On October 20, 2011, the Federal Trade Commission and Department of Justice issued a final policy statement on accountable care organizations (ACOs) participating in the Medicare Shared Savings Program (MSSP). Significantly, the Agencies eliminated mandatory antitrust review of certain ACOs seeking to participate in the MSSP, but declined to adopt other stakeholder recommendations.
In recent years, the Federal Trade Commission (FTC) and the Department of Justice (DOJ)—the two US agencies responsible for reviewing and challenging transactions that may lessen competition—have increasingly challenged non-reportable and consummated transactions. There have been several such challenges so far in 2011, and at least nine in 2010 (all but one of which resulted in a settlement).
Companies should begin regularly collecting required data—in particular revenues by North American Industry Classification System code and information about “associates”—in advance of need to file Hart-Scott-Rodino notification.
On June 24, 2011, Assistant Attorney General Christine Varney announced that the U.S. antitrust enforcement agencies will be signing a cooperation agreement with their Chinese counterparts. As a consequence, companies can now expect to see the Chinese authorities participating in coordinated “dawn raids” and related cooperative enforcement initiatives with the U.S. and EU antitrust enforcers in international cartel cases.
The head of the United States Department of Justices’s (DOJ) Antitrust Division, Christine Varney, gave a speech to the Chamber of Commerce on June 24, 2011. One of the topics she discussed involved IP/antitrust issues regarding standard-setting organizations (SSOs). Provided below is the excerpt from her remarks dealing with this topic. While her remarks do not signify a change in the way the DOJ analyzes SSOs, they serve as a reminder that the DOJ is vigilant of anticompetitive practices related to standard-setting.
Christine Varney’s Remarks on SSOs:
One issue that arises in the context of civil non-merger enforcement, and which I understand is of considerable interest to the business community, is the application of the antitrust laws to standard setting. I have examined standard setting since my days as a Federal Trade Commissioner, when I voted to challenge Dell Computer Corporation’s anticompetitive conduct in a Standard Setting Organization (SSO). The FTC alleged that Dell—as a member of an SSO—restricted competition in the personal computer industry and undermined the standard-setting process by threatening to exercise undisclosed patent rights against computer companies that had adopted the standard. In that settlement, the FTC made clear that the antitrust laws do not allow firms to commit to an open standard, and only after the standard is adopted, assert patent rights to block use of the design or increase prices.
However, if structured appropriately, standards promulgated by an SSO can be permissible under the antitrust laws. As you well know, standard setting creates enormous benefits for businesses and consumers, including reducing production costs and fostering public health and safety. The Division has expressed this support for SSOs in a joint report with the FTC, in business review letters and in speeches.
I personally support the role of standard setting in promoting innovation as long as such standards comply with the basic and fundamental principles of the antitrust laws. This requires that standards be open and published, with clear disclosure and license rules, and should be apportioned fairly and efficiently, with no company able to distort the process. In addition, standards should be limited to technical and operational functions that support individual business decisions—not thwart the competitive process by enabling collective and collusive business decisions. The best SSO framework may vary by industry, but these fundamental principles remain.
To view Christine Varney’s full comments, please click here.
The DOJ has released an updated merger remedies guide that provides an overview on how the DOJ Antitrust Division staff will analyze proposed remedies in merger matters. The revised guide places an increased emphasis on behavioral or conduct remedies to address issues raised by vertical transactions.
On May 10, the U.S. Department of Justice (DOJ) filed a civil lawsuit against George’s Inc. to block its $3M acquisition of Tyson Foods Inc.’s, Harrisonburg, Virginia chicken processing plant, showing that deals of all sizes face scrutiny. This case also continues the trend of challenges to non-reportable transactions by both the DOJ and FTC, as well as the DOJ’s current focus on the agriculture sector. It is also notable because the DOJ is alleging that the merger leads to monopsony power, a relatively rare allegation, but one that is increasingly used in challenging deals in the agriculture business.
The DOJ began investigating the acquisition when it was announced in mid-March, and issued Civil Investigative Demands to the parties on April 18, 2011. Despite their awareness of the DOJ’s concerns and ongoing data and document productions, the parties consummated the deal.
George’s and Tyson are two of only three chicken processors in the Shenandoah Valley. Chicken processors process and distribute "broilers," which are chickens raised for meat products. The processors compete for contracts with growers, who care for and raise chicks from the time they are hatched until the time they are ready for slaughter.
In its complaint, the DOJ alleges that the relevant product market is the "purchase of broiler grower services from chicken farmers." The DOJ then asserts that, following the proposed merger, chicken farmers would have only a single processor to sell their growing services to – in part because the only other processor in the 50-75 mile range, Pilgrim’s Pride, is at capacity. The DOJ alleges that the consolidation would not only harm grower’s contract prices but also lead to inferior contract terms on other, non-price factors. The DOJ argues that the relevant geographic market is limited to the Shenandoah Valley because of transportation costs for feed and live birds.
Yesterday, the U.S. Department of Justice announced that CPTN Holdings, LLC, a joint venture owned equally by Microsoft Corp., Apple, Inc. , Oracle Corp., and EMC Corp, has agreed to modify its agreement to acquire certain patents from Novell, Inc. in order to allay antitrust concerns raised by the transaction. The Department had expressed concerns that the original deal would threaten the ability of open source software to innovate and compete in critical software markets. The modifications to the deal will allow it to go forward, but the Department emphasized that it will continue to monitor distribution of the patents to ensure continued competition. The transaction also received antitrust clearance from Germany’s Federal Cartel Office. The German and American authorities cooperated closely on the matter, aided by waivers from the parties that allowed information sharing between the two agencies. Regulators are increasingly attuned to the effects of intellectual property transactions on competition.
For more information on the CPTN Holdings, LLC transaction, you may find the following links useful:
In M&A transactions, early involvement of antitrust counsel is essential to avoid unnecessary expense, delay and antitrust risks. Failure to involve antitrust counsel early on in the process may not only jeopardize the parties’ ability to obtain antitrust clearance, but it can also give rise to potential exposure for independent antitrust violations and deal risk. This article discusses five avoidable antitrust pitfalls to keep in mind early in any transaction planning process.
Earlier this week, The Tribune (Greely, Colorado) published the article below discussing proposed changes to livestock marketing rules. The article discusses the pros and cons of the Grain Inspection, Packers and Stockyards Administration proposed rule – commonly referred to as the GIPSA rule.
"New rules were mandated by the 2008 Farm Bill, which required the U.S. Department of Agriculture to conduct rulemaking that ‘improves fairness in the marketing of livestock and poultry.’"
The rule aims to promote fairness and transparency, and would make it easier for a plaintiff to bring a case under the Packers & Stockyards Act by no longer requiring that the plaintiff first show harm to competition in a complaint alleging certain unfair trade practices. However, critics say that the changes will promote unnecessary litigation and would result in anywhere from 22,800 to 104,000 jobs lost.
Comments on the new rule were due November 22, 2010 and are currently being reviewed. However, on January 21, 2011, the USDA published one change to their regulations requiring testing of scales twice per year, at defined 6 month intervals.
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