September Antitrust Bulletin

September 16, 2014

District Court Strikes NCAA Rules Prohibiting Revenue Sharing with Student Athletes

On August 8, the U.S. District Court for the Northern District of California issued a widely anticipated decision in O Bannon v. NCAA, striking down the NCAA s rules prohibiting student athletes from receiving compensation for the use of their names, images and likenesses during their college athletic careers. After a highly publicized, multi-week bench trial, the court agreed with the plaintiffs, led by former UCLA basketball star Ed O Bannon, that the NCAA s rules violated the Sherman Act. The court entered a permanent injunction providing that member schools may not enter into any agreement to cap student athletes compensation for the licensing and use of players names, images and likenesses at less than each student athlete s full cost of attendance at a member school. The court s injunction also provided that member schools may pay their student athletes deferred compensation for the licensing and use of players names, images and likenesses (such deferred compensation being placed in trust), but that member schools may not agree to cap such deferred compensation at less than $5,000 (in 2014 dollars) per player per year.

Federal and State Antitrust Regulators Maintain Active Role in Corporate Transactions

Recent actions by the U.S. Department of Justice Antitrust Division (DOJ) and Federal Trade Commission (FTC) serve as reminders that antitrust enforcement does not begin and end with the Sherman Act. On August 20, the DOJ and FTC announced that Berkshire Hathaway Inc. had agreed to pay an $896,000 civil penalty for violating the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act), which requires advance notification to, and approval from, federal regulators for transactions that meet certain thresholds . Notably, Berkshire Hathaway s HSR Act violation did not stem from an announced merger, but instead from its failure to report its increased equity stake in wallboard manufacturer USG Corporation when it redeemed convertible USG notes for stock in December 2013.

On August 27, the DOJ announced that it had joined with state attorneys general from Illinois, Iowa and Missouri to file suit in the U.S. District Court for the District of Columbia to block Tyson Foods Inc. s announced acquisition of The Hillshire Brands Company. Pursuant to a settlement filed simultaneously with the complaint, Tyson agreed to divest its sow purchasing business, Heinold Hog Markets, to a DOJ-approved purchaser in order to complete the Hillshire acquisition. The DOJ s press release noted that the divestiture would protect hog breeders by preserving competition in the market for sows. Tyson and Hillshire announced completion of their merger on August 28.

Finally, on August 28, the FTC announced that Prestige Brands Holdings, Inc., the manufacturer of motion-sickness drug Dramamine, had agreed to divest assets and marketing rights for a competing drug, Bonine, in order to complete its previously announced acquisition of Bonine s manufacturer, Insight Pharmaceuticals Corporation. According to the FTC s complaint, Dramamine and Bonine are the two largest over-the-counter motion-sickness drugs.

DOJ Auto Parts Investigation Continues

The DOJ recently announced yet another agreement to plead guilty to antitrust charges in its ongoing investigation of the automotive parts industry. The plea agreement involved price fixing and bid rigging for spark plugs, standard oxygen sensors and air fuel ratio sensors, and entailed a $52.1 million fine. It is the latest in a series of recent events in the investigation, including a guilty plea by a former executive of a Japanese manufacturer of antilock brake system components, who was sentenced on July 31 to 13 months in jail, as well as new charges against executives of Japanese manufacturers of seatbelts and heater control panels. According to the DOJ s most recent press release, the investigation s totals now stand at 28 corporate guilty pleas, 26 individual guilty pleas and over $2.4 billion in fines.

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