DOJ Developments Archives - Page 23 of 42

DOJ Developments

Department of Justice Launches an Antitrust Investigation into Pressure Pumping Services Used in Hydraulic Fracturing

by Emily Townsend | Jul 29, 2013 | DOJ Developments, Energy/Commodities

On July 24, 2013, Baker Hughes, Inc., the owner of the third-largest pressure pumping fleet in the United States, disclosed as part of its filing with the Securities and Exchange Commission that it had received a civil investigative demand (CID) from the Department of Justice (DOJ) on May 30, 2013. The CID requests information and documents relating to U.S. pressure pumping services for the period from May 29, 2011, through May 30, 2013.

Baker Hughes stated in its filing that it was “not able to predict what action, if any, might be taken in the future by the DOJ or other governmental authorities as a result of the investigation.”

Pressure pumping services generally refers to the process of pumping water and other materials into a well to break apart rock formations and increase the well’s oil or gas production. Pressure pumping is the main step in the hydraulic fracturing process, and has in recent years become more heavily used for extracting oil and natural gas from rock formations.

The following day, on July 25, 2013, Halliburton Co., the largest provider of pressure pumping services in the United States., confirmed that it had also received a CID from the DOJ regarding pressure pumping services.

Judge Finds that Apple Conspired to Raise E-book Prices

by Emily Townsend | Jul 12, 2013 | DOJ Developments, Monopolization/Abuse of Dominance

by James Camden

On July 10, 2013, Judge Denise Cote of the Southern District of New York issued a 160-page opinion holding that Apple conspired with five book publishers to raise e-book prices and eliminate retail price competition in violation of Section 1 of the Sherman Act and several relevant state statutes. United States v. Apple Inc., case number 12-civ-2826 (DLC). The five publishers – Hatchett, HarperCollins, Macmillan, Penguin and Simon & Schuester – had all previously settled with the U.S. Department of Justice (DOJ).

The opinion stated that as Apple prepared to launch its iPad to the public and sought to concurrently enter the e-book market with its iBookstore, it met with the publishers and agreed to provide them with an “agency model” for e-book pricing that allowed the publishers to set the prices of the e-books themselves, subject to certain price caps. Apple’s agreements with the publishers also included Most Favored Nation provisions which ensured that Apple could match its competitors’ prices and also provided an incentive for the publishers to lobby Amazon and other retailers to change their wholesale business models to agency models. According to the court’s opinion, these agency model agreements caused e-book prices to increase, sometimes 50% or more for a specific title.

A separate trial for potential damages will be scheduled later. Apple said it will appeal the ruling.

$720,000 Civil Penalty for Failure to File HSR

by Emily Townsend | Jun 21, 2013 | DOJ Developments, FTC Developments, Mergers & Acquisitions

by Carla A. R. Hine

Today the Department of Justice (DOJ), on behalf of the Federal Trade Commission (FTC), announced a settlement with MacAndrews & Forbes for failing to file Hart-Scott-Rodino (HSR) in connection with the acquisition of voting securities of Scientific Games (SG). MacAndrews & Forbes, which is a wholly-owned holding company of Ronald Perelman, will pay $720,000 for failing to file HSR.

MacAndrews & Forbes had filed HSR and observed the waiting period for a prior acquisition of SG voting securities. Under the HSR Rules, a buyer that has filed HSR and observed the waiting period can continue to acquire voting securities of an issuer valued up to the next notification threshold for a period of five years following expiration of the HSR waiting period. (The relevant notification thresholds in acquisitions of less than 50 percent of the voting securities are $50 million, $100 million and $500 million, each of which are adjusted annually.) However, if the buyer will pass the next notification threshold, or acquire additional stock after the five year period expires, a new HSR filing is required. The HSR size-of-transaction is determined by valuing what a buyer will hold as a result of the transaction. In other words, the buyer needs to look at the value of the voting securities of an issuer it currently holds aggregated with the value of the stock it will acquire. The value of publicly traded stock, such as SG’s, is determined by looking at the lowest closing quotation price in the preceding 45 calendar days. As such, if a stock goes up in value over time, even acquisitions of small tranches of shares can put an acquiring person above a notification threshold.

That is what happened in MacAndrews & Forbes’s case. It had filed HSR in February 2007 and the five year period in which it could make additional acquisitions expired when it acquired an additional 800,000 shares, valued at $6.5 million, in June 2012. This acquisition, when aggregated with the value of SG stock MacAndrews & Forbes already held, exceeded the filing threshold. MacAndrews & Forbes realized the inadvertent failure to file, and submitted a corrective filing in September 2012. The takeaways here are to remember that HSR thresholds consider both what a buyer already holds in addition to what else it will acquire, and that subsequent potential HSR obligations need to be monitored over time.

To view the press release, click here.

To view the complaint, click here.

FTC Issues Fiscal Year 2012 HSR Report

by McDermott Will & Emery | May 6, 2013 | DOJ Developments, FTC Developments, Mergers & Acquisitions

by Carla A. R. Hine

Earlier this week, the Federal Trade Commission (FTC) issued its Hart-Scott-Rodino (HSR) report for fiscal year 2012 (FY2012), which summarizes enforcement actions and key statistics regarding number of filings, second requests and challenges. The press release and a link to the report can be found here.

Filings were relatively flat from 2011 to 2012. There were fewer second requests and there wasn’t a remarkable difference in the overall percentage of filings resulting in second requests (3.9 percent in 2011; 3.5 percent in 2012). In 2012, the FTC issued more second requests than the U.S. Department of Justice (DOJ). However, when looking at the number of second requests each agency issued as a percentage of the filings each agency was "cleared" to investigate, the FTC only issued second requests in 14.8 percent of the filings it was cleared to investigate, whereas the DOJ issued second requests in 40.8 percent of filings the agency was cleared to investigate. Overall, it is hard to read too much into these statistics other than reportable transactions remain steady and there do not seem to be any wild swings in enforcement trends.

The report also notes that of 60 corrective filings (i.e., filings where the parties closed the transaction and later realized they should have filed), two resulted in enforcement actions with civil penalties ($500,000 and $850,000).

North Carolina Legislature Passes Prohibition on MFNs in Health Care Contracts

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

by Jeffrey Brennan and Carrie Amezcua

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.