Antitrust Law Blog

Court Refuses to Dismiss Division’s Suit against National Association of Realtors

• In United States v. National Association of Realtors, No. 05 C 5140 (N.D. Ill. Nov. 27, 2006) (available at http://www.usdoj.gov/atr)., Judge Filip rejected the National Association of Realtors' ("NAR") arguments that the Court lacked subject matter jurisdiction or that the Division had failed to state a claim. Importantly, Judge Filip held that just because NAR had changed its policies in response to the threatened filing of a complaint did not mean that there was no case or controversy about the initial filing.

In response to traditional broker's complaints that the increasing use of Virtual Office Websites ("VOWs"), in which clients of a broker could view all of the information about listings without going to the broker's office, NAR passed a mandatory policy that would have permitted brokers to refuse to have certain properties shown on competing brokers' VOWs. After the Division notified the NAR that it would probably initiate a suit to enjoin the enforcement of the new policy, NAR rescinded the prior policy and issued a new one, in which brokers could only refuse to let competing brokers show their listings on their VOWs if the broker also agreed not to show any of the competing brokers' listings on his or her VOW.

The Court held that it still had subject matter jurisdiction over the initial policy because the effects of the policy may be continuing and that there is a possibility that NAR may reinstitute the policy. On the continuing effects, the court distinguished Stevens v. Northwest Indiana Dist. Council, Int'l B 'hood of Carpenters, 20 F.3d 720 (7th Cir. 1994), as the same organization that had adopted the initial policy, NAR, had adopted the latter policy. In addition, the court noted the Government's complaint alleged that several brokers had exercised the opt out clause while it had been in effect, and at least one discount broker had been forced to close because of the policies. Because the initial policy was " fairly traceable" to NAR and the policy had enduring effects, the Court determined that there was a case or controversy.

Alternatively, the Court held that it had subject matter jurisdiction because there was a reasonable chance of NAR resuming the conduct. The Court distinguished United States v. Oregon Stale Med'l Society, 343 U.S. 326 (1952), because NAR's initial policy had been rescinded only shortly before the institution of litigation. "'It is the duty of the courts to beware of efforts to defeat injunctive relief by protestations of repentance and reform, especially when abandonment seems timed to anticipate suit, and there is probability of resumption.'" (quoting Oregon Stale Medical Society). 

The ruling is noteworthy because it highlights that the antitrust enforcement agencies may still pursue an association for anticompetitive policies that have been rescinded. Thus, associations and their members must craft such policies carefully in the first instance, as adopting a later policy will not necessarily preclude the Division from suing to enjoin the operation of the first policy. This is important, as the Division may now seek discovery of all of the materials related to the first policy as well as the second policy. 

FTC Defines Narrow Markets in Funeral Home Consent Decree

• On November 22, 2006, the FTC announced that it had reached an agreement with SCI, the nation's largest funeral home services company with 10% of the market by revenue, and Alderwoods, which represents 5% of the market by revenue. Under the terms of the consent decree, the merging parties will divest funeral home services in 29 markets, and cemetery services in 12 markets. In addition, in 6 markets, SCI may either divest the Alderwoods property or end its affiliate program with independent funeral homes.

  The decision emphasized that the FTC will define certain markets by consumer. Noting that certain consumers of funeral home services were "customs-conscious," the FTC required divestiture in cities where the parties would not have otherwise had concerning market shares, if they would have a higher percentage of either the "customs-conscious" funeral homes or the non-"customs-conscious" funeral homes. For example, in Alhambra, California, the FTC forced a divestiture because the combined company would include 100% of the funeral homes that provide funeral home services to Chinese-American customs-conscious consumers. The complaint also differentiated between traditional funeral home services and "no frills" funeral homes, and concluded that entry by a "no frills" competitor would be unlikely to deter price increases, as it would not be a sufficiently close substitute. In other geographic markets, however, the product market was simply all funeral home services.

  The FTC chose the market definition, because customs-conscious consumers will not switch to another funeral home provider even when faced with a price increase. Thus, when reviewing mergers for antitrust issues, the FTC will at different markets, even when the products appear substantially similar.

Updated on Linde – BOC

• Linde and BOC have requested FTC approval of Airgas, another leading industrial gas company, as a purchaser of their atmospheric gases plants. Linde and BOC, two of the largest industrial gas producers in the United States, announced their merger in March. After an investigation and second request, the FTC in July announced that it would require the divestiture of certain Helium assets to Taiyo Nippon, and the divestiture of regional nitrogen and oxygen facilities in Northeast, Southeast, Ohio, and the Milwaukee-Chicago Region to another buyer.

  The public will have until January 7 to make public comments before the FTC votes on whether to approve Airgas as a buyer.

Authored by:

Christopher Bowen

(202) 772 - 5348

cabowen@sheppardmullin.com