Civil Non-Merger Highlights

November 22, 2011

FTC Settles With Pool Supplier Regarding Exclusive Dealing Practices

On November 21, 2011, the Federal Trade Commission (“FTC”) settled allegations of violations of Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45 (“FTC Act”) against Pool Corporation (“PoolCorp”). PoolCorp and the FTC reached a proposed consent agreement resolving charges that PoolCorp used exclusionary acts and practices to maintain its monopoly power in the pool product distribution market in violation of Section 5.

The Pool Product Industry

This case involves the wholesale distribution of pool products in the swimming pool industry, which had an estimated value of $3 billion in 2010. Manufacturers depend on distributors to sell the products, while distributors allow manufacturers to operate their factories year-round by purchasing large quantities of pool products throughout the year, despite the seasonal nature of the pool industry. In turn, distributors extend credit and provide quick delivery of pool products to thousands of retailers, most of which are “mom-and-pop” businesses that don't have the resources to purchase directly from manufacturers. There are about 100 manufacturers of pool products but only three major manufacturers produce the full range of pool products. These three manufacturers collectively occupy over 50% of sales. To be successful, it is critical that a distributor sell the products of at least one of these three major manufacturers. PoolCorp is the world's largest distributor of pool products used in the construction, renovation, repair, service, and maintenance of residential and commercial swimming pools. The FTC concluded that PoolCorp's market share exceeded 80% in some areas and that Pool Corp accounted for 30% to 50% of most pool supply manufacturers' sales, making it by far their largest customer. The FTC alleged that PoolCorp, therefore, has substantial market power (the power to exclude competition).

November 1, 2011

The Foreign Trade Antitrust Improvements Act, Twombly & Iqbal: Is Compliance Practical?

by Doyle, Barlow & Mazard PLLC

On September 23, 2011, the Seventh Circuit Court of Appeals dismissed a case brought by a group of corporations that filed an antitrust suit against the major players in the potash industry, ruling that plaintiffs failed to allege specific facts sufficient to plead a plausible “direct, substantial, and reasonably foreseeable” connection between the alleged foreign anticompetitive activity and the domestic potash market. As the Foreign Trade and Antitrust Improvements Act (“FTAIA” or “Act”) develops through case law, antitrust lawyers and academics hoped that this latest case, Minn-Chem Inc. v. Agrium Inc., would provide more guidance in interpreting the Act's three-step test. However, it seems that this case spurred more questions than answers.

The FTAIA limits enforcement of U.S. antitrust laws in situations where there are no clear effects on U.S. consumers. The Act aims to regulate foreign trade or commerce with foreign nations via a three-step test: (1) Did the conduct involve U.S. import trade or import commerce? (2) If not, does the conduct involve trade with foreign nations? and (3) If the conduct involves trade with foreign nations, does it have a “direct, substantial, and reasonably foreseeable effect” on the U.S. market?

Minn-Chem Inc. v. Agrium Inc. Background

August 3, 2011

When Private Enforcement Meets Leniency

by Doyle, Barlow & Mazard PLLC

On June 14, 2011, the European Court of Justice decided that EU law allows third parties, who are suing cartel members for money damages, access to information and evidence gathered in criminal antitrust investigations. The decision may mean the end for leniency procedures, now that cartel members looking for a way out are faced with potential disclosure of the often incriminating information they provide the competition authorities.

Leniency in the framework of imposing fines for infringement of competition rules

Leniency procedures are the center of the fight against practices that restrict competition. Cartels can be fined and eliminated because one of its members brings enough information and evidence to the competition authorities in exchange for leniency or a reduced fine. A recent judgment of the European Court of Justice (“ECJ”), analyzed in this text, ruled that national laws that allow this disclosure of information are possible.

June 2, 2011

Accountable Care Organizations: Dilemma or Opportunity

by Doyle, Barlow & Mazard PLLC

The Affordable Care Act of 2010 encourages health care providers to form integrated organizations to jointly offer services in order to reduce costs and improve the quality of health care in the United States. Section 3022 of the Act provides for the formation of Accountable Care Organizations (“ACOs”) to serve fee-for-service Medicare beneficiaries through Medicare's Shared Savings Program (“SSP”). ACOs must sign up with the Department of Health and Human Services' Centers for Medicare and Medicaid Services (“CMS”) to participate in the program for at least three years.

ACOs are collaborations that integrate groups of providers, such as physicians (particularly primary care physicians), hospitals, and other health care providers around the ability to receive shared-savings bonuses from a payer by achieving measured quality targets and demonstrating real reductions in overall spending growth for a defined population of patients. The basic goal for ACOs is to improve the quality and lower the costs of health care by integrating health care delivery among independent providers. The integration process however, increases the possibility of price-fixing and other forms of illegal collusion in the health care community.

To avoid such a result, the Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”) (collectively “Agency” or “Agencies”) issued a Joint Statement (“Statement”) on March 31, 2011, outlining the Agencies' antitrust enforcement procedures for ACOs.

January 27, 2011

SUPREME COURT AGREES TO HEAR WAL-MART CLASS ACTION APPEAL

by Doyle, Barlow & Mazard PLLC

On December 6, 2010, the Supreme Court agreed to hear a class action appeal in the Wal-Mart Stores employment discrimination case, one claiming that the company discriminated against a huge number of current and former Wal-Mart women employees in both pay and promotion. This is the biggest employment discrimination case in U.S. history and seeks billions of dollars in back pay and promotions resulting from Wal-Mart's ongoing discrimination against these women.

The Supreme Court agreed to hear Wal-Mart's bid to overturn the United States Court of Appeals for the Ninth Circuit's decision to uphold certification of a class of potentially more than 1.5 million women. The question before the court is whether individual claims by one and half million women employees can be combined into a single class action over alleged discrimination. This Supreme Court decision will affect all sorts of class action lawsuits in securities, product liability and antitrust cases. This case needs to be watched closely by the antitrust bar.

According to Wal-Mart, the company's policies expressly bar discrimination and promote diversity and the plaintiffs that worked in approximately 3400 separately managed stores throughout the United States, in over 170 job classifications, cannot possibly have enough in common to make class action treatment appropriate. Wal-Mart furthered argued that each employee who thinks she may have been discriminated against should file a separate and distinct lawsuit in which the unique details of each and every case would be analyzed.

January 10, 2011

EU Revises Rules On Horizontal Cooperation Agreements

by Doyle, Barlow & Mazard PLLC

The European Union recently published new revised rules regarding the assessment of horizontal cooperation agreements (i.e. agreements concluded between competitors). These new modifications primarily concern issues of standardization, information exchange, and research and development (“R&D”). Now, businesses operating in the EU may better assess their compliance with EU antitrust law to avoid penalties and litigation. The new regulations come in two parts: (1) a set of “Horizontal Guidelines” and (2) pair of Block Exemption Regulations (“BERs”).

EU Commission Vice President Joaquin Almunia commented: “One of the overarching goals of the new rules is to contribute to the Commission's Europe 2020 strategy, in particular by promoting innovation and competitiveness. The new Guidelines and Block Exemption Regulations will give companies the necessary freedom to cooperate in a globalized market place, while at the same time minimizing the risk of agreements that are harmful to industry or consumers.”

The new “Horizontal Guidelines” set up a basic framework for analyzing common types of horizontal cooperation agreements, including those in the areas of R&D, production, purchasing, commercialization, standardization, standard terms, and information exchange. Included in the Guidelines is a revised chapter on standardization agreements. The chapter promotes an open and transparent standard-setting system in order to increase the transparency of licensing costs for intellectual property rights (“IPRs”). Access will be given on “fair, reasonable, and non-discriminatory” (“FRAND”) terms to interested businesses and individuals. In addition, it features detailed criteria on what constitutes a so-called “safe-harbour” agreement so that companies may assess the extent to which their agreements line up with EU competition law. The Guidelines also feature a new chapter on information exchange, which explains how to assess the compatibility of information exchanges with EU competition law. This chapter allows competitors, for example, to increase prices without incurring the risk of losing market shares or triggering a price war during the adjustment period to new prices. The chapter also includes real-life examples of typical information exchange scenarios.

November 17, 2010

DOJ Disfavors MFNs

by Doyle, Barlow & Mazard PLLC

On October 18, 2010, the U.S. Department of Justice (“DOJ”) and the Michigan Attorney General challenged Blue Cross Blue Shield (“BCBS”) of Michigan in a civil antitrust action. The complaint alleges that “most-favored nation” (“MFN”) clauses in BCBS contracts with Michigan hospitals raises health-care costs for Michigan residents and employers and excludes other insurers from the Michigan health-care market. United States v. Blue Cross Blue Shield of Michigan, No. 2:10-cv-14155-DPH-MKM (Mich. E. Dist. Oct. 18, 2010).

Background

MFN clauses come in two flavors: equal-to MFN and MFN-plus. An equal-to MFN clause in a contract between a health insurer and health-care provider requires that the provider – such as a hospital – charge the insurer no more than the lowest price the provider charges other insurers. An MFN-plus clause requires that the provider charge other insurers a certain percentage more than what it charges the MFN-insurer.

October 12, 2010

FTC Loses Merger Trial Because Of Market Definition

by Doyle, Barlow & Mazard PLLC

The Federal Trade Commission (“FTC”) lost its challenge to Ovation Pharmaceutical Inc.’s (“Ovation Pharmaceutical” now Lundbeck Inc.) acquisition of the pediatric heart drugs Indocin and NeoProfen. While the FTC claimed that the combination was a merger to monopoly resulting in anticompetitive price increases, the Federal District Court in Minnesota decided that Lundbeck (formerly “Ovation Pharmaceutical”) did not violate federal or state antitrust laws when it combined Indocin IV and NeoProfen, the only two FDA-approved drugs for treatment of patent ductus arteriosus (“PDA”). The primary reason for Judge Joan N. Erikson’s decision was that she did not believe that the FTC established that the drugs were in the same product market. FTC v. Lundbeck, Inc., No. 08-6379 and Minnesota v. Lundbeck, Inc., No. 08-6381 (D. Minn. August 31, 2010).

Background

Indocin and NeoProfen are pediatric heart drugs used to treat PDA, a potentially fatal heart condition that primarily affects premature babies. Surgery or pharmaceutical drugs are both treatment options for PDA, however, due to the health risks and high costs of surgery, use of drugs is a more favorable treatment.

October 5, 2010

Antitrust Division Settles With Visa and MasterCard But Continues Lawsuit Against American Express

by Doyle, Barlow & Mazard PLLC

On October 4, 2010, the Antitrust Division announced that it along with the states of Connecticut, Iowa, Maryland, Michigan, Missouri, Ohio, and Texas filed a civil antitrust lawsuit in U.S. District Court for the Eastern District of New York challenging rules that American Express, Master Card, and Visa have in place that prevent merchants from offering consumers discounts, rewards and information about card costs, ultimately resulting in consumers paying more for their purchases.

According to the complaint, American Express, MasterCard and Visa maintain rules that prohibit merchants from encouraging consumers to use lower-cost payment methods when making purchases. For example, the rules prohibit merchants from offering discounts or other incentives to consumers in order to encourage them to pay with credit cards that cost the merchant less to accept.

The Antitrust Division announced that it has entered into a settlement with Visa and MasterCard that resolves its antitrust concerns against them. The settlement would require the two companies to allow merchants to offer discounts, incentives, and information to consumers to encourage the use of payment methods that are less costly.

September 8, 2010

Second Circuit Punts on Pay for Delay Settlements

by Doyle, Barlow & Mazard PLLC

On April 29, 2010, a panel of three judges at the Second Circuit Court of Appeals gave hope to the opponents of pay-for-delay settlements, when the Court’s decision invited plaintiffs-appellants of Arkansas Carpenters Health and Welfare Fund v. Bayer AG to petition for an en banc rehearing of the case. On September 7, 2010, however, the Court denied Appellants’ petition without providing any reasoning.

Pay-for-delay settlements, also known as reverse exclusion payments, are becoming increasingly common. These agreements usually occur when a brand-name pharmaceutical manufacturer pays an allegedly infringing generic manufacturer to settle claims of patent infringement in exchange for agreeing not to enter the market. By paying the generic manufacturer more than it could have earned by entering the market, brand-name manufacturer can increase its profit by maintaining its monopoly.

The Federal Trade Commission (“FTC”) has consistently challenged these anti-competitive agreements in the courts and through testimonies before Congress. Calling them “unconscionable agreements,” FTC Chairman Leibowitz said, “these types of settlements will continue to insulate more and more drugs from competition.” FTC has estimated that pay-for-delay settlements are costing consumers and our health system at least $3.5 billion a year. American Association for Retired Persons (“AARP”) has noted that “[e]ven for those patients who are insured but who are on fixed or limited incomes, having a generic option is often the difference between having access to health care treatment and not having any treatment option at all.”