[Federal Register Volume 87, Number 87 (Thursday, May 5, 2022)]
[Notices]
[Pages 26787-26789]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-09595]



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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Biglari Holdings Inc.; Response to Public 
Comment

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
16(b)-(h), the United States hereby publishes below the Response to 
Public Comment on the Proposed Final Judgment in United States v. 
Biglari Holdings Inc., Civil Action No. 1:21-cv-03331-TSC, which was 
filed in the United States District Court for the District of Columbia 
on April 29, 2022, together with a copy of the one comment received by 
the United States.
    A copy of the comment and the United States' response to the 
comment is available at https://www.justice.gov/atr/case/us-v-biglari-holding-inc. Copies of the comment and the United States' response are 
available for inspection at the Office of the Clerk of the United 
States District Court for the District of Columbia. Copies of these 
materials may also be obtained from the Antitrust Division upon request 
and payment of the copying fee set by Department of Justice 
regulations.

Suzanne Morris,
Chief, Premerger and Division Statistics, Antitrust Division.

United States District Court for the District of Columbia

    United States of America, Plaintiff, v. Biglari Holdings Inc., 
Defendant.

Civil Action No. 1:21-cv-03331-TSC

Response of Plaintiff United States to Public Comment on the Proposed 
Final Judgment

    Pursuant to the requirements of the Antitrust Procedures and 
Penalties Act (the ``APPA'' or ``Tunney Act''), 15 U.S.C. 16, the 
United States hereby responds to the one public comment received 
regarding the proposed Final Judgment in this case. After careful 
consideration of the submitted comment, the United States continues to 
believe that the civil penalty required by the proposed Final Judgment 
provides an effective and appropriate remedy for the violation alleged 
in the Complaint and is therefore in the public interest. The United 
States will move the Court for entry of the proposed Final Judgment 
after the public comment and this response have been published as 
required by 15 U.S.C. 16(d).

I. Procedural History

    On March 16, 2020, Biglari Holdings Inc. (``Biglari'') acquired 
55,141 voting securities of Cracker Barrel Old Country Store, Inc. 
(``Cracker Barrel''), which increased Biglari's holdings of Cracker 
Barrel voting securities to a value of approximately $159.4 million. 
Biglari did not file a notification with the Department of Justice and 
the Federal Trade Commission (collectively, the ``federal antitrust 
agencies'') or observe a waiting period before acquiring the Cracker 
Barrel voting securities. The United States filed a civil antitrust 
Complaint on December 22, 2021, seeking civil penalties for the 
violation of the notice and waiting period requirements of Section 7A 
of the Clayton Act, 15 U.S.C. 18a, commonly known as the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 (``HSR Act'' or ``Act''). The 
Complaint alleges that Biglari was in continuous violation of the HSR 
Act from March 16, 2020 through July 20, 2020, when the waiting period 
expired on its corrective filing. See Dkt. No 1-1.
    At the same time the Complaint was filed, the United States filed a 
proposed Final Judgment and a Stipulation and Order in which the United 
States and Defendant consent to entry of the proposed Final Judgment 
after compliance with the requirements of the Tunney Act, 15 U.S.C. 16. 
See Dkt. Nos. 1-2, 1-3. The proposed Final Judgment requires Defendant 
to pay a civil penalty of $1,374,190 within 30-days of entry of the 
Final Judgment.
    Pursuant to the APPA's requirements, the United States filed a 
Competitive Impact Statement (``CIS'') on December 22, 2021, describing 
the transaction and the proposed Final Judgment. See Dkt. No. 1-4. On 
January 5, 2022, the United States published the Complaint, proposed 
Final Judgment and CIS in the Federal Register, see 87 FR 484 (2022), 
and caused notice regarding the same, together with directions for the 
submission of written comments relating to the proposed Final Judgment, 
to be published in The Washington Post for seven days, from December 
31, 2021 through January 6, 2022. The 60-day period for public comment 
ended on March 7, 2022. The United States received one comment, 
attached as Exhibit A.

II. The Complaint and the Proposed Final Judgment

    The Complaint alleges that Biglari was in continuous violation of 
the HSR Act each day during the period beginning March 16, 2020 through 
July 20, 2020, when the waiting period expired on its corrective 
filing. In particular, the Complaint alleges that Biglari held 2 
million Cracker Barrel voting securities prior to March 16, 2020, with 
a value of approximately $155.1 million. On March 16, 2020, two 
entities controlled by Biglari acquired an additional 55,141 Cracker 
Barrel voting securities. When aggregated with the voting securities 
already held by Biglari, these acquisitions resulted in Biglari holding 
2,055,141 Cracker Barrel voting securities, valued at approximately 
$159.4 million. Biglari's holdings of Cracker Barrel voting securities 
therefore exceeded the size of transaction threshold, which in March 
2020 was $94 million. Additionally, Biglari and Cracker Barrel exceeded 
the size of person thresholds, which in March 2020 were $18.8 million 
and $188 million. The HSR Act required Biglari to file a notification 
with the federal antitrust agencies and to observe a waiting period 
before consummating the March 16, 2020, acquisitions of Cracker Barrel 
voting securities. By acquiring the voting securities without filing 
the required notification and observing the waiting period, Biglari 
violated the HSR Act, Section 7A of the Clayton Act, 15 U.S.C. 18a.
    The violation alleged in the Complaint is not Biglari's first 
violation of the HSR Act. On September 25, 2012, the United States 
filed a complaint alleging that Biglari's acquisitions of voting 
securities of Cracker Barrel in June 2011 violated the HSR Act. United 
States v. Biglari Holdings, Inc., Civil Action No. 1:12-cv-01586 
(D.D.C. 2012). At the same time the 2012 complaint was filed, the 
United States filed a proposed final judgment settling the case. The 
final judgment, entered by the court on May 30, 2013, required Biglari 
to pay a civil penalty of $850,000 for violating the reporting and 
waiting period requirements of the HSR Act.
    As explained in the CIS, the proposed Final Judgment imposes a 
civil penalty of $1,374,190 and is designed to address the HSR 
violation alleged in the Complaint, penalize the Defendant, and deter 
the Defendant and others from violating the HSR Act. The penalty amount 
reflects that this is Defendant's second violation of the HSR Act in 
connection with the same issuer (Cracker Barrel), that Defendant did 
not make a corrective filing until the Federal Trade Commission's 
Premerger Notification Office notified Defendant of its failure to 
file, and that Defendant did not consult HSR counsel prior to its 
acquisition as it had committed to do in connection with its 2011 HSR 
Act violation. See Dkt. No. 1-4.

III. Standard of Judicial Review

    The Clayton Act, as amended by the APPA, requires that proposed 
consent judgments in antitrust cases brought by the United States be 
subject to a 60-day

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comment period, after which the Court shall determine whether entry of 
the proposed Final Judgment ``is in the public interest.'' 15 U.S.C. 
16(e)(1). In making that determination, the Court, in accordance with 
the statute as amended in 2004, is required to consider:

    (A) The competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration of relief sought, anticipated effects of 
alternative remedies actually considered, whether its terms are 
ambiguous, and any other competitive considerations bearing upon the 
adequacy of such judgment that the court deems necessary to a 
determination of whether the consent judgment is in the public 
interest; and
    (B) the impact of entry of such judgment upon competition in the 
relevant market or markets, upon the public generally and 
individuals alleging specific injury from the violations set forth 
in the complaint including consideration of the public benefit, if 
any, to be derived from a determination of the issues at trial.

    15 U.S.C. 16(e)(1)(A) & (B). In considering these statutory 
factors, the Court's inquiry is necessarily a limited one as the 
government is entitled to ``broad discretion to settle with the 
defendant within the reaches of the public interest.'' United States v. 
Microsoft Corp., 56 F.3d 1448, 1461 (D.C. Cir. 1995); United States v. 
U.S. Airways Grp., Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014) 
(explaining that the ``court's inquiry is limited'' in APPA 
settlements); United States v. InBev N.V./S.A., No. 08-1965 (JR), 2009 
U.S. Dist. LEXIS 84787, at *3 (D.D.C. Aug. 11, 2009) (noting that a 
court's review of a consent judgment is limited and only inquires 
``into whether the government's determination that the proposed 
remedies will cure the antitrust violations alleged in the complaint 
was reasonable, and whether the mechanisms to enforce the final 
judgment are clear and manageable'').
    Under the APPA, a court considers, among other things, the 
relationship between the remedy secured and the specific allegations in 
the government's complaint, whether the proposed Final Judgment is 
sufficiently clear, whether its enforcement mechanisms are sufficient, 
and whether it may positively harm third parties. See Microsoft, 56 
F.3d at 1458-62. With respect to the adequacy of the relief secured by 
the proposed Final Judgment, a court may not ``make de novo 
determination of facts and issues.'' United States v. W. Elec. Co., 993 
F.2d 1572, 1577 (D.C. Cir. 1993) (quotation marks omitted); see also 
Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 152 F. 
Supp. 2d 37, 40 (D.D.C. 2001); United States v. Enova Corp., 107 F. 
Supp. 2d 10, 16 (D.D.C. 2000); InBev, 2009 U.S. Dist. LEXIS 84787, at 
*3. Instead, ``[t]he balancing of competing social and political 
interests affected by a proposed antitrust consent decree must be left, 
in the first instance, to the discretion of the Attorney General.'' W. 
Elec. Co., 993 F.2d at 1577 (quotation marks omitted).
    ``The court should bear in mind the flexibility of the public 
interest inquiry: the court's function is not to determine whether the 
resulting array of rights and liabilities is one that will best serve 
society, but only to confirm that the resulting settlement is within 
the reaches of the public interest.'' Microsoft, 56 F.3d at 1460 
(quotation marks omitted); see also United States v. Deutsche Telekom 
AG, No. 19-2232 (TJK), 2020 WL 1873555, at *7 (D.D.C. Apr. 14, 2020). 
More demanding requirements would ``have enormous practical 
consequences for the government's ability to negotiate future 
settlements,'' contrary to congressional intent. Microsoft, 56 F.3d at 
1456. ``The Tunney Act was not intended to create a disincentive to the 
use of the consent decree.'' Id.
    The United States' predictions about the efficacy of the remedy are 
to be afforded deference by the Court. See, e.g., Microsoft, 56 F.3d at 
1461 (recognizing courts should give ``due respect to the Justice 
Department's . . . view of the nature of its case''); United States v. 
Iron Mountain, Inc., 217 F. Supp. 3d 146, 152-53 (D.D.C. 2016) (``In 
evaluating objections to settlement agreements under the Tunney Act, a 
court must be mindful that [t]he government need not prove that the 
settlements will perfectly remedy the alleged antitrust harms[;] it 
need only provide a factual basis for concluding that the settlements 
are reasonably adequate remedies for the alleged harms.'') (internal 
citations omitted); United States v. Republic Servs., Inc., 723 F. 
Supp. 2d 157, 160 (D.D.C. 2010) (noting ``the deferential review to 
which the government's proposed remedy is accorded''); United States v. 
Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (``A 
district court must accord due respect to the government's prediction 
as to the effect of proposed remedies, its perception of the market 
structure, and its view of the nature of the case.''). The ultimate 
question is whether ``the remedies [obtained by the Final Judgment are] 
so inconsonant with the allegations charged as to fall outside of the 
`reaches of the public interest.' '' Microsoft, 56 F.3d at 1461 
(quoting W. Elec. Co., 900 F.2d at 309).
    Moreover, the Court's role under the APPA is limited to reviewing 
the remedy in relationship to the violations that the United States has 
alleged in its complaint, and does not authorize the Court to 
``construct [its] own hypothetical case and then evaluate the decree 
against that case.'' Microsoft, 56 F.3d at 1459; see also U.S. Airways, 
38 F. Supp. 3d at 75 (noting that the court must simply determine 
whether there is a factual foundation for the government's decisions 
such that its conclusions regarding the proposed settlements are 
reasonable); InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``[T]he 
`public interest' is not to be measured by comparing the violations 
alleged in the complaint against those the court believes could have, 
or even should have, been alleged.''). Because the ``court's authority 
to review the decree depends entirely on the government's exercising 
its prosecutorial discretion by bringing a case in the first place,'' 
it follows that ``the court is only authorized to review the decree 
itself,'' and not to ``effectively redraft the complaint'' to inquire 
into other matters that the United States did not pursue. Microsoft, 56 
F.3d at 1459-60.
    In its 2004 amendments to the APPA, Congress made clear its intent 
to preserve the practical benefits of using consent judgments proposed 
by the United States in antitrust enforcement, Public Law 108-237, 
Sec.  221, and added the unambiguous instruction that ``[n]othing in 
this section shall be construed to require the court to conduct an 
evidentiary hearing or to require the court to permit anyone to 
intervene.'' 15 U.S.C. 16(e)(2); see also U.S. Airways, 38 F. Supp. 3d 
at 76 (indicating that a court is not required to hold an evidentiary 
hearing or to permit intervenors as part of its review under the APPA). 
This language explicitly wrote into the statute what Congress intended 
when it first enacted the APPA in 1974. As Senator Tunney explained: 
``[t]he court is nowhere compelled to go to trial or to engage in 
extended proceedings which might have the effect of vitiating the 
benefits of prompt and less costly settlement through the consent 
decree process.'' 119 Cong. Rec. 24,598 (1973) (statement of Sen. 
Tunney). ``A court can make its public interest determination based on 
the competitive impact statement and response to public comments 
alone.'' U.S. Airways, 38 F. Supp. 3d at 76 (citing Enova Corp., 107 F. 
Supp. 2d at 17).

IV. Summary of the Comment and the United States' Response

    The United States received one public comment in response to the 
proposed Final Judgment from Alan Fishbein, a

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member of the public. Mr. Fishbein asserts that the settlement is 
inadequate. He asserts that Biglari should be required to divest its 
entire holdings in Cracker Barrel and be precluded from acquiring any 
Cracker Barrel voting securities in the future. See Exhibit A.
    The United States believes that nothing in the comment warrants a 
change to the proposed Final Judgment or supports a conclusion that the 
proposed Final Judgment is not in the public interest. Section (g)(a) 
of the HSR Act, 15 U.S.C. 18(a)(g)(1) provides that the United States 
may recover a civil penalty for violations of the Act up to $43,280 per 
day of violation.\1\ Biglari will pay a penalty of $1,374,190 pursuant 
to the terms of the proposed Final Judgment, representing 25 percent of 
the statutory maximum. The United States has determined that this 
amount will appropriately penalize Biglari and deter it and others from 
future violations of the HSR Act. As required by the APPA, the comment 
\2\ and this response will be published in the Federal Register.
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    \1\ The maximum daily civil penalty, which had been $10,000, was 
increased to $11,000 for violations occurring on or after November 
20, 1996, pursuant to the Debt Collection Improvement Act of 1996, 
Public Law 104-134 Sec.  31001(s) and FTC Rule 1.98, 16 DC.F.R. 
1.98, 61 FR 54548 (Oct. 21, 1996). The maximum daily penalty in 
effect at the time of Biglari's corrective filing was $43,280 per 
day. The maximum daily penalty was increased to $46,517 for 
violations occurring on or after January 10, 2022, 87 FR 1070 (Jan. 
10, 2022).
    \2\ Aside from a redaction of personally identifiable 
information the comment is provided in its entirety.
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V. Conclusion

    After careful consideration of the public comment, the United 
States continues to believe that the proposed Final Judgment provides 
an effective and appropriate remedy for the violation alleged in the 
Complaint and is therefore in the public interest. The United States 
will move this Court to enter the Final Judgment after the comment and 
this response are published as required by 15 U.S.C. 16(d).

    Dated: April 29, 2022.

    Respectfully submitted,
    FOR PLAINTIFF, UNITED STATES OF AMERICA.

/s/Kenneth A. Libby

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KENNETH A. LIBBY,
Special Attorney for the United States, c/o Federal Trade 
Commission, 600 Pennsylvania Avenue NW, Washington, DC 20580, Tel: 
(202) 326-2694, Email: <a href="/cdn-cgi/l/email-protection#117a7d78737368517765723f767e67"><span class="__cf_email__" data-cfemail="e08b8c89828299a0869483ce878f96">[email protected]</span></a>.

Exhibit A
[GRAPHIC] [TIFF OMITTED] TN05MY22.023

[FR Doc. 2022-09595 Filed 5-4-22; 8:45 am]
BILLING CODE 4410-11-P


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