Arctic Glacier Pleads Guilty to Criminal Antitrust Conspiracy

Arctic Glacier and three of its executives have pleaded guilty to a criminal antitrust conspiracy in the market for packaged ice.

The Department of Justice issued a press release on Tuesday announcing the plea agreement:

Minneapolis Packaged-Ice Company Agrees to Plead Guilty to Customer Allocation Conspiracy

Company Agrees to Pay $9 Million Criminal Fine

WASHINGTON – A packaged-ice company, headquartered in St. Paul, Minn., has agreed to plead guilty and to pay a $9 million criminal fine for allocating customers, the Department of Justice announced today. In addition, three of the company's former executives pleaded guilty for their roles in the conspiracy to allocate customers.

According to a one-count felony charge filed under seal on Sept. 10, 2009, and unsealed today in the U.S. District Court in Cincinnati, Arctic Glacier International Inc. engaged in a conspiracy to suppress and eliminate competition by allocating packaged-ice customers in the Detroit metropolitan area and southeastern Michigan, beginning Jan. 1, 2001, and continuing until at least July 17, 2007. Under the plea agreement, which must be approved by the court, Arctic Glacier has agreed to cooperate with the Department's ongoing investigation.

According to separate one-count felony charges, also filed under seal on Sept. 10, 2009, and unsealed today in the U.S. District Court in Cincinnati, Frank Larson, Arctic Glacier's former senior vice president of operations, and Keith Corbin, the company's former vice president of sales and marketing, participated in the same conspiracy beginning at least as early as March 1, 2005, and continuing at least until July 17, 2007. According to an additional one-count felony charge filed under seal on Sept. 10, 2009, in the U.S. District Court in Cincinnati and unsealed today, Gary Cooley, the company's former vice president of sales and marketing, also participated in the conspiracy from at least as early as June 1, 2006, until July 17, 2007. Under the three separate plea agreements, which must be approved by the court, the former executives have agreed to cooperate with the Department's ongoing investigation.

In court documents, the Department said that the three former executives and Arctic Glacier, conspired with another packaged-ice competitor to allocate packaged-ice customers in southeastern Michigan and the Detroit metropolitan areas. As a part of the conspiracy, Arctic Glacier, its former executives and other co-conspirators exchanged information for the purpose of monitoring and enforcing adherence to the agreed customer allocations and refrained from competing for the allocated customers.

Arctic Glacier, Larson, Corbin and Cooley are each charged with allocating packaged-ice customers in violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million fine for individuals and a $100 million fine for corporations. The maximum fines may be increased to twice the gain derived from the crime or twice the loss suffered by the victims if either of those amounts is greater than the Sherman Act maximum fines.

These charges stem from an ongoing antitrust investigation into the packaged-ice industry. As a part of the same investigation, Home City Ice Company pleaded guilty on June 17, 2008, for its participation in a conspiracy to allocate customers and territories in the packaged-ice industry. The investigation is being conducted by the Antitrust Division's Cleveland Field Office and by FBI offices in Ann Arbor, Mich.; Indianapolis, Ind.; Dallas, Texas; and Cincinnati and Toledo, Ohio.

One of Arctic Glacier's competitors, Home City Ice, previously pleaded guilty to allocating customers and territories. Several civil actions are pending against Arctic Glacier, Home City, and Reddy Ice.

Court Denies News America’s Summary Judgment Motion in Insignia System’s Lawsuit

On September 30, the U.S. District Court for the District of Minnesota largely denied News America's motion for summary judgment and granted Insignia Systems' motion for summary judgment on News America's counterclaims.

Insignia had alleged that News America engaged in anticompetitive business practices in the market for in-store shelf advertising, while News America filed a number of counterclaims.

News America had asked the Court to dismiss Insignia's claims on the grounds that the undisputed material facts failed to prove the violations alleged by Insignia, including claims for monopolization, conspiracy, and false advertising. The Court ruled in favor of News America, however, on Insignia's claim that News America has monopsony power over retailers, pointing out that Insignia's own expert witness indicated that he did not believe that News had monopsony power.

Insignia filed a motion seeking dismissal of News America counterclaims, which the Court granted. The Court held that News America had failed to produce evidence of damages on six of its claims, and could not recover damages on those claims. The Court dismissed claims that were predicated on allegedly disparaging statements because those statements, which included statements expressing the opinions of Scott Drill, were not actionable, and there was no evidence to suggest that Drill believed his statements to be false. The Court found that News had failed to present sufficient evidence of tortious interference with contract, tortious interference with prospective business relationship, and unfair competition, and dismissed those claims.

In response to an unrelated discovery motion, the Court's order granted in part a motion to compel, and extended discovery for an additional 45 days, which could affect the trial date.

In light of the Court's order, News America will likely face two trials in federal court in early 2010 – Insignia's lawsuit, and Valassis's lawsuit, both of which raise similar allegations of News America's anticompetitive practices in the in-store advertising industry.

Related posts.

DOJ Weighs in on Proposed Google Books Settlement

The Department of Justice Antitrust Division filed a statement of interest Friday, available here, opposing the Google Books settlement. DOJ's filing addresses concerns that the settlement: (1) fails to satisfy Federal Rule of Civil Procedure 23 (which governs class action lawsuits); (2) violates copyright law; and (3) violates antitrust law. DOJ's statement is a bit unusual in that it raises both antitrust and non-antitrust concerns; typically the DOJ's Antitrust Division confines public stances to antitrust issues.

DOJ states that the proposed settlement "is one of the most far-reaching class action settlements of which the United States is aware." Under Rule 23, DOJ raises concerns that the interests of one set of class members -- orphan works holders – conflicts with another set of class members – rightsholders, that the settlement resolves amorphous future claims, and that the class was not provided adequate notice of the settlement. A class member (and former colleague), Scott Gant, previously filed a lengthy and well reasoned objection to the settlement raising more detailed class action procedural concerns.

DOJ raises two main antitrust concerns. First, the proposed settlement appears to give book publishers the power to restrict price competition. Second, the settlement may "effectively preclude[]" competing distributors of digital books. Kotchen & Low recently co-authored an op-ed, along with the American Antitrust Institute, addressing the antitrust implications of the Google Books settlement, available here, raising the same concerns. The settlement provides a fixed royalty rate and creates a joint pricing mechanism. It also provides a monopoly over orphan works, which may create a substantial disadvantage for any potential competitors.

Despite these objections, DOJ recognizes that the settlement has great potential benefits, such as to "breathe life into millions of works that are now effectively off limits to the public," and to "open the door to new research opportunities."

In light of these issues, DOJ concludes that the Court should reject the proposed settlement, but should encourage the parties to continue negotiations to modify the settlement consistent with Rule 23 and the copyright and antitrust laws. Consistent with Kotchen & Low and AAI's recent op-ed, I agree, and encourage the Court to give substantial weight to DOJ's concerns.

Consolidated Complaints Filed in Packaged Ice MDL

Plaintiffs in the In re Packaged Ice Antitrust Litigation, MDL 1952, filed consolidated amended class action complaints this week alleging a conspiracy by the three major packaged ice manufacturers to allocate territories.

More than 70 separate complaints were originally filed last year against packaged ice manufacturers Reddy Ice, Arctic Glacier, and Home City Ice. The cases were transferred and consolidated by the Judicial Panel on Multidistrict Litigation before Judge Borman in the Eastern District of Michigan. After Judge Borman appointed lead counsel, plaintiffs' counsel filed their consolidated amended complaints.

Plaintiffs allege, inter alia, that:

The existence of the unlawful agreements and conspiracy is evidenced, inter alia, by admissions made by Defendants' officers and employees who directly participated in or witnessed acts in furtherance of the conspiracy, by a United States Department of Justice Criminal Information and guilty plea, as well as by the structure of the market and supporting economic data.

Defendants have 60 days to respond to the complaints.

The amended complaints were discussed in an article in the Dallas Morning News.

Valassis’ Federal Trial Set for February 2, 2010

Valassis issued a press release today announcing that a trial date for its federal antitrust lawsuit against News America has been set for February 2, 2010:

Valassis (NYSE: VCI), one of the nation's leading media and marketing services companies, announced that, on Thursday, Sept. 3, 2009, United States District Court Judge Arthur J. Tarnow formally scheduled Valassis' federal trial against News America Incorporated ("News America") for Feb. 2, 2010. Valassis originally filed the action in the United States District Court, Eastern District of Michigan on Jan. 18, 2006 alleging violations of the Sherman Act. Generally, the complaint alleges that News America has improperly leveraged and tied the purchase of its in-store promotion and advertising services to the purchase of space in its free-standing insert (FSI) and that News America has attempted to monopolize the FSI market. Judge Tarnow denied all motions for summary judgment and established the trial schedule.

"With a court date set, we are eager to move forward with the second of our three cases against News America to restore lost value to our shareholders and return to a fair and even playing field in the FSI marketplace," said Alan F. Schultz, Valassis Chairman, President and Chief Executive Officer.

As announced on July 23, 2009, a Wayne County Circuit Court jury awarded Valassis $300 million for compensatory damages in its first of three lawsuits against News America. News America was found liable for unfair competition and tortious interference. This award accumulates interest on a compounding basis beginning from March 9, 2007, the date the complaint was filed. The award is subject to the risks of post-trial motions, appeal and collection.

In addition to the Federal antitrust law claims, Valassis has a lawsuit pending against News America in the Supreme Court of the State of California for the County of Los Angeles raising claims under California's Cartwright, Unfair Competition and Unfair Practices Acts. This case is not currently scheduled for trial. Under the relevant Federal and California laws, any compensatory damages awarded in either of the remaining cases will be automatically tripled by the respective court.

Related posts.

Summary Judgment Denied in Valassis’ Federal Case Against News America

A federal judge in Michigan denied Valassis' motion for partial summary judgment today. Although Valassis submitted a supplemental brief with some powerful evidence from the recent state court trial, the court found that the recent state court verdict did not have a preclusive effect. Similarly, the court denied News America's motion for summary judgment:

ORDER DENYING CROSS-MOTIONS FOR SUMMARY JUDGMENT [129, 133]

Before the court are defendants' motion for summary judgment and plaintiff's motion for partial summary judgment. The court received supplemental briefing. The motions came on for a hearing on September 3, 2009.

For the reasons stated on the record, the motions are DENIED. The state-court trial before Judge Sapala does not have issue-preclusive effect on the proceedings before this court. Accordingly, there are genuine issues of material fact for a jury to consider.
. . . .

With the denial of the summary judgment motions (neither of which is surprising), I would expect that trial will commence in the next few months. After News America lost the first trial on unfair competition, and given the evidence presented in that case, they have reason to be concerned about the federal case, which involves antitrust claims that would lead to treble damages.

Related posts.

News America Whistleblower Emmel Drops Bid to Lift Stay

I've posted several times about Robert Emmel, a whistleblower who has previously testified to evidence of wrongdoing by his former employer, News America Marketing. News America prevailed in a court case against him, and the court entered an injunction preventing Emmel from disclosing confidential News America information, effectively preventing him from testifying in person at the Valassis or Insignia trials. Emmel appealed the injunction, but his appeal was stayed after he filed bankruptcy. Over two months ago, he filed a motion in the bankruptcy court to lift the stay, but has recently withdrawn that motion. In his recent filing he laments the delayed resolution and News' tactics:

NAM's sole major objective in delaying Emmel's motion has been to prevent, for as long as possible, the Emmel live trial appearances as a witness at three pending trials against NAM so that he cannot testify to previously unknown and non-disclosed (except to government regulators and officials through previous Emmel disclosure) additional allegations in the areas of NAM's deceptive business practices, fraud, improper revenue recognition and other areas of wrongdoing concerning NAM's alleged criminal conduct against competitors, NAM's own sales clients and retailers under lease agreement contracts with NAM, and, lastly, the consequences of the wrongdoing to cause NAM actions detrimental to the shareholders of the public corporation News Corp. of which NAM is an operating entity. And, further, NAM desires to prevent Emmel from providing even greater detail --as Emmel was a former employee insider of almost 8 years at NAM—of alleged abhorrent NAM business practices and actions against its own customers and against competitors that has now entered the public record from emergence of discovery previously under seal, and now evidence coming into court proceedings and through trial testimony of Emmel and various other third parties at a recent trial that has concluded.

While live testimony by Emmel would be helpful to the plaintiffs, the recent Valassis verdict shows that it's not entirely necessary.