Antitrust Lawyer Blog

June 4, 2007

FTC Challenges Rite Aid’s Proposed $3.5 Billion Acquisition of Brooks and Eckerd Pharmacies from Canada’s Jean Coutu Group, Inc.

On June 4, the FTC entered into a settlement to resolve its concerns relating to Rite Aid Corporation’s proposed $3.5 billion acquisition of the Brooks and Eckerd pharmacies from Canada’s Jean Coutu Group (PJC), Inc. Rite Aid and Jean Coutu were required to sell 23 pharmacies to FTC-approved buyers in order to remedy the alleged anticompetitive impact of the proposed transaction. The stores will be sold to: 1) Kinney Drugs; 2) Medicine Shoppe International, Inc.; 3) Walgreen Co.; 4) Big Y; and 5) Weis Markets.

The consent order with the FTC requires the companies to sell pharmacies in all of the markets where competition would be adversely affected by the proposed. It will ensure that consumers continue to have a choice in where they shop for prescription drugs.

The FTC’s Investigation

June 1, 2007

International Competition Network Presents Report on Unilateral Conduct and Announces Merger Convergence Project

by Doyle, Barlow & Mazard PLLC

On June 1, the DOJ announced the launch of a report on unilateral conduct laws, the initiation of a project to develop recommendations on substantive merger analysis, and the sixth annual International Competition Network (“ICN”) conference in Moscow took significant steps toward strengthening antitrust convergence.

The ICN conference, hosted by Russia’s competition authority, the Federal Antimonopoly Service, was held on May 30 through June 1, 2007. More than 350 delegates and competition experts participated, representing more than 80 antitrust agencies, international organizations, and the legal, business, consumer, and academic communities. The conference showcased the recent work of ICN working groups on mergers, unilateral conduct, cartels, and competition policy implementation. Also featured were presentations by Thomas O. Barnett, Assistant Attorney General in charge of the DOJ’s Antitrust Division, FTC Chairman Deborah Platt Majoras, FTC Commissioner William E. Kovacic, and other key officials from antitrust agencies worldwide.

Assistant Attorney General Barnett announced that the Merger Working Group will begin developing consensus recommendations for substantive merger analysis. Barnett identified three topics for initial consideration during the coming year: the efficacy of an agency’s legal framework for analyzing proposed mergers, the use and role of presumptions and safe harbors or thresholds, and the analysis of entry and expansion.

May 31, 2007

Justice Department Requires Divestitures in $1.5 Billion Merger of Monsanto and Delta & Pine Land

by Doyle, Barlow & Mazard PLLC

On May 31, the Monsanto Company and Delta & Pine Land Company (“DPL”) were required to divest a significant seed company, multiple cottonseed lines, and other valuable assets in order to proceed with their $1.5 billion merger.

Monsanto was also required to change certain license agreements as a condition for proceeding with its acquisition of DPL. The DOJ said that the transaction, as originally proposed, would have caused higher prices to U.S. farmers for traited cottonseed and would have blocked or delayed development of traits for cottonseed that would compete with Monsanto. Traited cottonseed is seed that has been genetically modified to include highly desirable characteristics, such as resistance to insects or tolerance to herbicides.

In order to go forward with their proposed transaction, the merged firm must divest Monsanto’s Stoneville Pedigreed Seed Company, 20 proprietary DPL cottonseed lines, and other significant assets. Monsanto must also provide the divested Stoneville company a license as favorable as DPL’s current Monsanto license in terms of revenues, future traits, and the ability to combine or “stack” non-Monsanto traits with Monsanto traits. The merged firm will also have to divest to Syngenta Crop Protection AG a group of 43 DPL cottonseed lines that contain VipCot, Syngenta’s insect-resistant trait technology that DPL planned to begin marketing as early as 2009. Finally, the merged firm must amend certain terms in its current trait license agreements with other cottonseed companies to allow them, without penalty, to stack non-Monsanto and Monsanto traits and to sell cottonseed that includes non-Monsanto traits.

May 31, 2007

FTC Testifies on Government Agencies’ Collection and Use of Personal Information and Identity Theft

by Doyle, Barlow & Mazard PLLC

On May 31, the FTC asserts that public agencies can help reduce the incidence and impact of identity theft. The FTC, in a discussion with the Ohio Privacy and Public Records Access Study Committee in Columbus, also affirms that government agencies should limit the amount of information they collect, restrict access to the information, and implement procedures to respond to data breaches.

The President’s Identity Theft Task Force was presented at the testimony delivering a comprehensive national strategy to combat identity theft. The plan, that has 31 initiatives the federal government should consider taking to combat identity theft, included recommendations on how to prevent sensitive data from falling into the wrong hands, to make such data less valuable to identity thieves by improving authentication, to ease victim recovery and to improve tools for effective criminal law enforcement.

The FTC’s testimony suggests that federal government agencies take steps to eliminate, restrict, or conceal the use of SSNs, often the key to identity theft, wherever possible. The suggestions to the federal agencies can be applied equally to government agencies at all levels.

May 24, 2007

FTC Chairman Deborah Platt Majoras Participated in Sixth Annual International Competition Network Conference in Moscow, Russia

by Doyle, Barlow & Mazard PLLC

On May 24, FTC Chairman Deborah Platt Majoras participated in the sixth annual International Competition Network (“ICN”) Conference in Moscow, Russia, from May 30-June 1, 2007. Senior government antitrust officials, private sector antitrust experts from around the world, and representatives from intergovernmental organizations met to discuss competition issues.

The ICN conference focused on the recent work of its four substantive working groups: unilateral conduct, mergers, cartels, and competition policy implementation. ICN member agencies participated in these project-oriented working groups to address policy and enforcement issues and formulate proposals for ICN consensus. Private sector experts participated actively in the working groups. Conference discussions focused on topics addressed by these groups including: prospects for convergence on substantive merger review issues; objectives of competition laws on unilateral conduct; definition and assessment of market power/dominance; international cooperation in cartel investigations, and case selection and prioritization; and the promotion of competition policy in developing and transition economies. Participants also discussed the implementation of the ICN Recommended Practices for Merger Notification and Review Procedures and other ICN work product. The conference finalized work programs for the coming year.

Robert Doyle

May 23, 2007

FTC Testifies Before Congress on Petroleum Industry Consolidation

by Doyle, Barlow & Mazard PLLC

On May 23, Bureau of Economics Director Michael A. Salinger described the FTC’s initiatives to protect competitive markets in the production, distribution, and sale of gasoline through the agency’s comprehensive merger program on behalf of the FTC before the U.S. Congress’ Joint Economic Committee.

Although the FTC does not regulate energy market sectors, the agency plays a key role in maintaining competition and protecting consumers in energy markets. The FTC has been very involved regarding mergers in the oil industry that could harm competition. It examines any merger and any course of conduct in the industry that has the potential to decrease competition and thus harm consumers of gasoline and other petroleum products.

The FTC’s statement states that a review released in January of this year on horizontal merger investigations and enforcement actions from fiscal year 1996 to fiscal year 2005 shows that the FTC has brought more merger cases at lower market concentration levels in the petroleum industry than in any other industry. Further, unlike in other industries, the FTC has brought enforcement actions – and obtained merger relief in many instances – in petroleum markets that are only moderately concentrated.

May 22, 2007

FTC Testifies on Market Forces, Competitive Dynamics, and Gasoline Prices

by Doyle, Barlow & Mazard PLLC

On May 22, Commissioner William E. Kovacic detailed the FTC’s varied initiatives to protect competitive markets in the production, distribution, and sale of gasoline and other petroleum products before the U.S. House of Representatives Subcommittee on Oversight and Investigations of the Committee on Energy and Commerce.

The petroleum industry plays a crucial role in our economy. Indeed, few issues are more important to American consumers and businesses than the decisions being made about current and future energy production and use. Not only do changes in gasoline prices affect consumers directly, but the price and availability of gasoline also influence many other economic sectors. This is why this industry is so carefully scrutinized, more than others, by the FTC.

The testimony presents FTC’s work related to the petroleum industry in two parts. First, it reviews the basic tools used by the FTC to promote competition in the petroleum industry – challenging potentially anticompetitive mergers, investigating potential non-merger antitrust violations and prosecuting actions where appropriate, and monitoring industry behavior to detect possible anticompetitive conduct. Second, it details the FTC’s additional efforts to examine and analyze issues important to consumers in the petroleum industry – including conferences, studies, and reports.

May 22, 2007

Justice Department Files Antitrust Lawsuit Against Daily Gazette Company and MediaNews Group

by Doyle, Barlow & Mazard PLLC

On May 22, the DOJ filed a civil antitrust lawsuit that required the Daily Gazette Company and MediaNews to undo their transaction and restore the competition that existed before May 2004, alleging that the Daily Gazette Company violated the antitrust laws when it acquired the Daily Mail newspaper from MediaNews. Daily Gazette Company is a privately-held corporation based in Charleston, West Virginia. MediaNews Group is based in Denver and is the fourth largest newspaper company in the United States.

The Charleston Gazette and the Daily Mail are the only two daily newspapers in Charleston, West Virginia. The DOJ alleged that Daily Gazette Company, owner and publisher of The Charleston Gazette, bought the Daily Mail with the purpose and intent to shut it down, and began using its new control over that newspaper to initiate the termination of the second paper, but suspended those actions in December 2004 when the DOJ learned of the transactions and began an investigation.

Until 2004, Daily Gazette Company and MediaNews operated within a joint operating agreement (“JOA”) and each owned a 50 percent interest in an entity called, Charleston Newspapers, which performed many of the commercial functions of The Charleston Gazette and Daily Mail. In May 2004, Daily Gazette Company acquired MediaNews’ ownership interest in the JOA and ownership of the Daily Mail. As a result, Daily Gazette Company now owns all of the assets and controls all of the business operations of the only two daily newspapers in Charleston, West Virginia.

May 21, 2007

Texas Hedge Fund Manager Will Pay Civil Penalty for Violating Antitrust Premerger Notification Requirements

by Doyle, Barlow & Mazard PLLC

On May 21, Mr. James D. Dondero, a Texas hedge fund manager, entered a settlement with the DOJ where he agreed to pay $250,000 for alleged charges of violating premerger reporting requirements.

According to the complaint, Mr. Dondero acquired stock of Motient Corp. (“Motient”), based in Reston, Virgina, where he served on the board of directors in February 2005, before complying with the antitrust premerger notification and waiting period requirements of the HSR Act. As a result of exercising the options, Dondero and the investment fund that he controlled, Highland Capital Management L.P. (“Highland”), held voting securities of Motient valued in excess of the $50 million HSR reporting threshold.

Less than a year before the violation alleged in the complaint, Dondero made a corrective HSR filing relating to a failure to file regarding Highland’s acquisitions of stock in another company. As part of that filing, Highland outlined steps that would be taken to avoid future violations.

May 15, 2007

FTC Recovers $160,000 for Franchisees Who Bought Web Services Businesses

by Doyle, Barlow & Mazard PLLC

On May 15, the FTC banned Elliot Krasnow from ever promoting or selling franchises or business opportunities ever again. Along with his company Netvertise, Inc, Krasnow returned $160,000 to consumers after the FTC charged that they used bogus earnings claims to lure franchisees into buying their Web services businesses, and failed to tell customers that the owner was under a previous FTC order for deceptively promoting rare coins.

Netvertise, Inc. and Elliot Krasnow allegedly violated federal law when they sold franchises for Web site design and promotion services to businesses. The franchises, which cost between $20,000 to $100,000, offered various Internet services to small and medium-sized businesses, including the construction and promotion of Web sites, use of e-mail marketing, and off-site data protection. The franchise included Netspace’s Search Engine Optimizing software, which they claimed would allow franchisees to create high-quality Web sites for clients that would appear on the first page of results from an Internet search engine.

Krasnow allegedly overstated the value of the Netspace software and misrepresented that franchisees would earn substantial incomes. The complaint also charged that the earnings claims were unsubstantiated and that the defendants provided consumers with defective disclosure documents. In 1990, Krasnow had to pay $400,000 and prohibited misrepresentations when dealing in rare coins. The franchise disclosure documents did not disclose this to franchisees as required by law. The defendants also did not provide franchisees with an earnings claim document even though they made earnings claims to potential buyers. In fact, even though they made oral representations, the defendants’ basic disclosure document said no earnings claims were made.