Antitrust Lawyer Blog Commentary on Current Developments

Articles Posted in Civil Non-Merger Highlights

On August 20, 2019, it was reported that the states are set to join forces to investigate Big Tech.

On the same day, Assistant Attorney General Makan Delrahim of the Antitrust Division of the U.S. Department of Justice (“DOJ”) said the DOJ is working with a group of more than a dozen state attorneys general as it investigates the market power of major technology companies.  Delrahim said at a tech conference that the government is studying acquisitions by major tech companies that were previously approved as part of a broad antitrust review announced in July of major tech firms with significant market power.  “Those are some of the questions that are being raised… whether those were nascent competitors that may or may not have been wise to approve,” he said.

On July 23, the DOJ said it was opening a broad investigation into whether major digital technology firms engaged in anticompetitive practices, including concerns raised about “search, social media, and some retail services online.”  The investigations appear to be focused on Alphabet Inc.’s Google, Amazon.com, Inc. and Facebook, Inc. (“Facebook”), as well as potentially Apple Inc.

On March 22, 2019, Judge John Michael Vazquez of the United States District Court for the District of New Jersey granted Allergan’s motion to dismiss Shire’s antitrust complaint that Allergan monopolized the Medicare Part D dry eye disease (“DED”) treatment market through its contracting practices with insurers including rebates based on a bundled portfolio of drugs and an exclusive dealing contract whereby a Medicare Part D plan was contractually barred from offering any other DED drug on its formulary. Shire US, Inc. v. Allergan, Inc., No. 17-cv-7716 (D.N.J. Mar. 22, 2019).

Background

On October 2, 2017, Shire sued Allergan for its bundling and exclusive dealing arrangements with Medicare Part D plans that deny patients access to Xiidra® – Shire’s best-in-class, breakthrough drug to treat DED.

Changes in the economy, technology, international business, and data collection have all converged to make the FTC rethink its enforcement priorities going forward. In the spirit of the 1995 Pitofsky Hearings, the FTC on September 13, 2018 kicked off the first day of hearings on Competition and Consumer Protection in the 21st Century at Georgetown University Law Center. The public hearings are expected to open the debate up to the public and experts so the FTC can formulate a modern antitrust enforcement and consumer protection agenda.

The first day of hearings was broken into three panel discussions which broadly discussed the current landscape of antitrust law, U.S. economic competitiveness, and consumer protection and data privacy. The discussions focused on process and substance and how best to reframe FTC priorities to deal with complex 21st century issues.

Panelists drew lines in the sand when it came to whether the FTC is successfully navigating the landscape in an era of mega-mergers. Some panelists took the “populist” view that FTC’s merger guidelines are unhealthy for the overall economy and consumer welfare. The FTC has been guided by the “consumer welfare standard” when it comes to mergers, and has accommodated mergers that increase efficiencies and provide benefits in the form of lower prices to consumers.  Those in favor of the consumer welfare standard want to avoid a ‘big is bad’ mentality while keeping the interests of consumers in mind.  Proper antitrust enforcement is about protecting consumers, and protecting the competitive process, not about protecting competitors.  Some panelists argued, however, that the consumer welfare standard has failed to take into account important social concerns like privacy, rising social and income inequality, and decreased economic competition and dynamism. They pointed to recent studies seeming to vindicate the view that the FTC needs to reorient its enforcement procedures because the economy appears to be more concentrated and less dynamic than it used to be.

On Friday, September 14th, a Congressional briefing was held regarding the renegotiation of NAFTA and how certain changes under discussion could end up undermining the President’s Blueprint to lower drug prices in the United States by extending pharma monopolies.  One of the provisions under discussion would increase brand-name drug exclusivity.  Imposing additional brand-name drug exclusivity only keeps already high brand drug prices out of reach for patients for longer.

The panelists included representatives from Association for Accessible Medicines (Jeff Francer), Mylan (Marcie McClintic Coates), Patients for Affordable Drugs (David Mitchell), and AARP (Leigh Purvis).  Watch the briefing here:  https://www.youtube.com/watch?v=9K3RQHB-oTE

They explained how one of most promising areas of drug research is the creation of generic biologic medicines, or biosimilars.  These drugs have great potential and often offer the best treatments for serious diseases such as cancer, multiple sclerosis, rheumatoid arthritis, and others.  Yet, today, there are only four biosimilars on the market in the United States.

On August 2, 2018, the DOJ’s Antitrust Division announced that it would begin a review of legacy consent decrees “regulat[ing] how certain movie studios distribute films to movie theatres.”  The Paramount Consent Decrees have been in place for almost 70 years.  U.S. v. Paramount, 334 U.S. 131 (1948).  The Supreme Court decision forced major studios to sell their theater chains. Since that ruling, the Paramount decrees, have governed the way that studios do business with exhibitors. The decrees have prohibited certain “motion picture distribution practices, including block booking (bundling multiple films into one theatre license), circuit dealing (entering into one license that covered all theatres in a theatre circuit), resale price maintenance (setting minimum prices on movie tickets), and granting overbroad clearances (exclusive film licenses for specific geographic areas).”

The DOJ has indicated its review will take into account the changes in the identity of movie theatre owners, the increased number of movie theaters in a geographic area, the increased number of screens in movie theaters, and increased number of viewing platforms available to consumers.  The review is part of the Antitrust Division’s initiative to terminate long-standing antitrust judgment, including many that have no termination date.

“The Paramount Decrees have been on the books with no sunset provisions since 1949. Much has changed in the motion picture industry since that time,” Makan Delrahim, the DOJ’s antitrust chief, said in a statement. “It is high time that these and other legacy judgments are examined to determine whether they still serve to protect competition.” 

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.

On September 21, 2017, the DOJ’s Antitrust Division issued a business letter stating that it would not challenge a proposal by The Clearing House Payments Company LLC (“TCH”), a joint venture of 24 U.S. banks, to create and operate a new payment system that will enable the real-time transfer of funds between depository institutions, at any time of the day, on any day of the week.

According to TCH, it claims that it will create and operate the Real Time Payment system (“RTP”) – a new payment rail that will provide for real-time funds transfers between depository institutions – and in turn, RTP will allow depository institutions to enable faster fund transfers for their end-user customers.

According to TCH, RTP will not interfere with the continued use and operation of existing payment rails, including automated clearing house, wire, and check clearing houses.  RTP will also incorporate additional features that existing payment rails do not offer, such as enhanced messaging capabilities.

On March 23, 2017, the U.S. Department of Justice (“DOJ”) announced that it reached a settlement that will prohibit DIRECTV Group Holdings, LLC (“DirecTV”) and its parent corporation, AT&T Inc. (“AT&T”), from illegally sharing confidential, forward-looking information with competitors.

On November 2, 2016, the DOJ’s Antitrust Division filed suit alleging that DirecTV was the ringleader of a series of unlawful information exchanges between DirecTV and three of its competitors – namely, Cox Communications Inc. (“Cox”), Charter Communications Inc. (“Charter”) and AT&T (before it acquired DirecTV) – during the companies’ negotiations to carry the SportsNet LA “Dodgers Channel.”

SportsNet LA holds the exclusive rights to telecast almost all live Dodgers games in the Los Angeles area.  According to the complaint, DirecTV’s Chief Content Officer, Daniel York, unlawfully exchanged competitively-sensitive information with his counter-parts at Cox, Charter and AT&T while they were each negotiating with SportsNet LA for the right to telecast the Dodgers Channel.  Specifically, the complaint alleges that DirecTV and each of these competitors agreed to and exchanged non-public information about their companies’ ongoing negotiations to telecast the Dodgers Channel, as well as their companies’ future plans to carry – or not carry – the channel. The complaint also alleges that the companies engaged in this conduct in order to unlawfully obtain bargaining leverage and to reduce the risk that they would lose subscribers if they decided not to carry the channel but a competitor chose to do so. The complaint further alleges that the information learned through these unlawful agreements was a material factor in the companies’ decisions not to carry the Dodgers Channel. The Dodgers Channel is still not carried by DirecTV, Cox or AT&T. The DOJ allegations make out a buyer conspiracy case that violate Section 1 of the Sherman Act.  The DOJ further claims that the illegal information sharing corrupted the competitive bargaining process and likely contributed to the lengthy blackout.

On Monday, October 26, 2015, in a joint statement, the Federal Trade Commission and the U.S. Department of Justice urged the state of Virginia to reform or repeal its certificate-of-need (CON) law.

CON laws typically require hospitals to obtain government approval before undergoing expansion projects or purchasing major assets, including hospital equipment.  Virginia is known to have one of the most restrictive CON laws in the country, and the antitrust enforcement agencies recently have addressed the possible negative effects such laws have on competition, stating that CON laws may impede on healthcare providers’ abilities to provide efficient and effective services for consumers and may hinder competition by creating barriers to entry, limiting consumer choice, and stifling innovation.

In the joint statement, the enforcement agencies cited several studies that show that CON laws have not been effective at controlling costs or improving quality for consumers and indicated that more targeted measures might better address such goals.  While Virginia has an established working group tasked with addressing the issues surrounding CON laws, no final decisions have been made on the status of the state’s current CON law.

On Monday, October 26, 2015, U.S. Senators Richard Blumenthal (D-Conn.), Mike Lee (R-Utah), Amy Klobuchar (D-Minn.) and Orrin G. Hatch (R-Utah) sent a letter to the Federal Trade Commission (“FTC”) Chairwoman, Edith Ramirez, requesting that the FTC investigate possible illegal collusion by saline solution manufacturers.

In their letter, the senators noted that there has been a shortage of saline solution in the United States since 2013 and that the three companies that provide all the saline solution for the United States, Baxter, Hospira, and B. Braun, have failed to end the shortage.  The senators further claim that such activity may be the result of collusive behavior by the manufacturing companies to exploit the shortage of saline solution to increase their own profits and that this activity has resulted in higher costs to hospitals, patients, and the overall healthcare system.  The letter also states that hospitals have reported that Baxter, Hospira, and B. Braun have each imposed greater price increases (200-300%) since the shortage began.  The senators also state that the manufacturers on saline solution customers who do not also purchase additional non-saline products, effectively claiming that the manufacturers may be illegally tying the products.

Given the rising costs of healthcare, the FTC should ensure that anticompetitive conduct does not further increase those costs.  Therefore, the senators urge the FTC to investigate the troubling allegations to determine whether the saline suppliers’ apparent anticompetitive conduct is harming consumers and running afoul of the antitrust laws.