Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: Protecting competitive process is goal of antitrust: DAAG Gelfand, (May 5, 2015)

By Jeffrey May, J.D.

David Gelfand, Deputy Assistant Attorney General for Litigation at the Department of Justice Antitrust Division, warned attendees of the 15^th Annual Loyola Antitrust Colloquium in Chicago about the dangers of a “CSI effect” in antitrust enforcement, resulting from the misuse of or overemphasis on economic tools for analyzing mergers. While “CSI evidence purporting to show that prices will stay the same or go down, that customers will not be hurt” offered by merging parties will be considered and will sometimes be persuasive, Gelfand noted in his April 24 remarks that “[m]erger review is a predictive exercise and we look at all evidence and all circumstances in making these decisions.” Referring to the increasing demand for forensic evidence in criminal trials and corresponding burden on prosecutors resulting from crime television shows such as CSI: Crime Scene Investigation, Gelfand added: “we cannot allow there to be a CSI effect on our decision-making.”

“We must be able to look at all sources of evidence about competitive effects, including industry structure, history of competition, history of innovation, testimony from knowledgeable witnesses, company documents, and the like,” Gelfand stated. “If this evidence leads us to conclude that competition will be harmed, we need to be able to challenge a transaction even without microscopic DNA evidence that shows up under ultraviolet light,” he noted, pointing out that “[t]he purpose of antitrust law is to preserve competition.”

Gelfand's remarks were delivered the day after Comcast Corporation dropped its planned $45.2 billion acquisition of Time Warner Cable. He remarked that the development was a “terrific outcome for consumers.” However, his speech focused on another transaction recently abandoned in light of a Justice Department challenge.

Dropped National CineMedia/Screenvision combination. The Justice Department's suit to block National CineMedia’s acquisition of Screenvision was described as an example of the government's protection of the competitive process itself as opposed to the “preservation of existing commercial outcomes.” Gelfand explained how the parties to this combination of the only two significant cinema advertising network in the country had argued that movie exhibitors would be just as well off or better off relative to the current commercial situation after the merger in light of long-term contracts. The merging parties also argued that exhibitors would benefit from increased ad revenue under revenue sharing agreements.

“It is hard to imagine a circumstance in which we would allow a merger to monopoly based on a defense that customers are protected by contracts and might benefit from increased revenue in a related market, especially one we also view as merging to monopoly,” Gelfand remarked. “[L]ong-term contracts do not replicate the benefits that competition brings to a market. They might lock in commercial terms but they do not preserve competition.” He added: “parties to anticompetitive mergers should not expect us to be persuaded by such contractual solutions.”

“Open and vibrant competition is the engine of our free-market economy and it is the touchstone of effective antitrust enforcement,” Gelfand concluded.

Companies: National CineMedia, Inc.; Screenvision, LLC

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