Antitrust Lawyer Blog

 Commentary on Current Developments

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Newly appointed FCC member Robert McDowell supports agency involvement to ensure that phone companies can enter local cable-TV markets without having to overcome a lot of red tape. On August 8, during his first meeting with reporters at FCC headquarters, McDowell said “I do think we can do a lot to help speed the deployment of video penetration and marry it up with that broadband penetration by clearing some of that regulatory underbrush.”

Addressing a number of issues important to the cable industry, McDowell said multicast-must-carry requirements were beyond FCC authority; network-neutrality regulation of the Internet was premature; and more a la carte programming options would likely emerge as a result of consumer demand. On net neutrality, he said it was unclear what form government regulation of broadband-access providers would take because charges of misconduct have been speculative. McDowell joined the FCC on June 1 to give the GOP a 3-2 advantage at the agency for the first time since March 2005. Although he said his regulatory philosophy was market-oriented, he supports government intervention to correct market failures. On cable franchising, FCC chairman Kevin Martin supports imposing a deadline on local governments to act on applications. But the National Cable & Telecommunications Association (“NCTA”), disputing that local governments have been slow to act, has told the FCC that the courts are the proper forum to settle franchising disputes.

McDowell suggested disagreement with the NCTA by asserting that the FCC “does have that authority” over local government. However, he cautioned that the Commission should wait a few months to see whether Congress addressed the issue. According to McDowell, FCC involvement should preserve a meaningful role for local officials.

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The European Commission said on August 8 it would look into the Italian government’s move to block a proposed merger between the Italian highway operator Autostrade and the Spanish infrastructure company Abertis. The Italian government and highways regulator rejected the proposed merger, worth nearly 12 billion euros ($15 billion). The deal created the world’s largest highway company, operating in 16 countries with a road network of 6,713 kilometers (4,171 miles).

Italian Economy Minister Tommaso Padoa-Schioppa and Infrastructure Minister Antonio Di Pietro were concerned about possible conflicts of interest because of Abertis shareholders in the construction and transportation field, according to the statement from the two ministries. Both Autostrade and Abertis shareholders approved the deal, which was announced in April and required government and European Union approval.

The European Commission was waiting for notification from the Italian government of its reasons for blocking the proposed merger between Abertis Infraestructures SA and Autostrade SpA. The deal would have created a company with more than $7.5 billion in annual revenue. Although a merger, the proposed deal suggested a takeover of Autostrade by Abertis because the new company was to be based in Barcelona, Spain, carry the Abertis name and be run by the Abertis chief executive.

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On August 7, the FCC reaffirmed its ruling that Time Warner Cable (“Time Warner”) had to carry the NFL Network for 30 days on systems just acquired from Comcast and Adelphia Communications. On August 4, Time Warner threatened to take the FCC to court if the agency did not back down and allow it to drop NFL Network. Following the release of the FCC's second decision, Time Warner did not commit to a court fight over the need to provide consumers a 30-day notice before deleting a channel. “Time Warner Cable continues to believe that the FCC has misconstrued the notice rules and has ordered a remedy that is in clear violation of the First Amendment. The FCC's action has resulted in exacerbating, not avoiding, consumer confusion,” Time Warner spokesman Mark Harrad said.

Time Warner and NFL Network have never had a carriage agreement, but the network had deals with Comcast and Adelphia systems that Time Warner obtained July 31 when the $16.9 billion Adelphia transaction closed. Time Warner dropped NFL Network on those systems on August 1. Claiming that it gave Time Warner the necessary 30 days to issue the proper consumer notices, NFL Network complained to the FCC within hours that it had been illegally removed by Time Warner. The second FCC ruling was again issued by Media Bureau chief Donna Gregg, an appointee of FCC chairman Kevin Martin. Time Warner may ask the five FCC commissioners to overturn Gregg's rulings as an alternative to an immediate court challenge, which Time Warner said would involve important First Amendment issues.

Time Warner and the NFL have been haggling over terms of carriage, with the network seeking an expanded-basic position but Time Warner hoping to start a sports tier with NFL Network as a key driver of mini-tier penetration. In her 15-page order, Gregg said Time Warner's treatment of NFL Network was “disappointing” because FCC members and outside parties “had expressed serious concern about the impact that the Adelphia transactions would have on unaffiliated programmers.”

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The FTC and the Federal Reserve Board on August 7 issued a joint report to Congress on compliance with the consumer dispute provisions of the Fair Credit Reporting Act (“FCRA”). The Fair and Accurate Credit Transactions Act of 2003 (“FACT Act”), which generally amends the FCRA, required the FTC and the Board to conduct a study of the extent to which consumer reporting agencies and furnishers of information to consumer reporting agencies (“CRAs”) complied with certain FCRA requirements.

The study found that, although most consumer disputes appear to be processed within the statutory timeframe, there is disagreement as to the adequacy of the investigations performed by the CRAs and by the furnishers of information. The resulting report recommends no additional administrative or legislative action at this time to amend the dispute process. Rather, the FTC and the Board believe that recent FACT Act provisions intended to enhance the customer dispute process should be given time to take effect. The FTC and the Board will continue to monitor the performance of the dispute process, explore possible enhancements, and make recommendations for action, if appropriate.

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A company and its owner selling contact lenses directly to consumers via three Web sites are settling Federal Trade Commission (“Commission” or “FTC”) charges they violated federal law by failing to verify consumers' prescriptions as required by the Commission's Contact Lens Rule. They will pay $40,000 in civil penalties and will be prohibited from violating the Rule in the future.

This settlement is the FTC's first enforcement action under the Fairness to Contact Lens Consumers Act of 2003 and the Contact Lens Rule, which the Commission issued in 2004.

The laws require that prescribers provide consumers with a copy of their prescription after they are fitted for contact lenses and that sellers either obtain a copy of the prescription or directly verify it with the prescriber before selling contact lenses to consumers. The laws are designed to make the market for contact lenses more competitive by allowing consumers to obtain their prescriptions and comparison shop for lenses. They also are designed to protect consumers' ocular health by prohibiting the sale of contact lenses without a valid prescription.

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On August 3rd, European Union antitrust regulators asked Spain to explain why it attached conditions to German energy company E.On AG's $34 billion bid for the Spanish utility Endesa SA. Spain's National Energy Commission said last week that it would permit the 26.9 billion euro deal only if E.On sells about a third of Endesa's power generation assets.

The European Commission — which oversees large European mergers — already cleared the bid in April without conditions, saying it would not create competition problems in Spain. EU spokesman Stefaan De Rynck said regulators wanted Spain to explain how its decision was in line with EU competition law.

E.On said it would appeal the ruling that it must sell assets. The company made its cash bid for Endesa after Spain's Gas Natural SA offered 20.87 billion euros ($26.6 billion) in cash and stock.

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By a unanimous vote, the Federal Trade Commission (“Commission” or “FTC”) determined on August 2 that computer technology developer Rambus, Inc. unlawfully monopolized the markets for four computer memory technologies incorporated into industry standards for dynamic random access memory (“DRAM”) chips. DRAMs are widely used in personal computers, servers, printers, and cameras.

In an opinion by Commissioner Pamela Jones Harbour, the Commission found that Rambus deceptively distorted a critical standard-setting process and engaged in an anticompetitive “hold up” of the computer memory industry. The Commission held that Rambus's acts of deception constituted exclusionary conduct under Section 2 of the Sherman Act and contributed significantly to Rambus's acquisition of monopoly power in the four relevant markets.

In June 2002, the FTC charged Rambus with violating federal antitrust laws by deliberately engaging in a pattern of anticompetitive acts to deceive an industry-wide standard-setting organization, which caused or threatened to cause substantial harm to competition and consumers. According to the FTC complaint, Rambus participated in Joint Electron Device Engineering Council's (“JEDEC's”) DRAM standard-setting activities for more than four years without disclosing to JEDEC or its members that it was actively working to develop, and possessed, a patent and several pending patent applications that involved specific technologies ultimately adopted in the standards.

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On August 1, the DOJ Antitrust Division announced that it would require Mittal Steel Company N.V. to divest one of three North American tin mills it will own after its $33 billion acquisition of Arcelor S.A. in order to proceed with the deal. After a thorough investigation, the DOJ concluded that the original deal would have adversely affected competition by eliminating constraints on the ability of tin mill products producers to coordinate their behavior and thereby increase the price of tin mill products to can manufacturers and other customers particularly in the eastern United States.

Prior to Mittal's acquisition of Arcelor, two large firms-Mittal and one other integrated steel producer-accounted for more than 74 percent of all tin mill product sales in the eastern United States, but Arcelor, together with its subsidiary Dofasco, which operates a large integrated mill in Ontario, provided a significant competitive constraint on these two firms.

The proposed consent decree will preserve competition by requiring the divestiture of one of the three North American tin mills that Mittal will own following its acquisition of Arcelor-the Dofasco mill, currently owned by Arcelor, located in Hamilton, Ontario, Canada; Mittal's Sparrows Point facility located near Baltimore, Maryland; or Mittal's Weirton facility located in Weirton, West Virginia.

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Testifying on behalf of the Federal Trade Commission (“FTC”) before the U.S. Senate's Special Committee on Aging, Commissioner Jon Leibowitz described the FTC's work in the area of branded and generic pharmaceutical competition and discussed barriers that can lead to the delay of generic entry into the U.S. marketplace.

Opening with a discussion of pharmaceutical prices, the testimony noted that pharmaceutical expenditures are a concern not only to individual consumers, but also to government payers, private health plans, and employers.

Generic drugs play an important role in containing rising prescription drug costs, by offering consumers therapeutically identical alternatives to brand-name drugs at a significantly reduced cost. To address the cost issue, Congress passed the Hatch-Waxman Amendments to the Food, Drug, and Cosmetic Act in 1984, establishing a regulatory framework that sought to balance innovation by research-based drug companies with opportunities for entry by generic drug manufacturers. Under Hatch-Waxman, the Congressional Budget Office estimated that consumers saved between $8 billion and $10 billion on retail drug purchases in 1994 alone.

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The Federal Trade Commission will host three days of public hearings to examine how evolving technology will shape and change the habits, opportunities and challenges of consumers and businesses in the coming decade. The event will bring together experts from business, government and technology sectors, consumer advocates, academicians, and law enforcement officials to examine emerging technologies and to explore technologies that are currently evolving.
The public hearings, “Protecting Consumers in the Next Tech-ade,” will be held November 6-8 in The George Washington University Lisner Auditorium, 730 21st Street, NW, Washington, DC, and will be free and open to the public. Examples of new technologies will be on display during the hearings. On November 9, the FTC will invite law enforcers and other government officials to a non-public meeting to examine the implications emerging technologies will have for consumer education and consumer protection in the coming decade.

An agenda for the hearings will be published soon. Topics to be addressed at the hearings will include, but are not limited to:

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