Antitrust Lawyer Blog

 Commentary on Current Developments

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On November 9, the European Commission approved the proposed acquisition of Fisher Scientific International Inc. by Thermo Electron Corporation. Both companies are based in the United States and supply products and services for laboratory activities. The Commission’s clearance is conditional upon the divestiture of Genevac, Fisher’s subsidiary active in the production and sale of centrifugal evaporators. In light of this commitment, the Commission concluded that the transaction would not significantly impede effective competition in the European Economic Area or any substantial part of it.

Both Thermo and Fisher are U.S. companies active in the field of manufacturing and supplying a wide variety of analytical instruments, scientific equipment, consumables and services to the scientific community, including clinical, pharmaceutical, environmental and industrial laboratories. Fisher is also active as a distributor of laboratory and life science products.

The Commission examined the competitive effects of the proposed merger in the markets where both companies are active as suppliers. The Commission’s investigation showed that the new entity continues to face strong, effective competitors in the manufacturing of the products involved, with the exception of centrifugal evaporators. Centrifugal evaporators are equipment that uses heat, vacuum and centrifugal force to concentrate laboratory samples by separating the solvent from samples suspended in solutions. As Thermo committed to divest all of Fisher’s assets for the production of centrifugal evaporators, the competition concerns resulting from the proposed transaction will be entirely removed.

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The European Commission cleared the proposed acquisition by the Dutch company Philips of the US-based company Intermagnetics on November 7. After examining the operation, the Commission concluded that the transaction would not significantly impede effective competition in the European Economic Area or any substantial part of it.

Philips markets a wide range of electrical and electronic products, such as lighting products, domestic appliances, consumer electronics, semiconductors and medical systems, including magnetic resonance imaging (“MRI”) systems. Intermagnetics manufactures magnets and radio-frequency used in MRI systems, as well as patient monitors, computer-aided detection systems and so-called functional MRI.

In particular, Intermagnetics currently supplies radio-frequency coils to Philips and several other MRI system manufacturers. Thus, the Commission analyzed whether the proposed transaction enabled the new entity to disrupt the supply of coils and to hinder its competitors to compete effectively on the market for MRI systems. The market investigation showed that these risks were minimal, mainly due to economic incentives and the presence of several other suppliers of coils for MRI systems. In addition, manufacturers of MRI systems can produce coils internally. Consequently, the Commission concluded that the proposed transaction would not give rise to any significant reduction of competition.

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Following her meeting in Brussels on November 7 with Antonio Di Pietro, Italy’s Minister for Public Works, European Commissioner for Competition Neelie Kroes expressed her satisfaction that the Italian authorities removed what the Commission considered to be unjustified obstacles to a merger between Abertis of Spain and Autostrade of Italy. Commissioner Kroes also welcomed Mr Di Pietro’s undertaking to respect in full the EU Merger Regulation and that any further authorization measures concerning the merger would not be implemented without first obtaining the authorization of the Commission in accordance with Article 21 of the EU Merger Regulation.

The Commission adopted a preliminary conclusion on 18th October that Italy violated Article 21 of the EU Merger Regulation because of unjustified obstacles placed in the way of the Abertis-Autostrade merger. In particular, the Commission had serious doubts about the compatibility with Article 21 of an opinion delivered by the Ministers of Infrastructures and of Economic Affairs on August 4 2006 as well as a decision adopted on August 5 2006 by the public entity responsible for granting motorway concessions in Italy (ANAS), rejecting Autostrade’s application for authorization to merge with Abertis. Both the Ministers’opinion and the ANAS decision were withdrawn.

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A company that sent unsolicited commercial e-mail after consumers asked it to stop agreed to pay a $50,717 civil penalty on November 6 to settle Federal Trade Commission charges that it violated federal law. The FTC charged Yesmail Inc., doing business as @Once Corporation, with sending e-mail on behalf of its clients more than 10 business days after recipients asked it to stop.

According to the FTC’s complaint, Yesmail offers e-mail marketing services, including sending commercial e-mail and processing unsubscribe requests from recipients. The FTC’s complaint alleges that Yesmail’s spam filtering software filtered out certain “reply to” unsubscribe requests from recipients as “spam,” which resulted in Yesmail failing to honor unsubscribe requests by sending thousands of commercial e-mail messages to recipients more than 10 business days after their requests.

The CAN-SPAM Act requires commercial e-mailers to give recipients an opt-out method and honor such requests within 10 business days. The Act also bans false or misleading header information, prohibits deceptive subject lines, requires that commercial e-mail be identified as an advertisement, and requires the sender to include a valid physical postal address.

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On November 3, Zango, Inc., formerly known as 180solutions, Inc., one of the world’s largest distributors of adware, and two principals agreed to settle Federal Trade Commission charges that they used unfair and deceptive methods to download adware and obstruct consumers from removing it, in violation of federal law. The settlement bars future downloads of Zango’s adware without consumers’ consent, requires Zango to provide a way for consumers to remove the adware, and requires them to give up $3 million in ill-gotten gains.

According to the FTC, Zango often used third parties to install adware on consumers’ computers. The adware, including programs named Zango Search Assistant, 180Search Assistant, Seekmo, and n-CASE, monitors consumers’ Internet use in order to display targeted pop-up ads. It installed on U.S. consumers’ computers more than 70 million times and displayed more than 6.9 billion pop-up ads. The FTC alleges that Zango’s distributors – third-party affiliates who often contracted with numerous sub-affiliates – frequently offered consumers free content and software, such as screensavers, peer-to-peer file sharing software, games, and utilities, without disclosing that downloading them would result in installation of the adware. In other instances, Zango’s third-party distributors exploited security vulnerabilities in Web browsers to install the adware via “drive-by” downloads. As a result, millions of consumers received pop-up ads without knowing why, and had their Internet use monitored without their knowledge.

In addition, the agency alleges that Zango deliberately made it difficult to identify, locate, and remove the adware once it was installed. For example, Zango failed to label its pop-up ads to identify their origin, named its adware files with names resembling those of core systems software, provided uninstall tools that failed to uninstall the adware, gave confusing labels to those uninstall tools, and installed code on consumers’ computers that would enable the adware to be reinstalled secretly when consumers attempted to remove it.

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The DOJ announced on October 31st that it suspended its investigation of Entercom Communications Corporation’s proposed $262 million acquisition of Texas, Ohio, Tennessee, and New York radio stations from CBS Corporation as long as the companies sell three Rochester radio stations. Entercom informed the DOJ that it planned to divest the three Rochester stations in order to avoid the need for further investigation and to comply with the Federal Communications Commission’s (“FCC”) local ownership rules.

The Antitrust Division focused its investigation on the Rochester area in which Entercom already owns four radio stations-¬one AM and three FM-¬and would acquire four additional FM stations from CBS. The DOJ investigated whether Entercom’s ownership of eight radio stations in the Rochester area, accounting for more than 57 percent of radio advertising revenue, reduced competition and raised the price of radio advertising in that market.

The FCC’s local ownership rules prohibit Entercom from owning more than five FM stations in one area and require Entercom to sell two stations. Prior to the conclusion of the DOJ’s investigation, Entercom said that it planned to sell CBS’s WRMM-FM and WZNE-FM and Entercom’s WFKL-FM to a third party. The DOJ determined that this sale would reduce Entercom’s post-transaction share of Rochester radio advertising revenues to about 40 percent. Based on the reduced share of revenue and the characteristics of the radio stations being sold, the DOJ concluded that it would not have reason to continue its investigation.

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On October 31, the Federal Trade Commission announced its decision to challenge the terms of Watson Pharmaceuticals, Inc.’s proposed $1.9 billion acquisition of Andrx Corporation, a deal that would have led to competitive problems in the markets for 13 generic drug products. In allowing the deal to proceed while addressing these competitive problems, the Commission has ensured the maintenance of competition that otherwise would have been lost through the acquisition, and protected consumers from likely higher prices for the drugs.

Under the consent order settling the FTC complaint, Watson and Andrx will: 1) end Watson’s marketing agreement with Interpham Holdings, Inc. (Interpham) and return all rights and agreements necessary to market generic hydrocodone bitartate/ibuprofen tablets back to Interpharm; 2) assign and divest the Andrx right necessary to develop, make, and market generic extended release glipizide (glipizide ER) tablets to Actavis Elizabeth, LLC, a subsidiary of The Actavis Group hf. (Actavis); and 3) sell Andrx’s rights and assets needed to develop and market eleven generic oral contraceptive products to Teva Pharmaceutical Industries, Inc. (Teva).

Hydrocodone bitartrate/ibuprofen is a combination of an opiate-based analgesic agent and a nonsteroidal anti-inflammatory drug (NSAID) ibuprofen. It is a generic version of Abbott Laboratories Inc.’s Vicoprofen and is used for the short-term management of acute pain. Only three companies compete in the generic market for the drug: Watson, Andrx, and Teva. Teva is the market leader, with about 62 percent of sales. After the acquisition as proposed, Watson’s market share would increase from 12 percent to 39 percent, with Teva its only remaining competitor.

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On October 31st, the European Commission cleared the proposed acquisition of Bayer Diagnostics, the diagnostic division of Bayer Healthcare, a business unit of Bayer AG of Germany, by Siemens AG of Germany. The Commission concluded that the transaction would not significantly impede effective competition in the European Economic Area or any substantial part of it.

Siemens is active in various manufacturing, technology and services business activities, including medical systems. Within the latter, Siemens is notably active in the in-vitro diagnostic (“IVD”) sector following the acquisition of Diagnostic Products Corporation on July 28, 2006. Bayer Diagnostics develops, manufactures and markets IVD systems for hospitals and medical laboratories. IVD systems are made of dedicated equipment and reagents that allow the carrying out of diagnostic tests to identify and measure substances in samples (e.g. tissue or blood) taken from patients.

Both firms are active in the immunochemistry business, a sub-segment of IVD, which involves diagnostics for fertility, allergies, cancer and other pathologies. The merger created one of the leading groups in the European and world markets for immunochemistry. However, the market investigation revealed that the horizontal overlaps between the activities of Siemens and Bayer Diagnostics would not result in the ability to increase prices for laboratories or consumers.

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On October 30, the DOJ announced that it will not oppose a proposal by the VMEbus International Trade Association (“VITA”) to implement a policy on the disclosure and licensing of patents. The policy requires the disclosure of essential patents, commitments to license essential patent claims on fair, reasonable, and non-discriminatory terms, and declarations of the most restrictive licensing terms that patent holders will require. The DOJ said that the proposed policy will enable VITA to make better informed decisions and thereby formulate standards that will benefit consumers.

The DOJ’s position was stated in a business review letter from Thomas O. Barnett, Assistant Attorney General in charge of the Antitrust Division, to counsel for VITA and its standards development subcommittee, VITA Standards Organization (“VSO”). VSO is a non-profit organization that develops and promotes standards for VMEbus computer architecture, i.e., robust pathways through which information travels within a computer system. VMEbus systems are found in a wide range of products, including ultrasound and magnetic resonance imaging machines, semiconductor manufacturing equipment, industrial control equipment, and advanced avionics and radar systems.

VITA requested a business review letter from the Antitrust Division expressing its enforcement intentions regarding a proposed patent policy that will impose two requirements on holders of essential patents who participate in VSO standard-setting activities. First, the policy requires that patent holders make early disclosures of patents and patent applications that may be essential to implementing VITA standards once they are adopted. Second, the policy requires that patent holders declare the maximum royalty rate and most restrictive non-price licensing terms they will require from those who must take a patent license in order to implement the eventual VITA standard. These declarations are irrevocable, but patent holders may submit subsequent declarations with less restrictive licensing terms.

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