[Federal Register Volume 83, Number 73 (Monday, April 16, 2018)]
[Notices]
[Pages 16382-16396]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-07840]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Knorr-Bremse AG and Westinghouse Air Brake
Technologies Corporation; Proposed Final Judgment and Competitive
Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Stipulation and Order, and Competitive Impact Statement have been filed
with the United States District Court for the District of Columbia in
United States of America v. Knorr-Bremse AG and Westinghouse Air Brake
Technologies Corporation, Civil Action No. 1:18-cv-00747. On April 3,
2018, the United States filed a Complaint alleging that Knorr-Bremse AG
(``Knorr'') and Westinghouse Air Brake Technologies Corporation
(``Wabtec'') entered into unlawful agreements not to poach employees in
violation of Section 1 of the Sherman Act, 15 U.S.C. 1. The proposed
Final Judgment, filed at the same time as the Complaint, requires Knorr
and Wabtec to refrain from entering into, maintaining, or enforcing
unlawful agreements not to compete for employees.
Copies of the Complaint, proposed Final Judgment, and Competitive
Impact Statement are available for inspection on the Antitrust
Division's website at http://www.justice.gov/atr and at the Office of
the Clerk of the United States District Court for the District of
Columbia. Copies of these materials may be obtained from the Antitrust
Division upon request and payment of the copying fee set by Department
of Justice regulations.
[[Page 16383]]
Public comment is invited within 60 days of the date of this
notice. Such comments, including the name of the submitter, and
responses thereto, will be posted on the Antitrust Division's website,
filed with the Court, and, under certain circumstances, published in
the Federal Register. Comments should be directed to Maribeth Petrizzi,
Chief, Defense, Industrials, and Aerospace Section, Antitrust Division,
Department of Justice, 450 Fifth Street NW, Suite 8700, Washington, DC
20530 (telephone: 202-307-0924).
Patricia A. Brink,
Director of Civil Enforcement.
United States District Court for the District of Columbia
United States of America, U.S. Department of Justice, Antitrust
Division, 450 Fifth Street, NW, Suite 8700, Washington, DC 20530,
Plaintiff, v. Knorr-Bremse AG, Moosacher Str. 80, 80809
M[uuml]nchen, Germany, and Westinghouse Air Brake Technologies
Corporation, 1001 Airbrake Avenue, Wilmerding, PA 15148, Defendants.
Civil Action No: 1:18-cv-00747
Judge: Colleen Kollar-Kotelly
COMPLAINT
The United States of America, acting under the direction of the
Attorney General of the United States, brings this civil antitrust
action to obtain equitable relief against Defendants Knorr-Bremse AG
and Westinghouse Air Brake Technologies Corporation. The United States
alleges as follows:
I. INTRODUCTION
1. This action challenges under Section 1 of the Sherman Act, 15
U.S.C. Sec. 1, a series of unlawful agreement between three of world's
largest rail equipment suppliers to restrain competition in the labor
markets in which they compete for employees.
2. Defendants Knorr-Bremse AG (``Knorr'') and Westinghouse Air
Brake Technologies Corporation (``Wabtec'') are each other's top
competitors for rail equipment used in freight and passenger rail
applications. They also compete with each other to attract, hire, and
retain various skilled employees, including rail industry project
managers, engineers, sales executives, business unit heads, and
corporate officers. Prior to its acquisition by Wabtec in November
2016, Faiveley Transport S.A. (``Faiveley'') also competed with Knorr
and Wabtec to attract, hire, and retain employees.
3. The unlawful agreements between Knorr, Wabtec, and Faiveley
included promises and commitments not to solicit, recruit, hire without
prior approval, or otherwise compete for employees (collectively, ``no-
poach agreements''). The no-poach agreements were not reasonably
necessary to any separate, legitimate business transaction or
collaboration between the companies. They spanned several years and
were monitored and enforced by high-level company executives, and had
the effect of unlawfully allocating employees between the companies,
resulting in harm to U.S. workers and consumers.
4. Beginning no later than 2009, senior executives at Knorr and
Wabtec, including executives at several of their U.S. subsidiaries,
entered into no-poach agreements with one another. Beginning no later
than 2011, senior executives at certain U.S. subsidiaries of Knorr and
Faiveley entered into a no-poach agreement with one another. And
beginning no later than January 2014, senior executives at the U.S.
passenger rail businesses of Wabtec and Faiveley entered into a no-
poach agreement with one another.
5. By entering into no-poach agreements, Knorr, Wabtec, and
Faiveley substantially reduced competition for employees to the
detriment of workers in this important U.S. industry. These no-poach
agreements denied American rail industry workers access to better job
opportunities, restricted their mobility, and deprived them of
competitively significant information that they could have used to
negotiate for better terms of employment. Moreover, these no-poach
agreements disrupted the efficient allocation of labor that comes from
Knorr, Wabtec, and Faiveley competing for rail industry employees.
6. Defendants' no-poach agreements are per se unlawful restraints
of trade that violate Section 1 of the Sherman Act, 15 U.S.C. Sec. 1.
The United States seeks an order prohibiting such agreements and other
relief.
II. JURISDICTION AND VENUE
7. Defendants Knorr and Wabtec develop, manufacture, and sell rail
equipment into the United States. In furtherance of each Defendant's
U.S. business activities, Knorr and Wabtec recruit and hire skilled
employees in the United States. Such activities, including the employee
recruiting and hiring activities that are the subject of this
Complaint, are in the flow of and substantially affect interstate
commerce. The Court has subject matter jurisdiction under Section 4 of
the Sherman Act, 15 U.S.C. Sec. 4, and under 28 U.S.C. Sec. Sec. 1331
and 1337, to prevent and restrain Defendants from violating Section 1
of the Sherman Act, 15 U.S.C. Sec. 1.
8. Defendants have consented to venue and personal jurisdiction in
this district. Venue is proper in this district under Section 12 of the
Clayton Act, 15 U.S.C. Sec. 22, and 28 U.S.C. Sec. 1391.
III. DEFENDANTS
9. Defendant Knorr is a privately-owned German company with its
headquarters in Munich, Germany. Knorr is a global leader in the
development, manufacture, and sale of rail and commercial vehicle
equipment. In 2017, Knorr had annual revenues of approximately $7.7
billion.
10. Knorr holds several wholly-owned subsidiaries in the United
States. Knorr Brake Company is a Delaware corporation with its
headquarters in Westminster, Maryland. It manufactures train control,
braking, and door equipment used on passenger rail vehicles. New York
Air Brake Corporation is a Delaware corporation with its headquarters
in Watertown, New York. It manufactures railway air brakes and other
rail equipment used on freight trains. Knorr Brake Company and New York
Air Brake Corporation are wholly-owned subsidiaries of Knorr.
11. Defendant Wabtec is a Delaware corporation headquartered in
Wilmerding, Pennsylvania. With over 100 subsidiaries, Wabtec is the
world's largest provider of rail equipment and services with global
sales of $3.9 billion in 2017. It is an industry leader in the freight
and passenger rail segments of the rail industry. Wabtec Passenger
Transit is a business unit of Wabtec that develops, manufactures, and
sells rail equipment and services for passenger rail applications. It
is based in Spartanburg, South Carolina.
12. On November 30, 2016, Wabtec acquired Faiveley, which had been
a French soci[eacute]t[eacute] anonyme based in Gennevilliers, France.
Before the acquisition, Faiveley was the world's third-largest rail
equipment supplier behind Wabtec and Knorr. Faiveley had employees in
24 countries, including at six U.S. locations. It developed,
manufactured, and sold passenger and freight rail equipment to
customers in Europe, Asia, and North America, including the United
States, with revenues of approximately [euro]1.2 billion in 2016. In
the United States, Faiveley conducted business primarily through
Faiveley Transport North America, a wholly-owned subsidiary of Faiveley
and a New York corporation headquartered in Greenville, South Carolina.
Certain Faiveley recruiting activities conducted prior to its
acquisition by Wabtec are at issue in this Complaint.
[[Page 16384]]
IV. TRADE AND COMMERCE
13. Knorr and Wabtec (which now includes Faiveley) are the world's
largest rail equipment suppliers and each other's top rival in the
development, manufacture, and sale of equipment used in freight and
passenger rail applications.
14. Defendants also compete with one another and with firms at
other tiers of the rail industry supply chain to attract, hire, and
retain skilled employees by offering attractive salaries, benefits,
training, advancement opportunities, and other favorable terms of
employment.
15. There is high demand for and limited supply of skilled
employees who have rail industry experience. As a result, firms in the
rail industry can experience vacancies of critical roles for months
while they try to recruit and hire an individual with the requisite
skills, training, and experience for a job opening. Employees of other
rail industry participants, including the employees of Defendants'
customers, competitors, and suppliers, are key sources of potential
talent to fill these openings.
16. Firms in the rail industry employ a variety of recruiting
techniques, including using internal and external recruiters to
identify, solicit, recruit, and otherwise help hire potential
employees. Rail companies also receive direct applications from
individuals interested in potential employment opportunities. Directly
soliciting employees from another rail industry participant is a
particularly efficient and effective method of competing for qualified
employees. Soliciting involves communicating directly--whether by
phone, email, social and electronic networking, or in person--with
another firm's employee who has not otherwise applied for a job
opening. Such direct solicitation can be performed by individuals of
the company seeking to fill the position or by outside recruiters
retained to identify potential employees on the company's behalf. Firms
in the rail industry rely on direct solicitation of employees of other
rail companies because those individuals have the specialized skills
necessary and may be unresponsive to other methods of recruiting. In
addition, the rail industry is an insular one in which employees at
different firms form long-term relationships and often look to their
professional networks to fill a vacancy.
17. In a competitive labor market, rail industry employers compete
with one another to attract highly-skilled talent for their employment
needs. This competition benefits employees because it increases the
available job opportunities that employees learn about. It also
improves an employee's ability to negotiate for a better salary and
other terms of employment. Defendants' no-poach agreements, however,
restrained competition for employees and disrupted the normal
bargaining and price-setting mechanisms that apply in the labor market.
V. THE UNLAWFUL AGREEMENTS
18. Over a period spanning several years, Wabtec, Knorr, and
Faiveley entered into similar no-poach agreements with one another to
eliminate competition between them for employees. These agreements were
executed and enforced by senior company executives and reached several
of the companies' U.S. subsidiaries. The no-poach agreements were not
reasonably necessary to any separate, legitimate business transaction
or collaboration between the companies.
I. Wabtec--Knorr Agreements
19. Wabtec and Knorr entered into pervasive no-poach agreements
that spanned multiple business units and jurisdictions. Senior
executives at the companies' global headquarters and their respective
U.S. passenger and freight rail businesses entered into no-poach
agreements that involved promises and commitments not to solicit or
hire one another's employees. These no-poach agreements primarily
affected recruiting for project management, engineering, sales, and
corporate officer roles and restricted each company from soliciting
current employees from the other's company. At times, these agreements
were operationalized as agreements not to hire current employees from
one another without prior approval.
20. Beginning no later than 2009, Wabtec's and Knorr Brake
Company's most senior executives entered into an express no-poach
agreement and then actively managed it with each other through direct
communications. For example, in a letter dated January 28, 2009, a
director of Knorr Brake Company wrote to a senior executive at Wabtec's
headquarters, ``[Y]ou and I both agreed that our practice of not
targeting each other's personnel is a prudent cause for both companies.
As you so accurately put it, `we compete in the market.' '' Although
the no-poach agreement was between Wabtec and Knorr's U.S. passenger
rail subsidiary, it was well-known to senior executives at the parent
companies, including top Knorr executives in Germany who were included
in key communications about the no-poach agreement. In furtherance of
their agreement, Wabtec and Knorr Brake Company informed their outside
recruiters not to solicit employees from the other company.
21. In some instances, Wabtec and Knorr Brake Company's no-poach
agreement foreclosed the consideration of an unsolicited applicant
employed by Wabtec or Knorr Brake Company without prior approval of the
other firm. For example, in a 2010 internal communication, a senior
executive at Knorr Brake Company stated that he would not even consider
a Wabtec candidate who applied to Knorr Brake Company without the
permission of his counterpart at Wabtec.
22. Wabtec and Knorr's no-poach agreements also reached the
companies' U.S. freight rail businesses. In July 2012, for example, a
senior executive at New York Air Brake Corporation informed a human
resources manager that he could not consider a Wabtec employee for a
job opening due to the no-poach agreement between Wabtec and Knorr.
23. Wabtec's and Knorr's senior executives actively policed
potential breaches of their companies' no-poach agreements and directly
communicated with one another to ensure adherence to the agreements.
For example, in February 2016, a member of Knorr's executive board
complained directly to an executive officer at Wabtec regarding an
external recruiter who allegedly solicited a Knorr Brake Company
employee for an opening at Wabtec. The Wabtec executive investigated
the matter internally and reported back to Knorr that Wabtec's outside
recruiter was responsible for the contact and that he had instructed
the recruiter to terminate his activities with the candidate and
refrain from soliciting Knorr employees going forward due to the
existing no-poach agreement between the companies.
II. Knorr--Faiveley Agreement
24. Beginning no later than 2011, senior executives at Knorr Brake
Company and Faiveley Transport North America reached an express no-
poach agreement that involved promises and commitments to contact one
another before pursuing an employee of the other company. In October
2011, a senior executive at Knorr Brake Company explained in an email
to a high-level executive at Knorr-Bremse AG that he had a discussion
with an executive at Faiveley's U.S. subsidiary that ``resulted in an
agreement between us that we do not poach each other's employees. We
agreed to talk if there was one trying to get a job[.]'' Executives at
Knorr Brake Company and Faiveley's
[[Page 16385]]
U.S. subsidiary actively managed the agreement with each other through
direct communications.
25. In or about 2012, a senior executive at Knorr Brake Company
discussed the companies' no-poach agreement with an executive at
Faiveley Transport North America. This discussion took place at a trade
show in Berlin, Germany. Subsequently, the executives enforced the no-
poach agreement with each other through direct communications. This no-
poach agreement was known to other senior executives at the companies,
who directly communicated with one another to ensure adherence to the
agreement. For example, in October 2012, executives at Faiveley
Transport North America stated in an internal communication that they
were required to contact Knorr Brake Company before hiring a U.S. train
brake engineer.
26. The companies continued their no-poach agreement until at least
2015. After Wabtec announced its proposed acquisition of Faiveley in
July 2015, a high-level Knorr executive directed the company's
recruiters in the United States and other jurisdictions to raid
Faiveley for high-potential employees.
III. Wabtec--Faiveley Agreement
27. Beginning no later than January 2014, senior executives at
Wabtec Passenger Transit and Faiveley Transport North America entered
into a no-poach agreement in which the companies agreed not to hire
each other's employees without prior notification to and approval from
the other company.
28. Wabtec Passenger Transit and Faiveley Transport North America
executives actively managed and enforced their agreement with each
other through direct communications. For example, in January 2014,
Wabtec Passenger Transit executives refused to engage in hiring
discussions with a U.S.-based project manager at Faiveley Transport
North America without first getting permission from Faiveley Transport
North America executives. In an internal email to his colleagues, a
Wabtec Passenger Transit executive explained that the candidate ``is a
good guy, but I don't want to violate my own agreement with [Faiveley
Transport North America].'' Only after receiving permission from
Faiveley Transport North America did Wabtec Passenger Transit hire the
project manager. One month later, a Wabtec Passenger Transit senior
executive informed his staff that hiring Faiveley Transport North
America's employees was ``off the table'' due to the agreement with
Faiveley Transport North America not to engage in hiring discussions
with each other's employees without the other's prior approval.
29. In July 2015, Wabtec and Faiveley publicly announced their
intent to merge. Wabtec closed its acquisition of Faiveley on November
30, 2016. Presently, Faiveley is a wholly-owned subsidiary of Wabtec.
VI. VIOLATION ALLEGED
30. Defendants are direct competitors in certain labor markets for
skilled rail industry employees, including project managers, engineers,
sales executives, and corporate officers. Defendants entered into
anticompetitive no-poach agreements that reduced competition in the
labor markets in which they compete and, in doing so, disrupted the
typical bargaining and negotiation between employees and employers that
ordinarily would take place in these labor markets.
31. Defendants' no-poach agreements were facially anticompetitive
because they eliminated a significant form of competition to attract
skilled labor in the U.S. rail industry. These agreements denied
employees access to better job opportunities, restricted their
mobility, and deprived them of competitively significant information
that they could have used to negotiate for better terms of employment.
32. Accordingly, Defendants' no-poach agreements constitute
unreasonable restraints of trade that are per se unlawful under Section
1 of the Sherman Act, 15 U.S.C. Sec. 1.
VII. REQUEST FOR RELIEF
33. The United States requests that this Court:
(a) adjudge and decree that Defendants' no-poach agreements
constitute per se illegal restraints of trade and interstate commerce
in violation of Section 1 of the Sherman Act;
(b) enjoin and restrain Defendants from enforcing or adhering to
existing no-poach agreements that unreasonably restrict competition for
employees;
(c) permanently enjoin and restrain each Defendant from
establishing a no-poach agreement except as prescribed by the Court;
(d) award the United States such other relief as the Court may deem
just and proper to redress and prevent recurrence of the alleged
violations and to dissipate the anticompetitive effects of the illegal
no-poach agreements entered into by Defendants; and
(e) award the United States the costs of this action.
Dated: April 3, 2018
Respectfully submitted,
FOR PLAINTIFF UNITED STATES OF AMERICA
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MAKAN DELRAHIM
Assistant Attorney General for Antitrust
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MARIBETH PETRIZZI (D.C. Bar #435204)
Chief
Defense, Industrials, and Aerospace Section
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ANDREW C. FINCH
Principal Deputy Assistant Attorney General
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DAVID E. ALTSCHULER (D.C. Bar #983023)
Assistant Chief
Defense, Industrials, and Aerospace Section
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BERNARD A. NIGRO, JR.
(D.C. Bar #412357)
Deputy Assistant Attorney General
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DOHA MEKKI*
DAN MONAHAN
GABRIELLA MOSKOWITZ (D.C. Bar #1044309)
Trial Attorneys
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PATRICIA A. BRINK
Director of Civil Enforcement
United States Department of Justice Antitrust Division
Defense, Industrials, and Aerospace Section
450 Fifth Street NW, Suite 8700
Washington, D.C. 20530
Telephone: (202) 598-8023
Facsimile: (202) 514-9033
Email: doha.mekki@usdoj.gov
*Lead Attorney to be Noticed
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Plaintiff,
v.
KNORR-BREMSE AG,
and
WESTINGHOUSE AIR BRAKE
TECHNOLOGIES CORPORATION,
Defendants.
Civil Action No: 1:18-cv-00747
Judge: Colleen Kollar-Kotelly
[PROPOSED] FINAL JUDGMENT
WHEREAS, Plaintiff, United States of America, filed its Complaint
on April 3, 2018, alleging that Defendants Knorr-Bremse AG and
Westinghouse Air Brake Technologies Corporation violated Section 1 of
the Sherman Act, 15 U.S.C. Sec. 1, the United States and the
[[Page 16386]]
Defendants, by their respective attorneys, have consented to the entry
of this Final Judgment without trial or adjudication of any issue of
fact or law;
AND WHEREAS, this Final Judgment does not constitute any evidence
against or admission by any party regarding any issue of fact or law;
AND WHEREAS, the Defendants agree to be bound by the provisions of
this Final Judgment pending its approval by this Court;
AND WHEREAS, the United States requires the Defendants to agree to
undertake certain actions and refrain from certain conduct for the
purpose of remedying the anticompetitive effects alleged in the
Complaint;
NOW THEREFORE, before any testimony is taken, without trial or
adjudication of any issue of fact or law, and upon consent of the
parties, it is ORDERED, ADJUDGED, AND DECREED:
I. JURISDICTION
This Court has jurisdiction over the subject matter and each of the
parties to this action. The Complaint states a claim upon which relief
may be granted against the Defendants under Section 1 of the Sherman
Act, as amended, 15 U.S.C. Sec. 1.
II. DEFINITIONS
As used in this Final Judgment:
A. ``Knorr'' and ``Defendant'' (when that term is applicable to
Knorr) means Knorr-Bremse AG, a German corporation with its
headquarters in Munich, Germany, its successors and assigns, and its
subsidiaries, divisions, groups, affiliates, partnerships, and joint
ventures, and their directors, officers, managers, agents, and
employees.
B. ``Wabtec'' and ``Defendant'' (when that term is applicable to
Wabtec) means Westinghouse Air Brake Technologies Corporation, a
Delaware corporation with its headquarters in Wilmerding, Pennsylvania,
its successors and assigns, and its subsidiaries (including Faiveley
Transport), divisions, groups, affiliates, partnerships, and joint
ventures, and their directors, officers, managers, agents, and
employees. Wabtec acquired Faiveley Transport S.A., a French
soci[eacute]t[eacute] anonyme based in Gennevilliers, France, on
November 30, 2016.
C. ``Agreement'' means any agreement, understanding, pact,
contract, or arrangement, formal or informal, oral or written, between
two or more persons.
D. ``HR Management'' means directors, officers, and human resource
employees of the Defendant who supervise or have responsibility for
recruiting, solicitation, or hiring efforts affecting the United
States.
E. ``No-Poach Agreement'' or ``No-Poach Provision'' means any
Agreement, or part of an Agreement, among two or more employers that
restrains any person from cold calling, soliciting, recruiting, hiring,
or otherwise competing for (i) employees located in the United States
being hired to work in the United States or outside the United States
or (ii) any employee located outside the United States being hired to
work in the United States.
F. ``Person'' means any natural person, corporation, company,
partnership, joint venture, firm, association, proprietorship, agency,
board, authority, commission, office, or other business or legal
entity, whether private or governmental.
G. ``Management'' means all officers, directors, and board members
of Knorr-Bremse AG or Westinghouse Air Brake Technologies Corporation,
or anyone with management or supervisory responsibilities for Knorr's
or Wabtec's U.S. business or operations.
III. APPLICABILITY
This Final Judgment applies to Knorr and Wabtec, and to all other
persons in active concert or participation with any of them who receive
actual notice of this Final Judgment by personal service or otherwise.
IV. PROHIBITED CONDUCT
Each Defendant is enjoined from attempting to enter into, entering
into, maintaining, or enforcing any No-Poach Agreement or No-Poach
Provision.
V. CONDUCT NOT PROHIBITED
A. Nothing in Section IV shall prohibit a Defendant from attempting
to enter into, entering into, maintaining, or enforcing a reasonable
Agreement not to solicit, recruit, or hire employees that is ancillary
to a legitimate business collaboration.
B. All Agreements not to solicit, recruit, or hire employees
described in Paragraph V(A) that a Defendant enters into, renews, or
affirmatively extends after the date of entry of this Final Judgment
shall:
1. be in writing and signed by all parties thereto;
2. identify, with specificity, the Agreement to which it is
ancillary;
3. be narrowly tailored to affect only employees who are reasonably
anticipated to be directly involved in the Agreement;
4. identify with reasonable specificity the employees who are
subject to the Agreement; and
5. contain a specific termination date or event.
C. Defendants shall not be required to modify or conform, but shall
not enforce, any No-Poach Provision to the extent it violates this
Final Judgment if the No-Poach Provision appears in a Defendant's
agreement in effect as of the date of entry of this Final Judgment (or
in effect as of the time a Defendant acquires a company that is a party
to such an Agreement).
D. Nothing in Section IV shall prohibit a Defendant from
unilaterally deciding to adopt a policy not to consider applications
from employees of another person, or to solicit, cold call, recruit, or
hire employees of another person, provided that Defendants are
prohibited from:
1. requesting, encouraging, proposing, or suggesting that any
person other than the Defendant and its agents adopt, enforce, or
maintain such a policy; or
2. notifying the other person that the Defendant has decided to
adopt such a policy.
VI. REQUIRED CONDUCT
A. Within ten (10) days of entry of this Final Judgment, each
Defendant shall appoint an Antitrust Compliance Officer and identify to
Plaintiff his or her name, business address, and telephone number.
B. Each Antitrust Compliance Officer shall:
1. within sixty (60) days of entry of the Final Judgment, furnish
to all of the Defendant's Management and HR Management a copy of this
Final Judgment, the Competitive Impact Statement, and a cover letter in
a form attached as Exhibit 1;
2. within sixty (60) days of entry of the Final Judgment, in a
manner to be devised by each Defendant and approved by the United
States, provide the Defendant's U.S. employees reasonable notice of the
meaning and requirements of this Final Judgment;
3. annually brief the Defendant's Management and HR Management on
the meaning and requirements of this Final Judgment and the antitrust
laws;
4. within sixty (60) days of such succession, brief any person who
succeeds a person in any position identified in Paragraph VI(B)(3);
5. obtain from each person designated in Paragraph VI(B)(3) or
VI(B)(4), within sixty (60) days of that person's receipt of the Final
Judgment, a certification that he or she (i) has read and, to the best
of his or her ability, understands and agrees to abide by the terms of
this Final Judgment; (ii) is not aware of any violation of the Final
Judgment that has not been reported to the Defendant; and (iii)
understands that any person's failure to comply with this Final
[[Page 16387]]
Judgment may result in an enforcement action for civil or criminal
contempt of court against the Defendant and/or any person who violates
this Final Judgment;
6. maintain (i) a copy of all Agreements covered by Paragraph V(A)
and (ii) a record of certifications received pursuant to this Section;
7. annually communicate to the Defendant's employees that they may
disclose to the Antitrust Compliance Officer, without reprisal,
information concerning any potential violation of this Final Judgment
or the antitrust laws;
8. within sixty (60) days of entry of the Final Judgment, furnish a
copy of this Final Judgment, the Competitive Impact Statement, and a
cover letter in a form attached as Exhibit 2 to all recruiting agencies
or providers of temporary employees or contract workers retained by the
Defendant for recruiting, soliciting, or hiring efforts affecting the
Defendant's business activities in the United States at the time of
entry of the Final Judgment or subsequently retained by the Defendant
during the term of the Final Judgment; and
9. furnish a copy of all materials required to be issued pursuant
to Paragraph VI(B) to the United States within seventy-five (75) days
of entry of the Final Judgment.
C. Within thirty (30) days of entry of the Final Judgment,
Defendants shall furnish notice of this action to the rail industry
through (1) the placement of an advertisement, at the expense of Knorr
and Wabtec equally, to be run in one monthly edition of an industry
trade publication approved by the United States in a form approved by
the United States prior to publication and containing the text of
Exhibit 3, and (2) the creation of website pages linked to the
corporate websites of Knorr and Wabtec, respectively, to be posted for
no less than one (1) year after the date of entry of the Final
Judgment, containing the text of Exhibit 3 and links to the Final
Judgment, Competitive Impact Statement, and Complaint on the Antitrust
Division's website.
D. Each Defendant shall:
1. upon Management or HR Management learning of any violation or
potential violation of any of the terms and conditions contained in
this Final Judgment, promptly take appropriate action to terminate or
modify the activity so as to comply with this Final Judgment and
maintain all documents related to any violation or potential violation
of this Final Judgment;
2. within sixty (60) days of Management or HR Management learning
of any violation or potential violation of any of the terms and
conditions contained in this Final Judgment, file with the United
States a statement describing any violation or potential violation,
which shall include a description of any communications constituting
the violation or potential violation, including the date and place of
the communication, the persons involved, and the subject matter of the
communication; and
3. have its CEO or CFO, and its General Counsel, certify to the
United States annually on the anniversary date of the entry of this
Final Judgment that the Defendant has complied with the provisions of
this Final Judgment.
VII. DEFENDANTS' COOPERATION
A. Each Defendant shall cooperate fully and truthfully with the
United States in any investigation or litigation examining whether or
alleging that the Defendant entered into a No-Poach Agreement with any
other person in violation of Section 1 of the Sherman Act, as amended,
15 U.S.C. Sec. 1. Each Defendant shall use its best efforts to ensure
that all current and former officers, directors, employees, and agents
also fully and promptly cooperate with the United States. The full,
truthful, and continuing cooperation of each Defendant shall include,
but not be limited to:
1. providing sworn testimony to the United States regarding each
No-Poach Agreement between the Defendant and any other person;
2. producing, upon request of the United States, all documents and
other materials, wherever located, not protected under the attorney-
client privilege or the attorney work-product doctrines, in the
possession, custody, or control of that Defendant, that relate to any
No-Poach Agreement between that Defendant and any other person;
3. making available for interview any officers, directors,
employees, and agents if so requested by the United States; and
4. testifying at trial and other judicial proceedings fully,
truthfully, and under oath, subject to the penalties of perjury (18
U.S.C. Sec. 1621), making a false statement or declaration in court
proceedings (18 U.S.C. Sec. 1623), contempt (18 U.S.C. Sec. 401-402),
and obstruction of justice (18 U.S.C. Sec. 1503, et seq.) when called
upon to do so by the United States;
5. provided however, that the obligations of each Defendant to
cooperate fully with the United States as described in this Section
shall cease upon the conclusion of all the United States'
investigations and the United States' litigation examining whether or
alleging that the Defendant agreed to any No-Poach Agreement with any
other person in violation of Section 1 of the Sherman Act, as amended,
15 U.S.C. Sec. 1, including exhaustion of all appeals or expiration of
time for all appeals of any Court ruling in each such matter.
B. Subject to the full, truthful, and continuing cooperation of
each Defendant, as defined in Paragraph VII(A), the United States
agrees that it will not bring any further civil actions or criminal
charges against that Defendant for any No-Poach Agreement with any
other person that:
1. was entered into and terminated on or before the date of the
filing of the Complaint in this action;
2. was disclosed to the United States before the date of the filing
of the Complaint in this action; and
3. does not in any way constitute or include an agreement to fix
wages, compensation, or other benefits.
C. The United States' agreement set forth in Paragraph VII(B) does
not apply to any acts of perjury or subornation of perjury (18 U.S.C.
Sec. 1621-22), making a false statement or declaration (18 U.S.C.
Sec. 1001, 1623), contempt (18 U.S.C. Sec. 401-402), or obstruction
of justice (18 U.S.C. Sec. 1503, et seq.) by the Defendant or its
officers, directors, employees, and agents.
VIII. COMPLIANCE INSPECTION
A. For the purposes of determining or securing compliance with this
Final Judgment, or of determining whether the Final Judgment should be
modified or vacated, and subject to any legally-recognized privilege,
from time to time authorized representatives of the United States
Department of Justice, including consultants and other persons retained
by the United States, shall, upon the written request of an authorized
representative of the Assistant Attorney General in charge of the
Antitrust Division, and on reasonable notice to each Defendant be
permitted:
1. access during each Defendant's office hours to inspect and copy,
or at the option of the United States, to require each Defendant to
provide electronic or hard copies of, all books, ledgers, accounts,
records, data, and documents in the possession, custody, or control of
each Defendant, relating to any matters contained in this Final
Judgment; and
2. to interview, either informally or on the record, each
Defendant's officers, employees, or agents, who may have counsel,
including their individual counsel, present, regarding such matters.
The interviews shall be subject to the reasonable convenience of the
[[Page 16388]]
interviewee and without restraint or interference by any Defendant.
B. Upon the written request of an authorized representative of the
Assistant Attorney General in charge of the Antitrust Division, each
Defendant shall submit written reports or responses to written
interrogatories, under oath if requested, relating to any of the
matters contained in this Final Judgment as may be requested.
C. No information or documents obtained by the means provided in
this section shall be divulged by the United States to any person other
than an authorized representative of the executive branch of the United
States, except in the course of legal proceedings to which the United
States is a party (including grand jury proceedings), or for the
purpose of securing compliance with this Final Judgment, or as
otherwise required by law.
D. If at the time information or documents are furnished by a
Defendant to the United States, the Defendant represents and identifies
in writing the material in any such information or documents to which a
claim of protection may be asserted under Rule 26(c)(1)(G) of the
Federal Rules of Civil Procedure, and the Defendant marks each
pertinent page of such material, ``Subject to claim of protection under
Rule 26(c)(1)(G) of the Federal Rules of Civil Procedure,'' then the
United States shall give the Defendant ten (10) calendar days' notice
prior to divulging such material in any legal proceeding (other than a
grand jury proceeding).
IX. RETENTION OF JURISDICTION
This Court retains jurisdiction to enable any party to this Final
Judgment to apply to this Court at any time for further orders and
directions as may be necessary or appropriate to carry out or construe
this Final Judgment, to modify any of its provisions, to enforce
compliance, and to punish violations of its provisions.
X. ENFORCEMENT OF FINAL JUDGMENT
A. The United States retains and reserves all rights to enforce the
provisions of this Final Judgment, including its right to seek an order
of contempt from this Court. Defendants agree that in any civil
contempt action, any motion to show cause, or any similar action
brought by the United States regarding an alleged violation of this
Final Judgment, the United States may establish a violation of the
decree and the appropriateness of any remedy therefor by a
preponderance of the evidence, and they waive any argument that a
different standard of proof should apply.
B. In any enforcement proceeding in which the Court finds that the
Defendants have violated this Final Judgment, the United States may
apply to the Court for a one-time extension of this Final Judgment,
together with such other relief as may be appropriate. In connection
with any successful effort by the United States to enforce this Final
Judgment against a Defendant, whether litigated or resolved prior to
litigation, that Defendant agrees to reimburse the United States for
any attorneys' fees, experts' fees, and costs incurred in connection
with that enforcement effort, including the investigation of the
potential violation.
XI. EXPIRATION OF FINAL JUDGMENT
Unless this Court grants an extension, this Final Judgment shall
expire seven (7) years from the date of its entry, except that after
five (5) years from the date of its entry, this Final Judgment may be
terminated upon notice by the United States to the Court and the
Defendants that the continuation of the Final Judgment no longer is
necessary or in the public interest.
XII. NOTICE
For purposes of this Final Judgment, any notice or other
communication required to be provided to the United States shall be
sent to the person at the address set forth below (or such other
addresses as the United States may specify in writing to the
Defendants):
Chief
Defense, Industrials, and Aerospace Section
U.S. Department of Justice
Antitrust Division
450 Fifth Street, NW, Suite 8700
Washington, D.C. 20530
XIII. PUBLIC INTEREST DETERMINATION
Entry of this Final Judgment is in the public interest. The parties
have complied with the Procedures of the Antitrust Procedures and
Penalties Act, 15 U.S.C. Sec. 16, including making copies available to
the public of this Final Judgment, the Competitive Impact Statement,
and any comments thereon and the United States' responses to comments.
Based upon the record before the Court, which includes the Competitive
Impact Statement and any comments and response to comments filed with
the Court, entry of this final judgment is in the public interest.
Date:------------------------------------------------------------------
Court approval subject to procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. Sec. 16
-----------------------------------------------------------------------
United States District Judge
EXHIBIT 1
[Company Letterhead]
[Name and Address of Antitrust Compliance Officer]
Re: Agreements Not to Solicit Employees from Other Companies
Dear [XX]:
I am providing you this notice regarding a judgment recently
entered by a federal judge in Washington, D.C. affecting our employee
recruiting, soliciting, and hiring practices. The judgment applies to
our company and all of its employees, including you, so it is important
that you understand the obligations it imposes on us. [CEO Name] has
asked me to let each of you know that [s/he] expects you to take these
obligations seriously and abide by them.
The judgment prohibits us from agreeing with any other employer not
to solicit, cold call, or recruit each other's employees. This includes
seeking permission or approval before considering or approaching an
employee of the employer about a potential opportunity or requiring the
other employer to seek permission or approval from us before
considering or approaching one of our employees. There are limited
exceptions to this restriction. You must consult me before determining
whether a particular employer is subject to an exception under the
judgment.
A copy of the court order is attached. Please read it carefully and
familiarize yourself with its terms. The judgment, rather than the
above description, is controlling. If you have any questions about the
judgment or how it affects your recruiting and hiring activities,
please contact me as soon as possible.
Thank you for your cooperation.
Sincerely,
[Defendant's Antitrust Compliance Officer]
EXHIBIT 2
[Company Letterhead]
[Name and Address of Antitrust Compliance Officer]
Re: Agreements Not to Solicit Employees from Other Companies
Dear [XX]:
I am providing you this notice regarding a judgment recently
entered by a federal judge in Washington, D.C. affecting [Defendant's]
employee recruiting, soliciting, and hiring
[[Page 16389]]
practices. The judgment applies to [Defendant] and all of its
employees, so it is important that you understand the obligations it
imposes on your recruiting activities for [Defendant]. [CEO Name] has
asked me to let you know that [s/he] expects you to take these
obligations seriously and abide by them, irrespective of any contrary
instructions you may receive from any other employee or officer of
[Defendant].
The judgment prohibits [Defendant] from agreeing with another
employer not to solicit, cold call, or recruit each other's employees.
This includes seeking permission or approval before considering or
approaching an employee of the other employer about a potential
opportunity or requiring the other employer to seek permission or
approval from [Defendant] before considering or approaching one of
[Defendant's] employees. There are limited exceptions to this
restriction. You must consult me before determining whether a
particular employer is subject to an exception under the judgment. If
any employee of [Defendant] has asked or asks you to refrain from
recruiting, cold calling, soliciting, or otherwise approaching an
employee from a particular company, you must notify me immediately
before doing so.
A copy of the court order is attached. Please read it carefully and
familiarize yourself with its terms. The judgment, rather than the
above description, is controlling. If you have any questions about the
judgment or how it affects your recruiting and hiring activities for
[Defendant], please contact me as soon as possible.
Thank you for your cooperation.
Sincerely,
[Defendant's Antitrust Compliance Officer]
EXHIBIT 3
Please take notice that Knorr-Bremse AG (Knorr) and Westinghouse
Air Brake Technologies Corporation (Wabtec) have entered into a
settlement with the United States Department of Justice relating to
their respective employee recruiting, solicitation, and hiring
practices.
On April 3, 2018, the United States filed a federal civil antitrust
Complaint alleging that Knorr and Wabtec entered into agreements that
restrained cold calling, soliciting, recruiting, hiring, or otherwise
competing for employees (collectively, ``no-poach agreements'') in
violation of Section 1 of the Sherman Act, 15 U.S.C. Sec. 1. At the
same time, the United States filed a proposed settlement that prohibits
each of Knorr and Wabtec from entering into, maintaining, or enforcing
no-poach agreements with another employer subject to limited
exceptions. This prohibition includes seeking permission or approval
before considering, approaching, or hiring an employee or requiring the
other employer to seek permission or approval from Knorr and Wabtec
before considering or approaching one of their employees.
As part of its settlement with the United States, Knorr and Wabtec
confirmed that each company has unilaterally withdrawn from and will
not enforce any prohibited no-poach agreements it may have had with any
other employer relating to employees located or being hired to work in
the United States.
The Final Judgment, which was recently entered by a federal
district court, is effective for seven years. Copies of the Complaint,
Final Judgment, and Competitive Impact Statement are available at:
[Link to Complaint]
[Link to Final Judgment]
[Link to Competitive Impact Statement]
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Plaintiff,
v.
KNORR-BREMSE AG
and
WESTINGHOUSE AIR BRAKE
TECHNOLOGIES CORPORATION,
Defendants.
Civil Action No: 1:18-cv-00747
Judge: Colleen Kollar-Kotelly
COMPETITIVE IMPACT STATEMENT
Plaintiff United States of America (``United States''), pursuant to
Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or
``Tunney Act''), 15 U.S.C. Sec. 16(b)-(h), files this Competitive
Impact Statement relating to the proposed Final Judgment submitted for
entry in this civil antitrust proceeding.
I. NATURE AND PURPOSE OF THE PROCEEDING
On April 3, 2018, the United States filed a civil antitrust
Complaint alleging that Defendants Knorr-Bremse AG (``Knorr'') and
Westinghouse Air Brake Technologies Corporation (``Wabtec'') entered
into unlawful agreements not to poach each other's employees in
violation of Section 1 of the Sherman Act, 15 U.S.C. Sec. 1.
Specifically, the Complaint alleges that Knorr and Wabtec entered into
a series of agreements not to solicit, recruit, hire without prior
approval, or otherwise compete for employees (collectively, ``No-Poach
Agreements''). In addition, the Complaint alleges that Knorr and Wabtec
separately entered into No-Poach Agreements with Faiveley Transport
North America, a U.S. subsidiary of Faiveley Transport S.A.
(``Faiveley''), before Faiveley was acquired by Wabtec in November
2016. The No-Poach Agreements were not reasonably necessary to any
separate, legitimate business transaction or collaboration between the
companies. According to the Complaint, the Defendants' No-Poach
Agreements unlawfully allocated employees between the companies and are
per se unlawful restraints of trade that violate Section 1 of the
Sherman Act, 15 U.S.C. Sec. 1.
At the same time the Complaint was filed, the United States also
filed a Stipulation and Order and proposed Final Judgment, which would
remedy the violation by enjoining the Defendants from entering into,
maintaining, or enforcing any No-Poach Agreements, subject to limited
exceptions. The proposed Final Judgment also requires the Defendants to
take specific compliance measures and to cooperate in any investigation
or litigation examining whether or alleging that the Defendant entered
into a No-Poach Agreement with any other person in violation of Section
1 of the Sherman Act, 15 U.S.C. Sec. 1.
The United States and the Defendants have stipulated that the
proposed Final Judgment may be entered after compliance with the APPA.
Entry of the proposed Final Judgment would terminate this action,
except that the Court would retain jurisdiction to construe, modify, or
enforce the provisions of the proposed Final Judgment and to punish
violations thereof.
II. DESCRIPTION OF THE EVENTS GIVING RISE TO THE ALLEGED VIOLATION
A. The Defendants
Knorr is a privately-owned German company with its headquarters in
Munich, Germany. It is a global leader in the development, manufacture,
and sale of rail and commercial vehicle equipment. In 2017, Knorr had
annual revenues of approximately $7.7 billion. Knorr holds several
wholly-owned rail subsidiaries in the United States. Knorr Brake
Company is a Delaware corporation with its headquarters in Westminster,
Maryland. It manufactures train control, braking, and door
[[Page 16390]]
equipment used on passenger rail vehicles. New York Air Brake
Corporation is a Delaware corporation with its headquarters in
Watertown, New York. It manufactures railway air brakes and other rail
equipment used on freight trains. Knorr Brake Company and New York Air
Brake Corporation are wholly-owned subsidiaries of Knorr.
Wabtec is a Delaware corporation headquartered in Wilmerding,
Pennsylvania. With over 100 subsidiaries, Wabtec is the world's largest
provider of rail equipment and services with global sales of $3.9
billion in 2017. Wabtec Passenger Transit is a business unit of Wabtec
that develops, manufactures, and sells rail equipment and services for
passenger rail applications. It is based in Spartanburg, South
Carolina.
On November 30, 2016, Wabtec acquired Faiveley, which had been a
French soci[eacute]t[eacute] anonyme based in Gennevilliers, France.
Before the acquisition, Faiveley was the world's third-largest rail
equipment supplier behind Wabtec and Knorr. Faiveley had employees in
24 countries, including at six U.S. locations. It developed,
manufactured and sold passenger and freight rail equipment to customers
in Europe, Asia, and North America, including the United States, with
revenues of approximately [euro]1.2 billion in 2016. In the United
States, Faiveley conducted business primarily through Faiveley
Transport North America, a wholly-owned subsidiary of Faiveley and a
New York corporation headquartered in Greenville, South Carolina.
B. Defendants Enter into and Maintain No-Poach Agreements
The Complaint alleges that Knorr and Wabtec (which now includes
Faiveley) are the world's largest rail equipment suppliers and each
other's top rival for the development, manufacture, and sale of
equipment used in freight and passenger rail applications. Knorr and
Wabtec also compete with one another and with firms at other tiers of
the rail industry supply chain to attract, hire, and retain skilled
employees by offering attractive salaries, benefits, training,
advancement opportunities, and other favorable terms of employment.
The Complaint further alleges that there is high demand for and
limited supply of skilled employees who have rail industry experience.
As a result, firms in the rail industry can experience vacancies of
critical roles for months while they try to recruit and hire an
individual with the requisite skills, training, and experience for a
job opening. Employees of other rail industry participants, including
the employees of Knorr's and Wabtec's customers, competitors, and
suppliers, are key sources of potential talent to fill these openings.
According to the Complaint, firms in the rail industry employ a
variety of recruiting techniques, including using internal and external
recruiters to identify, solicit, recruit, and otherwise help hire
potential employees. Rail companies also receive direct applications
from individuals interested in potential employment opportunities.
Directly soliciting employees from another rail industry participant is
a particularly efficient and effective method of competing for
qualified employees. Soliciting involves communicating directly--
whether by phone, e-mail, social and electronic networking, or in
person--with another firm's employee who has not otherwise applied for
a job opening. Firms in the rail industry rely on direct solicitation
of employees of other rail companies because those individuals have the
specialized skills necessary for the vacant position and may be
unresponsive to other methods of recruiting. The Complaint alleges that
the rail industry is an insular one where employees at different firms
form long-term relationships and often look to their professional
networks to fill a vacancy.
According to the Complaint, in a competitive labor market, rail
industry employers compete with one another to attract highly-skilled
talent for their employment needs. This competition benefits employees
because it increases the available job opportunities that employees
learn about and improves employees' ability to negotiate for better
salaries and other terms of employment. The Complaint alleges that,
over a period spanning several years, Wabtec, Knorr, and Faiveley
entered into similar No-Poach Agreements with one another to eliminate
competition between them for employees. These agreements were executed
and enforced by senior company executives and reached several of the
companies' U.S. subsidiaries and business units. The Complaint alleges
that Knorr's and Wabtec's No-Poach Agreements restrained competition
for employees and disrupted the normal bargaining and price-setting
mechanisms that apply in the labor market. The Complaint further
alleges that the No-Poach Agreements were not reasonably necessary to
any separate, legitimate business transaction or collaboration between
the companies.
1. Wabtec-Knorr Agreements
According to the Complaint, Wabtec and Knorr entered into pervasive
No-Poach Agreements that spanned multiple business units and
jurisdictions. Senior executives at the companies' global headquarters
as well as their respective U.S. passenger and freight rail businesses
entered into No-Poach Agreements that involved promises and commitments
not to solicit or hire one another's employees. As alleged in the
Complaint, the No-Poach Agreements primarily affected recruiting for
project management, engineering, sales, and corporate officer roles and
restricted each company from soliciting current employees from the
other company. The Complaint further alleges that, at times, these
agreements were operationalized as agreements not to hire current
employees from one another without prior approval.
According to the Complaint, beginning no later than 2009, Wabtec's
and Knorr Brake Company's most senior executives entered into an
express No-Poach Agreement and then actively managed it with each other
through direct communications. The Complaint alleges that in a letter
dated January 28, 2009, a director of Knorr Brake Company wrote to a
senior executive at Wabtec's headquarters, ``[Y]ou and I both agreed
that our practice of not targeting each other's personnel is a prudent
cause for both companies. As you so accurately put it, `we compete in
the market.' '' As alleged in the Complaint, that agreement was well-
known to senior executives at the parent companies, including top Knorr
executives in Germany who were included in key communications about the
No-Poach Agreement. The Complaint further alleges that in furtherance
of their agreement, Wabtec and Knorr Brake Company informed their
outside recruiters not to solicit employees from the other company. In
some instances, Wabtec and Knorr Brake Company's No-Poach Agreement
foreclosed the consideration of an unsolicited applicant employed by
the other company without prior approval of the other firm. Knorr and
Wabtec's No-Poach Agreements also extended to the companies' U.S.
freight rail businesses.
According to the Complaint, Knorr's and Wabtec's senior executives
actively policed potential breaches of their companies' No-Poach
Agreements and directly communicated with one another to ensure
adherence to the agreements.
[[Page 16391]]
2. Knorr-Faiveley Agreement
As alleged in the Complaint, beginning no later than 2011, senior
executives at Knorr Brake Company and Faiveley Transport North America
reached an express No-Poach Agreement that involved promises and
commitments to contact one another before pursuing an employee of the
other company. The Complaint alleges that in October 2011, a senior
executive at Knorr Brake Company explained in an email to a high-level
executive at Knorr-Bremse AG that he had a discussion with an executive
at Faiveley's U.S. subsidiary that ``resulted in an agreement between
us that we do not poach each other's employees. We agreed to talk if
there was one trying to get a job[.]'' Executives at Knorr Brake
Company and Faiveley's U.S. subsidiary actively managed the No-Poach
Agreement with each other through direct communications. The Complaint
specifically alleges that in or about 2012, a senior executive at Knorr
Brake Company discussed the companies' No-Poach Agreement with an
executive at Faiveley Transport North America. This discussion took
place at a trade show in Berlin, Germany. Subsequently, the executives
enforced the No-Poach Agreement with each other through direct
communications. This No-Poach Agreement was known to other senior
executives at the companies, who directly communicated with one another
to ensure adherence to the agreement.
As alleged in the Complaint, the companies continued their No-Poach
Agreement until at least 2015. After Wabtec announced its proposed
acquisition of Faiveley in July 2015, a high-level Knorr executive
directed the company's recruiters in the United States and other
jurisdictions to raid Faiveley for high-potential employees.
3. Wabtec-Faiveley Agreement
The Complaint alleges that beginning no later than January 2014,
senior executives at Wabtec Passenger Transit and Faiveley Transport
North America entered into a No-Poach Agreement in which the companies
agreed not to hire each other's employees without prior notification to
and approval from the other company. According to the Complaint, Wabtec
Passenger Transit and Faiveley Transport North America executives
actively managed and enforced their agreement with each other through
direct communications. The Complaint specifically alleges that in an
internal email to his colleagues, a Wabtec Passenger Transit executive
explained that a candidate ``is a good guy, but I don't want to violate
my own agreement with [Faiveley Transport North America].''
The Complaint alleges that in July 2015, Wabtec and Faiveley
publicly announced their intent to merge. Wabtec closed its acquisition
of Faiveley on November 30, 2016. Presently, Faiveley is a wholly-owned
subsidiary of Wabtec.
C. Defendants' No-Poach Agreements Were Per Se Unlawful Market
Allocation Agreements under Section 1 of the Sherman Act
No-Poach Agreements that are not reasonably necessary to any
separate, legitimate business transaction or collaboration are properly
considered per se unlawful market allocation agreements under Section 1
of the Sherman Act. Section 1 outlaws any ``contract, combination . .
., or conspiracy, in restraint of trade or commerce.'' 15 U.S.C. 1.
Courts have long interpreted this language to prohibit only
``unreasonable'' restraints of trade. Bus. Elecs. Corp. v. Sharp Elecs.
Corp., 485 U.S. 717, 723 (1988). Most restraints are analyzed under the
rule of reason, which requires the plaintiff to present evidence of a
restraint's anticompetitive effects and permits the defendant to
present procompetitive justifications. Ultimately, the fact-finder
weighs all the circumstances to determine whether the restraint is one
that suppresses competition or promotes it. See Bd. of Trade of City of
Chi. v. United States, 246 U.S. 231, 238 (1918).
``The rule of reason does not govern all restraints,'' however.
Leegin Creative Leather Prod., Inc. v. PSKS, Inc., 551 U.S. 877, 886
(2007). Rather, ``some types of restraints on trade have such
predictable and pernicious anticompetitive effect, and such limited
potential for procompetitive benefit, that they are deemed unlawful per
se,'' State Oil Co. v. Khan, 522 U.S. 3, 3 (1997), and thus ``illegal
without elaborate inquiry as to the precise harm they have caused or
the business excuse for their use,'' Northern Pac. Ry. v. United
States, 356 U.S. 1, 545 (1958). It is well established that naked
restraints of competition among horizontal competitors, such as price-
fixing or market allocation agreements, are per se unlawful. See United
States v. Socony-Vacuum Oil Co., 310 U.S. 150, 218 (1940); Palmer v.
BRG of Georgia, Inc., 498 U.S. 46, 48-50 (1990) (per curiam).\1\
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\1\ Under the ancillary restraints doctrine, an agreement
ordinarily condemned as per se unlawful is ``exempt from the per se
rule'' if it is ancillary to a separate, legitimate procompetitive
venture between the competitors and reasonably necessary to achieve
the procompetitive benefits of that venture. Rothery Storage & Van
Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 224 (DC Cir. 1986) (a
customer allocation agreement is ancillary only if it is
``subordinate and collateral to a separate, legitimate transaction''
and reasonably necessary to make that separate transaction ``more
effective [or efficient] in accomplishing its purpose''); see Texaco
Inc. v. Dagher, 547 U.S. 1, 7-8 (2006).
---------------------------------------------------------------------------
Market allocation agreements cannot be distinguished from one
another based solely on whether they involve input or output
markets.\2\ Nor are labor markets treated differently than other input
markets under antitrust law. ``[A]n agreement among employers that they
will not compete against each other for the services of a particular
employee or prospective employee is, in fact, a service division
agreement, analogous to a product division agreement.'' United States
v. eBay, Inc., 968 F. Supp. 2d 1030, 1039 (N.D. Cal. 2013) (citation
omitted); see also IIA Phillip E. Areeda et al., Antitrust Law, ] 352c
at 288-89 (4th ed. 2014) (``Antitrust law addresses employer
conspiracies controlling employment terms precisely because they tamper
with the employment market and thereby impair the opportunities of
those who sell their services there. Just as antitrust law seeks to
preserve the free market opportunities of buyers and sellers of goods,
so also it seeks to do the same for buyers and sellers of employment
services.'').
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\2\ In similar circumstances, the Sixth Circuit has held that an
agreement among competitors not to solicit one another's customers
was a per se violation of the antitrust laws. See U.S. v.
Cooperative Theaters of Ohio, Inc., 845 F.2d 1367 (6th Cir. 1988)
(finding that two movie theater booking agents agreed to refrain
from actively soliciting each other's customers). In particular, the
Sixth Circuit found the defendants' ``no-solicitation agreement''
was ``undeniably a type of customer allocation scheme which courts
have often condemned in the past as a per se violation of the
Sherman Act.'' Id. at 1373.
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Consistent with these precedents, the United States has repeatedly
challenged No-Poach Agreements that are not reasonably necessary to any
separate, legitimate business transaction or collaboration as per se
unlawful restraints of trade. For example, in September 2010, the
United States charged six of the largest U.S. high technology
companies--Adobe Systems, Inc., Apple Inc., Google Inc., Intel Corp.,
Intuit Inc., and Pixar--with per se violations of Section 1 for
entering into bilateral agreements to prohibit each company from ``cold
calling'' the other company's employees. Complaint, United States v.
Adobe Sys., Inc., No. 10-cv-1629 (D.D.C. Oct. 1, 2010).\3\ In
[[Page 16392]]
December 2010, the United States charged Lucasfilm Ltd. with a per se
violation of Section 1 for entering an agreement with Pixar to prohibit
cold calling of each other's employees and setting forth anti-
counteroffer rules that restrained bidding for employees. Complaint,
United States v. Lucasfilm Ltd., No. 10-cv-2220 (D.D.C. Dec. 28,
2010).\4\ And in November 2012, the United States charged eBay with a
per se violation of Section 1 for entering an agreement with Intuit,
pursuant to which eBay and Intuit agreed not to recruit each other's
employees and eBay agreed not to hire Intuit employees, including those
that approached eBay for a job. See Complaint, United States v. eBay,
Inc., No. 12-cv-5869 (N.D. Cal. Nov. 16, 2012).\5\ In each case, the
defendants ultimately agreed to consent decrees terminating their
unlawful agreements.\6\
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\3\ The complaint is available at https://www.justice.gov/atr/case/us-v-adobe-systems-inc-et-al.
\4\ The complaint is available at https://www.justice.gov/atr/case/us-v-lucasfilm-ltd.
\5\ The complaint is available at https://www.justice.gov/atr/case/us-v-ebay-inc.
\6\ The Division's settlement in eBay followed the district
court's denial of eBay's motion to dismiss. See United States v.
eBay, Inc., 968 F. Supp. 2d 1030 (N.D. Cal. 2013).
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Beginning in October 2016, the department has made clear that it
intends to bring criminal, felony charges against culpable companies
and individuals who enter into naked No-Poach Agreements.\7\ No-Poach
Agreements eliminate competition in the same irredeemable way as a
customer- or market-allocation agreement, and the department has long
prosecuted such agreements as hardcore cartel conduct. The Division has
reiterated this prosecutorial intent in subsequent public statements
and indicated that it may proceed criminally where the underlying No-
Poach Agreements began or continued after October 2016.\8\ As a matter
of prosecutorial discretion, the Division will pursue No-Poach
Agreements entered into and terminated before that date through civil
actions for equitable relief.
---------------------------------------------------------------------------
\7\ See, e.g., Andrew C. Finch, Acting Asst. Att'y Gen.,
Antitrust Div., U.S. Dep't of Justice, ``Antitrust Enforcement and
the Rule of Law,'' Remarks at Global Antitrust Enforcement Symposium
(Sept. 12, 2017), available at https://www.justice.gov/opa/speech/file/996151/download (``The Guidelines cautioned that naked
agreements among employers not to recruit certain employees, or not
to compete on employee compensation, are per se illegal and may
thereafter be prosecuted criminally.''); Renata B. Hesse, Acting
Asst. Att'y Gen. for Antitrust, U.S. Dep't of Justice, ``The Measure
of Success: Criminal Antitrust Enforcement during the Obama
Administration,'' Remarks at 26th Annual Golden State Antitrust, UCL
and Privacy Law Institute (Nov. 3, 2016), available at https://www.justice.gov/opa/speech/acting-assistant-attorney-general-renata-hesse-antitrust-division-delivers-remarks-26th (``Naked wage-fixing
or no-poach agreements eliminate competition in the same
irredeemable way as per se unlawful price-fixing and customer-
allocation agreements do. So we will approach them the same way,
using our professional judgment, and considering all the factors
that ordinarily weigh on our discretion as criminal prosecutors.'');
Press Release, U.S. Dep't of Justice, Justice Department and Federal
Trade Commission Release Guidance for Human Resource Professionals
on How Antitrust Law Applies to Employee Hiring and Compensation
(Oct. 20, 2016), available at https://www.justice.gov/opa/pr/justice-department-and-federal-trade-commission-release-guidance-human-resource-professionals (``Going forward, the Justice
Department intends to criminally investigate naked no-poaching or
wage-fixing agreements that are unrelated or unnecessary to a larger
legitimate collaboration between the employers.'').
\8\ See Andrew C. Finch, Principal Deputy Asst. Att'y Gen.,
Antitrust Div., U.S. Dep't of Justice, ``Trump Antitrust Policy
After One Year,'' Remarks at the Heritage Foundation (Jan. 23,
2018), available at https://www.justice.gov/opa/speech/file/1028906/download (``In October 2016, the Division issued guidance reminding
the business community that no-poach agreements can be prosecuted as
criminal violations. For agreements that began after the date of
that announcement, or that began before but continued after that
announcement, the Division expects to pursue criminal charges.'').
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As described in the Complaint, Knorr's and Wabtec's No-Poach
Agreements were naked restraints on competition for employees and were
not reasonably necessary to any separate, legitimate business
transaction or collaboration between the firms. The No-Poach Agreements
suppressed and eliminated competition to the detriment of employees by
depriving workers of competitively important information that they
could have leveraged to bargain for better job opportunities and terms
of employment. In doing so, the No-Poach Agreements eliminated
significant competition between the firms to attract employees in the
rail industry. Accordingly, they are per se unlawful horizontal market
allocation agreements under Section 1 of the Sherman Act. The United
States has pursued the agreements at issue in the Complaint by civil
action rather than as a criminal prosecution because the United States
uncovered and began investigating the agreements, and the Defendants
terminated them, before the United States had announced its intent to
proceed criminally against such agreements.
III. EXPLANATION OF THE PROPOSED FINAL JUDGMENT
The proposed Final Judgment sets forth (1) conduct in which the
Defendants may not engage; (2) conduct in which the Defendants may
engage without violating the proposed Final Judgment; (3) certain
actions the Defendants are required to take to ensure compliance with
the terms of the proposed Final Judgment; (4) the Defendants'
obligations to cooperate with the United States in its investigations
of No-Poach Agreements; and (5) oversight procedures the United States
may use to ensure compliance with the proposed Final Judgment.
A. Prohibited Conduct
Section IV of the proposed Final Judgment prohibits the Defendants
from attempting to enter into, entering into, maintaining, or enforcing
any No-Poach Agreement or No-Poach Provision. Paragraph II(E) of the
proposed Final Judgment defines ``No-Poach Agreement'' or ``No-Poach
Provision'' as ``any Agreement, or part of an Agreement, among two or
more employers that restrains any person from cold calling, soliciting,
recruiting, hiring, or otherwise competing for (i) employees located in
the United States being hired to work in the United States or outside
the United States or (ii) any employee located outside the United
States being hired to work in the United States.'' \9\ Taken together,
these provisions will terminate any existing No-Poach Agreements to
which either Defendant is currently a party and prohibit each Defendant
from entering into any No-Poach Agreements in the future.
---------------------------------------------------------------------------
\9\ Paragraph II(C) defines ``Agreement'' to mean ``any
agreement, understanding, pact, contract, or arrangement, formal or
information, oral or written, between two or more persons.''
---------------------------------------------------------------------------
B. Conduct Not Prohibited
Paragraph V(A) of the proposed Final Judgment provides that nothing
in Section IV shall prohibit a Defendant from attempting to enter into,
entering into, maintaining, or enforcing a reasonable agreement not to
solicit, recruit, or hire employees that is ancillary to a legitimate
business collaboration. Paragraph V(B) requires that all Agreements
that satisfy Paragraph V(A) that are entered into, renewed, or
affirmatively extended after the proposed Final Judgment's entry: (1)
be in writing and signed by all parties thereto; (2) identify, with
specificity, the collaboration to which the Agreement is ancillary; (3)
be narrowly tailored to affect only employees who are anticipated to be
directly involved in the Agreement; (4) identify with reasonable
specificity the employees who are subject to the Agreement; and (5)
contain a specific termination date or event. The purpose of Paragraph
V(B) is to ensure that Agreements entered into pursuant to Paragraph
V(A) are narrowly tailored and can be properly monitored by the United
States.
Defendants may have existing Agreements that contain No-Poach
[[Page 16393]]
Provisions that may not comply with the terms of the proposed Final
Judgment. To avoid the unnecessary burden of identifying and
renegotiating these existing contracts, Paragraph V(C) of the proposed
Final Judgment provides that Defendants are not required to modify or
conform existing No-Poach Provisions that violate the proposed Final
Judgment but shall not enforce them.
Finally, Paragraph V(D) of the proposed Final Judgment provides
that a Defendant is not prohibited from unilaterally adopting or
maintaining a policy not to consider applications from employees of
another person, or not to solicit, cold call, recruit or hire employees
of another person, provided that the Defendant does not (1) request,
encourage, propose, or suggest that another person adopt, enforce, or
maintain such a policy; or (2) notify the other person that the
Defendant has adopted such a policy.
C. Required Conduct
Section VI of the proposed Final Judgment sets forth various
mandatory procedures to ensure the Defendants are in compliance with
the proposed Final Judgment. Paragraph VI(A) requires each Defendant to
appoint an Antitrust Compliance Officer within ten (10) days of entry
of the Final Judgment. Paragraph VI(B) then sets forth the steps that
the Antitrust Compliance Officer must take in order to ensure the
Defendant's compliance with the Final Judgment and make the Defendant's
employees and recruiting agencies aware of its terms.
Specifically, Paragraph VI(B)(1) of the proposed Final Judgment
requires that within sixty days of entry of the Final Judgment, the
Antitrust Compliance Officer must furnish copies of the Competitive
Impact Statement, the Final Judgment, and a cover letter explaining the
obligations of the Final Judgment to the Defendant's Management and HR
Management.\10\ Paragraphs VI(B)(3), (B)(5), and (B)(6) further require
that the Antitrust Compliance Officer annually brief the Defendant's
Management and HR Management on the meaning and requirements of the
Final Judgment and the antitrust laws, obtain from each of them a
certification that he or she has read and agreed to abide by the terms
of the Final Judgment, and maintain a record of all certifications
received.
---------------------------------------------------------------------------
\10\ Paragraph II(D) of the Proposed Final Judgment defines ``HR
Management'' as ``the directors, officers, and human resource
employees of the Defendant who supervise or have responsibility for
recruiting, solicitation, or hiring efforts affecting the United
States.'' Paragraph II(G) defines ``Management'' as ``all officers,
directors, and board members of Knorr-Bremse AG or Westinghouse Air
Brake Technologies Corporation, or anyone with management or
supervisory responsibilities for Knorr's or Wabtec's U.S. business
or operations.''
---------------------------------------------------------------------------
In addition, Paragraph VI(B)(2) of the proposed Final Judgment
obligates each Defendant to provide all of its U.S. employees
reasonable notice of the meaning and requirements of the Final Judgment
in a manner to be approved by the United States. Paragraph VI(B)(7)
further requires the Antitrust Compliance Officer to annually
communicate to the Defendant's employees that they may disclose to the
Antitrust Compliance Officer, without reprisal, information concerning
any potential violation of the Final Judgment or the antitrust laws.
To ensure that each Defendant's outside recruiters are aware of the
proposed Final Judgment, Paragraph VI(B)(8) requires the Antitrust
Compliance Officer, within sixty days of entry of the Final Judgment,
to furnish copies of the Competitive Impact Statement, the Final
Judgment, and a cover letter explaining the obligations of the Final
Judgment to all recruiting agencies, or providers of temporary
employees or contract workers, retained by the Defendant for
recruiting, soliciting, or hiring efforts affecting the Defendant's
business activities in the United States at the time of entry of the
Final Judgment and during the term of the Final Judgment.
Pursuant to Paragraph VI(B)(9) of the proposed Final Judgment, the
Antitrust Compliance Officer must furnish a copy of all materials
required by Paragraph VI(B) of the proposed Final Judgment to the
United States within seventy-five (75) days of entry of the Final
Judgment.
Paragraph VI(C) of the proposed Final Judgment requires the
Defendants to furnish notice of this action to the rail industry
through the placement of an advertisement in an industry trade
publication to be approved by the United States and the creation of
website pages linked to the corporate websites of each Defendant for no
less than one year.
Finally, Paragraph VI(D)(3) requires that the Chief Executive
Officer or Chief Financial Officer, and General Counsel of each
Defendant separately certify annually to the United States that the
Defendant has complied with the provisions of the Final Judgment.
Additionally, if Management or HR Management learns of any violation or
potential violation of the terms of the Final Judgment, Paragraph
VI(D)(1) and (D)(2) of the proposed Final Judgment obligate each
Defendant to promptly take action to terminate the violation, maintain
all documents relating to the violation, and, within sixty days, file
with the United States a statement describing the violation.
D. Cooperation
Section VII of the proposed Final Judgment requires each Defendant
to cooperate with the United States in any investigation or litigation
examining whether or alleging that the Defendant entered into a No-
Poach Agreement with any other person. Paragraph VII(A) requires each
Defendant, upon request of the United States, to provide sworn
testimony, produce documents and materials, make employees available
for interview, and testify in judicial proceedings about such No-Poach
Agreements.
Paragraph VII(B) provides that, subject to each Defendant's
truthful and continuing cooperation as defined in Paragraph VII(A), the
United States will not bring further civil actions or criminal charges
against that Defendant for any No-Poach Agreement with another person
if the agreement: (1) was entered into and terminated before the date
of the filing of the Complaint; (2) was disclosed to the United States
before the filing of the Complaint; and (3) does not in any way
constitute or include an agreement to fix wages, compensation, or other
benefits. The purpose of Paragraph VII(B) is to incentivize each
Defendant to provide the United States with all of the information it
knows about potential No-Poach Agreements it may have entered into with
additional counterparties.
E. Compliance
To facilitate monitoring of the Defendants' compliance with the
proposed Final Judgment, Paragraph VIII(A) permits the United States,
upon reasonable notice and a written request: (1) access during each
Defendant's office hours to inspect and copy, or at the option of the
United States, to require each Defendant to provide electronic or hard
copies of, all books, ledgers, accounts, records, data, and documents
in the possession, custody, or control of each Defendant, relating to
any matters contained in the proposed Final Judgment; and (2) to
interview, either informally or on the record, each Defendant's
officers, employees, or agents.
Additionally, Paragraph VIII(B), upon written request of the United
States, requires each Defendant to submit written reports or responses
to interrogatories relating to any of the matters contained in the
proposed Final Judgment.
[[Page 16394]]
F. Enforcement and Expiration of the Final Judgment
The proposed Final Judgment contains provisions designed to promote
compliance and make the enforcement of Division consent decrees as
effective as possible. Paragraph X(A) provides that the United States
retains and reserves all rights to enforce the provisions of the
proposed Final Judgment, including its rights to seek an order of
contempt from the Court. Under the terms of this paragraph, the
Defendants have agreed that in any civil contempt action, any motion to
show cause, or any similar action brought by the United States
regarding an alleged violation of the Final Judgment, the United States
may establish the violation and the appropriateness of any remedy by a
preponderance of the evidence and that the Defendants have waived any
argument that a different standard of proof should apply. This
provision aligns the standard for compliance obligations with the
standard of proof that applies to the underlying offense that the
compliance commitments address.
Paragraph X(B) of the proposed Final Judgment further provides that
should the Court find in an enforcement proceeding that the Defendants
have violated the Final Judgment, the United States may apply to the
Court for a one-time extension of the Final Judgment, together with
such other relief as may be appropriate. In addition, in order to
compensate American taxpayers for any costs associated with the
investigation and enforcement of violations of the proposed Final
Judgment, Paragraph X(B) provides that in any successful effort by the
United States to enforce this Final Judgment against a Defendant,
whether litigated or resolved prior to litigation, that Defendant
agrees to reimburse the United States for any attorneys' fees, experts'
fees, or costs incurred in connection with any enforcement effort,
including the investigation of the potential violation.
Finally, Section XI of the proposed Final Judgment provides that
the Final Judgment shall expire seven years from the date of its entry,
except that after five years from the date of its entry, the Final
Judgment may be terminated upon notice by the United States to the
Court and the Defendants that the continuation of the Final Judgment is
no longer necessary or in the public interest.
IV. REMEDIES AVAILABLE TO POTENTIAL PRIVATE LITIGANTS
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorneys' fees. Entry of the proposed Final Judgment will neither
impair nor assist the bringing of any private antitrust damage action.
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C.
16(a), the proposed Final Judgment has no prima facie effect in any
subsequent private lawsuit that may be brought against the Defendants.
V. PROCEDURES AVAILABLE FOR MODIFICATION OF THE PROPOSED FINAL JUDGMENT
The United States and the Defendants have stipulated that the
proposed Final Judgment may be entered by the Court after compliance
with the provisions of the APPA, provided that the United States has
not withdrawn its consent. The APPA conditions entry upon the Court's
determination that the proposed Final Judgment is in the public
interest.
The APPA provides a period of at least sixty (60) days preceding
the effective date of the proposed Final Judgment within which any
person may submit to the United States written comments regarding the
proposed Final Judgment. Any person who wishes to comment should do so
within sixty (60) days of the date of publication of this Competitive
Impact Statement in the Federal Register, or the last date of
publication in a newspaper of the summary of this Competitive Impact
Statement, whichever is later. All comments received during this period
will be considered by the United States, which remains free to withdraw
its consent to the proposed Final Judgment at any time prior to the
Court's entry of judgment. The comments and the response of the United
States will be filed with the Court. In addition, comments will be
posted on the U.S. Department of Justice, Antitrust Division's internet
website and, under certain circumstances, published in the Federal
Register.
Written comments should be submitted to:
Maribeth Petrizzi
Chief, Defense, Industrials, and Aerospace Section
Antitrust Division
United States Department of Justice
450 Fifth Street NW, Suite 8700
Washington, DC 20530
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI. ALTERNATIVES TO THE PROPOSED FINAL JUDGMENT
The United States considered, as an alternative to the proposed
Final Judgment, a full trial on the merits against the Defendants. The
United States is satisfied, however, that the relief proposed in the
Final Judgment will prevent the recurrence of the violations alleged in
the Complaint and restore competition between the Defendants and other
firms for employees. Thus, the proposed Final Judgment would achieve
all or substantially all of the relief the United States would have
obtained through litigation, but avoids the time, expense, and
uncertainty of a full trial on the merits of the Complaint.
VII. STANDARD OF REVIEW UNDER THE APPA FOR THE PROPOSED FINAL JUDGMENT
The Clayton Act, as amended by the APPA, requires that proposed
consent judgments in antitrust cases brought by the United States be
subject to a sixty-day comment period, after which the Court shall
determine whether entry of the proposed Final Judgment ``is in the
public interest.'' 15 U.S.C. 16(e)(1). In making that determination,
the Court, in accordance with the statute as amended in 2004, is
required to consider:
(A) the competitive impact of such judgment, including termination
of alleged violations, provisions for enforcement and modification,
duration of relief sought, anticipated effects of alternative remedies
actually considered, whether its terms are ambiguous, and any other
competitive considerations bearing upon the adequacy of such judgment
that the court deems necessary to a determination of whether the
consent judgment is in the public interest; and
(B) the impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and individuals
alleging specific injury from the violations set forth in the complaint
including consideration of the public benefit, if any, to be derived
from a determination of the issues at trial.
15 U.S.C. 16(e)(1)(A) & (B). In considering these statutory factors,
the Court's inquiry is necessarily a limited one as the government is
entitled to ``broad discretion to settle with the defendant within the
reaches of the public interest.'' United States v. Microsoft Corp., 56
F.3d 1448, 1461 (DC Cir. 1995); see generally United States v. SBC
Commc'ns, Inc., 489 F. Supp. 2d 1
[[Page 16395]]
(D.D.C. 2007) (assessing public interest standard under the Tunney
Act); United States v. US Airways Group, Inc., 38 F. Supp. 3d 69, 75
(D.D.C. 2014) (explaining that the ``court's inquiry is limited'' in
Tunney Act settlements); United States v. InBev N.V./S.A., No. 08-1965
(JR), 2009-2 Trade Cas. (CCH) ] 76,736, 2009 U.S. Dist. LEXIS 84787, at
*3, (D.D.C. Aug. 11, 2009) (noting that the court's review of a consent
judgment is limited and only inquires ``into whether the government's
determination that the proposed remedies will cure the antitrust
violations alleged in the complaint was reasonable, and whether the
mechanism to enforce the final judgment are clear and
manageable'').\11\
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\11\ The 2004 amendments substituted ``shall'' for ``may'' in
directing relevant factors for court to consider and amended the
list of factors to focus on competitive considerations and to
address potentially ambiguous judgment terms. Compare 15 U.S.C.
16(e) (2004) with 15 U.S.C. 16(e)(1) (2006); see also SBC Commc'ns,
489 F. Supp. 2d at 11 (concluding that the 2004 amendments
``effected minimal changes'' to Tunney Act review).
---------------------------------------------------------------------------
As the United States Court of Appeals for the District of Columbia
Circuit has held, under the APPA a court considers, among other things,
the relationship between the remedy secured and the specific
allegations set forth in the government's complaint, whether the decree
is sufficiently clear, whether enforcement mechanisms are sufficient,
and whether the decree may positively harm third parties. See
Microsoft, 56 F.3d at 1458-62. With respect to the adequacy of the
relief secured by the decree, a court may not ``engage in an
unrestricted evaluation of what relief would best serve the public.''
United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir. 1988) (quoting
United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see
also Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 152
F. Supp. 2d 37, 40 (D.D.C. 2001); InBev, 2009 U.S. Dist. LEXIS 84787,
at *3. Courts have held that:
[t]he balancing of competing social and political interests affected by
a proposed antitrust consent decree must be left, in the first
instance, to the discretion of the Attorney General. The court's role
in protecting the public interest is one of insuring that the
government has not breached its duty to the public in consenting to the
decree. The court is required to determine not whether a particular
decree is the one that will best serve society, but whether the
settlement is ``within the reaches of the public interest.'' More
elaborate requirements might undermine the effectiveness of antitrust
enforcement by consent decree.
Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\12\ In
determining whether a proposed settlement is in the public interest, a
district court ``must accord deference to the government's predictions
about the efficacy of its remedies, and may not require that the
remedies perfectly match the alleged violations.'' SBC Commc'ns, 489 F.
Supp. 2d at 17; see also US Airways, 38 F. Supp. 3d at 75 (noting that
a court should not reject the proposed remedies because it believes
others are preferable); Microsoft, 56 F.3d at 1461 (noting the need for
courts to be ``deferential to the government's predictions as to the
effect of the proposed remedies''); United States v. Archer-Daniels-
Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that the court
should grant due respect to the United States' prediction as to the
effect of proposed remedies, its perception of the market structure,
and its views of the nature of the case).
---------------------------------------------------------------------------
\12\ Cf. BNS, 858 F.2d at 464 (holding that the court's
``ultimate authority under the [APPA] is limited to approving or
disapproving the consent decree''); United States v. Gillette Co.,
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the
court is constrained to ``look at the overall picture not
hypercritically, nor with a microscope, but with an artist's
reducing glass''). See generally Microsoft, 56 F.3d at 1461
(discussing whether ``the remedies [obtained in the decree are] so
inconsonant with the allegations charged as to fall outside of the
`reaches of the public interest''').
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Courts have greater flexibility in approving proposed consent
decrees than in crafting their own decrees following a finding of
liability in a litigated matter. ``[A] proposed decree must be approved
even if it falls short of the remedy the court would impose on its own,
as long as it falls within the range of acceptability or is `within the
reaches of public interest.''' United States v. Am. Tel. & Tel. Co.,
552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United
States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd
sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also US
Airways, 38 F. Supp. 3d at 76 (noting that room must be made for the
government to grant concessions in the negotiation process for
settlements) (citing Microsoft, 56 F.3d at 1461); United States v.
Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 1985) (approving
the consent decree even though the court would have imposed a greater
remedy). To meet this standard, the United States ``need only provide a
factual basis for concluding that the settlements are reasonably
adequate remedies for the alleged harms.'' SBC Commc'ns, 489 F. Supp.
2d at 17.
Moreover, the Court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its Complaint, and does not authorize the Court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459; see also US Airways,
38 F. Supp. 3d at 75 (noting that the court must simply determine
whether there is a factual foundation for the government's decisions
such that its conclusions regarding the proposed settlements are
reasonable); InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``the `public
interest' is not to be measured by comparing the violations alleged in
the complaint against those the court believes could have, or even
should have, been alleged''). Because the ``court's authority to review
the decree depends entirely on the government's exercising its
prosecutorial discretion by bringing a case in the first place,'' it
follows that ``the court is only authorized to review the decree
itself,'' and not to ``effectively redraft the complaint'' to inquire
into other matters that the United States did not pursue. Microsoft, 56
F.3d at 1459-60. As this Court confirmed in SBC Communications, courts
``cannot look beyond the complaint in making the public interest
determination unless the complaint is drafted so narrowly as to make a
mockery of judicial power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
In its 2004 amendments, Congress made clear its intent to preserve
the practical benefits of utilizing consent decrees in antitrust
enforcement, adding the unambiguous instruction that ``[n]othing in
this section shall be construed to require the court to conduct an
evidentiary hearing or to require the court to permit anyone to
intervene.'' 15 U.S.C. 16(e)(2); see also US Airways, 38 F. Supp. 3d at
76 (indicating that a court is not required to hold an evidentiary
hearing or to permit intervenors as part of its review under the Tunney
Act). The language wrote into the statute what Congress intended when
it enacted the Tunney Act in 1974, as Senator Tunney explained: ``[t]he
court is nowhere compelled to go to trial or to engage in extended
proceedings which might have the effect of vitiating the benefits of
prompt and less costly settlement through the consent decree process.''
119 Cong. Rec. 24,598 (1973) (statement of Sen. Tunney). Rather, the
procedure for the public interest determination is left to the
discretion of the Court, with the recognition that the Court's ``scope
of review remains sharply proscribed by precedent and the nature of
Tunney Act proceedings.'' SBC Commc'ns, 489 F.
[[Page 16396]]
Supp. 2d at 11.\13\ A court can make its public interest determination
based on the competitive impact statement and response to public
comments alone. US Airways, 38 F. Supp. 3d at 76.
---------------------------------------------------------------------------
\13\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the
court to make its public interest determination on the basis of the
competitive impact statement and response to comments alone'');
United States v. Mid-Am. Dairymen, Inc., No. 73-CV-681-W-1, 1977-1
Trade Cas. (CCH) ] 61,508, at 71,980, *22 (W.D.Mo. 1977) (``Absent a
showing of corrupt failure of the government to discharge its duty,
the Court, in making its public interest finding, should . . .
carefully consider the explanations of the government in the
competitive impact statement and its responses to comments in order
to determine whether those explanations are reasonable under the
circumstances.''); S. Rep. No. 93-298, at 6 (1973) (``Where the
public interest can be meaningfully evaluated simply on the basis of
briefs and oral arguments, that is the approach that should be
utilized.'').
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VIII. DETERMINATIVE DOCUMENTS
There are no determinative materials or documents within the
meaning of the APPA that were considered by the United States in
formulating the proposed Final Judgment.
Dated: April 3, 2018
Respectfully submitted,
DOHA MEKKI
United States Department of Justice
Antitrust Division
Defense, Industrials, and Aerospace Section
450 Fifth Street NW, Suite 8700
Washington, DC 20530
Telephone: (202) 598-8023
Facsimile: (202) 514-9033
Email: doha.mekki@usdoj.gov
[FR Doc. 2018-07840 Filed 4-13-18; 8:45 am]
BILLING CODE 4410-11-P