Antitrust Litigation Highlights

March 8, 2018

FTC Blocks Cooking Oil Merger Citing Some “Hot Docs”

On March 5, 2018, the United States Federal Trade Commission (“FTC”) filed an administrative complaint alleging that J.M. Smucker Co.’s (“Smucker”) proposed $285 million acquisition of Conagra Brands, Inc.’s (“Conagra”) Wesson cooking oil brand may substantially lessen competition and reduce competition for canola and vegetable oils in the United States.

Smucker currently owns the Crisco brand, and by acquiring the Wesson brand, it would control at least 70% of the market for branded canola and vegetable oils sold to grocery stores and other retailers. Smucker and Conagra both manufacture and sell a wide range of food products, including canola and vegetable oil, other types of oils, and shortening. The FTC also claims that other branded canola and vegetable oils available in the United States, such as Mazola and LouAna, each control only a small share of the market, and do not hold the same brand equity. Furthermore, building sufficient brand equity to expand would require substantial investment and take at least several years.

Under the proposed acquisition, Smucker would obtain all intellectual property rights to the Wesson brand, as well as inventory and manufacturing equipment.

February 22, 2018

Is the Selective Enforcement Defense Applicable To Antitrust Cases?

by Doyle, Barlow & Mazard PLLC

On February 21, 2018, Judge Leon ruled against AT&T Inc.’s (“AT&T”) ability to discover evidence that would support its selective enforcement defense.

Background

On November 21, 2017, the U.S. Department of Justice’s (“DOJ”) Antitrust Division filed a complaint in federal court block AT&T’s acquisition of Time Warner Inc. (“Time Warner”).

February 15, 2018

FTC Continues To Aggressively Enforce Collusion and Invitations to Collude Cases

by Doyle, Barlow & Mazard PLLC

On February 12, 2018, the Federal Trade Commission (“FTC”) filed an administrative complaint against Benco, Henry Schein, and Patterson, the three largest national full service dental supply distributors in the United States for allegedly conspiring to refuse to provide discounts to or otherwise serve buying groups representing dentists and against Benco for inviting a fourth competing distributor to take part in the illegal conspiracy. As is typical with FTC conduct cases, the complaint was brought under Section 5 of the FTC Act.

The FTC alleges that three distributors agreed to boycott buying groups, which sought discounts and lower prices for dental supplies and equipment on behalf of solo and small-group dental practices. The FTC further alleges that the agreement deprived solo and small-group dental practices from the benefits of participating in buying groups.

Benco and Henry Schein allegedly entered into an agreement whereby both distributors would refuse to provide discounts to or compete for the business of buying groups. The complaint details email, phone, and text communications between executives of the two companies evidencing the agreement, as well as attempts to monitor and ensure compliance with the agreement. On Oct. 1, 2013, a Benco executive called his counterpart at Henry Schein and “reaffirmed Benco’s commitment against buying groups.” After the call, neither distributor bid on a buying group contract. The FTC’s complaint also alleges that Patterson joined the illegal agreement.

February 14, 2018

Politics Unlikely to Play a Role in Defense of Time Warner Deal

by Doyle, Barlow & Mazard PLLC

On February 14, 2018, it was reported that AT&T Inc. (“AT&T”) identified as a potential witness for trial, Makan Delrahim, the head of the U.S. Department of Justice’s (“DOJ”) Antitrust Division. AT&T’s request for the antitrust chief to testify is highly unusual, but would appear necessary given that AT&T is claiming as a defense that the DOJ’s action to block the deal is an “improper selective enforcement of the antitrust laws.”

It is common practice in the early stages of litigation to be overly inclusive when identifying witnesses for trial, and just because Delrahim is named does not necessarily mean that he will testify. However, when alleging selective enforcement as a defense, AT&T will necessarily need to put on proof of the improper discrimination behind the DOJ’s decision to block its deal with Time Warner, and presumably no one would be in a better position to testify as to the DOJ’s decision than the actual decision maker: Delrahim.

In addition to its witness list, AT&T has also requested internal communications between Delrahim’s office and Attorney General Jeff Sessions, including emails, phone calls and other communications between the White House and officials at the DOJ.

January 10, 2018

Business as Usual: Trump Administration Targets Consummated Mergers

by Doyle, Barlow & Mazard PLLC

Historically, the FTC and DOJ have sought to unwind consummated mergers that are deemed to be anticompetitive. During Trump’s first year in office, the FTC and DOJ have demonstrated their willingness to unwind anticompetitive mergers that somehow sneaked by the regulators.

FTC Seeks to Unwind Merger of Prosthetic Knee Manufacturers

On December 20, 2017, the FTC filed an administrative complaint to unwind the merger of Otto Bock HealthCare North America, Inc., (“Otto Bock”) and FIH Group Holdings, LLC (“Freedom”), two manufacturers of prosthetic knees equipped with microprocessors that adapt the joint to surface conditions and walking rhythm. In September 2017, the parties simultaneously signed a merger agreement and consummated the merger without the FTC having an opportunity to review the deal. Apparently, the merger was not HSR reportable. According to the FTC, the merger eliminated direct and substantial competition between head to head competitors that engaged in intense price and innovation competition. While the litigation is ongoing, the parties agreed to a Hold Separate and Asset Maintenance Agreement, which prevents them from continuing the integration of the two businesses. The FTC did not allege any violation of the HSR ACT.

December 27, 2017

FTC Challenges Consummated Prosthetic Knee Manufacturer Merger

by Doyle, Barlow & Mazard PLLC

On December 20, 2017, the FTC issued an administrative complaint seeking to unwind a merger between prosthetic knee manufacturers Otto Bock HealthCare North America, Inc. (“Otto Bock”) and FIH Group Holdings, LLC (“Freedom”).

Background

On September 22, 2017, Otto Bock and Freedom simultaneously executed a merger agreement and consummated their merger. Within four days of the acquisition, Otto Bock publicized to the world in its September 26, 2017 press release that “Otto Bock strengthens the leading position in prosethetics” and that the deal combined the #1 and #3 players in the field of prosethetics in the United States. It further went on to state that the acquisition expands its market share and “antitrust issues have already been clarified” so they closed the merger and Otto Bock then took steps to integrate Freedom’s business, including personnel, intellectual property, know-how, and other critical assets.

December 20, 2017

Power Buyer Defense Not Enough: FTC Wins PI Hearing Against Sanford Health

by Doyle, Barlow & Mazard PLLC

On December 15, 2017, a federal district court granted the Federal Trade Commission’s (“FTC”) and North Dakota Attorney General’s request for a preliminary injunction against Sanford Health’s proposed acquisition of Mid Dakota Clinic, a large multispecialty group, pending the FTC’s administrative trial on the merits scheduled for January of 2018. FTC v. Sanford Health, et al., Case. No. 1:17-cv-00133 (D. N.D. Dec. 15, 2017).

Background

In June of 2017, the FTC and the North Dakota Attorney General sued to block the merger of the two largest physician groups in Bismarck and Mandan, North Dakota. The FTC alleged that the two groups had based on physician headcount at 75 percent of the physicians for adult primary care physician services, pediatric services, and obstetrics and gynecology services, and 100 percent of the general surgery physician services in the Bismarck-Mandan area. The merger would eliminate competition between them and substantially lessen competition in the four markets.

December 8, 2017

Senator Warren Criticizes Current State of Antitrust Enforcement

by Doyle, Barlow & Mazard PLLC

On December 6, 2017, Senator Elizabeth Warren sharply criticized the state of antitrust enforcement in a speech at the Open Markets Institute.

She said that antitrust enforcers adopted the Chicago School principles, which narrowed the scope of the antitrust laws and allowed mega-mergers to proceed resulting in many concentrated industries. She believes that antitrust enforcers already have the tools to reduce concentrated markets and that they simply must start enforcing the law again.

Senator Warren’s recommendations included stronger merger enforcement, cracking down on anticompetitive conduct and increasing agency involvement in defending competition.

November 30, 2017

Cutting Out the Regulatory Middle-Man: AT&T Responds to DOJ’s Complaint

by Doyle, Barlow & Mazard PLLC

On November 21, 2017, the U.S. Department of Justice (“DOJ”) filed a lawsuit to block AT&T Inc.’s acquisition of Time Warner Inc. The vertical merger, which combines AT&T’s video distribution platform with Time Warner’s programming, could be the first such deal litigated in almost 40 years.

According to the DOJ, the proposed acquisition will result in higher prices for programming, thus harming consumers. The DOJ’s complaint alleges that the merged firm will have the increased ability and incentive to credibly threaten to withhold or raise the price of crucial programming content – such as Time Warner’s HBO, TNT, TBS, and CNN – from AT&T’s multi-channel video programmer distributor (“MVPD”) rivals. At present, Time Warner negotiates with an MVPD to reach a price that depends on each party’s willingness to walk away. But the transaction would change the bargaining leverage such that AT&T/Time Warner would have less to lose from walking away. Or so the DOJ alleges. According to this reasoning, post-merger, if the merged firm and an MVPD are unable to reach an agreement, some customers would switch from their current MVPD to AT&T/DirecTV in order to obtain the sought-after Time Warner content. In addition, the DOJ alleges that AT&T/DirecTV has approximately 25 million subscribers and that there are 18 Designated Marketing Areas (“DMAs”) – out of 210, nationwide – where AT&T/DirecTV has approximately 40% share of the local MVPD market.

However, AT&T’s response indicates that the DOJ’s complaint is a misguided effort to block a pro-competitive deal that poses no real threat to consumers. The DOJ’s theory betrays a lack of understanding of the current and rapidly evolving market for content and distribution. The merged firm will still have a strong financial incentive to license Time Warner’s programming to as many outlets as possible. Because local cable monopolies dominate local markets through the bundling of broadband and MVPD services, AT&T does not have a clear economic incentive to cut off rival video distributors. After all, such a strategy is risky because AT&T might lose more than it gains with only the possibility that a small number of subscribers would switch to AT&T/DirecTV. In fact, consumers are increasingly willing to cut the cord entirely as they look to virtual MVPDs like Sling TV as well as subscription video on demand services (“SVODs”) such as Amazon Prime (80 million U.S. subscribers) and Netflix (109 million subscribers worldwide), demonstrating that the video distribution and content markets have become ever more dynamic – and competitive. And the lines between MVPDs, virtual MVPDs and SVODs are blurring as Amazon Prime recently carried the Titans/Steelers game live. AT&T called out the DOJ for not providing any market analysis or empirical evidence to support its theory that consumers would be harmed.

August 3, 2016

Retail Pharmacies File Antitrust Suit Against Express Scripts

by Doyle, Barlow & Mazard PLLC

On Monday, August 1, 2016, five retail pharmacies filed a class action lawsuit against Express Scripts Inc., alleging that Express Scripts usurped patient prescription data gained from independent pharmacies through its pharmacy benefit management business to divert sales to its competing mail-order pharmacy. According to the complaint, Express Scripts used the customer information provided to it by the independent pharmacies for insurance eligibility verification and collection purposes to determine when patients are eligible for prescription refills. As alleged in the complaint, Express Scripts then fills the prescriptions using its mail-order pharmacy, often without the patient’s consent, and collects the insurance payments for itself. Among other claims, the pharmacies are alleging unjust competition, breach of contract, violation of the Uniform Trade Secrets Act, and fraud.