Antitrust Lawyer Blog

Commentary on Current Developments

On April 28, the Federal Trade Commission approved the publication of a notice of proposed rulemaking in the Federal Register that would amend the Telemarketing Sales Rule to revise the fees charged for industry access to the National Do Not Call Registry. The FTC is currently accepting comments on these proposed fee changes. Under the proposed new fee structure, the annual fee for each area code of data accessed would become $62, and the maximum amount charged to entities accessing 280 area codes or more would become $17,050.
The proposed rulemaking would continue to allow telemarketers to obtain the first five area codes of data for free, and would still allow those entities exempt from the Registry's requirements to obtain access at no charge. The Commission is, however, requesting comments on whether telemarketers should still be permitted to access a certain number of area codes for free and address the potential impact of a change to this provision. Telemarketers are required to renew their subscriptions to the National Do Not Call Registry once a year, and must “scrub” their call lists once every 31 days. To date, consumers registered approximately 122.6 million telephone numbers on the Registry. The FTC is accepting public comments on the proposed rulemaking until June 1, 2006. Pending public comment, the new fee schedule will go into effect on September 1, 2006. The Commission vote approving publication of the Federal Register notice was 5-0.

On April 27, the DOJ announced that Assistant Attorney General Thomas O. Barnett will participate in the fifth annual International Competition Network (“ICN”) Conference in Cape Town, South Africa, on May 3-5, 2006. At the conference, senior antitrust officials and private antitrust experts from around the world as well as representatives from intergovernmental organizations will meet to discuss competition issues. The ICN conference will focus on the recent work of its four substantive working groups – (1) Cartels, (2) Mergers, (3) Antitrust Enforcement in the Telecommunications Sector, and (4) Competition Policy Implementation. ICN member agencies participate in these project-oriented working groups to address policy and enforcement issues and formulate proposals for ICN consensus. Private sector experts and intergovernmental organizations are active participants in the working groups. Conference discussions will address the issues considered by the four working groups and will include: obstruction of justice in cartel investigations; digital evidence gathering; the interaction of public and private enforcement in cartel investigations; the analytical framework for merger review; suggested best practices in antitrust enforcement in the telecommunications sector; and the promotion of competition policy in developing and transition economies. Participants will also discuss the implementation of the ICN Recommended Practices for Merger Notification and Review Procedures and other ICN work product.

Andre Barlow

On April 27, the DOJ announced Hughey Inc., which does business as Carmel Concrete Products (“Carmel”), and its president, Scott D. Hughey agreed to plead guilty and pay criminal fines for fixing the price of ready mixed concrete in the Indianapolis metropolitan area. Under the plea agreement, which must be approved by the court, Carmel and the DOJ agreed to allow the court to determine an appropriate fine for the company. Mr. Hughey’s plea agreement, which is also subject to court approval, requires him to pay a fine of $30,000 to $50,000 and to serve a term of imprisonment to be determined by the court. In addition, Mr. Hughey has agreed to assist the government in its ongoing investigation. To date, four companies and nine executives have pleaded guilty or were charged for their roles in the price-fixing conspiracy. Fines totaling more than $30 million have resulted from the DOJ’s ongoing antitrust investigation of the ready mixed concrete industry.

Andre Barlow

On April 24th, the Federal Trade Commission’s Bureau of Competition issued a summary of agreements filed with the Commission in fiscal year 2005 (ending September 30, 2005) by generic and branded drug manufacturers. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 requires drug companies to file certain agreements with the FTC and the U.S. Department of Justice. The summary provides information regarding the 20 agreements that were filed with the FTC in FY 2005, involving 16 different products. It also compares FY 2005 data with those received in FY 2004 and with findings of the Commission’s 2002 study entitled “Generic Drug Entry Prior to Patent Expiration.”
For the first time since 1999, brand and generic companies are entering settlements in which the generic receives compensation from the branded manufacturer and there is a restriction on the generic’s ability to market its product. Based on the information reported in the Commission’s 2002 study and on settlements reported between 1999 and 2004, no patent settlements included both compensation to the generic and a restriction on the generic’s ability to market its product. In contrast, three settlements submitted in FY 2005 included those terms. The other highlights of the summary are that 1) 11 of the 20 agreements filed in FY 2005 were final settlements of patent litigation between a branded and generic company; 2) five were interim agreements that occurred during patent litigation between a brand and a generic company, but did not resolve the litigation; 3) the remaining agreements were between a first-filer generic company and a subsequent generic filer.

Andre Barlow

On April 20th, the Federal Trade Commission announced a consent agreement that will protect competition and consumers in several significant medical device markets affected by Boston Scientific’s proposed $27 billion acquisition of the Guidant Corporation (“Guidant”). The agreement will allow the transaction to proceed, provided the parties comply fully with its terms.
Under the terms of the order conditionally approving the transaction, Boston Scientific and Guidant are required 1) to divest all assets – including intellectual property – related to Guidant’s vascular business to a third party, enabling that third party to sell drug eluting stents with the rapid exchange delivery system, percutaneous transluminal coronary angioplasty balloon catheters, and coronary guidewires; and 2) to reform certain contractual rights between Boston Scientific and Cameron Health, Inc. (Cameron) to limit Boston Scientific’s control over certain Cameron actions and the sharing of nonpublic information about Cameron’s Implantable Cardioverter Defibrillator product.

Andre Barlow

The FTC announced on April 19 it joined its foreign partners in calling for stepped up cross-border law enforcement cooperation and increased public/private sector cooperation to combat spam. The Organization for Economic Cooperation and Development (“OECD”) issued recommendations in this area on the same day.

To date, the FTC already has implemented many of the OECD recommendations. For example, it engages in aggressive law enforcement against international spammers; works with an international network of spam enforcement authorities; partners with the private sector on consumer education; and, encourages the private sector to implement domain-level authentication systems. In addition, the FTC suggested that Congress enact legislation called the US SAFE WEB Act that would give the FTC new tools to cooperate with foreign counterparts in fighting spam and other types of cross-border fraud.

The OECD is an international forum of 30 countries, including the United States, established to promote economic growth, trade, and development. Spam is a vehicle for deception, for spreading viruses and spyware, and for inducing consumers to provide confidential information that can later be used to commit identity theft. Spam poses unique challenges for law enforcement in that senders can send their messages from anywhere in the world to anyone in the world, thus making spam an international problem that must be addressed through international cooperation.

The FTC announced on April 19 it joined its foreign partners in calling for stepped up cross-border law enforcement cooperation and increased public/private sector cooperation to combat spam. The Organization for Economic Cooperation and Development (“OECD”) issued recommendations in this area on the same day. To date, the FTC already implemented many of the OECD recommendations. For example, it engages in aggressive law enforcement against international spammers; works with an international network of spam enforcement authorities; partners with the private sector on consumer education; and, encourages the private sector to implement domain-level authentication systems.
In addition, the FTC suggested that Congress enact legislation called the US SAFE WEB Act that would give the FTC new tools to cooperate with foreign counterparts in fighting spam and other types of cross-border fraud. The OECD is an international forum of 30 countries, including the United States, established to promote economic growth, trade, and development. Spam is a vehicle for deception, for spreading viruses and spyware, and for inducing consumers to provide confidential information that can later be used to commit identity theft. Spam poses unique challenges for law enforcement in that senders can send their messages from anywhere in the world to anyone in the world, thus making spam an international problem that must be addressed through international cooperation.

Andre Barlow

On April 18, two companies and their owner, who were charged with selling bogus bartender and mystery shopper certification programs, were banned for life from telemarketing. The owner also will pay $115,000 and turn over his Porsche convertible to settle the Commission's charges. The owner, Stevan P. Todorovic, is a repeat-offender who also is under a court order from October 2001; following FTC charges that he deceptively sold auction information guides.

The defendants placed “help wanted” ads in local newspapers seeking bartender trainees and mystery shoppers. When job-seekers responded to the advertisements, the defendants' telemarketers represented that positions were available, but only for those consumers who had been “certified” by defendants as bartenders or mystery shoppers. The defendants led consumers to believe that upon being “certified,” they would receive concrete information on available job openings. Yet after charging consumers between $58.90 and $98.90 for their at-home certification programs, the defendants provided consumers with only general lists of potential employers that are available elsewhere at no cost, which often had never heard of the defendants and attached no significance whatsoever to their “certifications.”

In the October case, the FTC accused Todorovic of running a similar scheme. In that case, the FTC maintained that he had deceptively telemarketed auction guides, promising consumers unique information on what would be available at specific auctions, but delivering only general information on local auction houses, comparable to what consumers could find in the Yellow Pages. The order in the earlier case banned him from selling auction guides and also prohibited the deceptive practices alleged in the FTC's complaint. In addition to Todorovic, the order announced also applies to American Bartending Institute, Inc. and Intuitive Logic, Inc., the corporations through which Todorovic operated his latest schemes.

On April 18, two companies and their owner, who were charged with selling bogus bartender and mystery shopper certification programs, were banned for life from telemarketing. The owner also will pay $115,000 and turn over his Porsche convertible to settle the Commission's charges. The owner, Stevan P. Todorovic, is a repeat-offender who also is under a court order from October 2001, following FTC charges that he deceptively sold auction information guides. The defendants placed “help wanted” ads in local newspapers seeking bartender trainees and mystery shoppers. When job-seekers responded to the advertisements, the defendants' telemarketers represented that positions were available, but only for those consumers who had been “certified” by defendants as bartenders or mystery shoppers. The defendants led consumers to believe that upon being “certified,” they would receive concrete information on available job openings. Yet after charging consumers between $58.90 and $98.90 for their at-home certification programs, the defendants provided consumers with only general lists of potential employers that are available elsewhere at no cost, which often had never heard of the defendants and attached no significance whatsoever to their “certifications.”
In the October case, the FTC accused Todorovic of running a similar scheme. In that case, the FTC maintained that he had deceptively telemarketed auction guides, promising consumers unique information on what would be available at specific auctions, but delivering only general information on local auction houses, comparable to what consumers could find in the Yellow Pages. The order in the earlier case banned him from selling auction guides and also prohibited the deceptive practices alleged in the FTC's complaint. In addition to Todorovic, the order announced also applies to American Bartending Institute, Inc. and Intuitive Logic, Inc., the corporations through which Todorovic operated his latest schemes. On November 18, 2005, the federal court hearing the case granted the FTC's request for a preliminary injunction, banning the defendants from doing any telemarketing while the case was pending. The order announced makes that telemarketing ban permanent. The remaining defendant in the case, Michael G. Harvey, previously settled the FTC's charges. The final order against Harvey also includes a lifetime telemarketing ban.

On April 14, the Justice Department’s Antitrust Division (“Antitrust Division”) announced a $1.8 million civil settlement against merger partners Qualcomm and Flarion Technologies alleging “gun-jumping” violations of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”). The action underscores the Antitrust Division’s resolve to vigorously scrutinize the conduct of merging parties prior to consummation of the transaction.

Background

On July 25, 2005, Qualcomm and Flarion entered into a merger agreement that required a premerger filing under the HSR Act. All parties to transactions that meet certain jurisdictional thresholds are required to file a premerger notifications with the Federal Trade Commission (the “FTC”) and Antitrust Division. The premerger notification filing triggers a mandatory waiting period under the HSR Act, which is normally 30 days. A “gun-jumping” violation of the HSR Act occurs when a buyer attempts to exercise “beneficial ownership” or operational control over a seller’s business prior to expiration of the HSR waiting period. Gun-jumping increasingly draws the scrutiny of the Antitrust Division and the FTC and, in several cases, leads to significant monetary penalties. The normal 30 day HSR waiting period was extended for Qualcomm and Flarion because the Antitrust Division needed more time to investigate the competitive aspects of the deal. Ultimately, the Antitrust Division, terminated the waiting period on December 23, 2005, and the merger closed in January 2006.