Role of State Attorneys General and Other Federal Regulatory Agencies

• Pages: 95-137

95

CHAPTER III

ROLE OF STATE ATTORNEYS GENERAL AND

OTHER FEDERAL REGULATORY AGENCIES

A. State Attorneys General

The state attorney general is the state’s chief legal official, almost

always elected, with jurisdiction over all matters that affect the state and

its citizens. This includes the authority to investigate and challenge

mergers, not only under their own state antitrust laws, but also under

federal law. For example, like any other person, states may bring actions

for damages, injunctive relief, and fees under Sections 4 and 16 of the

Clayton Act.320 In addition, a state may act as parens patriae and seek

injunctive relief to prevent harm to its general economy.321 Because of

this parens patriae status, states do not face the standing and antitrust

injury problems that have limited private challenges to proposed merger

transactions.322

320. See 15 U.S.C. §§ 15, 26; Cal. v. Am. Stores Co., 495 U.S. 271 (1990);

Hawaii v. Standard Oil Co., 405 U.S. 251 (1972); Ga. v. Pa. R.R. Co.,

324 U.S. 439, 447 (1945).

321. Standard Oil, 405 U.S. at 251 (establishing right to seek injunctive relief

to remedy injury to the general economy of the state).

322. The right of states to investigate and challenge mergers was made clear in

American Stores, 495 U.S. at 271. In that case, after the Federal Trade

Commission reviewed a merger and entered into a consent decree to

resolve its competitive concerns, the Attorney General of California

challenged the merger and sought, among other things, an order of

divestiture. Reversing the Ninth Circuit, the U.S. Supreme Court held that

private parties, including state attorneys general, have the right under the

Clayton Act to seek orders of divestiture against anticompetitive mergers,

and that this right exists despite inconsistent or conflicting actions taken

by a federal reviewing agency. By so holding, the U.S. Supreme Court

effectively concluded that the states had remedial authority comparable to

that of the federal agencies. Cf. Cargill, Inc. v. Monfort, Inc., 479 U.S.

104, 109 (1986) (discussing the injury that plaintiffs generally must

establish to obtain damages and injunctive relief).

96 The Merger Review Process

The attorneys general have been involved in the antitrust review of

mergers for more than two decades.323 This authority to review mergers

has been used particularly, but by no means exclusively, with respect to

mergers that have localized effects on the day-to-day lives of the state’s

citizens. It has become, in fact, relatively rare for the affected state

attorneys general not to become involved in the review of mergers, for

example, between competing hospitals,324 school bus companies,325 and

funeral homes, or retail markets, such as supermarkets, department

stores, and gasoline stations.326 States will also give priority to mergers

that are national in scope where their proprietary and regulatory interests

are impacted in some fashion.327

Although a complete history of state merger enforcement is beyond

the scope of this chapter, a bit of history illustrates why many state

enforcers view their role in merger enforcement as an important one.

Having been largely dormant for years, state enforcement efforts

escalated in the 1980s, in part as a response to a perceived reduction in

323. See, e.g., Albertson’s Inc., 63 Fed. Reg. 51,933 (F.T.C. Sept. 29, 1998)

(aid to public comment) (supermarkets); Federated Department Stores, 7

Trade Reg. Rep. (CCH) ¶ 50,204 (F.T.C. Aug. 30, 2005) (department

stores); Washington v. Texaco, Inc., 1997-2 Trade Cas. (CCH) ¶ 72,019

(W.D. Wash. 1997) (gas stations).

324. See, e.g., California v. Sutter Health Sys., 84F. Supp. 2d 1057 (N.D. Cal.

2000), aff’d, 217 F.3d 846 (9th Cir. 2000), amended by 130 F. Supp. 2d

1109 (N.D. Cal. 2001).

325. Massachusetts v. FirstGroup PLC + Laidlaw Int’l, 2007 WL 3225347 (D.

Mass. 2007).

326. See, e.g., Albertson’s, Inc., 63 Fed. Reg. 51,933 (FTC Sept. 29, 1998)

(aid to public comment) (supermarkets); Federated Department Stores, 7

Trade Reg. Rep. (CCH) ¶ 50,204 (FTC Aug. 30, 2005) (department

stores); Washington v. Texaco, Inc., 1997-2 Trade Cas. (CCH) ¶ 72,019

(W.D. Wash. 1997) (gas stations).

327. The states’ interest in Oracle’s hostile tender offer for PeopleSoft was

driven in part by the states’ concern that Oracle would not adequately

support PeopleSoft software used by many state agencies after the

acquisition. United States v. Oracle Corp., 331 F. Supp. 2d 1098 (N.D.

Cal. 2004). Similarly, state review of the LiveNation combination with

Ticketmaster was fueled in large part by concerns about the impact on

government-owned or regulated concert venues. Final Judgment, United

States v. Ticketmaster Entm’t, 2010 U.S. Dist. LEXIS 88626 (D.D.C.

2010).

Role of State Attorneys General and Other Federal Regulatory Agencies 97

enforcement by the Reagan Administration.328 Faced with decreasing

federal enforcement at a time when mergers were increasing in number

and size, the states, through the National Association of Attorneys

General (NAAG), issued the NAAG Merger Guidelines329 to help provide

a framework for states to challenge mergers on their own. Most states

also adopted the NAAG Compact in 1987, which was revised in 1994,

with the goal of encouraging parties to submit a copy of their federal

premerger filings to the states.330

1.

Practical Considerations Dealing with State Attorneys General

State involvement in a federal merger investigation can present a

number of challenges to the merging parties. It is important for the

parties to understand on a practical level how the states approach their

enforcement responsibilities and the mechanisms available to facilitate

this process.

328. For example, then New York Attorney General Robert Abrams observed

at the time, “We have been witnessing the watchdog put to sleep. The

states have had to fill the breach.” Daniel B. Moskowitz, Why the States

Are Ganging Up on Some Giant Companies, BUS.WK., Apr. 11, 1988, at

62, 62.

329. NAT’LASSOC. OF ATT’YGEN., HORIZONTAL MERGER GUIDELINES

(1993), reprinted in 4 Trade Reg. Rep. (CCH) ¶¶ 13,405, 13,406

(Mar. 30, 1993) (NAAG Merger Guidelines), available at http://www.

naag.org/assets/files/pdf/at-hmerger_guidelines.pdf.

330. NAT’LASSOC. OF ATT’YGEN., VOLUNTARY PRE-MERGER DISCLOSURE

COMPACT (Mar. 21, 1994), reprinted in 4 Trade Reg. Rep. (CCH)

¶ 13,410(NAAG Compact), available at http://www.naag.org/assets/files/

pdf/200612-antitrust-voluntary-premerger-disclosure-compact.pdf. A list

of the parties to the NAAG Compact, the NAAG resolutions adopting the

NAAG Compact, a background statement, and the NAAG Compact itself

are available at http://www.naag.org/assets/files/pdf/200612-antitrust-

voluntary-premerger-disclosure-compact.pdf, and in the State Practices,

Guidelines/Protocols section of the Web site of the State Enforcement

Committee of the ABA Section of Antitrust Law, available at

[http://apps.americanbar.org/dch/committee.cfm?com=AT325000 (State

Enforcement Committee Web site).