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TRENTON
– Attorney General Anne Milgram announced
today that New Jersey has entered into a
settlement agreement that resolves its anti-trust
investigation of the proposed merger of
the nation’s two largest school bus
contractors -- FirstGroup and Laidlaw International
Inc.
The settlement resolves allegations that
FirstGroup's proposed acquisition of Laidlaw
would violate the federal Clayton Antitrust
Act, the New Jersey Antitrust Act and the
anti-trust laws of 10 other states that
are parties to the agreement. A Consent
Decree was filed in U.S. District Court
today memorializing the settlement with
FirstGroup, which operates school buses
in New Jersey through its subsidiary, First
Student Inc.
“This
is an important settlement for New Jersey.
The merger of these companies has created
a threat to competition for school bus services
in many districts, and the remedies included
as part of this agreement will work against
that threat,” said Attorney General
Milgram. “The result will be a more
competitive landscape for school bus contracts,
which will in turn help school districts
– and ultimately New Jersey taxpayers
– avoid substantial cost increases
that can occur when there is little or no
competition.”
According to Milgram, the Consent Decree
requires First Student to take a number
of steps to protect competition in New Jersey.
Initially, First Student will divest part
of its business in the Paramus Boro school
district, where the merging companies had
been each other’s largest competitors
and where the district had difficulty in
the past getting other companies to bid
on routes.
Additionally, the Consent Decree limits
First Student’s ability to pressure
districts to accept significant price increases.
Under current New Jersey regulations, if
a school district is satisfied with its
bussing contractor, it can renew a contract
with a price increase consistent with the
Consumer Price Index (CPI).
If the bus company rejects the renewal,
the district must put the contract out to
bid. School districts expressed concern
that the merged company could turn down
CPI increases for a larger than normal number
of contracts and disrupt local markets.
To ease these fears, the Consent Decree
requires First Student to give a school
district six months notice that it will
not accept a renewal with a CPI increase
so that the district has ample time to solicit
other bidders. When First Student refuses
to renew a contract with a CPI increase,
the Consent Decree requires First Student
to accept caps on price increases that First
Student can seek in the subsequent bidding
process. To help competitors enter new markets,
First Student must make bus depot space
available at commercially reasonable prices
to companies that win contracts from it
in districts where there has been limited
competition in the past.
The Consent Decree also requires First Student
to give the Attorney General and the New
Jersey Department of Education notice of
any proposed acquisition for the next 10
years. This notice requirement will allow
the Attorney General to review the anti-competitive
effects of mergers that might otherwise
escape scrutiny.
Finally, FirstGroup has agreed to pay the
states $1,100,000 as reimbursement for their
costs of the review.
AAG James J. Savage and DAG Joshua Rabinowitz
handled the FirstGroup settlement on behalf
of the State.
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