DOJ Developments Archives - Page 23 of 41

DOJ Developments

North Carolina Legislature Passes Prohibition on MFNs in Health Care Contracts

by Emily Townsend | May 2, 2013 | DOJ Developments, FTC Developments, Healthcare Antitrust

On Tuesday, the North Carolina legislature has enacted into law, pending the governor’s signature, a prohibition on the use of most favored nations (MFN) clauses in contracts between commercial health insurers and providers.

The two-page bill, titled “Freedom to Negotiate Health Care Rates,” lists "prohibited contract provisions related to reimbursement rates." The bill prevents a commercial health insurer from prohibiting a health care provider with which it contracts from entering into a contract with another insurer at equal or lower rates. In addition, insurers are not permitted to require a provider to accept a lower rate from the contracting insurer, or to require a renegotiation of rates, in the event that the provider agrees to provide equal or lower rates to another commercial health insurer. Next, the bill prohibits an insurer from terminating a provider that agrees to provide services at lower rates to another insurer. An insurer is also prevented from requiring that a provider charge another commercial health insurer a higher rate. Finally, insurers can no longer require that providers disclose the provider’s contractual rate with another health insurer.

MFN clauses have been attracting attention in recent years, particularly in the health care field. North Carolina’s bill follows closely on the heels of Michigan’s ban on MFN clauses passed in March 2013. That action led the Department of Justice (DOJ) to file a motion asking the court to dismiss an antitrust suit against Blue Cross Blue Shield of Michigan (BCBSM), in which the DOJ alleged the MFN clauses in BCBSM’s contracts with hospitals stifled competition, raised health care costs and harmed consumers. Ohio has a similar ban on MFN clauses.

Last year, the DOJ and the Federal Trade Commission (FTC) held a public workshop specifically to discuss the competitive effects of MFN clauses. The workshop featured panels discussing economic theories concerning MFN clauses and why they are used, and the legal treatment of and industry experiences with MFN clauses, among other topics.

MFN clauses are evaluated under the antitrust law rule of reason, because, depending on the applicable facts and circumstances, such provisions have been found to have procompetitive or anticompetitive effects. A recognized procompetitive feature of MFN clauses is lower transaction costs, which provides price stability over time and ensures that a buyer is not treated any worse than its rivals. The DOJ argued in the BCBSM case, on the other hand, that the MFN clauses there reduced incentives to lower prices, facilitated coordination and prevented entry.

Health care clients using or considering the use of MFN clauses should consult antitrust counsel to assess their legal risks in light of these developments.

Natural Gas Companies Settle Antitrust Suit Stemming from Joint Bidding

by McDermott Will & Emery | Apr 25, 2013 | DOJ Developments, Energy/Commodities

by Jon B. Dubrow and Cerissa Cafasso

On Monday, April 22, 2013, after rejecting the initial settlement agreement, Judge Richard Matsch (D. Colo.) approved a revised settlement of a suit brought by the U.S. Department of Justice (DOJ) against two energy companies for conspiring not to compete for mineral rights leases. Gunnison Energy Corp. (GEC) and SG Interests I Ltd. and SG Interests VII Ltd. (collectively "SGI”) will each pay a fine of $275,000 to the DOJ to settle allegations of agreeing not to bid against each other in violation of antitrust law for natural gas leases on government land in western Colorado. These fines are in addition to those related to alleged False Claims Act violations, for which SGI and GEC paid government fines of $206,250 and $245,000 respectively. The new settlement is twice the amount of the fines in the original settlement.

McDermott Will & Emery wrote an article in February 2012 analyzing the DOJ’s initial complaint against the parties, and the competitive implications of joint bidding. At the time, the parties had agreed to pay a total of $550,000 in fines. The court rejected the settlement in December 2012 finding that it was not in the public interest. "There is no basis for saying that the approval of these settlements would act as a deterrence to these defendants and others in the industry, particularly as GEC considers ‘joint bidding’ to be common in the industry." Further, the settlement amount was "nothing more than the nuisance value of [the] litigation." Additionally, as reflected in the newly approved deal, the court wanted the alleged Sherman Act violations and False Claims Act violations settled separately, with a payment for the Sherman Act claims separate from, and in addition to, any amount due under the False Claims Act. At heart, it appears Judge Matsch wanted any settlement he approved to be meaningful enough to have a deterrent effect on future agreements.

This was the DOJ’s first challenge to an anti-competitive bidding agreement for mineral rights leases, but it is just one of the recent cases in which joint bidding activities have become the focus of antitrust scrutiny. In Summer 2012, the DOJ opened an investigation into Chesapeake Energy’s acquisition of oil and gas properties in Michigan and the possibility that Chesapeake conspired with Encana Corp. to allocate bids on those properties. In 2006, the DOJ began investigating the joint bidding practices of private equity firms in connection with leveraged buyouts. That investigation led to class action suits against private equity firms. One of those suits survived a motion for summary judgment last month.

It is important to note that the DOJ is paying attention to joint bidding practices and taking action. As noted in the SGI/GEC matter, while joint bidding may in fact be common practice in the energy field, it is not necessarily lawful. Each arrangement should be evaluated for potential anticompetitive effects.

DOJ Issues Business Review Letter Regarding Hospital-Physician Gainsharing Program

by Emily Townsend | Jan 22, 2013 | DOJ Developments, Healthcare Antitrust

by Stephen Wu

On January 16, the U.S. Department of Justice Antitrust Division issued a Business Review Letter in which it disclosed its intention not to challenge the Greater New York Hospital Association’s (GNYHA) voluntary "gainsharing" program for its hospital members and the physicians who practice at their hospitals.

GNYHA’s program is designed to encourage physicians to become more cost-conscious in their treatment decision-making and reward them for greater efficiency. Important aspects of the program include:

that it is non-exclusive and voluntary;
each participating hospital will have its own quality-standards;
it will apply to commercial health insurance and Medicaid and Medicare managed care products;
each hospital will choose how much savings to share with its physicians (or none at all) subject to other regulatory requirements; and
the information that will be shared among GNYHA members is already publicly available.

The Antitrust Division concluded that the program was neither an agreement among competitors to set physician compensation levels nor an anticompetitive information exchange.

The Antitrust Division’s business review letter should provide guidance to hospitals and physicians looking to reduce costs of care. Importantly, however, the program and the Antitrust Division’s business review letter only addressed gainsharing between hospitals and their physicians and not joint contracting or "clinical integration" arrangements among competing providers, for example.

To read the Antitrust Division’s press release, click here.

Joint DOJ-FTC Workshop Explores Competitive Impact of Patent Assertion Entities

by McDermott Will & Emery | Dec 18, 2012 | DOJ Developments, FTC Developments, IP Antitrust

by Stefan M. Meisner and Daniel Powers

Federal antitrust enforcement agencies are closely studying the growing activity of patent assertion entities (PAE). At a recent joint workshop sponsored by the Federal Trade Commission (FTC) and U.S. Department of Justice (DOJ), participants from academia, industry and the legal world discussed the competitive impact of these organizations and considered whether antitrust law offers regulators any tools to grapple with potential anticompetitive activity. No new policy prescriptions emerged during the daylong session, but the agencies continue to seek comment and study this rapidly developing area.

To read the full article, click here.

Proposed Remedies in the Midst of the Patent Wars: EU and US Antitrust Watchdogs Push to Strengthen FRAND in Standard Setting

by McDermott Will & Emery | Nov 20, 2012 | DOJ Developments, FTC Developments, IP Antitrust

by David Henry, Wilko van Weert and Philipp Werner

Chief Economists from the US Federal Trade Commission, the US Department of Justice and the EU Directorate General for Competition, have agreed on a set of four, non-binding suggestions that should—if followed by standard-setting organizations – increase the level of protection afforded to consumers and promote innovation.

To read the full article, click here.

DOJ Chief Warns of Threats to Competition in Standard Setting and Patent Transfers

by Emily Townsend | Sep 24, 2012 | DOJ Developments, IP Antitrust

by Daniel Powers

The Acting Assistant Attorney General Joseph Wayland delivered a speech on Friday regarding how antitrust enforcement agencies can “balance patent rights, competition and innovation in the information age.” Wayland covered familiar ground on topics ranging from the dangers of patent hold-up to the importance of patent holders’ commitments to license essential patents on F/RAND terms. He stressed that the enforcement agencies continue to closely monitor the competitive impact of patent portfolio acquisitions, particularly in the wireless industry. He also reiterated the agencies’ views about the appropriate standards for injunctive relief and the impact on competition of ITC exclusion orders to enforce standards essential patents. Wayland’s prepared remarks also offered some specific suggestions about possible additions to the intellectual property policies of standard setting organizations that would limit opportunities to exploit the ambiguities of a F/RAND licensing commitment. Suggestions included, for example, requiring patent holders’ make clear their F/RAND commitments bind both the current patent holder and subsequent purchasers of the patents. He also warned that even if patent holders are not enforcing standard-essential patents, efforts to force licensees to accept certain kinds of anti-competitive contract terms might nevertheless trigger antitrust scrutiny. Wayland said he has made it a priority to examine use or misuse of patents that goes beyond standard-essential patents.

Wayland’s prepared remarks are available on the Antitrust Division’s website at: https://www.justice.gov/atr/public/speeches/287215.pdf.

News coverage highlighting Wayland’s additional comments is available at: https://www.law360.com/competition/articles/380674?nl_pk=13f0a320-0811-47df-83bc-07f151d901ad&utm_source=newsletter&utm_medium=email&utm_campaign=competition.

Proposed Changes to HSR Rules for Pharmaceutical Companies

by Emily Townsend | Aug 14, 2012 | DOJ Developments, FTC Developments, IP Antitrust

by Jon B. Dubrow and Carla A. R. Hine

Today the Federal Trade Commission (FTC) announced proposed changes to the Hart-Scott-Rodino (HSR) premerger notification rules that will impact the types of transactions for which pharmaceutical companies will be required to file HSR notifications with the Department of Justice and FTC. The proposed rulemaking is meant to clarify when a transfer of exclusive rights to a patent in the pharmaceutical industry results in a potentially reportable acquisition of assets under the HSR Act.

Previously — although never actually codified — the FTC would determine whether the transfer of rights to a patent (usually in the form of a license) was a reportable event under the HSR Act by focusing on whether the licensor transferred the exclusive rights to "make, use and sell" under a patent. The emphasis on the transfer of the exclusive right to manufacture would result in scenarios where parties would not be required to report the transfer of patent rights because although the licensor transferred the rights to commercialize the product, it retained the right to manufacture the product.

In an effort to place substance over form, the proposed rulemaking instead suggests an "all commercially significant rights" test, where a transfer of "the exclusive rights to a patent that allow only the recipient of the exclusive patent rights to use the patent in a particular therapeutic area (or specific indication within a therapeutic area)" would constitute a potentially reportable acquisition of assets if the size-of-transaction and size-of-person (if applicable) thresholds are met, and no exemption is applicable. The proposed rules further explain that all commercially significant rights are transferred even if the patent holder retains limited manufacturing rights to provide the licensee with product(s) covered by the patent, or co-rights to assist the licensee in developing and commercializing the product(s) covered by the patent. Please note that this rule would only apply to patents within the pharmaceutical industry (as this is the industry in which these scenarios most often occur).

The text of the proposed rulemaking can be found here. The FTC is accepting comments until October 25, 2012.

UPDATE: The U.S. Federal Trade Commission’s new proposed Hart-Scott-Rodino Act rules will apply only to transfers of pharmaceutical patent rights and are expected to increase the number of filings. Click here to read the full article, "FTC’s Proposed Rules Would Generate More HSR Filings for Transfers of Pharmaceutical Patent Rights."

DOJ, FTC Testimony Before Congress Indicates Enforcement Focus on Standard-Essential Patents and Concern over ITC Exclusion Orders

by Emily Townsend | Jul 13, 2012 | DOJ Developments, FTC Developments

by Stefan M. Meisner and Daniel Powers

Recent testimony from the U.S. Department of Justice’s Antitrust Division and the Federal Trade Commission (FTC) before the Senate Judiciary Committee focused on issues relating to standard-setting activities and competition policy. Antitrust Division Acting Assistant Attorney General Joseph Wayland and FTC Commissioner Edith Ramirez discussed the issue of injunctive relief to enforce standard-essential patents and emphasized the importance of pending actions before the International Trade Commission.

To read the full article, click here.

Alleged Agreement Between Chesapeake Energy and EnCana Corporation to Suppress Prices for Mineral Rights Highlights the Antitrust Risks Facing Energy Companies

by Emily Townsend | Jul 3, 2012 | DOJ Developments, Energy/Commodities, Joint Ventures/Competitor Collaboration

by Jon B. Dubrow and Shauna A. Barnes

Recently published reports of land acquisition activities between Chesapeake Energy and EnCana senior executives will likely expose those companies to a Department of Justice (DOJ) antitrust investigation and challenge, as well as, if accurate, civil antitrust claims. This matter highlights the risks that energy companies face when discussing lease arrangements with their competitors.

Joint Bidding or Bid Rigging for Property Rights Can Violate the Antitrust Laws

In February 2012, DOJ settled its first challenge to a bidding agreement for mineral rights, alleging that agreements between Gunneson Energy Corporation and SGI Interests to bid jointly for government mineral leases were anticompetitive. In a previous post, we explained the potential issues and pitfalls related to joint bidding for oil and gas properties. We suggested various factors that companies can use to assess, or manage, their antitrust exposure.

Reuters Obtains and Publishes Confidential Communications Between Chesapeake and EnCana Appearing to Coordinate to Reduce Prices Paid for Properties

On June 25, 2012, Reuters published a special report indicating that Chesapeake and EnCana agreed to suppress bids for mineral rights at public and private land auctions. Citing dozens of highly inflammatory emails, the article purports to detail how Chesapeake’s CEO, Aubrey McClendon, and other senior executives at Chesapeake and EnCana discussed how to avoid creating a bidding price war in acquiring drilling rights for Northern Michigan properties.

According to Reuters, throughout 2010, EnCana and Chesapeake were the leading buyers in Michigan and they aggressively competed to acquire properties for hydraulic fracturing (fracing) operations. During a May 2010 land auction, they paid approximately $1,413 per acre. Following the auction, private landowners sought competing bids, leading to a bidding war resulting in offers of more than $3,000 per acre.

Reuters indicates that Chesapeake and EnCana discussed via email entering into a formal venture, including some areas of mutual interest that would allow the parties to share in the risks and rewards of developing properties. However, they did not enter into any venture. Instead, they purportedly discussed in emails ways, as independent bidders, to refrain from bidding up land prices, and to allocate various properties between themselves. These emails were followed by significant price reductions in the offers made by Chesapeake and EnCana.

Oil and Gas Industry Companies Need to be Sensitized to the Risks in Joint Activities Related to the Acquisitions of Mineral Rights

The Chesapeake-EnCana situation, following quickly on the heels of the DOJ’s joint bidding challenge earlier this year, serves as a reminder that companies in the oil and gas industry must exercise care in situations where they may want to work with potentially competing bidders. In the oil and gas industry, firms frequently work together to acquire and develop properties, and that can often be lawfully accomplished through a legitimate collaboration. Firms, and their executives, may often have opportunities to discuss property acquisition in the context of a legitimate, integrated venture, including with firms that might otherwise be competitors. However, while some [...]

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