Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: Combination of leading buyers of structured settlements payments challenged, (Feb 11, 2015)

By Linda O’Brien, J.D., LL.M.

The acquisition by a financial services company specializing in the purchase of structured settlements of its leading competitor constituted a conspiracy to monopolize and substantially lessened competition in the market for the factoring of structured settlements, according to a complaint filed yesterday in the federal district court in Los Angeles (Novation Ventures, LLC v. J.G. Wentworth Co., LLC, Case No. 2:15-cv-00954).

Novation Ventures, LLC, J.G. Wentworth Company, LLC, and Peach Holdings, LLC are financial services companies that specialize in factoring structured settlement rights by purchasing structured settlement payments and annuities from individuals.

The complaint alleges that, in August 2011, J.G. Wentworth acquired the business and assets of Peachtree. Since the acquisition, the two brands, J.G. Wentworth and Peachtree, operate under common ownership and management, and are based at the same address in Pennsylvania. The merged companies are the largest single entity in the structured settlement factoring business, controlling approximately 75 percent of the market.

In the structured settlement factoring business, there are no posted or standard prices published. Typically, pricing for each transaction is the result of individual negotiations between buyer and seller, often influenced by whether the consumer has received genuinely competitive bids. A large number of structured settlement factoring transactions take place in California and are submitted by the parties to the state superior courts for approval. In making that determination, the courts will assess the consumer’s ability to consider other options. The courts and consumers are unaware that J.G. Wentworth and Peachtree are one and the same and they act under the pretext of competing with each other, the complaint states.

According to the complaint, Google, the leading Internet search engine, is the primary method consumers use to find (1) information about the factoring of structured settlements and (2) buyers for their structured settlement payments. Google allows J. G. Wentworth and Peachtree to list themselves separately in the paid search results on the same keywords when Google knows or should know that the two brands are commonly owned and controlled. Because of Google’s dual listing of J.G. Wentworth and Peachtree, Novation has been excluded consumer search results and has had to pay more to have its Google ad listings seen by consumers.

By simultaneously bidding on the same key words, such as “cash for structured settlement,” J.G. Wentworth and Peachtree rigged Google’s pay per click bidding system and minimized the competitive impact of other market entrants. Moreover, potential consumers, who are unaware of the two brands’ common ownership, are deceived into thinking that they are exploring genuine competing alternatives, when in fact, they are getting bids from two parts of the same integrated entity, the complaint states.

Novation asserts claims for violations of Section 2 of the Sherman Act and Section 7 of the Clayton Act. The action seeks injunctive relief, divestiture, treble damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 2:15-cv-00954-BRO-PJW.

Attorneys: Maxwell M. Blecher and Courtney A. Palko (Blecher Collins Pepperman & Joye, P.C.) for Novation Ventures, LLC.

Companies: Novation Ventures, LLC; J.G. Wentworth Co., LLC; Peach Holdings, LLC

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