July Antitrust Bulletin

July 2, 2015

Sysco Corp. Abandons $3.5 Billion Merger with US Foods Inc.

On June 29, 2015, Sysco Corp. announced that it was pulling the plug on its $3.5 billion proposed merger with US Foods Inc. The news comes less than a week after a Washington, D.C., federal judge concluded that the Federal Trade Commission (FTC) likely could prove that the merger would thwart competition. In February, the FTC sued to block the transaction, citing as the key issue the fact that the two companies were the top broadline food distributors in the country and the only two players capable of servicing customers that operate nationwide. Sysco and US Foods argued a different market definition that would have included a host of other types of food suppliers. Regardless, when the D.C. federal judge granted the FTC’s preliminary injunction to block the deal, the parties dismantled the merger. Sysco will have to pay US Foods a $300 million breakup fee.

U.S. Supreme Court Declines Reviewing Reach of the Foreign Trade Antitrust Improvements Act

On June 15, 2015, the U.S. Supreme Court declined to review a pair of petitions addressing the reach of the Foreign Trade Antitrust Improvements Act (FTAIA). Before the court were Motorola Mobility LLC’s damages case against electronics makers and AU Optronics Corporation’s bid to overturn a $500 million criminal cartel fine. The FTAIA limits the application of U.S. antitrust law to foreign conduct, though it includes exceptions for imports and behavior that affects U.S. commerce. Motorola had asked the court to review the 7th U.S. Circuit Court of Appeals’ ruling that the FTAIA blocked Motorola’s claims relating to allegedly price-fixed liquid crystal display panels that Motorola’s foreign subsidiaries had bought and incorporated into products abroad. AU Optronics had asked the court to reconsider the 9th U.S. Circuit Court of Appeals’ conclusion that the FTAIA did not prevent the DOJ from pursuing its criminal case against the company and inflicting record-breaking antitrust fines. This continues the Supreme Court’s trend of refusing to revisit the FTAIA despite repeated questions regarding interpretation of the legislation.

DOJ Brings Suit against Michigan Hospitals for Agreeing Not to Compete

On June 25, 2015, the DOJ filed a complaint against four Michigan hospital systems alleging that the hospitals agreed to not advertise in each other’s territories. Three of the four hospitals have reached settlement agreements with the DOJ and Michigan’s attorney general while W.A. Foote Memorial Hospital, operating as Allegiance Health, continues to litigate. The settlement agreements with the three other hospitals prohibit each of them from divvying up territories in the future and require that each hospital put compliance measures in place to prevent similar issues from occurring in the future. Allegiance has decided to move forward with the litigation.

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