The Ebb And Flow Of Joint State And Federal Antitrust Enforcement: Is Everyone Playing Nice?

1. INTRODUCTION

   For over two decades, the relationship between the state and federal antitrust enforcement authorities has varied from productive cooperative efforts to, at times, outright hostility. By most accounts, however, the relationship in the past few years has been quite productive both with respect to merger reviews and non-merger conduct investigations and lawsuits.

   However, there are important nuances to the state-federal relationship that bear emphasis. First, over the past twenty-five years, the state enforcers and the federal agencies have created a system of joint merger review that can be quite efficient and likely to lead the multiple enforcers to a common end point if handled competently by the parties to the transaction. That said, there are often difficult issues that need to be carefully addressed at the beginning and at the end of merger reviews. For example, merging parties enjoy comprehensive confidentiality protection with the federal agencies under the Hart-Scott-Rodino regime. But parties often struggle with how to create or at least simulate this confidentiality regime with state enforcers in the face of expansive state public records laws and the absence, at least in many cases, of explicit airtight confidentiality protections in state law. Similarly, although the system has evolved to provide for fairly streamlined review of transactions, at the end of the review it is important to understand that individual states may and often do demand relief or conditions not demanded by the federal agency or other state involved.

   Second, the procedural template governing joint state-federal merger reviews does not provide a controlling template for non-merger conduct cases but, it is fair to say, it provides at least a persuasive model. Both federal agencies have worked closely on several large conduct matters with groups of states. But just as in the case of joint merger reviews, confidentiality issues and differing settlement postures (e.g., most famously, the Microsoft case) can complicate resolution of these matters. Moreover, the availability of more expansive remedies to state enforcers (e.g., indirect purchaser damages) makes the joint litigation environment far more complicated than the merger review arena.

2. STATE ATTORNEYS GENERAL MERGER REVIEW AUTHORITY

   The authority of the state attorneys general to investigate and challenge mergers under federal law is not open to serious question. For example, like any other person, states may bring actions for damages, injunctive relief, and fees under Sections 4 and 16 of the Clayton Act.1 In addition, a state may act as parens patriae and seek injunctive relief to prevent harm to its general economy.2 Because of this parens patriae status, states do not face the standing and antitrust injury problems that have limited private challenges to proposed merger transactions.

   Over the past few decades, this authority to review mergers has been used particularly, but by no means exclusively, with respect to mergers that have localized effects on the day-to-day lives of the state's citizens. It has become, in fact, relatively rare for the affected state attorneys general not to become involved in the review of mergers, for example, between competing hospitals,3 school bus companies, funeral homes, or retail markets such as supermarkets, department stores, and gasoline stations. States will also give priority to mergers that are national in scope where their proprietary and regulatory interests are impacted in some fashion.

   Although a complete history of state merger enforcement is beyond the scope of this short article, a bit of history illustrates why many state enforcers view their role in merger enforcement as encompassing both national and local mergers. Having been largely dormant for years, state enforcement efforts escalated in the 1980s, in part as a response to a perceived reduction in enforcement by the Reagan Administration. 4 Faced with decreasing federal enforcement at a time when mergers were increasing in number and size, the states, through the National Association of Attorneys General ("NAAG"), issued Horizontal Merger Guidelines (NAAG Merger Guidelines) to help provide a framework for states to challenge mergers on their own.5 Most states also adopted NAAG's Voluntary Pre-Merger Disclosure Compact ("NAAG Compact") in 1987, which was revised in 1994, with the goal of encouraging parties o submit acopy of their federal premerger filings to the states.6

   State merger investigations can take many forms, as is the case with non-merger antitrust litigation. States sometimes proceed individually to address matters of...