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.
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.
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."
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.
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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by Jon Dubrow, Cerissa Cafasso and Carla Hine.
Failing to comply with premerger document disclosure rules can lead to civil and criminal penalties for companies and their executives.
To read the full article, click here.
Last week, Sharis Pozen, Acting Assistant Attorney General for the Antitrust Division of the U.S. Department of Justice, spoke at the World Annual Leadership Summit on Mergers and Acquisitions in Health Care, where she affirmed that protection of competition in the health care industry is a top priority of the Division. Pozen highlighted the Division’s recent enforcement activities in insurance and provider markets, including challenges to insurance company mergers and contracting practices used by dominant insurers or providers such as Most Favored Nation (MFN) provisions and exclusivity agreements.
Of note, Pozen remarked that the Division undertook a comprehensive evaluation of health insurance markets, the results of which have caused the Division to regard with increasing skepticism the ability of new entry to constrain a merged health insurance firm. Pozen explained that new entrants face obstacles because they need provider discounts to attract enrollees but have difficulty obtaining them without a large number of enrollees. Pozen stated that the Division will focus more attention on entry analysis to protect markets from harmful consolidation, especially markets dominated by one or two plans. Regarding provider markets, Pozen described the Division as "on the lookout for agreements or arrangements purported to improve quality but where the real goal is simply to raise prices." This is especially relevant given the Affordable Care Act’s encouragement of provider collaboration in the form of Accountable Care Organizations (ACOs).
Pozen’s remarks are available at: https://www.justice.gov/atr/public/speeches/281236.pdf.
Pozen’s comments highlight the need for health care companies considering collaborative arrangements with competitors or contracting arrangements such as MFNs or exclusivity agreements to consult counsel and articulate a clear pro-competitive basis for such conduct.
by Jon Dubrow and Cerissa Cafasso
Public utilities could face different levels of scrutiny in merger reviews before the U.S. Federal Energy Regulatory Commission, and the Department of Justice and the Federal Trade Commission (the Antitrust Agencies).
To view the full article, please click here.
by Jon B. Dubrow and Shauna A. Barnes
The U.S. Department of Justice’s recent action challenging a joint bidding arrangement for natural gas leases highlights the antitrust risks of joint bids. This newsletter describes considerations parties considering joint bids can take to evaluate and potentially manage their antitrust risks.
To read the full article, click here.
In December 2011, the United States Department of Justice (DOJ) announced that a public company chief executive officer (CEO) will pay a $500,000 civil penalty to settle charges that he violated Hart-Scott-Rodino Act (H-S-R Act) premerger reporting and waiting period requirements. The DOJ, acting at the request of the Federal Trade Commission, charged the executive for failing to satisfy the H-S-R Act’s requirements before acquiring common stock under the company’s stock-based compensation program. The CEO allegedly exceeded the H-S-R Act filing threshold ($59.8 million when the alleged violation occurred) upon the vesting of outstanding restricted stock units awards and the reinvestment of dividends and short term interest through his 401(k) account.
Violations of the H-S-R Act’s reporting and waiting period requirements are subject to fines of up to $16,000 per day. The DOJ’s recent enforcement action illustrates the potentially costly consequences of a failure to consider H-S-R Act compliance in connection with investment planning for corporate executives (and other individuals) who will hold or acquire stock valued in excess of the H-S-R Act’s notification threshold (currently $66 million and moving to $68.2 million effective February 27, 2012), and that violations may occur under somewhat obscure circumstances. In this connection, it is also important to remember that the relevant valuation is determined by reference to the total value of the voting securities that will held following any given acquisition of shares. Thus, for example, if an executive already holds shares valued at $65,999,999, a reporting obligation could be triggered by acquiring just one additional share. Likewise, if the executive’s existing holding has already crossed the $66 million valuation threshold through appreciation, any further acquisitions could trigger a reporting obligation.
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