Civil Non-Merger Highlights

September 26, 2012

Democrats and Republicans Work Together – But Get Sued For Monopolizing The Presidential Debates

Believe it or not, but on September 25, 2012, the Democrats and Republicans got sued in United States District Court for the Central District of California. They are accused under the antitrust laws of monopolizing the market for televised presidential debates in the United States by controlling the field of candidates in the race for president and vice president.

Third party Libertarian presidential candidate and former Governor of New Mexico, Gary E. Johnson, and Libertarian candidate, James P. Gray, a retired judge of the Superior Court of the State of California for Orange County, sued the Democratic National Committee, the Republican National Committee and the Commission on Presidential Debates for conspiring to restrain the Libertarians from participating in the electoral process by denying them access to the presidential and vice presidential debates scheduled for October 3,11,16 and 22. Plaintiffs seek to enjoin the debates until such time that they are permitted to participate in the only televised presidential and vice presidential debates in the country.

The plaintiffs allege in their seven-page complaint that the present conspiracy was “born” in October of 1988 when the Committee on Presidential Debates was organized for the purpose of hosting the 1988 presidential and vice presidential debates. Since October 1988, this 24-year conspiracy has raged and to this day the Democrats and Republicans “continue to secretly meet and have secretly met, in Washington, D.C., and in other places throughout the country, to devise rules for the presidential and vice presidential debates” and to exclude competing candidates and rival third parties.

September 25, 2012

Failure To File HSR Notification Form Can Be Costly

by Doyle, Barlow & Mazard PLLC

On September 25, 2012, the Federal Trade Commission (“FTC”) announced that Biglari Holdings, Inc., which owns Steak 'n Shake and Western Sizzlin restaurant chains, agreed to pay $850,000 in civil penalties to resolve allegations that it failed to make a premerger notification filing in connection with its acquisition of 8.7% of the outstanding voting securities of Cracker Barrel Old Country Store, Inc. http://www.ftc.gov/opa/2012/09/biglari.shtm

Premerger Rules

The Hart-Scott-Rodino (“HSR”) Act requires that parties notify the FTC and the Department of Justice (“DOJ”) of transactions that exceed $68.2 million. After submitting the notification form, parties must observe a waiting period before closing their transaction while the two agencies determine whether the transaction may harm competition.

September 21, 2012

Department of Justice Touts Its Antitrust Practice

by Doyle, Barlow & Mazard PLLC

On September 19, Joseph Wayland, head of the Antitrust Division of the Department of Justice, spoke of the Division's recent performance and future outlook at Georgetown Law's 6th Annual Global Antitrust Enforcement Symposium.

In his speech, he highlighted recent successes in tough litigation cases such as the one brought against AU Optronics Corporation for price fixing. With strong legal showings over the past two years, Wayland claimed, the Antitrust Division hopes to demonstrate its strong commitment to preventing unfair market practices and maintaining a competitive market. At the same time, Wayland also touted the Antitrust Division's impressive track record as a key factor in its ability to intimidate firms and resolve negotiations before litigations need to be filed, as was the case with the 3M and Avery merger deal as well as the AT&T and T-Mobile merger which was shelved after a mere four months. According to Wayland, the Division always prefers to settle cases in this way, opting for negotiations and dialog before legal action.

To this end, Wayland credited a great deal of the Division's successes to what he called “front office” workers, a group of individuals consisting of senior managers and directors of criminal and civil enforcement who scrutinize and filter merger cases, selecting the ones in which litigations seem likely and leaving out the ones the pose no real harm to competition. Through this practice, as Wayland pointed out, the Division is able to maximize its resources and commit itself fully to only the most pressing anti-competitive matters. This is not to say, however, that the Antitrust Division has softened on its litigation abilities. As Wayland reiterated throughout his speech, the Division has taken measures to bolster its legal capabilities to ensure that when litigations do occur, it can win.

September 19, 2012

FTC Calls Recent Patent Disputes “Anticompetitive”

by Doyle, Barlow & Mazard PLLC

At Georgetown Law’s 6th Annual Global Antitrust Enforcement Symposium on September 19, 2012, FTC Chairman Jon Leibowitz raised critical concerns about the recent anti-competitive practices of firms regarding the use of technology and IP patents.

In particular, he denounced the growing use of International Trade Commission (“ITC”) exclusion orders as a threat by patent holders to assert standard essential patents (“SEP”s) and leverage higher royalty payments from alleged infringers and potentially even bar competitors from the market. In essence, an SEP is a patent for any intellectual property that is deemed essential to a product in order for it to meet industry standards.

For a firm to produce a product containing an element covered by an SEP, that company must first license the patent from the patent-holder and thereby obtain permission to incorporate the element in question within the new product. This creates a rather imposing barrier to entry for many firms who must license numerous patents to be able to put a product into production. Nowhere is this more prevalent than the consumer technology market wherein even the smallest parts and components can be and are protected by SEPs.

July 31, 2012

FTC Withdraws Nine-Year Policy Statement on Monetary Equitable Remedies in Competition Cases

by Doyle, Barlow & Mazard PLLC

On July 31, 2012, the Federal Trade Commission (Commission) issued a statement withdrawing the Commission's nine-year-old Policy Statement on Monetary Equitable Remedies in Competition Cases (Policy Statement). The statement's withdrawal was approved on a 4-1 split vote, with Commissioner Maureen K. Ohlhausen casting the lone no vote and issuing a dissenting opinion.

The 2003 Policy Statement was initially issued to determine the “appropriate circumstances for the use of monetary equitable remedies in federal court.” However, as the FTC noted in its recent statement, the 2003 Policy Statement created a “restrictive view” for equitable remedies the Commission had at its disposal, such as disgorgement and restitution that were only applicable in “exceptional cases.” The 2012 Commission Statement explains that by withdrawing the 2003 Policy Statement, the Commission will use relevant existing case law to assess its use of disgorgement and restitution as remedies.

The 2003 Policy Statement established three factors the FTC should consider in disgorgement or restitution cases: if the violation was “clear”; if a reasonable basis exists to calculate payment; and whether “other remedies are likely to fail to accomplish fully the purposes of the antitrust laws[.]” As the Commission's July 31, 2012, statement explains, the restrictions set forth in the 2003 Policy Statement were either redundant or overly burdensome on the Commission. The first factor of a “clear” violation brings a “heightened standard” of review under federal antitrust law for disgorgement cases. As the 2012 Statement explains, “[w]hehter conduct is common or novel, clearly a violation or never before considered, has little to do with whether the conduct is anticompetitive.”

July 16, 2012

Third Circuit Supports FTC On “Pay for Delay”

by Doyle, Barlow & Mazard PLLC

On July 16th, the Third Circuit Court of Appeals ruled that pharmaceutical “pay-for-delay” settlements whereby cash is paid from a patent holding company to a generic manufacturer that agrees not to enter a market as prima facie evidence of an antitrust violation. The Third Circuit rejects the more lenient standard adopted by the other Circuit Courts. With the circuit courts split on the issue, the issue is now ripe for Supreme Court review.

The case, In re K-Dur Antitrust Litigation, involved Schering-Plough Corporation (“Schering”), the manufacturer of K-Dur 20, a brand-name sustained-release potassium chloride supplement, making two “reverse payment” settlements to generic manufacturers Upsher-Smith Laboratories (“Upsher”) and ESI Lederle (“ESI”).

Schering did not hold a patent for the potassium chloride salt because the compound is commonly known and not patentable. Instead, Schering held a patent for the controlled release coating. While the coating was under patent protection, Upsher and ESI sought approval from the FDA of generic versions of a potassium chloride supplement that each used a respectively different coating. To receive approval, both companies claimed that Schering’s patent would not

June 25, 2012

Seventh Circuit Sets Forth Elements for a Claim to Meet FTAIA

by Doyle, Barlow & Mazard PLLC

On June 27th, 2012, the 7th Circuit established elements extending the reach of United States antitrust law to certain cases where foreign companies engage in anticompetitive conduct outside the United States. (Minn-Chem, Inc., et al., v. Agrium Inc., No. 10-1712, slip op. (7th Cir. June 27, 2012)).

Background

In Minn-Chem, indirect U.S. potash purchasers alleged price-fixing and other antitrust conduct between potash suppliers. Because potash (minerals and salts used mainly in agricultural fertilizers) is a homogeneous commodity, a buyer will choose amongst suppliers largely based on price. Seventy one percent (71%) of the world's potash market is dominated by seven international entities that allegedly restrained the global supply of potash allowing for the entities to inflate prices.

January 23, 2012

FTC to Revise Investigatory Rules, Attorney Disciplinary Rules

by Doyle, Barlow & Mazard PLLC

On January 13, 2012, the FTC issued proposed amendments to Parts 2 and 4 of its Rules of Practice (“Rules”). Written comments must be received by March 23, 2012.

The FTC first raised the need to reform Part 2 citing a substantial risk of delay and mistakes in the FTC’s discovery process based on the complexities of modern electronic document discovery involving high volumes of electronically stored information (ESI). The proposed changes are meant to expedite FTC investigations by (i) requiring a party’s continued progress in achieving compliance before granting time extensions to comply with Commission processes; (ii) requiring parties to engage in meaningful “meet and confer” sessions with FTC staff before they file any petition to quash Commission process; and (iii) eliminating the two-step process for resolving petitions to quash, and establishing tighter deadlines for the FTC to rule on petitions. The proposed revisions to Part 2 streamline the rules, update investigatory practices in consideration of ESI, and clarify parties’ rights and duties with regard to the FTC’s compulsory process.

Additionally, the FTC proposed to amend attorney disciplinary rules in Part 4 to provide more guidance on the type of conduct that may warrant disciplinary action and introduced processes for investigating and adjudicating allegations of attorney misconduct, issuing attorney reprimands, and suspending attorneys that have been disbarred.

January 20, 2012

Commission Declines to Seek Certiorari to Review Eighth Circuit’s Decision in FTC v. Lundbeck, Inc.

by Doyle, Barlow & Mazard PLLC

On January 20, 2012, the Federal Trade Commission (“Commission”) issued a statement by Chairman Leibowitz, Commissioner Ramirez, and Commissioner Brill stating the Commission’s intention not to seek review by the U.S. Supreme Court of the Eighth Circuit Court of Appeal’s decision in FTC v. Lundbeck, Inc. This statement was accompanied by a separate statement by Commissioner Rosch.

In 2008, the FTC sued Lundbeck, Inc. (then Ovation Pharmaceuticals, Inc.) to enjoin the acquisition of NeoProfen and from forcing hospitals to pay monopoly prices for drugs used to treat a life-threatening heart defect in premature babies. Only two pharmaceutical treatments existed for this congenital disorder: Indocin and NeoProfen. Lundbeck purchased the rights to Indocin in 2005 (which was in the pipeline and had not yet reached the market) and immediately after its 2006 purchase of NeoProfen, prices for the drug increased over 1300%. The district court ruled for Lundbeck based on its opinion that the FTC failed to identify a relevant market that was harmed by Lundbeck’s acquisition of the NeoProfen, and the Court of Appeals upheld the district court’s decision. (For more on the district court’s ruling, see FTC Loses Merger Trial Because Of Market Definition, October 12, 2010) Although the FTC disagrees with both courts, it declined to seek certiorari in order to “…turn [its] energies to other enforcement priorities.”

In a separate statement, Commissioner Rosch listed several reasons for seeking Supreme Court review. He remarked that antitrust law failed to protect the most vulnerable of consumers, premature babies with congenital heart defects, when the courts allowed Lundbeck to charge whatever the market, that is, “desperate, frightened families” can bear. He argued that the district court committed an error of law and ignored basic economic principles by focusing only on cross-price elasticity of demand, to the erroneous exclusion of non-price considerations. He also argued that such an error by the district court allowed an economic expert’s opinion to trump undisputed findings of fact made by the court itself, allowing the court to ignore the parties’ own business documents, which showed that Lundbeck advantaged NeoProfen and disadvantaged Indocin in the marketplace. Moreover, Commissioner Rosch criticized the court’s failure to consider a hypothetical market, a common tool in merger analysis to postulate alternatives in which the merger did not occur.

January 3, 2012

D.C. Circuit Gives FTC Broad Discovery Rights

by Doyle, Barlow & Mazard PLLC

In June 2009, the Federal Trade Commission (“FTC” or “the Commission”) authorized the staff to conduct an investigation to determine whether Church & Dwight was using exclusionary practices such as conditioning discounts or rebates to retailers on the percentage of shelf or display space dedicated to Trojan brand condoms and “other products” sold and distributed by Church & Dwight.

Church & Dwight sells 70% of the latex condoms sold in the United States, primarily under the “Trojan” brand name. In order to market its condoms, Church & Dwight offers retailers a discount based on the amount of shelf space they devote to its condoms. In addition to condoms, Church & Dwight also sells a variety of other consumer products, such as cat litter and toothpaste.

As part of its investigation, the Commission issued a subpoena requiring Church & Dwight to produce documents on its sale and distribution of condoms, accompanied by a civil investigative demand (“CID”) seeking information about cost, pricing, production and sales of its condoms in the U.S. and Canada. The subpoena provided that all responses shall be produced “…in complete form, unredacted unless privileged.” Church & Dwight turned over documents with information related to condom sales only with information about other products redacted, and the Company petitioned the Commission to limit or quash the subpoena and CID. The Commission denied the petition and sought enforcement of the subpoena in the district court.