Antitrust Alert: FTC Wins First Preliminary Injunction in Merger Case Since 2002
A federal district court in Washington, D.C., recently granted the Federal Trade Commission's request for a preliminary injunction ("PI") to enjoin the proposed merger between CCC Information Services and Mitchell International, pending the agency's administrative challenge. The case is significant both because it is the first FTC district court PI victory in seven years and because this is the first merger case PI ruling since the D.C. Circuit's splintered decision last year in FTC v. Whole Foods.
FTC Injunction Standard
To obtain a PI in a merger case, the FTC must satisfy Section 13(b) of the FTC Act, which allows the district court to grant the injunction if, "weighing the equities and considering the Commission's likelihood of ultimate success, such action would be in the public interest." Although PIs are designed to preserve the status quo until the agency can argue its case on the merits, in practice the proceeding can doom a transaction. If the agency wins a PI, merging parties usually abandon the deal because of the time, expense, and uncertainty associated with prevailing on the merits and keeping the transaction intact during the process. Parties typically raise this point during PI hearings and, at least in recent cases, courts seemed to factor it into their decisions denying the FTC's request for a PI.
Notwithstanding those practical considerations, the D.C. Circuit's decision in Whole Foods last year appeared to reaffirm that the FTC usually would be entitled to a PI as long as it could raise "serious questions" about the competitive merits of a transaction. Because Whole Foods had no majority opinion, however, its value as precedent and its influence on lower courts was in question.
The decision in CCC Holdings treats Whole Foods as good law and suggests lower courts may be prepared to rely on it and to apply the "serious questions" standard to FTC PI cases.
In CCC Holdings, the FTC made a strong prima facie case based on its characterization of the deal as a "merger to duopoly" that would lessen competition for loss valuation software used in connection with automobile insurance claims. On the other hand, defendants offered "strong" rebuttal arguments, based on lack of barriers to entry / expansion and impediments to coordination, which caused the court to describe the evidence as "more complicated and uncertain" than the FTC's market concentration figures would suggest.
Despite the strength of the defendants' arguments, the court concluded – repeatedly citing Whole Foods – that the FTC was entitled to a PI because "the FTC has raised questions that are so 'serious, substantial, difficult and doubtful' that they are 'fair ground for thorough investigation, study, deliberation and determination by the FTC.'"
Because of its reliance on Whole Foods and its strict application of the "serious questions" standard, and because it reverses the FTC's losing streak, CCC Holdings is likely to give the FTC greater confidence in its ability to challenge mergers and obtain PIs even where it can do more than raise "serious questions" about the merits of a transaction. In practice, this likely will mean more aggressive merger enforcement from the FTC and may lead to greater divergence from the DOJ, which operates under a different PI statute.
Read more on CCC Holdings at the the FTC web site.
Jones Day's Peter J. Love and Ryan C. Thomas recently authored the attached article analyzing the significance of CCC Holdings. The article, "FTC v. CCC Holdings: Message Received," was originally published in GCP Magazine.
For more information, please contact your principal Jones Day representative or either of the lawyers listed below.
Peter J. Love
Ryan C. Thomas
Jones Day prepares summaries of significant antitrust enforcement, litigation, and policy events as a service to clients and interested readers, to provide timely insight on antitrust and competition law developments relevant to business, but not as legal advice on any specific matter. Please visit our Publication Request form to add your name to our distribution list.