Merging Parties Beware: DOJ Follows Through on Promise to Vigorously Enforce Merger Consent Decrees

In what it described as “the most significant enforcement action of an existing antitrust decree by the Department in 20 years,” the United States Department of Justice’s Antitrust Division recently required Live Nation Entertainment, Inc. and Ticketmaster Entertainment, Inc. to agree to several significant modifications to the 2010 consent decree that allowed the largest U.S. concert promoter to combine with the dominant ticketing service.  Citing the companies’ “repeated [decree] violations,” the DOJ required Live Nation and Ticketmaster to agree to significant monetary penalties and remedial measures, including extending the decree’s term by five and a half years, reimbursing the DOJ $3 million for its investigatory costs, implementing a whistleblower protection policy and DOJ-approved antitrust training, appointing an independent monitoring trustee, and paying a predetermined $1 million fine for each future decree violation.

After the court approved this settlement, Assistant Attorney General Makan Delrahim stated that the DOJ sought these significant penalties because the companies “broke the promises they made to the court and the American people” and thus needed to be held “accountable.”  He also stated that these penalties will “make[ ] it easier for the Antitrust Division and state enforcers to identify and prosecute future transgressions.”  AAG Delhrahim further made clear that these penalties should be seen as a strong signal that “[m]erging parties will be held to their promises” and that “the [DOJ] will not tolerate transgressions that hurt the American consumer.”

Recent policy and organizational changes implemented by the DOJ further suggest that it fully intends to bring additional merger consent decree enforcement actions and to seek considerable penalties when doing so.  The DOJ has announced the creation of an antitrust consent decree enforcement unit, which will be responsible for monitoring whether companies are complying with consent decrees and prosecuting any violations, and has added provisions to its merger consent decrees that lower the standard of proof for establishing a decree violation and expand the relief that the DOJ can seek.  In describing these changes, AAG Delrahim has repeatedly emphasized that their purpose is to ensure that the DOJ can “effectively” and “meaningfully” enforce its antitrust consent decrees.

Companies entering into merger consent decrees – especially those involving behavioral remedies – should anticipate even greater scrutiny of their compliance with the decree and an increased willingness on the part of the DOJ to prosecute any perceived violations.

Live Nation and Ticketmaster Face Stiff Penalties for Violating Merger Consent Decree

In 2009, Live Nation (the largest concert promoter in the U.S.) agreed to merge with Ticketmaster (the largest ticketing service provider for major concert venues in the U.S.).  In order to secure DOJ approval, the companies entered into a consent decree in 2010 that, among other things, prohibited them from:  (i) conditioning or threatening to condition Live Nation’s provision of concerts and other live events on a venue’s purchase of Ticketmaster’s ticketing services, or (ii) retaliating against concert venues that opted to use another ticketing company. 

According to the DOJ, Live Nation and Ticketmaster began violating these provisions “shortly after the decree was entered in 2010” and continued to violate them “as late as March 2019.”  As alleged by the DOJ, Live Nation and Ticketmaster gained a “well-earned reputation for threatening behavior” and “retaliatory conduct” because they “repeatedly conditioned and threatened to condition Live Nation’s provision of live concerts on a venue’s purchase of Ticketmaster ticketing services,” and “retaliated against venues that opted to use competing ticketing services[.]”  Such conduct, the DOJ concluded, “hinder[ed] effective competition for primary ticketing services” because “venues are afraid to leave Ticketmaster lest they risk losing Live Nation concerts,” which generate revenue that is of “paramount importance . . . to a venue’s bottom line.”

In order “to ensure that American consumers get the benefit of the bargain reached in [the] 2010 [consent decree]” and to “prevent future violations,” the DOJ required Live Nation and Ticketmaster to agree to the following key modifications to the decree.

• Extending the decree by five and one-half years in order to ensure that “at least one full cycle of most venue ticketing contracts [will] be free from [the companies’] coercive tactics and give competition a chance to take hold.”
• Adding language “that makes even clearer” the “specific conduct prohibited by” the decree’s anti-retaliation and anti-conditioning provisions.
• Appointing an independent monitoring trustee with the authority to investigate and report on the companies’ compliance with the decree, including making recommendations to the DOJ about appropriate remedies for any violations.
• Hiring an antitrust compliance officer who will be responsible for ensuring compliance with the consent decree and implementing a whistleblower protection policy and DOJ-approved antitrust training, among other things.
• Lowering the DOJ’s burden of proof in any future decree enforcement action from the traditional clear and convincing evidentiary standard to a preponderance of the evidence standard.
• Requiring the companies to pay a $1 million fine for any future violations of the decree’s anti-retaliation or anti-conditioning provisions.
• Enabling the DOJ to file an enforcement action for any decree violations for up to four years after the decree’s expiration.
• Requiring the companies to reimburse the DOJ’s $3 million costs for investigating and prosecuting the alleged violations.

Recent DOJ Initiatives Designed to Increase the Enforceability of Merger Consent Decrees

During the past three years, the DOJ has sought to strengthen its ability to enforce its merger consent decrees by making several changes to its standard decree provisions and organizational structure.  For instance, the DOJ Antitrust Division has announced its intention to create an Office of Decree Enforcement, which will have “the sole goal [of] ensur[ing] compliance with, and enforcement of, [the Division’s consent] decrees.”¹  While the DOJ has yet to disclose any details about the structure, authority, and resources of this new office, it could decide to use the Federal Trade Commission’s Compliance Division as a model.  Among other things, the FTC’s Compliance Division is responsible for overseeing compliance with FTC orders, investigating possible violations thereof, and bringing enforcement actions against non-complying parties.

In addition, the DOJ has revised its antitrust consent decrees to include new standard provisions “designed to ensure [that the Antitrust Division] can meaningfully enforce [these decrees].”  As discussed below, these provisions seek to: (i) lower the evidentiary standard that the DOJ must satisfy when seeking to enforce a consent decree in court; (ii) require parties to reimburse the DOJ for its investigatory and litigation costs if they are found to have violated a decree; and (iii) allow the DOJ to obtain an extension of a decree if a violation is found to have occurred.

DOJ Civil Contempt Actions are Now Governed by a Preponderance of the Evidence Standard

The DOJ has historically been required to satisfy the clear and convincing evidentiary standard when seeking to hold a party in civil contempt for violating a consent decree.  Over the past three years, the DOJ has sought to lower its burden of proof by requiring parties to agree that such actions will be governed by the preponderance of the evidence standard.  In doing so, the DOJ has explained that it has decided to “contract[ ] around” the default clear and convincing standard because:

• Consent decree violation actions should be governed by the “same preponderance of the evidence standard” that would apply in a challenge to the underlying transaction that resulted in the consent decree or an action seeking a decree interpretation.
• “The default clear and convincing evidence standard makes it difficult for the [Antitrust] Division to enforce decrees.”
• The need to satisfy the clear and convincing standard “sets up a dynamic” that is “counterproductive for both parties” given that the Antitrust Division, “needing to meet the heightened standard, must engage in extensive investigative efforts” that “subject[ ] parties to more burdensome CID investigations.”
• The clear and convincing standard “adds burden and delay to decree violation investigations” given that parties, “knowing they will have the benefit of a favorable evidentiary standard, [have] an incentive to hold out from resolving disputes and exacerbate the situation.”

Non-complying Parties Must Reimburse the DOJ for Investigatory and Litigation Costs

Traditionally, the DOJ has borne the “costs of decree enforcement investigations and proceedings, even in the presence of a serious violation of the decree and a meritorious judgment from the court.”  During the past three years, the DOJ has sought to reverse this default rule by requiring parties to agree to a fee-shifting provision whereby they agree to reimburse the DOJ for investigatory and litigation expenses “incurred in connection with any successful consent decree enforcement effort.”  The types of expenses covered by this fee-shifting provision include “attorney’s fees, expert fees, and [other decree enforcement-related] costs.”  As shown by the fact that Live Nation and Ticketmaster were required to reimburse the DOJ $3 million in costs, these provisions can subject companies to significant penalties.

The DOJ has explained that the inclusion of such fee-shifting provisions is both necessary and appropriate because it “encourage[s] speedy resolution of decree violation investigations” and “compensate[s] taxpayers for the costs” that the DOJ incurs whenever parties fail to honor their commitments under a consent decree.  The DOJ has also noted that most companies entering into antitrust consent decrees are familiar with fee-shifting provisions because many of them include such provisions in their commercial contracts.

Violations Can Result in the Extension of a Consent Decree’s Term

The DOJ’s antitrust consent decrees typically last 10 years.  In consent decrees entered during the past three years, the DOJ has required parties to agree that the DOJ may seek a “one-time extension of the [decree’s] term” if a court “finds that a defendant has violated the consent decree.”  In doing so, the DOJ has explained that these decree extension provisions “should make the relief in decree enforcement proceedings more meaningful, and [thus] discourage violations.”

The DOJ has also explained that it will “only [seek a consent decree extension] if appropriate to the market circumstances and the facts of the violation.”  In seeking to extend the Live Nation/Ticketmaster merger consent decree, the DOJ argued that, “because most primary ticketing contracts last for three to five years, a five- and one-half-year extension of the [decree] would ensure that at least one full cycle of most venue ticketing contracts would be free from [the companies’] coercive tactics and give competition a chance to take hold.”  The DOJ also emphasized that such a lengthy extension was necessary because the companies’ violations “began shortly after the decree was entered” and “recurred throughout its term.”