Antitrust Lawyer BlogFollowing a public comment period, the Commission has approved the issuance of a final consent order in the matter concerning Linde AG's acquisition of The BOC Group. The vote approving issuance of the final order was 5-0.
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FTC Halts Bogus Claims for Fuel Saving Device
On August 22, the manufacturer of a magnetic “fuel saving” and emissions-reduction device that did not save fuel or reduce emissions will pay $4.2 million to settle Federal Trade Commission (“FTC”) charges that his advertising claims were false. The FTC will seek to provide redress to consumers who bought the device based on the false advertising claims. In addition, the defendants will be banned from selling or manufacturing magnetic fuel savings and emissions reduction devices.
In October 2004, the FTC filed a suit in U.S. district court alleging that marketers, and the resellers working with them, were making deceptive claims for FuelMAX and Super FuelMax products. The Web site operators and their affiliates- made claims such as:
FTC Challenges Deal between Enterprise Products Partners and TEPPCO
The Federal Trade Commission (“FTC”) announced a law enforcement action on August 18 challenging a 2005 acquisition that combined the natural gas liquids (“NGL”) storage businesses of Enterprise Product Partners, L.P. and TEPPCO Partners, L.P. under common ownership. The FTC's complaint alleged that the transaction likely would result in higher prices and service degradations by reducing the number of commercial salt dome NGL storage providers in Mont Belvieu, Texas, from four to three.
In settling the Commission's charges, TEPPCO is required to sell its interest in an NGL storage facility and associated assets to a Commission-approved buyer no later than December 31, 2006. Both of the NGL storage facilities involved in the transaction, which are operated by TEPPCO Partners, L.P. and Enterprise Products Partners, L.P., ultimately are owned and controlled by Dan L. Duncan.
On February 24, 2005, EPCO, Inc., through a holding company, acquired: (1) TEPPCO's general partner, Texas Eastern Products Pipeline Company, LLC, and, (2) 2.5 million limited partnership units of TEPPCO Partners, L.P. for $1.1 billion and $100 million, respectively, from Duke Energy Field Services, LLC. Enterprise, a wholly owned subsidiary of EPCO, and TEPPCO operate the two leading providers of NGL salt dome storage out of only four providers in the Mont Belvieu market. TEPPCO operates the Mont Belvieu Storage Partners NGL storage facility, and Enterprise operates the Enterprise NGL storage facility. Duncan owns and controls both TEPPCO and Enterprise, and therefore controls a majority of the NGL storage capacity in Mont Belvieu.
FTC Sues to Halt Unfair Movieland Downloads
The Federal Trade Commission filed a complaint on August 15 in U.S. district court, seeking to halt an operation that downloads software barraging consumers with pop-ups demanding payment to make the pop-ups go away. The Office of the Attorney General of the State of Washington also sued the operators.
The FTC's complaint asked the court to order the defendants to give up their ill-gotten gains to provide for consumer redress. A U.S. district court judge denied a request by the FTC to issue a temporary restraining order. Trial on the merits of the case will be scheduled for a later time.
According to papers filed with the court, the defendants downloaded software that repeatedly pelted consumers' computers with pop-ups, accompanied by music that lasted nearly a minute, and could not be closed or minimized. These pop-ups demanded that consumers pay the defendants $29.95 to end the recurring pop-up cycle, claiming that consumers signed up for a three-day “free trial” of the defendants' Movieland Internet download services and did not cancel their “membership” before the trial period was over. Hundreds of consumers complained to the FTC. Most claimed they had never signed up for the “free trial,” never used Movieland's services, and never even heard of Movieland until they got their first demand for payment.
Internet Video Distributor VDC Complains to FCC about Inability to Secure Carriage Deals with Established Cable Networks
In an August 14 letter to the FCC, internet video distributor VDC Corp. (“VDC”), owner of VDC.com, complained that it is having difficulty securing carriage deals with established cable networks. While VDC.com distributes content from Discovery Communications, most of the company's carriage deals are with smaller cable networks such as The Pentagon Channel and Mav TV. The broadband video site also carries home-shopping channels QVC and ShopNBC. VDC chairman Scott Wolf said that VDC plans to seek relief from the FCC “in the next few weeks” under the FCC's program access rules. In his letter to FCC chairman Kevin Martin, Wolf alleges that some cable networks are balking at licensing their networks to VDC.com because of “external influence, mainly from the large [cable] MSOs.”
“Smaller channels like Anime Network, for example, have been afraid to license their channel to us, for fear of being thrown off the large cable systems. In this environment, it is already hard enough for smaller networks to become viable, it is unfair that their distribution options are limited because of pressure from large cable operators,” writes Wolf. He also said that VDC has been unable to reach a carriage agreement to carry C-SPAN's networks, even though C-SPAN has carriage deals with cable rivals such as MobiTV and AT&T's U-verse TV system.
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Justice Department Will Not Oppose American Trucking Associations’ Proposal
On August 10, the DOJ announced that it would not oppose a proposal by the American Trucking Associations Inc. (ATA) to develop and publicize model agreements for motor carriers and freight transportation brokers. The DOJ said the model agreements are not likely to be anticompetitive.
The DOJ's position was stated in a business review letter from Thomas O. Barnett, Assistant Attorney General in charge of the Antitrust Division. “Making the model agreements available to the trucking industry is not likely to reduce competition,” Barnett said in the letter. “The model agreements do not contain any provisions specifying rates to be charged or other competitively significant terms, and use of the agreements or any of their provisions will be left to the determination of each company acting independently.”
The ATA requested a business review letter from the Division expressing its enforcement intentions regarding the ATA's proposal to develop and publicize two model agreements for use between motor carriers and brokers that would contain terms commonly used in the industry. Motor carriers and transportation brokers can use the model agreements to negotiate the terms and conditions of contracts between them for the motor carriage of goods. The agreements contain clauses, among others, related to the shipment service to be rendered, liability for the cargo, and the role of indemnity if the service is not adequately performed. According to the request, the availability of such model agreements will ease the competitive disadvantage of small brokers brought about by the expense of drafting contracts with multiple carriers.
DIRECTV Telemarketers Pay $75,000 Penalty for Do Not Call Violations
The Federal Trade Commission (“FTC”) announced on August 10 that it entered into a court settlement with Nomrah Records, Inc. and its president, Mark Harmon – named defendants in the recent DIRECTV telemarketing case. Under the settlement, filed by the U.S. Department of Justice on the FTC's behalf, Harmon will pay a $75,000 civil penalty and both he and the company will be barred from violating the Do Not Call (“DNC”) Rule and Telemarketing Sales Rule (“TSR”) in the future.
In December 2005, the Commission charged DIRECTV and other defendants that telemarketed on DIRECTV's behalf with violating the DNC Rule and the TSR by calling consumers, despite the fact that their numbers were on the National DNC Registry. In settling the charges, DIRECTV paid $5.3 million, representing at the time the largest-ever DNC penalty obtained by the Commission.
The stipulated final judgment and order against Nomrah and Harmon contains strong injunctive relief, barring Nomrah and Harmon from calling consumers on the DNC Registry, as well as from violating any other provisions of the TSR in the future. The judgment and order also requires Harmon to pay a $75,000 civil penalty, with the stipulation that $400,575 will become due if he is found to have misrepresented his financial condition to the FTC. Finally, the order contains standard record keeping and reporting terms to ensure the defendants comply with the order.
China Issues Rules on Foreign Investment Via Share Swaps
On August 10, the Chinese government issued rules outlining the conditions for foreign investment in local companies through share swaps, paving the way for such transactions in merger and acquisition deals. The regulations also cover the entry of foreign investors in local companies through mergers and acquisitions.
The rules, which take effect on September 9, were issued by the Ministry of Commerce, the state-owned Assets Supervision and Administration Commission, the State Administration for Industry and Commerce (“SAIC”), and three other government agencies. The new rules come as some deals await regulatory approval.
For example, Xuzhou Construction Machinery Group Co. is waiting for regulators to approve Carlyle Group L.P.'s investment in the company, the Chinese firm's listed unit Xugong Science & Technology Co. said in June. For foreign companies to be allowed to acquire stakes in local companies through share swaps, they must have shares listed on stock exchanges abroad and stable prices in the past year.
Repeat Offenders Banned From Claiming Products Treat or Cure Diseases
An operation selling Chinese herbal supplements was banned on August 9 from claiming its products treated or cured diseases, to settle Federal Trade Commission (“FTC”) charges it violated a previous court order. The FTC alleged the sellers of Dia-Cope, a pill claimed to prevent, treat, and cure diabetes, violated the order by misrepresenting the health benefits of their product and misrepresenting that clinical trials proved their claims. The defendants will also give up their ill-gotten gains – all of the assets they received from the sale of Dia-Cope.
The defendants originally sold “Sagee”, a Chinese herbal supplement that they claimed could improve memory and concentration, repair damaged brain cells, slow the aging of the brain, increase the learning ability of people with mental handicaps, and treat various diseases and conditions related to brain function, including Alzheimer's disease, senile dementia, schizophrenia, autism, cerebral hemorrhage, stroke, epilepsy, and Parkinson's disease. They advertised Sagee mainly in Chinese-language media; some ads also appeared in Vietnamese and English. The supplements were sold by distributors on the Internet and in some stores.
The FTC charged that the claims about Sagee were false and unsubstantiated and an order entered in January 2005 prohibited the defendants from making unsubstantiated health benefit, performance, or efficacy claims for any dietary supplement, food, drug, device, or service. The order also barred them from misrepresenting the existence, results, validity or conclusions of any scientific study.
Justice Department Will Not Oppose Proposal to Form Textile Rental and Laundry Services Joint Venture
On August 8, the DOJ announced it would not oppose a proposal which would allow 10 textile maintenance companies to bid jointly to provide textile rental and laundry services to national healthcare outpatient centers. Based on representations made in the proposal by Linen Systems for Healthcare LLC, the DOJ concluded that the proposed joint venture is not likely to produce anticompetitive effects and could create a new competitor for national accounts.
The DOJ's position was stated in a business review letter from Thomas O. Barnett, Assistant Attorney General in charge of the Antitrust Division, to counsel for Linen Systems for Healthcare. “The proposed joint venture creates a new competitor for national healthcare outpatient center accounts without threatening to restrict output or harm competition among MEDtegrity members,” Barnett said in the letter.
Linen Systems for Healthcare requested a business review letter expressing the DOJ's enforcement intentions regarding the formation of the joint venture, which will operate under the name MEDtegrity. The proposed members seek to compete better for national account business from various types of healthcare outpatient centers. The proposal states that the growing number of national accounts seeking a single-source supplier of textile and rental services has left the 10 local suppliers at a competitive disadvantage against larger, multi-plant companies.