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Assistant Attorney General Baer Reports on Recent Developments in DOJ Remedies and Enforcement Policies




by:
Gregory J. Casas
Greenberg Traurig, LLP - Austin Office

 
November 21, 2013

Previously published on November 18, 2013

On September 25th, Bill Baer, Asst. Attorney General in charge of the Antitrust Division of the Department of Justice (DOJ), spoke at the Georgetown Law 7th Annual Global Antitrust Enforcement Symposium on recent developments in the DOJ's enforcement policy. The speech provided practitioners and their clients’ valuable insights into his views about appropriate remedies and sanctions for civil and criminal antitrust violations. While Baer's speech was informative, it can also possibly be seen as a warning.

Baer stressed that the Division's goal in enforcement, and the remedies it chooses, must be to preserve or restore competition in the affected markets. He stressed that the Division must be certain that the remedies it chooses "pry open" a market to competition so that any victory is not a hollow one that wastes the government's limited resources. He also noted that the DOJ's and FTC's policies are in alignment on these issues, and that the DOJ takes appropriate precautions to coordinate with enforcement officials in other jurisdictions to ensure that the remedies it seeks are not in conflict or inconsistent with any other appropriate remedies.

Merger Remedies

In the merger realm, Baer discussed recent enforcement actions that required a "full stop" injunction in order to protect or preserve competition. In a recent wireless telecommunications merger, for example, the DOJ sought a full injunction against the merger because it believed that no other remedy would ensure competition in such a vital market. Baer commented that the merger would have so fundamentally and adversely impacted the national competitive dynamic that no lesser remedy could ensure that competition would be protected. Faced with the injunction proceedings, the parties abandoned the merger. Baer believes that the wireless communications market is now more vibrant as a result of the DOJ's actions.

Baer also explained that litigation in the merger context is not the preferred route. Rather, negotiated consent decrees can most often preserve or protect competition in the relevant market. He asked, however, that parties come to the DOJ early with potential, meaningful remedies in order to avoid slowing down the merger review process. He stressed that the parties must present meaningful remedies in order for the consent decree option to be effective. He noted a recent case in the adult beverage industry market in which the parties presented a remedy he concluded had nothing but an unfavorable impact on competition. As a result, the Division dismissed the offer out of hand. Ultimately, the parties reached an agreement on a divestiture package that satisfied the Division by preserving pricing competition in the market. The consent decree, according to Baer, had the key elements of any good consent decree package: structural relief, an upfront buyer that could be fully vetted in a timely fashion, a monitoring trustee, and the conveyance of intellectual property and know-how to the buyer in order to ensure that the buyer would remain a viable competitor almost immediately.

Baer also commented on the remedies that may be required in a consummated transaction. He stated that at times the Division might seek the divestiture of assets in addition to those that were part of the original transaction in order to restore competition resulting from the parties’ illegal merger. While keeping the focus on competition, the remedies sought in such a situation also must deprive the acquiring company of illegally obtained market power.

Civil Remedies

In the non-merger context, Baer emphasized that the remedies sought in a civil case must end the violation of the antitrust laws, prevent recurrence and restore competition. Often, this requires injunctive relief, much like in the merger context.

He discussed a recent eCommerce case as an example of the effectiveness of the Division's injunctive power. In that case, the Division determined what remedy to use by the potential effectiveness of the remedy, and not merely by the fact that the anticompetitive conduct was proven and halted. By seeking the injunction, the Division was able to force all but one of the defendants to voluntarily cease their challenged activities, terminate their illegal contracts and agree not to engage in similar activities in the future. Further, the Division coordinated with state enforcers who were seeking monetary recovery for aggrieved consumers.

The Division then went forward to trial against the one defendant that refused to agree to an injunction. Ultimately, the Division was able to prove its case at trial, and the court entered the injunction against the remaining defendant. In light of the findings of the trial court, the Division was also able to craft a remedy that Baer noted was unique in a civil context. Specifically, the injunction required the remaining defendant to employ an external compliance monitor paid for by the defendant. The monitor will evaluate the defendant's future conduct and oversee the revamping of the defendant's compliance program and training. Both the Division and trial judge believed that the defendant's corporate culture had been such that its senior management and internal legal staff could not be trusted to police the company’s own actions in the future. The defendant is now also facing requests for possible monetary recovery by various state attorneys general on behalf of consumers in their states as well as private plaintiffs who had brought treble damage class actions.

In addition to injunctive and structural relief, the Division is also willing and able (when it deems it appropriate) to seek disgorgement of illegal profits as part of the civil remedies it may seek. Baer noted that the determination to seek disgorgement is made on a case-by-case basis. For example, a recent case in the power industry required disgorgement to prevent the defendant from keeping the benefits of its illegal acts. Injunctive action was not necessary because the activities had already ceased. Further, consumer damages were not an option because of the structure of the market and the actions that were in question. In situations where the division could work with state agencies to ensure restitution to impacted consumers, disgorgement might not be necessary. Whether restitution or disgorgement is sought, the goal is the same - to ensure that the bad actor is not allowed to retain its illegal profits.

Criminal Sanctions

With respect to criminal cases, Baer emphasized that the sanctions the Division will seek must provide just punishment and deterrence while also providing a defendant with the opportunity for effective rehabilitation. For example, in a recent case involving computer parts, as part of the sanctions imposed on the defendant, the DOJ required an external independent corporate monitor to develop and implement an effective antitrust compliance program as part of the defendant’s probation. The Division took such an unusual step in that matter because it believed that the defendant's standard operating procedure and its corporate culture had been centered around collusive behavior. Because of this, the Division and ultimately the court determined that not even a large fine would deter further criminal behavior.

Conclusion

From Baer's presentation, it is clear that the Antitrust Division will be creative as it seeks appropriate remedies to protect or restore competition in relevant markets. It is also clear that the Division will use the full extent of its authority in crafting tough remedies and sanctions to ensure that illegal conduct ceases, that defendants are not allowed to benefit in any manner from their illegal activities, and that impacted consumers are made whole.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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