DOJ Antitrust Highlights

By Sheppard Mullin on March 8, 2005

On March 3, ALLTEL and Western Wireless Corporation (“Western Wireless”) jointly announced that they have received a request from the Department of Justice for additional information (commonly referred to as a “second request”) in connection with ALLTEL’s pending acquisition of Western Wireless. The companies expect to comply with the second request as soon as possible. ALLTEL has more than 13 million customers and $8 billion in annual revenues. ALLTEL provides wireless, local telephone, long-distance, Internet and broadband services to residential and business customers in 26 states. Western Wireless, owner of the Cellular One brand, is a leading provider of rural wireless communications services to more than 1.4 million customers in the western United States.
Headquartered in Bellevue, Washington, Western Wireless operates wireless cellular phone systems and company-owned retail stores in 19 western states under the Western Wireless and Cellular One brand names and licenses the Cellular One name in 16 additional states and the Caribbean. Cellular One has been one of America’s most recognized wireless brands for more than 20 years. The DOJ is investigating the competition concerns presented by the acquisition.

On February 28, Polo Linen Service Inc. (“Polo Linen”), a New York linen supply company, and Anthony Lamprpoulos, its owner pleaded guilty to participating in a conspiracy to allocate customers for linen supply services in the New York City metropolitan area. Linen supply companies primarily supply restaurants, cafeterias, and caterers with laundered items such as table linens, napkins, chef’s uniforms, and aprons. Linen supplies are a significant cost of business for these establishments. According to the charges, Polo Linen and other linen supply companies carried out the conspiracy by agreeing not to compete for each other’s customers, meeting to discuss and affirm their agreement, notifying each other when such customers were contemplating switching linen suppliers, and submitting intentionally high, non-competitive price quotes or refraining from submitting price quotes to such customers. Allegedly, they participated in a conspiracy from 1994 until September 2002 to allocate customers for linen supply services in New York City; portions of Westchester, Suffolk, and Nassau Counties, New York; portions of northern New Jersey; and portions of Fairfield County, Connecticut.

On February 27, Yellow Roadway Corporation (“Yellow Roadway”) announced that it was acquiring USF Corporation (“USF”) for a transaction value of approximately $1.37 billion (based on the Yellow Roadway trailing 90-day closing stock price as of February 18, 2005). Yellow Roadway will also assume an expected $99 million in net USF debt, resulting in a total enterprise value of approximately $1.47 billion. The combined business would have more than $9 billion in annual revenue, more than 70,000 employees and 1,000 service locations. The DOJ reviewed the combination of Yellow and Roadway in 2003, but closed the investigation without requiring any divestitures.

On February 23, the DOJ issued a second request regarding Sprint Corporation’s (“Sprint”), the number three wireless carrier in the United States, planned acquisition of rival Nextel Communications Inc. (“Nextel”). The second request for information was expected in part because of the size of the deal in a rapidly consolidating telecommunications industry. Nextel’s proposed acquisition by Sprint, which also is a traditional local and long-distance provider, is currently valued at $33.8 billion.

On February 10, Carlton Gary Walker, the former vice president of Harriet & Henderson Yarns, Inc., a North Carolina based yarn spinner company, agreed to plead guilty to participating in a conspiracy to fix the prices of spun yarn used to manufacture hosiery such as athletic socks and printed T-shirts. The alleged conspiracy occurred from October 2000 until June 15, 2001. Mr. Walker has agreed to assist the government in its ongoing investigation. Allegedly, Mr. Walker participated in a meeting and in conversations to discuss fixing the prices of 10 and 18 count open-end spun yarn to be sold in the United States; agreed, during that meeting and those conversations, to charge prices at certain levels and otherwise to increase and maintain prices of 10 and 18 count open-end spun yarn to be sold in the United States; issued price announcements and price quotations in accordance with the agreements reached; and exchanged information on sales of 10 and 18 count open-end spun yarn in the United States for the purpose of monitoring and enforcing adherence to the agreed-upon prices. The DOJ continues to deter price fixing because it harms businesses and consumers by depriving them of the benefits of fair and competitive pricing.

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