Antitrust Lawyer Blog

June 10, 2018

FTC Resolves Vertical Competition Concerns with Behavioral Conditions

On June 5, 2018, the Federal Trade Commission (“FTC”) announced that Northrop Grumman’s (“Northrop”) $7.8 billion acquisition of aerospace and defense contractor Orbital ATK, a vertical merger that combined a supplier with its customer, could proceed so long as the Northrop agreed to certain behavioral remedies.

According to the complaint, Northrop is one of four companies capable of supplying the U.S. government with missile systems, including tactical missiles, strategic missiles and missile defense interceptors. Orbital ATK is the premier supplier of solid rocket motors (“SRMs”), which propel missiles to their intended targets and are an essential input for missile systems. The FTC’s complaint alleges that Northrop’s proposed acquisition of Orbital ATK would have reduced competition in the market for missile systems purchased by the U.S. government, resulting in less innovation and higher prices. The FTC was concerned that Northrop could raise prices on the motors on competitors or withhold them altogether, both of which the agency said would give the merged firm a clear advantage for missile contracts. Additionally, “the acquisition creates a risk that the proprietary, competitively sensitive information of a rival (solid rocket motor) supplier supporting Northrop’s missile system business could be shared with Northrop’s vertically integrated SRM business.”

To resolve the vertical competition concerns, the FTC required several behavioral or conduct remedies. First, Northrop was required to supply SRMs to competitors on a non-discriminatory basis. Second, Northrop was required to separate the operation of its SRM business from the rest of the company’s operations with a firewall. Third, the settlement agreement provides for the U.S. Department of Defense (“DOD”) to appoint a compliance officer to oversee Northrop’s conduct pursuant to the settlement. Fourth, the FTC required the merging parties to implement a compliance program and create regular compliance reports, to be submitted to the FTC, the DOD and the compliance officer. The FTC said that by ensuring that other missile suppliers can continue to compete, the settlement preserves the procompetitive benefits of the transaction while addressing the potential anticompetitive harms.

June 7, 2018

The Antitrust Division is Not Opposed to All Vertical Mergers

by Doyle, Barlow & Mazard PLLC

On June 7, 2018, the DOJ’s Makan Delrahim sought to reassure investors that worries that regulators would crack down on proposed vertical combinations were over-blown. “I understand that some journalists and observers have recently expressed concern that the Antitrust Division no longer believes that vertical mergers can be efficient and beneficial to competition and consumers,” he said. Noting that some point at the decision to sue to block AT&T from buying Time Warner “as a supposed bellwether”, Delrahim said: “rest assured these concerns are misplaced.”

So, is the Antitrust Division only concerned about vertical mergers in the media industry?

June 5, 2018

The DOJ Approves Bayer’s Acquisition of Monsanto With the Largest U.S. Antitrust Asset Divestiture Ever

by Doyle, Barlow & Mazard PLLC

On May 29, 2018, the DOJ approved Bayer’s acquisition of Monsanto with a $9 billion asset divestiture.

Background

In September 2016, Bayer agreed to acquire Monsanto. Bayer and Monsanto overlapped in the research, development, and marketing of seeds, crop protection chemicals, and related agricultural products. The principal areas of competitive concern related to the seeds business. The seeds and crop protection businesses are highly concentrated in the United States so from the get go Bayer knew that it needed to propose a comprehensive and complex remedy to resolve the antitrust concerns.

May 30, 2018

Fair Competition is Needed to Keep Generic Prescription Drugs Affordable

by Doyle, Barlow & Mazard PLLC

While there is much discussion about controlling prescription drug prices, the undeniable trend in the generic drug industry is that prices have been trending down for the past several years.

Generic Prices are Down, But Is that a Good Thing?

The short term effects appear good for the consumer, but the longer term effects could result in higher prices and drug shortages. Today, 90% of U.S. prescriptions are for generic drugs not branded drugs, but in 2017, generics made up only 13% of all prescription spending. Over the past several years, branded drug prices have been going up while generic drug prices have been going down. Prices are so low that some generics are deciding to exit, stop producing and marketing certain drugs that are no longer profitable. If they exit, where will consumers get basic antibiotics and drugs that are no longer sold by the branded firms?

May 24, 2018

Trump Administration Calling Out Google and Big Tech

by Doyle, Barlow & Mazard PLLC

On May 21, 2018, Treasury Secretary Steven Mnuchin urged the DOJ to review the power that large technology firms such as Google have over the U.S. economy. A “60 Minutes” segment on Sunday devoted to assertions that Alphabet Inc.’s Google wields a destructive monopoly in online search hammered home the notion of the company’s dominance during a time of heightened public concern with technology giants. The report didn’t include new allegations about the company. “These issues deserve to be reviewed carefully,” Mnuchin said in a CNBC interview in response to a question about the CBS News report. “These are issues the Justice Department needs to look at seriously, not for any one company, but as these technology companies have a greater and greater impact on the economy.”

The report highlighted how critics and rivals, such as Yelp Inc., are trying to bring Europe’s antitrust approach to Google to the United States. Margrethe Vestager, the European Union competition commissioner, told CBS that she is intent on stopping Google’s “illegal behavior” in web search, suggesting that the EC isn’t appeased by the company’s proposed solution for the hefty charges the EU filed last year. “You have to look at the power they have and it’s something the Justice Department I hope takes a serious look at,” Mnuchin said, though he added that “issues of monopolies are out of my lane” and that it’s up to the DOJ to review antitrust violations.

CBS featured guests who argued Google abuses its dominance in search and search advertising. It didn’t show any evidence that U.S. lawmakers or enforcement agencies will target the company or mention the potential cases Vestager is pursuing against Google for its Android mobile software and advertising business.

May 20, 2018

DOJ Catches Another Big Fish (Tuna)

by Doyle, Barlow & Mazard PLLC

More Fallout From The Ill-Advised Tuna Merger

On May 16, 2018, the Department of Justice (“DOJ”) announced that a federal grand jury returned an indictment against Christopher Lischewski, the President and CEO of Bumble Bee Foods LLC (“Bumble Bee”), for participating in a conspiracy to fix prices for packaged seafood sold in the United States.

The indictment, filed in the U.S. District Court for the Northern District of California in San Francisco, charges Lischewski with participating in a conspiracy to fix prices of packaged seafood beginning in or about November 2010 until December 2013. The one-count felony indictment charges that Lischewski carried out the conspiracy by agreeing to fix the prices of packaged seafood during meetings and other communications. The co-conspirators issued price announcements and pricing guidance in accordance with these agreements.

April 30, 2018

FTC Provides Guidance on How to Resolve Future Competition Concerns in Generic Pharmaceutical Deals

by Doyle, Barlow & Mazard PLLC

On April 27, 2018, the FTC announced that Amneal Pharmaceuticals LLC (“Amneal”) may complete its acquisition of an equity share in Impax Laboratories Inc. (“Impax”) so long as Impax divests its rights and assets for ten products to three separate companies.

The FTC concluded that the proposed acquisition would have reduced competition in three markets where both Amneal and Impax competed: (1) generic desipramine hydrochloride tablets; (2) generic ezetimibe and simvastatin immediate release (“IR”) tablets; and (3) generic felbamate tablets.

The FTC also concluded that the proposed acquisition would reduce future competition in seven markets where Amneal or Impax is a current competitor and the other would have been likely to enter the market absent the acquisition: (1) generic aspirin and dipyridamole extended release (“ER”) capsules; (2) generic azelastine nasal spray; (3) generic diclofenac sodium and misoprostol delayed release (“DR”) tablets; (4) generic erythromycin tablets; (5) generic fluocinonide-E cream; (6) generic methylphenidate hydrochloride ER tablets; and (7) generic olopatadine hydrochloride nasal spray.

April 25, 2018

DOJ Forces Martin Marietta to Divest Quarries

by Doyle, Barlow & Mazard PLLC

On April 25, 2018, the DOJ announced that it will require Martin Marietta Materials, Inc. (“Martin Marietta”) to divest quarries in Georgia and Maryland in order to proceed with its proposed $1.625 billion acquisition of Bluegrass Materials Company, LLC (“Bluegrass”) from LG Panadero, L.P. of Panadero Corp. and Panadero Aggregates Holdings, LLC.

According to the DOJ’s complaint, Martin Marietta and Bluegrass produce and sell aggregate, an essential input in asphalt and ready mix concrete that is used in road building and other types of construction. The complaint alleges that, for a significant number of customers in and immediately around Forsyth and north Fulton County, Georgia, and in the Washington County, Maryland area, Martin Marietta and Bluegrass are two of only three competitive sources of aggregate qualified by the respective states’ Departments of Transportation. According to the complaint, the loss of competition between Martin Marietta and Bluegrass would likely result in higher prices and poorer customer service for aggregate customers in these areas.

Under the terms of the proposed settlement, Martin Marietta must divest Bluegrass’s Beaver Creek quarry in Hagerstown, Maryland, and all of the quarry’s assets to an acquirer approved by the United States, in consultation with the State of Maryland. Martin Marietta must also divest the lease to its Forsyth quarry in Suwanee, Georgia, and all of the quarry’s assets to Midsouth Paving, Inc., or an alternate acquirer approved by the United States.

April 20, 2018

DOJ’s Top Antitrust Cop Says Evidence Based Enforcement Is Sufficient to Protect Consumers With Regards to Digital Platform Companies

by Doyle, Barlow & Mazard PLLC

On April 19, 2018, Makan Delrahim, Assistant Attorney General of DOJ’s Antitrust Division delivered the keynote address at the at the University of Chicago’s Antitrust and Competition Conference. The focus of his remarks was “evidence-based enforcement.” He said that “an evidence-based approach requires enforcement built on credible evidence that a practice harms competition and the American consumer, or in the case of merger enforcement, that it creates an unacceptable risk of doing so.”

Delrahim noted that outside of flat out price fixing and naked restraints of trade, which are clearly illegal, “antitrust demands evidence of harm or likely harm to competition, often weighed against efficiencies or procompetitive justifications.” He added that “taking an evidence-based approach to antitrust law should not be mistaken for an unwillingness to bring enforcement actions.” He said that if there is clear evidence of harm, the antitrust enforcers should vigorously prosecute the antitrust laws. He noted that antitrust enforcers that failed to take action when they had credible evidence and accepted behavioral “band-aid” fixes to anticompetitive mergers should accept some blame. Delrahim noted that “the Microsoft case proved that an evidence-based antitrust enforcement approach can be flexible in its application to new types of assets and markets—in that case, the computer code and software markets.”

His message was that the U.S. and international antitrust agencies should not simply go to war with digital platform companies rather a more effective approach would be grounded in evidence. He added that “in certain platform markets involving network effects, there may be barriers to entry or a tendency toward a single firm emerging as the sole winner” and in those situations, “antitrust enforcers may need to take a close look to see whether competition is suffering and consumers are losing out on new innovations as a result of misdeeds by a monopoly incumbent.”

March 23, 2018

FTC Blocks Software Merger Involving Small Competitor

by Doyle, Barlow & Mazard PLLC

On March 19, 2018, the Federal Trade Commission (“FTC”) filed an administrative complaint to block CDK Global’s ( “CDK”) proposed acquisition of Auto/Mate. The FTC alleged that the deal would violate Sections 5 of the FTC Act and 7 of the Clayton Act. The parties to the deal abandoned the deal after being faced with a lawsuit.

Background

CDK and Auto/Mate supply dealer management systems (“DMS”) software to franchise new car dealerships. Car dealerships use DMS software, a mission-critical business software to manage nearly every aspect of their business including payroll, accounting, financing and inventory. They track their services, prices, and other crucial functionalities. The top two DMS software providers, CDK, which had 41% and Reynolds & Reynolds (“Reynolds”), which had 29%, combined for about a 70% share of the DMS software market. The big two are the highest priced, and have similar business models, which include long-term contracts and significant initial and monthly fees for third-party applications (app) vendors to integrate with their respective DMS. Dealertrack, Autosoft and Auto/Mate also had competitive DMS offerings as well as others. Auto/Mate was a very small competitor with only 6% of the market. After the deal, CDK’s market share would have been 47%.