Antitrust Law Blog

On November 29, 2007 a federal court in Philadelphia issued a decision granting the motion of Stolt-Nielsen (Stolt), a Luxembourg tanker shipping company, to dismiss a grand jury indictment against it for violations of Section 1 of the Sherman Act alleging it conspired with its competitors to allocate customers among them. Stolt had self reported the customer allocation scheme to the Department of Justice in 2002, and thereafter entered into a leniency agreement with the DOJ whereby it was immunized from prosecution based on representations that it had ceased the unlawful conduct and would cooperate in the investigation. The DOJ later notified Stolt that it had obtained evidence that Stolt did not terminate its participation in the conspiracy as represented, and thus the leniency conditions were not met. The indictment followed. In this decision, Judge Kaufman reviews the evidence and concludes that Stolt did take action to terminate its participation in the conspiracy as represented, and otherwise fulfilled its obligations under the leniency agreement. Our January blog will contain a complete review and analysis of this important decision.

Authored by:

Carlton A. Varner

(213) 617-4146

cvarner@sheppardmullin.com

A price squeeze occurs when a vertically integrated company with a monopoly in the upstream market sets its wholesale prices to its customers so high that they cannot compete effectively with it at the downstream level.  In some circumstances, price squeezes may constitute exclusionary conduct under Section 2 of the Sherman Act.  For example, in City of Mishikawa v. American Electric Power, 616 F. 2d 976 (7^th Cir. 1980) the defendant utility company sold power both at wholesale and directly to consumers.  By setting its wholesale price higher than its retail price, it effectively prevented its wholesale customers from competing with it at the consumer level.  Other courts, however, have criticized price squeeze claims pointing out that they can be pro-consumer when the upstream monopolist can carry out the downstream activities more efficiently than its independent competitors, and such claims also impose administrative burdens on the courts with respect to price setting for which they are ill-suited.  Town of Concord v. Boston Edison Co., 915 F. 2d 17 (1^st Cir. 1990).

In October, the Department of Justice obtained a half a million dollar penalty against Iconix Brand Group for omitting "4(c)" documents in its Hart-Scott-Rodino Act premerger notification.  For lawyers and companies involved in mergers, acquisitions and joint ventures, the DOJ's actions make clear that HSR filings, including their more technical aspects, are no minor matter and call for diligence.