April 2015 Antitrust Bulletin

by McGuireWoods LLP

Proposed Sysco/US Foods Merger Challenged by FTC

The Federal Trade Commission (FTC) filed a complaint on February 19, seeking an injunction to prevent Sysco Corporation’s purchase of US Foods Inc. The FTC alleges that the deal would give Sysco too much market power in that it would control 75 percent of the national market for food and related away-from-home dining supplies. The FTC contends that Sysco and US Foods are the only two “broadline” foodservice distributors with nationwide networks of distribution centers. The FTC further contends that Sysco and US Foods are head-to-head competitors that watched each other’s prices carefully and the merger would significantly reduce nationwide competition for these services.

State attorneys general in the following states joined the FTC’s complaint for a preliminary injunction: California, Illinois, Iowa, Maryland, Minnesota, Nebraska, Ohio, Virginia, Pennsylvania, Tennessee and the District of Columbia.

The hearing on the request for preliminary injunction is set for May 5-8, 2015.

American Express Merchant Rules Held Anticompetitive

On February 19, a federal judge ruled that American Express Co.’s anti-steering rules, which prevent merchants from encouraging their consumers to use other credit card brands, violate the antitrust laws. The case was filed in 2010 by the Department of Justice (DOJ) and attorneys general of 17 states.

Whenever a customer uses a credit card, the merchant pays a fee to the network services provider that facilitates the customer’s purchase, and American Express rules prohibit merchants from encouraging customers to use credit cards that cost the merchant less to accept. To the court, in a competitive environment, a particular merchant may prefer that a customer who had both an American Express card and another brand of credit card use the other brand of card if the cost of the transaction would be lower for the merchant. Accordingly, the court held that the rules were anticompetitive.

The judge gave American Express 30 days to meet with the DOJ and reach an agreement on modified rules that would strike the appropriate balance between protecting American Express’s legitimate interests and the public’s interest. As of March 23, 2015, the parties disagreed as to the proper balance to be struck and submitted differing proposals to the court on the rules.

Four Executives Plead Guilty to Price Fixing International Ocean Shipping Services

Last year, the DOJ Antitrust Division filed its first charges against a company since it began its investigation into potential price fixing, bid rigging and other anticompetitive conduct in the international ocean shipping industry. On January 30, 2015, the first individual was sentenced for the alleged shipping conspiracy, and on February 6, 2015, the second individual was sentenced. Two additional individuals pled guilty each on March 10 and 26, 2015.

Hiroshige Tanioka, Takashi Yamaguchi and Toru Otoda, all general managers at Kawasaki Kisen Kaisha Ltd., as well as Susumu Tanaka, a general manager at Nippon Yusen Kabushiki Kaisha, pled guilty to conspiring to allocate customers and routes, rig bids, and fix prices for the sale of international ocean shipments of “roll-on, roll-off” cargo to and from the United States and elsewhere. The executives were fined $20,000 each and sentenced to serve time in U.S. prison − Tanioka and Otoda were sentenced to 18-month terms of imprisonment, Tanaka was sentenced to a 15-month term, and Yamaguchi was sentenced to a 14-month term. The executives all agreed to cooperate with the DOJ’s ongoing investigation of the conspiracy.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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