DOJ Antitrust Highlights

  • On June 24, United Defense Industries, Inc. (“UDI”) and BAE Systems, Inc., the North American subsidiary of BAE Systems plc announced that the DOJ closed its investigation of BAE’s acquisition of UDI by allowing the Hart-Scott-Rodino waiting period to expire. With expiration of the waiting period, the deal formally closed. London-based BAE Systems says it will merge its existing land systems divisions in the U.K, Sweden (Bofors Defence), and South Africa with UDI. The newly formed BAE Systems Land and Armaments will be headquartered in Arlington, VA and will be led by CEO Thomas W. Rabaut.
  • On June 24, the DOJ filed a lawsuit against the Federation of Physicians and Dentists (“Federation”), a Florida-based organization, which provides negotiating and consulting services to physician practice groups and simultaneously filed a consent agreement that resolves the antitrust concerns. The lawsuit also names Lynda Odenkirk, a Federation employee, and three Cincinnati obstetrician-gynecologist (“OB-GYN”) physicians: Dr. Warren Metherd, Dr. Michael Karram, and Dr. James Wendel. The lawsuit results from the DOJ’s investigation into allegations that the Federation had unlawfully coordinated its Cincinnati-area OB-GYN member physicians’ negotiations with insurers. The Complaint alleges that a large percentage of Cincinnati-area OB-GYNs joined the Federation to coordinate renegotiation of higher fees in their contracts with Cincinnati-area healthcare insurers. Allegedly, the Federation coordinated and helped implement its members’ demands to insurers for higher fees and more favorable related terms, accompanied by threats of contract terminations. The Complaint alleges that these actions caused Cincinnati-area health care insurers to raise fees paid to Federation OB-GYN members above the levels that the OB-GYNs likely would have obtained if they had negotiated competitively with those insurers.
  • On June 24, the DOJ announced that it reached a settlement that will require Professional Consultants Insurance Company Inc. (“PCIC”), and its actuarial consulting firm members, to stop sharing among themselves and with other actuarial consulting firms certain information on the use of contractual limitations of liability (“LOL”) in their dealings with clients. The Antitrust Division was concerned that PCIC, its members, and other actuarial consulting firms exchanged competitively sensitive information about their use of LOL in providing actuarial consulting services to employee benefit plans, in violation of Section 1 of the Sherman Act. According to the Antitrust Division’s complaint, actuarial consulting firms historically served their clients under terms that did not limit the consultants’ liability for damages due to actuarial mistakes, which can result in substantial monetary losses or other damages to pension funds or other employee benefit clients. The complaint alleges that as early as 1999, PCIC’s members began to consider requiring clients to accept LOL, which would contractually limit the amount of damages recoverable by the clients to a specified dollar amount, multiple of fees paid by a client, or certain types of damages sustained by a client. The complaint further alleges that PCIC unlawfully enabled and facilitated communications among its members and other actuarial consulting firms with respect to competitively sensitive information about firms’ implementation and planned usage of LOL; that these communications facilitated decisions of PCIC members and other competitors to implement LOL; and that as a result, employee benefit clients were denied significant competition among the actuarial consultants in their setting of contract terms. Besides preventing the parties from sharing competitively sensitive information, the decree requires PCIC and its members to establish antitrust compliance programs.
  • On June 24, America West Holdings Corp. and US Airways Group Inc. confirmed that the airlines have been informed by the Antitrust Division that it has completed its review of the proposed merger of the two airlines and that the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act expired on June 23 without a formal request from the DOJ for additional information (commonly referred to as a “second request”).
  • On June 22, Attorney General Alberto R. Gonzales announced that Thomas O. Barnett will serve as Acting Assistant Attorney General for the Antitrust Division following the departure of Assistant Attorney General R. Hewitt Pate. Mr. Barnett has served as the Deputy Assistant Attorney General for civil enforcement at the Antitrust Division since April 2004.

Authored by:

Andre P. Barlow

202-218-0026

abarlow@sheppardmullin.com