A No-Compete Agreement

In "Ninth Circuit Limits the Scope of In-Term Covenants Not to Compete," the Intellectual Property Blog tells how the comedy club Improv West made a contract with CCI that gave CCI exclusive use of the trademarked "Improv" name, but also prohibited CCI from opening comedy clubs under any other name:

Defendant Improv West ("Improv") is the founder and owner of the Improv Comedy Club trademark. It entered into an agreement with Comedy Club International ("CCI") providing that: 1) CCI had an exclusive right to use the "Improv" name to open comedy clubs in the United States, 2) CCI had to open four clubs a year for the first three years, and 3) CCI was prohibited from opening comedy clubs under any other name until the agreement expired in 2019.

CCI failed to open the requisite number of clubs. Improv immediately cancelled CCI's right to use the Improv name, began opening its own clubs, and sought to enforce the non-compete for the term of the agreement because CCI continued to run established Improv clubs.

The court ruled that the agreement did not violate anti-trust laws, because it didn't reduce the competitiveness of the comedy market substantially. The Court did say that it would enforce the no-compete agreement only in markets where new CCI clubs would directly hurt Improv profits, since California state law bans extreme no-compete contracts.

What the courts try to do in a case like this is to see whether the contract will end up destroying value (by reducing existing competition in the market) or increase it (by allowing two firms to help each other improve their product or reduce their costs.

California law, however, says the state will not enforce agreements not to compete that block competition in a substantial section of the market, so the Court ruled that CCI was only blocked from opening new clubs in counties where it already was operating an Improv club.

A Tax Software Merger

In "U.S. Sues to Stop H&R Block Deal for Rival,", the WSJ says:

The Department of Justice filed a civil antitrust lawsuit on Monday to stop the biggest U.S. tax preparer, H&R Block Inc. from buying the maker of a rival, do-it-yourself tax preparation product called TaxAct....
The top three companies in the field account for 90% of the sales of online tax programs and do-it-yourself tax-filing computer software.

The proposed purchase "would combine the second- and third-largest providers in that market and essentially create a duopoly," the department alleged in a complaint filed in a Washington, D.C., federal court. H&R Block had agreed to buy 2nd Story Software, or 2SS, in a transaction valued at $287.5 million in October.

TaxAct has served as "a maverick in the market," prompting its two rivals to lower prices by introducing such innovations as offering free filing of federal tax returns on the Internet in 2005, the Justice department said. The department's complaint cites internal H&R Block emails that it said show Block wanted to buy the TaxAct maker to "regain control of industry pricing and avoid further price erosion."
... The department cited an internal H&R Block email saying that "the other possible strategic consideration is that Intuit and HRB together would have 84% of the digital market and we both obviously have great incentive to keep this channel profitable."

Will blocking this merger encourage further entry into the industry?

One thing I wonder is why the US government does not itself give away or sell tax preparation software. Is there a good reason for it not to?

The Proposed Merger of ATT and T-Mobile

In "T-Mobile Antitrust Challenge Leaves AT&T With Little Recourse on Takeover," Bloomberg says

AT&T Inc. (T) wouldn’t have much luck trying to salvage its proposed $39 billion takeover of T-Mobile USA Inc. through negotiation with the U.S. Justice Department, leaving a court fight as its only recourse, lawyers said.

The combination of the country’s second- and fourth-largest wireless carriers would violate antitrust law and “substantially lessen competition,” the U.S. said in a lawsuit filed yesterday in federal court in Washington. The Justice Department asked U.S. District Judge Ellen Segal Huvelle to block the deal.

It would be strange for a merger of such large firms in a concentrated market to be permitted. What is most surprising is that ATT has agreed in its contract with T-Mobile, owned presently by Deutsche Telekom, to pay about $10 billion if the merger doesn't go through:

Rejection by regulators would leave AT&T liable to pay Deutsche Telekom $3 billion in cash, to give T-Mobile USA wireless spectrum, and to reduce charges for calls into AT&T’s network, a package valued at as much as $7 billion

FTC vs. Justice Department

"This Takeover Battle Pits Bureaucrat vs. Bureaucrat," in the WSJ says

Many antitrust lawyers believe that several deals that were approved by the Justice Department during the Bush administration—including Whirlpool Corp.'s purchase of Maytag Corp. and the merger of Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc.—would have been challenged by the FTC. Whirlpool and SiriusXM declined to comment, as did the two agencies....

Some methods used to resolve agency disputes belie the stakes involved. In addition to the most recent coin toss—which several people familiar with the matter said the Justice Department won—the agencies have employed the "possession arrow" system borrowed from college basketball, in which they take turns.

How else might the agencies decide who should analyze a given merger proposal?

The Canadian Government Wheat Monopoly

Canada Is Taking Aim at Its Wheat Monopoly says the WSJ:

The Canadian Wheat Board is poised to lose its monopoly grip on the country's wheat sales. Canada's Conservative Party captured a parliamentary majority this past spring, and newly elected government officials took that as a mandate to end the wheat board's reign.

The ripple effects from eliminating—or even weakening—the board's power would be widespread. Wheat prices, which already have experienced extreme highs and lows over the past three years, could become more volatile, some analysts say....

Farmers who favor the board, including its current chairman Allen Oberg, contend the benefits far outweigh the cross-border price differences that can emerge. By controlling the whole crop, the board has considerable power in global commodity markets to ensure Canadian farmers get the best price. Farmers also get an up-front payment that is backed by the government, and the board doesn't aim for a profit, so more money goes back to farmers than under an open-market system....

The board basically sells the grains and then divides the returns among the wheat and barley growers in western Canada.

So farmers get the average price over the course of a year, never capturing the top of the market, but also never selling at annual lows.

The board has added other pricing options over the years, including allowing farmers to sell their crop up-front for a fixed price.

The estimated return for a Canadian farmer in the board's traditional sales program is estimated at $7.19 to $7.48 a bushel for the spring wheat coming out of the fields now. That compares with Wednesday's U.S. cash price of $8.85 a bushel, according to MGEX.

The wheat board cautions against trying to compare the price Canadian farmers are expected to receive against current market prices in the U.S., saying the timing, location and system of sales are all different.