Although the Hamptons may be renowned as an exclusive vacation spot on New York’s Long Island, its real estate brokers may be getting some unwanted attention from the U.S. Department of Justice for expanding that exclusivity into the way they do business.

Apparently, the real estate industry has attracted the attention of antitrust investigators because of an online listing service – OpenRealNet Exchange, run by Hamptons Real Estate Online Inc. – that charges an annual fee of $50,000.  Brokers in the Hamptons use this service instead of Long Island’s Multiple Listing Service – which is open to all – or an East End service run by the Hamptons and North Fork Realtors Association. 

In recent years, East End real estate agents have complained about, and even sued, OpenRealNet Exchange.  Such brokers have complained that the exclusive listing service is designed to keep commissions within a limited pool of brokers, rather than having to split them with additional brokers.

According to some real estate brokers, investigators have been contacting brokers in the area to question them about the online listing service.

While the antitrust division of the DOJ has declined to comment on whether they have started an investigation, it would not be surprising if the federal enforcers take action.  Certainly the immense fees charged by OpenRealNet Exchange could be considered a barrier to entry, effectively denying smaller real estate companies access to listings, and shutting them out of the Hamptons real estate business.

Merchants in the United States are on the verge of a significant victory in their long struggle to limit credit and debit card fees. 

The Senate has approved an amendment to its financial reform bill that curtails the power of the card issuers in significant ways, including requiring that the “interchange fees” charged by banks on fees on debit card transactions be “reasonable and proportional to the actual” costs of processing those transactions, and permitting merchants to offer discounts for cash payments.  Whether those limits are enacted into law, however, remains to be seen since the Senate bill must still be reconciled with the House financial reform bill – which does not contain the amendment.

Interchange fees are set by the credit card networks (Visa, MasterCard, Discover and American Express) to banks that issue those networks’ branded cards.  When a merchant accepts a credit or debit card, it loses a small percentage of each purchase price to the issuer through this fee.  For Visa and MasterCard transactions, which dominate the credit and debit markets, the fees vary from 1.5 to 2 percent of the price for credit card purchases and are approximately 0.75 percent for an average debit card purchase.  These little fees add up to big money: they totaled an estimated $48 billion in 2008.

Merchants have lobbied Congress to limit or eliminate interchange fees for years.  And a federal merchants’ putative class action in New York claims that Visa’s and MasterCard’s interchange fees result from price-fixing in violation of Section One of the Sherman Act.  According to the plaintiffs, Visa and MasterCard set their interchange rates through collusion with their member banks, which compete with each other: that is, price-fixing by competitors with the networks as facilitators.

The Senate has now given the merchants a major win by adopting an amendment by Senator Richard Durbin (D – Ill.) to the financial reform bill.  That amendment passed by a solid bipartisan vote of 64-33 despite fierce lobbying by Visa and MasterCard.

Durbin’s amendment would reform the debit card interchange system in two ways.  First, it would require debit card interchange fees to be “reasonable and proportional” to the issuers’ actual costs.  This provision addresses complaints that interchange fees, while purportedly compensating card-issuing banks for their transaction costs, in fact has steadily climbed out of proportion to such actual costs.  And the networks have continued to raise those rates in the United States at the same time as they have lowered them abroad in the face of foreign regulatory pressure, further fueling complaints that they are higher here than necessary.

Second, the amendment would direct the Federal Reserve System’s Board of Governors to establish standards for assessing whether interchange rates meet the “reasonable and proportional” standard described above. click here for more »

The U.S. Supreme Court ruled in favor of plaintiff American Needle and a more expansive view of the scope of antitrust law today with what may well turn out to be a landmark opinion in the much anticipated case of American Needle, Inc. v. National Football League.

The decision rejects the lower courts’ broad grant of immunity to joint ventures from the conspiracy prohibition of § 1 of the Sherman Antitrust Act.

American Needle, the plaintiff-petitioner and a manufacturer of NFL-licensed headwear, claimed that the NFL acted anticompetitively by granting Reebok the exclusive license for certain NFL paraphernalia.  The trial court granted summary judgment to the NFL, and the U.S. Court of Appeals for the Seventh Circuit affirmed.  Both lower courts held that, in licensing individual team and NFL trademarks, the NFL was operating as a single entity under antitrust law – as opposed to multiple, collectively acting ball clubs – and thus was immune from the conspiracy prohibition of § 1 of the Sherman Act. 

The Supreme Court held unanimously that the NFL clubs are not immune from the conspiracy prohibition of the Sherman Act – at the very least with respect to licensing their intellectual property.  The Court’s language also indicates that the Court likely would hold the NFL clubs subject to the conspiracy prohibition with respect to the full panoply of the NFL’s operations.

The Court rejected the NFL’s position that, because everything the NFL does promotes NFL professional football, the NFL is really an integrated single entity immune from the conspiracy prohibition.  The Court also rejected the middle-of-the-road rule suggested by the Department of Justice’s Antitrust Division, which would not apply the conspiracy prohibition if “the teams and the league . . . have effectively merged the relevant aspects of their operations.” 

Most importantly, the Court took the opportunity to restate and clarify the principles governing when to apply the Sherman Act’s conspiracy prohibition.  Thus, American Needle will govern the application of antitrust law in all industries, not just professional sports, as evidenced by the submission of an amicus brief by Visa and MasterCard in the payments industry.  (Visa and MasterCard are public corporations owned by separate legal entities, including banks that were members of Visa and MasterCard when Visa and MasterCard were organized as joint ventures.) click here for more »

Antitrust enforcement is not going mobile, at least as of today.

On Friday, the Federal Trade Commission decided not to challenge to Google’s $750 million purchase of AdMob, which places electronic advertisements on cell phones and other mobile devices.

According to the FTC, the decision was “a difficult one because the parties currently are the two leading mobile advertising networks, and the Commission was concerned about the lost of head-to-head competition between them.”  What turned the FTC around was Apple’s December purchase of Quattro, a company that competes with AdMob, along with Apple’s subsequent launching of its own mobile advertising program.  That program, called iAd, will focus on placing ads on Apple’s rabidly successful iPhone, iPod, and iPad mobile devices. 

This is not a surprising decision, given how new and fluid the mobile market place is, and how many competitors already exist.  Aside from AdMob (founded only four years ago) and Apple, other companies in the space include Apploop, Bango, Smaato, Approlix, Adfonic, Millenial Media, JumpTag, PurpleTalk, Greystripe, Medialets, InMobi, MobGold, uLocate, 4INFO. 

Despite the Commission’s decision not to block the Google-AdMob merger, the FTC did state that the mobile advertising space does constitute a market – albeit an emerging one.  And the FTC also indicated that it will keep a close eye on both Google and Apple.  Neither company should be surprised if they hear from the FTC again.

The FTC is suing Dun & Bradstreet to challenge its February 2009 acquisition of QED, a division of Scholastic that provides kindergarten through twelfth-grade educational marketing databases.

The combination of MDR, Dun & Bradstreet’s subsidiary, and QED was a merger-to-monopoly, giving the combined entity more than 90 percent of the market for K-12 educational marketing data.  The deal glided under the radar given it’s valuation of $29 million which falls below the HSR reporting thresholds.  But the FTC is now seeking to unravel the merger given its apparent anticompetitive effects. 

Despite its relatively low dollar value, this transaction dramatically decreased competition in the marketplace,” according to Richard Feinstein, Director of the FTC’s Bureau of Competition.  “When Dun & Bradstreet acquired QED, it bought its closest competitor and created a monopoly.  That’s going to get the FTC’s attention every time.”

So buyer beware.  Just because a transaction doesn’t trigger an HSR filing doesn’t mean the parties can go on their merry way.  A merger analysis should be performed even for smaller, non-reportable transactions to assess whether the post-transaction market share, barriers to entry and other indicators will set off alarm bells for regulators.