On February 18, 2020, a group of unions, consumer groups, and public interest organizations filed a letter with the U.S. Federal Trade Commission (“FTC”) raising concerns that the divestiture of Allergan plc’s (“Allergan”) pipeline drug, brazikumab, will not succeed unless the FTC addresses AbbVie’s use of rebate walls.
Consumer Group Concerns Regarding Rebate Walls and the Proposed Divestiture
The letter expresses concerns that the proposed divestiture to AstraZeneca of Allergan’s brazikumab, a drug in development, is inadequate to address the clear anticompetitive effects of the AbbVie/Allergan merger. The letter makes the following points:
On January, 17, 2020, smaller rivals such as PopSockets, Basecamp, Sonos, and Tile testified to the the House antitrust subcommittee about how they have been bullied by big tech giants such as Google, Apple, Facebook, and Amazon and called for swift action.
According to the New York Times, the smaller rivals, which have largely been publicly quiet until the hearing, finally stepped up to the plate and sounded off on big tech at a hearing in Boulder, Colorado. The Congressional subcommittee heard stories of technology giants wielding their massive footprints and platforms as weapons, allegedly copying smaller competitors’ features or tweaking their algorithms in ways that stifle competition.
The pleas for regulatory relief resonated with lawmakers, led by Rep. David N. Cicilline (Democrat – Rhode Island), the chairman of the House’s antitrust subcommittee. Cicilline noted that “it has become clear these firms have tremendous power as gatekeepers to shape and control commerce online.”
Employers and Human Resource personnel need a crash course in the antitrust laws and an understanding of the antitrust risks of entering into no-poach agreements.
A no-poach agreement is essentially an agreement between two companies not to compete for each other’s employees, such as by not soliciting or hiring them. No-poach agreements, or agreements not to approach other companies’ employees to hire, are generally considered illegal under the antitrust laws. When companies make agreements not to compete for each other’s employees, they are restraining commerce because they are not allowing working people to freely change jobs to potentially make more money or move to another location if they wish to. It is illegal for companies or other entities to make these agreements, but it happens more often than you would think – just like the case with Seaman v. Duke University.
The federal antitrust agencies continue their emphasis on investigating, challenging, and unwinding consummated transactions that are not reportable under the Hart Scott Rodino (“HSR”) Act.
Most recently, on November 6, 2019, the Federal Trade Commission (“FTC”) issued an Opinion and Final Order in which the Commission upheld the Administrative Law Judge’s (“ALJ”) decision that Otto Bock HealthCare North America, Inc.’s (“Otto Bock”) acquisition of FIH Group Holdings, LLC (“Freedom”) was anticompetitive and that Otto Bock must divest Freedom’s entire business with the limited exceptions granted by the ALJ. The Commission’s order was approved by all five commissioners and continues the trend of unwinding consummated acquisitions that are deemed to be anticompetitive.
Accordingly, buyers must be aware of the risks of closing a non-reportable transaction that eliminates competition. Here are a couple of points to keep in mind:
On September 12, 2019, a coalition of unions, consumer groups, and public interest organizations filed a letter with the U.S. Federal Trade Commission (“FTC”) opposing AbbVie Inc.’s (“AbbVie”) acquisition of Allergan plc (“Allergan”).
Coalition Opposing the Merger
The coalition includes Families USA, Public Citizen, U.S. PIRG Education Fund, Service Employees International Union, American Federation of State, County, and Municipal Employees, UNITE HERE, Consumer Action, American Federation of Teachers, Alliance for Retired Americans, American Family Voices, Doctors for America, End AIDS Now, Prescription Justice, Social Security Works, the Other 98, Treatment Action Group, and NextGen California. It is asking the FTC to conduct a thorough investigation and to block the merger if the facts support it and a remedy cannot be devised to restore competition. The coalition highlights the competitive problems arising from continued consolidation in the pharmaceutical industry and requests that the FTC include in its investigation ongoing anticompetitive conduct by the parties, such as the use of rebate walls, which will have an even more profound anticompetitive effect if this merger is consolidated, as well as past abuse of the patent system.
On September 4, 2019, the DOJ filed an antitrust lawsuit in the Northern District of Ohio to block Novelis Inc.’s proposed acquisition of Aleris Corporation.
The DOJ alleges that the acquisition would substantially lessen competition in the North American market for rolled aluminum sheet for automotive applications, commonly referred to as aluminum auto body sheet. The complaint explains that steel companies are developing lighter, high strength steel varieties for the auto industry. But as Novelis has observed, high strength steel “is largely replacing existing mild steel” and “cannibalizing the existing material” (i.e., traditional steel). The threat of substitution from aluminum to high strength steel is, as Aleris confirms, “limited.” The price of aluminum auto body sheet is three or four times more expensive than traditional steel. The complaint further alleges that the transaction would combine two of only four North American producers of aluminum auto body sheet. The other two suppliers’ capacity is mostly committed to automakers. Thus, other automakers rely on Novelis and Aleris to produce aluminum body sheet for automobiles to make cars lighter, more fuel-efficient, safer and more durable.
On August 27, 2019, two U.S. senators asked the DOJ to investigate the state of competition in the ticketing business, and to extend the DOJ’s consent agreement with Live Nation Entertainment (“Live Nation”), the industry giant that owns Ticketmaster.
In a letter to Makan Delrahim, the head of the DOJ’s Antitrust Division, Senators Richard Blumenthal (D-CT) and Amy Klobuchar (D-MN) described the ticket industry as “broken” and they lamented the “exorbitant fees and inadequate disclosures” in the ticket buying process.
On August 20, 2019, the DOJ filed a civil antitrust lawsuit in the U.S. District Court for the District of Delaware seeking to block Sabre Corporation’s (“Sabre”) $360 million acquisition of Farelogix, Inc. (“Farelogix”).
The DOJ alleges that Sabre and Farelogix compete head-to-head to provide booking services to airlines. Booking services are IT solutions that allow airlines to sell tickets and ancillary products through traditional brick-and-mortar and online travel agencies to the traveling public. The DOJ alleges that the acquisition would eliminate competition that has substantially benefited airlines and consumers in both the traditional and online markets. The complaint further alleges that the transaction would allow Sabre, the largest booking services provider in the United States, to eliminate a disruptive competitor that has introduced new technology to the travel industry and is poised to grow significantly.
On August 20, 2019, it was reported that the states are set to join forces to investigate Big Tech.
On the same day, Assistant Attorney General Makan Delrahim of the Antitrust Division of the U.S. Department of Justice (“DOJ”) said the DOJ is working with a group of more than a dozen state attorneys general as it investigates the market power of major technology companies. Delrahim said at a tech conference that the government is studying acquisitions by major tech companies that were previously approved as part of a broad antitrust review announced in July of major tech firms with significant market power. “Those are some of the questions that are being raised… whether those were nascent competitors that may or may not have been wise to approve,” he said.
On July 23, the DOJ said it was opening a broad investigation into whether major digital technology firms engaged in anticompetitive practices, including concerns raised about “search, social media, and some retail services online.” The investigations appear to be focused on Alphabet Inc.’s Google, Amazon.com, Inc. and Facebook, Inc. (“Facebook”), as well as potentially Apple Inc.