State antitrust merger enforcement

• Pages: 179-221

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CHAPTER VI

STATE ANTITRUST MERGER ENFORCEMENT

A. Introduction

Like any other person, a state may bring an action for damages,

injunctive relief, and fees under Sections 4 and 16 of the Clayton Act.1 In

addition, a state may, acting as parens patriae, seek injunctive relief to

prevent harm to its general economy.2 When exercising its parens

patriae authority, a state does not face the same standing and antitrust

injury problems that private challengers to proposed merger transactions

sometimes confront.3

A state’s attorney general is its chief legal official and law

enforcement officer, usually elected4 with jurisdiction over all matters

1. See 15 U.S.C. §§15c, 26; California v. Am. Stores Co., 495 U.S. 271

(1990); Hawaii v. Standard Oil Co. of Cal., 405 U.S. 251 (1972); Georgia

v. Pa. R.R. Co., 324 U.S. 439, 447 (1945).

2. Standard Oil, 405 U.S. at 260–65 (establishing right to se ek injunctive

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

3. The right of states to investigate and challenge mergers was resolved in

California v. American Stores Co., 495 U.S. 271 (1990). In that case,

after the FTC 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 thin gs, an order of

divestiture. The Supreme Court held that private parties, including state

attorneys general, ha ve 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 fede ral reviewing

agency. Id. at 295–96. By so holding, the Supreme Court effectively

concluded that the states had remedial authority comparable to that of the

federal agencies. Cf. Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104,

109 (1986) (discussing the injury that plaintiffs generally must establis h

to obtain damages and injunctive relief).

4. Attorneys general are currently elected in forty-three states and the

District of Columbia. See, e.g., How Does One Become an Attorney

General?, NAT’L ASS’N OF ATTORNEYS GEN., http://www.naa g.org/

naag/about_naag/faq/how_does_one_become_an_attorney_general.php.

The attorney general is appointed by the governor in five states (Alaska,

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that affect the state and its citizens. Often Attorneys General will focus

their merger efforts on transactions that affect a significant number of

consumers within the state, that impact the state economy, or that involve

issues of particular importance to the state’s proprietary interests. State

attorneys general are most active in transactions that affect either local

markets (such as hospitals, funeral homes, supermarkets, department

stores, and gasoline stations) or service markets (such as airlines, concert

ticketing, and cellular telephone services).

1. Increased Level of State Enforcement

After being lar gely dormant for years, state enforcement efforts

escalated in the 1980s in response to a perceived reduction in

enforcement by the Reagan administration.5 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 Horizontal Merger Guidelines (NAAG Merger

Guidelines) to help provide a framework for states to challenge mergers

on their own.6 Most states also adopted NAAG’s Voluntary Pre-Merger

Disclosure Compact (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.7 The states remain active in

Hawaii, New Hampshire, New Jersey, and Wyoming), by the state

legislature in Maine, and by the state supreme court in Tennessee. Id.

5. 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.

6. NAT’L ASS’N OF ATTORNEYS GENERAL, HORIZONTAL MERGER

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

[hereinafter NAAG MERGER GUIDELINES]. The NAAG Merger

Guidelines were sunsetted in 2016.

7. NAT’L ASS’N OF ATTORNEYS GENERAL, VOLUNTARY PRE-MERGER

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

¶ 13,410 and Appendix A to this Handbook [hereinafter NAAG

COMPACT]. The NAAG resolutions adopting the NAAG Compact, a

background statement, and the NAAG Compact itself are available on the

website of the State Enforcement Committee of the ABA Section of

Antitrust Law. Committees, ABA SECTION OF ANTITRUST LAW,

http://www.americanbar.org/groups/antitrust_law/c ommittees.html.

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merger investigations and enforcement actions, particularly in the field of

health care. Because some hospitals and other health care providers have

responded to current market forces, especially the passage of the Patient

Protection Affordable Care Act, by seeking to control costs through both

vertical and horizontal integration, state merger activity in this area has

increased.

2. History of Federal-State Cooperation in Merger Enforcement

Since the 1980s, the states have worked with federal agencies and

with each other to investigate and prosecute anticompetitive mergers.

This new spirit of cooperation was fostered in part by the 1989 formation

of an Executive Working Group on Antitrust, created to formulate

common enforcement objectives.8 This group included the attorneys

general who serve on the NAAG Antitrust Committee, the chair of the

Federal Trade Commission (FTC), and the Assistant Attorney General in

charge of the Antitrust Division at the U.S. Department of Justice (DOJ).

As part of these cooperative efforts, NAAG revised its Merger

Guidelines in 1993 to harmonize them with the federal guidelines.9

In 1998, states and the federal agencies agreed to a Protocol for

Coordination in Merger Investigations Between the Federal Enforcement

Agencies and State Attorneys General (Merger Protocol).10 The Merger

Protocol establishes a process to facilitate cooperation in joint

enforcement efforts, including the sharing of confidential documents

obtained through state or federal enforcement actions, as well as

8. NAAG and Antitrust Division Set Up Executive Working Group for

Enforcement, 57 Antitrust & Trade Reg. Rep. (BNA) 84 (July 20, 1989).

9. NAAG MERGER GUIDELINES , supra note 6 (executive summary). The

NAAG Merger Guidelines were sunsetted in 2016. For the federal merger

guidelines, see U.S. DEP’T OF JUSTICE & FED. TRADE COMM’N,

HORIZONTAL MERGER GUIDELINES (rev. 1997), available at

http://www.usdoj.gov/atr/public/guideline s/hmg.htm [hereinaf ter DOJ/

FTC MERGER GUIDELINES].

10. NAT’L ASS’N OF ATTORNEYS GENERAL, PROTOCOL FOR COORDINATION

IN MERGER INVE STIGATIONS BETWEEN THE FEDERAL ENFORCEMENT

AGENCIES AND STATE ATTORNEYS GENERAL (1998), reprinted in 4 Trade

Reg. Rep. (CCH) ¶ 13,420 and Appendix B to this Handbook [hereinafter

MERGER PROTOCOL]. The Merger Protocol is also available in the

Committee Resources & Litigation Documents section of the State

Enforcement Committee website, supra note 7.