Antitrust Lawyer Blog

DOJ IMPOSES LONGEST JAIL SENTENCE FOR A SINGLE ANTITRUST CHARGE ON FORMER SHIPPING EXECUTIVE

2009-01-31T03:39:23Z

On January 30, 2009, Peter Baci, a former executive at a freight service company, was sentenced to 48 months in jail and agreed to pay a criminal fine of $20,000. This sentence marks the longest jail sentence ever imposed for a single antitrust charge.

]]> On October 20, 2008, Mr. Baci pled guilty to his role in a conspiracy to raise prices and eliminate competition for the movement of goods such as heavy equipment, medicines and consumer goods, on scheduled ocean voyages between the U.S. and Puerto Rico. On October 1, 2008, four U.S. shipping company executives including Peter Baci of Jacksonville, FL, Kevin Gill and Gregory Glova of Charlotte, NC, and Gabriel Serra of San Juan, Puerto Rico pled guilty for their role in a broad conspiracy to rig bids, fix prices, and allocate market share for customers transporting goods between the United States and Puerto Rico. A fifth shipping executive, Alexander Chisholm, of Jacksonville, FL was charged with obstruction of justice. He agreed to plead guilty and serve jail time. Sentences are still pending for Mr. Gill, Mr. Glova, Mr. Serra, and Mr. Chisholm

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

FTC INTERVENES IN GENTINGE’S $865 MILLION ACQUISITION OF RIVAL DATASCOPE

2009-01-30T03:50:05Z

On January 29, 2009, Getinge AB (“Getinge”) settled charges with the Federal Trade Commission (“FTC”) in order for its $865 million acquisition of rival Datascope Corporation (“Datascope”) to proceed. The FTC believed that the proposed acquisition violated federal antitrust laws. Datascope is required to divest its endoscopic vessel harvesting (“EVH”) product line to an FTC approved buyer within 10 days of the acquisition date.

]]> EVH devices are used in coronary artery bypass graft (CABG) surgery to remove a vein from the patient’s leg or arm for use as a conduit to bypass one or more blocked coronary arteries.

According to the FTC’s complaint, due to the high concentration of U.S. market for EVH devices, the combined firm would control 90% of it. The duopoly would increase prices and decrease innovation for EVH devices. In spite of the high concentration of the market, entry into the market is difficult and a new entry into the market within the next two to three years is unlikely.

As per the FTC consent order, Datascope has agreed to sell its EVH assets to Sorin Group USA, Inc. (“Sorin Group”), a diversified medical company that already markets and sells a line of cardiovascular products, including artificial cardiac valves and coronary stents. The consent order requires the divestiture to take place within 10 days of the acquisition date. The consent order also requires Getinge to allow Datascope to provide certain transitional services to Sorin Group.

The Commission vote to accept the complaint and consent order and place copies on the public record was 4-0.

Robert Doyle
(202) 589-1834
rdoyle@dbmlawgroup.com

IBM AND MICROSOFT ACCUSED OF “TYING” AND “BUNDLING” PRODUCTS IN EUROPE

2009-01-27T03:36:55Z

During the week of January 26, 2009, IBM Inc. (“IBM”) and Microsoft Corporation Inc. (“Microsoft”) were separately accused of “tying” or “bundling” their products, in effect abusing their market dominant position, a violation of Article 82 of the European Community Treaty.

]]> “Tying” or “bundling” products occurs when the sale of one product is conditional on the sale of different products.

The European Commission (“Commission”) received a complaint against IBM by T3 Technologies Inc. of tying its operating system with its mainframe computer hardware. Mainframe computers are used mainly by large organizations for critical applications such as bulk data processing for census, industry and consumer statistics and financial transaction processing. According to the complaint, mainframe hardware customers have been hurt due to IBM’s “exclusive lock” on the mainframe market.

Microsoft received a Statement of Objections (“SO”) from the Commission. The SO accuses Microsoft of tying its operating system, Windows, with its web browser, Internet Explorer. The Commission believes that as a result competition amongst web browsers has declined. A decade ago, Netscape accused Microsoft of the same thing in a case, which was ultimately settled.

Some legal experts criticized the Commission action as unnecessary due to the difference in the competitive landscape in Europe vs. the United States. Microsoft’s market share in Europe has declined considerably, while the web browser market has seen a number of new entrants in the past year. Microsoft believes that some of the remedies being developed by European competition authorities will force Microsoft to sell rivals’ browsers with Windows in new PCs.

Camelia C. Mazard
202-589-1837
cmazard@dbmlawgroup.com

FTC INTERVENES IN DOW’S $18.8 MILLION ACQUISITION OF RIVAL ROHM & HAAS

2009-01-24T03:48:46Z

On January 23, 2009, Dow Chemical Company (“Dow”) settled charges with the Federal Trade Commission (“FTC”) in order for its $18.8 million acquisition of rival Rohm & Haas Company (“R&H”) to proceed. Dow agreed to sell a range of assets to an FTC approved buyer and put in place mechanisms to ensure Dow will not have access to competitively sensitive non-public information regarding any businesses the new buyer acquires from Rohm & Haas.

]]> According to the complaint, the proposed acquisition would reduce the competition in relevant markets or the research, development, manufacture, and sale of certain acrylic monomers – including glacial acrylic acid, butyl acrylate, and ethyl acrylate – as well as hollow sphere particles and acrylic latex polymers for traffic paint used to mark lines on streets and highways. Glacial acrylic acid is used in the production of super-absorbent polymers, which are used in personal care and hygiene products. Butyl acrylate and ethyl acrylate are acrylate esters used to make the latex polymers that are used in paints, architectural coatings, and pressure-sensitive adhesives.

The FTC believes that each of the relevant product markets is highly concentrated and that the proposed acquisition would lead to fewer competitors in each market. The combined firm would control more than 40 percent of sales in the market for glacial acrylic acid; 75 percent of sales in the market for butyl acrylate; and 90 percent of sales in the market for ethyl acrylate. Dow and Rohm & Haas currently are the only two suppliers of hollow sphere particles and acrylic latex polymer and in those markets the proposed acquisition would be a merger to monopoly.

Dow has agreed to sell the following assets to an FTC approved buyer: 1) its acrylic monomer production facility in Clear Lake, Texas; 2) its acrylic polymer production assets in St. Charles, Louisiana; 3) its acrylic polymer production facility in Alsip, Illinois; 4) its acrylic polymer production facility in Torrance, California; 5) its acrylic monomer research and development group in South Charleston, West Virginia; 6) its acrylic latex polymer research and development group in Cary, North Carolina; and 7) other assets related to these businesses. The consent order, however, requires Dow to provide the FTC approved acquirer with site services to the acrylic polymer production assets in St. Charles, Louisiana. If Dow does not sell these assets, it is required to divest these assets within 240 days of when the consent order is accepted for public comment or 240 days from the acquisition date, whichever is later.

The FTC’s vote to accept the complaint and consent order and place copies on the public record was 4-0.

Robert Doyle
(202) 589-1834
rdoyle@dbmlawgroup.com

THREE MORE AIR CARGO CARRIERS CHARGED IN THE WORLDWIDE PRICE-FIXING CONSPIRACY INVESTIGATION

2009-01-22T17:06:39Z

On January 22, 2009, three air cargo airlines, LAN Cargo S.A. (“LAN”), a Chilean company, Aerolinhas Brasileiras S.A. (“ABSA”), a Brazilian company, and EL AL Israel Airlines Ltd. (“EL AL”), an Israeli company, each pled guilty for their role in a worldwide conspiracy to fix prices in the air cargo industry and agreed to pay criminal fines totaling $124.7 million. LAN, which owns a substantial portion of ABSA, agreed to pay a criminal fine of $109 million while EL AL agreed to pay a criminal fine of $15.7 million.

]]> According to the charges, the three air cargo airlines allegedly conspired in the United States and elsewhere to eliminate competition by fixing the cargo rates charged to customers for international air shipments, including to and from the United States. LAN and ABSA allegedly participated in the conspiracy from February 2003 to February 2006. EL AL participated in the conspiracy between January 2003 and February 2006.

As a part of this same investigation, nine other airlines, including British Airways, Korean Air Lines, Quantas Airways, Japan Airlines, Cathay Pacific Airways, Martinair Cargo, Air France, and KLM Royal Dutch Airlines, and a former Quantas executive have been charged in the DOJ’s ongoing investigation in the air cargo industry. More than $1.2 billion in criminal fines have been imposed.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

FORMER EXECUTIVES AT TFT-LCD PANEL MAKERS CHARGED IN GLOBAL CONSPIRACY TO FIX PRICES

2009-01-16T03:43:21Z

On January 15, 2009, Chang Suk (“C.S.”) Chung, former Vice President of Monitor Sales for LG Display Co. Ltd. (“LG”), Chieng-Hon Lin (“Frank”), former Chairman and Chief Executive Officer for Chunghwa Picture Tubes Ltd. (“Chunghwa”), Chih-Chun Liu (“C.C.”), former Vice President of LCD Sales for Chunghwa, and Hseuh-Lung Lee (“Brian”), former executive of Chunghwa, all pled guilty to their roles in a global conspiracy to fix prices in the sale of Thin Film Transistor-Liquid Crystal Display (“TFT-LCD”) panels. They also agreed to serve jail time and pay criminal fines.

]]> TFT-LCD panels are used in computer monitors, notebooks, televisions, mobile phones, and other electronic devices. Worldwide sales in 2006 were $70 billion.

C.S. agreed to serve a seven-month prison term and pay a criminal fine of $25,000. Frank agreed to serve a nine-month prison term and pay a criminal fine of $50,000. C.C. agreed to serve a seven-month prison term and pay a criminal fine of $30,000. Brian agreed to serve a six-month prison term and pay a criminal fine of $20,000.

All charged individuals allegedly conspired with other TFT-LCD panel makers to suppress and eliminate competition by fixing the prices of their products. C.S. allegedly participated in the conspiracy from September 21, 2001 to June 1, 2006. Frank, C.C., and Brian allegedly participated in the conspiracy at various times between September 14, 2001 and December 1, 2006.

According to the Department of Justice, these are the first individuals charged in the investigation into the TFT-LCD industry. On November 12, 2008, LG Display Co. Ltd. (“LG”), Sharp Corp. (“Sharp”), and Chunghwa Picture Tubes Ltd. (“Chunghwa”) pled guilty for their role in a conspiracy to fix prices for liquid crystal display (“LCD”) panels and agreed to pay criminal fines totaling $585 million.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

ANOTHER HOME DEPOT EMPLOYEE PLEADS GUILTY IN CONSPIRACY TO DEFRAUD COMPANY

2009-01-16T03:41:57Z

On January 15, 2009, Ronald K. Johnston, a former employee of Home Depot, pled guilty to conspiring to commit wire fraud and for two counts of filing false tax returns in an attempt to defraud Home Depot.

]]> The conspiracy took place between 2005 and 2007. Specifically, Mr. Johnston received kickbacks from foreign suppliers seeking to do business with Home Depot. In return, Mr. Jonhnston purchased supplies on behalf of Home Depot on less than the most advantageous terms for Home Depot. Anthony Tesvich, a former Home Depot employee convicted in June 2008 on similar charges, passed on kickbacks to Mr. Johnston worth thousands of dollars and paid for home improvement expenses for Mr. Johnston’s residence. As a part of the same investigation, on July 11, 2008, James P. Robinson, a former Divisional Merchandising Manager for Flooring at Home Depot, pled guilty to one count of conspiracy to commit wire fraud and two counts of tax evasion related to a scheme to defraud Home Depot.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

FORMER EXECUTIVES AT TFT-LCD PANEL MAKERS CHARGED IN GLOBAL CONSPIRACY TO FIX PRICES

2009-01-15T17:04:59Z

]]> TFT-LCD panels are used in computer monitors, notebooks, televisions, mobile phones, and other electronic devices. Worldwide sales in 2006 were $70 billion.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

ANOTHER HOME DEPOT EMPLOYEE PLEADS GUILTY IN CONSPIRACY TO DEFRAUD COMPANY

2009-01-15T17:03:54Z

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

FTC BLOCKS OLDCASTLE ARCHITECTURAL’S ACQUISITION OF RIVAL PAVESTONE

2009-01-15T03:47:11Z

On January 14, 2009, the Federal Trade Commission (“FTC”) filed a suit to block the proposed $540 million assets and interest acquisition of Pavestone Co. (“Pavestone”) by rival Oldcastle Architectural, Inc. (“Oldcastle”) because it would reduce competition in the manufacture and sale of drycast concrete hardscapes.

]]> Both companies manufacture and sell drycast concrete hardscape products, which are landscaping products that include interlocking concrete pavers, segmented retaining wall blocks, and other drycast concrete patio products to national home centers like The Home Depot, Lowe’s, and Wal-Mart.

Drycast concrete patio products are usually heavy and cumbersome products. To keep transportation costs to a minimum, companies like Old Castle and Pavestone build manufacturing plants within 200 miles of national home centers. As such, on deciding where to build plants, both companies typically bid on which home centers to supply their products. The proposed acquisition would reduce competition in the bidding process in the relevant geographic markets. Oldcastle and Pavestone are the only companies with plants throughout the country that are able to provide a broad range of drycast concrete hardscapes. According to the FTC, the combined companies would control 90 percent or more of the sales to national home centers in 300 metropolitan areas in 40 States and the District of Columbia. Oldcastle, if it were to acquire Pavestone, could unilaterally increase prices and lower the quality of services related to these products in the relevant geographic markets.

Furthermore, according to the complaint, the combined companies will control 75 percent of sales of drycast concrete hardscape products in the State of Texas. Commercial customers in the Dallas, Houston, and San Antonio areas will feel the resulting anticompetitive effects.

The FTC vote to issue the administrative complaint was 4-0. The parties abandoned the deal after the FTC took action.

Robert Doyle
(202) 589-1834
rdoyle@dbmlawgroup.com

AT&T AGREES TO PAY $2 MILLION TO SETTLE WITH DOJ

2009-01-15T03:40:50Z

On January 14, 2009, AT&T Inc. (“AT&T”) entered into a civil settlement worth $2 million with the Department of Justice (“DOJ”) to settle charges that AT&T was in contempt of a March 2008 consent decree AT&T entered into during its acquisition of Dobson Communications Corporation (“Dobson”).

]]> The consent decreed required AT&T to divest three mobile wireless telecommunications businesses in three rural service areas (RSAs), two in Kentucky and one in Oklahoma. Furthermore the decree and a related court order required AT&T to ensure that the divested businesses remained independent and uninfluenced by AT&T. In addition, AT&T was required to keep all competitive information of the divested businesses confidential and prevent access of such information to unauthorized personnel.

According to the petition filed by the DOJ, AT&T allegedly violated both orders by allowing personnel access to confidential customer account information of the divested businesses. The personnel allegedly used this competitively sensitive information to solicit and win away the divested businesses' customers by waiving termination fees for several customers of the divested businesses, which facilitated the switching of services from the divested businesses to AT&T.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

AT&T AGREES TO PAY $2 MILLION TO SETTLE WITH DOJ

2009-01-14T17:02:20Z

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

FTC ORDERS DIVESTITURE IN KING PHARMACEUTICAL’S ACQUISITION OF RIVAL ALPHARMA

2008-12-29T17:00:41Z

On December 29, 2008, the Federal Trade Commission (“FTC”) required a divestiture to resolve antitrust concerns with King Pharmaceuticals, Inc.’s (“King”) $1.6 billion acquisition of Alpharma, Inc. (“Alpharma”). To remedy the situation, the FTC is requiring King to divest Alpharma’s brand Kadian, an oral long-acting opioid (“LAO”) analgesic drug, to Actavis, one of the world’s largest generic drug companies, no later than 10 days of King’s acquisition of Alpharma. According to the FTC, King’s own brand of an oral LAO drug, Avinza, is a close substitute to Kadian for many customers.

]]> Oral LAO drugs are prescribed to patients suffering from moderate-to-severe chronic pain. Other drugs short-acting opioids or non-oral opioids are not close substitutes for the oral LAO products. The market for LAO drugs is highly concentrated. Although Purdue Pharma, Inc.’s oral LAO brand OxyContin is the dominant product in the oral LAO drug market in the United States, King’s Avinza and Alphama’s Kadian are very competitive. In 2007, the oral LAO drug market made $4 billion in total annual sales.

Because Actavis currently manufactures King’s oral LAO drug, the FTC believes it is well suited to acquire King’s assets. It takes approximately 2 years to obtain the approval for the manufacturing and sale of oral LAO drugs from the U.S. Food and Drug Administration. This divestiture gives Actavis the opportunity to obtain approval to create and sell an “authorized” generic oral LAO drug earlier than currently possible as the patent on Kadian expires in 2010.

Robert Doyle
(202) 589-1834
rdoyle@dbmlawgroup.com

A MAJOR IN US ARMY RESERVE PLEADS GUILTY TO BRIBERY AT CAMP VICOTRY, IRAQ

2008-12-22T06:19:21Z

On December 22, 2008, Theresa J. Baker, a major in the U.S. Army Reserve, pled guilty for her role in two conspiracies to commit bribery involving U.S. Department of Defense (“DOD”) contracts at Camp Victory, Iraq.

]]> As a part of the same investigation, on June 3, 2008, Raman International Inc. (“Raman”), a defense contractor, pled guilty to one count of conspiracy to commit bribery. It agreed to pay the maximum criminal fine for a corporation charged with conspiracy to commit bribery of $500,000 and restitution fees amounting to $327,192 to the DOD.

As a part of the first conspiracy, Raman, headquartered in Cypress, TX, and Eric Chidiac, one of its former employees already indicted for two counts of conspiracy to commit bribery, allegedly paid Ms. Baker money and gifted her a Harley Davidson to steer DOD contracts to Raman. Mr. Chidiac is currently a fugitive. Camp Victory is the main component of the Victory Base Plaza located near the Baghdad International Airport. Mr. Chidiac gave part of the payments made by DOD to Raman as kickbacks to the military officer.

The second conspiracy involved Ms. Baker cancelling contracts to third party contractors and awarding them to Mr. Chidiac. Mr. Chidiac received cash payments totaling approximately $700,000 from which Ms. Baker also took a portion.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

FTC ORDERS DIVESTITURE IN TEVA’s ACQUISITION OF BARR

2008-12-19T16:57:45Z

On December 19, 2008, Teva Pharmaceuticals Industries Ltd.’s settled charges that its proposed $8.9 billion acquisition of rival generic drug maker Barr Pharmaceuticals Inc. would be anticompetitive. The consent order required Teva and Barr to sell assets in 29 relevant markets, including generic drugs commonly used to treat acid reflux disease, various types of cancer, bacterial infections, diabetes, and depression.

]]> According to the complaint, Teva’s acquisition of Barr as proposed would lessen competition in each of the following U.S. generic drug markets: 1) tetracycline hydrochloride (HCl) capsules; 2) chlorzoxazone tablets; 3) desmopressin acetate tablets; 4) metoclopramide HCl tablets; 5) carboplatin injection; 6) tamoxifen citrate tablets; 7) metronidazole tablets; 8) trazodone HCl tablets; 9) glipizide/metformin HCl tablets; 10) cyclosporine liquid; 11) cyclosporine capsules; 12) flutamide capsules; 13) mirtazapine orally disintegrating tablets (ODT) ; 14) deferoxamine injection; 15) epoprostenol sodium (freeze-dried powder) injection (epop); 16) weekly fluoxetine capsules; and 17) 13 generic oral contraceptive markets.

Under the terms of the proposed consent agreement, the companies would be required to assign and divest to Watson, Teva’s rights and assets for generic: 1) chlorzoxazone tablets; 2) deferoxamine injection; 3) fluoxetine weekly capsules; 4) carboplatin injection; and 5) metronidazole tablets. The consent agreement also requires the companies to assign and divest to Watson all of Barr’s rights and assets for generic: 1) metoclopramide HCl tablets; 2) cyclosporine liquid; 3) cyclosporine capsules; 4) desmopressin acetate tablets; 5) epop; 6) flutamide capsules; 7) glipizide/metformin HCl tablets; 8) mirtazapine ODT; 9) tamoxifen citrate tablets; and 10) tetracycline HCl capsules. In addition, the companies must divest rights and assets related to trazodone HCl tablets and the 13 oral contraceptive products to Qualitest.

If the parties do not sell the assets within six months, the FTC may appoint a trustee to oversee the assets’ sale. The order also contains several provisions to ensure the assets are successfully divested, including requiring Teva and Barr to provide transitional services to enable the buyers to obtain necessary FDA approvals. The FTC also has appointed William Rahe of Quantic Regulatory Services, LLC to oversee the asset transfer and to ensure Teva and Barr comply with the terms of the order. The Commission vote to accept the complaint and consent order was 4-0.

Robert Doyle
(202) 589-1834
rdoyle@dbmlawgroup.com