More tensions erupt between states, DOJ

News of a federal judge approving amendments sought by 16 states to Live Nation’s settlement with the Justice Department didn’t tell the full story.

The settlement between the agency and Live Nation announced last month blindsided the states that also were involved in the litigation, according to a source who declined to speak for attribution out of fear of angering Justice Department officials.

“They did not have a clue that settlement was coming at all,” the source said. “They were not given a heads-up even though some of them were plaintiffs in the case.”

That the states’ attorneys general felt compelled to pursue amendments to secure their independent enforcement authority under the Live Nation settlement is the latest evidence of friction between the states and the DOJ’s antitrust division.

Other evidence in recent months includes a statement of interest the DOJ filed in the same federal court where 13 states and the District of Columbia were challenging the Sprint-T-Mobile megamerger.

DOJ argues the states have a limited role in enforcement, unlike the DOJ and Federal Communications Commission, which represent the interests of the nation as a whole.

The DOJ filing, on the last day of trial, set off plenty of unhappiness in state AG offices. It “unnecessarily and without legal basis seeks to undermine the states’ important and independent role in enforcing antitrust laws,” wrote Washington State Attorney General Bob Ferguson in a letter to presiding judge Victor Marrero.

Some see the animosity as building ever since the states rebuffed Makan Delrahim, head of the antitrust division, when he pushed aggressively for states to join his audacious lawsuit opposing the AT&T-Time Warner deal. None did. That rejection is said by some to have created lingering ill-will.

Delrahim even criticized the position of Washington AG Ferguson, who has targeted no-poach clauses in franchise agreements that prohibit employees from moving among stores in the same corporate chain as per se illegal. Delrahim told FTCWatch Ferguson’s approach misconstrued the difference between a vertical and horizontal merger (see FTCWatch, No. 974, Dec. 17, 2019).

In Live Nation, the states won amendments to a settlement the DOJ struck with the concert promoter that prohibits the company from forcing venues to use Ticketmaster rather than competing ticketing services. The Justice Department won an extension of the prohibition until 2025. It had been due to expire this year.

But the states didn’t see the settlement coming. “The states were working along thinking things were going one way and at the last minute, the front office at DOJ makes a maneuver and issues a consent with none of them involved,” a source who followed the case closely, said.

The recent settlement amendments won by the 16 states include an explicit recognition that they may pursue enforcement actions if Live Nation violates the agreement. The states also will get more access to an independent compliance monitor, appointed by the court, to ensure Live Nation abides by the settlement terms.

When asked to comment about differences between the states and DOJ in Live Nation, a DOJ spokesman wrote in an e-mail: “In the Live Nation matter, the Division spent thousands of hours of attorney time investigating violations of its consent decree, at times with assistance from several states. It conferred with states for over a month before filing its settlement with the court, and it did not oppose the states’ efforts to attempt to negotiate their own supplemental relief with the defendant.”

While the division didn’t oppose those changes, it struck a nerve with its statement of interest filed with the Southern District of New York in the states’ case against the T-Mobile-Sprint deal.

In defending the settlement it reached with Sprint and T-Mobile, which includes divestitures and conditions, the DOJ’s statement argues the states “have neither the authority nor the responsibility to act on behalf of the nation.” In arguing for limiting their role, DOJ said the states “do not consider the rights and interests of the nation as a whole,” and states’ concerns must be limited to their borders.

“[S]tates cannot and should not displace the federal government’s role as the nation’s federal antitrust enforcer,” the statement continues. “When a group of states attempts to do so by seeking relief that quite arguably may benefit certain citizens while harming others, such a remedy is not in the public interest.”

Taking sharp issue with that view, Ferguson, in his letter, wrote “DOJ’s Statement goes well beyond a substantive dispute and essentially suggests that if DOJ has taken a position on an antitrust matter, the states have no authority to reach a contrary conclusion. DOJ has no authority for this assertion, and, indeed, there is none.”

“Co-enforcement is woven into the fabric of the nation’s antitrust laws, and diminishing the role of the states in merger enforcement both overlooks the law and is shortsighted,” he concluded.

So, is it odd for DOJ to take an antagonistic public position against state enforcers?

“The fact that DOJ has ramped up their competition advocacy so much, and they are not confining their statements of interest to private litigation but also to state litigation and FTC litigation where they are taking opposite sides from their fellow enforcers is new to me,” said Sarah Oxenham Allen, chair of the National Association of Attorneys General multistate antitrust task force. “I have never seen that before.”

And DOJ’s statement also conflicts with its reliance, in a number of recent major cases, on state evidence to make the case for a national injunction.

Vic Domen noted the successful challenge mounted in 2017 by DOJ along with 11 states and the District of Columbia against the Anthem-Cigna merger. The former antitrust task force chair of the NAAG said the Richmond, Virginia, area became “kind of the poster child for why this merger should not take place on a national level.”

“What that tells me is that it doesn't just have to have an impact on every single state in the country,” said Domen, now with Norton Rose Fulbright. “It could have just been Virginia bringing the challenge, showing the impact on Richmond, and killing the entire national deal.”

On that point, a source who declined to speak for attribution said: “It is really a silly position for the DOJ to take because it is often the case where the antitrust division will focus on a particular market to draw conclusions about a national merger, and that local market itself can sink the deal.”

Ferguson, writing in his letter, said “states — and for that matter private parties — have every right to bring a merger challenge that the evidence and the law warrants, regardless of the position of the federal enforcers, or whether the markets are national or local.”

In an e-mail, a DOJ spokesman responded that the antitrust division “has always valued its relationships with state enforcers and believes they can play an important role. In fact, in 2019, it filed the first-ever amicus brief that was joined by several states.”

“In the Sprint/T-Mobile [merger], we recognized the role of state enforcers and worked with them throughout the investigation. In our statement of interest, the division respectfully argued its longstanding bipartisan — at least twenty-year-old — position that the remedy agreed to by the two expert agencies tasked by Congress with protecting the public interest should be considered by the district court in its analysis,” the spokesman wrote.

As the rhetoric on both sides heats up, Allen, who also is the senior assistant attorney general in the Virginia AG’s office, said the relationship between the states and the division has had ups and downs over the years.

“It tends to come and go with the philosophy of the current administration,” she said. “So, it is not that the staff attorneys in the agency itself have a shift in opinion — it is the administration.”

Despite the disagreements, Allen said: “We’re still working with [DOJ] and want to work with DOJ. We have a separate investigation in Google, but we are cooperating with them on their parallel Google investigation. And we’re working with them on a couple of other non-public investigations.”

When working with the Federal Trade Commission, which shares jurisdiction over mergers with the DOJ, “you assure them of your confidentiality protections and then you start working together,” Allen said. “We want it to be that easy with DOJ, too.”