Antitrust Division Selected Criminal Cases Appendix A: Selected Criminal Cases Criminal Selected A: Appendix April 1, 1996 Through September 30, 1999

ANTITRUST DIVISION UNITED STATES DEPARTMENT OF JUSTICE

ANNUAL REPORT

FY 1999 Contents

Foreword 1

The Criminal Enforcement Program 5

The Merger Enforcement Program 9

The Civil Non-Merger Enforcement Program 13

The Telecommunications Competition Program 17 Contents

International Antitrust Policies and Procedures 21

Appendix A: Selected Criminal Cases 25 iii

Appendix B: Merger Challenges 41

Appendix C: Civil Non-Merger Cases 87

Appendix D: Antitrust Division Organization Directory 99

Antitrust Division Annual Report Foreword March 20, 2000

By Assistant Attorney General Joel I. Klein

am pleased to present this Report This is the kind of antitrust enforcement I summarizing the recent major activi- policy to which this Administration is ties of the Antitrust Division of the committed. It is both principled and Department of Justice. As the Report pragmatic. There is no presumption that documents, this has been an active “big” is “bad,” but neither is there an period for the Antitrust Division across assumption that the market will always the full-range of its enforcement respon- “correct” anticompetitive problems. sibilities: criminal prosecutions, merger Instead, the Antitrust Division pays careful attention to facts, informed by review, and civil non-merger activities. economic analysis, in making its Our accomplishments range from enforcement decisions. Foreword prosecutions of international cartels that have resulted in greater fines than ever before to successful challenges to “magna carta” of the free enterprise multibillion dollar mergers, not to system. The antitrust laws are thus used mention challenges to exclusionary to deter and punish anticompetitive behavior in technologically critical conduct and to obtain prospective relief 1 industries. to prevent such conduct in the future.

Antitrust plays an important role in At the same time, caution must be our economy. Competition is the corner- taken to assure that the antitrust laws stone of this country’s economic founda- are not misused to protect competitors tion. We have long extolled the virtues from the vigor of the competitive of the free market, which provides process. In a free market system, innova- business with the opportunity to inno- tion and creativity should be rewarded, vate, produce, and distribute goods and not penalized. There will inevitably be services without direct intervention by winners and losers in this battle, but the government. Competition, rather while the antitrust laws are intended to than government directives, determines prevent conduct that impairs the com- which businesses will succeed, and petitive process, the antitrust agencies consumers are the ultimate—and appro- are not in the business of picking who priate—beneficiaries of the competitive should win and who should lose. That process. responsibility falls to consumers, who make that determination through their The antitrust laws ensure that the purchasing decisions. benefits of the competitive process are not interdicted by private anticompeti- This is the kind of antitrust enforce- tive conduct. The Supreme Court has ment policy to which this Administra- described the Sherman Act as the tion is committed. It is both principled

Antitrust Division Annual Report 2 Foreword The increasing globalization of economic behavior presents important challenges to challenges important presents behavior economic of nations. globalization increasing The Antitrust DivisionAnnual Report Antitrust for thefuture ofantitrustenforcement. these trends hasimportantimplications cal change,andderegulation. Eachof globalization oftrade,rapidtechnologi- the fullrangeofcompetitiveactivity: certain importanttrends thatcutcross service providers—we haveobserved practices bydominantproducers and criminal violationstoexclusionary ment targets—ranging from hard-core enforcement decisions. by economicanalysis,inmakingits pays careful attentiontofacts,informed lems. Instead,theAntitrustDivision always “correct” anticompetitiveprob- an assumptionthatthemarket will that “big”is“bad,”butneitherthere and pragmatic.There isnopresumption antitrust regimes that have traditionally been administered by individual sovereign individual by administered been traditionally have that regimes antitrust Despite thediversityofourenforce- agreements withother governments. including variousformsofcooperation foreign companiesandtheir employees, grams thatencouragecooperationby Antitrust Divisionhasdevelopedpro- prosecute internationalcartels,the panies thaneverbefore. To detectand nal investigationsinvolveforeign com- time forindividuals.More ofourcrimi- for companiesandinsignificantjail culminated infinesofover$875million involved invitaminproduction, which tion ofcompaniesandindividuals the pastyearwassuccessfulprosecu- most widelypublicizedexampleduring for Americanconsumers.Perhaps the has significanteconomicconsequences ering internationalcartelbehaviorthat devoting more ofits resources touncov- globalization oftradeinimportantways. trust Divisionhastaken accountofthe individual sovereign nations.TheAnti- traditionally beenadministered by challenges toantitrustregimes thathave economic behaviorpresents important trade. Theincreasing globalizationof is nowrelated toexportandimport abroad. Nearly25percent ofourGDP sumers purchase goodsmanufactured foreign countries,andAmericancon- ers. U.S.firmsfrequently exportto of UnitedStatesproducers andconsum- importance totheeconomicwell-being Globalization of Trade First, theAntitrustDivisionis International tradeisofincreasing Another important focus of the Department’s antitrust enforcement efforts over the past few years has been our continuing effort to eliminate both private and public restrictions on competition in industries traditionally regulated as franchise monopolies.

So, too, the Antitrust Division has recognized the international dimension of merger activity. An increasing number of transactions have competitive implications in more than one country, and today it is not uncommon for a transaction to be subject to multicountry review. The Antitrust Division has endeavored to develop good working relationships with other countries and the European Union. We are working closely with governments around the world to cooperate in merger review, both to minimize burdens on private parties and to advance the cause of Foreword proper antitrust analysis. To advance this process, the Attorney General established the International Competition Policy Advisory Committee, which work externalities and first-mover recently issued its report reviewing advantages, which pose risks that markets will “tip” very quickly toward a international antitrust issues and making 3 recommendations for consideration. dominant supplier and thereby make entry extremely difficult. The more important that innovation becomes to Technological Change society, the more important it is to A number of our most important preserve economic incentives to inno- industries have been characterized vate. In such circumstances, timely and recently by unprecedented levels of effective antitrust enforcement may be technological change. Such change has the key to preserving an environment in important implications for antitrust which companies—whether new or old, enforcement. On the one hand, such large or small—believe that there will be change creates opportunities for compa- no artificial barriers to bringing new nies to develop new products and products and services to market. services and find rapid customer acceptance. It has been argued that the pros- It is undoubtedly true that rapid pect for such change reduces the need technological change requires careful for antitrust enforcement because a attention to facts. Our challenges to the company that dominates an industry Lockheed Martin-Northrop Grumman today may be replaced tomorrow by a transaction and Microsoft’s monopoly of company that suddenly offers a superior computer operating systems are not product or service. However, rapid garden-variety antitrust actions. They technological change may actually and other challenges filed by the Anti- increase barriers to entry through net- trust Division were undertaken only

Antitrust Division Annual Report 4 Foreword services thatbusinesseswill provide. agencies determinetheproducts and by consumers—ratherthan government place—through purchase decisionsmade with Congress,urging thatthemarket- executive branchandworksregularly advocate ofcompetitionwithinthe The AntitrustDivisionistheprimary cations Commissionandinthecourts. of 1996,bothtotheFederal Communi- pursuant totheTelecommunications Act very activeinpromoting competition competitive incentives.We havebeen to replace regulatory constraintswith work withvariousagenciestofindways has againbecomethenorm. appropriate reliance upon antitrustlaws, transportation. Competition,with tions, energy, financialservices,and such basicindustriesastelecommunica- government regulation andderegulated have reversed agenerationof pervasive regulatory changesintheUnitedStates to come. the Americaneconomyformanyyears important ramificationsforthenature of rapid technologicalchange,willhave especially inindustriescharacterizedby forcement decisions thatare madetoday, abandoning theeffortaltogether. En- tries maybedifficultisnobasisfor issues arisinginhigh-technologyindus- effects. Thefactthatantitrustanalysisof antitrust. for role historical conductandlikely future a from important after careful considerationofboth industries increasingly these an moving in portending trend progress a possible, remarkable wherever witnessed has decade past The Antitrust DivisionAnnual Report Antitrust Deregulation regime based largely on regulated monopoly to one that encourages competition encourages that one to monopoly regulated on largely based regime The AntitrustDivisioncontinuesto In recent decades,legislativeand American economy. critical tothehealthandfuture ofthe enforcement hasenjoyed.Bothare the bipartisansupportthatantitrust women oftheAntitrustDivisionand testimony tothehard-working menand our lastannualreport. cases filedsubsequenttopublicationof appendices containinformationabout carried overintothatyear, andthe matters begunbefore fiscal1999that programs includesreferences tocertain result, thediscussionofourenforcement trust Divisioninoverthree years. Asa Annual Report publishedbytheAnti- report informative.Thisisthefirst not agree more. upgrading inaneconomy.” We could behavior, isessentialtotherateof tal mergers, alliances, andcollusive policy, especiallyinthearea ofhorizon- for antitrustpolicy….Astrong antitrust domestic rivalryhas“strong implications He alsofoundthattheimportanceof at homeare unlikely tosucceedabroad. domestic firmsspared from competing tage ofNations landmark work coincidence. MichaelPorter notedinhis antitrust enforcement policyisnota tition forregulation andareinvigorated coincided withasubstitutionofcompe- The factthatthisreemergence has the dominanteconomyofworld. The UnitedStateshasagainbecome Our recent accomplishmentsare I hopeyouwillfindtheattached (atpp.662-63)that The CompetitiveAdvan-

The Criminal Enforcement Program The Criminal Enforcement Program Enforcement Criminal The

he Antitrust Division institutes The Antitrust Division recently has Tcriminal enforcement of Section prosecuted international cartels One of the Sherman Act, 15 U.S.C. operating in a broad spectrum of Section 1, against hardcore cartel activ- commerce, including vitamins, food and ity such as price-fixing, bid-rigging, and feed additives, chemicals, graphite electrodes (used in steel making), and market-allocation agreements. Such marine construction and transportation conduct causes substantial harm to services. purchasers of goods and services.

The prosecution of such domestic additives, chemicals, graphite electrodes cartel activity has been at the heart of (used in steel making), and marine the Department of Justice’s antitrust construction and transportation services. enforcement efforts ever since the Since the beginning of FY 1997, the enactment of the Sherman Act in 1890 Antitrust Division has prosecuted and continues unabated. In the last international cartels affecting over $10 several years, however, the Antitrust billion in U.S. commerce. The cartel 5 Division has made the prosecution of activity in these cases cost U.S. busi- international cartels that victimize nesses and consumers many hundreds of American businesses and consumers one million of dollars annually. of its highest priorities. This strategy recognizes that in many instances inter- The Antitrust Division’s strategy of national cartels pose an even greater concentrating its criminal resources on threat to American businesses and international cartels has led to unprec- consumers than do domestic conspira- edented success in terms of cracking cies because they tend to be highly those cartels, securing the conviction of sophisticated and extremely broad in the major conspirators, and obtaining their impact—in terms of geographic record-breaking fines. scope, the amount of commerce affected, and the number of businesses Since the beginning of FY 1997, the and consumers victimized by the con- Antitrust Division has obtained over spiracy. $1.5 billion dollars in criminal fines, well over 90 percent of which were The Antitrust Division recently has imposed in connection with the prosecu- prosecuted international cartels operat- tion of international cartel activity. To ing in a broad spectrum of commerce, put this fine figure into perspective, including vitamins, food and feed consider that the highest amount of

Antitrust Division Annual Report 6 The Criminal Enforcement Program the volumesofaffectedcommerce and few yearshavebeenbigger, intermsof tional cartelsprosecuted over thepast reflects thefactthatmajorinterna- to theAct’s inceptionin1890. the ShermanAntitrustAct datingback criminal finesimposedforviolationsof tiples higherthanthesumtotalofall obtained sinceFY1997ismanymul- in criminalfines.Theamountoffines higher whenitsecured over$1.1billion the newrecord stillanother400percent FY 1999,theAntitrustDivisionthrust million incriminalfines.Andthen, that numberwhenitobtainedover$265 FY 1998,theAntitrustDivisiontopped Antitrust Division’s history. In than duringanyprevious yearinthe nal fines—nearly500percent higher when itcollected$205millionincrimi- Antitrust Divisionshattered thatmark roughly $42million.InFY1997,the in anygivenyearpriortoFY1997was fines obtainedbytheAntitrustDivision Antitrust DivisionAnnual Report Antitrust $1,105,654,316 $266,924,000 1999: $205,178,000 1998: $26,817,000 1997: $41,653,000 1996: $40,236,000 1995: $42,296,000 1994: $23,705,000 1993: $20,379,000 1992: $23,575,000 1991: 1990: Fine Amounts The dramaticincrease infines

Criminal Fines (in millions) $1,000 $1,100 $1,200 $100 $200 $300 $400 $500 $600 $700 $800 $900 9019 9219 9419 9619 981999 1998 1997 1996 1995 1994 1993 1992 1991 1990 Antitrust DivisionCriminalFines a bowlofcereal—ended uppayingmore a vitamin,drankglassofmilk,orhad American consumer—anyonewhotook In theend,fornearlyadecade,every first tofeeltheeffectsofthisconspiracy. However, thesecompanies were justthe Tyson Foods, andProctor &Gamble. as GeneralMills,Kellogg, Coca-Cola, companies withhouseholdnamessuch from thecartelmembersincluded sell. Thevictimswhopurchased directly charge, towhichcustomerstheywould produce, tohowmuchtheywould how muchproduct eachcompanywould reached agreements oneverythingfrom The membersofthevitamincartel uncovered bytheAntitrustDivision. harmful andelaborateconspiracyever billion inU.S.commerce, wasthemost vitamin cartel,whichaffectedover$5 the AntitrustDivision. conspiracies previously encountered by businesses andconsumers,thanany the amountofharmcausedtoAmerican For example,theinternational Sherman Act Violations Yielding a Fine of $10 Million or More

Defendant (Fiscal Year) Product Fine Geographic Country (million) Scope F. Hoffman-La Roche Ltd. (1999) Vitamins $500 International Switzerland BASF AG (1999) Vitamins $225 International Germany

SGL Carbon AG (1999) Graphite Electrodes $135 International Germany Program Enforcement Criminal The UCAR International, Inc. (1998) Graphite Electrodes $110 International United States Archer Daniels Midland Co. (1997) Lysine & Citric Acid $100 International United States Takeda Chemical Industries, Ltd. Vitamins $72 International Japan (1999) Haarmann & Reimer Corp. (1997) Citric Acid $50 International German Parent HeereMac v.o.f. (1998) Marine Construction $49 International Netherlands Eisai Co., Ltd. (1999) Vitamins $40 International Japan Hoechst AG (1999) Sorbates $36 International Germany Showa Denko Carbon, Inc. (1998) Graphite Electrodes $32.5 International Japan Daiichi Pharmaceutical Co., Ltd. Vitamins $25 International Japan (1999) Nippon Gohsei (1999) Sorbates $21 International Japan Pfizer Inc. (1999) Maltol/Sodium $20 International United States Erythorbate Fujisawa Pharmaceuticals Co. (1998) Sodium Gluconate $20 International Japan Dockwise N.V. (1998) Marine Transportation $15 International Belgium 7 Dyno Nobel (1996) Explosives $15 Domestic Norwegian Parent F. Hoffmann-LaRoche, Ltd. (1997) Citric Acid $14 International Switzerland Eastman Chemical Co. (1998) Sorbates $11 International United States Jungbunzlauer International (1997) Citric Acid $11 International Switzerland Lonza AG (1998) Vitamins $10.5 International Switzerland Akzo Nobel Chemicals, BV & Glucona, BV (1997) Sodium Gluconate $9 International Netherlands ICI Explosives (1996) Explosives $10 Domestic British Parent Mrs. Baird’s Bakeries (1996) Bread $10 Domestic United States Ajinomoto (1996) Lysine $10 International Japan Kyowa Hakko Kogyo, Co., Ltd. (1996) Lysine $10 International Japan

so that the conspirators could reap Swiss, German, Canadian, and Japanese hundreds of millions of dollars in addi- firms and over $875 million in criminal tional revenues. fines against the corporate defendants, including a $500 million fine imposed To date, the vitamin investigation on F. Hoffmann-La Roche Ltd. (HLR) has resulted in convictions against and a $225 million fine imposed on

Antitrust Division Annual Report 8 The Criminal Enforcement Program sends apowerfuldeterrent messagethat edented finesobtainedinthismatter, country, togetherwiththeunprec- foreign nationalsresiding outsidethis imposition ofjailsentencesagainst for engagingincartelactivity. The nationals toservetimeinaU.S.prison Brönnimann are thefirstEuropean min cartel.Messrs.Sommerand stantial finesfortheirroles inthevita- sent toprisonandordered topaysub- Vitamin DivisionatHLR,were recently president oftheFine Chemicaland and Roland Brönnimann,theformer wide MarketingforVitamins atHLR, Sommer, theformerdirector ofWorld- heavy fines.For example,Kuno face potentialjailsentencesaswell prison orare awaitingsentencingand either already servingtimeinfederal including theforeign defendants,are vitamin cartel.Alloftheseindividuals, executives whoparticipatedinthe prosecuted sevenAmericanandforeign The AntitrustDivisionalsohasthusfar Justice proceeding underanystatute. ever imposedinanyDepartmentof imposed againstHLRisthelargest fine BASF AG. The$500millionfine Antitrust DivisionAnnual Report Antitrust fines. tions andover$1billionincriminal Program hasledtodozens ofconvic- in thepastyearalone,Amnesty the priorAmnestyProgram. Moreover, than twenty-foldincrease compared to approximately twopermonth—amore ing amnestyapplicationsattherateof the AntitrustDivisionhasbeenreceiv- leniency program. Duringthepastyear, Department ofJustice’smostsuccessful generator oflarge cases,anditisthe Antitrust Division’s mosteffective ecution. Today, thatprogram isthe exchange foracompletepassonpros- ate withtheAntitrustDivisionin companies tocomeforward andcooper- to make iteasierandmore attractivefor Division expandeditsAmnestyProgram success. InAugust 1993,theAntitrust major contributortoitsinvestigative Division’s AmnestyProgram hasbeena as wellgoodtrialwork.TheAntitrust result from more effectiveinvestigation Antitrust Division’s anticartelefforts international cartelactivity. vigorous antitrust enforcement against the UnitedStatesiscommittedto The increased effectivenessofthe

The Merger Enforcement Program The Merger Enforcement Program Enforcement Merger The

ection 7 of the Clayton Act (15 The analysis of proposed mergers has become increasingly difficult as the U.S.C. Sec. 18) prohibits mergers S products and services of our economy that may substantially lessen competi- become more complex and the pace of tion. The Antitrust Division’s goal in the development of new products enforcing Section 7 is to preserve for increases. consumers—individuals, businesses and government—the price-reducing and quality-enhancing effects of competi- The analysis of proposed mergers tion. has become increasingly difficult as the products and services of our economy The Antitrust Division’s merger become more complex and the pace of enforcement program has been tested the development of new products during the past two years by record increases. In technologically complex or numbers of transactions filed under the rapidly changing markets, the Antitrust Hart-Scott-Rodino Act’s premerger Division must determine not only the review provisions. In FY 1998 and extent to which the merging firms 9 1999, approximately 4,500 transactions compete today but also the manner in were filed each year—more than double which such rivalry is likely to be af- the number filed just a few years earlier. fected by foreseeable innovation from During the past two years, 97 transac- these firms and others in the same or tions have been abandoned or restruc- related markets. This type of complex, tured in response to the competitive fact-based analysis led to the Division’s concerns expressed by the Antitrust suit to block the $11.9 billion proposed Division, the highest level of merger merger of Lockheed Martin and enforcement activity in its history. Northrop Grumman, the largest merger These transactions encompassed many ever challenged by the government, as products and services that affect every- well as to the divestitures ordered in day life, including telephone, Internet, connection with Raytheon’s acquisi- health insurance, airline, and banking tions of the defense electronics busi- services, local radio advertising, movie nesses of Texas Instruments and theaters, aluminum cans, trash hauling Hughes Electronics. The Division’s and disposal, voting machines, elec- goal in each of these transactions was tronic benefits transfer, and our to preserve for our armed services the military’s most sophisticated weapons. competition necessary for development Many of these transactions have in- of innovative, cutting-edge weapons volved firms with billions of dollars in systems. revenues, operating in numerous product and service markets.

Antitrust Division Annual Report 10 The Merger Enforcement Program abandoned thetransactionbefore trial. broadcast satelliteservice.The parties to provide suchhigh-powerdirect one ofonlythree orbitalslotsavailable their jointventurePrimestar, toacquire largest cablecompanies,actingthrough block aneffortbyfiveofthenation’s ered satellites.TheDivisionsuedto ute programming through high-pow- firms usingnewtechnologytodistrib- are beginningtofacecompetitionfrom of multichannelvideoprogramming, dominated markets forthedistribution companies, whichformanyyearshave from anewtechnology. Cabletelevision would beabletoimpedecompetition raised theriskthatcableindustry Division challengedanacquisitionthat Antitrust DivisionAnnual Report Antitrust such asthosesubjecttoapproval by federal agencies. regulatory *Chargeable filings. Datadoesnotincludetransactions for whichnoticemust begiven but nofilingfees arerequired,

Total Number In United Statesv. Primestar 1000 2000 4000 5000 3000 Hart-Scott-Rodino Premerger Filings* Hart-Scott-Rodino 1990 1388 9119 9319 9519 9719 992000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1328 -4% 1382 +4% , the +21% 1673 +28% 2145 Fiscal Year +22% 2617 in history, andrequired divestitures of actions, includingsomeofthelargest analyzed numer During FY Division’s objections orabandoned. either restructured toresolve the cerns; allofthosetransactionswere would haveledtocompetitivecon- ers andhaschallengedtransactionsthat has investigateddozensofradiomerg- tion intheradioindustry. The Division Act of1996hasledtorapidconsolida- restrictions intheTelecommunications relaxation ofradio stationownership dating industries.For example,the recently deregulated orrapidlyconsoli- few yearshasbeenconcentratedin merger enforcement workoverthelast Much oftheAntitrustDivision’s +10% 2870 +19% 3425 1999 alone, 1999 alone, ous +30% 4482 bank merger trans- 4332 -3% the Division +14% (est.) 4938 Value of U.S. Merger Activity*

$1,790 1,800

$1,613 Program Enforcement Merger The 1,600

1,400

1,200

1,000 $959

800 $659 Value in Billions Value 600 $502

400 $357 $239 $186 200 $137 $150

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Calendar Year

Source: Securities Data Company 11

local branches and assets in seven artificially physicians’ reimbursement transactions, including the largest rates, leading to a reduction in quantity divestiture in bank merger history. The or degradation in quality of physicians’ Division also challenged a merger services. In Cargill, the Division’s between a gas and an electric company, complaint alleged that, in certain geo- as well as Northwest Airlines’ acquisi- graphic markets, the acquisition of tion of voting control of Continental Continental’s grain business by Cargill Airlines. would allow Cargill to depress artificially the prices paid to farmers for grain In two cases last year, United States and soybeans. Both cases were success- v. Aetna and United States v. Cargill, the fully resolved by consent decree. Division demonstrated that its concerns about market power extend to circum- The majority of the Division’s stances involving “monopsony power,” merger cases are resolved by consent in which a transaction may create or decrees requiring divestitures that are enhance the power of buyers. In Aetna, designed to protect competition. Full the Division’s complaint alleged that, in compliance with consent decrees is certain geographic markets, the merged therefore essential to merger enforce- firm would obtain the ability to depress ment. During the year, the Division

Antitrust Division Annual Report 12 The Merger Enforcement Program Antitrust Division’s willingnessto should beprohibited initsentirety.The a consentdecree andthatthetransaction particular transactioncannotbecured by that theanticompetitiveeffectsofa stances inwhichtheDivisionconcludes well. ously andexpectsdefendantstodosoas Division takes itsconsentdecrees seri- contempt andfined$750,000each.The civil fines;bothwere foundincriminal panies agreedtopay$13.1millionin consent decree. InDecember, thecom- Schlumberger, Ltd.forviolationofa against SmithInternationaland filed criminalandcivilcontemptcharges Antitrust DivisionAnnual Report Antitrust Nevertheless, there willbecircum- analysis inthecourts. appropriate relief oradvancemerger lenges whenevernecessarytoachieve will continuetolitigatemerger chal- tions intheirentirety,the Division and lawsuits toprohibit pr sion has the AntitrustDivi- the pasttwoyears, merger lawreflects current learning.In other remedy, andithelpsensure that accept aninadequatedivestiture or signals thattheDivisionisunwillingto affected bythemerger inquestion.It competition intheparticularmarkets public overandabovetheprotection of provides important benefitstothe engage inlitigationonmerger issues filed or thr eatened tofile13 oposed transac- The Civil Non-Merger Enforcement Program Enforcement Non-Merger Civil The The Civil Non-Merger Enforcement Program

he Antitrust Division’s civil non- The Antitrust Division has filed Tmerger enforcement program has complaints challenging a wide variety of been addressing one of the most timely both unilateral and multilateral conduct questions about antitrust enforcement: in industries that are important to Are the antitrust laws adequate to consumers, such as personal computer protect consumers from anticompetitive operating systems, credit cards, and airlines, to ensure that consumers are harm that may arise during a period of not denied the full benefits of unprecedented technological change? competition. During this period, the Antitrust Divi- sion has filed complaints challenging a wide variety of both unilateral and systems pose special risks that markets multilateral conduct in industries that will “tip” very quickly in favor of a are important to consumers, such as dominant incumbent. In such cases, personal computer operating systems, timely and effective antitrust interven- credit cards, and airlines, to ensure that tion may be even more important than consumers are not denied the full ben- is normally the case if we are to ensure efits of competition. The Antitrust that the eventual market winner prevails 13 Division has simultaneously continued on the basis of competition on the its competitive advocacy efforts before merits. Congress and federal administrative agencies to urge reliance on competi- Network effects, a phenomenon of tion, rather than regulation, as the various computer and communications means to maximize consumer welfare. systems, arise when the value of a product or service to a user increases Recent years have seen unprec- with the number of other users or as edented technological change in many products compatible with the service industries, particularly those involving increase. Network effects arise directly information technology. While some where communication with other users people have contended that the rapid is important; for example, in telecom- pace of change obviates the need for munications or sharing of computer antitrust enforcement on the ground files. Network effects can also arise that new entrants can easily supplant indirectly where a product’s value dominant incumbents that try to exert depends heavily on complementary market power, the Division believes that products (such as application programs such a generalization is mistaken. Under compatible with a computer’s operating certain circumstances, network externali- system), since a larger customer base ties and first-mover advantages associ- tends to attract a greater variety of such ated with information technology complements. Where network effects are

Antitrust Division Annual Report 14 The Civil Non-Merger Enforcement Program Antitrust DivisionAnnual Report Antitrust type hasbeenitsaction against Division’s enforcement efforts ofthis efficient access. ary practicesagainstrivalsthatrestrict genuine efficiencies)orotherexclusion- incompatibilities (thatis,notfrom firm’s advantagesderivefrom contrived trust concernsarisewhenadominant offerings are otherwisesuperior. Anti- market poweragainstrivalswhose markets, aswellhelpdefenditscore firm acompetitiveedgealsoinrelated ibility advantagescangivethedominant those products. Installed-basecompat- complementary products tailored for dominant firm’sproducts orwith ability tointerfaceseamlesslywiththe price oreaseofuse)butalsoonits only onitsinherent attributes(suchas product willdependnot competitor’s substantial, themarket successofa The mostsignificantof the Antitrust failing tocompeteagainst oneanother purpose credit card networks,with MasterCard, thetwo dominantgeneral- Antitrust Divisioncharged Visa and competitors. InOctober1998,the case involvingcollaborativeconductby Antitrust Divisiontofilesuitinanother vices importanttoconsumersledthe 5, 1999. extensive findingsoffactonNovember 1999, andtheDistrictCourtissued the liabilityissueswascompletedin the Internetbrowser market. Trial on and toextenditsmonopolypowerinto personal computeroperatingsystems practices toprotect itsmonopolyin with itseffortstouseexclusionary 2 oftheShermanAct inconnection Microsoft withviolatingSections1and sion filedacomplaintcharging Microsoft. In1998,theAntitrustDivi- Concerns aboutinnovationinser- In 1998, the Antitrust Division filed a complaint charging Microsoft with violating Sections 1 and 2 of the Sherman Act in connection with its efforts to use exclusionary practices to protect its monopoly in personal computer operating systems and to extend Program Enforcement Non-Merger Civil The its monopoly power into the Internet browser market.

and adopting rules to prevent their testifies regularly to Congress on various member banks from dealing with other proposals with competitive implications. card networks, all of which retarded In recent years, significant segments of innovation. The case, which is scheduled the American economy, subjected to to go to trial in June, will highlight the economic regulation for half a century importance that the antitrust laws attach or more, have been substantially deregu- to preserving competitive incentives and lated by statute. Where public restraints opportunities for exiting and potential have been lifted, proper application of rivals. the antitrust laws ensures that the benefits of competition will not be During the year, the Antitrust impaired by private restraints. Division also filed suit charging Ameri- can Airlines with monopolizing routes Even in industries that have not emanating from its Dallas/Ft. Worth been deregulated by statute, regulatory (DFW) hub in violation of Section 2 of agencies often retain substantial discre- the Sherman Act, through predatory tion to promote competitive behavior. practices designed to drive low-cost The Antitrust Division works closely carriers out of DFW routes. The com- with many federal agencies, including 15 plaint charges that American added the Department of Transportation, the uneconomic flights and reduced fares in Federal Energy Regulatory Commission, DFW routes served by low-cost carriers the Securities and Exchange Commis- until the low-cost carriers were forced sion, and the Federal Communications out of the market; American viewed Commission, to urge that they rely in such conduct as an “investment” to their decision making on competitive protect its ability to charge high fares on principles to the maximum extent DFW routes. This is the first predation consistent with the other statutory case brought against an airline by the goals. Division since the industry was deregulated in 1979. Thus, through antitrust enforcement actions, direct overtures to Congress for The Antitrust Division has also regulatory reform, and communications continued its long-standing policy of with federal regulatory agencies, the being an effective advocate for the cause Antitrust Division remains the of competition in various legislative government’s foremost proponent of proceedings. The Antitrust Division competition.

Antitrust Division Annual Report 16 The Civil Non-Merger Enforcement Program Antitrust DivisionAnnual Report Antitrust The Telecommunications The Program Competition

The Telecommunications Competition Program

he promotion of competition in Thanks in significant part to the Ttelecommunications has been one of Antitrust Division’s activities, consumers the Antitrust Division’s most significant today have more choices than ever accomplishments of the past three before in choosing among providers for decades and will be one of its greatest local telecommunications services, for continuing challenges in years to come. wireless services, for video services, for Internet services, and for international telecommunications services. For most of the twentieth century, the telecommunications industry in the United States was a regulated monopoly. telephone service and firmly established In the late 1960s, the Antitrust Division a fundamental national policy favoring participated in FCC proceedings and competition and deregulation in all successfully advocated the introduction telecommunications markets. The new of competition into long-distance tele- competitive environment created by the phone service. In 1974, the Justice Telecommunications Act presented Department filed a monopolization case several competition advocacy challenges against AT&T, seeking structural relief for the Antitrust Division, which are 17 that would permit the long-distance reflected in its activities since 1996. competition then authorized by the FCC to develop. That case was resolved 1. Opening Local Telecommunica- through the entry of a consent decree in tions Markets. The Telecommunications 1982, which involved a breakup of Act of 1996 created opportunities to AT&T. The breakup was highly contro- eliminate the most important remaining versial, but subsequent experience monopoly in the telecommunications proved its wisdom. Competition grew industry—the monopoly of local tele- and flourished. By the mid-1990s, the communications services controlled by lower prices and rapid innovation the Bell Operating Companies (BOCs) generated by competition and deregula- and other incumbent local exchange tion of long-distance telephone service carriers. The Antitrust Division has and telecommunications equipment worked to maximize those opportunities manufacturing in the United States by successfully advocating principled prompted U.S. policy makers to seek to and procompetitive interpretation and extend competition more broadly implementation of the local market throughout the domestic telecommuni- opening provisions of the Act. cations industry. This effort culminated in the passage of the Telecommunica- To that end, the Division filed tions Act of 1996, which eliminated extensive comments in the FCC’s Local legal restrictions on competition in local Competition rulemaking advocating

Antitrust Division Annual Report 18 The Telecommunications Competition Program selves, create competition.Successful litigation victorieswillnot, bythem- 1966 Telecommunications Act, but opening process contemplatedbythe solid legalfoundationforthemarket- critically importantinestablishinga of theAct. requirements ofSections 251and252 interpretations ofthemarket-opening supporting appropriate, procompetitive produce asubstantialbodyofprecedent entrants. Theseeffortshavehelpedto local exchange carriers(LECs)andnew tion agreements betweenincumbent Act, reviewing arbitratedinterconnec- tion 252oftheTelecommunications and courtofappealscasesunderSec- briefs inthenumerous districtcourt assisted inmonitoringandfiling stitutional. andare nototherwiseuncon- attainder” BOCs donotconstitutea“billof Fifth Circuit thattherestrictions onthe in theU.S.CourtofAppealsfor General JoelKleinsuccessfullyargued were challenged.AssistantAttorney transitional restrictions ontheBOCs the constitutionalityof1996Act’s successfully defendingactionsinwhich The AntitrustDivisionalsoassistedin upheld theFCC’sprocompetitive rules. the Supreme Court,whichlargely tion) intheEighthCircuit andbefore (and theFCC’srulemakingjurisdic- with theFCCindefendingthoserules rules. TheDivisionthenworked closely for it promulgated itslocalcompetition challenges principles thattheFCCadoptedwhen new created has industry mission. telecommunications the of globalization The Antitrust DivisionAnnual Report Antitrust the Antitrust Division. The Division’s mission in the global arena mirrors its domestic its mirrors arena global the in mission Division’s The Division. Antitrust the These litigationvictorieshavebeen The AntitrustDivisionhasalso amicus successful 271application havebeen process, many oftherequirements fora sions, andothers.Asaresult ofthis ers, consumergroups, statecommis- sions withtheBOCs,competingcarri- market-opening efforts,through discus- continuous monitoringoftheBOCs’ devoted substantialresources tothe opening process. TheDivisionhas to ariseinconnectionwiththemarket- cific controversies thatcanbeexpected that standard inevaluatingmanyspe- interested parties—howitwillapply and initsfrequent discussionswith Section 271applications,inspeeches, detail—in itsformalevaluationsof Appeals. TheDivisionhasexplainedin affirmed bytheD.C.Circuit Courtof decisionwas dations. Theagency’s that followedtheDivision’s recommen- threshold requirements ofSection271 adopted aninterpretation ofthecritical open tocompetition.”TheFCC local market was“fullyandirreversibly the applicantdemonstratedthatits support Section 271applicationsonlyif tions, andconcludedthatitwould should useinreviewing theseapplica- input concerningthestandard thatit late 1996,theDivisionsolicitedpublic BOCs underSection 271oftheAct. In distance serviceapplicationsbythe connection withitsreview oflong- tial portionoftheDivision’s effortsin ments hasbeenthefocusofasubstan- incumbents’ ubiquitouslocalnetworks. for interconnection andaccesstothe the technicallycomplexarrangements LECs andnewentrantstoimplement competition willalsorequire incumbent The developmentofthesearrange- met by a number of BOCs, and the communications services, further Telecommunications The Program Competition Division is hopeful that successful stimulating demand for international applications, demonstrating fully and communications. irreversibly open markets, will be filed in the near future. The globalization of the telecommunications industry has created new These efforts have led to substantial challenges for the Antitrust Division. entry by competitive local exchange The Division’s mission in the global carriers (CLECs). Using exclusively arena mirrors its domestic mission. their own facilities or a combination of First, we have worked to support the their own facilities with elements of the opening of markets for international BOCs’ networks, these CLECs are telecommunications, a process that will providing local telecommunications also entail the opening of markets in services to an increasing number of other countries. These international customers. CLECs had installed more market-opening efforts will benefit than 800 voice switches by the end of American consumers, who purchase a 1999, compared to a total of 139 voice large share of international telecommu- switches in 1996. CLECs tripled the nications services. It will also benefit size of their local fiber transmission American telecommunications firms, networks from 1996 to 1999. As of whose experience in competitive do- June 1999, CLECs had obtained ap- mestic markets has positioned them for proximately 685,000 unbundled loops success in the international arena as from incumbents (an increase of 180 well. Second, we have worked closely percent over the previous year) and had with telecommunications and competi- collocated in wire centers serving 60 tion authorities in other countries, percent of all lines in the country (com- particularly with respect to merger 19 pared to 32 percent the previous year). enforcement, to ensure the consistent CLECs have achieved local market application of sound policies that will shares approximating 10 percent in protect competition in international some states, a remarkable achievement markets. in markets that were virtually complete monopolies throughout most of the The transition to deregulated, twentieth century. competitive telecommunications markets will continue to create new chal- 2. Promoting Competition in the lenges for the Antitrust Division in the Global Telecommunications Market. coming years. That transition is far The telecommunications industry is a from complete. In many critically central component of the emerging important telecommunications markets, global economy. As firms in other incumbent providers still maintain markets have expanded the geographic substantial market power. But the scope of their operations, their need for experience in moving to competitive global communications capabilities, equipment and long-distance markets both voice and data, have greatly over the past two decades and more increased. Improved technology and recent experience in extending competi- more competitive telecommunications tion to other markets under the Tele- markets throughout the world have also communications Act has demonstrated lowered the costs and prices of tele- the great benefits of competitive mar-

Antitrust Division Annual Report 20 The Telecommunications Competition Program Internet services,andinternational wireless services,video local telecommunicationsservices, before inchoosingamongproviders for ers todayhavemore choicesthanever Antitrust Division’s activities,consum- kets. Thanksinsignificantparttothe Antitrust DivisionAnnual Report Antitrust competition provides. and broader consumer choicesthatsuch the lowerprices,improved technology, greater competitioninthefuture and helped tocreate asolidfoundationfor importantly, theDivision’s effortshave telecommunications services.More International Antitrust Policy and Procedures and Policy Antitrust International

International Antitrust Policy and Procedures

s a result of the increasing global- The Division now has more than 30 A ization of the world economy in ongoing grand juries—well over one- recent years, it is increasingly common third of its criminal investigations— for business conduct in one country to looking into international cartel activity. have anticompetitive consequences in other countries. This trend has given rise to new challenges for the Antitrust 29 OECD member countries to enact Division. The most immediate challenge and enforce laws prohibiting hard-core is to ensure continued, effective enforce- cartels as well as to enter into mutual ment of the antitrust laws against un- assistance agreements to permit the lawful conduct, wherever it occurs, that sharing of evidence with foreign anti- causes injury in the United States. As trust authorities to the extent permitted noted previously, the Division has by national laws. In April 1999, the actively pursued criminal enforcement United States signed an agreement with against international cartels. The Divi- Australia, the first under the Interna- sion now has more than 30 ongoing tional Antitrust Enforcement Assistance 21 grand juries—well over one-third of its Act of 1994, that will permit the two criminal investigations—looking into antitrust enforcement agencies to share international cartel activity. confidential information on both civil and criminal matters. In March 1999, The Division has also sought to the United States signed an antitrust encourage developments in competition cooperation agreement with Israel, and law throughout the world that will similar agreements were signed in both further the enforcement of sound, October 1999 with Japan and Brazil. effective antitrust laws and reduce any costs imposed on United States busi- As described in detail above, the nesses and consumers by reason of the Division has been actively engaged in number of, or possible inconsistencies international merger and civil non- among, different national competition merger enforcement. In many cases the laws. To those ends, the Division has business conduct involved is subject to taken several steps to facilitate its review by two or more countries’ obtaining evidence (both documents antitrust agencies. As a result, the and witnesses) located abroad in con- Division has had numerous occasions nection with its cartel enforcement to work with the Commission of the activities. In April 1998, for example, European Communities on merger the OECD ministers endorsed a Divi- matters and has had good experiences sion-introduced Hard-Core Cartel with case-specific cooperation. One Recommendation that encourages the example is the WorldCom/MCI merger

Antitrust Division Annual Report 22 International Antitrust Policy and Procedures and theEur nonmerger matters,theU with importanttransnationalcivil requiring asignificantdivestiture. resolved byaU.S.consentdecree where theantitrustconcernswere in theDresser/Halliburton merger, Commission, andthemerging parties followed bytheDivision,Eur A similarprocedure wassuccessfully both theDivisionandCommission. proposal thathadbeenproposed to and implementingthedivestiture cooperation andassistanceinevaluating cooperation agreement, theDivision’s pursuant tothe1991U.S.-EUantitrust the Commissionformallyrequested, proval ofthetransactioninJuly 1998, sions, andbefore announcingitsap- reached essentiallythesameconclu- European the transaction.TheDivisionand making theirindependentanalysesof staffs toworkcloselytogetherin ality thatpermittedthetwoagencies’ provided writtenwaiversofconfidenti- merger history. Inthatcase,theparties assets—the largest divestiture inU.S. of MCI’s$1.75billionininternet firms, whichresulted inthedivestiture involving twoU.S.telecommunications agencies U.S. other with worked also has enforcement. Division antitrust the sound years, several past the During Antitrust DivisionAnnual Report Antitrust country preliminarily determinesthat concept, theantitrustauthority ofone 1991. Underthe“positivecomity” such agreement, whichwasadoptedin positive comityprovisions ofthefirst 1998. Thisagreement buildsonthe new positivecomityagreement inJune and in multinational fora to improve the overall environment for competitive markets and markets competitive for environment overall the improve to fora multinational in and Anticipating thattheywillbefaced Commission ultimately opean Union entered intoa nited States opean for example,theDivision hascochaired trust enforcement. During thisperiod, competitive markets andsoundanti- to improve theoverallenvironment for U.S. agenciesandinmultinationalfora Division hasalsoworked withother to thisreferral. ings, againstoneoftheairlinespursuant objections, whichopensformalproceed- Commission issuedastatementof pean countries. In competing effectivelyincertainEuro- computer reservations systems from that maybepreventing U.S.-based conduct bycertainEuropean airlines regarding possibleanticompetitive referral underthe1991agreement 1997 theDivisionmadeaformal made underthe1998agreement, in results underitsownlaws. conclusionsorseekdifferentauthority’s thority mayaccepttheforeign sions andactions,therequesting au- conclu- depending onthatauthority’s with theforeign antitrustauthorityand the suspectbehavior. Afterconsulting markets are mostdirectly affectedby analysis, totheauthoritywhosehome matter, alongwithitspreliminary The requesting authorityrefers the anticompetitive behaviorinthelatter. the markets ofanothercountryby appears tohavebeendeniedaccess case where afirmbasedinthatcountry antitrust investigation,typicallyina there are reasonable grounds foran During thepastseveralyears, While noreferrals haveyetbeen 1999, theEuropean International Antitrust Policy and Procedures and Policy Antitrust International

(with the Department of State) the The Division also participates in Structural Issues Working Group of the discussions in the increasing number of U.S.-Japan Enhanced Initiative on international fora, including the 23 Deregulation and Competition Policy; OECD, NAFTA, the Asia Pacific this group’s joint report included Economic Cooperation, and the nego- commitments by the government of tiations for the Free Trade Area of the Japan to strengthen its antitrust en- Americas (FTAA), in which antitrust forcement program. Similarly, the and competition policy issues are Division worked with USTR and other discussed. In addition, the Division has domestic agencies on the successful participated (with other U.S. agencies) conclusion of the World Trade Organi- during the past three years in discus- zation (WTO) negotiations on basic sions of the WTO working group on telecommunications issues, which the relationship between trade and included agreement on a Reference competition policy. Paper on interconnection rules and other transitional competition-related In 1997, Attorney General Reno safeguards. Although the Reference and Assistant Attorney General for Paper does not directly affect antitrust Antitrust Klein established an Interna- enforcement, it does establish a mini- tional Competition Policy Advisory mum level of effective (non-antitrust) Committee (ICPAC) to examine the regulation for governments to employ changing international environment in liberalizing former monopoly from an outside-the-Division perspec- telecom markets. tive. ICPAC devoted special attention to

Antitrust Division Annual Report 24 International Antitrust Policy and Procedures relationships betweentradeandcompe- How shouldwedealwiththecomplex consumers andmerging firms?(3) as toachievesoundresults forboth and merger lawsaround theworld,so premerger notificationrequirements should wedealwiththeproliferation of of atinternationalcartels?(2) How cooperation andeffectiveprosecution a consensusamonggovernmentsfor three key issues:(1)How canwebuild Antitrust DivisionAnnual Report Antitrust February 2000. pated. ICPAC’s report wide rangeofU.S.witnessespartici- from around theworldaswella hearings inwhichantitrustofficials Stern, metseveraltimesandheld Trade CommissionChairwomanPaula Rill andformerU.S.International former AssistantAttorney GeneralJim tition? ICPAC, whichwas cochaired by was issuedin

Antitrust Division Selected Criminal Cases Appendix A: Selected Criminal Cases Criminal Selected A: Appendix April 1, 1996 through September 30, 1999

Vitamins The vitamin cartel is the most pervasive and harmful criminal antitrust conspiracy ever uncovered by the Divi- sion. The members of the vitamin cartel reached agreements on everything from how much product each company would produce, to how much they would charge, to which customers they would sell. The victims of this conspiracy were the purchasers of the vitamins most commonly used as nutri- tional supplements or to enrich human 25 food and animal feed. However, in the The Antitrust Division also has thus final analysis, the conspiratorial conduct far prosecuted seven U.S. and foreign of the cartel members affected the executives who participated in the pocketbook of virtually every American vitamin cartel. All of these individuals, consumer who took a daily vitamin including the foreign defendants, are supplement or who had a bowl of cereal either already serving time in federal in the morning. prison or are awaiting sentencing and face potential jail sentences as well as The vitamin investigation has thus heavy fines. For example, Kuno far resulted in convictions against Swiss, Sommer, the former Director of World- German, Canadian, and Japanese firms wide Marketing for Vitamins at HLR, and over $875 million in criminal fines and Roland Brönnimann, the former against the corporate defendants, includ- President of the Fine Chemical and ing a $500 million fine imposed on Vitamin Division at HLR, were recently F. Hoffmann-La Roche Ltd. (HLR) sent to prison and ordered to pay sub- and a $225 million fine imposed on stantial fines for their roles in the vita- BASF AG. The $500 million fine min cartel. Messrs. Sommer and imposed against HLR is the largest fine Brönnimann are the first European ever imposed in any Department of nationals to serve time in a U.S. prison Justice proceeding under any statute. for engaging in cartel activity.

Antitrust Division Annual Report 26 Appendix A: Selected Criminal Cases are asfollows: · · Antitrust DivisionAnnual Report Antitrust · · · · · · · · agreement) agreed to$10.5millionfineinplea Tex. 1998)(Swissfirm;defendant incarceration; $20,000fine) Tex. 1999)(U.S.citizen;12months United Statesv. JohnKennedy United Statesv. AG Lonza, The vitaminscasesbrought thusfar Brönnimann United Statesv. Dr. Roland fine) 4 monthsincarceration, $100,000 (N.D. Tex. 1999) (Swisscitizen; United Statesv. Dr. KunoSommer million fine) Tex. 1999)(Germanfirm;$225 United Statesv. BASF AG firm; $500millionfine) Roche, Ltd. United Statesv. F. Hoffmann-La ing sentencing) Tex. 1999)(Mexicancitizen;await- United Statesv. AntonioFelix awaiting sentencing) (N.D. Tex. 1999)(U.S.citizen; United Statesv. RobertSamuelson fine inpleaagreement) period of8monthsand$20,000 defendant agreed toincarceration for (N.D. Tex. 1999)(U.S.citizen; United Statesv. JohnL.“Pete” Fischer fine inpleaagreement) period of12monthsand$20,000 defendant agreed toincarceration for (N.D. Tex. 1999)(U.S.citizen; United Statesv. LindellHilling , (N.D.Tex. 1999)(Swiss , (N.D.Tex. 1999) , (N.D. , (N.D. , (N.D. , (N.D. , , , , evidence thatthemembers ofthegraph- warrants. Theinvestigation uncovered directly totheexecution ofsearch Policy,Corporate Leniency whichled from anapplicanttotheDivision’s was sparked bycooperation received were welloveronebilliondollars. States duringthetermofconspiracy sales ofgraphiteelectrodes intheUnited used inthemanufacturingprocess. Total and higherpricesforgraphiteelectrodes consumer items,paidnoncompetitive are integraltoavarietyofbusinessand conspiracy, steelmakers, whoseproducts melt scrapsteel.Asaresult ofthis in electricarc furnacesinsteel millsto worldwide forgraphiteelectrodes used fix thepriceandallocatemarket shares · · · Graphite Electrodes · $150,000 fineinpleaagreement) 5 monthsincarceration and (Swiss citizen;defendantagreed to $72 millionfineinpleaagreement) (Japanese firm;defendantagreed to Industries, Ltd. United Statesv. Takeda Chemical in pleaagreement) defendant agreed to$40millionfine (N.D. Tex. 1999)(Japanesefirm; United Statesv. EasaiCo., Ltd. $25 millionfineinpleaagreement) (Japanese firm;defendantagreed to cal Co., Ltd. United Statesv. DaiichiPharmaceuti- The graphiteelectrodes investigation The Divisioncracked aconspiracyto in pleaagreement) defendant agreed to$5millionfine (N.D. Tex. 1999)(Canadianfirm; United Statesv. Chinook GroupLtd. , (N.D.Tex. 1999) , (N.D.Tex. 1999) , , ite electrodes cartel met in the United prison terms of 9 months and 17 States, Far East, and Europe and agreed months, respectively, and a German to fix prices and allocate volume on a executive was fined $10 million—the region-by-region basis around the globe. largest criminal antitrust fine ever

In addition, the conspirators agreed to imposed on an individual—for their Appendix A: Selected Criminal Cases Criminal Selected A: Appendix restrict capacity for producing graphite roles in the international conspiracy. electrodes, to restrict non-conspirator companies’ access to graphite electrode The graphite electrodes cases manufacturing technology, and, further, brought thus far are as follows: to exchange sales and customer information to monitor and enforce the con- · United States v. UCAR International, spiracy. Inc., (E.D. Pa. 1998) (U.S. firm; $110 million fine) An American, German, and two Japanese companies have pled guilty and · United States v. Showa Denko Carbon, agreed to cooperate with the Division’s Inc., (E.D. Pa. 1998) (Japanese firm; ongoing investigation. Two of the $32.5 million fine) companies, UCAR International and SGL Carbon AG, were fined $110 · United States v. Tokai Carbon Com- million and $135 million, respectively, pany, Ltd., (E.D. Pa. 1999) (Japa- for their participation in the conspiracy. nese firm; $6 million fine) In addition, two U.S. executives pled guilty and have agreed to pay fines of · United States v. SGL Carbon AG and more than $1 million each and to serve Robert Koehler, (E.D. Pa. 1999) (German firm; $135 million. Ger- man citizen; $10 million fine) 27

· United States v. Robert J. Hart, (E.D. Pa. 1999) (U.S. citizen; defendant agreed to serve 9 months incarceration and to pay a $1 million fine in plea agreement)

· United States v. Robert P. Krass, (E.D. Pa. 1999) (U.S. citizen; defendant agreed to serve 17 months incarceration and to pay a $1.25 million fine in plea agreement)

Lysine The lysine investigation broke up an international price-fixing and volume- allocation agreement among the world’s major producers of lysine. Lysine, a feed additive used by farmers in livestock feeds, is a $600 million-a-year industry

Antitrust Division Annual Report 28 Appendix A: Selected Criminal Cases executives were subsequentlysentenced against allthree executives. TheADM Chicago juryreturned guiltyverdicts September 1998,afteraten-weektrial, participation inthelysinecartel.In ranking ADMexecutives fortheir with thejurytrialofthree formerhigh- million.) Theinvestigationculminated market and paidatotalfineof$100 separate conspiracyinthecitricacid $30 millionforitsparticipationina (ADM). (ADMwasfinedanadditional Archer DanielsMidlandCompany including a$70millionfineagainst nearly $100millionincriminalfines, their executives; ithasalsoyielded and twoKorean companies,andsixof five companies,includingtwoJapanese tion hasresulted intheconvictionof charges inAugust 1996,theinvestiga- three monthsoftheconspiracyalone. went upabout70percent inthefirst customers worldwide.Asaresult, prices on whatpriceswouldbecharged to volumes amongthemselvesandagreeing the worldmarket byallocatingsales cartel reached agreements tocarveup worldwide. Themembersofthelysine Antitrust DivisionAnnual Report Antitrust Beginning withthefirstround of lows: or more. defendants havebeenfined$100million or more are nowcommon,andfive Act statutorycap,finesof$10million fines abovethe$10millionSherman time thattheDivisionutilized in October1996,represented thefirst each. the executives were fined$350,000 ing from 24to30months,andtwoof to servelengthyprisonsentencesrang- · · · Korean company, $328,000fine) (N.D. Ill.1996)(U.S.subsidiary of United Statesv. SewonAmerica,Inc. firm, $10millionfine) Co. Ltd. United Statesv. Kyowa HakkoKogyo in pleaagreement) defendant agreed to$10millionfine (N.D. Ill.1996)(Japanesefirm, United Statesv. AjinomotoCo., Inc. A listofallthelysinecasesfol- ADM’s $100millionfine,imposed , (N.D.Ill.1996)(Japanese sentencing there were no Whereas priortoADM’s has changeddramatically. corporate antitrustfines result, thelandscapefor loss tothevictims.Asa to thecartelortwice equal totwicethegain mits impositionofafine Section 3571(d),per- found in18U.S.C. alternative fineprovision, of $10million.The Act statutorymaximum greater thantheSherman in order toobtainafine alternative fineprovision , , · United States v. Kanji Mimoto, (N.D. sophisticated and sweeping anticom- Ill. 1996) (Japanese citizen, $75,000 petitive schemes ever uncovered by the fine) Division. Citric acid, a flavor additive and preservative in such products as soft

· United States v. Masaru Yamamoto, drinks and processed foods, found in Appendix A: Selected Criminal Cases Criminal Selected A: Appendix (N.D. Ill. 1996) (Japanese citizen, nearly every home in the United States, $50,000 fine) as well as in detergents, pharmaceuticals and cosmetic products, is a $1.2 billion- · United States v. Jhom Su Kim, (N.D. a-year industry worldwide. The con- Ill. 1996) (Korean citizen, $75,000 spirators agreed to fix prices and allocate fine) sales volumes in the citric acid market worldwide. The conspirators also agreed · United States v. Archer Daniels on complex systems to monitor and Midland, Co., (N.D. Ill. 1996) (U.S. enforce the agreements. For example, firm, $100 million fine: $70 mil- the conspirators devised a compensation lion fine for lysine and $30 million system whereby the cartel members fine for citric acid) reviewed the sales of each conspirator at the end of the year, and any company · United States v. Cheil Jedang, Ltd., that sold more than its precisely allotted (N.D. Ill. 1996) (Korean company, share in one year was required in the $1.25 million fine) following year to purchase the excess from another conspirator that had not · United States v. Michael D. Andreas; reached its volume allocation target in Mark E. Whitacre; Terrance S. Wil- that preceding year. As a result of the son; and Kazutoshi Yamada, (N.D. conspiracy, list prices for citric acid were Ill. 1996) (Andreas, Whitacre and raised by more than 30 percent to 29 Wilson, all U.S. citizens, convicted customers in the United States during at trial; Andreas and Wilson each the conspiracy period, resulting in well sentenced to serve 24 months incar- over $100 million in additional revenue ceration and to pay fines of to the members of the conspiracy. $350,000; Whitacre sentenced to serve 30 months incarceration with Beginning with the first round of 10 months to be served concurrently charges in October 1996, the citric acid with a prison sentence he was investigation has resulted in convictions already serving for another offense against five corporations, including and 20 months to be served consecu- U.S., German, Swiss, and Dutch firms, tively. Yamada, a Japanese citizen, and four of their executives. In addition, did not appear at trial and remains a over $100 million in criminal fines— fugitive.) including a $50 million fine imposed on Haarmann & Reimer Corporation, the Citric Acid U.S. subsidiary of the German pharmaceutical giant Bayer AG—have been The Division’s investigation and obtained against the convicted defen- prosecution of an international cartel dants. among U.S. and European producers of citric acid put an end to one of the most

Antitrust Division Annual Report 30 Appendix A: Selected Criminal Cases follows: gluconate. the world’smajorproducers ofsodium allocate salesvolumesworldwide among unraveled aconspiracyto fixpricesand removal. TheDivision’s investigation cleaning, bottlewashing,andpaint tions, suchasfoodserviceandutensil industrial cleanerwithmanyapplica- investigations. Sodiumgluconateisan defendants inthelysineandcitricacid information received from cooperating sodium gluconateindustryarose from eliminate competitionintheworldwide international conspiracytosuppress and · · Antitrust DivisionAnnual Report Antitrust Sodium Gluconate · · · Corp. andHansHartmann United Statesv. Haarmann&Reimer million fineforcitricacid) million fineforlysineand$30 (U.S. firm,$100millionfine:$70 Midland Co. United Statesv. ArcherDaniels A listofallthecitricacidcases The Division’s investigationofan Italian citizen,$40,000fine) 1998) (Dutchfirm,$400,000fine; BV andSylvioKluzer United Statesv. CerestarBioproducts $150,000 fine) million fine;Swisscitizen, (N.D. Cal.1997)(Swissfirm,$11 national AG RainerBichlbauer United Statesv. JungbunzlauerInter- fine; Swisscitizen,$150,000fine) Cal. 1997)(Swissfirm,$14million Roche. Ltd.andUdoHaas United Statesv. F. Hoffmann-La fine; Germancitizen,$150,000fine) of Germancompany, $50million (N.D. Cal.1997)(U.S.subsidiary , (N.D.Cal.1996) , (N.D.Cal. , (N.D. , , cases brought thusfarfollows: conspiracy. million foritsparticipationinthe plead guiltyandpayafineof$20 Ltd., aJapanesecorporation,agreed to leaders, Fujisawa PharmaceuticalCo., criminal fines.Oneoftheindustry and hasresulted inover$30million companies andtheirforeign executives against investigation hasledtocriminalcharges Division bytheFTC.Sorbates (sorbic began asamattertransferred to the and Japaneseproducers ofsorbates tional conspiracyamongU.S.,German, prosecution ofaseventeen-yearinterna- · Sorbates · · · · To date,thesodiumgluconate A listofallthesodiumgluconate fine) 1997) (Dutchfirms,$10million BV andGluconaBV United Statesv. AkzoNobelChemicals The Division’s investigationand French citizen,$50,000fine) (French firm,$2.5millionfine; Bertrand Dufour United Statesv. RoquetteFreres and $200,000 fine) $20 millionfine;Japanesecitizen, (N.D. Cal.1998)(Japanesefirm, tical Co., Ltd. andAkiraNakao United Statesv. Fujisawa Pharmaceu- $100,000 fine) (N.D. Cal.1997)(Dutchcitizen, United Statesv. MarcelVan Eekhout citizen, $100,000fine) Nederveen United Statesv. CornelisR.

Dutch, French, andJapanese , (N.D.Cal.1997)(Dutch , (N.D.Cal.1997) , (N.D.Cal. , , acid and potassium sorbate) are chemical preservatives used primarily to prevent mold in food products, such as cheese and baked goods. Sales are over

$250 million a year worldwide. The Appendix A: Selected Criminal Cases Criminal Selected A: Appendix Division’s investigation uncovered one of the longest-running and durable international cartels ever prosecuted, a conspiracy which affected over $1 billion in U.S. sales.

The sorbates conspirators agreed to fix sorbates prices and allocate the market shares of sorbates sold worldwide, including the United States. Meetings among the producers were held in Japan and Europe throughout the seventeen-year conspiracy. The producers established several levels of target prices in the U.S. market based on the size of the customers and agreed to announce price increases on different dates to avoid detection of collusion. To date, three corporations and two executives have pled guilty and have agreed to pay fines totaling over 31 $68 million. · United States v. Hiromi Ito, (N.D. Cal. 1999) (Japanese citizen, The sorbates cases brought thus far $350,000 fine) are as follows: Marine Construction And · United States v. Eastman Chemical Transportation Company, (N.D. Cal. 1998) (U.S. In December 1997, the Division firm, $11 million fine) charged a company from The Nether- lands and one of its foreign executives · United States v. Hoechst AG, (N.D. with participating in an international Cal. 1999) (German firm, $36 cartel in marine construction services million fine) and a company from Belgium, its U.S. subsidiary, and two of its foreign execu- · United States v. Bernd Romahn, tives with participating in a separate (N.D. Cal. 1999) (German citizen, international cartel in marine transporta- $250,000 fine) tion services. The three related firms, which have a common parent, agreed to · United States v. Nippon Gohsei, (N.D. plead guilty and to pay a total of $65 Cal. 1999) (Japanese firm, $21 million in criminal fines. million fine)

Antitrust Division Annual Report 32 Appendix A: Selected Criminal Cases mersible heavy-lifttransport servicesto the conspiratorscolluded onsemisub- billion. the fixed contractswere inexcess of$1 their conspiracy. Worldwide revenues on Italy, Turkey, andelsewhere tocarryout in theUnitedStates,TheNetherlands, the Far East. Mexico andnextexpandedtoinclude grew toincludeprojects intheGulfof in theNorthSea.Theconspiracythen targeted marineconstructioncontracts environment. Theconspiratorsoriginally production platforms,inamarine of offshore oilandgasdrilling to liftheavystructures, suchasthedecks are floatingcranevesselswithacapacity of theworld.Heavy-liftderrickbarges the majoroilandgasproduction regions related marineconstructionservicesin pricing forheavy-liftderrickbarge and to allocatecustomersandagree on the conspiratorsreached anagreement Antitrust DivisionAnnual Report Antitrust In themarinetransportation cartel, In themarineconstructioncartel,

Members ofthecartelmet tion withtheguiltypleas, theU.S. profits dividedbythecartel.Inconnec- included inthepoolofrevenues and agreement, andthesecontractswere by theconspiratorsaspartoftheir tracts letbytheU.S.Navywere rigged developed bythecartel.Bidsoncon- profits according toacomplexformula all customers,andthendivideupthe would service,pooltherevenues from then wouldagree onwhichjobseach of theirinternaloperations.Theparties tomers, fleetpositions,andotheraspects upcoming jobs,pricesquotedtocus- agreed toshare informationabout the UnitedStates,andelsewhere and met inanumberoflocationsEurope, and theU.S.Navy. Theconspirators customers includedrillingcontractors long distancesintheopenocean.Its monly oilrigsandotherships,across carry extremely large cargo, mostcom- going vesselsthatpartiallysubmerge to heavy-lift transportshipsare ocean- throughout theworld.Semisubmersible customers intheUnitedStatesand Navy was paid civil damages for the • United States v. ICI Explosives USA, rigged contracts. Inc., (N.D. Tex. 1995) ($10 million fine)* The marine construction and trans-

portation cases brought thus far are as • United States v. Withers Waller Appendix A: Selected Criminal Cases Criminal Selected A: Appendix follows: Caldwell, (N.D. Tex. 1995) ($50,000 fine)* · United States v. HeereMac, v.o.f. and Jan Meek, (N.D. Ill. 1997) (Dutch • United States v. Dyno Nobel, Inc., firm, $49 million fine; Dutch citi- (N.D. Tex. 1995) ($15 million zen, $100,000 fine) fine)*

· United States v. Dockwise, N.V., • United States v. Mine Equipment and Dockwise U.S.A. Inc., Christiaan Mill Supply, Inc., (N.D. Tex. 1995) Bernardus van der Zwan, and ($1.9 million fine)* Bastiaan Albertus de Jong, (N.D. Ill. 1997) (Belgian firm, $15 million • United States v. Explosives Technologies fine; U.S. subsidiary of Belgian firm, International, Inc., (N.D. Tex. 1996) $1 million fine; Dutch citizen, ($950,000 fine)* $150,000 fine; Dutch citizen, $75,000 fine) • United States v. Amos Dolby Co., (W.D. Pa. 1996) ($90,000 fine) · United States v. Vincent Oliveri, (S.D. Tex. 1999) (Italian citizen, trial • United States v. DC Guelich Explosive pending) Co., (W.D. Pa. 1996) ($200,000 fine) 33 · United States v. Littleton E. Walker, (S.D. Tex. 1999) (U.S. citizen, • United States v. Douglas Explosive, awaiting sentencing) Inc., (W.D. Pa. 1996) ($70,000 fine) Explosives • United States v. Hilltop Energy, Inc., This investigation of regional and (W.D. Pa. 1996) ($330,000 fine) national conspiracies to fix prices for certain commercial explosives, such as • United States v. Kesco, Inc., (W.D. Pa. dynamite, ammonium nitrate, and 1996) ($100,000 fine) blasting agents, has resulted in guilty pleas by 14 corporations and 3 individu- • United States v. Ren-Loi, Inc., (W.D. als and total fines of nearly $40 million. Pa. 1996) ($112,000 fine) The commercial explosives subject to these conspiracies are those used in coal • United States v. Austin Powder Co., and metal mining, quarry operations, (N.D. Tex. 1996) ($7 million fine) construction, and oil and gas production and account for about $1 billion in sales • United States v. Thomas Mechtenberg, annually. (An asterisk after the case (N.D. Tex. 1996) ($20,000 fine) name denotes prosecutions filed prior to the reporting period.)

Antitrust Division Annual Report 34 Appendix A: Selected Criminal Cases period.) prosecutions filedpriortothereporting asterisk afterthecasenamedenotes and moneylaunderingviolations.(An cial bribery, incometaxevasion,fraud, investigations haveuncovered commer- addition tothebid-riggingoffenses, bars, liquorstores, andrestaurants. In or otherpromotional equipmentusedin as plasticandneonsigns,lamps,lights, purchase (POP)displaymaterials,such of bid-riggingbysupplierspoint-of- parallel investigationsandprosecutions cago Field Officesare conducting • • • • Antitrust DivisionAnnual Report Antitrust Materials Point-of-Purchase Display • $5 millioninbacktaxes have been up to30months.Inaddition, roughly million, andindividualjail sentencesof ordered restitutioninexcess of$1 fines totalingover$5million,court- have beensentencedtodateresulting in teen individualsandsevencorporations individuals and9corporations.Seven- in thefilingof29casesagainst24 Office investigationthusfarhasresulted United Statesv. DavidP. True (W.D. Pa. 1997)($1.5millionfine) United Statesv. NutriteCorporation (N.D. Tex. 1997)($44,580fine) United Statesv. DonaldJ.Westmaas fine) Inc. United Statesv. Industries, LaRoche New York. New The Division’s NewYork andChi- 4 monthshousearrest) (W.D. Ky. 1997)($50,000fine, United Statesv. JosephH.Longmire Ky. 1997)(acquittedattrial) , (W.D. Pa. 1997)($1.5million TheNewYork Field , (W.D. , , , and theIRS,iscontinuing. tial assistancefrom agentsoftheFBI District ofNewYork andwithsubstan- States Attorney’s OfficefortheSouthern ducted incooperationwiththeUnited The investigation,whichisbeingcon- ments havetotaledover$10million. recovered andprivaterestitution agree- of thosepayments. connection withtherequest andreceipt to conspiringcommitwire fraudin period. Thepurchasing agentpledguilty POP displayvendorsoveramultiyear agents whoreceived kickbacksfrom Company byoneofitspurchasing conspiracy todefraudMillerBrewing The investigationalsouncovered a statutory maximumfineof$350,000. defendants were sentencedtopaythe addition, twoofthefourindividual 13 monthsincarceration, respectively. In and were sentencedto12monthsand Two Everbriteexecutives alsopledguilty conspiracies andpaida$9millionfine. Inc., pledguiltytoparticipatinginboth conspiring POPproducers, Everbrite, ceeded $75million.Thelargest ofthe long-running illegalagreements ex- volume ofcommerce affectedbythese mid-1980s andendingin1996.The chase displaymaterialsbeginninginthe four majorproducers ofpoint-of-pur- allocate customersinvolvingthree ofthe conspiracies tofixprices,rigbids,and The Chicagoinvestigationexposedtwo Co., Inc.andMillerBrewing Company. two U.S.breweries, Anheuser-Busch the saleofpoint-of-purchase displaysto antitrust andrelated federaloffensesin dants arisingoutofaninvestigation two corporateandfiveindividualdefen- FBI, hasfiledsixcriminalcasesagainst Field Office,withtheassistanceof Chicago. TheDivision’s Chicago New York Cases · United States v. Dani Siegel, Visart M&F Corp., and Genetra Affil., · United States v. Jomar Displays, Inc., (S.D.N.Y. 1996) (awaiting sentenc-

(S.D.N.Y. 1993) ($175,000 fine)* ing) Appendix A: Selected Criminal Cases Criminal Selected A: Appendix · United States v. Louis Cappelli, · United States v. Michael Heinrich, (S.D.N.Y. 1994) (6 months incar- (S.D.N.Y. 1996) (6 months house ceration, 6 months community arrest) confinement, $296,000 fine)* · United States v. Winko, Inc., · United States v. Bert Levine, (S.D.N.Y. 1996) ($1.1 million fine) (S.D.N.Y. 1994) (6 months incarceration, $5,000 fine)* · United States v. Manufacturers Corru- gated Box Co., (S.D.N.Y. 1996) · United States v. Richard T. Billies and ($400,000 fine) Sidney Rothenberg, (S.D.N.Y. 1994) (6 months house arrest each, · United States v. Irwin Englander, $100,000 fine each)* (S.D.N.Y. 1997) (awaiting sentencing) · United States v. Robert Berger, (S.D.N.Y. 1994) (10 months house · United States v. Leslie Sutorius, arrest, $3,000 fine)* (S.D.N.Y. 1997) (2 months house arrest, $5,000 fine) · United States v. John Clemence, (S.D.N.Y. 1995) (4 months house · United States v. Grinnell Lithographic arrest, $100,000 fine)* Co., (S.D.N.Y. 1997) ($55,000 fine) 35

· United States v. Eugene Veltri, · United States v. Gabriel Sagaz, (S.D.N.Y. 1995) (3 months house (S.D.N.Y. 1998) (awaiting sentenc- arrest)* ing)

· United States v. Richard Sanislo, · United States v. Peter Zanone, (S.D.N.Y. 1995) ($2,500 fine)* (S.D.N.Y. 1998) (4 months incarceration) · United States v. Richard Rituno and Consumer Displays, Inc., (S.D.N.Y. · United States v. Brian McCormack, 1995) (Rituno: 6 months incarcera- (S.D.N.Y. 1998) (30 months incar- tion, $10,000 fine; Consumer ceration, $750,000 restitution) Displays: $175,000 fine)* · United States v. Target Graphics, Inc., · United States v. Harvey Shayew, (S.D.N.Y. 1998) ($100,000 fine) (S.D.N.Y. 1995) (4 months house arrest, $75,000 fine)* · United States v. Bruce Schwartz, (S.D.N.Y. 1998) (12 months incar- · United States v. Southern Container ceration) Corp., (S.D.N.Y. 1996) ($2.5 million fine)

Antitrust Division Annual Report 36 Appendix A: Selected Criminal Cases · · · Antitrust DivisionAnnual Report Antitrust · · · · · Cases Chicago · · · United Statesv. JohnMavros confinement, $275,000restitution) (S.D.N.Y. 1999)(9monthshome United Statesv. MaryBurke ceration) (S.D.N.Y. 1999)(12monthsincar- United Statesv. EdwardLundberg tion, $350,000fine) Wis. 1997)(13months incarcera- United Statesv. JonS.Wamser Wis. 1997)($9millionfine) United Statesv. Everbrite,Inc. $150,000 fine) Machas: 4monthshousearrest, 1997) (Schutz:$500,000fine; Inc. andRichardMachas United Statesv. SchutzInternational, $350,000 fine) Wis. 1996)(4monthshousearrest, United Statesv. ZelmanLevine arrest, $2,500fine) (E.D. Wis. 1996)(5monthshouse United Statesv. RonaldHarrison ing) (S.D.N.Y. 1999)(awaiting sentenc- United Statesv. MartinCohen ing) (S.D.N.Y. 1999)(awaiting sentenc- United Statesv. Schneiderman Leslie ing) (S.D.N.Y. 1999)(awaitingsentenc- United Statesv. Peter Lanigan ing) (S.D.N.Y. 1999)(awaitingsentenc- , (E.D.Wis. , , , (E.D. , , (E.D. , , (E.D. , , , period.) prosecutions filedpriorto the reporting asterisk afterthecasenamedenotes homes attheforeclosure auction.(An denied competitivebiddingfortheir who hadlosttheirhomesandwere many lower-middle-class individuals the victimsoftheseconspiracieswere possible pricefortheproperty. Among ensuring thattheywouldgetthelowest tactics toscare offoutsidebidders,thus ment, intimidation,anddistraction Queens conspiratorsoftenusedharass- bidding atthepublicauction.The others tocompensatethemfornot mission” or“premium” payoffstothe secret auctionwouldmake illicit“com- property. Thewinnerofthissecond, bid againsteachotherfortheforeclosed which theconspiratorswouldactively second privateor“knockout” auctionat auction, theconspiratorswouldholda win theproperty. Then,aftertheformal would bidthelowestpricepossibleto Instead, onememberofaconspiracy other atreal estateforeclosure auctions. agreed nottocompeteagainsteach Real estatebrokers andinvestorssecretly decade, operatedinasimilarfashion. both ofwhichexistedforatleasta Virginia, respectively. Theconspiracies, Queens, NewYork, andNorthern real estateforeclosure auctionsin artificially lowerpublicauctionpricesat bid-rigging conspiraciesdesignedto Washington, D.C.helpedcrackseparate Office andLitigationISectionin Real EstateForeclosure Auctions · of theQueensbid-rigging conspiracy The Division’s NewYork Field tion, $180,000fine) Wis. 1997)(12monthsincarcera- United Statesv. HenryC.Zeni Queens, New York. New Queens,

The prosecution , (E.D. has been jointly conducted by the Fourth Circuit, and the Supreme Court Division’s New York Field Office and recently denied their petition for certio- the U.S. Attorney’s Office for the rari. The continuing investigation is Eastern District of New York, with being conducted with the assistance of

substantial assistance provided by FBI the FBI. Appendix A: Selected Criminal Cases Criminal Selected A: Appendix and IRS agents. The investigation uncovered a conspiracy beginning in the mid-1980s and continuing until search Queens, New York Cases warrants were executed in February · United States v. Danny Abrishamian, 1997. Over 400 properties were affected (E.D.N.Y. 1998) (12 month proba- by this conspiracy. The investigation tion, $20,000 fine) thus far has resulted in the filing of cases against 35 individuals, including 26 · United States v. Ted Adeli, (E.D.N.Y. cases filed on the same day. Most of the 1998) (24 months probation, defendants were charged with felony tax $5,000 fine) offenses in addition to the bid-rigging counts. All 35 defendants pled guilty. · United States v. Joseph Attarian, Over half of the defendants sentenced to (E.D.N.Y. 1998) (3 months incar- date received some period of incarcera- ceration, 3 months house arrest, tion. As a result of this investigation, $20,000 fine) public foreclosure auctions in Queens are now conducted in a courtroom · United States v. Albert Babajanian, inside the Queens County Courthouse (E.D.N.Y. 1998) (1 month incar- with strict rules governing the auction ceration, 3 months house arrest, process. Moreover, it has been reported $5,000 fine) that there are more bidders today than 37 ever and that houses are being auctioned · United States v. Glen Bakhshi, off at record high prices. The investiga- (E.D.N.Y. 1998) (3 months incar- tion also provided leads to a similar bid- ceration, 3 months house arrest, rigging scheme in Brooklyn, New York, $20,000 fine) which has already led to 14 additional cases. · United States v. Ramin Baratian, (E.D.N.Y. 1998) (1 month incar- Northern Virginia. Eight individuals ceration, $20,000 fine) have pled guilty and three individuals have been convicted at jury trials thus · United States v. Steve Bloor, (E.D.N.Y. far in the Northern Virginia investiga- 1998) (3 months incarceration, 3 tion. The crimes charged against the months house arrest, $20,000 fine) conspirators have included bid-rigging, wire fraud, bank fraud, conspiracy to · United States v. Yoram Eliyahu, defraud the United States, and mail (E.D.N.Y. 1998) (24 months proba- fraud. Eight of the individuals have been tion, $20,000 fine) sentenced to date, with jail sentences ranging from 7 months to 60 months · United States v. Farshad Haghi, incarceration. The convictions of two of (E.D.N.Y. 1998) (24 months proba- the defendants have been upheld by the tion, $20,000 fine)

Antitrust Division Annual Report 38 Appendix A: Selected Criminal Cases · · · Antitrust DivisionAnnual Report Antitrust · · · · · · · $5,000 fine) ceration, 2monthshousearrest, (E.D.N.Y. 1998)(2monthsincar- United Statesv. KevinKhani $20,000 fine) ceration, 4monthshousearrest, (E.D.N.Y. 1998) (4monthsincar- United Statesv. JohnKhani $5,000 fine) ceration, 2monthshousearrest, (E.D.N.Y. 1998)(2monthsincar- United Statesv. HenryKhani tion, $20,000fine) (E.D.N.Y. 1998) (24monthsproba- United Statesv. SteveManesh $20,000 fine) ceration, 4monthshousearrest, (E.D.N.Y. 1998)(4monthsincar- United Statesv. DavidManesh $20,000 fine) ceration, 3monthshousearrest, (E.D.N.Y. 1998)(3monthsincar- United Statesv. MikeMakhani $20,000 fine) ceration, 2monthshousearrest, (E.D.N.Y. 1998)(2monthsincar- United Statesv. Joseph Makhani arrest, $20,000fine) (E.D.N.Y. 1998)(4monthshouse United Statesv. MauriceKohan $20,000 fine) ceration, 2monthshousearrest, (E.D.N.Y. 1998)(2monthsincar- United Statesv. David Kimia $20,000 fine) ceration, 2monthshousearrest, (E.D.N.Y. 1998)(2monthsincar- United Statesv. DanielKimia , , , , , , , , , , · · · · · · · · · · · tion, $20,000fine) (E.D.N.Y. 1998)(12monthsproba- United Statesv. Firooz Tehranchipour arrest, $20,000fine) (E.D.N.Y. 1998)(4monthshouse United Statesv. KamranShahkohi $20,000 fine) ceration, 2monthshousearrest, (E.D.N.Y. 1998) (1monthsincar- United Statesv. JosephRastegar tion, $20,000fine) (E.D.N.Y. 1998)(12monthsproba- United Statesv. LisaParvin tion, $20,000fine) (E.D.N.Y. 1998)(12monthsproba- United Statesv. CyrusNiknamfard ing) (E.D.N.Y. 1998)(awaitingsentenc- United Statesv. JosephDavoudzadeh ing) (E.D.N.Y. 1998)(awaitingsentenc- United Statesv. AlbertBasal ing) (E.D.N.Y. 1998)(awaitingsentenc- United Statesv. DavidDilmanian ing) (E.D.N.Y. 1998)(awaiting sentenc- United Statesv. AlfredBasal arrest, $20,000fine) (E.D.N.Y. 1998)(3monthshouse United Statesv. Itzchak Zivari arrest, $20,000fine) (E.D.N.Y. 1998)(3monthshouse United Statesv. AkbarYasrabi , , , , , , , , , , , · United States v. Allen Shahipour, · United States v. Alan Shams, (E.D. (E.D.N.Y. 1998) (12 months proba- Va. 1999) (4 months house arrest, tion, $20,000 fine) $20,000 fine, $3,682 restitution)

· United States v. Mansour Mehizadeh, · United States v. Kenneth Arnold, Appendix A: Selected Criminal Cases Criminal Selected A: Appendix (E.D.N.Y. 1998) (12 months proba- (E.D. Va. 1999) (5 months incar- tion, $20,000 fine) ceration, 5 months house arrest, $20,000 fine, $54,624 restitution) · United States v. Nicholas Cola, (E.D.N.Y. 1998) (12 months proba- · United States v. Edgar C. Dove, Jr., tion, $20,000 fine) (E.D. Va. 1999) (awaiting sentencing)

Northern Virginia Cases Metal Buildings Installation · United States v. Alexander Giap, The Division, with the assistance of (E.D. Va. 1995) (60 months incar- the FBI, uncovered a conspiracy to fix ceration, $100,000 restitution)* prices on insulation sold to metal building contractors and manufacturers. At · United States v. Donald Kotowicz, the heart of the conspiracy was an (E.D. Va. 1995) (7 months incar- agreement among national and regional ceration, $20,000 fine, $15,000 insulation companies to adhere to a restitution)* series of published price increases. Metal buildings are widely used for schools, · United States v. Leo Gulley, (E.D. Va. churches, and synagogues, as well as for 1995) (7 months incarceration, commercial structures, including facto- 39 $20,000 fine, $12,000 restitution)* ries and warehouses. To date, the Divi- sion has obtained convictions in five of · United States v. Frank Stinnett, (E.D. the six cases in this investigation, in- Va. 1996) (36 months probation) cluding a guilty verdict after trial of one of the leaders of the conspiracy for price · United States v. Mija Romer, (E.D. fixing and conspiracy to commit wire Va. 1997) (18 months incarceration, fraud. This individual received a sen- $20,000 fine, $7,200 restitution) tence of 30 months incarceration and a $30,000 fine. · United States v. Khem Batra, (E.D. Va. 1997) (6 months house arrest, The metal buildings installation $8,377 restitution) cases brought thus far are as follows:

· United States v. Patricia Remele, · United States v. Huber Wallace (E.D. Va. 1998) ($16,800 restitu- Rhodes, Jr., (S.D. Tex. 1996) (defen- tion, 12 months probation) dant agreed to sentence of 4 months incarceration in plea agreement) · United States v. Lawrence Rosen, (E.D. Va. 1998) (4 months incar- · United States v. Jerrold Warren ceration, 4 months house arrest; Killingsworth, (S.D. Tex. 1996) $20,000 fine, $33,978 restitution) (awaiting sentencing)

Antitrust Division Annual Report 40 Appendix A: Selected Criminal Cases · · Antitrust DivisionAnnual Report Antitrust $100,000 fineinpleaagreement) Tex. 1996)(defendantagreed to Corp. d/b/aBriteInsulation United Statesv. HiplaxInternational ing sentencing) Peter Yueh United Statesv. Yun LungYueh a/k/a , (S.D.Tex. 1996)(await- (S.D. · · trial) Fong United Statesv. DannyTwo-Sheng tion, $30,000fine) sentenced to30monthsincarcera- (S.D. Tex. 1997)(convictedattrial; United Statesv. MarkAlbertMaloof , (S.D.Tex. 1999)(acquittedat ,

Antitrust Division Merger Challenges Appendix B: Merger Challenges Merger B: Appendix

Union Pacific Corp./South- ern Pacific Rail Corp. (4/12/96)

In comments filed with the Surface Transportation Board, the Division expressed its competitive concerns regarding the merger between Union Pacific Corp. and Southern Pacific Rail Corp. The Division noted that in a large number of markets throughout the western United States, the number of possible rail carrier competitors would assets, including the inventory, machin- decline from two to one or from three ery, equipment, and customer and 41 to two, which would likely result in supplier lists, before the companies price increases to shippers and consum- notified federal antitrust agencies about ers of approximately $800 million. the acquisition. The Hart-Scott-Rodino Thereafter, on July 3, 1996, the Surface Act of 1976 imposes notification and Transportation Board approved the $5.4 waiting period requirements on indi- billion merger. viduals and companies before they can consummate acquisitions of stock or assets over a certain value or ownership United States v. Titan Wheel Interna- percentage. Titan was in continuous tional, Inc., violation of the law until the purchase (5/7/96) agreement in the acquisition was amended and control of the plant re- The Division filed a complaint turned to Pirelli Armstrong—a total of which alleged that Titan Wheel Interna- 13 days. A proposed final judgment was tional violated the premerger notifica- filed simultaneously settling the suit, tion reporting requirements of the Hart- under which Titan agreed to pay a civil Scott-Rodino Act in connection with its penalty in the amount of $130,000. The $41 million acquisition of a Pirelli final judgment was entered by the Court Armstrong Tire Corp. plant in Des on May 10, 1996. Moines, Iowa. According to the complaint, Titan took control of the Pirelli

Antitrust Division Annual Report 42 Appendix B: Merger Challenges rendering industry. resulted inincreased pricesinthetallow/ the merger goneforward, itcouldhave about thirtymilesfrom Turlock. Had located inModesto, Californiaand Company, asmallrendering company proposed acquisition ofModestoTallow petitive concerns,Darlingabandonedits remove cuttings from thedrillhole,and lubricate thecuttingtools onthepipe, pumped throughdrillpipes tocooland various drillingapplications: theyare business. Drillingfluidsare usedin U.S.drillingfluids divested Anchor’s Drilling Fluids,provided thatSmith Smith Internationaltopurchase Anchor tion ofa1994consentdecree allowing maintenance ontheTFE731. by AlliedSignaltoperformheavy independent servicecentersauthorized merger wouldhavecombinedtheonly jet engineintheUnitedStates.The turbofan engines,thepremier business heavy repair ofAlliedSignal’sTFE731 tition inthe$100millionmarket for acquisition wouldhavelessenedcompe- Sabreliner. Asoriginally structured, the engine heavymaintenancebusinessesto L.P. afterUNCdivestedoneofitsjet Phoenix-based CFCAviation Services, proposed $150millionpurchase of Darling International, Inc./Modesto (5/23/96) International, Darling Antitrust DivisionAnnual Report Antitrust (6/5/96) Inc./Anchor International, Smith Aviation (5/29/96) Inc./CFC UNC, Tallow Company Tallow Drilling Fluids Drilling In response totheDivision’s com- The Divisionagreed toamodifica- The DivisiondidnotopposeUNC’s States. tor ofdrillingfluidsintheUnited the fourthlargest producer anddistribu- States, andAnchorDrillingFluidswas drilling fluidscompanyintheUnited the majorityownerofM-I,largest an explosionofthedrillsite.Smithwas control downholepressure toprevent the Columbusstation. ing theirpurchase agreement toexclude to restructure thetransactionbyamend- market, SinclairandRiverCityagreed advertising intheColumbus,Ohio antitrust concernsinthesaleofradio cerns thatthetransactionposedserious eastern Massachusetts, Connecti- ski excursions forresidents ofMaine, trips forMaineresidents andweekend and eliminatediscounts for dayskiing that theacquisitionwouldraiseprices American SkiingCompany, andcharged million acquisitionofS-K-I Limitedby the largest competitorinthat market. the frozen piemarket. Mrs.Smith’swas would haveanticompetitiveeffectsin expressed concernthattheacquisition Smucker Company, aftertheDivision wholly-owned subsidiaryofJ.M. acquire 100percent ofMrs.Smith’s,a Sinclair Broadcast Group, Inc./River (6/6/96) Group, Broadcast Sinclair United States v. American Skiing (6/11/96) American v. States United Inc. Smith’s, (6/7/96) ConAgra/Mrs. City Broadcasting L.P. Broadcasting City Company and S-K-I Limited S-K-I and Company In response totheDivision’s con- The Divisionchallengedthe$137 ConAgra abandoneditsplansto cut, and Rhode Island. A proposed final Bank of Boston/BayBanks judgment was filed simultaneously with (6/18/96) the complaint, requiring divestiture of New Hampshire ski resorts at Waterville In response to the Division’s con- Valley and Mount Cranmore. Without cerns that the $2 billion merger between the divestiture, American Skiing would Bank of Boston and BayBanks would have controlled eight of the largest ski lessen competition for banking services available to small and medium-sized

resorts serving skiers residing in the Challenges Merger B: Appendix eastern portions of New England. businesses, the parties agreed to sell 20 bank branches located in the Boston metropolitan area, with total deposits of Cooper Cameron Corp./Ingram approximately $860 million, to USTrust. Cactus Co. The Division had conducted a joint (6/13/96) investigation with the Office of the Massachusetts Attorney General. In response to the Division’s concerns that Cooper Cameron’s $98 million acquisition of Ingram Cactus United States, State of California, would lessen competition in the U.S. State of Connecticut, State of Illi- market for geothermal wellheads and nois, Commonwealth of Massachu- setts, State of New York, State of valves, Cooper Cameron agreed to Washington, and State of Wisconsin license and supply certain oil well v. The Thomson Corp. and West equipment and technology to a third Publishing Company company, Daniel Valve Co. Without this (6/19/96) resolution, the merger would have combined the two largest suppliers of The Division challenged the $3.4 43 geothermal wellheads and valves and billion merger of two of the nation’s would have lessened competition for largest legal publishers, Thomson Cor- customers of important oil well equip- poration and West Publishing, alleging ment in the United States. that the acquisition would lessen competition in 9 markets for enhanced primary law products (legal publications of Park Corp./Johnstown Corp. statutes or court decisions in which (6/17/96) commentary is offered) and in more than 50 markets for secondary law In response to the prospect of an products (treatises and legal guides), as antitrust suit by the Division, Park well as in the online services market. A Corp., the nation’s largest producer of proposed final judgment, filed simulta- cast steel industrial equipment, aban- neously with the complaint, settled the doned its bid to buy Johnstown Corp. suit. The final judgment required the at a bankruptcy auction. Had Park been divestiture of more than 40 products by allowed to acquire Johnstown, it would Thomson, guaranteed access to impor- have controlled a monopoly share of the tant databases, required Thomson to markets for both cast steel work rolls license openly (for a capped fee) other and large slag pots, which could have law publishers the right to use the resulted in increased prices for consum- pagination of individual pages in West’s ers. National Reporter System in their

Antitrust Division Annual Report 44 Appendix B: Merger Challenges syrup) andfuelalcohol. syrups (suchashigh-fructose corn als (usuallycorn)intosugar-containing processing starch-containing rawmateri- cals, Ltd.Theseenzymesare usedfor to athird company, NagaseBiochemi- certain enzymesusedtoprocess starch and supplytechnologyrelating to restructured. Genencoragreed tolicense amylase enzymes,thetransactionwas the saleofalphaamylaseandgluco- lessen competitioninU.S.markets for wide industrialenzymebusinesswould world- national’s acquisitionofSolvay’s raised concernsthatGenencorInter- Antitrust DivisionAnnual Report Antitrust Inc./Solvay, (7/1/96) International, Genencor contracts. states toreopen biddingforcertain products, andgaveoptionsto three S.A. The Divisionannouncedthatafterit radio ownership. 1996, whichrelaxed previous limitson Telecommunications Reform Act of announced followingpassageofthe first ofmanyradioindustrytransactions Citicasters acquisitionwasoneofthe to anindependentbuyer. TheJacor/ Cincinnati contemporarymusicstation, agreed todivestWKRQ-FM,aleading settled thesuit.JacorandCiticasters simultaneously withthecomplaint, market. Aproposed finaljudgment,filed million Cincinnatiradioadvertising stantially reduce competitioninthe$80 increase pricesto advertisersandsub- nati andcouldenablethecompaniesto sales ofradioadvertisingtimeinCincin- control more than50percent ofthe alleged thatthecombinationwould radio stationowners.Thecomplaint Citicasters, twoofthenation’s largest million merger betweenJacorand board businesses. companies operatedcompetitivebill- Denver wastheonlycityinwhichboth numerous areas across thecountry, but the billboard advertisingbusinessin companies were leading competitorsin board operationstoanotherparty. Both Systems agreed tosellitsDenverbill- door DivisionofGannett,Outdoor door Systems’acquisitionoftheOut- raised competitiveconcernswithOut- United States v. Jacor Communica- (8/5/96) Jacor v. States United Outdoor Systems, Inc./Gannett Co. Inc./Gannett (8/12/96) Systems, Outdoor tions, Inc. and Citicasters, Inc. Citicasters, and Inc. tions, The Divisionchallengedthe$770 The Divisionannouncedthatafterit United States v. Foodmaker, Inc. United States, State of Texas, and (8/13/96) Commonwealth of Pennsylvania v. USA Waste Services, Inc. and The Division filed a compliant Sanifill, Inc. (8/30/96) charging Foodmaker, of San Diego, California, with violating the Hart- The Division challenged the $1.5 Scott-Rodino premerger notification billion proposed merger between USA reporting requirements for acquiring all Waste and Sanifill, two of the largest Challenges Merger B: Appendix of the voting securities of Consul Res- waste hauling and disposal companies in taurant Corporation without notifying North America. The complaint alleged federal antitrust authorities. Consul, that the acquisition would substantially which had operated 26 franchised Chi- lessen competition in the markets for Chi’s restaurants, was acquired by Chi- small containerized hauling and disposal Chi’s, Inc., then a subsidiary of in Houston, Texas, and small container- Foodmaker. Foodmaker was in violation ized hauling in Johnstown, Pennsylva- of the law for a total of 471 days, from nia. A proposed final judgment, filed October 23, 1992 until February 5, simultaneously with the complaint, 1994. Foodmaker agreed to pay a $1.45 settled the suit. The decree required million civil penalty to settle the certain divestitures and included other charges. The final judgment was entered provisions, including requiring munici- by the Court on August 20, 1996. pal solid waste landfill capacity in Houston and Johnstown to be made Ingersoll-Rand Company/ available to independent haulers for a Zimmerman International, Corp. ten-year period. (8/29/96) 45 In order to resolve the Division’s Westinghouse Air Brake Company/ competitive concerns with Ingersoll- Vapor Corp. (8/30/96) Rand’s acquisition of Zimmerman, a manufacturer of air balancers equipment The Division announced that it primarily used to lift and move heavy would not oppose Westinghouse Air objects on assembly lines, Ingersoll- Brake Company’s acquisition of Vapor Rand agreed to end its exclusive licens- Corp., a subway car door system sup- ing agreement with another manufac- plier, after Westinghouse Air Brake turer, Knight Industries. The licensing agreed to sell its 50 percent interest in agreement allowed Ingersoll-Rand to Westcode, another subway car door produce air balancers under its own system supplier. Because Vapor Corp. brand name using Knight’s technology. and Westcode were the only U.S. sub- Eliminating the exclusive licensing way and rail car door suppliers, the agreement that allowed Knight to spin-off of Westcode ensured that the license others that wished to enter the rail car door systems market in the industry ensured that competition was United States would remain competi- maintained in the manufacture and sale tive. of air balancers.

Antitrust Division Annual Report 46 Appendix B: Merger Challenges the powertoincrease prices. in thegreater Hartford area market with the dominantasphaltconcrete company allowed OldcastleNortheasttobecome tion, asoriginallyproposed, wouldhave plants locatedatthequarry. Thetransac- necticut) andtwoofthethree asphalt to divestaquarry(EastGranby, Con- with thecomplaint,required Oldcastle consent decree, filedsimultaneously ways, andparkinglots.Aproposed structing orresurfacing roads, drive- blacktop andisusedmainlyforcon- asphalt concrete, whichisalsoknownas that competedintheproduction of million dealbetweentwocompanies between America’stwolargest tortilla would notopposea$280 milliondeal General’s Officeannounced thatthey ment isaltered asaresult oftraintraffic. realign a railroad trackafterthealign- maintenance-of-way-equipment usedto tamper market. Automatic tampersare high concentrationintheautomatic would beanticompetitiveandresult ina expressed concernsthattheacquisition merly JacksonJordan, aftertheDivision plans toacquire Pandrol Jackson,for- Harsco Corporation,abandonedits (9/3/96) Con- of State and States United Antitrust DivisionAnnual Report Antitrust Co./Gruma (9/13/96) Midland Daniels Archer Jackson’s (9/10/96) Tamper/Pandrol Fairmont necticut v. Oldcastle Northeast, Inc., Northeast, Oldcastle v. necticut S.A. de C.V. de S.A. Business Tamper CRH, plc, Tilcon, Inc., and BTR, plc BTR, and Inc., Tilcon, plc, CRH, The Divisionchallengedthe$270 The DivisionandtheTexas Attorney Fairmont Tamper, asubsidiaryof remained competitive. masa flourmarket intheUnitedStates sale oftheTexas millensured thatthe creating asingledominantfirm.The masa flourmillsofthetwofirms, would havemerged thesixdomestic originally structured, ADMandGruma llas, tacoshells,andtortillachips.As is theprimaryingredient incorntorti- milling ofcooked whole-kernel cornand tions. Masaflourisproduced bythe companies’ U.S.masaflourmillopera- partnership withGrumatocombinethe percent ofGrumastockandforminga panhandle. ADMwasacquiring22 divest amasaflourmillintheTexas S.A.—after thecompaniesagreed to Midland Co. (ADM)andGrumman flour manufacturers—Archer Daniels joint salesagreement. Division’s firstchallengeevertoaradio of anotherstation.This was the sole righttosellalltheadvertising time agreement, underwhichARS hadthe required dissolutionofthejointsales AM stations.Thefinaljudgmentalso WHAM-AM, WVOR-FM, andWCMF- Lincoln Group, provided itdivestedthe Rochester radiostationsfrom The complaint, allowedARStoacquire two judgment, filedsimultaneouslywiththe advertising prices.Aproposed final the acquisitionwaslikely toraiseradio Talking Machine.Thecomplaintalleged between ARSandGreat Lakes Wireless Group L.P. andajointsalesagreement Radio Systems(ARS)from TheLincoln New York, radiostationsbyAmerican posed acquisitionofthree Rochester, (10/24/96) New of State the and States United York v. American Radio Systems Radio American v. York Corp., The Lincoln Group L.P., and L.P., Group Lincoln The Corp., Great Lakes Wireless Talking Ma- Talking Wireless Lakes Great chine LLC chine The Divisionchallengedthepro- United States v. US West, Inc. and complaint alleged that the acquisition Continental Cablevision, Inc. would have lessened competition sub- (11/5/96) stantially for radio advertising in the Philadelphia, Pennsylvania, and Boston, The Division challenged the acquisi- Massachusetts, markets, giving tion of Continental Cablevision, the Westinghouse over 40 percent of the third largest cable system operator in the radio advertising revenues in each city, nation, by US WEST, one of the seven

and would have eliminated competition Challenges Merger B: Appendix Regional Bell Operating Companies. for radio advertisers trying to reach The complaint alleged that the partial particular demographic groups. A final acquisition would have resulted in a judgment, filed simultaneously with the substantial lessening of competition in complaint, settled the suit. The decree the market for dedicated telephone required the divestiture of two radio services, which include special access stations: WMMR-FM in Philadelphia (dedicated lines linking high-volume and WBOS-FM in Boston. business users with their chosen long-distance carriers) and local private line services (dedicated lines connecting Andersen Area Medical Center/ multiple locations of an end-user within Greenville Hospital/Spartanburg a given metropolitan area). At the same Hospital time, a proposed final judgment was (12/9/96) filed that settled the case. As part of the proposed settlement, US WEST and the Three northwestern South Carolina Boston-based Continental agreed to hospital systems—Andersen Area Medi- divest Continental’s interest in Teleport cal Center, Greenville Hospital System and Spartanburg Hospital System Communications by December 31, 47 1998. The final judgment also prohib- (collectively AGS)—abandoned plans to ited the parties from appointing mem- consolidate their operations after the bers to or participating in meetings of Division expressed concerns that the Teleport Communications’ Board of merged hospitals would be able to force Directors. In each of the relevant cities managed care plans to exclude other (Denver, Phoenix, Seattle, and Omaha, hospitals from their plans if they were to Nebraska), US WEST was the dominant include any of the AGS hospitals in provider of dedicated services, and their panels. If the merger had been Teleport Communications was one of consummated, the merging parties only a small number of firms challeng- would have had 60 to 70 percent of the ing US WEST’s dominance. area’s hospital beds.

United States v. Westinghouse StarKist Food, Inc./H.J. Heinz, Co./ Electric Corp. and Infinity Broad- Bumble Bee Seafoods/Unicord casting Corp. Public Company and Questor Part- (11/13/96) ners (12/10/96) The Division challenged the approxi- Unicord abandoned its plans to sell mately $4.9 billion acquisition of Infin- its Bumble Bee brand tuna to Questor ity Broadcasting by Westinghouse Partners and to sell three Bumble Bee Electric, a subsidiary of CBS, Inc. The

Antitrust Division Annual Report 48 Appendix B: Merger Challenges likely resulting inhigherprices Front Range skiermarket, competition substantially inthe merger wouldhavelessened proposed divestiture, the plaint allegedthat,withoutthe deal togoforward. Thecom- a third partyinorder forthe hoe BasinSkiResort besoldto requiring thatRalston’s Arapa- proposed finaljudgment and simultaneouslyfileda acquisition ofRalston Resorts Vail Resorts’ $310million of Grove Hill. have resulted inamonopolythetown forward asoriginallystructured, would ing services.Themerger, haditgone Division concernsandpreserved bank- Alabama branch,whichalleviated divest theGrove Hill,ClarkCounty, banking services,thepartiesagreed to would lessencompetitionforbusiness Security BankandFirst BankandTrust cerns thatthemerger betweenUnited United Security Bank/First Bank Bank/First Security United in ahighlyconcentratedmarket. tuna respectively andmajorcompetitors number oneandtwosellersofcanned Company, andBumbleBee,were the StarKist, asubsidiaryofH.J.Heinz noted itsconcernstotheparties. California toStarKistaftertheDivision plants inPuertoRico, Ecuador, and Antitrust DivisionAnnual Report Antitrust (1/3/97) Colorado of State and States United (12/12/96) and Trust and v. Vail Resorts, Inc., Ralston Re- Ralston Inc., Resorts, Vail v. sorts, Inc., and Ralston Foods, Inc. Foods, Ralston and Inc., sorts, The Divisionchallenged After theDivisionexpressed con- market. that 38percent oftheFront Range sulted inthemerged firmhavingmore originally structured, wouldhavere- hoe Basinskiresorts. Thedeal,as the Breckenridge, Keystone, andArapa- ski resorts, andRalston Resorts owned Beaver Creek, andArrowhead Mountain Springs. Vail Resorts ownedtheVail, Fort Collins,Boulder, andColorado cluding theColoradocitiesofDenver, area eastofthe Rocky Mountainsin- overnight trips.TheFront Range isthe Range andskiattheresorts ondayand to skierswholiveinColorado’sFront fueling andramphangerspace provide flightsupportservices,suchas are facilitieslocatedatairportsthat national Airport.Fixed baseoperations operation servicesatPalm BeachInter- market fortheprovision offixed base would havereduced competitioninthe ing thatthetransaction,asproposed, tional Aviation Palm Beach,Inc.,alleg- Flight Support’sacquisitionofInterna- United States v. Signature Flight (2/5/97) Signature v. States United Support Corp. Support The DivisionchallengedSignature rental to charter, private, and corporate tition substantially in the Sacramento, aircraft operators. The complaint alleged California radio advertising market and that the acquisition, as originally struc- would have given ARS control over six tured, would likely have led to higher of the 12 class B FM radio signals—the prices by creating a duopoly in the sale strongest and most competitively signifi- of jet fuel to aviation customers using cant radio broadcasting signals—operat- the Palm Beach Airport. A proposed ing in the area and would have given

final judgment, filed simultaneously ARS 36 percent of Sacramento’s radio Challenges Merger B: Appendix with the complaint, required Signature advertising revenues. A proposed final to divest certain assets and leaseholds of judgment, filed simultaneously with the its fixed base operations business at complaint, required ARS to divest Palm Beach International Airport. KSSJ-FM, a new age contemporary station in the process of being upgraded to class B status. United States v. Figgie International, Inc. and Harry E. Figgie, Jr. (2/13/97) United States v. EZ Communica- tions, Inc. and Evergreen Media The Division’s complaint alleged a Corp. violation of the premerger notification (2/27/97) and waiting period requirements of the Hart-Scott-Rodino Act and sought civil In a case related to the American penalty of $150,000. The complaint Radio Systems case (see above) filed the charged that Figgie International of same day, the Division challenged EZ’s Willoughby, Ohio, a manufacturer of acquisition of six radio stations in Charlotte, North Carolina, from Ever- industrial and consumer products and its 49 founder, Harry E. Figgie, were in green Media Corporation. The com- violation of the reporting requirements plaint alleged that the acquisition would when Mr. Figgie acquired more than 15 have lessened competition substantially percent of the voting securities of Figgie in the Charlotte, North Carolina, radio International. A proposed final judg- advertising market. This was one of a ment, filed simultaneously with the series of transactions involving ARS and complaint, required each of the defen- EZ that, without restructuring, would dants to pay $75,000 in civil penalties. have resulted in ARS having 55 percent The final judgment was entered by the of Charlotte’s radio advertising revenues. Court on February 14, 1997. A proposed final judgment, filed simultaneously with the complaint, required divestiture of the largest rock format United States v. American Radio station in Charlotte, WRFX-FM. Fol- Systems Corp. and EZ Communica- lowing consummation of the merger tions, Inc. between ARS and EZ, ARS (as EZ’s (2/27/97) successor) would become a party to the EZ/Evergreen action and would be The Division challenged the $655 required to fulfill EZ’s divestiture million acquisition of EZ Communica- obligation. tions by American Radio Systems (ARS). The complaint alleged that the acquisition would have lessened compe-

Antitrust Division Annual Report 50 Appendix B: Merger Challenges Arkansas radiomarket. advertising revenues intheNorthwest more than62percent ofthe1995 Gulfstar, wouldhavegivenGulfstar together withotheracquisitionsby sas. Acquisition oftheDemaree stations, advertising pricesinNorthwestArkan- that thedealwouldleadtohigher after theDivisionexpressed concerns sas radiostationsfrom Demaree Media doned itseffortstoacquire three Arkan- prices foraggregate andasphaltconcrete reduce competitionandlead tohigher expressed concernsthatthedealwould struction companyaftertheDivision from aNewHampshire highway con- acquire aquarryandtwoasphaltplants company, abandoneditsefforts to based aggregate andasphaltconcrete the Virginia Attorney General. tion bytheDivisionandOfficeof nesses, resulted from ajointinvestiga- vided toindividualsandsmallbusi- loans andotherbankingservicespro- designed topreserve competitionfor proposal merger. Thedivestitures, Virginia before goingforward withtheir three branchofficesinsouthwestern Banks andPremier Bankshares tosell Gulfstar Communications Inc./ (3/6/97) Communications Gulfstar Antitrust DivisionAnnual Report Antitrust Whitcomb F. (3/28/97) Industries/Frank Pike Inc./Premier (3/18/97) Banks, Virginia First Demaree Media, Inc Media, Demaree Construction Company Construction Corp. Bankshares Gulfstar Communicationsaban- Pike Industries,aNewHampshire- The Divisionrequired First Virginia driveways, andparkinglots. constructing andresurfacing roads, as blacktop,isusedprincipallyfor concrete. Asphaltconcrete, alsoknown both asphaltconcrete andready-mix Aggregate isusedintheproduction of in Vermont andNewHampshire. tains. Aproposed final judgment,filed lion market eastoftheRocky Moun- grade evaporatedsaltin the $200mil- and third leading producers offood foods. Cargill andAkzowere thesecond variety ofbaked, frozen, andcanned and flavor-enhancing ingredient fora during foodprocessing asapreservative human consumption)thatisadded Drug Administration standards for extremely pure salt(meetingFood and evaporated saltisahighlyrefined, Burlington, Vermont. Food grade falo, New York; Erie,Pennsylvania; and includes Rochester, Syracuse,andBuf- east interiormarket, anarea which deicing saltinthe$100millionnorth- two ofonlyfourproducers ofbulk on publicroads. Cargill andAkzowere ments foruseinmeltingsnowandice in bulkbystateandmunicipalgovern- dium orcoarsegraderock salt bought Rocky Mountains.Deicingsaltisme- grade evaporatedsaltmarket eastofthe interior ofthecountryandinfood- bulk deicingsaltmarket inthenortheast ened competitionsubstantiallyinthe originally structured, wouldhaveless- complaint allegedthatthemerger, as nation’s largest saltproducers. The million merger betweentwoofthe (4/21/97) Commonwealth and States United of Pennsylvania, State of New York, New of State Pennsylvania, of and State of Ohio, v. Cargill, Inc., Cargill, v. Ohio, of State and Akzo Nobel, N.V., Akzo Nobel, Inc., Nobel, Akzo N.V., Nobel, Akzo and Akzo Nobel Salt, Inc. Salt, Nobel Akzo and The Divisionchallengedthe$160 Appendix B: Merger Challenges Merger B: Appendix

simultaneously with the complaint, tition for banking services in 10 differ- required Cargill to sell several key assets ent geographic areas of North Carolina. to American Salt Company, a prospective new entrant. The assets included a 51 stockpile of bulk deicing salt in Retsof, Northern States Power Company/ Wisconsin Energy Company New York, a four-year salt supply con- (5/16/97) tract from the Cargill and Akzo mines, and numerous salt depots for storage Northern States Power Company and transshipment of salt to customers. and Wisconsin Energy terminated their Cargill was also required to divest merger agreement and abandoned their Akzo’s Watkins Glen, New York, plant plans to consolidate after the Division to alleviate competitive effects in the stated its concerns and the Federal food-grade salt market. Energy Regulatory Commission disap- proved the merger as proposed. The Southern National Corp./United Division was concerned about possible Carolina Bancshares anticompetitive effects in Wisconsin (4/29/97) resulting from Northern’s control over a transmission line at the Minneapolis- Southern National and United Wisconsin state border, which was an Carolina Bancshares agreed to sell 20 exclusive gateway into Wisconsin. North Carolina bank branch offices with total deposits of about $488 million in Absent the merger, Northern had the order to address Division concerns that incentive to keep the transmission line the merger would have lessened compe- open and sell its cheaper power in

Antitrust Division Annual Report 52 Appendix B: Merger Challenges neously withthecomplaint, required posed finaljudgment,filed simulta- aggregate inMarion County. Apro- contracts, wasthelargest purchaser of Transportation, through itshighway highways. TheIndianaDepartmentof which are usedtobuildroads and asphalt concrete andready-mix concrete, prices. Aggregate isusedtomanufacture Indiana, withthepowertoincrease supplier ofaggregate inMarionCounty, Marietta tobecomethedominant structured, wouldhaveallowedMartin alleged thattheacquisition,asoriginally Limited ofAustralia. Thecomplaint gia-based companyownedbyCSR a subsidiaryofCSRAmerica,Geor- Materials, Inc.AmericanAggregates was gates CorporationbyMartinMarietta million acquisitionofAmericanAggre- business bankingservices. tion inCibolaCounty, NewMexico, for merger wouldhaveeliminatedcompeti- concerns aboutthetransaction.The merge aftertheDivisionexpressed State Bankterminatedtheirplansto First Bank of Grants/Grants State (5/27/97) Grants/Grants of Bank First sell athighprices. Energy’s market powerandabilityto transmission tomaintainWisconsin elsewhere anduseitscontrol over merger, itwouldsellitscheappower with Wisconsin Energy. With the Wisconsin, where itwouldcompete Antitrust DivisionAnnual Report Antitrust (5/27/97) Marietta Martin v. States United Bank Materials, Inc., CSR Limited, CSR Limited, CSR Inc., Materials, America, Inc., and American Aggre- American and Inc., America, gates, Inc. gates, The Divisionchallengedthe$234.5 First BankofGrantsand Indianapolis. Aggregates’ Harding Street Quarryin Martin MariettatodivestAmerican traveled highwaysinthearea. the billboards alongthemostheavily would havehadmore than70percent of each ofthecommunitiesinvolvedand percent oftheavailablebillboards in would havecontrolled more than50 Florida. Without thedivestitures, Lamar and areas inMississippi,Louisiana, boards locatedinfourmetropolitan condition thatLamardivest170bill- acquisition ofHedrickOutdooron would notopposeLamarAdvertising’s transaction were permitted togo Division contendedthat iftheproposed Nassau andQueensCounties. The families, andindividuals throughout of healthcare optionstoarea employers, Islandtobeableoffera choice Long assembled bymanagedcare planson hospital inthenetworksofhospitals to-head tobethe“flagship”or“anchor” strategic location.Theycompetedhead- comparable fullrangeofservices,and by virtueoftheirpremier reputations, principalcompetitor were eachother’s North Shore Manhasset,andLIJMC that NorthShore’s flagshiphospital, Center (LIJMC).Thecomplaintalleged IslandJewishMedical System andLong Island:NorthShore Health on Long combination oftwoflagshiphospitals (6/2/97) Co./Hedrick Advertising Lamar (6/11/97) Jewish Island Long v. States United Outdoor, Inc. Outdoor, Medical Center and North Shore North and Center Medical Health System, Inc. System, Health The Divisionannouncedthatit The Divisionsuedtoblockthe through, North Shore and LIJMC Metal Leve for about $40 million on would cease to compete for the business June 26, 1996, without notifying the of managed care plans, and managed Federal Trade Commission and the care plans would have only a single Department of Justice. The parties were entity to negotiate with, eliminating the in violation of the Act from June 26, bargaining that has benefitted consum- 1996 through at least March 20, 1997. ers of health care services. The district Defendant Mahle GmbH and Metal

court denied the government’s request Levee each agreed to pay a penalty of Challenges Merger B: Appendix for a permanent injunction and entered $2,801,000 for a total of $5,602,000. A judgment in favor of the defendants proposed final judgment, filed simulta- (983 F. Supp. 121 (E.D.N.Y. 1997)). neously with the complaint, settled the suit. The consent decree was entered by the Court on June 24, 1997. The civil AlliedSignal Truck Brake Systems penalty was paid on July 23, 1997. Co./Midland Brake, Inc. (6/13/97) Waste Management of Ohio/USA AlliedSignal Truck Brake Systems Waste Services, Inc. Co., a subsidiary of AlliedSignal, aban- (6/30/97) doned its proposed acquisition of the assets of Midland Brake, Inc., a subsid- USA Waste Services abandoned its iary of Echlin, Inc., after the Division efforts to acquire the WMX operations expressed concerns that the deal, as of Waste Management of Ohio after the originally structured, would have elimi- Division expressed concerns about the nated competition in brake components decrease in competition in the solid for trucks, trailers, and other types of waste hauling business in the Allentown, 53 vehicles, possibly resulting in higher Pennsylvania market. prices for consumers.

GKN, plc/Weasler Holdings, Inc. United States v. Mahle GmbH, (6/30/97) Mahle, Inc., Mabeg E.V. Metal Leve, S.A., and Metal Leve, Inc. GKN, plc abandoned its plan to (6/19/97) acquire the $48 million Weasler Hold- ings Inc, whose only asset was 100 The Division filed a complaint percent of the stock of Weasler Engi- against Mahle GmbH, a German piston neering, Inc., from Code, Hennessy & manufacturer, and Metal Leve, S.A., a Simmons after the Division expressed its Brazilian competitor, that alleged a concerns that the transaction would violation of the premerger notification likely raise prices for consumers of the and waiting period requirements of the driveline systems for agricultural imple- Hart-Scott-Rodino Act and sought a ments. Weasler manufactured driveline civil penalty of $5.6 million. The com- systems (also referred to as power plaint charged the parties with failing to takeoff driveshafts) and related compo- notify federal officials of Mahle’s pro- nents for agricultural implements. GKN posed acquisition of a controlling and its subsidiaries, operating under the interest in Metal Leve. Mahle acquired name of Walterscheid, was one of the 50.1 percent of the voting securities of world’s leading manufacturers of driv-

Antitrust Division Annual Report 54 Appendix B: Merger Challenges effort toconsolidatethe defense industry time thelargest sincethepostColdWar grams. Therequired divestiture, atthat future Defense Departmentradarpro- able tosupplycompetitiveMMICsfor had positionedthemastheonlyfirms their research anddevelopmentefforts edge highpoweramplifiersandthat peted aggressively todevelopleading Raytheon andTexas Instrumentscom- emies. Thecomplaintallegedthat lower probability ofdetectionbyen- airspace quicklyandefficiently, witha range ofradars,enablingthemtoscan ward. MMICsextendthepower and tems, inorder forthedealtogofor- duced akey componentforradarsys- chips (MMICs)business,whichpro- ments’ monolithicmicrowave integrated requiring Raytheon tosellTexas Instru- neously filedaproposed finaljudgment weapons systems.TheDivisionsimulta- advanced militaryradarsusedinmajor and ultimatelybythetaxpayers—for paid bytheDepartmentofDefense— would haveresulted inhigher prices acquisition, asoriginallystructured, tronics UnitbyRaytheon Company. The Instruments’ DefenseSystemandElec- posed $2.9billionacquisitionofTexas market share. while GKNhadthesecondlargest neered agriculturaldrivelinemarket can market leaderinthehighlyengi- Weasler. Weasler wastheNorthAmeri- the NorthAmericanmarket with tural drivelinesystemsthatcompetedin vehicles. GKNmanufactured agricul- eline systemsforabroad rangeof Antitrust DivisionAnnual Report Antitrust Company (7/2/97) Raytheon v. States United and Texas Instruments Texas and The Divisionchallengedthepro- Department radarsystems. sary forthenextgenerationofDefense position toprovide theMMICsneces- viable competitortoRaytheon ina began, ensured thatthere wouldbea to monitorwhetherBT is engagedin crimination, andtoenable theDivision detection ofspecificinstancesdis- reported totheDivisionfacilitate to increase theamountofinformation it required thenewlyformedcompany changed market conditions.Specifically, British Telecom andMCI,aswell into accountthefullintegrationof strengthened thoseprotections totake judgment retained and,insomecases, the world.Theproposed modifiedfinal and theUnitedKingdomaround tions servicesbetweentheUnitedStates market forinternationaltelecommunica- expense ofotherscompetinginthe Telecom/MCI jointventure atthe favor ofMCIorinaBritish the UnitedKingdomtodiscriminatein Telecom from usingitsmarket powerin provisions designedtoprevent British original 1994settlementcontained have violatedtheantitrustlaws.The initial 20percent interest inMCIwould that BritishTelecom’s acquisitionofan decree hadsettledDivisionallegations prices forconsumers.The1994consent disadvantage competitorsandraise obtain 100percent ofMCIwouldnot Telecom’s then-proposed acquisitionto and MCItoensure thatBritish settlement involvingBritishTelecom lumbia, tomodifyandextendthe1994 District CourtfortheofCo- British Telecom/MCI Communica- (7/7/97) Telecom/MCI British tions Corp. tions The Divisionmoved,intheU.S. The complaint alleged that the acquisition would have lessened competition substantially in the Tarrant County area of Texas (where Fort Worth is located) by concentrating the landfill capacity in that area into the hands of

only three companies, resulting Challenges Merger B: Appendix in higher prices for waste disposal and hauling. A proposed final judgment, filed simultaneously with the complaint, required the divestiture of more than 1.4 million cubic yards of landfill space over a five- to ten-year discrimination. MCI was ultimately period at the two landfills in the Tarrant acquired by WorldCom, Inc., not British County area Allied would own after the Telecom, and British Telecom sold its 20 acquisition. Additional divestiture of percent interest. landfill space would be required if Allied expanded its capacity at USA Waste’s Crow Landfill or developed a new Jacor Communications/Village landfill nearby. In addition, the decree Communications required the acceptance of waste at (7/11/97) Allied’s two Tarrant County area landfills from haulers not affiliated with The Division did not oppose Jacor Allied on nonprice terms and conditions 55 Communications’ acquisition of radio identical to those provided Allied. stations from Village Communications in the Lexington-Fayette, Kentucky, market after Jacor agreed to divest its Outdoor Systems, Inc./3M WXZZ-FM station to Regent Commu- (8/15/97) nications. The deal, as originally structured, would have resulted in the The Division did not oppose Out- merged entity controlling 52 percent of door Systems’ acquisition of 3M’s the radio advertising market. subsidiary, National Advertising Com- pany, after Outdoor Systems agreed to sell billboards in 10 metropolitan areas. United States and State of Texas v. Without the divestiture, the transaction Allied Waste Industries, Inc. and would have given Outdoor Systems USA Waste Services (7/14/97) market shares above 50 percent in many markets and limited advertisers to only The Division challenged a proposed one remaining billboard provider as an Texas landfill acquisition involving alternative to the merged company. Allied Waste and USA Waste Services, two of the largest waste hauling and disposal companies in North America.

Antitrust Division Annual Report 56 Appendix B: Merger Challenges owned byasubsidiaryofUnitedWaste. divestiture ofaPittsburgh-area landfill neously withthecomplaint,required the proposed finaljudgment,filedsimulta- and commercial trashandgarbage.A nicipal solidwasteincludesresidential and haulingservicesinthatarea. Mu- prices formunicipalsolidwastedisposal This wouldhaveresulted inhigher municipal solidwastegeneratedthere. disposal servicesoffered tohaulersof control overabout60percent ofthe Pennsylvania, bygivingUSA Waste hauling servicesinAlleghenyCounty, for municipalsolidwastedisposaland would lessencompetitionsubstantially complaint allegedthattheacquisition largest wastehaulingcompanies.The Waste Services,twoofthenation’s tion ofUnitedWaste SystemsbyUSA 24 inches.Thedivestiture wasdesigned providers ofsuchvalvesinsizesbelow valves andwouldhaveleftonlytwo concentration amongproducers ofthese would havesignificantlyincreased Without thespin-off,transaction tions, suchaswaste-watertreatment. valves are usedinwaterworks applica- and businesstoathird party. Butterfly sell itswaterworksbutterflyvalveassets International afterKeystone agreed to International’s acquisitionofKeystone (8/22/97) Commonwealth and States United Antitrust DivisionAnnual Report Antitrust (8/22/97) Ltd./Keystone International Tyco of Pennsylvania v. USA Waste Ser- Waste USA v. Pennsylvania of International vices, Inc., United Waste Systems, Waste United Inc., vices, Inc., and Riviera Acquisition Corp. Acquisition Riviera and Inc., The Divisionchallengedtheacquisi- The DivisiondidnotopposeTyco construction component. choices forthisessentialwaterworks works, wouldcontinuetohaveviable consumers ofbutterflyvalvesforwater- to ensure thatmunicipalities,thelargest Southern Foods Group LP, inwhich out muchofTexas andLouisiana, eastern Texas Through- and Louisiana. milk topublicschoolsthroughout competition substantiallyforthesaleof that theacquisitionwouldhavelessened United States.Thecomplaintalleged men, thelargest dairycooperativeinthe Holdings, Inc.byMid-AmericaDairy- tion ofBorden/Meadows GoldDairies (9/3/97) Dairy- Mid-America v. States United men, Inc., Southern Foods Group Foods Southern Inc., men, LP and Milk Products LLC Products Milk and LP The Divisionchallengedtheacquisi- Mid-America had a partial ownership Wachovia Corp./Central Fidelity interest, and Borden were the only two Banks, Inc. (10/17/97) bidders for school milk contracts. A proposed final judgment, filed simulta- The Division did not oppose neously with the complaint, settled the Wachovia Corporation’s and Central suit. The decree required divestiture of Fidelity Banks’ merger after Wachovia nine plants: five in Texas, three in agreed to divest nine branches, with

Louisiana, and one in New Mexico. A Challenges Merger B: Appendix total deposits of about $218 million, in newly formed firm, Milk Products LLC, order to resolve the Division’s concerns would be allowed to buy the divested that the merger would lessen competi- dairies under certain conditions set out tion for banking services in certain areas in the decree. The transaction, as origi- of Virginia. The agreement resulted nally proposed, would have had Mid- from a joint investigation conducted by America finance most of the purchase the Division and the Office of the price to be paid by Milk Products, but Virginia Attorney General. the complaint alleged that this would have left Mid-America with the ability to influence the operations of Milk Connoisseur Communications/ Products. The decree placed limits on Lincoln Group L.P. the terms and duration of Mid-America (10/23/97) loans to Milk Products and placed strict limits on Mid-America’s access to The Division did not oppose Con- information about Milk Products. noisseur Communications’ $13.5 million acquisition of two Youngstown, Ohio, radio stations from the Lincoln Group United States v. Raytheon Company, after Connoisseur sold two other Young- 57 General Motors Corp., and HE stown area radio stations. Connoisseur Holdings, Inc. (10/16/97) sold the stations after the Division and the Ohio Attorney General expressed The Division challenged Raytheon’s concerns that the acquisition of $5.1 billion acquisition of General Lincoln’s stations would lessen competi- Motors’ Hughes Aircraft subsidiary. The tion in the Youngstown radio advertis- complaint alleged that the acquisition ing market. Without the divestiture, would have lessened competition sub- Connoisseur’s acquisition of stations stantially in infrared sensors used in from Lincoln would have given Con- both ground and aviation weapons noisseur 55 percent of the radio adver- systems, and in electro-optical systems tising revenues in Youngstown. for ground vehicles. A proposed final judgment, filed simultaneously with the United States v. Chancellor Media complaint, required divestiture of two Corp. and SFX Broadcasting, Inc. defense electronics businesses in order to (11/6/97) preserve competition in sophisticated technology for U.S. weapons systems. The Division challenged Chancellor’s The divestiture was, at the time, the acquisition of four Long Island, New largest divestiture since the end of the York, radio stations, alleging that the Cold War. acquisition would result in local busi-

Antitrust Division Annual Report 58 Appendix B: Merger Challenges tion. eight statesparticipated in theinvestiga- in theU.S.Attorneys General from optical scanvotetabulationequipment two ofonlythree manufacturers of tion SystemsandBusinessRecords were decreased services.AmericanInforma- anticompetitive priceincreases and tions) wouldlikely suffer and localgovernmentsthatrunelec- scan votetabulationequipment(state concerns thatconsumersoftheoptical structured, raisedsignificantantitrust third party. Thedeal,asoriginally optical scanvotetabulationbusinesstoa Business Records agreed tosellits two votingmachinemanufacturers, after Systems andBusinessRecords Corp., merger betweenAmericanInformation tion. stations inanticipationoftheacquisi- Islandradio been operatingSFX’sLong agreement underwhichChancellor had SFX toterminatealocalmarketing judgment alsorequired Chancellorand acquire Island stations.The SFX’sLong requiring ittoabandon itsplanto agreed toenterintoafinaljudgment of 1996,wasresolved whenChancellor passage oftheTelecommunications Act challenge toaradiostationmerger since suit, whichwasthefirstcontestedcourt more than65percent ofthemarket. The Islandradiogroup with dominant Long and themerger wouldhavecreated a largest radiogroups Island, onLong Chancellor andSFXwere thetwo paying higherradioadvertisingprices. nesses’ ownedbySFXBroadcasting Antitrust DivisionAnnual Report Antitrust Systems/ (11/19/97) Information American Business Records Corp. Records Business The Divisiondidnotopposethe General’s Office. jointly withtheFloridaAttorney Division’s investigationwasconducted second largest bankdivestiture. The bank divestiture inasinglestateandthe time, thisdivestiture wasthelargest billion, in15areas ofFlorida.At the with totalassetsofapproximately $4.1 vested approximately 124branchoffices, Barnett BanksafterNationsBankdi- proposed merger ofNationsBankwith eral Electric’sproposed $600million abandoned thetransaction. players. OnDecember30,1997,Alcoa ness thathadonlytwoothermajor aluminum canstockcapacityinabusi- had more than60percent ofU.S. United States.Thetwofirmstogether makers ofaluminumcanstock inthe tively, thelargest andthird largest ages. AlcoaandReynolds were, respec- consumers whopurchase cannedbever- produce cansandhigherpricesto in higherpricesforaluminumusedto that theacquisitionwouldhaveresulted Reynolds facility. Thecomplaintalleged acquisition, Alcoaplannedtoclosethe Muscle Shoals,Alabama.Aspartofthe rolling millandotherrelated assetsin acquisition ofReynolds’ aluminum United States v. Aluminum Com- Aluminum v. States United Banks Corp./Barnett (12/9/97) NationsBank General Electric Corp./Stewart & (12/30/97) Corp./Stewart Electric General (12/29/97) pany of America and Reynolds and America of pany Stevenson Services, Inc. Services, Stevenson Metals Company Metals The Divisiondidnotopposethe The Divisiondidnotoppose Gen- The DivisionchallengedAlcoa’s purchase of Stewart & Stevenson Ser- lessened competition for radio advertis- vices’ Gas Turbine Division after GE ing in Allentown, Pennsylvania. agreed to license a newly formed joint venture, TransCanada Turbines, to perform maintenance and overhauls of KPMG Peat Marwick/Ernst & Young (2/13/98) certain GE-manufactured marine and industrial equipment. Stewart & KPMG Peat Marwick and Ernst &

Stevenson was GE’s largest competitor Challenges Merger B: Appendix Young, two of the big six accounting worldwide in the provision of mainte- firms, abandoned their plans to merge nance and overhaul services and was the after the Division expressed concerns only North American company licensed that the merger would have adversely to service certain GE engines. affected competition by reducing the already limited number of firms provid- Perkin-Elmer Corp./PerSeptive ing auditing services to Fortune 1000 BioSystems, Inc. companies. (1/15/98)

The Division did not oppose Perkin- United States v. Pacific Enterprises Elmer’s $360 million purchase of and Enova Corp. (3/3/98) PerSeptive BioSystems after Perkin- Elmer agreed to sell the entire bundle of The Division challenged the pro- PerSeptive’s DNA synthesis patent posed $6 billion merger of Pacific rights to NeXstar Pharmaceuticals, Inc. Enterprises, a California natural gas The divestiture, which would enable utility, and Enova Corporation, a Cali- NeXstar to make the instruments and fornia electric utility company. This was 59 chemicals used in the synthesis of DNA the Division’s first challenge to a merger molecules, resolved concerns that the between a gas and electric utility. The acquisition would stifle competition for complaint alleged that, as a result of the these products. Perkin-Elmer and merger of Pacific’s natural gas pipeline PerSeptive were the only two companies with Enova’s electric power business, that held patents necessary for produc- the combined company would have had tion of certain DNA molecules, which both the incentive and the ability to are used in the research and develop- lessen competition in the market for ment of certain medical treatments. electricity in California and that the merger likely would have resulted in Capstar Broadcasting Partners/ consumers in California paying higher Patterson Broadcasting prices for electricity. The complaint (1/29/98) further stated that, in early 1998, the California electric market experienced The Division did not oppose significant changes as a result of legisla- Capstar’s acquisition of Patterson Broad- tively mandated restructuring. In this casting after Capstar agreed to sell the new competitive electric market, gas- two Allentown, Pennsylvania, radio fired plants, which were the most costly stations acquired in the transaction. The generating plants to operate, set the transaction, as originally structured, price that all sellers received for electric- would have increased concentration and ity in California in peak demand peri-

Antitrust Division Annual Report 60 Appendix B: Merger Challenges parties agreed todivestthree branch Heritage’s purchase ofCFX afterthe industries. land-based gasturbine,andoil in theaerospace,chemicalprocessing, highly corrosive environments, suchas to beusedinhightemperature and are soldinvariousformsanddesigned High-performance nickel-based alloys performance nickel-based alloyproducts. consumers purchasing certainhigh- likely haveresulted inhigherpricesto Division saidthattheacquisitionwould challenge theproposed acquisition.The Division announceditsintentionto alloys divisionofIncoLimited,afterthe chase IncoAlloysInternational,the ings abandonedtheirattempttopur- Banking Fund, L.P. andHaynesHold- Blackstone CapitalPartners IIMerchant to completeitsmerger withPacific. low-cost electricpowerplantsinorder required Enovatosellitstwolargest simultaneously withthecomplaint, prices. Aproposed finaljudgment,filed to benefitfrom anyincrease inelectric generating plantsgavePacific ameans acquisition ofEnova’slow-costelectric sources ofelectricity. Inthisway, the the profits ofownerslowercost by allsellersofelectricityandincrease prices, itcouldraisethepricecharged cost ofgas-fired plantsbyraisingfuel ods. Thus,ifafirmcouldincrease the Antitrust DivisionAnnual Report Antitrust Group, (3/9/98) Financial Heritage Peoples Alloys (3/3/98) Inc./Inco Holdings, Haynes Inc./CFX Corp. Inc./CFX International The Divisiondidnotoppose Peoples The Divisionannouncedthat Hampshire. business bankingservicesinNew the merger wouldlessencompetitionfor ment resolved Divisionconcernsthat offices inNewHampshire. Theagree- cant cooperationbetweentheagencies. posed transactions,butthere wassignifi- independent investigationsofthepro- and theEuropean Unionconducted and medicalpublications.TheDivision publications, suchasscientific,technical, higher pricesforconsumerscertain merger wouldhavelikely resulted in The Divisionwasconcernedthatthe expressed concerns about themerger. Division andtheEuropean Union cal, andlegalpublishing,afterthe ing insuchsegmentsasbusiness,medi- Wolters, aleadingpublisherparticipat- scientific andbusinessinformation,with Elsevier, aworldwidepublisherof which wouldhavecombinedReed abandoned their$7.8billionmerger, competitor. market. There wasonlyone other about 67percent ofthewalk-invan van assemblyandhadcombined salesof competitors inthemarket forwalk-in Union CityandUtilmasterwere direct result in higherpricesforconsumers. concerns thatthedealwouldlikely Davidson), aftertheDivisionexpressed bler, LLC(asubsidiaryofHarley Utilmaster, adivisionof Holiday Ram- doned planstoacquire theassetsof Reed Elsevier Business Informa- (3/9/98) Business Elsevier Reed Andrew Taitz/Harley Davidson (3/20/98) Taitz/Harley Andrew tion/Wolters Kluwer NV Kluwer tion/Wolters Reed ElsevierandWolters Kluwer Union CityBodyCompanyaban- United States v. Lockheed Martin Corp. and Northrop Grumman Corp. (3/23/98)

The Division challenged the proposed acquisition of Northrop Grumman by Lockheed Martin, an $11.6 billion merger that was Challenges Merger B: Appendix the single largest ever challenged by a federal antitrust agency. The complaint alleged that the merger would have resulted in unprecedented vertical and horizontal concen- of Allied Signal’s Ocean Systems Busi- tration in the defense industry, which ness and Allied Signal ELAC Nautik would substantially lessened, and in GmbH (Ocean Systems) and simulta- several cases eliminated, competition in neously filed a proposed final judgment major product markets critical to the requiring L-3 to put into place proce- national defense. The merger would dures to ensure Ocean Systems’ indepen- have resulted in Lockheed Martin’s dence as a competitor for a future obtaining a monopoly position in submarine detector known as a towed airborne early warning radar, electro- sonar array. Ocean Systems and optical missile warning systems, directed Lockheed Martin Corporation infrared countermeasures systems, the (Lockheed Martin) were the leading SQQ-89 antisubmarine warfare combat providers of submarine detectors used system, and fiber-optic towed decoys, on U.S. Navy surface combat vessels 61 which would likely have led to higher and submarines. Lockheed Martin costs, higher prices, and less innovation owned 34 percent of the common stock for systems required by the U.S. mili- of L-3 and controlled three of 10 seats tary. In addition, the merger would have on L-3’s Board of Directors. The com- reduced competition in the sale of plaint alleged that the proposed acquisi- advanced tactical and strategic aircraft, tion would have lessened competition airborne early warning radar systems, substantially because there was a strong sonar systems, and several types of likelihood that competitively sensitive countermeasure systems that are de- information concerning L-3’s design, signed to alert aircraft pilots to threats production, and bid plans for towed and to help them respond to those arrays would be shared with Lockheed threats. On July 16, 1998, the parties Martin. abandoned the transaction.

United States v. Loewen Group, Inc. United States v. Lehman Brothers and Loewen Group International, Holdings, Inc. and L-3 Communica- Inc. tions Holdings, Inc. (3/31/98) (3/27/98)

The Division filed a complaint The Division challenged L-3 Com- against Loewen Group and Loewen munications’ (L-3) proposed acquisition

Antitrust Division Annual Report 62 Appendix B: Merger Challenges than 40percent. enues ineachofthethree citiestoless CBS’s share ofradioadvertisingrev- (WOCT-FM). Thedivestiture reduced KLOU-FM), andoneinBaltimore (KSD-FM and AM), twoinSt.Louis WAAF-FM, WEGQ-FM, andWRKO- stations: fourinBoston(WEEI-AM, required CBStodivestsevenradio filed simultaneouslywiththecomplaint, Baltimore. Aproposed finaljudgment, percent and46percent inSt.Louis, in Boston’s radioadvertisingrevenues, 49 sulted inCBShaving59percent of land. Theacquisitionwouldhavere- Missouri;andBaltimore,Louis, Mary- prices inBoston,Massachusetts;St. resulted inhigherradioadvertising that theacquisitionwouldlikely have Systems byCBS.Thecomplaintalleged billion acquisitionofAmericanRadio April 15,1998. judgment wasentered bytheCourton penalty totaling$500,000.Thefinal 14, 1998,thedefendantspaidacivil complaint, settledthesuit,andonMay judgment, filedsimultaneouslywiththe antitrust agencies.Aproposed final before notifyingthenation’s twofederal tor offuneralhomesandcemeteries, Inc., anIndiana-basedownerandopera- voting securitiesofPrime Succession Group’s $16millionacquisitionofthe violation wasaresult ofLoewen of theHart-Scott-Rodino Act. The of thepremerger reporting requirements Group Internationalallegingaviolation Antitrust DivisionAnnual Report Antitrust and (3/31/98) Corp. CBS v. States United American Radio Systems Corp. Systems Radio American The Divisionchallengedthe$1.6 and WGBB-AM). (WBLI-FM, WBAB-FM,WHFM-FM, Island,NewYorkSFX stationsinLong one inJackson(WJDX-FM), andfour FM), oneinPittsburgh (WTAE-AM), WTPT-FM), oneinHouston(KKPN- (WESC-FM andAM,WJMZ-FM, radio stations:fourinGreenville complaint, required Capstartodivest11 judgment, filedsimultaneouslywiththe County, NewYork. Aproposed final Jackson, and65percent inSuffolk percent inPittsburgh, 57percent in Greenville, 43percent inHouston,44 of radioadvertisingrevenues in Media Corporation)having74percent Muse, Tate &Furst Inc.andChancellor Capstar anditsrelated entities(Hicks, The acquisitionwouldhaveresulted in sippi; andSuffolkCounty, NewYork. burgh, Pennsylvania; Jackson,Missis- South Carolina; Houston,Texas; Pitts- radio advertisingpricesinGreenville, tion wouldlikely haveresulted inhigher The complaintallegedthattheacquisi- by CapstarBroadcasting Partners, Inc. billion acquisitionofSFXBroadcasting three markets: Milwaukee, Wisconsin; concerns bysellingbillboard assetsin resolve theDivision’s competitive ings afterClearChannelagreed to acquisition ofUniversalOutdoorHold- Channel Communications’$1.1billion (3/31/98) & Tate Muse, Hicks, v. States United (4/1/98) Communications, Channel Clear Furst, Inc., Capstar Broadcasting Capstar Inc., Furst, Inc./Universal Outdoor Holdings, Outdoor Inc./Universal Partners, Inc., and SFX Broadcast- SFX and Inc., Partners, Inc. ing, Inc. ing, The Divisionchallengedthe$2.1 The DivisiondidnotopposeClear Orlando, Florida; and Pinellas County, United States, State of New York, Florida. The deal, as originally struc- and State of Illinois v. Sony Corp. of America, LTM Holdings Inc. d/b/a tured, would have reduced competition Loews Theatres Cineplex Odeon in billboard advertising in these three Corp., and J.E. Seagram markets. The transaction would have left (4/16/98) Milwaukee with only one significant billboard provider, and in the two The Division challenged the pro-

Florida markets, consumers would have posed merger between Loews Theatres, Challenges Merger B: Appendix lost a significant competitor. a subsidiary of Sony Corp., and Cineplex Odeon Corp. The complaint alleged that the merger of these two Sungard Data Systems, Inc./Rolfe & movie theater chains would lessen Nolan, plc (4/3/98) competition substantially in the Manhat- tan and metro-Chicago markets, leading Sungard abandoned its $120 million to higher ticket prices and reduced plan to purchase Rolfe & Nolan after theater quality for first-run movies. The the Division expressed concerns about merged firm would have had market the transaction. Sungard and Rolfe were shares, by revenues, of 67 percent in the only two providers of clearing and Manhattan and 77 percent in Chicago. A settlement software for use by banks, proposed consent decree, filed simulta- trading firms, and exchanges. The neously with the complaint, required the merger would have given the combined divestiture of 14 theaters in Manhattan firm a monopoly in the clearing and and 11 theaters in Chicago. In both settlement software market. Manhattan and Chicago, the divestitures represented slightly more than the 63 leading firm would have acquired in First Union Corp./CoreStates Finan- terms of both number of screens and cial Corp. revenues. (4/10/98)

The Division did not oppose the Banc One Corp./First Commerce $16.6 billion merger of First Union Corp. with CoreStates Financial after an (5/4/98) agreement was reached to divest 32 branch offices in Pennsylvania. The The Division did not oppose Banc divestitures ensured that consumers One’s $3.1 billion merger with First would continue to receive the most Commerce after the banks agreed to competitive loan rates and the best resolve the Division’s antitrust concerns banking services in those markets. The by selling off 25 branch offices in 32 CoreState branches required to be Louisiana. The Division stated that, divested were located in Philadelphia, with the divestiture of those branches, Delaware, and Montgomery Counties with total deposits of $614 million, and Lehigh Valley, and had total depos- small and medium-sized business con- its of approximately $1.1 billion. The sumers would continue to receive Division’s investigation was conducted competitive loan rates and banking jointly with the Pennsylvania Attorney services. General’s Office.

Antitrust Division Annual Report 64 Appendix B: Merger Challenges vigorously withthePrimestar owners’ using theassetstocompete directly and would prevent anindependent firmfrom complaint allegedthatthe transaction sion byindependentDBSfirms.The last positionavailableforuseorexpan- continental UnitedStates,andwasthe 18 inchesindiameter, totheentire ers couldreceive usingdishesassmall high-power DBSservice,whichcustom- three thatcouldbeused toprovide to Primestar. The110slotwasone of power DBSsatellitesunderconstruction longitude orbitalslotandtwohigh- satellite transpondersatthe110west to transferauthorizationoperate28 transaction calledforNewsCorp./MCI increased innovation.Theproposed higher quality, greater choice,and competition, includinglowerprices, tion, denyingconsumersthebenefitsof types ofvideoprogramming distribu- includes cable,DBS,andafewother programming distribution,which monopoly powerinmultichannelvideo competition substantiallyandenhance $1.1 billionacquisitionwouldlessen complaint allegedthattheproposed and keep outnewcompetitors.The Primestar, toprotect theirmonopolies in theUnitedStates,whichcontrolled allow fiveofthelargest cablecompanies Limited andMCI,allegingthatitwould satellite (DBS)assetsofNewsCorp. acquisition ofthedirect broadcast (5/12/98) Inc., Primestar, v. States United Antitrust DivisionAnnual Report Antitrust Tele-Communications, Inc., TCI Inc., Tele-Communications, Satellite Entertainment, Inc., Time Inc., Entertainment, Satellite Warner Entertainment Company, Entertainment Warner L.P., MediaOne Group, Comcast Group, MediaOne L.P., Corp., Cox Communications, Inc., Communications, Cox Corp., GE American Communications, Inc., Communications, American GE Newhouse Broadcasting Corp., The Corp., Broadcasting Newhouse The DivisionchallengedPrimestar’s News Corp. Limited, MCI Communi- MCI Limited, Corp. News cations Corp., and Keith Rupert Keith and Corp., cations Murdoch News Corp.’sandMCI’sDBSassets. Primestar abandoneditsacquisitionof satellite venture. OnOctober14,1998, tial competitor, NewsCorp.’sASkyB cable companies’mostsignificantpoten- cable systemsandwouldeliminatethe in thesemarkets. tion forretail andsmallbusinesslending branches, thereby preserving competi- its applicationtoexclude thesefour Lucasville. StarBankagreed toamend mouth Auto-Bank, Wheelersburg, and in SciotoCounty: Portsmouth, Ports- Star Bank’sacquisitionoffourbranches alleviate Divisionconcernsregarding restructure theproposed acquisitionto Virginia) afterthepartiesagreed to Steubenville, N.A.,Wheeling,West branches ofBankOneWheeling- Columbus, Ohio, andfiveOhio Ohio (48branchesofBankOne,N.A., branches ofBankOnesubsidiariesin Bank N.A.’sacquisitionof53Ohio enues. percent oftheradioadvertisingrev- New Orleans,accounting forabout55 Sinclair control ofnineradiostationsin the fivestationswouldhavegiven Broadcasting LLC.Theacquisitionof to sellthree stationstoCentennial Media andPhaseIIafterSinclairagreed tions inNewOrleansfrom Heritage acquisitionoffiveradiosta- Sinclair’s Star Bank, N.A./Bank One, N.A./ One, (5/15/98) N.A./Bank Bank, Star (5/28/98) Inc./ Group, Broadcast Sinclair Bank One Wheeling-Steubenville One Bank Heritage Media Corp. and Phase II Phase and Corp. Media Heritage Broadcasting The DivisiondidnotopposeStar The Divisiondidnotoppose Capstar Acquisition Company Inc./ eter. A spectrometer is a device that KRNA, Inc. determines the chemical composition of (6/8/98) substances. Graseby Specac remained part of Smiths Industries, plc. Graseby The Division did not oppose Specac and Thermo Environmental’s Capstar’s acquisition of a Cedar Rapids, SpectraTech were the only full-line Iowa radio station from KRNA, Inc. manufacturers of sample holding acces- after Capstar terminated a contract to

sories for use with spectrometers. Thus Challenges Merger B: Appendix acquire an additional Cedar Rapids area the transaction, as originally structured, radio station from KRNA. Had Capstar would have combined the number one acquired both radio stations, it would and the number two worldwide manu- have had five of the 12 radio stations in facturers of spectrometer accessories the Cedar Rapids radio market and respectively. The restructured deal would approximately 49 percent of the radio maintain competition and would pro- advertising revenues in that market. vide low prices and effective services for these accessories, helping to ensure the Bangor Savings Bank/Fleet Bank of purity and quality of many goods. Maine (6/10/98) United States v. Aluminum Com- pany of America and Alumax, Inc. The Division did not oppose (6/15/98) Bangor’s acquisition of several branches from Fleet Bank of Maine after Bangor The Division challenged the pro- Savings Bank amended the transaction posed $3.8 billion acquisition of Alumax to remove three branches, with total by Alcoa. The complaint alleged that the deposits of $36 million, located within 65 acquisition likely would have resulted in the Guilford market. The transaction, as higher prices for customers of aluminum originally structured, would have had a cast plate. Alcoa and Alumax were the significantly adverse effect on competi- two largest producers of aluminum cast tion in the market for business banking plate and together controlled approxi- services in Guilford, Maine. mately 90 percent of the worldwide market for cast plate. Cast plate is a flat Thermo Environmental Instruments, aluminum product that resists warping Inc./Smiths Industries, plc and is used in machinery that makes (6/11/98) products for packaging frozen foods and aircraft and automotive parts. A pro- The Division did not oppose posed final judgment, filed simulta- Thermo Environmental’s acquisition of neously with the complaint, required Smiths Industries, plc’s Graseby, plc Alcoa to sell its cast plate operations, product-monitoring and environmental- including its Vernon, California, plant monitoring groups after the acquisition that makes cast plate, to a firm that was restructured. Under the restructured would continue to manufacture and sell merger, Thermo Environmental agreed cast plate. not to acquire Graseby Specac Limited, which manufactured accessories essential to test various substances in a spectrom-

Antitrust Division Annual Report 66 Appendix B: Merger Challenges son, Indiana,bankingmarket. business bankingservicesintheAnder- resulted inhigherloanpricesfor acquisition wouldhavelikely Without thisdivestiture, the total depositsof$31.9million). Indiana, bankingmarket (with branch officesintheAnderson, America agreed todivesttwo Bank CorporationafterFirst Corporation ofFirst ofAmerica the acquisitionbyNationalCity Argentina market, including theNew only carriersservingthe UnitedStates- along withUnitedAirlines, were the acquisition. Americanand Aerolineas, after Americanagreed torestructure the Argentinas, Argentina’s majorairline, about 8.5percent ofAerolineas can Airlines’proposed acquisitionof ket: WMEZ-FMandWXBM-FM. stations inthePensacola, Floridamar- posed acquisition,Capstaroperatedtwo radio market. At thetimeofpro- consumers inthePensacola, Florida, increased radioadvertisingpricesfor acquisition wouldhaveresulted in sponse toDivisionconcernsthatthe from Paxson Communicationsinre- abandoned itsacquisitionofWYCL-FM National City Corp./First of (6/30/98) Corp./First City National Antitrust DivisionAnnual Report Antitrust (7/8/98) Airlines/Aerolineas American Partners/ (6/30/98) Broadcasting Capstar America Bank Corp. Bank America Argentinas Communications Paxson The Divisiondidnotoppose The DivisiondidnotopposeAmeri- Capstar Broadcasting Partners by Aerolineas. shares toinfluencecompetitivedecisions would relinquish itsrighttovote Aerolineas Board ofDirectors and would havenorepresentatives onthe restructured transaction,American tina andtheUnitedStates.Under bilateral aviationtreaty betweenArgen- these routes waslimitedbya restrictive Aires routes. Entryandexpansionon York-Buenos Aires andMiami-Buenos equipment, and InnoServ’s PREVU equipment, andInnoServ’s for alltypesandbrands of medical ment andaleadingprovider ofservice manufacturer ofmedicalimagingequip- equipment. GEwastheworld’slargest to servicemostorallofahospital’s hospitals contractwithasingleprovider multivendor service,inwhichsome throughout theUnitedStatesfor imaging equipmentandinlocalareas servicing certainmodelsofGEmedical tition substantiallyinthemarkets for that theacquisitionwouldlessencompe- Company (GE).Thecomplaintalleged tion ofInnoServbyGeneralElectric (7/14/98) Electric General v. States United Company and InnoServ Technolo- InnoServ and Company gies, Inc. gies, The Divisionchallengedtheacquisi- software was one of a very few pro- United States and States of Ohio, grams available to service some models Arizona, California, Colorado, Florida, Commonwealth of Ken- of imaging equipment. A proposed final tucky, States of Maryland, Michigan, judgment, filed simultaneously with the New York, Commonwealth of Penn- complaint, required GE to sell sylvania, States of Texas, Washing- InnoServ’s PREVU software to a third ton, and Wisconsin v. USA Waste party. Services, Inc., Dome Merger Sub- sidiary, and Waste Management, Inc. (7/16/98) Challenges Merger B: Appendix WorldCom, Inc./MCI Communica- tions Corp. The Division and 13 states chal- (7/15/98) lenged the $13.5 billion acquisition of Waste Management, Inc. (WMI) by The Division did not oppose USA Waste Services, Inc. (USA Waste). WorldCom’s $44 billion purchase of WMI and USA Waste were two of the MCI after MCI agreed to divest its nation’s largest waste collection and Internet business. MCI agreed to sell disposal companies. The complaint internetMCI to Cable & Wireless, plc alleged that the acquisition would lessen for an estimated $1.75 billion, making it competition substantially for waste the largest divestiture of a company at collection and disposal services in 21 that date in merger history. Without that geographic areas across the United divestiture, the WorldCom/MCI merger States. A proposed final judgment, filed would have combined the two leading simultaneously with the complaint, providers of nationwide Internet back- required USA Waste to divest waste bone service, a service that connects collection and/or disposal operations in various high-capacity computer net- 13 states, covering 21 metropolitan 67 works carrying Internet traffic. The areas: Tucson, Arizona; Los Angeles, merger, as originally proposed, would California; Denver, Colorado; have given WorldCom/MCI a significant Gainesville and Miami, Florida; Louis- proportion of the nation’s Internet ville, Kentucky; Baltimore, Maryland; traffic, giving the company the ability to Detroit, Flint, and Northeast, Michigan; cut off or reduce the quality of Internet New York, New York; Akron, Cleveland, services that it provided to its rivals, and Canton and Columbus, Ohio; Portland, harming customers using the services of Oregon; Allentown, Philadelphia, and those rivals. Customers of backbone Pittsburgh, Pennsylvania; Houston, services include Internet service provid- Texas; and Milwaukee, Wisconsin. ers and private and public institutions and corporations. The Division and the European Union conducted independent Specialty Teleconstructors, Inc./ investigations of the proposed transac- Stainless, Inc. (7/17/98) tions, but there was a high degree of cooperation between the agencies. Specialty Teleconstructors aban- Attorneys General from ten states also doned its proposed acquisition of 100 participated in the investigation. percent of the stock of Stainless and certain related assets of Stainless Enter- prises of Pennsylvania, Inc., through its 33 percent ownership of Kline Iron &

Antitrust Division Annual Report 68 Appendix B: Merger Challenges licensing itsprocessing systemtoan- Citicorp fornewEBTcontracts orfrom Transactive from competing with agreement thatwouldhave prevented was alsoanoncompeteprovision inthe the acquisitionofthesecontracts,there services inthesestates.Inadditionto software usedtoprovide processing well ascertaincomputerhardware and Sacramento CountyinCalifornia,as states ofTexas, Illinois,andIndiana contracts todeliverEBTservicesthe have acquired from Transactive the challenged transaction,Citicorpwould stamp benefitsbytheyear2002.In to useEBTsystemsdeliverfood payments. Federal lawrequires allstates Americans whoqualifyforwelfare provide foodstampsandcashbenefitsto used bystateandlocalagenciesto local governments.EBTservicesare provision ofEBTservicestostateand lessen competitionsubstantiallyinthe plaint allegedthattheacquisitionwould subsidiary ofCiticorp,Inc.Thecom- Citicorp Services,Inc.(Citicorp),a of GTECH HoldingsCorporation,by Corporation (Transactive), asubsidiary (EBT) systembusinessofTransactive tion oftheelectronic benefittransfer television broadcast towerconstruction. in thehighlyconcentratedmarket oftall Stainless wasakey competitorofKline which require tremendous expertise. towers fortelevisionbroadcasting, in themarket fortheconstructionof anticompetitive effectsofthetransaction expressed concernsaboutthe Steel Company, aftertheDivision Antitrust DivisionAnnual Report Antitrust (7/27/98) Inc., Citicorp, v. States United Citicorp Services, Inc., GTECH Inc., Services, Citicorp Holdings Corp., and Transactive and Corp., Holdings Corp. The Divisionchallengedtheacquisi- the partiesabandonedtransaction. welfare benefits. OnJanuary29,1999, lower qualityservicesforrecipients of services forstateandlocalagencies in higherpricesandlowerquality competition forEBTcontracts,resulting acquisition wouldhaveeliminated systems. Thecomplaintallegedthatthe other vendorforuseindeliveringEBT licensed inthemarket. owned fourofthe12Classstations Arkansas, radiomarket andwouldhave mately 62percent oftheFt.Smith, Capstar wouldhavecontrolled approxi- tion hadbeenconsummatedasplanned, Broadcasting Company. Ifthetransac- KTCS-AM radiostationsfrom BigChief proposed acquisitionofKTCS-FM and Capstar Broadcasting abandonedits entity wouldhavecontrolled approxi- the advertisingrevenues. Thecombined which controlled about27percent of Communications ownedWMNX-FM, advertising revenues inthemarket. Sea controlled about39percent ofthe FM, andWSFM-FM,thosestations merger, ownedWMNX-FM, WGNI- casting, atthetimeofproposed for radioadvertising.CapeFear Broad- the Wilmington, North Carolina, market would haveanticompetitiveeffectsin expressed concernsthatthe merger proposed merger planaftertheDivision Communications abandonedtheir Capstar Broadcasting Partners/Big (7/27/98) Broadcasting Capstar Cape Fear Broadcasting/Sea Com- (8/10/98) Broadcasting/Sea Fear Cape Chief Broadcasting Company Broadcasting Chief munications As aresult ofDivisionconcerns, Cape Fear Broadcasting andSea mately 66 percent of the radio advertis- NationsBank Corp./BankAmerica ing revenues and controlled four of the Corp. (8/14/98) nine Class stations licensed.

The Division did not oppose Jacor Communications, Inc./Nation- NationsBank’s proposed merger with wide Communications, Inc. BankAmerica after NationsBank agreed (8/10/98) to sell off 17 branch offices with total deposits of approximately $491.6 mil- Challenges Merger B: Appendix The Division did not oppose Jacor lion located in New Mexico (15 branch Communications’ $620 million acquisi- offices in Albuquerque, one in Clovis, tion of Nationwide Communications and one in McKinley) in order to after Jacor agreed to sell eight radio resolve the Division’s concerns that the stations: two in San Diego, California; merger would lessen competition for one in Cleveland, Ohio; and five in loans to small and medium-sized busi- Columbus, Ohio. Without the divesti- nesses. The Division’s investigation was tures, the acquisition would have signifi- conducted jointly with the offices of the cantly reduced competition in those New Mexico and Texas Attorney Gen- cities. If the deal were approved as eral. originally proposed, Jacor would have had control of 12 stations in San Diego, accounting for 42 percent of radio Capstar Broadcasting Partners/ advertising revenues. In Cleveland, Jacor KATQ Radio, Inc. (9/2/98) would have owned six radio stations with 43 percent of radio advertising Capstar Broadcasting abandoned its revenues. In Columbus, with nine radio acquisition of KATQ Radio after the 69 stations, Jacor would have had 58 Division expressed concerns that the percent of radio advertising revenues. acquisition would have reduced compe- The Division and the Ohio Attorney tition and increased prices in the General’s Office conducted a joint Texarkana, Arkansas-Texas, radio adver- investigation. tising market. By purchasing KATQ Radio, Capstar would have acquired two Dean Foods Company/Barber Dair- radio stations that competed with ies, Inc. Capstar stations in that market and (8/11/98) would have had a 62 percent share of advertising revenues. The Division did not oppose the acquisition of Barber Dairies, Inc. by Dean Foods Company after the parties Banc One Corp./First Chicago NBD agreed to sell a Barber Dairies plant in Corp. (9/8/98) Huntsville, Alabama, to Southern Foods Group, L.P. The deal, as initially struc- The Division did not oppose the tured, could have lessened competition $29 billion merger of Banc One with in bidding to supply milk to school First Chicago after the banks agreed to districts in at least 18 counties in Ala- divest 39 branch offices in Indiana with bama. total deposits of approximately $1.47 billion. In addition, the banks offered to

Antitrust Division Annual Report 70 Appendix B: Merger Challenges the Orlandoarea televisionstations. ture thetransactionbydivestingone of stations. Thepartiesagreed torestruc- ing theparties’competingtelevision market inOrlando, Florida,bycombin- effects inthetelevisionadvertising would haveresulted inanticompetitive The transaction,asoriginallystructured, agreed torestructure thetransaction. First MediaTelevision aftertheparties Meredith Corporation’s acquisition of Virginia, radioadvertisingmarket. consumers intheMorgantown, West would haveresulted inhigherpricesfor pressed concernsthatthetransaction Broadcasting aftertheDivisionex- station, WFGM-FM,from Fantasia one Morgantown, West Virginia, radio abandoned itsproposed acquisitionof Attorney General’sOffice. conducted jointlywiththeIndiana tition. TheDivision’s investigationwas continue tohavethebenefitsofcompe- medium-sized businessconsumerswould The divestiture ensured thatsmalland ated middlemarket commercial loans. loan operationsinIndianaandassoci- sell certainmiddle-market commercial Antitrust DivisionAnnual Report Antitrust Televi- (9/16/98) Media Corp./First Meredith (9/16/98) Corp./Fantasia Radio Virginia West sion, L.P. sion, Broadcasting The Divisiondidnotoppose West Virginia Radio Corporation and decreased qualityforlogging-while- merger wouldresult inincreased prices Dresser. Thecomplaintallegedthatthe posed merger ofHalliburtonand College market. radio advertisingrevenues intheState trolled approximately 46percent ofthe forward, Talleyrand wouldhavecon- radio stations.Ifthedealhadgone market, where bothcompaniesowned lege, Pennsylvania, radioadvertising a lossofcompetitionintheStateCol- acquisition likely wouldhaveresulted in Division expressed concernsthatthe from CitadelBroadcasting, afterthe its effortstopurchase radiostations United States v. Halliburton Com- (9/29/98) Halliburton v. States United Inc./Cita- (9/24/98) Broadcasting, Talleyrand pany and Dresser Industries, Inc. Industries, Dresser and pany Company Broadcasting del The Divisionchallengedthepro- Talleyrand Broadcasting abandoned drilling (LWD) tools and services for oil percent or more of the available bill- and natural gas drilling projects, as well boards in these markets. The divestitures as decreased competition in the develop- ensured that competition would remain ment and improvement of LWD tools. in the billboard market, protecting small LWD services provide information to oil business customers who rely on bill- and gas companies about the formations board advertising as a cost-effective way through which the companies are drill- to promote their businesses.

ing, whether there is oil in the forma- Challenges Merger B: Appendix tion, and the ease with which oil can be extracted. A proposed final judgment, U.S. Bancorp/Northwest Bancshares, Inc. filed simultaneously with the complaint, (10/9/98) required Halliburton to divest its entire LWD business, including its manufac- The Division did not oppose the turing, research and development, and merger of U.S. Bancorp and Northwest sales and service capabilities. Separately, Bancshares after U.S. Bancorp agreed to Halliburton also agreed to sell its 36 divest a bank branch in Clark County, percent interest in M-I Drilling to Smith Washington. The Division stated that International, Inc. Without that divesti- the deal, as originally proposed, would ture, Halliburton would have acquired have lessened competition for banking one of its principal competitors, services in Clark County. The divestiture Dresser’s Baroid Division. M-I and ensured that local customers would Baroid were the two largest drilling continue to have competitively priced fluids competitors in a $3 billion indus- banking services. try. Halliburton sold this interest on August 31, 1998. Drilling fluids, which 71 are a combination of chemical com- Norwest Corp./Wells Fargo & Com- pounds and minerals, are the second pany largest cost of drilling for oil and natural (10/13/98) gas after rental of the rig. They are critical for cooling and lubricating the The Division did not oppose the drill bit and controlling downhole $34 billion merger of Norwest Corpora- pressure. The decree was entered by the tion with Wells Fargo & Company after Court on February 22, 1999. the banks agreed to sell 26 bank branch offices in Arizona and Nevada with deposits totaling approximately $1.18 Lamar Advertising Company/Out- billion. The divestiture was designed to door Communications, Inc. ensure that local customers, particularly (10/2/98) small businesses, had access to competitively priced banking services. The Division did not oppose Lamar Advertising’s $148.2 million acquisition of Outdoor Communications after the United States v. Northwest Airlines parties agreed to divest billboard assets Corp. and Continental Airlines, Inc. in six counties in Alabama, Mississippi, (10/23/98) and Tennessee. The deal, as originally structured, would have resulted in The Division filed suit to block Lamar controlling approximately 50 Northwest Airlines from buying a controlling stake in Continental Airlines.

Antitrust Division Annual Report 72 Appendix B: Merger Challenges the acquisitionwouldsubstantially customers. Thecomplaint allegedthat such asbillboard space,tobusiness business ofsellingoutdooradvertising, were head-to-headcompetitors inthe Kunz &Company. ChancellorandKunz Media’s $39.5millionacquisitionof 2000. scheduled tocommenceSeptember19, Court inDetroit, Michigan.Trial is litigation ispendinginU.S.District has goneaheadwithitsacquisition,and result from theacquisition.Northwest prevent thecompetitiveharmlikely to alleged thatthevotingtrustwouldnot trust” forsixyears,thecomplaint west toplaceitsstockina“voting ment withContinentalrequired North- voting rights.Althougharelated agree- equity butcarrying51percent ofits senting 14percent ofContinental’s Northwest planstoacquire stockrepre- hubs. According tothecomplaint, between thecitieswhere theyoperate competitor—for nonstopairlineservice significant competitor—ifnottheonly most Continental are eachother’s complaint allegedthatNorthwestand to competeagainsteachother. The Northwest’s andContinental’sincentives profits, diminishingsubstantiallyboth as welltoshare inContinental’s acquire votingcontrol overContinental, acquisition wouldallowNorthwestto routes across thecountry. Theproposed transportation servicesonthousandsof respectively andcompetetoprovide air fourth andfifthlargest U.S.airlines Northwest andContinentalare the Antitrust DivisionAnnual Report Antitrust Media (11/12/98) Chancellor v. States United Corp. and Kunz & Company & Kunz and Corp. The DivisionchallengedChancellor four counties. valued atmore than$5millioninthose to divestoutdooradvertisingassets the complaintthatrequired Chancellor judgment wasfiledsimultaneouslywith the market inothers.Aproposed final some areas andmore than60percent of giving Chancelloravirtualmonopolyin California, andMojaveCounty, Arizona, ing inKern, Kings,andInyoCounties, lessen competitionforoutdooradvertis- waste. dispose ofNewYork residential City’s awarded partofa$6billioncontract to to sellitspendingproposal tobe states. Inaddition,Easternwasrequired operations inninemarkets inthosethree divest wastecollectionand/ordisposal 1998. Itrequired thecompaniesto settle thesuitwasfiledDecember31, proposed finaljudgmentthatwould York, Pennsylvania, andFlorida.A collection anddisposalservicesinNew reduce competitionforothersolidwaste residential solidwasteandwould also contract todisposeofNewYork City’s competition onamultibilliondollar $1.2 billionmerger wouldreduce Services. Thecomplaintallegedthatthe regional rival,EasternEnvironmental Management, from acquiringalarge collection anddisposalfirm,Waste sued toblockthenation’s largest waste (11/17/98) New of States and States United York and Florida and Common- and Florida and York wealth of Pennsylvania v. Waste v. Pennsylvania of wealth Management, Inc., Ocho Acquisi- Ocho Inc., Management, tion, Corp., and Eastern Environ- Eastern and Corp., tion, mental Services, Inc. Services, mental The Division,joinedbythree states, United States v. Pearson, plc, Pearson, Inc., and Viacom Interna- tional, Inc. (11/23/98)

The Division challenged Pearson’s $4.6 billion acquisition of educational, professional, and reference publishing businesses from Viacom. The complaint Challenges Merger B: Appendix alleged that the acquisition would have lessened competition, and a proposed final judgment, filed simultaneously with the complaint, required Pearson to sell off an elementary school science textbook program and textbooks used in 32 college courses. Pearson and Viacom were two of only four publishers of major comprehensive elementary school science programs (which include textbooks and related materials and services) and two of only a few publishers of textbooks and educational materials for over 30 college courses. City Holding Company/Horizon United States v. Chancellor Media Bancorp, Inc. Corp., Whiteco Industries, Inc., and (11/30/98) 73 Metro Management Associates (11/25/98) The Division did not oppose City Holding Company’s acquisition of The Division challenged Chancellor Horizon Bancorp after the parties Media’s $930 million acquisition of agreed to divest two branch offices in Whiteco Industries. Chancellor and West Virginia with deposits totaling Whiteco were head-to-head competitors approximately $94.8 million. Without in the business of selling outdoor adver- the divestitures, the deal would have tising, such as billboard space. The reduced competition for consumers of complaint alleged that the acquisition business banking services in Greenbrier would have reduced competition in County and Hinton, West Virginia. seven counties located in Kansas, Penn- sylvania, Connecticut, and Texas. The combined entity would have had a Monsanto Company/DeKalb Genet- ics Corp. monopoly in Hartford County, Con- (11/30/98) necticut, and market shares ranging between 48 percent to 88 percent in the The Division did not oppose remaining markets. A proposed final Monsanto’s $2.3 billion acquisition of judgment was filed that required divesti- DeKalb Genetics after Monsanto agreed ture of billboard assets in those seven to modify the deal. The Division’s counties. concerns focused on maintaining compe-

Antitrust Division Annual Report 74 Appendix B: Merger Challenges harm competitionbyinterfering with divestiture ofSprintPCSstockwould structured tominimizeanyriskthatthe complete thesale.Thesettlementwas then haveapproximately fiveyearsto closing theirmerger. Thetrusteewould stock toanindependenttrusteebefore were required totransfertheSprintPCS the termsofsettlement,parties nationwide geographiccoverage.Under networks thatoffered nearlycomplete AT&T andSprintoperatedwireless telephone business,SprintPCS.Both the stockofSprint’smobilewireless owned approximately 23.5percent of services intheUnitedStates,andTCI provider ofmobilewireless telephone five-year period.AT&T wasthelargest TCI’s interests inSprintPCSovera decree required completedivestiture of judgment thatwouldsettlethesuit.The and simultaneouslyfiledaproposed final billion merger betweenAT&T andTCI resistance orherbicidetolerance. it hascertaintraits,suchasinsect that hasbeengeneticallyalteredso farmers plant.Transgenic cornis in corntobreed thehybridseedthat nies tointroduce newtransgenictraits material thatisusedbybiotechcompa- corn germplasm,thetypeofgenetic commitments tolicenseitsHolden’s Monsanto alsoentered intobinding University ofCaliforniaatBerkeley. transformation technology)tothe into cornseed(agrobacterium-mediated ogy usedtointroduce newgenetictraits claims toarecently developedtechnol- corn. Monsantoagreed tospinoffits tition inbiotechnologydevelopments Antitrust DivisionAnnual Report Antitrust and (12/30/98) Corp. AT&T v. States United Tele-Communications, Inc. Tele-Communications, The Divisionchallengedthe$48 work. continue toconstructitswireless net- otherwise raisecapitalinorder to Sprint’s abilitytoissuenewstockor of hospitalsforroutine services. would havelosttheironlynearbychoice Had themerger goneforward, patients Missouri. largest citysouthofSt.Louis, Cape Girardeau, Missouri,whichisthe Francis are theonlytwohospitalsin Missouri region. SoutheastandSt. effective healthcare inthesoutheast inhibited thedevelopmentofcost- concerns thatthemerger couldhave merger aftertheDivisionexpressed Memorial abandonedtheirproposed risk ofthiscoordinated interactionwas players tocoordinate theirprices. The the opportunityfortwo dominant States andwouldsubstantiallyincrease $1 billionHPLmarket intheUnited key competitorfrom theapproximately proposed acquisitionwouldremove a surfaces. TheDivisionsaidthatthe lavatory dividers,desktops,andwork bath countertops,eatingsurfaces,doors, surfacing products, suchaskitchenand durable andimpact-resistant decorative prices forHPL.HPLisusedtomake the transactionwouldresult inhigher of InternationalPaper Companybecause high-pressure laminate(HPL)business tion byFormica Corp.ofthedecorative would challengetheproposed acquisi- (1/8/99) Hospital/St. Missouri Southeast Formica Corp./International Paper (1/15/99) Corp./International Formica Francis Memorial Hospital Memorial Francis Company Southeast MissouriandSt.Francis The Divisionannouncedthatit especially pronounced where the com- Media One Group-Erie, Ltd./ petitors had timely access to pricing Rambaldo Communications, Inc. (1/27/99) announcements and other competitively sensitive information. On January 19, Media One Group-Erie abandoned 1999, the transaction was abandoned. its efforts to purchase two Erie, Pennsyl- vania, radio stations from Rambaldo Capstar Broadcasting Company/ Communications after the Division Radio of Vero, Inc. expressed concerns that the acquisition Challenges Merger B: Appendix (1/19/99) likely would have resulted in higher prices to businesses in the Erie radio As a result of Division concerns, advertising market. Capstar abandoned its proposed acquisition of WPAW-FM from Radio of Vero, Inc. At the time of the proposed acquisi- United States v. Signature Flight tion, Capstar owned five radio stations Support Corp., AMR Combs, Inc., and AMR Corp. in Vero Beach. Those stations controlled (3/1/99) almost 60 percent of the advertising revenues in the market. Had the acquisi- The Division challenged Signature tion gone forward, Capstar would have Flight Support Corp.’s proposed acqui- controlled about 64 percent of the sition of AMR Combs, Inc., and simul- advertising revenues and controlled six taneously filed a proposed final judg- of the eight C licensed stations, which ment that would settle the suit. The would likely have resulted in higher decree required Signature to sell flight prices for radio advertising. support businesses at Palm Springs, Bradley International (Hartford, CT) 75 Capstar Broadcasting Company/ and Denver Centennial Airports. Signa- Powell Broadcasting ture and Combs were head-to-head (1/25/99) competitors in the business of providing flight support services, such as fueling, Capstar abandoned its proposed ramp, and hangar space rentals, at Palm acquisition of KTBT-FM from Powell Springs and Bradley International Broadcasting because of concerns ex- Airports. At Denver Centennial Airport, pressed by the Division about the Signature had agreed to become the merger and its effect on the Baton operator of a flight support facility, Rouge, Louisiana, radio market. At the which upon completion in the year time of the proposed acquisition, 2000 would have put it in direct compe- Capstar owned WYNK-A/F, WLSS-FM, tition with Combs. KRVE-FM, WJBO-AM, and WBIU-AM in Baton Rouge. These stations represented 49 percent of the advertising United States v. Central Parking Corp. and Allright Holdings, Inc. revenues in the market. Powell owned (3/16/99) KTBT-FM, which controlled about 1 percent of the market. Post-merger, The Division challenged the $585 Capstar would have controlled about million merger between Central Parking half of the radio advertising revenues in and Allright Holdings and simulta- Baton Rouge. neously filed a proposed final judgment

Antitrust Division Annual Report 76 Appendix B: Merger Challenges sion sought—andthedefendants agreed prior bid-riggingconspiracy. TheDivi- recreate the anticompetitiveeffectsofa stated thattheproposed merger could including Kentucky. The complaint bid riggingonschoolmilkcontracts more than100criminalcasesinvolving with theDivisionhavingprosecuted been plaguedbyahistoryofcollusion, was settooccurinanindustrythathad two. TheDivisionnotedthatthe merger the numberofbiddersfrom three to 30 otherdistricts,itwouldhavereduced on bidstosupplymilk,andinatleast merger wouldhavecreated amonopoly in more than20ofthosedistricts,the Kentucky. According tothecomplaint, of schooldistrictsinsouthcentral tors forschoolmilkcontractsindozens Broughton were head-to-headcompeti- school districtsinKentucky. Suizaand result inhigherpricesformilksoldto Foods becausethetransactionwould Suiza Foods’ acquisitionofBroughton Minnesota assistedintheinvestigation. Ohio, Illinois,Texas, Tennessee, and Attorney GeneralOfficesofMaryland, services offered tomotorists.TheState to control thepricesandtypeof 18 citiesandwouldhavehadtheability facilities incertainareas ofeachthe nant market share ofoff-street parking Central wouldhavebeengivenadomi- divestitures required underthedecree, in theUnitedStates.Without the largest parkingmanagementcompanies states. CentralandAllrightwere thetwo street parkingfacilitiesin18cities10 terminate theirinterests incertainoff- that required thecompaniestosellor Antitrust DivisionAnnual Report Antitrust Corp. Foods (3/18/99) Suiza v. States United and Broughton Foods Company Foods Broughton and The Divisionfiledsuittoblock the divestiture ofSouthernBellDairy. was filedonApril28,1999,requiring Thereafter, aproposed finaljudgment tion ofapreliminary injunctionmotion. nies from closingthedealuntilresolu- restraining order toprevent thecompa- not tooppose—entryofatemporary Comcast. Illinois where itcompetedwith phone systemsinthree markets in in Missouri,aswellitscellulartele- andothermarkets systems inSt.Louis Ameritech todivestitscellulartelephone neously withthecomplaint,required proposed finaljudgment,filedsimulta- in Illinois,Indiana,andMissouri.A mobile telephoneservicein17markets head-to-head competitioninwireless proposed, wouldhaveledtoalossof tion. Theacquisitions,asoriginally ration andComcastCellularCorpora- billion acquisitionofAmeritechCorpo- num production andcarbongraphite ture ofcarbonanodesusedforalumi- an essentialrawmaterialinthemanufac- sold toU.S.consumers.Binderpitchis significant producers ofbinderpitch AlliedSignal were twoofthefour Division’s antitrustconcerns. Reilly and restructure thetransactiontoresolve the business afterthepartiesagreed to AlliedSignal’s pitchandcoaltarrefining Industries’ $44millionacquisitionof (3/23/99) Communica- SBC v. States United (3/29/99) Inc./AlliedSignal, Industries, Reilly tions, Inc. and Ameritech Corp. Ameritech and Inc. tions, Inc. The DivisionchallengedSBC’s$62 The DivisiondidnotopposeReilly electrodes used in steel production. The United States and States of Illinois deal, as originally structured, would and Missouri v. Allied Waste Indus- tries, Inc. and Browning Ferris have reduced competition in the binder Industries, Inc. pitch market and would have likely lead (4/8/99) to a price increase in aluminum and graphite products. The parties restruc- The Division challenged the $210 tured the deal by: (1) precluding Reilly million acquisition of Allied Waste from implementing a planned strategic Industries from Browning Ferris Indus- Challenges Merger B: Appendix alliance with competitor VfT, which tries (BFI) of certain assets, including would have tied up additional binder nine hauling companies, three transfer pitch supplies to be sold in the United stations, and one landfill. According to States; (2) limiting Reilly’s contractual the complaint, the proposed acquisition rights to use AlliedSignal’s Ironton, would substantially lessen competition Ohio pitch melter so that this melting for commercial solid waste hauling capacity would be available to other services in the St. Louis market. Allied binder pitch competitors; and (3) and Browning-Ferris were two of only continuing to investigate the proposed three major competitors providing small tolling agreement entered into by Reilly container commercial hauling services in and competitor Koppers to insure that the St. Louis market, which included the impact of the tolling agreement was the City of St. Louis and St. Louis procompetitive. County in Missouri and the Illinois counties of St. Clair, Madison, and Monroe. Commercial waste hauling is United States v. Blackstone Capital Partners II Merchant Banking Fund the collection and transportation to a disposal site of trash and garbage stored L.P. and Howard Andrew Lipson 77 (3/30/99) in small metal containers or dumpsters, generally by specialized front-end load The Division filed a complaint trucks, from such establishments as against Blackstone Capital Partners II office and apartment buildings and retail Merchant Banking Fund L.P. for a businesses, such as stores and restau- violation of Hart-Scott-Rodino rants. A final judgment, filed simulta- premerger notification requirements. neously with the complaint, required The violation was a result of its failure Allied and BFI to divest certain waste to produce a key document before collection routes in the St. Louis metro- undertaking its acquisition of more than politan area. $15 million in voting securities from Prime Succession, Inc., an owner and operator of funeral homes and cemeter- United States v. Input/Output, Inc. and The Laitram Corp. ies. Under the proposed final judgment, (4/12/99) filed simultaneously with the complaint, the defendants agreed to pay a civil The Division filed a complaint penalty. Blackstone paid $2,785,000 and against Input/Output and The Laitram Howard Andrew Lipson paid a $50,000 Corp. alleging a violation of Hart-Scott- penalty. The final judgment was entered Rodino premerger notification require- by the Court on March 31, 1999. ments. The violation was a result of the parties’ failure to observe the required

Antitrust Division Annual Report 78 Appendix B: Merger Challenges tion processes forthebakingof Weber’s Four-S return theformulasandproduc- of theorder, IBC haddemandedthat Weber’s label.Despitetheclearlanguage transferable, exclusive license”tousethe perpetual, royalty-free, assignable, judgment required IBCtogrant“a sole stockholderofFour-S. Thefinal Bakeries USA, Inc.,whichbecamethe 1999, Four-S waspurchased byBimbo Southern Californiaarea. OnMarch 29, sale ofWeber’s brandbread inthe Baking Companyforproduction and IBC licenseditsWeber’s labelto Four-S Pursuant tothe1996finaljudgment, largest producers ofwhitepanbread. Continental were twoofthethree nental Baking.At thattime,IBCand state Bakeries Corp.(IBC)andConti- was filedtoblockthemerger ofInter- Corp., etal., in the Court,entered onJanuary9,1996, tempt forviolatinga1996judgementof to findInterstateBakeries incivilcon- U.S. DistrictCourtinChicago, Illinois, entered onMay13,1999. $450,000. Thefinaljudgmentwas penalty of$225,000foratotal and Laitrameachagreed topayacivil complaint, settledthesuit.Input/Output judgment, filedsimultaneouslywiththe acquire thecompany. Aproposed final DigiCOURSE whenundercontractto when ittookoperationalcontrol of DigiCOURSE, aLaitramsubsidiary, Output obtainedbeneficialownershipof The complaintallegedthatInput/ before consummatingtheacquisition. antitrust premerger waitingperiod Antitrust DivisionAnnual Report Antitrust (4/13/99) Bakeries Interstate v. States United Corp. and Continental Baking Com- Baking Continental and Corp. pany United Statesv. Interstate Bakeries The Divisionfiledacivilpetitionin (7/20/95).Thatcivilsuit Division withdrew itscontemptmotion. assignment ofknow-howrights,the letter toBimboandagreed toauthorize comply. Afterdefendantswithdrew their day itwasinviolationoftheorder to IBC incontemptandfineforeach Division requested thattheCourtfind compliance withthecourt’sorder. The order afinetocoerce adefendantinto order ofthecourt,andacourtmay sanction toenforce compliancewithan final judgment.Acivilcontemptisa actions were incivilcontemptofthe bread. ThepetitionstatedthattheIBC’s Broadcasting Company. At thetimeof $190 millionacquisition ofTriathlon ment ofDefense. nated itsinvestigationwiththeDepart- nuclear vessels.TheDivisioncoordi- the onlytwoyards capableofbuilding two yards thatconstructsubmarinesand Navy construction,includingtheonly controlled fourofthesixyards doing port NewsShipyard, itwouldhave nuclear vessels.Ifithadacquired New- for buildingsubmarinesandone vessels fortheU.S.Navy, includingone of thesixshipyards thatbuiltnew General Dynamicsalready ownedthree At thetimeofproposed acquisition, pressed concernsaboutthetransaction. News Shipyard aftertheDivisionex- billion proposed acquisitionofNewport General Dynamics/Newport News (4/14/99) Dynamics/Newport General (4/21/99) Broadcast- Capstar v. States United Shipyard ing Corp. and Triathlon Broadcast- Triathlon and Corp. ing ing Company ing The Divisionchallenged Capstar’s General Dynamicsabandonedits$2 the proposed acquisition, Capstar owned calcium carbonate, and fused silica. about 309 stations in 76 markets. Imetal and English China Clays were Triathlon owned 31 radio stations in six two of only five producers of water- markets. In order for the acquisition to washed kaolin and calcined kaolin and go forward, Capstar was required to sell were the dominant producers of fused five radio stations in Wichita, Kansas. A silica in the United States. Water-washed proposed final judgment, filed simulta- kaolin is a type of clay used as a pig-

neously with the complaint, required ment for coating paper and as a filler in Challenges Merger B: Appendix Capstar to sell five radio stations: the body of paper. Calcined kaolin is KEYN-FM, KWSJ-FM, KNSS-AM, used in paper-making when the paper KFH-AM, and KQAM-AM. The trans- requires a greater opacity. Ground action, as originally structured, would calcium carbonate (GCC) is a mineral have allowed Capstar to control more used as a pigment in paper-making. than 45 percent of the Wichita radio Fused silica is used in such applications advertising market and would likely have as investment castings, high-grade glass, allowed it to raise prices for advertising and refractory applications, such as the on radio stations in the Wichita metro- preparation of ceramics. A proposed politan area. final judgment, filed simultaneously with the complaint, required that Imetal divest assets and operations in each of Clear Channel Communication, Inc./ the four product areas. Jacor Communications (4/22/99) United States v. Citadel Communi- The Division did not oppose Clear cations Corp., Triathlon Broadcast- Channel’s $3.8 billion acquisition of ing Company, and Capstar Broad- 79 Jacor after both parties agreed to sell 18 casting Corp. radio stations in four cities: Cleveland, (4/28/99) Ohio; Dayton, Ohio; Louisville, Ken- tucky; and Tampa, Florida. Without the The Division challenged the pro- divestitures, the acquisition would have posed acquisition by Capstar Broadcast- significantly reduced competition in ing Corporation of Triathlon, including those cities in the radio advertising radio broadcast stations in Colorado market. Springs and Spokane, Washington. The complaint also sought to terminate a Joint Sales Agreement between Citadel United States v. Imetal, DBK Miner- Communications Corporation and als, Inc., English China Clays, plc, Triathlon Broadcasting Company that and English China Clays, Inc. eliminated competition in the sale of (4/26/99) radio advertising on certain radio stations in Colorado Springs and Spokane. The Division challenged Imetal SA’s A proposed final judgment, filed simul- $1.24 billion acquisition of English taneously with the complaint, required China Clays, plc. The complaint alleged the termination of the joint sales agree- that the acquisition, as originally struc- ment, and in the Colorado market, tured, would have substantially lessened Capstar was to transfer KSPZ-FM, competition in four markets: water- KVOR-AM, and KTWK-AM to Citadel, washed kaolin, calcine kaolin, ground while Citadel agreed to transfer KKLI-

Antitrust Division Annual Report 80 Appendix B: Merger Challenges telecommunications merger inhistory. the Divisionandsecondlargest ages involvingamerger everrequired by was oneofthelargest divestiture pack- less telephonesystems.At thetime,this their twointerests inoverlappingwire- decree, thepartiesagreed toselloneof complaint, settledthesuit.Under ment, filedsimultaneouslywiththe in ninestates.Aproposed finaljudg- mobile telephoneservicesin65markets head-to-head competitioninwireless structured, wouldhaveledtoalossof alleged thatthemerger, asoriginally Bell Atlantic’s merger withGTE and Century Telephone continuedtoown Under therestructured agreement, assets oftheMunicipality ofAnchorage. munications Inc.andthelocaltelephone ward with itsacquisitionofATU Com- restructuring, Fox wasabletogofor- Fairbanks. Asaresult ofFox Paine’s mobile wireless telephoneservicesin in alossofhead-to-headcompetition originally planned,wouldhaveresulted by theDivisionthatacquisition,as in order toresolve concernsexpressed Century Telephone inFairbanks, Alaska, acquisition ofthecellularoperations United States v. Bell Atlantic Corp. (5/7/99) Atlantic Bell v. States United party toacquire KNJY-FM. entered intoanagreement withathird KEYF-AM toCitadel,andCitadel agreed totransferKEYF-FMand FM toCapstar. InSpokane,Capstar Antitrust DivisionAnnual Report Antitrust L.P./Century (5/7/99) Fund Capital Paine Fox and GTE Corp. GTE and Telephone The Division’s complaint challenged Fox Paine restructured itsproposed the PTIdealwithFox. system asithadpriortoenteringinto and operatetheFairbanks cellular banking services. assured ofhavingcompetitivelypriced customers andsmallbusinesseswere Vergennes. With thesedivestitures, local Middlebury, Rutland, Springfield,and Brattleboro, Burlington-StAlbans, Barre-Montpelier, Bennington, in eightVermont bankingmarkets: The divestedbranchofficeswere located deposits totalingabout$480million. offices andoneATM inVermont with the partiesagreed todivest17branch Vermont Financial ServicesCorp.after merger ofChittenden Corporationwith neously withthecomplaint, settledthe posed finaljudgment,filed simulta- ciates inanumberofmarkets. Apro- stantial competitorstoComputerAsso- ucts andhadbeenoneofthefewsub- mainframe systemsmanagementprod- Platinum wasamajorcompetitorin accounting products software business. was thedominantcompetitorinjob product markets. ComputerAssociates in fivemainframesystemsmanagement tured, wouldhavereduced competition posed transaction,asoriginallystruc- International andallegedthatthepro- International byComputerAssociates acquisition ofPlatinumTechnology Chittenden Corp./Vermont Financial (5/12/99) Corp./Vermont Chittenden (5/25/99) Associ- Computer v. States United Services Corp. Services ates International, Inc. and Platinum and Inc. International, ates Technology International, Inc. International, Technology The Divisiondidnotopposethe This complaintchallengedthe suit. Under the decree, Computer choices for local businesses in connec- Associates was required to sell six tion with their billboard advertising Platinum mainframe systems manage- requirements. Under the modified ment software products and related agreement, Vivid would retained certain assets. billboards in Walworth County, Wiscon- sin, and Winnebago County, Illinois.

United States v. Florida Rock Indus- tries, Inc., Harper Bros., Inc., Com- Chancellor Media Corp./Petry Media Challenges Merger B: Appendix mercial Testing, Inc., and Daniel R. Corp. Harper, Inc. (6/9/99) (5/26/99) Chancellor Media abandoned its The Division filed a complaint that proposed acquisition of Petry Media, a challenged Florida Rock Industries $60 television representative firm, after the million merger with Harper Bros. and Division expressed concerns that the Commercial Testing and alleged that the transaction would have decreased com- acquisition would substantially lessen petition in the television representative competition in the aggregate and silica market, which would have affected sand markets in southwest Florida. advertisers and owners of radio or Aggregate is used to manufacture as- television stations in the form of higher phalt concrete and ready mix concrete. commissions paid to representative Silica sand is used to manufacture firms. Television representative firms act specific types of ready mix concrete. A on behalf of client television or radio proposed final judgment, filed simulta- stations by selling time on those stations neously with the complaint, settled the to advertisers located outside a station’s 81 suit. Under the terms of the decree, local geographic area. Florida Rock was required to divest the Alico Road Quarry in Fort Myers, Florida, and the Palmdale Sand Mine in Capstar Broadcasting Partners/ Palmdale, Florida. James L. Gibbons (6/14/99)

Lamar Advertising Company/Vivid, Capstar Broadcasting Partners Inc. terminated its proposed acquisition of (5/28/99) two radio stations, WPVR-FM and WFIR-AM, from James L. Gibbons in The Division did not oppose Lamar the Roanoke-Lynchburg, Virginia, radio Advertising Company’s $22.5 million market after the Division expressed acquisition of Vivid after the parties concerns that the transaction would have agreed to restructure the deal. As origi- reduced competition and raised prices nally structured, Vivid would have sold for radio advertising. Had the merger to Lamar all of its billboard operations occurred, Capstar would have operated throughout Wisconsin, Indiana, and nine of the top eleven stations in this Illinois, which would have led to a loss market and controlled almost 64 percent of competition between Vivid and of advertising revenues. Lamar for the sale of outdoor advertising in the two counties and fewer

Antitrust Division Annual Report 82 Appendix B: Merger Challenges decree required Aetna todivestits with thecomplaint,settled thesuit.The final judgment,filedsimultaneously structure, andtheirprices.Aproposed and hospitalnetworks,theirbenefits breadth andqualityof their physician pete inlocalareas onthebasisof care plans.HMOplansgenerallycom- prices orreduced qualityofthosehealth would havealsoresulted inincreased The transaction,asoriginallystructured, Houston andDallas-Fort Worth, Texas. based point-of-service (POS)plansin nance organization (HMO)andHMO- dominant provider ofhealthmainte- transaction wouldhavemadeAetna the The complaintallegedthattheproposed America’s healthcare businessbyAetna. Prudential InsuranceCompanyof billion proposed acquisitionofThe Antitrust DivisionAnnual Report Antitrust (6/21/99) Texas of State the and States United v. Aetna, Inc. and The Prudential The and Inc. Aetna, v. Insurance Company of America of Company Insurance The Divisionchallengedthe$1 and Dallas-Fort Worth. zation (HMO)businessesinHouston NYLCare HealthMaintenanceOrgani- independent source forelectricity. electric generationfacilities remained an produced byOrange&Rockland’s New York andensured thatelectricity preserved competitionforelectricityin during peakperiods.Thedivestitures supply electricityineasternNewYork electric generationplantsavailableto 50 percent ormore ofthecapacity divestitures, ConEdwould haveowned to SouthernEnergy, Inc.Without the and aplantco-ownedbythecompanies to divestitselectricgeneratingplants Utilities afterthelattercompanyagreed lion merger withOrange&Rockland solidated Edison’s (ConEd)$800mil- Consolidated Edison, Inc./Orange & Inc./Orange (7/2/99) Edison, Consolidated Rockland Utilities, Inc. Utilities, Rockland The DivisiondidnotopposeCon- United States v. Cargill Incorporated Litton/Newport News and Continental Grain Company (7/9/99) (7/8/99) Litton abandoned its proposed The Division filed suit challenging acquisition of Newport News Shipyard Cargill Incorporated’s acquisition of after the Division expressed concerns Continental Grain Company’s Commod- that this and a related transaction would ity Marketing Group. Cargill and Conti- reduce competition in the construction nental operated nationwide distribution of naval ships. If this acquisition and Challenges Merger B: Appendix networks that annually move millions of Litton’s acquisition of Avondale had tons of grain and soybeans to customers been permitted to go forward, there throughout the United States and would have been only two remaining around the world. The transaction, as companies building such ships for the originally structured, would have de- Navy, and for some kinds of ships creased competition for the purchase of (auxilary ships and amphibious crafts), grain (such as wheat and corn) and there may have been no other close soybeans from farmers and other suppli- alternatives. At the time of this pro- ers, resulting in American farmers’ posed transaction, there were six U.S. getting less money for major crops they shipyards doing construction for the produced. The complaint alleged that U.S. Navy, three of which were owned the combination of the merging firms’ by General Dynamics and one by competing port elevators in the Pacific Litton. Northwest, Central California, and the Texas Gulf would have harmed competition, and that the combination of their Abry Broadcast Partners/Bastet Broadcasting Corp. competing river elevators and rail 83 (7/16/99) terminals in Midwestern states, such as Illinois, Iowa, Kansas, Missouri, and Abry Broadcast Partners abandoned Ohio, would have been anticompetitive. its proposed agreement with Bastet In addition, the consolidation of Cargill Broadcasting to sell advertising on and Continental river elevators along the competing television stations and pur- Illinois River would have concentrated chase Bastet after the Division expressed ownership of delivery points authorized concerns about the transaction. At the by the Chicago Board of Trade (CBOT) time of the proposed acquisition, Abry for settlement of corn and soybean owned WBRE-TV (the NBC affiliate) futures contracts under the control of and Bastet owned WYOU-TV (the CBS Cargill and one other firm. This concen- affiliate), both of which where in tration would have increased the risk Wilkes-Barre/Scranton, Pennsylvania, that prices for CBOT corn and soybean market. The transaction would have futures contracts could be manipulated. reduced competition in the sales of A proposed final judgment, filed simul- television advertising in the Wilkes- taneously with the complaint, settled the Barre/Scranton market, and businesses suit. The decree required Cargill to would have likely paid higher prices to divest grain and soybean facilities in advertise on the local broadcast stations. various states.

Antitrust Division Annual Report 84 Appendix B: Merger Challenges and legallydisposeofwaste. and landfills,whichforafeewillprocess such astransferstations,incinerators, transport thewastetodisposalfacilities, tial andcommercial customers.They waste (garbageandtrash)from residen- BFI, contracttocollectmunicipalsolid Waste collection firms,like Alliedand waste ordisposaloperations. competitive overlapinthecompanies’ market inwhichthere wasasignificant judgment required divestitures inevery complaint, settledthesuit.Thefinal judgment, filedsimultaneouslywiththe pay higherprices.Aproposed final businesses, andgovernmententities)to pricing, causingconsumers(residents, would havebeenabletocoordinate their petitors. Asaresult, thosecompetitors have leftonlytwoorthree majorcom- combination ofAlliedandBFIwould markets. Inmost ofthemarkets, the collection anddisposalservicesin18 stantially lessenedcompetitionforwaste originally structured, wouldhavesub- disposal services,andthetransaction,as for bothwastecollectionand competitors inmanygeographicmarkets tries (BFI).AlliedandBFIwere direct acquisition ofBrowning-Ferris Indus- Waste Industries’proposed $9.4billion criminal contemptpapers againstSmith 15 years,theDivisionfiled civiland involving amerger decree inmore than nal antitrustcontemptpetitioncase (7/20/99) Indus- Waste Allied v. States United Antitrust DivisionAnnual Report Antitrust International, (7/27/99) Smith v. States United tries, Inc. and Browning-Ferris and Inc. tries, Inc. and Schlumberger, Ltd. Schlumberger, and Inc. Industries, Inc. Industries, The DivisionchallengedAllied On July27,1999,initsfirstcrimi- in civilandcriminalcontempt and 9, 1999theCourtfound thecompanies impose criminalpenalties. OnDecember violation oftheorder tocomplyand a feeforeachdaythatthewere in the Courtrequire bothcompaniestopay which itwasboundandrequested that violation oftheFinal Judgmentto that Smith’sactionswere inwillful fluid operations.Thepetitionsalleged drilling ing M-IwithSchlumberger’s interest inthejointventure andcombin- selling Schlumberger a40percent Smith violatedtheFinal Judgmentby the clearlanguageofCourt’sorder, ger. According tothepetitions,despite certain companies,includingSchlumber- with, thedrillingfluidoperationsof ness to, orcombiningthatbusiness selling thedivesteddrillingfluidbusi- Final Judgmentalsobarred Smithfrom to beboundbytheFinal Judgment.The M-I interest toSmith,andSmithagreed with theCourt’sorder, Dresser soldits drilling fluidssubsidiary. To comply either itsinterest inM-IorBaroid’s settling thesuitrequired Dresser tosell in theUnitedStates.Thecourtorder two largest producers ofdrillingfluids percent interest, andBaroid were the company inwhichDresser hada64 At thattime,M-IDrillingFluids,a Industries, Inc.andBaroid Corporation. sion, toblockthemerger ofDresser filed December23,1993bytheDivi- Judgment wastheresult ofacivilsuit, September 19,1996order. TheFinal (1993), asmodified,bytheCourt’s Baroid, etal. on April12,1994,in a Final Judgmententered bytheCourt criminal andcivilcontemptforviolating Schlumberger shouldnotbefoundin respondents Smith Internationaland Court foranOrder toShowCausewhy Division petitionedtheU.S.District International andSchlumberger. The , CivilAction No. 93-262 United Statesv. imposed criminal fines of $1.5 million. rily in automobile exhaust systems. AK The parties also agreed to pay $13.1 Steel was the only U.S. producer of million to settle the civil contempt case. aluminized 409 stainless steel and held two process patents for making the product, as well as the licenses on other Thomas E. and James D. Ingstad/ product and process patents relating to MSB, Inc. the product. Armco, which was prepar- (8/17/99)

ing to manufacture aluminized 409 Challenges Merger B: Appendix stainless steel, held four patents, includ- The Division did not oppose Tho- ing the product patents, and had licenses mas and James Ingstads’ proposed for the two process patents owned by acquisition of KFGO, Inc. after the AK Steel. As originally structured, the Ingstad’s agreed to divest five radio proposed acquisition would have re- broadcast stations (KQWB-AM/FM, duced competition by combining the KPFX-FM, KLTA-FM, and KVOX-FM) only U.S. producer of aluminized 409 to Triad Broadcasting, a new market stainless steel with the only other U.S. entrant. Thomas and James Ingstad had company that had the rights to make proposed to purchase six radio broadcast and sell the product under the patents stations (KFGO-AM/FM, KPTH-FM, held by AK Steel and Armco. With the KFGX-FM, and KVOX-AM/FM) from license agreement, Wheeling-Nisshin KFGO in the Fargo-Moorehead, North would have the ability to become a Dakota, radio market. At the time of the long-term, viable competitor in the proposed acquisition, the Ingstads manufacture and sale of aluminized owned five stations. Under the restruc- stainless steel, preserving competition tured agreement, the Ingstads would for the benefit of consumers of alumi- retain ownership of KFGO-AM/FM, nized stainless steel. 85 KVOX-AM, KFGX-FM, KPHT-FM, and WDAY-FM. Had the deal gone forward as originally structured, the Ingstads Marathon Media L.P./Citadel Com- would have controlled nearly 93 percent munications Corp. of the radio advertising revenues and (9/1/99) would have operated 11 of the top 14 stations in the Fargo-Moorehead market. The Division did not oppose Mara- thon Media’s acquisition of radio stations from Citadel after Marathon AK Steel Corp/Armco, Inc. agreed to sell three radio stations to (8/26/99) New Northwest Broadcasters II, Inc. The deal, as originally structured, would AK Steel Corp. agreed to license have likely increased concentration and patents relating to the manufacture and lessened competition for radio advertis- sale of aluminized stainless steel to ing in the Billings, Montana, market, Wheeling-Nisshin, in order to resolve given Marathon almost 65 percent of the Division’s concerns that the pro- advertising revenues, and allowed Mara- posed acquisition would lessen competi- thon to operate nine of the 16 stations tion in the United States for the sale of in that market. Under the restructured aluminized 409 stainless steel. Alumi- agreement, Marathon would sell its nized 409 stainless steel is used prima- three Billings radio stations (KIDX-FM,

Antitrust Division Annual Report 86 Appendix B: Merger Challenges restructured agreement calledforFleet of America/SecurityPacific merger. The $8.5 billiondivestiture inthe1992Bank bank divestiture inhistory, exceeding the in NewEngland.Thiswasthelargest merger fornumerous bankingcustomers to resolve concernsabouttheproposed Rhode Island,andConnecticutinorder in Massachusetts,NewHampshire, billion indeposits306branchoffices after thepartiesagreed tosell$13.2 Financial’s merger withBankBoston cial advertisingtosupportthatbroker. ming tofillthattimeandsellscommer- broker, whothensuppliestheprogram- radio stationwillsellblocksoftimetoa Under atimebrokerage agreement, a tual optiontopurchase thestation. KBEX-FM, andtoabandonitscontrac- with anotherstationinthemarket, terminate itstimebrokerage agreement market. Inaddition,Marathonagreed to Northwest, anewentranttotheBillings KRSQ-FM, andKGHL-AM)toNew Antitrust DivisionAnnual Report Antitrust (9/2/99) Group/BankBoston Financial Fleet Corp. The DivisiondidnotopposeFleet be soldtoMassachusettsbanks. about $810millionindepositswere to primary buyer, while28branchesand bulk ofthedivestitures were togoa billion indepositsConnecticut.The 39 brancheswithapproximately $1.8 billion indepositsRhodeIsland,and branches withapproximately $2.3 deposits inNewHampshire, 50 branches withabout$543.5millionin billion indepositsMassachusetts,13 to divest204brancheswithabout$816 competition inthe31markets. outdoor advertisingneedsandpreserved businesses withgreater choicesfortheir market. Thesedivestitures providedlocal competition intheoutdooradvertising would haveledtoasignificantlossof $2.6billionacquisition that Lamar’s tures resolved theDivision’s concerns markets across 13states.Thedivesti- assets valuedatover$30millionin31 after Lamaragreed todivestbillboard acquisitionof ChancellorMedia Lamar’s (9/15/99) Company/Chan- Advertising Lamar cellor Media Company Media cellor The Divisiondidnotoppose

Antitrust Division Civil Non-Merger Cases Appendix C: Civil Non-Merger Cases Non-Merger Civil C: Appendix June 1, 1996 through September 30, 1999

United States v. Women’s Hospital Foundation and Women’s Physician Health Organization (4/23/96)

This complaint alleged that a Baton Rouge hospital authorized its affiliated physician organization to develop a minimum fee schedule for its member doctors and to negotiate with managed care plans on behalf of the hospital and the doctors. In so doing, the hospital was trying to prevent other challenged the “all-or-none” utility Baton Rouge area hospitals from being policy of the Stilwell Area Development 87 able to offer lower cost inpatient obstet- Authority as an unlawful tying arrange- rical services, while the doctors were ment and as monopolization. The City trying to protect their fee structure. of Stilwell refused to provide water and Together with the complaint, the Divi- sewer services to certain area residents sion filed a proposed consent decree that and businesses that did not agree also to prohibited the defendants from fixing buy electricity from the city. Stilwell has compensation levels or exchanging a legal monopoly over water and sewer information about current or prospective service, but faces competition in the compensation, except in carefully limited electricity market in some areas from circumstances. The U.S. District Court Ozarks Rural Electrical Cooperative. for the Middle District of Louisiana The City of Stilwell enforced its “all-or- entered that decree on September 16, none” policy by cutting off water service 1996. to Ozarks’ customers and refusing to issue building permits to real estate United States v. City of Stilwell, developers who did not agree to choose Oklahoma and Stilwell Area Devel- city-supplied electricity for new con- opment Authority struction. Some months after the filing (4/25/96) of the complaint, the City entered into a settlement that prohibits the City from In the first antitrust case brought by conditioning the purchase of water and the Department of Justice against a sewer services on the purchase of elec- municipal utility system, the Division tricity, requires the City to inform

Antitrust Division Annual Report 88 Appendix C: Civil Non-Merger Cases conspiracy tofixwholesale andresale and criminalcharges concerninga the decree onAugust 15,1996. Court inKansas City, Missouri,entered challenged guidelines.TheU.S.District ing theAssociationtowithdraw filed aproposed consentdecree requir- as theComplaintwasfiled,Division competing program. At thesametime of residency trainingtotransfera persuade thosealready intheirfirstyear candidates andfrom attemptingto individualized economicinducementsto vented residency programs from offering prospective residents. Therulespre- hospitals from competingtoattract adopted “ethical”rulesthatprevented family practiceresidency programs approximately 95percent ofallU.S. United States v. Association of Association v. States United of OklahomaonNovember5,1998. District CourtfortheEastern This decree wasentered bytheU.S. lish anantitrustcomplianceprogram. provider, andrequires theCitytoestab- related totheir choice ofelectricservice that theirpurchase ofsuchserviceisnot potential waterandsewercustomers Antitrust DivisionAnnual Report Antitrust (9/26/96) Associ- Mayer A&L v. States United (5/28/96) Family Practice Residency Direc- Residency Practice Family ates, Inc., A&L Mayer, Inc. and Inc. Mayer, A&L Inc., ates, tors Fibras Saltillo, S.A. De C.V. De S.A. Saltillo, Fibras (5/30/96) United States v. Brush Fibers, Inc. Fibers, Brush v. States United (8/29/96) The Divisionfiledcompanion civil A tradeassociationrepresenting United States v. Ixtlera, S.A. and S.A. Ixtlera, v. States United MFC Corp. MFC 10, 1996. gust 16,November19,andDecember District CourtinPhiladelphiaonAu- by consentdecrees, entered bytheU.S. distributors. Thecaseswere eachsettled be charged bytheirexclusive U.S. wholesale levelbysettingresale pricesto enhance andpreserve thepricefixat the wholesalepriceoftampicoandto tributor. Thefirmshadconspired tofix other wholesaleranditsaffiliateddis- (2) atampicodistributor, and(3)the wholesaler andtwoaffiliatedcompanies, were brought against(1)atampico brushes andbrooms. Three related cases bristles insuchitemsashouseholdscrub grown inMexicoandusedtomake prices oftampicofiber, avegetablefiber October 8,1996. for theSouthernDistrict ofFloridaon decree wasentered bytheDistrict Court below AnchorShade’sresale price.The to terminateanydealerforpricing agreements withitsdealersorthreaten enter intoretail pricemaintenance the complaint,AnchorShademaynot consent decree, filedatthesametimeas AnchorShade. Underthetermsof written approval inadvancefrom petition andonlyiftheyobtained to discountonlyinorder tomeetcom- tional umbrellas from AnchorShadeand price asaconditionofreceiving addi- agreed tomaintaintheminimumresale throughout theUnitedStates.Dealers boat umbrellas thatitsoldtodealers conspired tofixthepriceofoutdoor Division allegedthatAnchorShade,Inc., nance inthesaleofboatumbrellas. The complaint allegingresale pricemainte- United States v. AnchorShade, Inc. AnchorShade, v. (6/20/96) States United In thiscase,theDivisionfileda United States v. Alex Brown & Sons, Inc., et al. (Nasdaq market makers) (7/17/96)

In this civil action, the Appendix C: Civil Non-Merger Cases Non-Merger Civil C: Appendix Division filed suit against 24 market-making Nasdaq securities firms. Nasdaq is a computerized public market in which investors can buy and sell over-the-counter stocks. The complaint charged these Nasdaq market makers with inflat- ing the quoted “inside United States v. American National spread” in certain Nasdaq stocks. The Can Co. and KMK Maschinen AG 24 firms adhered to and enforced a (6/25/96) “quoting convention” which updated the prices they quoted by a quarter (25 This case charged that the American cents) rather than an eighth (12.5 cents) National Can Co. (ANC) and KMK whenever an individual dealer’s spread Maschinen AG, a Swiss firm, violated (the difference between the price at Section 1 of the Sherman Act when they which an individual market-maker offers agreed that KMK would stop making or to buy a stock and the price at which it selling in the United States laminated offers to sell the same stock, on a per 89 tubes like those used for toothpaste, that share basis) was 75 cents or more. KMK would grant ANC an exclusive Consequently, spreads were kept artifi- license to KMK’s laminated tube-making cially wide and investors paid higher technology in North America, and that trading costs for buying and selling ANC would stop making tube-manufac- stocks on the Nasdaq market. The turing equipment. The consent decree, consent decree, filed simultaneously filed the same day as the complaint, with the complaint, prohibits the market allows KMK to reenter the North makers from agreeing with other market American laminated tubes market by makers to adhere to the quoting conven- terminating this exclusive deal, makes tion or to in any way fix prices. The ANC’s license non-exclusive, and pro- settlement includes an enforcement hibits future market allocation agree- mechanism that requires the settling ments between the firms. The decree firms to monitor and tape record 3.5 was entered by the U.S. District Court percent (or 70 hours per week) of their for the District of Columbia on Febru- Nasdaq traders’ telephone calls and ary 12, 1997. permits an unannounced Division representative to listen in on trader conversations as they occur. The decree was entered April 24, 1997 by the U.S. District Court for the Southern District of New York. Entry of the decree was

Antitrust Division Annual Report 90 Appendix C: Civil Non-Merger Cases but deniedthemotionas totheSection the courtdismissedSection 2claim In response to GE’smotiondismiss, for medicalimagingequipmentaswell. restricted competitioninsomemarkets tition inservicingsomeequipmentand censes stillunreasonably limitedcompe- Department allegedthatthenewli- tions. Initscomplaint,however, the gation, GErelaxed someoftheserestric- in response totheDepartment’sinvesti- nearby medicalfacilities.InMay1996, to offermedicalequipmentservice the specializedsoftware andcontinuing hospitals tochoosebetweenlicensing be serviced.Thislicensetermforced not beusedwiththeotherequipmentto though thelicensedGEsoftware could doctors. Therestriction appliedeven owned byotherhospitals,clinics,or equipment ofanykindormanufacture compete withGEinservicingmedical equipment in-housetoagreenot software inorder toservicetheirown quired hospitalsseekingtolicensethis maintenance orrepair work.GEre- that improves thespeedofanyneeded systems), itdesignsspecializedsoftware CT scanners,X-ray machines,andMRI imaging equipmentGEmakes (suchas equipment. For eachtypeofadvanced the servicingofthird-party medical hospitals from competingwithGEin Sherman Act by restricting licensee software violatedSections1and2ofthe licenses formedicalimagingequipment that theGeneralElectricCompany’s United States v. General Electric (8/1/96) General v. States United Circuit onAugust 6,1998. the judgmentwasupheldbySecond appealed byanintervenor, butentryof Antitrust DivisionAnnual Report Antitrust Company In thiscase,theDivisionalleged on January11,1999. District ofMontanaentered thedecree sions. TheU.S.DistrictCourtforthe enforcing therestrictive licensingprovi- settle thecaseandceaseobtainingor 1 claim.SubsequentlyGEagreed to January 31,1997. Columbia entered thefinaljudgmenton U.S. DistrictCourtfortheof JSA withtheGreat Lakes station.The to divestthree stationsandterminatethe proposed consentdecree required ARS Section 1oftheShermanAct. The challenged theJSA asaviolationof of Section7theClaytonAct and sion challengedthemerger asaviolation procompetitive efficiencies.TheDivi- station withoutaccomplishingany the ARSstationsandGreat Lakes eliminated pricecompetitionbetween competition, andtheJSA hadalready merger waslikely tosubstantiallylessen stations from theLincolnGroup. The acquire fouradditionalRochester radio station. Inthemerger, ARSsoughtto over thesaleofadvertisingonthat by Great Lakes, givingARScontrol agreement withafourthstationowned ester, NewYork, andhadajointsales operator, ownedthree stationsin Roch- (ARS), alarge radiostationownerand radio station.AmericanRadio Systems of themerging partiesandathird-party joint salesagreement (JSA)betweenone radio merger along withanexisting (10/24/96) New of State the and States United York v. American Radio Systems, Radio American v. York Inc.,The Lincoln Group, L.P., and L.P., Group, Lincoln Inc.,The Great Lakes Wireless Talking Ma- Talking Wireless Lakes Great chine LLC chine The casechallengedaproposed State of Oregon, State of Washing- United States v. Seminole Fertilizer ton, State of California, United Corp. States v. Jeff Mulkey, Jerry Hampel, (6/18/97) Todd Whaley, Brad Pettinger, Jo- seph Speir, Thomas Timmer, Rich- United States v. Norsk Hydro USA ard Sheldon, Dennis Sturgell, Allen Inc., et al. Gann, and Russell Smotherman (2/19/98) Cases Non-Merger Civil C: Appendix (2/11/97) These cases charged Seminole Fertil- In this case, the Division, along with izer Corporation, formerly a major the states of California, Oregon, and fertilizer manufacturer, Norsk Hydro Washington, charged ten West Coast USA, Inc., and Farmland Industries commercial crab fishermen with leading with colluding to restrain competitive a conspiracy to raise the sale price bidding for the purchase at bankruptcy charged by fishermen to crab processors auction of a Tampa, Florida, facility and boycotting all processors until they used to store ammonia, a primary raw agreed to pay the fixed price for crab. material used for the production of The defendants agreed to raise the price diammonium phosphate fertilizer. The they charged to processors and secured Division alleged that Seminole and two similar commitments from competing of its competitors, Norsk Hydro USA fishermen, using threats, intimidation, Inc. and Farmland Industries Inc., met and coercion where necessary. In further- in March 1992 and agreed that Seminole ance of the conspiracy, the fishermen set would withdraw from the storage up a group boycott, known as a “tie-up” facility auction, eliminating Norsk’s in the industry, in which they refused to chief rival as a viable competing bidder. fish for crab until all commercial sea- The Division filed a separate complaint food fishermen in every major Califor- against Norsk Hydro and Farmland 91 nia, Oregon, and Washington port were Industries. The Division filed proposed receiving at least the fixed minimum consent decrees simultaneously with the price. As a result of the agreement, complaints pursuant to which the prices to consumers rose, and the supply defendants agreed not to enter into of crab available to processors was agreements with others illegally setting significantly reduced during the course the price of assets used in the produc- of the boycott. The complaint charged tion and distribution of fertilizer and the defendants with violating state laws being sold under the auspices of a court as well as Section 1 of the Sherman Act. or federal agency. The defendants also The consent decree enjoins the defen- agreed not to submit joint bids for dants from entering into or enforcing fertilizer assets without first notifying any agreement to fix prices or restrict the seller of the asset and the person the supply of seafood or engaging in any administering the sale of the asset that conduct in furtherance of such an the bid was jointly proposed. The agreement. The U.S. District Court in Seminole decree was entered by the U.S. Portland, Oregon, entered the Final District Court for the Middle District of Judgment on June 16, 1997. Florida in September 1997, and the Norsk/Farmland decree was entered by the same court on May 18, 1998.

Antitrust Division Annual Report 92 Appendix C: Civil Non-Merger Cases plant. build anewandefficient cogeneration ester issuedrequests forproposal to the settlement,UniversityofRoch- 1998. Subsequenttoannouncementof judgment wasentered onJune18, potential competitor. Theconsent similar onewithanotheractualor ing thisagreement orenteringintoa settlement thatbarsRG&Efrom enforc- defense. Thisdecisionprecipitated a was notprotected bythestateaction the UnitedStates,rulingthatRG&E granted partialsummaryjudgmentfor ment. OnFebruary 17,1998,theCourt and RG&Emovedforsummaryjudg- built in1929.BoththeUnitedStates ued toproduce steamusingacoalplant build thenewplant.Instead,itcontin- other thanRG&E,anditagreed notto customers withenergy from anyone that wouldprovide othercurrent RG&E study participationinanyotherproject sity agreed nottoparticipateoreven tionally lowelectricityrate.TheUniver- agreed togivetheUniversityanexcep- The DivisionalsoallegedthatRG&E a conservationprogram ifitdidnot. sity hundreds ofthousandsdollarsfor plant andpromised togivetheUniver- grants totheUniversityifitbuilt RG&E threatened tocutoffresearch buildings. TheDivisionallegedthat steam forheatingandcoolingcampus electricity asabyproduct ofproducing plant, whichwouldhaveproduced been planningtobuilda“cogeneration” electricity market. TheUniversityhad limit competitionintheRochester University ofRochester designedto agreement betweenRG&Eandthe United States v. Rochester Gas & Gas (6/24/97) Rochester v. States United Antitrust DivisionAnnual Report Antitrust Electric Corp. Electric This contestedcasechallengedan the nextmonthforward. Thetrading price forBrent crudeoiltobeloadedin loaded onaspecificdayandthefuture is already loadedoravailabletobe published priceforBrent crudeoilthat on thedifference betweenthecurrent CFD isacommercial transactionbased forward, forBrent crudeoil.ABrent two contracts,fordifferent months the simultaneouspurchase andsaleof North Sea.ABrent spread contractis tracts. Brent crudeoilisproduced inthe States forcertainBrent crudeoilcon- sions theypaidtobrokers intheUnited tate anagreement tolowerthecommis- changed informationinorder tofacili- International, allegingthattheyex- Corp., BPExploration,andCargill major oiltradingfirms,AIGTrading (7/18/97) Corp., Trading AIG v. States United BP Exploration & Oil, Inc., and Inc., Oil, & Exploration BP Cargill International, S.A. International, Cargill The Divisionfiledsuitagainstthree firms had been paying separate full that it was inappropriate for it to have commissions to brokers for both sides of appointed a “special master” to advise the paired contracts and wanted to the court on technical issues. The Court reduce the amount they paid. The of Appeals remanded the case, which complaint alleges that from July 1992 was then supplanted by the subsequent through May 1993, AIG, BP, Cargill, complaint alleging violations of the Cases Non-Merger Civil C: Appendix and others conspired to exchange cur- Sherman Act. rent and prospective brokerage commission information on Brent spread contracts and CFDs and lowered the bro- United States v. Tom Paige Catering Co. and Valley Foods, Inc. kerage commissions they paid to brokers (12/16/97) in the United States. The proposed order, filed at the same time as the The Division alleged that two Ohio complaint, prohibits AG, BP, and Cargill food service contractors had established from agreeing with any other trader to a joint venture in order illegally to fix, lower, raise, stabilize, or maintain eliminate competition between them for any brokerage commission for Brent bids on food service contracts with the spread contracts and CFDs or to ex- Cleveland Head Start Program. Head change any information for these pur- Start, a program funded by the U.S. poses. The proposed settlement also government, provides comprehensive prohibits these companies from request- developmental services, including free ing or advising other traders to lower, lunches, for low-income preschool raise, or change any brokerage commis- children. According to the complaint, sions for Brent spread contracts and lunch prices for Head Start programs in CFDs. The final order was entered on Cleveland rose by 50 percent after the October 10, 1997, in the U.S. District 93 joint venture began in 1994. The pro- Court for the Southern District of New posed Stipulation and Order, filed with York. the complaint in the United States District Court for the Northern District United States v. Microsoft Corp. of Ohio, requires the two companies to (Contempt Petition) dissolve their joint venture and prohibits (10/20/97) them from engaging in similar activities with each other or other food service The Division alleged that by bun- contractors. The Final Judgment was dling its Internet Explorer browser with entered on May 15, 1998. its Windows 95 operating system, Microsoft had violated the consent decree entered in 1995. The District United States v. International Busi- ness Machines Corporation and Court entered a preliminary injunction Storage Technology Corporation prohibiting the practice, and Microsoft (12/18/97) appealed. On June 23, 1998, the D.C. Court of Appeals reversed the lower The Division charged that a 1996 court’s decision and lifted the injunc- distribution agreement between Interna- tion. The three-judge panel held that the tional Business Machines Corporation district court judge had denied (IBM) and Storage Technology Corpo- Microsoft certain procedural rights and ration (STK) restrained competition

Antitrust Division Annual Report 94 Appendix C: Civil Non-Merger Cases Antitrust DivisionAnnual Report Antitrust and otheranticompetitive termseffec- STK. According tothecomplaint, these disk storagesubsystems products from IBM ifitdidnotbuyafixed quantityof IBM andimposedfinancialpenaltieson storage systemstoanyoneotherthan on STKifitsolditsmainframedisk imposed substantialfinancialpenalties challenged a1996agreement that ultrafast accesstodata.Thecomplaint subsystems, whichstore andprovide marketing ofmainframe diskstorage the development,production, and independent competitorsworldwidein and STKare twoofonlyfourmajor computer diskstoragesubsystems.IBM multibillion dollarmarket formainframe between thetwocompaniesin Division andMicrosoft eachsubmitted Trial beganonOctober 19,1998.The with thepreliminary injunctionhearing. also consolidatedtrialonthemerits neys generalwiththefederalaction,and dated aparallelactionof20stateattor- of theShermanAct. The courtconsoli- vendors inviolationofSections1and2 contracts withvariouscustomersand exclusionary termsandconditionsinits with itscompetitors,andimposed system, attemptedtodividemarkets browser withitsWindows operating Microsoft illegallybundleditsInternet plaint allegedthat,amongotherthings, operating systemsmarket. Thecom- position inthepersonalcomputer order toprotect Microsoft’s monopoly Internet browser market in designed tomonopolizethe variety ofpracticesbyMicrosoft (5/18/98) Microsoft v. States United tomers otherthanIBM. makes substantialsalestocus- through IBM,unlessSTKalso systems thatSTKmaysell mainframe diskstoragesub- after 1998,theamountof IBM. Thesettlementalsolimits, systems tocustomersotherthan mainframe diskstoragesub- penalize STKformarketing provisions thatwouldfinancially STK from maintainingcontract Order, whichprohibits IBMand the proposed Stipulationand the DistrictofColumbiaentered United StatesDistrictCourtfor market. OnMarch 20,1998,the independent competitorinthe tively eliminatedSTKasan Corp. (Monopolization) Corp. The Divisionchallengeda the direct testimony of 12 witnesses in the Federation and would resist the written form as directed by the court. efforts of BlueCross BlueShield of Cross-examination of these witnesses Delaware (BC/BS) to reduce the fees it was heard in open court. On rebuttal, paid orthopedic surgeons in Delaware to each side presented three witnesses. The the level of fees it paid to other medical parties have submitted proposed find- specialists in Delaware and to orthope- Cases Non-Merger Civil C: Appendix ings of fact to the court, which heard dic surgeons in nearby states. The oral argument on the proposed findings complaint further alleges that, pursuant on September 21, 1999. On November to that understanding, nearly all of the 5, 1999, Judge Jackson issued his members of the Federation rejected a findings of fact. On December 6, 1999 BC/BS fee proposal and terminated their the Division filed Plaintiffs’ Joint Pro- individual provider services contracts posed Conclusions of Law. with BC/BS. Trial has been set for April 2000. Oral argument on the collateral issues of public access to depositions took place on October 20, 1998, before United States v. Medical Mutual of Ohio the United States Court of Appeals for (9/23/98) the D.C. Circuit. On January 29, 1999, the Court of Appeals upheld the district Medical Mutual of Ohio, Ohio’s court’s holding, supported by the De- largest health care insurer, discouraged partment, that the Publicity in Taking discounting and price competition Evidence Act requires public access to among health plans in the Cleveland depositions in government Sherman Act area by use of a most favorable rate or cases, subject to reasonable protections MFR (sometimes referred to as most- to be imposed by the district court. 95 favored-nation or MFN) contract provision. The MFR provision required United States v. Federation of Phy- hospitals contracting with Medical sicians and Dentists, Inc. Mutual to charge other health plans 15 (8/12/98) to 30 percent more than they charged Medical Mutual. Its purpose was to raise The Division seeks to prohibit the hospital costs for competing health defendant Federation of Physicians and plans, thereby limiting their ability to Dentists, Inc. (the Federation), whose compete with Medical Mutual. Medical members include nearly all of the inde- Mutual aggressively enforced the provi- pendent orthopedic surgeons in Dela- sion with well over 100 hospital audits, ware, from continuing its Section 1 resulting in millions of dollars in penal- conspiracy with its member physicians ties paid by the hospitals over the years. to negotiate jointly with various man- After Medical Mutual was notified that aged care plans to obtain higher fees for the Division’s suit was imminent, it the Federation’s otherwise competing announced that it would stop enforcing orthopedic surgeons. The complaint its MFR provision. This announcement alleges that the Federation’s representa- did not adequately protect consumers, tives and its member orthopedic sur- since there was a risk that, absent a geons reached an understanding that the decree, Medical Mutual would reinstate members would negotiate only through the MFR provision or implement other

Antitrust Division Annual Report 96 Appendix C: Civil Non-Merger Cases 2000. networks. Trial issetforthesummer of banks toissuecards onbothbank and Discovercards, whileallowingthe banks from issuingAmerican Express both networksprohibit theirmember other credit card networks.Inparticular, their memberbankstodobusinesswith adopted rulesthatrestrict the abilityof Second, Visa andMasterCard have pete vigorously againsteachother. 75 percent ofthemarket, donotcom- those twonetworks,whichaccountfor same group oflarge banks;asaresult, are jointlyownedandcontrolled bythe problems. First, Visa andMasterCard separate, butinterrelated, competitive market. Thecomplaintidentifiestwo competition inthecredit card network adopted rulesandpracticesthatlimit largest credit card networks,have Visa andMasterCard, thenation’s two ern DistrictofNewYork allegingthat Division filedacomplaintintheSouth- United States v. Visa U.S.A. Inc., U.S.A. Visa v. States United ary 29,1999. the NorthernDistrictofOhioonJanu- entered bytheU.S.DistrictCourtfor entry ofaconsentdecree, whichwas effects. MedicalMutualthenagreed to policies withsimilaranticompetitive Antitrust DivisionAnnual Report Antitrust (10/7/98) Visa International Corp., and Corp., International Visa MasterCard International Incorpo- International MasterCard rated On October7,1998theAntitrust Corp. ofBethesda,Maryland;and21 of Jackson,Mississippi;Omnipoint D.C., charging Mercury PCSII,LLC, in U.S.DistrictCourtWashington, plaint. Thefinaljudgments for21 decree wasfiledalong with eachcom- Lubbock, Texas. Aproposed consent Indianapolis, Indiana;Toledo, Ohio; and otherwise wouldhaveforlicensesin government received less moneythanit as aresult oftheseagreements, the its complaints,theDivisionallegedthat, them inothermarkets theywanted.In defendant wouldnottobidagainst it, inexchange foranagreement thatthe that licensetoagree toceasebiddingfor invite firmsthathadbeencompetingfor to highlightthelicenseitwantedand license. Eachdefendantusedthecodes for whichthedefendantwanteda number foraparticularcityorregion its bidtocorrespond withtheFCC defendants codedthefinalthree digitsof January 1997.Onoccasion,eachofthe cities orregions, from August 1996to cellular phoneservice,covering493 wireless telephoneservicessimilarto licenses tobeusedprovide digital cations services(PCS)radiospectrum for more than1000personalcommuni- plaints, theFCCconductedanauction bandwidth. According tothecom- competition forlicensestocertain agreements amongbidderseliminating during FCCauctionstonegotiate Beach, California,withusingcodedbids Century BiddingCorp.ofNewport (11/10/98) II, PCS Mercury v. States United February 24,1999;the finaljudgment Century andOmnipoint were entered on LLC ding Corp. ding United States v. Omnipoint Corp. Omnipoint v. States United United States v. 21 v. States United The Divisionfiledcivilcomplaints st Century Bid- Century st st for Mercury PCS was entered on April consulting firm that represented FCSSI 29, 1999. in negotiations. The FCSSI surgeons made up the vast majority of the general and vascular surgeons with operating United States v. Dentsply Interna- privileges at five Tampa hospitals; in

tional, Inc. Cases Non-Merger Civil C: Appendix 1996, they performed 87 percent of the (1/5/99) general and vascular surgeries at the hospitals. The complaint, filed in The complaint alleged that Dentsply Tampa, alleges that PYA approached International, Inc., has unlawfully health plans on behalf of FCSSI sur- maintained a monopoly in the market geons to negotiate higher fees and for artificial teeth in the United States informed each of them that the surgeons by entering into restrictive dealing would terminate their contracts and arrangements with more than 80 percent refuse to participate in the plan’s net- of the nation’s tooth distributors, pre- work unless it contracted with all FCSSI venting them from selling products surgeons under terms proposed by PYA. made by Dentsply’s competitors. In one instance, 28 FCSSI surgeons Dentsply’s efforts to deprive rivals of an terminated their contracts with a health effective distribution network have plan before the plan capitulated to PYA’s resulted in increased prices for artificial demands. A final judgment was entered teeth, reduced innovation, prevented on June 1, 1999, which prohibits illegal other firms from competing effectively, contract negotiations and boycotts. and deterred entry into the market. Litigation is pending in the U.S. Dis- trict Court for the District of Delaware. United States v. Citadel Communi- Trial is expected in 2000. cations Corp., Triathlon Broadcast- 97 ing Company, and Capstar Broad- casting Corporation United States v. Federation of Certi- (4/28/99) fied Surgeons and Specialists, Inc. and Pershing Yoakley & Associates, On Wednesday April 28, 1999, the P.C. Antitrust Division filed a civil antitrust (1/26/99) action in United States District Court in Washington, D.C., to terminate a joint On January 26, 1999, the Division sales agreement (JSA) between Citadel filed suit to stop a large number of Communications Corporation and general and vascular surgeons in Tampa, Triathlon Broadcasting Company. Under Florida, from increasing their fees to the JSA, Citadel set prices and sold artificially high levels through illegal radio advertising time for not only its joint contract negotiations and boycotts. own radio stations in Colorado Springs, The complaint named as defendants the Colorado, and Spokane, Washington, Federation of Certified Surgeons and but also for competing stations owned Specialists, Inc. (FCSSI), a corporation by Triathlon. In both markets, Citadel formed by 29 competing general and and Triathlon had been direct competi- vascular surgeons to obtain higher fees tors, and the JSA between them ended for their services from managed care competition to the detriment of adver- plans, and Pershing Yoakley and Associ- tisers. In Colorado Springs, the Com- ates, P.C. (PYA), an accounting and plaint alleges that Citadel set prices for

Antitrust Division Annual Report 98 Appendix C: Civil Non-Merger Cases on August 26,1999. the Division.TheJudgmentwasentered JSAs ineithermarket withoutnoticeto acquiring additionalstationsorentering vents bothCitadelandCapstarfrom Spokane. Thefinaljudgmentalsopre- market ineitherColoradoSpringsor 40 percent oftheradioadvertising representing more thanapproximately Citadel norCapstarwillownstations the termsoffinaljudgment,neither to divestonestationinSpokane.Under terminate theJSA andrequiring Capstar poration (Triathlon’s successor)to Citadel andCapstarBroadcasting Cor- negotiated finaljudgmentrequiring sion filedtheaction,italsoa revenue from theJSA. WhentheDivi- because Triathlon received partofthe Triathlon’s commonownershipand substantially diminishedbecauseof and theCitadel/Triathlon JSA was between thesenewTriathlon stations percent ofthemarket. Competition tions, representing anadditional26 tion, Triathlon thenboughtmore sta- under theJSA withTriathlon. Inaddi- percent oftheradio advertisingmarket alleges thatCitadelsetpricesfor44 petitors. InSpokane,theComplaint by agreements withitsremaining com- tempted toeliminatecertaindiscounts radio advertisingmarket andalsoat- stations constituting58percent ofthe Antitrust DivisionAnnual Report Antitrust an entrantleftthemarket. however, bycharging higherfares after pected torecoup thosetemporarylosses, enues theygenerated.Americanex- the flightsitaddedexceeded therev- predatory becausethecostsofsome alleges thatAmerican’s conductwas rado (Western Pacific). Thecomplaint (Sun Jet);andColoradoSprings,Colo- (Vanguard); Beach,California Long Kansas, andKansas City, Missouri four DFWspoke routes: Wichita, Airlines, SunJet,andWestern Pacific in American’s responses toVanguard service. Thecomplaintdescribeson reestablished highfares andreduced its it drove outanewentrant,American additional flightsandcuttingfares. After DFW bysaturatingtheirroutes with drive small,start-upairlinesoutof that Americanrepeatedly soughtto use theairport.Thecomplaintcharges percent ofallnonstoppassengerswho the UnitedStates,flyingmore than70 nates DFW, thethird largest airportin tional Airport(DFW).Americandomi- to andfrom Dallas/Ft.Worth Interna- to monopolizeairlinepassengerservice States, formonopolizingandattempting second largest airlineintheUnited against AmericanAirlinesInc.,the Division filedsuitinWichita, Kansas, (5/13/99) Corporation, AMR v. States United American Airlines Inc., and AMR and Inc., Airlines American Eagle Holding Corporation Holding Eagle On May13,1999,theAntitrust Antitrust Division Health Care Task Force Gail Kursh 307-5799 Organization Directory David Jordan 307-6693 Legal Policy Section Mailing Address: Robert Potter 214-2512 Office of the Assistant Attorney General Howard Blumenthal 214-2513 Antitrust Division U.S. Department of Justice, Room 3109 Litigation I Section Directory Organization D: Appendix 10th Street and Constitution Avenue, NW Anthony Nanni 307-6694 Washington, D.C. 20530-0001 David Blotner 307-6695 Assistant Attorney General Litigation II Section Joel I. Klein 514-2401 J. Robert Kramer 307-0924 Willie Hudgins 307-0207 Deputy Assistant Attorneys General Mark J. Botti 307-0827 A. Douglas Melamed 514-2410 Anne M. Purcell 514-5803 Timothy F. Bresnahan 514-2408 James M. Griffin 514-3543 Telecommunications Task Force John M. Nannes 514-1157 Donald Russell 514-5621 Donna Patterson 307-2032 Laury Bobbish 514-5709 Chief of Staff Transportation, Energy & Agriculture Adam M. Golodner 514-8251 Section Roger Fones 307-6351 Office of Operations/ Donna Kooperstein 307-6349 Director of Enforcement Constance Robinson 514-3544 Atlanta Field Office John Orr 404-331-7100 Directors of Enforcement Nezida Davis 404-331-7100 Scott D. Hammond 514-4590 Mary Jane Moltenbrey 514-2562 Chicago Field Office Marius Schwartz 305-3055 Marvin Price 312-353-7530 Appellate Section Cleveland Field Office Catherine O’Sullivan 514-2413 Scott M. Watson 216-522-4070 99 Robert Nicholson 514-2489 Michael F. Wood 216-522-2085 John Powers 514-2414 Dallas Field Office Civil Task Force Alan Pason 214-880-9401 Susan Edelheit, Acting 616-5935 Duncan Currie 214-880-9401 Competition Policy Section New York Field Office Kenneth Heyer 307-6665 Ralph Giordano 212-264-0390 Andrew R. Dick 307-6341 Philip Cody 212-264-0390 Computers and Finance Section Philadelphia Field Office Nancy Goodman 514-5634 Robert Connolly 215-597-7405 N. Scott Sacks 307-6132 Joseph Muoio 215-597-7405 Economic Litigation Section San Francisco Field Office Norman Familant 307-6323 Christopher Crook 415-436-6660 Elizabeth A. Reardon 307-6332 Phillip Warren 415-436-6660 Economic Regulatory Section Internet Access George Rozanski 307-6591 For additional information on the Antitrust W. Robert Majure 307-6603 Division, visit our website: www.usdoj.gov/atr Executive Office Send all Internet correspondence to: Thomas King 514-2421 [email protected] Katherine Crump-Wiesner 514-2421 Carl Anderson (ISSG) 633-1413 All phone numbers listed are in the 202 Foreign Commerce Section area code, unless otherwise noted. Charles Stark 514-2464 Edward Hand 514-2488

Antitrust Division Annual Report