The parent company of the New York Stock Exchange, NYSE Euronext, has agreed to merge with Deutsche Boerse, the operator of the Frankfurt stock exchange.  In an all-stock deal worth more than $10 billion, Deutsche Boerse will own a majority 60 percent of the new company, and NYSE Euronext shareholders will own 40 percent.  The merger, if approved, would create the world’s largest financial exchange operator and have headquarters in Frankfurt and New York. 

The current president and deputy of NYSE Euronext, Duncan Niederauer, would serve as the new company’s CEO.  Reto Francioni, the current chief executive of Deutsche Boerse, would become chairman. 

A merger of this magnitude will certainly face intense scrutiny by U.S. and European regulators, both because of its sheer size and also for its effect on the world’s financial markets.  The U.S. Department of Justice will review potential antitrust issues, and the Securities and Exchange Commission will also need to give the deal a green light.  In Europe, both the European Commission on antitrust, as well as the German state of Hesse’s Economy, Transport and Development Ministry will have to approve the merger. 

The name of the exchange has yet to be decided, but is already becoming a political issue.  U.S. lawmakers, including New York State Senator Charles Schumer, have expressed concern that the deal may hurt New York’s leadership role in the financial world.  Schumer recently said his approval of the merger depends on whether New York gets top billing in the exchange’s new name. 

The firms hope to complete the merger by the end of the year.

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 »

China is beefing up its antitrust laws, and will be taking a closer look at classic antitrust violations such as price fixing and abuse of monopoly power. 

According to a government press release, China is taking the action because “various forms of price collusion and the abuse of monopoly position are seriously harming the legal rights and interests of consumers.”

The measures build on an antitrust law that China implemented in 2008, and China reportedly hopes that the new rules will help combat inflation.

The new gloss on antitrust law was released by China’s National Development and Reform Commission (NDRC), which is somewhat similar to America’s Federal Trade Commission.  According to the NDRC’s web page, that agency’s mission includes “the regulation of the overall price level and the optimization of major economic structures.”

The new regulations will ban competitors from agreeing to fix prices, and prohibits companies with dominant market shares from selling goods at “unfairly high prices” or buying them at “unfairly low prices.”  These amendments supplement the original 2008 antitrust law, which mainly concerned mergers.

The European Commission has fined five manufacturers of liquid crystal display (“LCD”) panels a total of 649 million euros (approximately US$ 860 million) for participating in a price-fixing conspiracy between October 2001 and February 2006.

LCD panels are the main component of the flat screens used in televisions, laptop computers and desktop computer monitors. 

In a press release, the Commission stated that the LCD panel manufacturers operated a cartel which not only agreed on prices but also exchanged information on future production planning, capacity utilization, and commercial conditions.  They were found to have violated Article 101 of the EU treaty, which prohibits price-fixing and other restrictions of competition. 

Four of the firms fined by the Commission are Taiwanese corporations: Chimei InnoLux (300 million euros), AU Optronics (117 million euros), Chunghwa Picture Tubes (9 million euros), and HannStar Display (8 million euros).

The South Korean based Samsung Electronics was found to have participated in the conspiracy but escaped being fined.  The company received full immunity under the Commission’s leniency program for having brought the cartel to the Commission’s attention and helping prove the infringement.

LG Display, also of South Korea, was ordered to pay 215 million euros.  However, LG escaped a significantly greater fine.  Its fine for the 2001-2005 period was reduced by 50% because it was “second in the door” in applying to the Commission for leniency.  In addition, it was not fined for 2006 because it was the first to inform the Commission that the cartel had continued after 2005.   click here for more »

Zipcar Inc., the worldwide leader in car-sharing with over 500,000 members and 8,000 vehicles, was granted approval in its bid to acquire Streetcar Limited, a leading car-sharing company in the UK.  The Competition Commission, the UK’s independent public body responsible for investigating mergers, found it unlikely that the merger would lead to a decrease in competition, thereby permitting the acquisition to advance.

On April 21, 2010, Zipcar acquired all of the issued share capital of Streetcar.  Given the size of these two companies in the relevant market, the UK’s antitrust watchdog, the Office of Fair Trading, referred the matter to the Competition Commission for investigation and report, pursuant to the Enterprise Act of 2002.

Car-sharing companies, or car clubs, allow members to access available vehicles 24 hours a day, without the hassles or high costs of car ownership.  A recent article found at www.prnewswire.com cites an independent study commissioned by Zipcar for the proposition that “Millennials” (18 to 34-Year Olds) are generally driving less and seeking alternative access to automobiles.  Car-sharing companies may satisfy this growing demand.

The Competition Commission found that notwithstanding the merger of two large competitors in the relevant market, the industry was poised for substantial growth and entry.  “All, else being equal, a growing market will encourage new entrants, as new entrants can gain members without having to win them away from existing relationships with other car club operators,” the Provisional Findings Report states. 

The Report made particular note of the relatively low barriers to entry given that car-sharing companies are “not high-fixed-cost businesses relative to the size of the market.”  The likelihood and magnitude of entry would compensate for any foreseeable loss of competition.