FTC Developments Archives - Page 22 of 47

FTC Developments

FTC Promotes Competition Among Professionals Through Advocacy, Enforcement

by McDermott Will & Emery | Jul 21, 2014 | FTC Developments

On July 16, 2014, Andrew Gavil, Director of the Office of Policy Planning at the Federal Trade Commission (FTC), testified on the subject of “Competition and the Potential Costs and Benefits of Professional Licensure” before the House Committee on Small Business. Gavil explained the FTC’s rationale for evaluating the competitive effects of different licensing regimes and described its strategy of promoting competition among professionals through a combination of advocacy and enforcement.

The FTC’s approach in this area is to evaluate the pros and cons of specific licensure regulations on a case-by-case basis. In a nutshell, the agency recognizes that, “although licensure may be designed to provide consumers with minimum quality assurances, licensure provisions do not always increase service quality,” and indeed “may . . . discourage innovation and entrepreneurship” and “impede the flow of labor or services.” Advocacy is an important component of the FTC’s strategy because state and local licensing regimes are often not actionable under the federal antitrust laws. Instead, the agency utilizes tools such as comments, testimony, workshops, reports and amicus briefs to encourage policymakers to consider the likely competitive effects of proposed regulations. Gavil noted a recent example in which, at the request of Chicago Alderman Brendan Reilly, FTC staff provided a comment assessing the potential competitive effects of a proposed Chicago ordinance creating a licensing scheme to regulate mobile ride-sharing apps. The comment, available here, details how certain provisions of the ordinance might “unnecessarily impede competition in these services without providing any apparent consumer protection benefits,” for example, by placing licensees at a competitive disadvantage to traditional transportation services or by restricting innovative pricing models.

The FTC also keeps an eye out for opportunities to flex its enforcement muscle and discourage anticompetitive conduct by independent regulatory boards that are not protected by the state action doctrine. For example, the Fourth Circuit last year sided with the FTC in a suit challenging the North Carolina Board of Dental Examiners’ practice of issuing cease-and-desist letters to non-dentist providers of teeth-whitening services. See N.C. State Bd. of Dental Examiners v. FTC, 717 F.3d 359 (4th Cir. 2013), cert. granted, No. 13-564, 5014 WL 801099 (U.S. Mar. 3, 2014). In particular, state agencies comprised mostly of industry participants who are chosen by other industry participants must take special precautions to avoid violating the antitrust laws. Many of the examples of enforcement actions Gavil provided in his testimony concerned the healthcare arena, which is consistent with the FTC’s ongoing commitment to promote competition in that sector.

The text of the Commission’s prepared statement is available here.

FTC and DOJ Host Conditional Pricing Programs Workshop

by Jon B. Dubrow | Jun 25, 2014 | DOJ Developments, FTC Developments

The Federal Trade Commission (FTC) and United States Department of Justice (DOJ) hosted a workshop on June 23, 2014 discussing the law and economics of “conditional pricing” programs. Most panelists were academics, including economists and law school professors. The bulk of the presenters advocated a more aggressive posture towards these arrangements than the courts have recently adopted.

Conditional pricing programs. Conditional pricing generally encompasses pricing, discounting and contracting practices in which a company’s prices charged will vary depending upon the level of purchases the customer makes from the company’s competitors. Examples include:

Bundled discounts: Supplier X, which sells dominant product A and competitive product B, grants a discount on product A (which the customers have to buy) so long as customers buy a certain percentage of their needs of product B from Supplier X, rather than from its competitors.
Loyalty / market share discounts: Supplier X, which has a dominant position in product A, grants discounts from its baseline pricing if customers purchase a high percentage (e.g., 90 percent) of Product A from Supplier X, rather than from its competitors.

Theories of harm. The panelists discussed two basic categories of theories of competitive harm.

Exclusion of rival manufacturer. When a smaller rival, perhaps a new entrant, tries to break in to a market, the dominant incumbent may impose a conditional pricing program that makes it hard for the new entrant to get a significant share of sales, which may deprive it of critical scale efficiencies and render it a marginal supplier, or perhaps even force an exit.
Coordination / collusion of customers / distributors. A retailer can be viewed as providing retailing services in the sale of the manufacturer’s products. The purchases and contracts different retailers receive from manufacturers can be thought of as inputs in the retailer’s provision of its services. Some of the economists stated their view that customers who may desire to coordinate their behavior as sellers can use conditional pricing programs from their suppliers to ensure that the input costs are comparable, which can reduce competition among retailers. For example, the conditional pricing program may ensure that no retailer switches over from the dominant supplier to the new entrant with a lower cost product. Keeping the customers from switching to the new entrant may make it easier to achieve or maintain coordination.

Relevance of cost based tests. The panel addressed cost-based safe harbors in great detail, with most of the economists opining that they were simply not helpful. The issue is whether conditional pricing programs that result in a product being sold “above cost” should fit within a safe harbor.

Legal background. This discussion starts with the Supreme Court’s Brook Group case, which found that above cost pricing cannot create liability under a predatory pricing theory. In cases involving bundled /multiproduct discounts, there has been a circuit split with the Third Circuit (LePage’s) allowing liability even if prices are above costs, and the Ninth Circuit (Peace Health) holding that above [...]

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FTC’s Reporting Rule for Pharmaceutical Patent Transfers Upheld

by Daniel Powers | Jun 4, 2014 | FTC Developments, IP Antitrust

On May 30, 2014, the U.S. District Court for the District of Columbia ruled in favor of the Federal Trade Commission (FTC) in a dispute with the Pharmaceutical Research and Manufacturers of America (PhRMA) regarding the Commission’s authority to require the pharmaceutical industry to report certain transfers of exclusive patent rights under the Hart-Scott-Rodino (HSR) Act.

The dispute centered on a Final Rule promulgated by the FTC in November 2013. Patents are considered assets by the FTC and their transfer may be reportable. Some transactions provide for the transfer of certain exclusive patent rights without implicating the transfer of the patent in its entirety. The FTC maintains that the exclusive right to commercially use all or part of a patent is, in substance, identical to a full acquisition of the patent. The challenged rule was intended to clarify the circumstances when a transfer of exclusive rights to a pharmaceutical patent is considered a potentially reportable acquisition of an asset under the HSR Act.

PhRMA sued to have the new rule set aside. PhRMA contended in its complaint that the FTC lacked the statutory authority to issue rules that target a single industry, as opposed to rules of general effect. The trade organization also contended that the FTC failed to establish a rational basis for an industry-specific rule and that it failed to comply with legally required procedures in instituting the rule. PhRMA and the FTC both filed motions for summary judgment.

In granting summary judgment to the FTC, Judge Beryl Howell agreed that Congress had never spoken in the HSR Act to the specific issue of whether the FTC was authorized to issue industry-specific rules: “Nothing in this text restricts the FTC to generating only general rules rather than industry specific rules.” Given the congressional silence on this specific question, the court next considered whether the FTC’s interpretation of the statue was a permissible one. Under the applicable legal standard, an agency’s rule is entitled to deference “as long as it is a permissible construction of the statute.” The FTC contended that the Final Rule did not expand “‘HSR requirements to parties or transactions not covered by the Act,’ but ‘simply clarif[ied] the types of transactions that constitute asset transfers for which the Act requires prior notification.’” The court concluded this was a permissible construction of the authority granted to the FTC under the HSR Act.

FTC and DOJ Release FY 2013 HSR Annual Report

by Emily Townsend | May 27, 2014 | DOJ Developments, FTC Developments

On May 21, 2014, the Federal Trade Commission (FTC) and Department of Justice (DOJ) released the Hart-Scott-Rodino Annual Report covering Fiscal Year (FY) 2013 (October 1, 2012 – September 30, 2013). The report describes key merger enforcement actions over the past year and provides interesting data regarding the agencies’ antitrust enforcement activity.

Specifically, the report indicates that in FY 2013, 1,326 transactions were reported under the Hart-Scott-Rodino (HSR) Act, representing an approximate 7 percent decline in reported transactions from FY 2012. The FTC was granted clearance to investigate 145 of these transactions, while the DOJ was granted clearance to investigate 72 transactions. Of the 145 transactions the FTC investigated in FY 2013, it only issued 25 second requests. In other words, the FTC only issued second requests in 17.2 percent of its investigations in FY 2013. The DOJ’s Antitrust Division, on the other hand, issued second requests in 22 of the 72 transactions it was granted clearance to investigate (i.e., 30.6 percent of its investigations).

However, of the FTC’s 25 second requests in FY 2013, it brought 23 merger enforcement actions. That is, the FTC brought enforcement actions in more than 90 percent of the transactions for which it issued a second request in FY 2013. The DOJ’s Antitrust Division brought only 15 merger enforcement actions in FY 2013, or just under 70 percent of the transactions for which it issued a second request (15 out of 22).

This information can be a helpful tool to assist clients in evaluating their chances before the merger enforcement agencies at various stages of the HSR notification process. While the FTC and DOJ together only investigated 217 transactions in FY 2013, most of those investigations were brought by the FTC. Furthermore, the agencies’ decisions to issue second requests made it increasingly likely that they would bring enforcement actions to block or unwind the transactions, particularly with respect to the FTC.

Perspectives from the Federal Antitrust Enforcement Agencies

by Ashley Fischer, Michelle Lowery and Stephen Wu | May 20, 2014 | DOJ Developments, FTC Developments, Healthcare Antitrust

At the recent Antitrust in Health Care conference in Arlington, Virginia, representatives from the Federal Trade Commission and U.S. Department of Justice Antitrust Division discussed important health care and antitrust topics. Speakers stressed that the Affordable Care Act is not an opportunity for anticompetitive consolidation and conduct. Providers and payers alike should continue to analyze every acquisition, collaborative arrangement, contract or unilateral action under the traditional framework of antitrust law.

Please click here to read the full article.

FTC Asks Court to Reverse Payment Decision

by Emily Townsend | May 12, 2014 | FTC Developments, IP Antitrust

On May 2, 2014, the Federal Trade Commission (FTC) filed an amicus brief with the U.S. Court of Appeals for the Third Circuit requesting that the court reverse the district court’s decision in Lamictal Direct Purchaser Antitrust Litigation, finding that a “no authorized generic” agreement between branded and generic drug makers does not qualify as a “payment,” and is therefore not an antitrust violation. Such agreements arise in patent settlements when a branded drug maker agrees to not issue its own authorized-generic alternative when the generic company begins to compete.

The FTC has taken the position that the “no authorized generic” agreements are akin to reverse payment settlements. In FTC v. Actavis, Inc., the Supreme Court clarified that reverse payment settlements can violate the antitrust laws and are to be reviewed under the rule of reason. In a reverse payment settlement, the branded drug maker pays the generic drug maker to drop its patent claim and not sell the generic drug.

In the Lamictal case, the issue in question was what constituted a payment and therefore, what types of settlements are considered to be subject to antitrust scrutiny. On one hand, the FTC holds the position that a “no authorized generic” agreement is valuable compensation to the generic drug maker in exchange for abandoning a patent challenge. The FTC is concerned that unless “no authorized generic” agreements are subject to antitrust laws, drug makers will simply avoid Actavis by structuring patent settlements to exclude cash payments.

The district court, on the other hand, found that a “no authorized generic” agreement is not a cash or other payment that would make the settlement subject to antitrust scrutiny. One of the primary concerns of classifying this type of agreement as a payment is that nearly all patent settlements include valuable compensation for a party, so almost every patent settlement would raise concerns that the agreement is anticompetitive.

DOJ and FTC to Hold Conditional Pricing Practices Public Workshop

by Emily Townsend | May 9, 2014 | DOJ Developments, FTC Developments

The U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC) announced on Tuesday, May 6, that the agencies will jointly hold a public workshop on June 23, 2014, to consider the economic effects and antitrust law treatment of conditional pricing arrangements.

Conditional pricing arrangements, such as loyalty discounts or bundled product discounts, are programs through which a seller may discount prices based upon a buyer purchasing specific volumes of or combinations of products. Loyalty discounts are practices by which a seller charges a buyer a lower price for purchasing a certain volume of a product or products. In bundling, another common pricing arrangement, a seller may offer several products for sale as one combined product, often charging less for the combined product than the sum of the prices of the component products.

Courts have been concerned that loyalty discounts and bundled discounting could be anticompetitive if utilized to exclude competitors from a market or to facilitate a predatory pricing scheme.

Despite these concerns, loyalty discounts and product bundling can also be procompetitive. Both programs can produce efficiencies. For example, by selling a greater volume of products or certain products together, a firm may reduce shipping or marketing costs. Further, these practices decrease prices through discounts, and courts have long recognized that “cutting prices to increase business often is the very essence of competition.”

No clear legal standard has been established for determining which conditional pricing arrangements are anticompetitive. For loyalty discounts, courts have attempted to articulate a standard by evaluating the economic theory that loyalty programs can facilitate exclusive dealing or predatory pricing schemes. For bundled discount practices, courts are split among three different legal standards, and a fourth was recommended by the Antitrust Modernization Commission in 2007.

The agencies have welcomed the public to submit comments on conditional pricing practices on its website. Comments are being accepted through August 22, 2014.

Patent Enforcement Protected by First Amendment?

by Michelle Lowery | Apr 24, 2014 | FTC Developments, IP Antitrust

After receiving a draft complaint and a stipulated order from the Federal Trade Commission (FTC) banning its allegedly deceptive letters to infringers of its scanning technology, MPHJ Technology Investments LLC (MPHJ) filed suit against the FTC in the Western District of Texas, alleging violations of the First Amendment. The complaint alleged that the FTC’s investigation prevented MPHJ from its government-granted right to enforce its patent, a form of free speech under the Bill of Rights. On March 28, 2014, the FTC filed a motion to dismiss the complaint, and MPHJ filed its response on April 18, 2014.

The FTC argued in its motion to dismiss that the controversy was not ripe for suit because there had been no final agency action, that MPHJ was not immune from suit because patent enforcement activity is not protected by the First Amendment and that the FTC is not looking to prevent MPHJ from sending letters, only looking to prevent the deceptive statements within those letters.

MPHJ contended in its response that the FTC’s draft complaint was a sufficient “credible threat” of suit to make the case ripe for adjudication. MPHJ’s patent enforcement conduct included a threat to sue the alleged infringers, and it was this conduct, in part, that was subject to the FTC investigation and also protected by the First Amendment. MPHJ argued that in order to sue it under Section 5 of the FTC Act, the FTC must overcome the First Amendment protection for plaintiffs in a lawsuit from allegations of misconduct related to bringing that suit, which applies unless the suit brought was “objectively baseless.” MPHJ argued that the FTC has not overcome the burden of showing objective baselessness, because in its investigation of MPHJ’s conduct, it concluded only that the letters threatening to sue infringers were “deceptive.” According to MPHJ, allowing the type of enforcement activity pursued by the FTC would prevent patent holders like MPHJ from threatening to sue infringers. MPHJ further argued that the District of Nebraska entered a preliminary injunction against the attorney general when faced with identical facts.

The case is MPHJ Tech. Inv., LLC v. FTC, case number 6:14-cv-00011, pending before the U.S. District Court for the Western District of Texas.

Terrell McSweeny Confirmed as Fifth FTC Commissioner

by McDermott Will & Emery | Apr 11, 2014 | FTC Developments

10 months after President Obama nominated her, Terrell McSweeny has been confirmed as the fifth FTC commissioner. The vote was 95-1 for McSweeny with David Vitter, a Republican from Louisiana, voting against her nomination.

McSweeny’s confirmation marks the first time in history that four women have served as FTC commissioners at the same time. It also gives the FTC its full complement of commissioners (now three Democrats and two Republicans), which may increase the number of matters that move forward to investigation and may help to resolve matters more quickly. A full panel of commissioners will be key in several upcoming large mergers, including a plan by food distributor Sysco Corp to merge with rival U.S. Foods Inc., and a proposed combination of grocery chains Kroger and Harris Teeter.

Prior to the FTC, Ms. McSweeny served at the DOJ on many high-profile matters such as the Anheuser-Busch InBev NV-Grupo Modelo SAB de CV merger and the merger between American Airlines Inc. and US Airways Group Inc. She also worked on the DOJ’s e-books price-fixing suit against Apple Inc. and its work on the International Trade Commission’s decision to block the import of Apple Inc. products based on Samsung Electronics Co. Ltd.’s standard-essential patents.

Her experience at the DOJ will carry over to the FTC and will likely increase the cooperation between the two agencies. Her prior work at the DOJ in particular, as well as at her former law firm, O’Melveny Myers, gives her experience on an issue the FTC is currently pursuing on patent assertion entities, pay-for-delay arrangements and privacy issues.

Previously, Ms. McSweeny advised three presidential candidates on domestic policy and related matters. In 2008, she worked for Vice President Biden in various capacities including domestic policy issues.

FTC Hosts Public Workshop, “Examining Health Care Competition”

by McDermott Will & Emery, Stephen Wu and McDermott Will & Emery | Mar 26, 2014 | FTC Developments, Healthcare Antitrust

During the last several years, the Federal Trade Commission (FTC) has taken an active role in antitrust enforcement in the health care industry, particularly with respect to hospital and physician group acquisitions. Last week, the FTC held a two-day public workshop to examine new trends and developments in the health care industry related to professional regulations of health care providers, health information technology, new care delivery models, quality measurements and pricing transparency and how those developments may affect competition. Health care providers should anticipate increased FTC scrutiny of these trends and how they affect health care costs, quality, access and care coordination.

Click here to read the full article.

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