually are considered separate Persons because the parent fund did not “control” them.  Therefore, until recently, an investment fund making an acquisition did not need to provide information, including information regarding acquisitions or holdings, about other investment funds under the same parent fund.  Also, currently, an investment fund does not need to aggregate its holdings with those of other funds under the same parent to determine HSR reportability.

In such scenarios, the agencies might not realize that another investment fund under the same parent fund holds interests in competitors of the target entity.  The agencies partially corrected this situation in 2011 by defining such related investment funds as “associates” and requiring the Acquiring Person to disclose holdings of its associates in other entities that generated revenues in the same industries as the target entity.

The proposed rule would go a step further and change the definition of “Person” to include “associates.”  The intended effect of such a change is to require Acquiring Persons to provide even more information about their associates when completing the HSR form.  (Again in HSR parlance, such an Acquiring Person would need to disclose additional information about its associates in Items 4 through 8 of the form.)  In addition, all the holdings of the Acquiring Person in the target entity, even those held by an associate, would need to be aggregated to determine if the most recent acquisition is reportable.

As a result, the agencies should have more complete information to assess the potential competitive impact of the proposed transaction.  For private equity funds structured in this way, the result likely will be additional HSR filings plus the burden to collect, track, and provide additional information in each filing.

Small Transactions Would Be Exempt Regardless of Intent

While the agencies have an incentive to receive filings for all transaction that could pose competitive issues, they also have an incentive to conserve resources and avoid the review of filings for transactions that almost certainly pose no competitive threat.  As a result, the HSR statute and rules have numerous exemptions for transaction types that raise few if any competitive issues.

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Author: Jon Cieslak

The United States Department of Justice Antitrust Division recently announced changes to its Civil Investigative Demand (CID) forms and deposition process.  While these changes are cosmetic—the Antitrust Division acknowledges that the changes “are consistent with long-standing division policies”—they serve as a good reminder of risks that always exist when communicating with the government.

Background on Civil Investigative Demands

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Author: Jarod Bona

I suspect that Antitrust DOJ head Makan Delrahim and I have had a similar reading list lately. And I am not even referring to any sort of antitrust books, like, for example, Steve Cernak’s book on Antitrust in Distribution and Franchising.

Let me explain.

I read, with great interest, a speech that Assistant Attorney General Makan Delraihim delivered on August 27, 2020 to the Conference on Innovation Economics in Evanston, Illinois (well, virtually).

His two topics were blockchain and Nassim Taleb’s concept of antifragility.

As a consistent reader of this blog, I trust that you already know that I am a big fan of Nassim Taleb and, particularly, his book, Antifragile: Things that Gain from Disorder. Indeed, a re-reading of Antifragile inspired an earlier article about Iatrogenics. If you haven’t read Antifragile, you should, right away.

My interest in blockchain, Bitcoin, and other cryptocurrency systems like Ethereum is relatively recent. But—like many before me—a little bit of knowledge has created an insatiable appetite for more. I am making my way down the rabbit hole, as they say.

Let’s dig in and talk about what the Department of Justice thinks about both antifragility and blockchain.

Antifragile

What does the term “antifragile” mean?

You might think that robust is the opposite of fragile. But those of us that have read Taleb know that isn’t true. Something that is fragile is likely to break or weaken from stress, shocks, or variability. If something is robust, it will resist this stress, shock, or variance.

But what you really want during times of stress (or, really, just over time), is antifragility. If you are antifragile, you improve from stress, shocks, and variance, which are inevitable, especially as time passes.

The human body is, in some ways, antifragile. Lifting weights, for example, creates a stressor on the muscles and surrounding tissues, which cause, ultimately, an increase in strength. So make sure you get your deadlifts in this week.

Antifragile is the opposite of fragile and it is better than robustness.

There is a lot more to antifragility than this. Indeed, there is an entire book about it (and, really, a set of books—Incerto). I urge you to read more—it might change your life.

Earnest Hemingway understood antifragility when he said in A Farewell to Arms that “the world breaks everyone and afterward many are strong at the broken places.” The next line is just as important for reasons you will understand if you read Antifragile: “But those that will not break it kills.”

So, what does antifragility have to do with the Department of Justice and antitrust?

Assistant Attorney General Makan, in his speech, emphasized that “the Antitrust Division has made protecting competition in order to advance innovation in the private sector one of our top priorities,” and that the Division wants to “ensure that antitrust law protects competition without standing as an impediment to rapid innovation.”

He then introduced the concept of antifragility and acknowledged that the pandemic can certainly be described as a “shock” producing a “wide array of trauma.” But with that harm comes an opportunity—“if we rise to the challenge of being antifragile, there is also an opportunity for tremendous growth.” More specifically, “[c]ritical innovations and technological developments often result from the kind of extraordinary experimentation the pandemic has made necessary. We have the opportunity to embrace antifragility, to delve into the experimentation and trial and error that drive growth, and to make ourselves better.”

According to AAG Makan, “[o]ur goal at the Antitrust Division is to extend the spirit of innovation beyond our latest efforts to combat the pandemic and protect competition—ultimately, to become antifragile.”

The market system—competition—is, of course, an antifragile system because it improves with variance over time, including shocks and stresses. As problems arise, the market provides solutions. As new preferences arise, the system meets those preferences. As demands for certain products or services decrease, resources move away from those areas. Indeed, the “heart of our national economy has long been faith in the value of competition.” And the purpose of the antitrust laws is to protect that competition.

I am pleased to read the DOJ Antitrust leader expressly affirm those values and I have no doubt that he believes them—you can’t read and quote Taleb and not be affected.

But let’s remember that large central government is not typically the friend of antifragility. Indeed, government interference is more likely to distort incentives and the market’s ability to adjust to stressors. It can also lock-up parts of the system and increase fragility.

When a knocking on your door is followed by a shout of “I am from the government and I am here to help,” your heart should feel fear not relief.

I view the antitrust laws, if applied with restraint, as similar to contract, property, and tort laws. They provide the rules of the game that allow the market to prosper. Failure to apply any of them uniformly or fairly harms the beneficial potential of markets and competition. But over-applying them does the same. Like much of life, sometimes the answer is complicated and doesn’t fit into a single tweet.

Government enforcers can, however, stay on the right track if they have in their mind the rule that doctors often forget: “First, do no harm.” Antitrust enforcement, like medical intervention, can be iatrogenic.

Blockchain, Bitcoin, and Cryptocurrency

The DOJ Antitrust Division’s attorneys have formally educated themselves on blockchain and other technologies. And, like me, once they started learning about it, they probably realized what a big deal it truly is.

My worry, frankly, is that the government is going to somehow screw it up.

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Author: Steven Madoff

Steven Madoff was an Executive Vice President of Business and Legal Affairs for Paramount Pictures Corporation from 1997-2006.

The recent announcement by the Antitrust Division of the Department of Justice that it is planning to terminate the 70-year-old Paramount Consent Decrees leads to reflection on how culture, business models, the law, and technology intersect and impact one another.

The history of the motion picture business resonates with the evolution (and sometimes revolution) of technology, the industry’s adaptation of its business models to respond to these changes in technology and the impact of these changes and adaptations to cultural transitions and transformations.

Virtually from its birth in the early 20th century, the motion picture industry attracted the scrutiny of governmental regulators. As early as the 1920’s, the U.S. Justice Department started looking into the trade practices and dominant market share of the Hollywood studios.

The Studio System

In the early 1930’s, the Justice Department found that the major studios were vertically-integrated monopolies that produced the motion pictures, employed the talent (directors, writers, actors) under long-term exclusive contracts, distributed the motion pictures and also owned or controlled many of the theaters that exhibited the movies. This was sometimes called the “studio system.”

Particularly troubling were the studios’ practices of block booking and blind bidding. Block booking is the practice of licensing one feature film or group of feature films on the condition that the licensee-exhibitor will also license another feature film or group of feature films released by the same distributor. Block booking prevents customers from bidding for individual feature films on their own merits. Blind bidding or blind selling is the practice whereby a distributor licenses a feature film before the exhibitor is afforded an opportunity to view it. These practices were particularly onerous when applied against independent theater owners not owned or affiliated with the studio-distributor.

It seemed like the time had come for the government to force the studios to divest their ownership of the exhibition side of the business. But the Depression intervened and the studios convinced President Roosevelt that the country needed a strong studio system to supply movie entertainment to the populous as a relief from tough economic times. President Roosevelt therefore delayed any action requiring the studios to divest their theaters under the goals of the National Industrial Recovery Act.

The Paramount Consent Decrees

But, by 1940, the Department of Justice filed a lawsuit against the studios alleging violations of Sherman 1 and 2—restraint of trade and monopolization. The claims were made against what were then called the Big Five Studios, all of which produced, distributed and exhibited films (MGM, Paramount, RKO, Twentieth Century-Fox and Warner Bros.) and what were called the Little Three studios, which produced and distributed films but did not exhibit them (Columbia, United Arts and Universal).

At the time, Paramount was the largest studio and exhibitor and was first-named in the lawsuit, and so in 1940 when the studios reached a settlement with the Department of Justice, the resulting arrangement became known as the Paramount Consent Decrees.

As part of the Consent Decrees, the Studios were not required to divest their ownership in theaters; however, block booking was dramatically cut back (e.g., no tying of short subjects to feature films and no “packages” in excess of five feature films) and blind bidding was prohibited. The parties agreed to a 3-year period for the Consent Decrees during which the Department of Justice would monitor compliance by the Studios.

By 1946, however, the Department of Justice had determined the Studios were not in compliance and brought the case back to the Federal District Court.  After the trial, the Court ruled that the Studios could no longer engage in block booking, but did not require them to divest their ownership in theaters, which the Department of Justice had asked for. Both parties appealed the case, which eventually reached the US Supreme Court.

In a 7-1 decision, written by Justice William O. Douglas, the Court found, among other things, that block booking was a per se violation of Sherman 1 and in remanding the case to the District Court recommended that the Studios be ordered to divest their ownership in theaters. But before the District Court rendered a decision on whether the Studios should divest their theaters, one of the Big Five Studio defendants, RKO Pictures (then controlled by Howard Hughes) decided to sell its theaters. After that, another Big Five Studio defendant, Paramount, sold its theaters.

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Author: Jon Cieslak

When a law enforcement or regulatory agency—such as the Department of Justice (DOJ) or the Securities and Exchange Commission (SEC)—investigates potentially illegal business conduct, it may not be targeting just the company under investigation. Oftentimes, authorities are also targeting the company’s employees who engaged in the illegal conduct, and corporate officers and other employees are frequently indicted alongside their employers in antitrust and other cases. See, e.g., United States v. Hsiung, 778 F.3d 738 (9th Cir. 2014). Indeed, in 2015, U.S. Attorney General Sally Yates issued the so-called “Yates Memo” that reaffirmed DOJ’s commitment to seek “accountability from the individuals who perpetrated the wrongdoing.”

While the company typically hires outside counsel with experience defending the potential claims, one area that is sometimes overlooked is whether the employees involved in the investigation need their own lawyers. Employees may think the company’s lawyer represents them as well, but that is rarely the case and employees should be quickly disabused of the notion. Both the Supreme Court in Upjohn v. United States, 449 U.S. 383 (1981), and legal ethics rules compel corporate lawyers to clarify when they do not represent individual employees when conducting internal investigations. See, e.g., Model Rules of Prof’l Conduct R. 1.13(f).

So when does an employee need her own lawyer?

While there is no bright-line rule, considering some key questions can help you make the right decision.

First, is the employee a target of the investigation, or merely a witness? During an investigation, investigators will talk to many potential witnesses in addition to the individuals whom they suspect of illegal conduct. When confident that investigators believe an employee is only a witness to the potentially illegal conduct, the need for separate counsel is significantly reduced.

Second, does the employee face personal consequences as a result of her conduct? Consequences may include criminal penalties such as imprisonment or fines, suspension or loss of professional licenses, personal liability for civil damages awards, or employment consequences such as demotion or termination. While even a small chance of criminal penalties merits separate counsel, as the likelihood of any of these consequences grows, so too does the importance for an employee to have her own lawyer. Keep in mind, too, that individuals involved in some illegal conduct—such as an antitrust conspiracy—can be jointly and severally liable for all the harm caused by the conspiracy, so could face an enormous civil damages award even if their role was minimal. See Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 646 (1981).

Third, was the investigation initiated by a law enforcement or regulatory agency, or is it purely an internal investigation by the company itself? In general, separate counsel is less important in internal investigations. On the other hand, when the government is investigating, separate counsel can benefit both the employee and the company. Not only will the employee’s interests be better protected, separate counsel will also help insulate the company’s lawyers from potential disqualification and allegations of obstruction. Separate counsel is particularly important when an employee will be interviewed directly by law enforcement agents, who are more likely to trust a witness’s independent attorney.

Fourth, and most importantly, does the employee have any actual or potential conflicts of interest with the company and, if so, how severe are they? When both the company and the employee are targets of a government investigation, there will almost always be at least a potential conflict between them. A company usually has substantial incentives to cooperate with a government investigation, such as the potential for amnesty under the DOJ’s Leniency Program and credit for cooperating under the Sentencing Guidelines. To fully cooperate, however, the Yates Memo requires companies to “completely disclose . . . all relevant facts about individual misconduct.” Meanwhile, an employee involved in the conduct may want to seek immunity in exchange for testifying against the company or other individuals. Even less severe conflicts, however, can warrant separate counsel. If an employee disagrees with the company’s view of the facts or feels pressure to testify in a certain way, separate counsel may be needed to protect the employee’s interests.

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Author: Steven Cernak

On March 24, 2020, the FTC and DOJ Antitrust Division issued a joint statement regarding their approach to coordination among competitors during the current health crisis. The agencies announced a streamlining of the usual lengthy Advisory Opinion or Business Review Letter processes for potentially problematic joint efforts of competitors. The statement also confirmed that the antitrust laws had not been suspended and, for instance, price fixing would still be prosecuted.

More importantly, however, the agencies reminded businesses that many kinds of joint ventures of competitors have long been allowed, even encouraged, under the antitrust laws. That message might have been lost in the blizzard of reports and client alerts focusing on the changes to the processes to judge only the riskiest joint efforts. Especially in economic crises, businesses should consider if certain joint ventures with others in their industry, including competitors, might be good for both the businesses and their customers. As explained below, the U.S. auto industry has been using such joint ventures for decades.

Joint Ventures

The term “joint venture” can cover any collaborative activity where separate firms pool resources to advance some common objective.  When that joint activity among competitors is likely to lead to faster introduction of a new product, lower costs, or some other benefits to be passed on to customers, antitrust law will balance those benefits with any loss of competition.  Two specific types of joint ventures—research & development and production—have received particular antitrust encouragement. Below, lessons from both types are explored using examples from the auto industry.

Research & Development Joint Ventures

The FTC and DOJ have described joint R&D as “efficiency-enhancing integration of economic activity” and, generally, pro-competitive. Getting scientists and engineers from competing firms to share data, test results, and best practices on basic areas that each company can then build on to create or improve competitive products can save money and reduce time to market.

GM, Ford and then-Chrysler started doing joint R&D on battery technology and other basic building blocks of motor vehicles in 1990. In 1992, all these efforts were put under the umbrella of the United States Council for Automotive Research or USCAR.  Through USCAR and other joint efforts, these fierce competitors cooperate on technologies like advanced powertrains, manufacturing and materials, and various types of energy storage and then compete on their applications in their vehicles.

Similarly, GM and Ford shared design responsibilities for advanced 9- and 10-speed transmissions. After the cooperating on design, each company then manufactured the transmissions and competed on the vehicles that used them.

Production Joint Ventures

In 1983, GM and Toyota formed a production-only joint venture, NUMMI, to produce vehicles for each parent that were then marketed separately. In 1984, the FTC barely approved the joint venture and insisted on an Order imposing reporting requirements and limits on communication.  By 1993, the FTC had grown comfortable with NUMMI’s operation and so unanimously voted to vacate the Order as no longer necessary given changed conditions.

NUMMI’s success in navigating through antitrust concerns led to other production joint ventures in the industry including a Ford-Mazda one for vehicles, a Chrysler-Mitsubishi-Hyundai joint venture on engines, and a GM-Chrysler joint venture on manual transmissions. None of them were as controversial or received the same level of antitrust scrutiny as NUMMI.

The National Cooperative Research and Production Act

At about that same time as NUMMI’s formation, Congress was clarifying the antitrust laws to ensure that certain cooperative efforts that could benefit consumers were not inappropriately stifled by the antitrust laws. In 1984, the National Cooperative Research Act confirmed that most R&D joint ventures would be judged under the rule of reason. To further encourage such pro-competitive cooperation, the law also allowed the parties to file a very short notice describing the joint venture with the FTC and DOJ. Once such a notice is published in the Federal Register, any antitrust liability for the joint venture and its parents is limited to actual, not treble, damages and attorney fees. In 1993, the law was expanded to cover certain joint production ventures and standard development organizations and retitled the National Cooperative Research and Production Act or NCRPA.

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Authors: Steven Cernak and Jarod Bona

In big antitrust news, the Federal Trade Commission and Department of Justice Antitrust Division released a draft of an update to the 1984 Vertical Merger Guidelines (VMG) on January 10, 2020.  Only three of the five FTC commissioners voted to release the draft with Democratic Commissioners Rebecca Kelly Slaughter and Rohit Chopra abstaining but issuing separate statements. The agency will accept public comments on the draft through February 11, 2020.

These vertical merger guidelines make extensive references to the Horizontal Merger Guidelines, most recently issued in 2010 (HMG). Like the HMG, the VMG are guidelines only, not law, and are meant to provide the merging parties some understanding of the analysis the reviewing agency will use. Because nearly all merger reviews begin and end with these agencies, however, the HMG have become both influential and persuasive for courts. The VMG rely on the HMG for much of the analysis and so, at nine pages, are much shorter and seem to break little new ground besides updating the outdated 1984 version.

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