Antitrust Lawyer Blog Commentary on Current Developments

Articles Posted in FTC Consumer Protection Highlights

On September 9, 2010, The FTC entered into a settlement agreement with Air Products and Chemicals, Inc. regarding its proposed takeover of Airgas, Inc. The settlement will require the company to sell certain liquid gas assets if it proceeds with its proposed hostile takeover of Airgas.

The proposed settlement agreement resolves FTC charges that Air Products' proposed acquisition of Airgas would harm competition in five regional markets for bulk liquid oxygen and bulk liquid nitrogen, which are used in a range of applications from hospital patient care to the manufacture of frozen foods. According to the FTC's complaint, Air Products' acquisition of Airgas, as originally proposed, would eliminate direct competition between the two companies in five U.S. regions and likely would allow the combined firm to exercise its market power to set prices for bulk liquid oxygen and bulk liquid nitrogen.

The settlement agreement is designed to remedy this competitive harm by requiring that, if Air Products succeeds in its hostile takeover, Air Products sell 15 air separation units (“ASU”s) and related assets that are currently owned and operated by Airgas. The ASUs are used to separate atmospheric air into nitrogen, oxygen, and its other primary components. The units to be sold are in Bozrah, Connecticut; Carrollton, Kentucky; Canton, Ohio; Dayton, Ohio; New Carlisle, Indiana; Madison, Wisconsin; Waukesha, Wisconsin; Carrollton, Georgia; Jefferson, Georgia; Gaston, South Carolina (two ASUs); Rock Hill, South Carolina; Chester, Virginia; Mulberry, Arkansas; and Lawton, Oklahoma. As a result of this agreement, Air Products would face the same competition in those areas as it does now.

On July 28, 2010, the FTC entered into a settlement agreement with Australian based Nufarm Limited (“Nufarm”) regarding its March 5, 2008 acquisition of all of the shares of United Kingdom-based A.H. Marks Holding Limited (“A.H. Marks”).

Both companies held or had access to regulatory approvals from the United States Environmental Protection Agency (“EPA”) to sell certain herbicides in the United States: MCPA, MCPP-p, and 2,4DB. These herbicides are relied upon by farmers, landscapers, and consumers. Before the transaction, both Nufarm and A.H. Marks sold the raw herbicides to agricultural formulators who used them to make formulated herbicides.

The FTC alleged that the acquisition resulted in Nufarm obtaining monopoly of two phenoxy herbicide markets (MCPA and MCPP-p) and reduced a third market (2,4DB) to a duopoly. Furthermore, FTC alleged that the merger would result in higher prices and other anticompetitive effects, because there are no comparable substitutes on the market for these three herbicides.

On December 23, 2009, Agrium Inc. agreed to sell a range of assets as part of an agreement with the FTC that will allow Agrium to move forward with its acquisition of competitor CF Industries Holdings, Inc. The proposed consent order settles allegations that the acquisition would have eliminated competition in the market for anhydrous ammonia fertilizer, a product that farmers rely on to grow their crops.

According to the FTC’s complaint, Agrium’s acquisition of CF would have eliminated competition between the two companies in the distribution and sale of anhydrous ammonia in three markets: the Pacific Northwest; East Dubuque, Illinois; and Marseilles, Illinois.

The FTC’s complaint alleges that each of these markets is highly concentrated and the proposed transaction would further increase concentration levels by reducing the number of significant competitors in the Pacific Northwest from two to one, and in the two areas in Illinois from three to two. The complaint further alleges that the proposed transaction likely would increase the prices for anhydrous ammonium fertilizer.

On December 2, 2009, the FTC announced an order settling charges that Watson Pharmaceuticals, Inc.’s acquisition of Robin Hood Holdings Limited, owner of Arrow Pharmaceuticals, would have harmed consumers by eliminating future competition for important generic drugs used to treat Parkinson’s disease (cabergoline) and the side effects of chemotherapy (dronabinol).

Under the order’s terms, Watson will sell its generic cabergoline product to Impax Laboratories Inc. and Arrow will spin off its subsidiary, Resolution Chemicals, which is currently developing generic dronabinol, to a new entity, Reso Holdings, within 10 days of the acquisition. Arrow also must sell the U.S. marketing rights for generic dronabinol to Impax.

According to the Commission’s complaint, Watson’s acquisition of Arrow, as originally proposed, would violate federal antitrust law because it would lessen competition in the U.S. markets for generic cabergoline tablets and generic dronabinol capsules. The complaint alleges that the acquisition would reduce the number of generic suppliers in the market, which could raise the prices that patients pay for these drugs.

On November 25, 2009, the FTC announced that it approved SCI’s acquisition of Palm Mortuary, Inc. (“Palm”) as long as it sold a cemetery and funeral home in Las Vegas.

The FTC alleged that Las Vegas has a highly concentrated market for cemetery services, which includes burial plots, opening and closing of graves, memorials, burial vaults, mausoleum spaces, and cemetery maintenance. According to the FTC’s complaint, SCI’s proposed acquisition of Palm would have reduced the number of significant competitors from three to two, and SCI would have controlled 76 percent of the market for funeral services.

The complaint alleges that the transaction would have increased the likelihood that the combined firm could raise prices either unilaterally or through coordinated interaction with its only remaining competitor. Entry of a new competitor in the area is not likely to counteract the alleged anticompetitive effects of the acquisition, due in part to the limited amount of land in Las Vegas that is suitable for cemeteries.

On October 14, 2009, the Federal Trade Commission (“FTC”) settled with Pfizer Inc. regarding its proposed $68 billion acquisition of Wyeth.

According to the FTC, the proposed transaction would have reduced competition in several U.S. markets for the manufacture and sale of animal vaccines and animal pharmaceutical products. Veterinarians and other animal health product customers could have seen the prices of these goods increase. Furthermore, the FTC believes that the entry of new competitors in these markets would not be timely, likely, nor sufficient to offset the loss of competition.

The consent order requires Pfizer to sell approximately half of Wyeth’s Fort Dodge U.S. animal health business, including vaccines for cattle, dogs, and cats, and other pharmaceutical products used in treating cattle, dogs, cats, and horses, to Boehringer Ingelheim Vetmedica, Inc. (“Boehringer”), within 10 days of the acquisition. Pfizer is required to provide Boehringer with key services to help it compete after the consummation of the deal. In addition, the order requires Pfizer to return its exclusive distribution rights for a product to treat tapeworms in horses to Virbac S.A., the manufacturer of the product.

On October 7, 2009, the Federal Trade Commission (“FTC”) settled its litigation regarding Carilion Clinic’s (“Carilion”) acquisition of two outpatient clinics.

On July 24, 2009, the FTC issued an administrative complaint challenging Carilion’s August 2008 acquisition of two outpatient clinics in the Roanoke, Virginia area. Prior to the acquisition, the Center for Advanced Imaging (“CAI”) and the Center for Surgical Excellence (“CSE”) had strong reputations for offering high-quality care and convenient services at prices much lower than Carilion’s.

According to the complaint, Carilion’s $20 million acquisition of CAI and CSE reduced the number of outpatient imaging and surgical services providers in the Roanoke area from three to two. Carilion now faces competition for outpatient imaging and surgical services from only one other provider, HCA, the other major hospital system in the Roanoke area.

Although the Competition Commission of India (“CCI”) became functional on April 1, 2008, several other provisions of the Competition (Amendment) Act, 2007 (“Competition Act”) have not been notified. According to the Indian legislative process, the Act, even though passed by the Parliament, has to be notified by the President of India to become functional. Section 66 of the Competition Act requires the dissolution of the Monopolies and Restrictive Trade Practices Commission (“MRTPC”), which to this point was the erstwhile competition authority in the country. This section has not been notified. As a result, there has been a multiplicity of regulators. The CCI has already begun seeing cases with is first formal complaint of “cartelization” coming from the Multiplex Association of India against the United Producers and Distributors Forum, Association of Motion Pictures and TV Program Producers; and Film and TV Producers Guild of India. However, the MRTPC is also continuing to take cases (at least 30 a month).

In addition, even though the merger control regulations, under the Competition Act, 2002 were issued in January 2008, they are yet to be enacted. As such there seems to be some overlap regarding the role of the CCI in merger regulations as well.

Camelia C. Mazard

On June 21, a federal court stopped an operation that allegedly victimized Spanish-speaking consumers nationwide by posing as debt collectors seeking payments consumers did not owe.

From 2003 to 2005 the defendants had been allegedly selling an English-language instruction course, “Inglés con Ritmo,” advertised on Spanish-language television and the defendants’ Web sites, www.tonorecords.com and www.tonomusic.com, stating that it was free due to government or non-profit subsidies. Inquiring consumers were told that a shipping and handling fee of $100 to $169 applied. Since 2006, the complaint states, the defendants, posing as third-party debt collectors, told consumers they owed money, typically $900, and repeatedly called them, even though the evidence shows that they owe no money.

The FTC has charged the defendants for falsely claiming that a debt is owed; by falsely claiming to be, or to represent, an attorney; and by falsely threatening legal action, arrest, imprisonment, property seizure, or garnishment of wages. Other violations alleged are attempting to collect an amount of debt not authorized by contract or permitted by law; harassing consumers; and failing to inform consumers, within five days of their initial communication with them, of their right to dispute and obtain verification of their debt and the name of the original creditor.

On June 6, following the NorVergence Inc. telecommunications fraud case won by the FTC in 2005, the agency charged a company with violating federal law by helping to finance the scheme and continuing to seek payment from defrauded consumers.

In 2004, a federal court voided 1,600 NorVergence contracts with small businesses and religious and other nonprofit organizations that were misled by promised savings on phone and Internet services. The contracts purported to be long-term rental agreements for a relatively inexpensive device that NorVergence falsely claimed would create the savings. NorVergence was forced into bankruptcy, and the promised services stopped. The judgment the FTC obtained against NorVergence left unaffected thousands of rental agreements NorVergence had already sold to finance companies.

According to a complaint filed on June 6 by the FTC, IFC Credit Corporation purchased NorVergence rental agreements valued at $21 million, with individual contracts ranging from $4,439 to $160,672. Altough payments were received, as the complaint alleges, no customers received services from NorVergrnce for an extended period, while others received none.