The U.S. Department of Justice Antitrust Division last year warned that changes to DOJ consent decrees were forthcoming. Since then, DOJ has adopted new terms in recent consent decrees that enhance the DOJ’s ability to enforce its settlements.
The new DOJ consent decree terms, to be included in DOJ civil enforcement settlements going forward, will make the following changes from current practice:
(1) Lower the evidentiary standard for DOJ to prove civil contempt for violation of a consent decree from clear and convincing evidence to a preponderance of the evidence.
(2) Require defendants to pay DOJ’s attorneys’ fees, expert fees and other costs DOJ incurs related to successful consent decree enforcement efforts.
(3) Permit DOJ to extend the term of the decree if a court determines defendants violated the decree.
(4) Permit DOJ to terminate the decree upon notice to the court and the defendants.
The lower civil contempt standard first appeared in a DOJ settlement in early November 2017, and three settlements in December 2017 contained all four new provisions. Jones Day handled two of these four matters, including the first two settlements under the new DOJ terms.
In a speech delivered by Principal Deputy Assistant Attorney General Andrew Finch, DOJ outlined the policy reasons for the new provisions. Mr. Finch stated that the changes improve “significantly” DOJ’s ability to enforce its consent decrees. According to Mr. Finch, the long-standing burden of proof in civil contempt cases sometimes forced DOJ to conduct burdensome investigations to prepare its contempt case and encouraged defendants to delay and “exacerbate the situation.” Mr. Finch also stated that the fee-shifting provision should encourage the speedy resolution of consent decree violation investigations and compensate taxpayers for the cost of enforcement. He analogized DOJ’s approach to that employed by private parties that commonly contract around “inefficient legal rules.”
We question whether one should analogize the dynamics in private, voluntary contractual agreements to the leverage available to DOJ in the settlement of an antitrust enforcement action. Mr. Finch reported that DOJ will “insist” that these new terms be included in future civil merger and non--merger consent decrees. Consistent with our experience, DOJ refuses to negotiate these new provisions. Further, Federal Trade Commission settlements do not include similar enforcement provisions, leaving companies facing different compliance standards depending on which agency is involved.
Although civil contempt actions to enforce merger and civil non-merger antitrust consent decrees are rare, the consequences of a violation are serious, including substantial monetary penalties and injunctive relief. With a lower evidentiary burden, DOJ may seek to make an example as a warning to others or use its new leverage to obtain concessions from noncompliant parties, such as the imposition of a ticking fee for each month until a divestiture is completed.
As a practical matter, parties settling DOJ investigations by consent decree should consider how future DOJ consent decree enforcement may affect their consent decree compliance. For example, parties committing to make divestitures to settle a merger challenge typically have agreed to divest a defined set of assets on a certain timeline. In many cases, the precise assets to be divested are not clear at the time the consent decree language is finalized. The terms required to implement the divestiture, the need for supplier and customer consents, financing or regulatory approvals (state regulators, works councils, CFIUS, etc.) all introduce uncertainty. Moreover, a divestiture buyer, not bound by the consent decree, has a substantial role in affecting how quickly the divestiture is consummated. The DOJ’s recent position change has increased the risks of misjudgment on these issues.
These new terms increase the DOJ’s leverage over settling in the event there is a dispute about compliance with the consent decree. Companies should be especially careful to comply with settlement provisions to avoid a violation or the perception of a violation given the new, lower standard for a civil contempt action.
Nathaniel J. Harris, an associate in Jones Day’s Washington office, assisted in the preparation of this article.
The views and opinions set forth herein are the personal views or opinions of the authors; they do not necessarily reflect views or opinions of the law firm with which they are associated.
Kathy Fenton has experience providing timely and practical advice to clients on merger reviews and complex business transactions, as well as defending government investigations. She has represented numerous media, energy, aviation and consumer products firms. She is a frequent lecturer and author on antitrust and competition issues. Reach her at [email protected].
Michael Gleason counsels clients on antitrust matters before U.S. and international enforcement agencies, including the antitrust aspects of M&A transactions and government investigations, as well as antitrust litigation. He was involved in some of the most significant transactions to recently come before the antitrust agencies, particularly in the health care industry. Reach him at [email protected].
Bruce McDonald represents energy, transportation and telecommunications companies in antitrust government investigations and enforcement actions, merger reviews and antitrust private litigation. He served as Deputy Assistant Attorney General in the U.S. Justice Department Antitrust Division, 2003-2007. Today he chairs the State Bar of Texas’ Antitrust & Business Litigation Section. Reach him at [email protected]esday.com.
Julie McEvoy has more than 20 years of antitrust experience at Jones Day and as a senior Department of Justice official. She defends clients against civil conduct claims brought by private plaintiffs’ attorneys, as well as merger challenges brought by federal government agencies. In addition, Ms. McEvoy has extensive experience in criminal antitrust matters, conducting and resolving investigations and defending follow-on civil litigation. Reach her at [email protected].
Published March 2, 2018.