ANTITRUST ALERT
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
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Antitrust M&A Snapshot

by , and | May 7, 2018 | , , , ,

United States: January – March 2018 Update

One year into the Trump administration, the US antitrust agencies are finally starting to implement their enforcement policies. Most notably, trial began in the US Department of Justice’s (DOJ) challenge of the AT&T/Time Warner merger, which is the Antitrust Division’s first significant vertical challenge in several decades. Judge Richard J. Leon’s opinion in that case could alter the outlook for several other vertical transactions pending before the agencies. While the DOJ was preparing for trial, the Federal Trade Commission (FTC) was preparing for a transition to five new commissioners, who were approved by the Senate in April. It remains unclear whether the new, Republican-led FTC will be more moderate in its enforcement efforts, similar to prior Republican administrations, or will follow in the footsteps of President Trump’s DOJ, which has been surprisingly aggressive.

EU: January – March 2018 Update

The European Commission (EC) continued to be quite active in the first quarter of 2018, clearing five mergers. The most significant decision was the approval of a megamerger in the agrochemical sector—Bayer/Monsanto—where the parties submitted a remedy package that totalled over €6 billion. This remedy package included divestitures of research and development assets that addressed the EC’s concerns about innovation, similar to the EC’s Dow/DuPont clearance last year. In addition to Bayer/Monsanto, two other proposed acquisitions in the chemicals sectors fell through, most notably Celanese/Blackstone, due to excessive divestiture requests required by the Commission. (more…)



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THE LATEST: Health Care Antitrust Enforcement Remains a Top Priority for New FTC Commissioners

by , and | May 4, 2018 | , ,

On April 27, 2018, the United States Senate confirmed President Trump’s five nominees for Commissioners of the Federal Trade Commission (FTC). Three are Republicans: Chairman Joseph Simons, Noah Phillips and Christine Wilson, and two are Democrats: Rohit Chopra and Rebecca Slaughter. The Senate’s vote returns the FTC to a full complement of Commissioners for the first time under the Trump Administration. Of note to participants in the health care sector: the FTC shares civil antitrust law enforcement jurisdiction over the health care industry with the Department of Justice Antitrust Division, but takes the lead when it comes to the health care provider, pharmaceutical and medical device industries. (more…)



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FTC Alleges Another Price Discrimination Market – Seeks to Block Wilhelmsen’s Acquisition of Drew Marine

by and | Mar 15, 2018 | ,

The Federal Trade Commission (FTC) recently announced that it has challenged a merger between Wilhelmsen Maritime Services (Wilhelmsen) and Drew Marine Group (Drew) because of an overlap in service to “global fleet customers,” a narrow customer segment that purchases marine water treatment chemicals and services.

WHAT HAPPENED:
  • The FTC issued an administrative complaint and filed a complaint in federal court seeking a temporary restraining order and preliminary injunction, asserting that Wilhelmsen’s proposed $400 million acquisition of Drew would significantly reduce competition in the market for marine water treatment chemicals and services used by global fleets.
  • The FTC enforcement action focuses on a narrow sub-segment of customers, global fleet customers, that buys marine water treatment chemicals and services.
  • The FTC distinguished global fleet customers from other marine water treatment chemical customers on the basis that:
  • (1) global fleets have specialized needs that only a few suppliers can meet
    (turn-key global sales, service and delivery capabilities, as well as consistent and reliable product supply); and
  • (2) these customers seek out suppliers via requests for proposal and direct negotiation and therefore potential suppliers can price discriminate to that subset of customers.
  • Because of the specific needs of global fleet customers and because global fleet suppliers can identify which customers are seeking service for global fleets, suppliers are able to price discriminate to the global fleet customer set.
  • The FTC alleged a harm to competition because their investigation showed Wilhelmsen and Drew are each other’s closest competitors based on company documents, statements by the business personnel, and bid data showing that the companies are most frequently the first and second choice for global fleet customers. In addition, the FTC noted that Wilhelmsen and Drew would control at least 60 percent of the market with the next largest competitor having less than a 5 percent share.
  • The FTC complaint disparaged the remaining market participants as unable to practicably compete with Wilhelmsen and Drew to service global fleets because they are perceived as offering lower quality products with less reliability, having more limited service capabilities, and failing to price competitively.
WHAT THIS MEANS:
  • The FTC’s enforcement action continues a trend of applying price discrimination markets. These markets are characterized by: (1) buyers with special requirements that only select suppliers can service; and (2) sellers who can identify the buyers with those special requirements and selectively price based upon the knowledge of those special needs.
  • Antitrust enforcement of price discrimination markets lead to narrower product market definitions. Therefore, applying price discrimination markets may result in antitrust enforcers challenging mergers that appear lawful when viewed as a broader market.
  • There is increased risk of price discrimination markets being applied by antitrust enforcers in industries in which:
    • The customers’ end uses differ for the same product;
    • Merging companies’ documents recognize distinctions among customer groups; and
    • Groups of customers require unique product characteristics.


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Antitrust M&A Snapshot: July – December 2017 Update

by | Mar 14, 2018 | , , , , , , ,

United States: July – December 2017 Update

Although delays in antitrust appointments continued throughout the second half of 2017, the Federal Trade Commission (FTC) and Department of Justice (DOJ) continued to actively investigate and challenge mergers and acquisitions. Notably, the DOJ challenged the vertical AT&T/Time Warner transaction, the first vertical merger the DOJ has tried since the 1970s. The end of 2017 showed a trend where the FTC and DOJ are focusing on structural remedies rather than behavioral remedies. Additionally, at the end of 2017, the FTC and DOJ challenged several consummated transactions, as well as transactions that were not reportable under the Hart-Scott-Rodino Antitrust Improvements Act.

European Union: July – December 2017 Update

After two concentrations within the agrochemicals sector in the second quarter of 2017 — Dow/DuPont and ChemChina/Syngenta — the European Commission continued to see megamergers notifications in the agrochemical sector in the second half of 2017. The fourth quarter of 2017 saw the second Commission merger decision challenged successfully this year and the fourth case of annulment of a clearance decision since the implementation of the EU Merger Regulation.

Snapshot of Events (Legislation/Agency Remarks/Speeches/News, etc.)

United States

  • Seats at the FTC Remain Unfilled Despite Continued Progress in the Appointment of New Antitrust Leadership

After a long wait, on September 27, the Senate confirmed Makan Delrahim, President Trump’s nominee to head DOJ’s antitrust division. The DOJ has also named several deputies to serve under Delrahim: Andrew Finch, Bernard Nigro, Luke Froeb, Donald Kempf and Roger Alford. These positions are not subject to Senate confirmation.

President Trump nominated four Commissioners for the FTC, including Joseph Simons to lead the FTC as Chairman. Joe Simons is an experienced antitrust attorney who was previously Director of the FTC’s Bureau of Competition. He has mainstream Republican views. Until the new Commissioners are confirmed, there must presently be unanimity between the two Commissioners for the FTC to take action.

  • FTC Warns That It May Challenge Vertical Mergers

Acting Bureau of Competition Director, Bruce Hoffman, gave remarks at the Global Antitrust Enforcement Symposium on September 13, 2017. He said that the FTC would be ready to challenge vertical mergers if there were competition issues to resolve. He added that the FTC may impose structural remedies in vertical mergers where it views the remedy as necessary to prevent competitive harm.

  • Senator Amy Klobuchar (D-Minn) Introduces New Legislation to Curtail Market Concentration and Enhance Antitrust Scrutiny of Mergers and Acquisitions

On September 14, 2017, two bills were introduced by Senator Amy Klobuchar to the Senate: the Consolidation Prevention and Competition PromotionAct (CPCPA) and the Merger Enforcement Improvement Act (MEIA). Both bills are part of the Senate Democrats’ “A Better Deal” antitrust agenda. The CPCPA would impose extra scrutiny on so-called “mega deals” by shifting the burden of proof from antitrust enforcers to the companies. It would also update the Clayton Act to refer to “monopsonies” in addition to “monopolies.” The MEIA [...]

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THE LATEST: Divestitures of Complex Pipeline Pharmaceutical Products off the Table at the FTC

by and | Feb 9, 2018 | ,

WHAT HAPPENED:
  • Bruce Hoffman, acting director of the Bureau of Competition at the Federal Trade Commission (FTC), announced that the FTC will no longer accept divestitures of inhalant and injectable pipeline drugs in pharmaceutical mergers.
  • Hoffman, speaking at the Global Competition Review Seventh Annual Antitrust Law Leaders Forum on February 2, 2018, explained that divestitures of pipeline products were not working well for complex pharmaceuticals, such as inhalants and injectables.
  • Instead, in situations in which the parties to the transaction own both a successfully manufactured inhalant or injectable and an overlapping pipeline inhalant or injectable in a concentrated market, the FTC will seek a divestiture of the manufactured product.
  • An internal study at the FTC revealed that the rate of failure was “startlingly high” for divestitures of certain complex pipeline pharmaceutical products. Hoffman blamed the high failure rate on the difficulty in actually getting the complex pipeline pharmaceutical to market by a divestiture buyer. He explained that a divestiture buyer, for example, could struggle to reliably manufacture an inhalant or injectable product, frustrating its ability to ultimately bring the product to market.

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Antitrust Merger Enforcement Update: One Year into the Trump Administration

by , and | Jan 30, 2018 | , , ,

At the one year anniversary of the Trump administration, antitrust merger enforcement remains similar to the Obama administration, but it is still early to judge given the delays in antitrust appointments and given the DOJ’s lawsuit against the vertical AT&T/Time Warner transaction, the first vertical merger litigation in decades.  Below are some of the recent developments that have impacted merger enforcement by the Federal Trade Commission (FTC) and Antitrust Division of the US Department of Justice (DOJ), as well as European regulators.

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FTC Increases Notification Thresholds under the Hart-Scott-Rodino Act and Clayton Act Section 8

by and | Jan 29, 2018 | ,

The US Federal Trade Commission recently announced increased thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and for determining whether parties trigger the prohibition against interlocking directors under Section 8 of the Clayton Act.

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THE LATEST: FTC Challenges Retail Fuel Station and Convenience Store Transaction— Requires Ten Localized Divestitures in Wisconsin and Minnesota

by | Dec 28, 2017 | ,

WHAT HAPPENED:
  • Alimentation Couche-Tard Inc. (ACT) and its subsidiaries (including Circle K Stores, Inc.) are engaged in the retail sale of gasoline and diesel fuel in the United States, as well as in the operation of convenience stores. ACT is the largest convenience store operator in terms of company-owned stores and is the second-largest chain overall in the United States.
  • Pursuant to an Equity Purchase Agreements, dated July 10, 2017, ACT would acquire, through its wholly owned subsidiary Oliver Acquisition Corp., all of the equity interests of certain Holiday subsidiary companies.
  • The FTC defined the relevant product markets as the retail sale of gasoline and the retail sale of diesel.
  • The FTC defined local geographic markets, identifying ten separate geographic markets in Wisconsin (including Hayward, Siren and Spooner) and Minnesota (including Aitkin, Hibbing, Minnetonka, Mora, Saint Paul and Saint Peter).
  • In its complaint, the FTC stated that the “relevant geographic markets for retail gasoline and retail diesel are highly localized, ranging up to a few miles, depending on local circumstances” and “[e]ach relevant market is distinct and fact-dependent, reflecting the commuting patterns, traffic flows, and outlet characteristics unique to each market.” Additionally, the FTC stated that “[c]onsumers typically choose between nearby retail fuel outlets with similar characteristics along their planned routes.”
  • In its complaint, the FTC alleged that post-merger the transaction would reduce the number of independent competitors from 3-to-2 in five local markets, and from 4-to-3 in five other local markets.
  • The FTC also stated that new entry was unlikely to mitigate the impact of the transaction in these local areas because there are significant entry barriers in the retail gasoline and diesel fuel business, including “the availability of attractive real estate, the time and cost associated with constructing a new retail fuel outlet, and the time associated with obtaining necessary permits and approvals.”
  • The FTC alleged that the proposed acquisition would result in (1) an increased likelihood that ACT and its subsidiaries would unilaterally exercise market power in the relevant markets; and (2) an increased likelihood of collusive or coordinated interaction between the remaining competitors in the relevant markets.
  • The FTC accepted a consent order in which ACT agreed to divest certain of its subsidiary’s and Holiday’s retail fuel outlets and related assets to remedy concern in ten local geographic markets in Wisconsin and Minnesota. ACT must complete the divestiture to a Commission-approved buyer within 120 days after the acquisition closes.
WHAT THIS MEANS:
  • Local geographic markets are highly fact specific. Factors used to determine local geographic markets for retail gasoline and retail diesel include: commuting patterns, traffic flows and outlet characteristics unique to each market.
  • In certain markets where only two or three independent competitors will remain post-transaction, the FTC may allege that the transaction will increase the likelihood of coordination though no collusive or coordinated interaction is alleged. Certain aspects of the fuel industry make it vulnerable to coordination including: [...]

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THE LATEST: FTC Challenges Non-HSR Reportable Retail Fuel Station Transaction— Requires Three Localized Divestitures in Alabama

by | Dec 6, 2017 | ,

WHAT HAPPENED:
  • Alimentation Couche-Tard Inc. (ACT) is a Canadian corporation and is engaged in the retail sale of gasoline and diesel fuel in the United States. Circle K Stores, Inc. (Circle K) is a wholly owned subsidiary of ACT. Circle K indirectly owns all of the membership interests in CrossAmerica GP LLC, CrossAmerica Partners LP’s (CAPL) general partner.
  • Pursuant to three separate Asset Purchase Agreements, dated August 4, 2017, ACT would acquire ownership or operation of all Jet-Pep, Inc. retail fuel outlets. Specifically, Circle K would acquire 18 retail fuel outlets, a fuel terminal and related trucking assets and CAPL would acquire 102 Jet-Pep retail fuel outlets.
  • While the purchases did not require an HSR filing, the FTC learned of the transaction, investigated and required remedies before allowing the transaction to proceed.
  • The FTC defined the relevant product markets as the retail sale of gasoline and the retail sale of diesel.
  • The FTC defined the geographic markets as local markets and identified the three separate geographic markets in Alabama including Brewton, Monroeville and Valley.
  • In its complaint, the FTC alleged that post-merger the “number of competitively constraining independent market participants” would be reduced “to no more than three in each local market.”
  • The FTC alleged that the proposed acquisition would result in (1) an increased likelihood that ACT would unilaterally exercise market power in the relevant markets; and (2) an increased likelihood of collusive or coordinated interaction between the remaining competitors in the relevant markets.
  • The FTC accepted a consent order in which ACT agreed to divest certain Jet-Pep retail fuel outlets and related assets to remedy concern in three local geographic markets in Alabama. ACT must complete the divestiture to a Commission-approved buyer within 120 days after the acquisition closes.
WHAT THIS MEANS:
  • This consent decree is a reminder that even when a transaction is not HSR reportable, the transaction may still be reviewed and challenged by the FTC and DOJ.
  • Local geographic markets are highly fact specific. Factors used to determine local geographic markets for retail gasoline and retail diesel include: commuting patterns, traffic flows and outlet characteristics unique to each market.
  • If the proposed divestiture package is something less than a complete, autonomous and operable business unit, the parties must show that their proposed package will enable the buyer to maintain or restore competition in the market.
  • FTC and DOJ may not require a buyer-up-front where they have significant experience in the industries at issue, and where the ownership interest is a high-value, low-risk asset (e.g., retail fuel business) that is likely to generate substantial interest from more than one potentially acceptable buyer.


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THE LATEST: FTC Acting Chairman Ohlhausen Signals Potentially Reduced Role for Antitrust Oversight of Intellectual Property Disputes

by and | Oct 23, 2017 | ,

WHAT HAPPENED
  • On Friday, October 13, acting FTC chairman Maureen Ohlhausen delivered a speech at the Hillsdale College Free Market Forum titled, “Markets, Government, and the Common Good,” highlighting her view on the intersection between IP and antitrust domestically and abroad.
  • Chairman Ohlhausen’s position, that IP rights must be vigorously protected, is in line with her long-held belief that some enforcement of antitrust laws, especially abroad, has been overzealous when it comes to intellectual property.
  • In 2012, Ohlhausen objected to the FTC’s decision to require Robert Bosch GmbH to refrain from pursuing injunctions on certain SEPs (standard essential patents), and she wrote a dissenting opinion on the commission’s consent agreement with Google Inc. and Motorola Mobility Inc. requiring Google to withdraw claims for injunctive relief on SEPs.
  • In Friday’s speech, she argued that though “foreign [governments] take or allow the taking of American proprietary technologies without due payment,” the US should continue to protect patent rights and avoid punishing a company for “a unilateral refusal to assist its competitors.”
  • Ohlhausen also addressed what she termed the current “age of IP skepticism” as it relates to patent-assertion entities (PAEs).
  • She concluded that while some minor changes may be appropriate to promote innovation in the face of “Litigation PAEs” employing nuisance litigation techniques, these changes should be “narrowly tailored to address observed behavior.”
  • She voiced support for case management practices that could mitigate litigation cost asymmetries between PAE plaintiffs and defendants, increased transparency, and rules encouraging courts to stay litigation by PAEs when parallel proceedings are already underway, but eschewed more drastic measures such as the creation of “new, specialized guidelines to address particular types of IP disputes,” which, she argued, are unsupported by the available evidence.
  • In her view, “the key to addressing the US patent system lies in incremental adjustment where necessary based on a firm empirical foundation.”
WHAT THIS MEANS
  • Ohlhausen’s concern that certain antitrust enforcement “inappropriately morphs antitrust law into a tool for price regulation” is a notable policy direction that could make the FTC less inclined to pursue cases involving alleged violations of SEPs.
  • Under her direction, any changes forthcoming at the FTC are likely to be minor adjustments reflecting the belief that protecting patent rights is “fundamental to advanc[ing] innovation.”


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Gregory E. Heltzer

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