New Jersey AG Milgram Announces Settlement of School Bus Co. Anti-Trust Case

September 26, 2007 -- TRENTON – New Jersey 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.

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“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.

Source: New Jersey Attorney General