DOJ Antitrust Highlights
- On December 22, the Antitrust Division announced that it will require the holding companies for AMC Entertainment and Loews Cineplex Entertainment, to divest certain movie theater assets in order to proceed with their proposed multi-billion dollar transaction. Allegedly, the transaction, as originally proposed, would have eliminated head-to-head competition between AMC and Loews, which would have likely resulted in higher prices for tickets to first-run, commercial movies in portions of five cities including Boston, Chicago, Dallas, New York, and Seattle. Under the terms of the consent decree, AMC and Loews must divest the following movie theaters: the Webster Place 11 and City North 14 theaters in Chicago; the E-Walk 13 theater in New York; the Fenway 13 theater in Boston; the Meridian 16 theater in Seattle; and the Keystone Park 16 in Dallas. In addition, the newly formed AMC/Loews company must inform the Division if it proposes to acquire movie theater assets in those markets over the next 10 years.
- On December 20, the Antitrust Division announced that it will require UnitedHealth Group Inc. and PacifiCare Health Systems Inc. to divest portions of PacifiCare's commercial health insurance business in Tucson, Arizona and Boulder, Colorado in order to proceed with their deal. The Department will also require United to modify and, after one year, terminate its network access agreement with Blue Shield of California. The Antitrust Division defined a fairly narrow product market in its complaint. According to the complaint, United and PacifiCare are two of the three largest health plans in Tucson selling commercial health insurance to small-group employers, those with between two and 50 employees. The Antitrust Division alleged that without the divestitures, the transaction would eliminate competition between these two health insurers and likely would enable United to raise prices and reduce the quality of commercial health insurance plans to small-group employers in Tucson. Under the proposed consent decree United must divest all of PacifiCare's small-group business in the Tucson area to a purchaser that will remain a viable competitor in the market. The other issue brought up in the complaint is that the acquisition allegedly would have given United the ability to lower the reimbursement rates of physicians in the Tucson and Boulder areas. To address those concerns, the proposed consent decree requires United to divest a percentage of PacifiCare's membership in those markets to a viable competitor. Finally, for the past five years United has rented the provider network of CareTrust Networks, a wholly owned subsidiary of Blue Shield of California. Under the network access agreement governing that relationship, United has access to certain Blue Shield information and the ability to confer with Blue Shield about United's product development in California. PacifiCare and Blue Shield of California are competitors, both for the sale of commercial health insurance and for the purchase of physician and hospital services. After United's acquisition of PacifiCare's business in California, United will be a principal competitor to Blue Shield. The Antitrust Division believed that continuing this close relationship after the merger would give United and Blue Shield opportunities and incentives to coordinate their competitive activities and could reduce competition between them in the future. Therefore, the proposed consent decree prohibits United from continuing to exchange certain information with Blue Shield and requires United to terminate its rental agreement with Blue Shield within one year.
- On December 8, the Antitrust Division announced in a business review letter that it will not challenge the creation of a free edition of the Denver Post and the handling of that edition's non-reportorial and non-editorial business operations under an existing newspaper joint operating agreement ("JOA"). Two daily Denver newspapers, MediaNews Group Inc.'s Denver Post and the E.W. Scripps Co.'s Rocky Mountain News, participate in a JOA organized as the Denver Newspaper Agency. In January of 2001, the Attorney General approved the JOA under the Newspaper Preservation Act. The Act provides limited antitrust immunity for certain joint actions that might otherwise violate the federal antitrust laws. When parties to a JOA created under the Newspaper Preservation Act extend their joint activity beyond what was approved by the Attorney General, the new activity is evaluated under usual antitrust principles applied to joint ventures. Therefore, MediaNews, Scripps, and the Denver Newspaper Agency requested that the Division issue a business review letter expressing its enforcement intentions if the Denver Post created a new free edition.
Authored by:
Andre P. Barlow
202-218-0026
abarlow@sheppardmullin.com
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