According to media reports, the DOJ Antitrust Division is investigating accusations that UPS and FedEx colluded to freeze third-party shipping consultants out of the their shipping businesses.  The reports indicate that Justice has opened an investigation into possible collusion between FedEx and UPS, the two largest companies in the package shipping world. This investigation would come on the heels of a private antitrust action filed by a shipping consultant.

FedEx and UPS are said to each have complex shipping rates and rules, especially for international shipments.  Comparing their prices, against each other and against other competitors, is said to be difficult.  Some companies use third-party shipping consultants to help find the best shipping rates and to negotiate discounts.  One such consultant, AFSM, has sued FedEx and UPS, claiming collusion, refusal to deal, and group boycott.

The AFSM complaint, filed in the U.S. District Court for the Central District of California, alleges that FedEx and UPS publicly announced that they would no longer deal with shipping consultants, and that the two companies told their customers that their shipping rates would rise if they continued to use consultants.  We will monitor both the civil suit and the DOJ investigation for developments.

The Antitrust Division of the U.S. Department of Justice has given the green light to Swiss engineering giant ABB’s multi-billion-dollar acquisition of the American industrial motors firm Baldor Electric Co.

This regulatory approval paves the way for ABB’s $4.2 billion, or $63.50 per share, all-cash purchase.  The purchase price was a 41% premium over the November 29, 2010, $45.11 closing price of Baldor shares, the day ABB announced the $4.2 billon offer.  Since then, the management of both companies have approved the transaction. 

In general, hype surrounding ABB’s acquisition of Baldor has been positive.  Leading up to the takeover, leaders of both companies touted business efficiencies of the combined company, how Baldor as an ABB subsidiary would not be laying its U.S. workforce, and how the premium share price paid by ABB to acquire Baldor has the potential of making millionaires of many Baldor employees overnight.  Despite the fanfare, the companies’ path to the deal did face obstacles.  In particular, the scruples of both companies were assailed.  In the end, however, either the attacks lacked substance or the attackers couldn’t withstand the companies’ willingness to settle with anyone who might get in the way of their deal. 

In recent years, ABB has been on an acquisition bender.  Baldor is the seventh – and largest – company ABB has acquired since May 2008.

Though U.S. antitrust regulators green-lighted ABB’s acquisition of Baldor with minimal consternation, ABB’s dealings have kept other U.S. regulators busy.  On September 29, 2010, while ABB and Baldor were engaged in merger talks, the SEC announced that it had filed a “settled civil action” against ABB, charging the company with violations of the Foreign Corrupt Practices Act.  Specifically, the SEC alleged that ABB 1) bribed Mexican officials to obtain business with government-owned power companies; and 2) paid kickbacks to the former regime in Iraq to obtain contracts under the U.N. Oil for Food program.   According to the SEC, the bribery in Mexico resulted in contracts that generated $90 million in revenues and $13 million in profits for ABB, while the Iraqi kickbacks resulted in contracts that generated $13.5 million in revenues and $3.8 million in profits. 

Without admitting the allegations, ABB settled with the SEC for $39.3 million.  In related criminal proceedings, ABB reached a settlement with the Department of Justice to pay $19 million in criminal penalties. click here for more »

The FTC has voted unanimously to approve a Federal Register notice announcing revised thresholds for the Hart-Scott-Rodino Antitrust Improvements Act.

The Hart-Scott-Rodino Act requires persons contemplating certain large mergers or acquisitions to notify the FTC and the Assistant Attorney General, and to wait a designated period of time before consummating such transactions.  The threshold for reporting proposed mergers and acquisitions decreased from $65.2 million to $63.4 million.  Several additional thresholds were also revised and can be found in the notice.

The revised thresholds will apply to all transactions that close on or after the effective date of the notice.  According to an FTC press release, the notice will be published in the Federal Register shortly and will become effective 30 days after publication.

The FTC also unanimously approved a Federal Register notice announcing revised thresholds that trigger the prohibition on interlocking directorates under Section 8 of the Clayton Act.  The new thresholds are $25,841,000 for Section 8(a)(1) and $2,584,100 for Section 8(a)(2)(A).  According to the FTC press release, the notice will be published in the Federal Register shortly and will become effective upon publication.

The Clayton Act requires that these thresholds be revised annually by the FTC based on the change in gross national product.

The U.S. Department of Justice’s crusade against anticompetitive employment practices at high-tech companies continues, this time with a settlement with Lucasfilm Ltd.

In a complaint filed with the settlement in federal district court in Washington, D.C., the DOJ alleges that Lucasfilm agreed with Walt Disney’s animation studio, Pixar, as far back as 2005, that neither company would solicit each other’s employees for hire, both companies would give notice before hiring employees away from each other, and in cases where offers were made to each other’s employees, neither would make a higher counteroffer. 

Earlier last year, the DOJ reached settlements with six other high-tech companies – Pixar, Apple, Google, Adobe Systems, Intel, and Intuit – that bars them from entering into anticompetitive agreements to not solicit each other’s employees.  Because the earlier settlement will prevent Pixar from entering into anticompetitive employment agreements, the DOJ announced that its recent complaint did not need to name Pixar as a defendant.

Under the proposed final judgment, which if approved by the court would be in effect for five years, Lucasfilm would be barred from entering into anticompetitive hiring agreements and would engage in affirmative steps to ensure compliance with the settlement. 

This is not the first time these two firms’ names have appeared together; Lucasfilm and Pixar have enjoyed a relatively long history.  Pixar was established after Apple’s Steve Jobs purchased the computer graphics division of Lucasfilm in 1986 and renamed it Pixar.

The four major U.S. music labels have lost their bid to convince the Supreme Court to pull the plug on an antitrust class action under the high court’s Twombly standard for pleading.

The Supreme Court has declined to hear an appeal in Sony Music Entertainment v. Kevin Starr, a price-fixing class action against Warner Music Group, Universal Music Group, Sony, and EMI.  The denial of certiorari leaves standing the decision of the U.S. Court of Appeals for the Second Circuit to let the case proceed to discovery.

This case provides yet another test of the bounds of the Supreme Court’s Twombly standard, which federal courts have struggled to flesh out in their rulings on motions to dismiss antitrust complaints. 

The case arose from the major labels’ early ventures into Internet music, through services called MusicNet and pressplay.  Plaintiffs alleged that these ventures “provided a forum and means through which defendants could communicate about pricing, terms, and use restrictions.”  Plaintiffs also claimed that MusicNet and pressplay charged unreasonably high prices, burdened users with unpopular DRM software, and failed to account for increasingly lower costs in the digitization of music.

The district court dismissed the complaint under the Twombly standard, which requires that complaints state enough facts to “plausibly suggest” a violation of antitrust law.  The Second Circuit reversed in January 2010.  The appeals court reasoned that alleged behavior by the labels – including setting high prices for music and imposing restrictive digital rights management – would not have been in the labels’ self-interest unless their competitors did the same, and this plausibly suggested an illegal agreement.

The Supreme Court’s denial of review means that the case will proceed to discovery and potentially trial, though any trial is unlikely to take place before late 2011.