Securities Industry Commentator by Bill Singer, Esq

[A]ntitrust is law enforcement, not regulation. At its best, it supports reducing regulation, by encouraging competitive markets that, as a result, require less government intervention. That is to say, proper and timely antitrust enforcement helps competition police markets instead of bureaucrats in Washington, D.C. doing so. Vigorous antitrust enforcement plays an important role in building a less regulated economy in which innovation and business can thrive, and American consumers can benefit.

[A]t times antitrust enforcers have experimented with allowing illegal mergers to proceed subject to behavioral commitments. That approach is fundamentally regulatory, imposing ongoing government oversight on what should preferably be a free market. And, as 11 Senators wrote to the Attorney General earlier this year, the "lack of enforceability and reliability of such conditions [can] render them insufficient" to protect consumers.  As we reduce regulation across the government, I expect to cut back on the number of long-term consent decrees we have in place and to return to the preferred focus on structural relief to remedy mergers that violate the law and harm consumers.

[I]n recent years, the Division has investigated a number of behavioral decree violations, but has found it onerous to collect information or satisfy the exacting standards of proving contempt and seeking relief.  We have a limited window into the day-to-day operations of business, and it is difficult to monitor and enforce granular commitments like non- discrimination and information firewalls. Behavioral remedies presume that the government should serve as a roving ombudsman of the affairs of business; even if we wanted to do that, we often don't have the skills or the tools to do so effectively.

[I]n my short tenure at the Division we have begun to streamline and improve our use of consent decrees. I was surprised to learn how many longstanding antitrust decrees we still have on the books. Believe it or not, we have nearly 1,300 judgments in effect, with some that are well over 100 years old. My favorite is the one pertaining to music rolls, still protecting consumers against the ills of anti-competitive behavior in the mechanical organ market. But I understand our Chief Legal Advisor Dorothy Fountain prefers the Horseshoer's National Protective Association judgment from 1913. Both are still in effect today.  Do you see what I mean about static solutions to the realities of dynamic markets?

Over time, the preliminary injunction proceedings have become like mini-trials on the merits.  Indeed, at the Division, recent cases have been litigated on the merits in the first instance.  And even PI proceedings can have the same effect as a trial on the merits, because, if the agency wins the PI, parties typically abandon their transaction, while, if the agency loses, it typically does not pursue a permanent injunction-beyond, of course trying to overturn the district court's decision on an expedited appeal.  

First, we at the agencies can strive to identify and clear more transactions that do not threaten harm to competition during the initial HSR waiting period without issuing a second request.   To help facilitate this, if you are aware of competitive issues from the get-go, meet with us early and often.  Help us investigate quickly by being ready to provide information such as lists of overlapping products, strategic and marketing plans, and lists of top customers early in the waiting period.  If you push for early termination, do what you can to get us there.  

Second, when a second request appears necessary, tell us how you think we can make the investigation more efficient by improving our ability to identify the information we need to make our enforcement decisions.  We know that second requests can be burdensome.  I saw one downside to broad second requests when I was in the defense bar: they impose a huge burden on parties to produce the documents.  Now that I've joined the government I've seen another downside: it's also a huge burden on the government to review them.  Our goal should not be more information, but better information.  The Division is looking for relevant documents, not a needle in a haystack.  

Third, work with us so that we at the Division can tailor our document requests to limit the universe of responsive documents to those most likely to be relevant to assessing whether the likely effect of the transaction may be substantially to lessen competition.  All of the Division's second requests are preliminarily based on our model second request, which is available on our website.  We continually revise the model to try to clarify definitions, reduce burdens, and address issues that have arisen in past investigations.  We welcome suggestions from the parties of ways we can further tailor our requests in specific investigations without compromising the quality of the information that will be produced.  

Fourth, I would urge the parties to provide relevant information early in the investigation.  For example, the parties can make business people available for interviews without delay.  The parties can prioritize certain custodians or certain categories of documents.  And documents can be produced on a rolling basis rather than altogether at the end of the gathering process.  In addition, the prompt production of data will speed our economic analysis of the likely competitive effects of the transaction.  

Fifth, we at the Division will endeavor to reduce the number of custodians whose documents we request.  In many routine investigations, the incremental benefit of seeking documents from additional custodians or from investigating additional markets is small in comparison with the burdens the additional requests impose on parties.  Again, we welcome suggestions from the parties as to ways to reduce the number of custodians while ensuring that the necessary relevant documents are produced.

2. From approximately July 2014 through February 2016, Defendants raised about $38 million from more than 150,000 investors in the United States and abroad by engaging in offering and selling unregistered securities in the form of investment contracts. This offering fraud was a Ponzi scheme, as roughly 99% of the revenues generated by Defendants' businesses came exclusively from other investors' funds. 

3. During the relevant time period, Defendants operated at least three separate online businesses which purported to provide legitimate advertising services: MLM Shop, available at mlmshop.net; The Business Shop, available at tbsbusiness.com; and Fort Ad Pays, available at fortadpays.com. 

4. Through these websites, Defendants offered the sale of certain investments referred to as "guaranteed plans" and "advertising packs" on the MLM Shop and The Business Shop websites, and "shares," "Ad Packs," and "Ad Credit Packs" on the Fort Ad Pays website (collectively, "Ad Packs"). Defendants solicited investors to purchase Ad Packs through these websites and promotional videos, available in English, Spanish, and French, and linked directly from the websites. These materials promoted Defendants' businesses as successful online advertising and marketing companies. 

5. In reality, Defendants' claims of operating legitimate businesses were fictitious. The websites' seeming professionalism concealed their true purpose of offering and selling securities to perpetuate Defendants' Ponzi scheme, including representing to investors that the sale of Ad Packs was not a Ponzi scheme. The businesses had virtually no other revenue from any other source. The monies raised from investors were used to make payments to other investors and for the Defendants' personal expenses. 

6. Defendants diverted roughly $4.3 million of investor funds for Berbel's personal use. At least $1.25 million of these funds were transferred by Defendants to the Relief Defendant, Sibades LLC, in February 2015 for the purchase of Berbel's private home in South Florida. More than $20,000 in investor funds were also used to pay the property taxes for his home.

• Securities Industry Commentator
• BrokeAndBroker
• RRBDLaw
• Bill Singer