Antitrust Lawyer Blog

Commentary on Current Developments

On December 22, the Commission received a petition from Service Corporation International (SCI) and Alderwoods Group, Inc. seeking approval to divest to Keystone America, Inc., a wholly owned subsidiary of Keystone North America, Inc., the following companies and properties: 1) Hankins & Whittington-Dilworth Chapel, Charlotte, North Carolina; 2) Bush River Memorial Gardens, Columbia, South Carolina; 3) Elmwood Cemetery, Columbia, South Carolina; 4) Southland Memorial Gardens, West Columbia, South Carolina; 5) Caughman-Harman Funeral Home, Columbia, South Carolina; 6) Caughman-Harman Funeral Home, West Columbia, South Carolina; 7) Diuguid Funeral Service, Lynchburg, Virginia; 8) Diuguid Waterlick Chapel, Lynchburg, Virginia; 9) T.J. McGowan Sons Funeral Home, Garnersville, New York; 10) T.J. McGowan Sons Funeral Home, Haverstraw, New York; 11) Shaw & Sons Funeral Directors, Inc., Yakima, Washington; 12) Glen Haven Memorial Gardens, Macon, Georgia; and 13) Lambeth Troxler Funeral Home, Greensboro, North Carolina.

Authored by

Robert W. Doyle, Jr.

On December 21, the DOJ announced that in 2006 the Antitrust Division marked its second highest level of criminal fines obtained in Division history. The Division also experienced increases in merger filings and entered into more merger settlements than the previous two years combined. Further, the Division supported initiatives to improve the analysis of civil non-merger conduct, both in the United States and internationally, and participated in several U.S. Supreme Court cases important to the continuing refinement of the antitrust laws.

On December 21, the DOJ announced that in 2006 the Antitrust Division marked its second highest level of criminal fines obtained in Division history. The Division also experienced increases in merger filings and entered into more merger settlements than the previous two years combined. Further, the Division supported initiatives to improve the analysis of civil non-merger conduct, both in the United States and internationally, and participated in several U.S. Supreme Court cases important to the continuing refinement of the antitrust laws.

Cartel Enforcement

At the request of the Federal Trade Commission, on December 20, a federal court shut down a payment processing operation that allegedly helped fraudulent telemarketers take millions of dollars from consumers’ bank accounts. According to the FTC’s complaint, since at least January 2003 the operation has aided at least nine Canada-based, advance-fee credit card schemes that induce consumers to allow an electronic debit of several hundred dollars from their bank account in exchange for an unsecured credit card; but consumers never receive a credit card or, at best, they receive a “benefits package” containing relatively worthless items.

The complaint alleges that the defendants debit funds from consumers’ bank accounts, deduct their processing fees from the gross proceeds, and forward the balance of the proceeds from the deceptive scheme to the telemarketers. According to the complaint, the defendants also provided customer service and complaint handling, order fulfillment, list brokering, and other services.

The complaint alleges that the defendants process payments on behalf of clients whose sales scripts plainly indicate that they intend to violate the FTC’s Telemarketing Sales Rule (TSR) and industry rules that prohibit processing electronic banking transactions for outbound telemarketers; that they draft, edit, review, and approve sales scripts; and that they process transactions without first obtaining adequate information about the clients and their business practices, or when evidence demonstrates that illegal activity is contemplated or ongoing. According to the complaint, the defendants often receive complaints about their clients from consumers, law enforcement, and the Better Business Bureau concerning deceptive and abusive business practices, such as the failure to provide promised credit cards. They also receive such complaints while handling customer service for clients, including receiving and responding to consumer inquiries and refund requests.

Local governments will have 90 days to act on cable-franchise applications filed by AT&T Inc., Verizon Communications and other entities with existing rights to access city-owned conduits, the FCC ruled in an action on December 20 that split the agency along partisan lines. With support from major phone firms, FCC chairman Kevin Martin championed franchise reform as his proclaimed antidote for rising nominal cable rates and for spurring deployment of high-speed Internet-access facilities across the country. Because cable incumbents were not granted similar 90-day guarantees, the National Cable & Telecommunications Association (“NCTA”) called the FCC vote a rejection of a “level playing field” among cable providers.

Needing more time to evaluate the FCC’s order in full, NCTA president Kyle McSlarrow declined to promise that the trade group would take the agency to court. While fellow Republicans Deborah Taylor Tate and Robert McDowell backed Martin, Democrats Michael Copps and Jonathan Adelstein refused to go along, claiming that the Commission was on shaky legal ground in thinking that it could boss thousands of cities and towns on how to charter new cable entrants. The new franchise rules are expected to take legal effect early next year.

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On December 20, the Commission received a petition from Service Corporation International (SCI) and Alderwoods Group, Inc. seeking approval to divest: 1) Conroe Memorial Park, Conroe, Texas; 2) Harper-Talasek Funeral Home, Killeen, Texas; 3) Palmer Mortuary, Sequin, Texas; 4) Trevino Funeral Home, Brownsville, Texas; 5) Darling-Mouser Funeral Home, Brownsville, Texas; 6) Elmwood Funeral Home, Abilene, Texas; 7) Elmwood Memorial Park, Abilene, Texas; 8) Sunset Memorial Home, Odessa, Texas; 9) Resthaven Gardens of Memory cemetery, Baton Rouge, Louisiana; 10) Resthaven Gardens of Memory funeral home, Baton Rouge, Louisiana; 11) Welsh Funeral Home, Gonzalez, Louisiana; 12) James F. Webb Funeral Home, Meridian, Mississippi; and 13) James F. Webb Funeral Home, Newton, Mississippi to Legacy Holdings.

Authored by

Robert W. Doyle, Jr.

On December 19, the Commission received a petition from Service Corporation International (SCI) and Alderwoods Group, Inc. seeking approval of a proposed divestiture related to SCI’s recent acquisition of Alderwoods. In the FTC’s consent agreement and order allowing the transaction to proceed with conditions, SCI and Alderwoods were required to divest a range of funeral home and cemetery services companies. Through this petition, the companies requested approval to divest: 1) Conejo Mountain Funeral Home, located at 2052 Howard Road, Camarillo, California (Southern Ventura County); and 2) Conjeo Mountain Memorial Park, located at the same address, to two wholly owned subsidiaries of Carriage Services, Inc.: Carriage Cemetery Services, Inc. (CCSI) and Cochrane’s Chapel of Roses, Inc. Under an agreement with SCI, CCSI will buy the cemetery assets and Cochrane’s will buy the funeral home assets.

Authored by

Robert W. Doyle, Jr.

On December 15, the Antitrust Division announced that it is amending its 2001 Merger Review Process Initiative in order to further streamline the merger investigation process to improve the efficiency of the Division’s investigations while reducing the cost, time and burdens faced by parties to transactions that are reviewed by the Division.

The amendments to the Division’s already successful Merger Review Process Initiative are part of its ongoing efforts to reduce enforcement burdens, while at the same time preserve its ability to conduct thorough investigations. The goal of the 2001 Merger Review Process Initiative was to help the Division identify critical legal, factual and economic issues regarding proposed mergers more quickly; facilitate more efficient and more focused investigative discovery; and provide for an effective process for the evaluation of evidence. The amended initiative is the culmination of an extensive internal review of the Division’s best practices for investigating mergers and acquisitions, as well as an analysis of the progress the Division has made since first launching its initiative.

The amendments include a voluntary option enabling companies to reduce the duration and cost of merger investigations. The new option limits the document search required by a Division information request, known as a “second request,” to certain central files and a targeted list of 30 employees whose files must be searched for responsive documents. This option will be made available to parties to most transactions that are reviewed by the Division, and will be conditioned on certain timing and procedural agreements which, among other things, protect the Division’s ability to obtain appropriate discovery should it decide to challenge the deal in federal district court.

To circumvent federal limits on radio ownership, investors trying to buy industry giant Clear Channel Communications Inc. (“Clear Channel”) plan to become passive owners in some radio stations they already own and divest others. According to their merger application submitted Friday, December 15, to the FCC, Thomas H. Lee Partners LP (“Lee”) and Bain Capital LLC (“Bain”) plan to insulate their interests in other radio companies in which they have a stake to avoid violating the agency’s limits on how many stations one company can own in a single market.

The FCC sets such limits by market size. A company may own no more than eight stations in the largest U.S. markets, such as Los Angeles, New York and Chicago, where at least 45 full-power radio stations operate. As markets get smaller, so do the number of stations a single owner may hold. Both Lee and Bain already have substantial radio investments that conflict with the FCC’s rules. Lee participated in a consortium of companies that acquired Univision Communications Inc. (“Univision”) for $13.7 billion in June through an entity called Broadcast Media Partners. Both Lee and Bain also have an interest in radio company Cumulus Media Inc. (“Cumulus”).

Clear Channel announced on November 16, that Lee and Bain will take a big portion of the company to help founder Lowry Mays and his family take the publicly traded company private for $26.7 billion. The Mays will invest with the buyout firms and remain involved in company operations. Clear Channel also plans to divest 448 radio stations in smaller cities and rural areas. The buyout shops do not specify what steps they will take to become passive owners in Univision and Cumulus, but telecommunications industry lawyers said one option could be stopping their participation in programming and management decisions. They are also likely to remove their representatives from the Univision and Cumulus boards and change any voting stock holdings to nonvoting.

On December 14, operators who promised Spanish-speaking consumers “designer” merchandise but delivered knock-offs and outdated electronics will give up approximately $235,000 to settle FTC charges that their scam violated federal laws including the Do Not Call Rule. The telemarketers called Spanish-speaking customers, telling them they had been selected to get a valuable “prize,” such as a laptop or digital video camera.

They told consumers that to get the prize, they would have to purchase “designer” merchandise, such as watches and fragrances. The FTC alleged that all consumers received for their payment of $213 to $250 were cheap knock-offs and outdated electronics. The FTC also charged that the operation called phone numbers listed on the National Do Not Call Registry.

The settlement with Del Sol, LLC and its principal, Fernando Gonzalez Lopez, prohibits them from making misrepresentations in the advertising or sale of any product or service and prohibits them from violating any provision of the Telemarketing Sales Rule, including the Commission’s Do Not Call Rule. A $1.6 million judgment against the defendants is suspended based on their inability to pay. They will give up approximately $235,000. If it is found that the defendants misrepresented their financial status, then they will be liable for the full amount. The Commission vote to authorize staff to file the stipulated final order was 5-0.

On December 12, the Federal Trade Commission announced its decision to challenge the terms of Johnson & Johnson’s (J&J) proposed $16.6 billion acquisition of Pfizer Inc.’s (Pfizer) Consumer Healthcare business. The FTC’s complaint alleged that the transaction as originally proposed would reduce competition in the U.S. markets for over-the-counter (OTC) H-2 blockers used to prevent and relieve heartburn, OTC hydrocortisone anti-itch products, OTC night-time sleep aids, and OTC diaper rash treatments.

In settling the Commission’s charges, the companies agreed to sell Pfizer’s Zantac H-2 blocker business to Boehringer Ingelheim Pharmaceuticals Inc. (Boehringer), and Pfizer’s Cortizone hydrocortisone anti-itch business, Pfizer’s Unisom night-time sleep aid business, and J&J’s Balmex diaper rash treatment business to Chattem, Inc.

On June 25, 2006, J&J entered into an agreement to buy Pfizer’s Consumer Healthcare business for approximately $16.6 billion. According to the FTC, the transaction as originally structured would have violated Section 7 of the Clayton Act and Section 5 of the FTC Act by lessening competition in the U.S. markets for the research, development, manufacture, distribution, and sale of the following OTC medications: 1) H-2 blockers, 2) hydrocortisone anti-itch products, 3) night-time sleep aids, and 4) diaper rash treatments.

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