Welcome to the Sidley Antitrust Bulletin — thoughts on topics that are top of mind for Sidley’s Antitrust team and why they matter to you. Earlier this month, a federal judge in Massachusetts blocked an airline alliance that had been set up in the early months of the Covid-19, finding that it caused the two competing airlines to function as a single airline. The state of Louisiana filed a motion to intervene in federal litigation relating to a gun-jumping challenge of a hospital merger. Gun jumping also featured in Europe, where Advocate General (AG) Anthony Collins of the Court of Justice of the European Union (CJEU) issued an opinion in favor of dismissing an appeal of the European Commission’s highest fine for this offense. The Commission also published a package of measures to simplify its merger procedures, and in the United Kingdom, the much-anticipated Digital Markets, Competition, and Consumers Bill (DMCCB) was published in late April. Once enacted, this will lead to significant changes to the UK’s competition regime. In the United States, legislation that aims to reduce exclusivity in live event ticketing was introduced to the Senate. Interested? Keep reading....
Our Take on Top-of-Mind Global Antitrust Issues
Federal judge blocks JetBlue-American partnership: After a monthlong bench trial, a federal judge in Massachusetts determined that a partnership between American Airlines Group Inc. and JetBlue Airways Corporation (the Northeast Alliance (NEA)) formed during the early months of the Covid-19 pandemic to create an optimized network in New York and Boston contravened Section 1 of the Sherman Act, in a challenge by the U.S. Department of Justice. According to the 94-page order, the NEA partnership involved cooperation by the two airlines, for example, to sell seats on the other’s flights, determine which airline would fly which routes, and in some instances share revenues. The judge found that this alliance caused American Airlines and JetBlue effectively to “function as a single airline” in the NEA region, replacing what the judge described as “direct and aggressive competition.”
Why it matters: Although the judge concluded that the airlines’ partnership caused actual competitive harm in New York and Boston, the order did not identify any consumer harm beyond reduced consumer choice on certain routes and JetBlue’s “weakened” status as a “maverick competitor.” The order also noted that piggybacking putative consumer class action suits were filed shortly after the trial concluded. The judge did not reach the balancing stage in its rule of reason analysis, but he did acknowledge that the NEA’s reciprocity generated “broader access to benefits and discounts” to many travelers and that since the NEA was announced, American’s slots at major New York airports were used “more heavily and efficiently.”
FTC sues to stop a $150 million hospital acquisition in Louisiana: The Federal Trade Commission (FTC) recently filed a petition in the U.S. District Court for the District of Columbia seeking a temporary restraining order and a preliminary injunction to prevent Louisiana Children’s Medical Center (LCMC) from integrating three recently acquired competing hospitals in the New Orleans area from HCA Healthcare, Inc. (HCA). The FTC alleges LCMC and HCA violated the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) by failing to submit the required premerger notification and observe the waiting period prior to consummating the transaction. The FTC requested that the court enter an order that would require LCMC to cease any further integration of the acquired hospitals and to hold separate and maintain all acquired assets until the parties comply with the HSR Act, which would give the FTC additional time to investigate the transaction’s impact on competition. A day before this petition was filed, LCMC and HCA filed separate but substantively identical complaints in the U.S. District Court for the Eastern District of Louisiana for declaratory judgment that the HSR Act does not apply to transactions that are immune from federal antitrust laws under the doctrine of state action immunity so that the parties can complete integration. LCMC and HCA argue that a Certificate of Public Advantage from the Louisiana Attorney General exempts them from the waiting period requirements under the HSR Act. On May 23, 2023, the federal judge presiding over the FTC’s petition granted the hospitals’ request to transfer the FTC’s challenge to the Eastern District of Louisiana, where the cases are now consolidated.
Why it matters: The resolution will have implications for interpreting applicable exemptions to the HSR Act, specifically whether a state law can supersede the requirements of the HSR Act or other federal antitrust law. Moreover, the State of Louisiana filed to join the litigation in support of the acquisition, and it is rare for states to enter as a party in direct opposition to the FTC at the premerger stage. Finally, this lawsuit signifies the FTC’s growing willingness to enforce the HSR Act for acquisitions of all sizes; the transaction, which is valued at $150 million, exceeds the HSR Act’s current $111.4 million reportability threshold, but it falls into the transaction value category that triggers the lowest filing fee.
EU legal opinion supports Commission fine in Altice gun-jumping case: AG Collins recently issued his advisory opinion in Case C-746/21 P Altice Group Lux v Commission. The case concerns two fines totalling €125 million the Commission imposed in 2018 on cable and telecommunications company Altice for implementing its acquisition of PT Portugal ahead of both notifying and receiving approval from the Commission under European Union (EU) merger control rules. Altice has appealed a judgment by the EU General Court that largely upheld the Commission’s decision. In his opinion, AG Collins asserts that the higher CJEU should dismiss Altice’s appeal in its entirety.
Why it matters: The Altice proceedings signify stricter consequences for companies that fail to adhere to EU merger control rules and clarify the circumstances in which a deal may be deemed unlawfully “implemented.” Importantly, AG Collins agrees with the EU General Court that the possibility to exercise “decisive influence” over a target can arise from the signing of a share purchase agreement, for example, through preclosing restrictive covenants, rather than such possibility being conferred only by the transfer of shares to the buyer (as was argued by Altice). Although AG opinions are advisory and not binding on the CJEU, they are influential and followed in many cases.
Commission simplifies and streamlines merger control review processes: The Commission recently adopted a package of measures to further simplify and streamline review processes for nonproblematic deals under the EU Merger Regulation. The package (i) expands and/or clarifies which deals qualify for the Commission’s simplified procedure, (ii) streamlines the review of both simplified and nonsimplified cases, and (iii) introduces an electronic system for notifications. The changes will enter into force on September 1, 2023.
Why it matters: The updated rules aim to minimize the notification burden for transactions that do not raise substantive antitrust issues. Parties will have to provide less information in a new “tick-the-box” notification form for simplified cases that includes primarily multiple-choice questions and tables. Furthermore, joint ventures with no turnover or assets in the European Economic Area or transactions with no overlaps can be immediately notified to the Commission without any prenotifications contacts. To find out more about the revised rules, see our client alert here.
UK government publishes new competition reform bill: The DMCCB, introduced to Parliament on April 25, 2023, proposes significant changes to existing competition and consumer protection law and the regulation of digital markets in the UK. It entails the biggest reform to the UK competition law regime since the 2014 creation of the Competition and Markets Authority (CMA). The new regime is expected to come into force in 2024.
Why it matters: The multifaceted new regime introduces new powers for the CMA, a whole new “strategic market status” for large digital companies, and tougher consumer protection laws (for further details, please see our more detailed client alerts here and here). Many companies will be affected by the proposed changes to the jurisdictional thresholds for merger review. The proposals expand the CMA’s merger remit by introducing a threshold that will enable the CMA to review acquisitions by companies with a material UK presence without the need for an overlap between the target and acquirer’s business — as is currently the case. The new regime will
- increase the threshold under the “target turnover test” from £70 million to £100 million
- add a safe-harbor exemption to the “share of supply test” whereby the CMA would not have jurisdiction to review transactions (even when there is an overlap between the parties of 25% in the share of supply of any good/services in the UK) if both parties have less than £10 million turnover in the UK
- introduce a new test that gives the CMA jurisdiction to review transactions where (A) one party has (i) an existing 33% share of supply of goods or services in the UK and (ii) £350 million UK turnover and (B) where the other party has some local nexus with the UK
Senate bill targets concentration in live-event ticketing market: On April 26, 2023, Democratic Sens. Amy Klobuchar of Minnesota and Richard Blumenthal of Connecticut introduced the Unlock Ticketing Markets Act. A press release announcing the bill explains that the bill aims “to improve competition in live event ticketing markets” by authorizing the FTC to “prevent the use of excessively long multi-year exclusive contracts.”
Why it matters: Given mounting public pressure regarding market concentration in the live-event ticketing market, the prospect of government intervention continues to grow. The FTC obtaining the power to prevent excessively long multiyear contracts would disproportionately affect Live Nation and Ticketmaster, as 70% to 80% of major U.S. venues have exclusive contracts with Ticketmaster. Further, following a January 2023 hearing before a subcommittee of the Senate Judiciary Committee, Sens. Klobuchar and Mike Lee, R-Utah, also called on the U.S. Department of Justice to further examine the business practices and conduct of Ticketmaster and Live Nation. With the Biden administration not backing off its aggressive antitrust stance, further changes to the ticketing sector may be afoot.