DOJ Developments Archives - Page 19 of 42

DOJ Developments

House Passes GOP-Backed SMARTER ACT Aiming to Harmonize Merger Review Process for FTC and DOJ

by McDermott Will & Emery | Apr 4, 2016 | DOJ Developments, FTC Developments, Mergers & Acquisitions

On March 23, 2016, the U.S. House of Representatives passed the Standard Merger and Acquisition Reviews Through Equal Rules (SMARTER) Act by a vote of 235-171, despite strenuous objections from the Federal Trade Commission (FTC). The FTC and the Department of Justice (DOJ) review proposed mergers and acquisitions. Currently, the FTC can challenge transactions under different processes and standards than the DOJ, and those procedures provide several advantages to the FTC. The SMARTER Act would neutralize those advantages for the FTC by: (1) eliminating the FTC’s ability to use its internal administrative proceedings to challenge unconsummated transactions; and (2) standardizing the criteria for the FTC and DOJ to obtain a preliminary injunction to block a merger in federal court.

The FTC has the authority to pursue administrative relief to challenge a transaction. Even if the FTC is denied a preliminary injunction in federal court, the agency may continue to seek to block or unwind a transaction in an administrative trial at the FTC’s own in-house court. That process creates two procedural advantages for the FTC. First, the FTC can continue to challenge a transaction even after a federal district court denies an injunction. Second, because the full trial will take place in the FTC’s court, some courts have said that the the standard the FTC uses to obtain a federal court injunction is lower than the standard the DOJ must meet. The courts will generally grant the FTC an injunction if the case “raise[s] questions going to the merits so serious, substantial, difficult and doubtful as to make them fair ground” for a full hearing “by the FTC in the first instance and ultimately by the Court of Appeals.” Under that standard, the FTC need not show a substantial likelihood of success at the trial on the merits or irreparable harm.

The DOJ can only challenge transactions in federal court proceedings. The DOJ can seek a preliminary injunction under Section 15 of the Clayton Act (15 U.S.C. § 25) on the grounds that the transaction is likely to substantially lessen competition. The DOJ is subject to a traditional equitable injunction standard including criteria such as a showing of a substantial likelihood of success and the potential for irreparable harm.

Supporters of the SMARTER Act argue that reform is necessary to ensure consistent and fair application of the antitrust laws. SMARTER Act supporters also argue that courts apply a more lenient standard to the FTC for blocking a transaction than to the DOJ. However, those that oppose the SMARTER Act argue that in practice, courts impose the same standards on the FTC and DOJ during injunction hearings. Those against the SMARTER Act also argue that workload statistics compiled in the DOJ and FTC Annual Competition Reports actually demonstrate that mergers reviewed by the DOJ are more likely to be challenged or receive a Second Request than mergers reviewed by the FTC. FTC Chairwoman Edith Ramirez expressed concern that the SMARTER Act “risks undermining the effectiveness of the FTC.” Chairwoman Ramirez also [...]

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Virginia’s Certificate of Need Laws May Stay, Fourth Circuit Says

by Lisa A. Peterson | Jan 26, 2016 | DOJ Developments, FTC Developments

On January 21, the U.S. Court of Appeals for the Fourth Circuit upheld Virginia’s Certificate of Need (CON) laws, ruling that the scheme does not illegally discriminate against out-of-state health care providers. See Colon Health Ctrs. v. Hazel, No. 14-2283 (4th Cir. Jan. 21, 2015).

In Virginia, and the 35 other states with CON laws, health care facilities are required to obtain government approval before establishing or expanding certain medical facilities and undertaking major medical expenditures. CON laws require applicants to show sufficient public need for the expenditure in question and thereby attempt to reduce healthcare costs by preventing excess capacity and unnecessary duplication of services and equipment.

The plaintiff-appellants in the case were two out-of-state outpatient providers that sought to open facilities to provide medical imaging services in Virginia. Their request for a CON for new CT scanners and MRI machines was denied. The plaintiff-appellants subsequently challenged the laws as putting an undue burden on interstate commerce in violation of the dormant commerce clause. The Fourth Circuit affirmed the district court’s ruling that the CON requirement neither discriminated against nor placed an undue burden on interstate commerce because both in-state and out-of-state providers were required to abide by the CON requirement.

Previously, in October 2015, the Federal Trade Commission (FTC) and U.S. Department of Justice’s Antitrust Division (DOJ) issued a joint statement urging Virginia to consider changes to its CON laws. Both agencies argued that CON requirements create significant competitive concerns by suppressing supply and misallocating resources. Moreover, FTC and DOJ said the requirements have not been shown to lower costs or improve the quality of care for consumers. The agencies said that CON requirements can hinder “the efficient functioning of health care markets” by allowing an existing provider to file challenges to prevent or delay competition from a rival. Additionally, they may enable anticompetitive agreements among providers to pursue CON approval for separate services. The Fourth Circuit’s recent opinion may lessen the likelihood that the FTC or DOJ would separately challenge Virginia’s CON laws, but the agencies are likely to remain active in speaking out against CON requirements in Virginia and elsewhere.

DOJ Nabs Two More in Real Estate Bid Rigging Conspiracy

by Emily Townsend | Jan 11, 2016 | DOJ Developments

Two real estate investors pleaded guilty to participating in a conspiracy to rig bids and commit mail fraud at public real estate foreclosure auctions in Georgia. The guilty pleas, entered on Monday, January 4, are the 11th and 12th defendants charged in the investigation by the U.S. Department of Justice (DOJ) Antitrust Division in its ongoing investigations into a bid rigging and mail fraud conspiracy that took place from 2009 to 2011.

The conspirators agreed not to bid against each other for specific public real estate foreclosure auctions in several Georgia counties. By declining to bid against each other, the bidders could acquire the properties at sub-competitive prices. If the public auctions were competitive and free from bid rigging, however, the same money taken by the conspiracy would have been used to pay off the mortgage, pay the debt holders of, and/or pay the owners of the properties being foreclosed upon. This case serves as a reminder that a wide variety of behaviors, including agreeing to refrain from bidding against other bidders, may be considered bid rigging. In fact, courts have held that this and other types of bid rigging—such as rotating bids, or comparing bids before submission—can be per se illegal under the antitrust laws.

This investigation also highlights the government’s ongoing commitment to root out financial crimes. In particular, the interagency Financial Fraud Enforcement Task Force, established by President Barack Obama in 2009, has used the “broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud” and financial crimes. As part of this effort, the DOJ has frequently targeted conspiracies to rig bids. In fact, the agency has uncovered bid rigging in industries of all sizes, from regional conspiracies to large, nationwide conspiracies resulting in billions of dollars in fines.

Has Antitrust Enforcement Been ‘Reinvigorated’ Under Obama?

by Daniel Powers and Gregory E. Heltzer | Oct 27, 2015 | DOJ Developments, FTC Developments, Mergers & Acquisitions

In the 2008 presidential election campaign, then-candidate Barack Obama promised to “reinvigorate” antitrust enforcement. Over the last few years, several observers have concluded that the Obama administration’s antitrust record is not substantially different from that of his predecessor. Conventional wisdom suggests that antitrust enforcement is non-partisan. Some key statistics bear out this conclusion, but a comparative review of the data in Hart-Scott-Rodino (HSR) Annual Reports published jointly by the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ), including the recently issued fiscal year 2014 report, reveals some significant differences in antitrust enforcement during the Obama administration.

Analyzing the first six years of each administration reveals some superficial differences, but also significant continuity. Between 2001 and 2006, the agencies received a total of 9080 HSR filings; in 2009–2014 they received only 7530 filings. The total number of filings reviewed by the agencies also declined in absolute terms in the Obama years (Bush: 1537; Obama: 1251). Yet the percentage of filings reviewed has been remarkably consistent at slightly less than 17 percent of filings received in each period (Bush: 16.9 percent; Obama: 16.6 percent). The same consistency applies to Second Requests issued. The agencies actually issued a higher number of Second Requests in the first six years of the Bush administration compared to the same period in the Obama administration (Bush: 284; Obama 275). Given the lower number of filings in 2009–2014, the number of Second Requests as a percentage of all filings reviewed was higher in the Obama years, but only slightly (Bush: 3.1 percent; Obama: 3.7 percent).

If the analysis stopped there, we might conclude that antitrust review and enforcement has changed little during the Obama years. But data for the individual agencies reveals a different picture. In the Bush years, the FTC issued 142 Second Requests compared to 134 during the Obama years. Once again, given the different volume of transactions, this difference in absolute numbers results in no meaningful change in the Second Requests issued as a percentage of the transactions reviewed (Bush: 15.3 percent; Obama: 15.4 percent). For the DOJ, however, the numbers reveal a different story. Although the DOJ issued an almost equal number of second requests in each administration (Bush: 142; Obama: 141), as a percentage of all transactions reviewed by the DOJ, this steady rate results in a significant increase in the total as a percentage of the transactions reviewed; 23.4 percent during the Bush administration, compared to 37.1 during the Obama administration.

The number of enforcement actions pursued by each agency also reveals significant differences. The FTC launched nine more actions under Obama than it did under Bush (Bush: 113; Obama: 124). These totals translate to a modest two percent increase when measured as a percentage of the transactions reviewed by the agency (Bush: 12.1 percent; Obama: 14.2 percent). At the DOJ, the total number of enforcement actions also increased, from 86 under Bush to 101 under Obama. Given the different number of transactions reviewed, however, this change almost doubled [...]

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Four FTC Commissioners Reject Wright’s Call for GUPPI Safe Harbor

by Daniel Powers | Jul 16, 2015 | DOJ Developments, FTC Developments, Mergers & Acquisitions

Four members of the Federal Trade Commission (FTC) issued a statement on July 13, 2015, disputing claims by a fellow commissioner that the 2010 Horizontal Merger Guidelines include a “safe harbor” that is available in unilateral effects merger investigations. Commissioner Joshua Wright’s comments about the potential safe harbor arose in the context of the Commission’s investigation into Dollar Tree’s proposed acquisition of Family Dollar Stores, Inc. The FTC has accepted a proposed settlement to resolve the alleged anticompetitive effects of that transaction.

The dispute involves a Gross Upward Pricing Pressure Index (GUPPI) analysis. The GUPPI analysis permits the federal antitrust enforcement agencies to assess whether a merger involving differentiated products is likely to result in unilateral anticompetitive effects. Such effects can arise where the merged entity can profit from diverted sales. The GUPPI measures the value of diverted sales that would be gained by the second firm measured in proportion to the revenues that would be lost by the first firm.

The 2010 Horizontal Merger Guidelines anticipate the use of such an analysis in certain cases. Indeed, according to the guidelines, “[i]f the value of diverted sales is proportionately small, significant unilateral price effects are unlikely.” Commissioner Joshua Wright pointed to this language, and statements by one of the principal drafters of the 2010 Guidelines, to argue that the Department of Justice had already publicly announced a safe harbor where the GUPPI is less than five percent. Commissioner Wright argued that there was a strong legal, economic and policy case in favor of such a safe harbor, and urged the FTC to “adopt a GUPPI-based safe harbor in unilateral effects investigations where the data are available.”

Wright’s fellow commissioners firmly disagreed that any safe harbor has previously been identified, or that such a safe harbor is appropriate. In their statement, Chairman Ramirez and Commissioners Brill, Ohlhausen and McSweeney explained that the GUPPI analysis serves “as a useful initial screen to flag those markets where the transaction might likely harm competition and those where it might pose little or no risk to competition.” They emphasized that the GUPPI analysis is “only a starting point” in a merger investigation. The commissioners further claimed that Commissioner Wright’s remarks ignored “the reality that merger analysis is inherently fact-specific” and that “[t]the manner in which GUPPI analysis is used will vary depending on the factual circumstances, the available data, and the other evidence gathered during an investigation.” The commissioners concluded that “accumulated experience and economic learning” do not provide an adequate basis for recognizing a GUPPI safe harbor. The Commission will continue to “use GUPPIs flexibly and as merely one tool of analysis in the Commission’s assessment of unilateral anticompetitive effects.”

FTC Comment: Minnesota Law Requiring Public Disclosure of Health Care Contract Data Increases Risk of Anticompetitive Behavior

by McDermott Will & Emery | Jul 14, 2015 | DOJ Developments, FTC Developments, Healthcare Antitrust

On June 29, 2015, the Federal Trade Commission (FTC) responded to a request for comment from two Minnesota state legislators concerning recently enacted amendments to the Minnesota Government Data Practices Act (MGDPA). Under the amendments, the MGDPA would be expanded to cover all data collected by health maintenance organizations, health plans, and other health services vendors that contract with the state to provide health care services to Minnesota residents. In practice, this means that the confidential terms and conditions of health plans’ contracts with health care providers could be subject to public disclosure.

While they commended the “laudable goals” of the MGDPA, the FTC ultimately concluded that the amendments could lead to the disclosure of competitively sensitive information and, therefore, increase the likelihood of anticompetitive behavior. Specifically, there were two major concerns raised in the FTC comment.

First, the amendments likely would lead to the exchange of fees, discounts and other pricing terms among providers, which would increase the likelihood of provider collusion. The comment notes that in markets with a relatively small number of competitors and where those competitors have the ability to accurately monitor each other’s transactions, there is increased risk of collusion.

The second concern is that the exchange of information among providers could impede the ability of health plans to selectively contract among providers. In a typical selective contracting environment “where health care providers do not know each other’s prices, providers are more likely to bid aggressively—offering lower prices—to ensure they are not excluded from selective networks.” If providers know the prices, rebates, and discount arrangements offered by their competitors, they possess a new tool in negotiations with health plans and are less likely to bid aggressively.

The FTC argued that a balance is needed between providing consumers with the information they need to make informed decisions concerning their health care and allowing competitors to share information that could facilitate anticompetitive behavior. The FTC encouraged the Minnesota legislature to consider the types of information that would be the most helpful for consumers in selecting their service, such as actual or predicted out-of-pocket expenses, co-pays, and quality comparisons of plans and providers. However, they urged caution in mandating public disclosure of health plan contract details and fee schedules.

While the FTC’s comment was addressed to legislators, it highlights the kinds of information exchanges that the antitrust regulators believe can lead to anticompetitive behavior in the health care industry. In that sense it builds on the joint FTC and U.S. Department of Justice Statements of Enforcement Policy in Health Care, originally published in 1996. Providers should avoid exchange of any information concerning their fees, discounts and other pricing arrangements with their competitors.

To see the full letter from the FTC, please click here.

Second Circuit Refuses to Stay Injunction During American Express Appeal

by Emily Townsend | Jun 23, 2015 | DOJ Developments

On Tuesday, the U.S. Court of Appeals for the Second Circuit rejected American Express Co.’s request to stay an injunction ordered by a judge in the Eastern District of New York which prevented Amex from imposing certain anti-steering rules on merchants. U.S. et al. v. American Express Co., et al., Case No. 15-1672. In 2010, the U.S. Department of Justice brought suit against Amex alleging that the anti-steering rules were anticompetitive, and, after a seven week trial held during the summer of 2014, District Judge Nicholas Garaufis agreed. Case No. 1:10-cv-04496. In February 2015, using a rule-of-reason analysis, Judge Garaufis, determined that the policies caused an adverse effect on competition and, thus, violated the Sherman Act. On April 30, 2015, he entered an injunction to “allow[] Merchants to attempt to influence the [credit card] that a Customer uses.” Therefore, the injunction prohibited Amex from adopting or enforcing any rule that prevented merchants from offering discounts or incentives to customers for using a particular card; from promoting the use of a particular card; from expressing a preference for the use of a particular card; or from explaining to the customer the costs that the merchant incurred by the use of a particular card (Order Entering Permanent Injunction as to the American Express Defendants at 5-6 (No. 638)). Amex appealed Judge Garaufis’s ruling to the Second Circuit. It also asked the Second Circuit to stay the injunction pending the appeal, arguing that the injunction would cause irreparable harm to Amex through the loss of sales and market share. The request was denied.

Shipping Executive Acquitted of Antitrust Charge

by Gregory E. Heltzer | May 18, 2015 | Cartel Enforcement, DOJ Developments

On May 8, 2015, a jury in Puerto Rico acquitted Thomas Farmer (Farmer), the former vice president of price and yield management for Crowley Liner Services, Inc., of conspiring to suppress and eliminate competition in violation of Sherman Act, Section 1. The case is United States v. Thomas Farmer (3:13-cr-00162) in the United States District Court for the District of Puerto Rico.

In March 2013, the United States Department of Justice (DOJ) indicted Farmer. The DOJ accused him of conspiring with competing shipping companies, from mid-2005 through April 2008, to fix rates and surcharges for freight transported between the United States and Puerto Rico. The DOJ alleged that Farmer and competing shipping executives participated in meetings, conversations, and communications where they agreed to allocate customers; fix and inflate prices; and rig bids submitted to government and commercial customers. The type of freight in the alleged conspiracy included heavy equipment, medicines, food, beverages and consumer goods.

While the jury acquitted Farmer, other shipping executives have either pled or been found guilty of similar charges. In January 2013, a Puerto Rican jury convicted, Frank Peake (Peake), the former president of Sea Star Line LLC. Peake was sentenced in December 2013 to five years in prison, which at the time was the longest prison sentence for a Sherman Act violation. In addition, five other shipping executives have pled guilty and been sentenced to prison terms ranging from seven months to four years.

Antitrust Enforcers Discuss Recent Highlights, Ongoing Cases, Enforcement Priorities and General Trends at the 2015 ABA Section of Antitrust Law Spring Meeting

by Louise Aberg | Apr 29, 2015 | Cartel Enforcement, DOJ Developments, EC Developments, FTC Developments

The American Bar Association (ABA) Section of Antitrust Law Spring Meeting concluded earlier this month with the traditional “Enforcers’ Roundtable,” an interview with leading competition authorities about recent highlights, ongoing cases, enforcement priorities and general trends.

This year’s participants were Bill Baer, U.S. Assistant Attorney General for Antitrust; Edith Ramirez, Federal Trade Commission (FTC) Chairwoman; Kathleen Foote, Chair of the Multistate Antitrust Task Force of the National Association of Attorneys General; Margrethe Vestager, E.U. Commissioner for Competition; and Lord David Currie, Chairman of the one-year old UK Competition and Markets Authority (CMA). Below is a summary of certain highlights from the discussion.

Recent Domestic Achievements and Enforcement Priorities

Ramirez touted the FTC’s recent U.S. Supreme Court victory in North Carolina Board of Dental Examiners[1], in which the court held that a state licensing board was not entitled to state action immunity because active market participants controlled the board, and the board was not subject to active supervision by the state. Foote noted that states are currently taking steps to ensure compliance with this ruling.

Ramirez also highlighted the FTC’s current efforts to challenge the merger between the nation’s two largest food distributors, Sysco and US Foods. Foote noted that the Sysco/US Foods[2] case is a multistate effort, with 11 state attorneys general collaborating with the FTC.

Enforcement in the pharmaceutical industry, especially pertaining to reverse payment settlements, is a priority, panelists stated. Ramirez discussed the FTC’s ongoing litigation in three reverse payment settlement cases. She noted that in the aftermath of the Supreme Court’s ruling in Actavis[3], the FTC posits that non-monetary payments, such as supply agreements, could constitute reverse payments and thus be subject to antitrust scrutiny.

Foote remarked that reverse payment settlements are also a major state focus, pointing to the recent settlement between the New York Attorney General and two generic pharmaceutical companies, Ranbaxy Pharmaceuticals Inc. and Teva Pharmaceuticals USA Inc.

Global Cartel Enforcement: a Record-Breaking Year

Baer and Vestager highlighted the increasing number and severity of fines imposed on companies engaged in price-fixing, as well as prison sentences imposed on executives in the U.S. In recent years, enforcers have scrutinized conduct in a range of industries, including financial services, agriculture, ocean shipping, consumer goods and the auto parts industry.

Baer indicated that cartel enforcement accounts for more than 40 percent of the Antitrust Division’s work. Vestager noted that the European Commission (EC) rendered 10 decisions related to cartel activity in 2014, including eight settlements. She noted that settlements are part of the EC’s “toolbox,” but the EC would continue rendering infringement decisions to develop case law.

In contrast to the U.S. Department of Justice (DOJ) and the EC, Currie said that the CMA’s 2014 cartel record was not as strong as he would have liked and that the CMA received a recent budget increase in part to enhance enforcement efforts.

International Enforcement Cooperation

Each of the panelists praised the quality of international cooperation among antitrust agencies. Vestager said that 60 [...]

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