Antitrust Lawyer Blog Commentary on Current Developments

Articles Posted in FTC Antitrust Highlights

On September 12, 2019, a coalition of unions, consumer groups, and public interest organizations filed a letter with the U.S. Federal Trade Commission (“FTC”) opposing AbbVie Inc.’s (“AbbVie”) acquisition of Allergan plc (“Allergan”).

Coalition Opposing the Merger

The coalition includes Families USA, Public Citizen, U.S. PIRG Education Fund, Service Employees International Union, American Federation of State, County, and Municipal Employees, UNITE HERE, Consumer Action, American Federation of Teachers, Alliance for Retired Americans, American Family Voices, Doctors for America, End AIDS Now, Prescription Justice, Social Security Works, the Other 98, Treatment Action Group, and NextGen California.  It is asking the FTC to conduct a thorough investigation and to block the merger if the facts support it and a remedy cannot be devised to restore competition.  The coalition highlights the competitive problems arising from continued consolidation in the pharmaceutical industry and requests that the FTC include in its investigation ongoing anticompetitive conduct by the parties, such as the use of rebate walls, which will have an even more profound anticompetitive effect if this merger is consolidated, as well as past abuse of the patent system.

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 August 2, 2019, the FTC authorized an enforcement action to challenge Evonik Industries AG’s (“Evonik”) proposed $625 million acquisition of PeroxyChem Holding Company (“PeroxyChem”).

Complaint

The FTC is alleging the merger of the chemical companies would substantially reduce competition in the Pacific Northwest and the Southern and Central United States for the production and sale of hydrogen peroxide, a commodity chemical used for oxidation, disinfection, and bleaching.

Senate Democrats Aim at Strengthening Antitrust Enforcement

On Friday, February 1, Senator Amy Klobuchar re-introduced two bills aimed at strengthening antitrust enforcement.

The co-sponsors include Senators Ed Markey (Dem-Massachusetts), Richard Blumenthal (Dem-Connecticut), Dick Durbin (Dem-Illinois) and Corey Booker (Dem-New Jersey).

On January 11, 2019, Congressman Peter Welch and Francis Rooney, members of Congress, wrote a letter to the Federal Trade Commission (“FTC”), urging the Commission to investigate Bristol-Myers Squibb’s (“BMS”) acquisition of Celgene.

The letter asks the FTC to examine how the transaction may harm competition with respect to horizontal overlaps and even complementary drugs.  Specifically, the letter points out that the acquisition allows BMS to increase its drug portfolio and leverage over pharmacy benefit managers (“PBMs”) when negotiating preferred drug placement on formularies and bundled discounts that can create “rebate walls”.

The transaction gives the FTC an opportunity to investigate a questionable contracting practice in the pharmaceutical drug industry known as a “rebate wall” or “rebate trap”.  Payors such as PBMs and health insurers obtain rebates on prescription drugs from pharmaceutical manufacturers that have actually inflated the price of drugs and stifled the ability of rival drug manufacturers to effectively compete.  This practice is recognized by both the administration and industry players as anticompetitive.  Department of Health and Human Services Secretary Alex Azar has noted that rebate walls can prevent competition and new entrants into the system. Moreover, major drug manufacturers such as Pfizer and Shire have filed antitrust suits challenging rebate walls as antitrust violations.  In theory, rebates could have a positive impact on the prescription drug market if they led to lower prices and benefit consumers.  But, in practice, this is simply not the case.  Rebate walls distort the workings of the free market, result in higher drug prices, and reduce patients’ access to affordable branded drugs.

The government shutdown is likely to delay FTC merger reviews, but the Department of Justice’s (“DOJ”) Second Request investigations will likely proceed as they normally do albeit with less staff.  Although the FTC’s Premerger Notification Office (PNO) and the DOJ’s Premerger Office remain open during regular hours to receive HSR filings, the FTC PNO will be operating with a limited staff and is unavailable to provide guidance about the administration of the HSR Act.  All merging parties have to wait the full initial waiting period before obtaining antitrust clearance, because the PNO is not granting early termination of waiting periods during the shutdown.

The staff attorneys who run investigations and negotiations at the Commission are out of the office, which means that parties are simply waiting while everything is on hold.  HSR waiting periods will continue to run during a government shutdown.  DOJ and FTC staff will continue to review premerger filings and conduct investigations to determine whether to challenge reported transactions under the antitrust laws.  Second Requests will continue to be issued and, if engaged in merger litigation, FTC and DOJ attorneys will notify opposing parties and the courts of the government shutdown and attempt to negotiate timing extensions and suspensions. If such relief is not available, they will continue to litigate the matter.

The DOJ and the FTC both issued contingency plans indicating that certain employees connected to antitrust enforcement within the Antitrust Division of the DOJ and the Bureau of Competition at the FTC will be excepted from the furlough and will continue to conduct antitrust enforcement activities.

On September 5, 2018, Judge Trevor N. McFadden of the United States District Court for the District of Columbia granted the Federal Trade Commission’s request for a preliminary injunction preventing Tronox Ltd. (“Tronox”) from completing its proposed $2.4 billion acquisition of National Titanium Dioxide Company Ltd. (“Cristal”) until after a final ruling in the FTC’s administrative proceedings challenging the deal.  Federal Trade Commission v. Tronox Ltd. (D.D.C. Sept. 12, 2018).  It is a huge victory for the FTC.

Background

On February 21, 2017, Tronox inked a deal to buy Cristal for $1.67 billion and a 24% stake in the new entity. The transaction would have created the largest TiO2 company in the world, based on titanium chemical sales and nameplate capacity.

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 August 7, 2018, the FTC’s Bureau of Competition announced a new new Model Timing Agreement for its merger reviews.  This is part of its initiatives to streamline its merger review process.

New FTC Model Timing Agreement

Merger investigations typically involve timing agreements, which provide an agreed-upon framework for the timing of certain steps in the investigation. Timing agreements provide the FTC staff with notice of when the parties plan to close the deal. Both parties and staff benefit from having such a framework established shortly after issuance of the Second Request as it allows staff and the parties to engage in substantive discussions with more certainty about the timing.

On June 20, 2018, the Federal Trade Commission (“FTC”) announced that it will hold a series of public hearings on whether broad-based changes in the economy, evolving business practices, new technologies, or international developments might require adjustments to competition and consumer protection enforcement law, enforcement priorities, and policy.  The multi-day, multi-part hearings will take place this fall and winter.

It is expected that a lot of time will be devoted to the dominant digital two sided platforms (Google, Facebook, and Amazon) as well as the associated network effects.  The FTC is interested in learning more about how their conduct hinders competition and innovation or how their services actually benefit consumers and enhance competition and innovation.

The hearings and public comment process will provide opportunities for FTC staff and leadership to listen to interested persons and outside experts representing a broad and diverse range of viewpoints.  Additionally, the hearings will stimulate thoughtful internal and external evaluation of the FTC’s near- and long-term law enforcement and policy agenda.  The hearings may identify areas for enforcement and policy guidance, including improvements to the agency’s investigation and law enforcement processes, as well as areas that warrant additional study.