ANTITRUST ALERT
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
Joint Ventures/Competitor Collaboration
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Antitrust M&A Snapshot: April – June 2017 Update

by , and | Aug 3, 2017 | , , , , , , ,

McDermott’s Antitrust M&A Snapshot is a resource for in-house counsel and others who deal with antitrust M&A issues but are not faced with these issues on a daily basis. In each quarterly issue, we will provide concise summaries of Federal Trade Commission (FTC), Department of Justice (DOJ) and European Commission (EC) news and events related to M&A, including significant ongoing investigations, trials and consent orders, as well as analysis on the trends we see developing in the antitrust review process.

Read the full report here.



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THE LATEST: DOJ Price-Fixing Probe Demonstrates That Deal Risk Is Not the Only Antitrust Concern Merging Parties Should Keep in Mind

by | Jun 15, 2017 | , , , ,

Bumble Bee Foods, and two of its senior vice presidents, have recently pled guilty to US Department of Justice (DOJ) charges that they engaged in a conspiracy to fix prices of shelf-stable tuna fish sold in the United States from 2011 to 2013. Bumble Bee agreed to pay a $25 million criminal fine that can increase to $81.5 million under certain conditions, and the company’s two senior vice presidents pled guilty and agreed to pay criminal fines as well. The investigation appears to have been prompted by information that the DOJ uncovered during its investigation of Thai Union Group’s (owner of Chicken of the Sea) proposed acquisition of Bumble Bee, which was abandoned after DOJ concerns.

WHAT HAPPENED:
  • On December 19, 2014, Thai Union Group, the largest global producer of shelf-stable tuna, announced that it had agreed to acquire Bumble Bee Foods for $1.5 billion. A year later, on December 3, 2015, the DOJ announced that the parties had abandoned the transaction after the DOJ expressed concerns that the acquisition would harm competition. The DOJ stated that “Thai Union’s proposed acquisition of Bumble Bee would have combined the second and third largest sellers of shelf-stable tuna in the United States in a market long dominated by three major brands, as well as combined the first and second largest domestic sellers of other shelf-stable seafood products.”
  • Beyond its comments about the potential for competitive harm from the transaction, however, the DOJ further noted that “[o]ur investigation convinced us – and the parties knew or should have known from the get go – that the market is not functioning competitively today, and further consolidation would only make things worse.”
  • It appears that the DOJ’s concerns that the market for packaged seafood was not functioning competitively spurred the government to proceed with an investigation into potential collusion among the suppliers of packaged seafood. After its investigation, the DOJ concluded that Bumble Bee Foods, two of its senior vice presidents, and other co-conspirators “discussed the prices of packaged seafood sold in the United States[,] agreed to fix the prices of those products [and] negotiated prices and issued price announcements for packaged seafood in accordance with the agreements they reached.”
WHAT THIS MEANS:
  • In the Mergers & Acquisitions context, the merging parties are most often concerned with the potential risk that antitrust concerns may pose to the deal and the ability to obtain DOJ or Federal Trade Commission (FTC) clearance for the transaction. This criminal investigation by the DOJ demonstrates that the parties need to be aware of their conduct in the market, whether they have engaged in conduct that may be found to be collusive, and the potential consequences of such conduct [...]

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THE LATEST: Behavioral Remedy Satisfies European Commission in Rolls-Royce’s €720M Agreement to Purchase the Rest of ITP

by | Apr 21, 2017 | , ,

WHAT HAPPENED:
  • Rolls-Royce and SENER have a 47 percent/53 percent joint-venture in Industrial de Turbo Propulsores (ITP)–an aircraft engine components manufacturer.
  • Rolls-Royce, together with ITP, MTU and Safran, are members of a military engine consortium–Europrop International (EPI)–that supplies the engine to the Airbus’ A400M, the primary competitor to the Lockheed Martin C-130J.
  • The European Commission (EC) had concerns that Rolls-Royce’s full ownership of ITP would increase its influence in EPI such that Rolls-Royce could undercut the competitiveness of the EPI engine, and consequently subvert Airbus’ competitiveness vis-à-vis Lockheed Martin.
  • The EC and Rolls-Royce agreed to a behavioral remedy focused on EPI’s governance rules that would eliminate the potential conflict of interest and maintain EPI’s competitiveness. While the EC press release does not provide details, the agreement likely allows MTU and Safran to control the consortium’s decision making.
WHAT THIS MEANS:
  • Antitrust enforcers continue to investigate competitive impacts from vertical transactions.
  • While antitrust enforcers have a strong preference for structural remedies, when addressing vertical competition issues, there is greater potential that enforcers will accept a behavioral fix.
  • Antitrust enforcers continue to focus on antitrust impacts in narrow markets. Here, the remedy is designed to maintain competition between the Airbus A400M and Lockheed Martin’s C-130J – military turboprop transport aircraft.


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Antitrust M&A Snapshot: October – December 2016 Update

by , and | Jan 30, 2017 | , , , , ,

McDermott’s Antitrust M&A Snapshot is a resource for in-house counsel and others who deal with antitrust M&A issues but are not faced with these issues on a daily basis. In each quarterly issue, we will provide concise summaries of Federal Trade Commission (FTC), Department of Justice (DOJ) and European Commission (EC) news and events related to M&A, including significant ongoing investigations, trials and consent orders, as well as analysis on the trends we see developing in the antitrust review process.

Read the full report here.

 



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Model Management Services, Italian Competition Authority Fines 8 Modelling Agencies and Their Trade Association for Price Fixing

by | Nov 14, 2016 | , , ,

On 11 November 2016, the Italian Competition Authority (the Authority) fined eight modelling agencies (B.M. S.r.l. – Brave, D’management Group S.r.l., Elite Model Management S.r.l., Enjoy S.r.l., Major Model Management S.r.l., Next Italy S.r.l., Why Not S.r.l. and Women Models S.p.a.) and their trade association (Assem) of € 4.5 million for alleged price collusion. According to the Authority, the modelling agencies would have agreed on the applicable prices on the market with the aim of avoiding any form of competition. In particular, the alleged price collusion would have concerned all the components of the prices applied to the major maisons and other clients (e.g., fees for models, wages for the modelling agencies and other additional costs). Furthermore, a practical role would have been played by the trade association, Assem, where the modelling agencies had held frequent meetings to develop the alleged concerted practice.

In calculating the fine, the Authority took into account that the alleged conduct took place between 2007 and 2015. Moreover, the Authority granted to Img Italy S.r.l. the full immunity from fines given that it revealed the existence of the alleged conduct. Regarding the European scenario, on 29 September 2016, the French Competition Authority fined the main trade association, SYNAM and 37 modelling agencies of €2.38 million for price fixing. In addition, there is a pending investigation of the Competition and Market Authority into alleged anti-competitive conducts in the model management services in United Kingdom.

Gabriele Giunta contributed to this blog post.



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European Commission Challenges Public Price Announcements by Shipping Liner Companies

by | Oct 20, 2016 | ,

On 7 July 2016, the European Commission adopted a decision accepting commitments by 14 shipping liner companies to change their practices concerning announcements of intended price increases for containerised shipping services. The Commission considered that these announcements were anti-competitive and resulted in higher prices for container liner shipping services, thereby harming customers. (more…)



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Antitrust Enforcement under a Clinton Administration: Status Quo or Significant Change?

by | Oct 10, 2016 | , , , , ,

On Monday, October 3, 2016, Hillary Clinton issued a statement on her website titled “Hillary Clinton’s Vision for an Economy Where our Businesses, our Workers, and Our Consumers Grow and Prosper Together.”

Prior to this statement, there had been some speculation over what a Clinton presidency might bring in terms of antitrust enforcement.

Unlike President Barack Obama, former Secretary Clinton had not issued a clear policy statement on her antitrust position before Monday. She had, however, penned one short op-ed piece for Quartz, and had made some general statements on the campaign trail regarding the problems of industry consolidation. It was unclear from these prior statements whether a Clinton administration would mean any change in the current state of affairs at Department of Justice (DOJ) Antitrust Division and the Federal Trade Commission (FTC). The current administration has challenged a higher percentage of mergers than any administration since before Reagan’s, but it has not significantly altered the law regarding what mergers are considered actionable.

In her Quartz op-ed, Secretary Clinton stated that “we need to fix [the system],” and decried the concentrated markets in the pharmaceutical, airline and telecommunications industries. But Secretary Clinton gave only two concrete examples of how she would “take on the fight” against “large corporations.” (more…)



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General Court of the EU Confirms Fines Imposed on Lundbeck and Generic Drug Manufacturers for Entering into Patent Settlements

by | Sep 22, 2016 | , ,

On 8 September 2016, the General Court of the EU (GCEU) handed down five judgments upholding a decision by the Commission of 19 June 2013 imposing fines on Lundbeck, an originator company, and Merck (the parent company of Generics), Arrow, Alpharma and Ranbaxy, four generic companies. The Commission found that the companies had entered into anticompetitive “pay-for-delay” settlement agreements whereby Lundbeck paid a lump sum to the generic companies in exchange for their agreement to delay their entry on the market for Citalopram, an anti-depressant drug.

This ruling is notable in that it is the first time that the GCEU has been asked to rule on patent settlements between originators and generic companies. The GCEU upheld the Commission’s reasoning, noting that the Commission’s reasoning in this case reflects the provisions of its Guidelines on the application of Article 101 of the Treaty on the Functioning of the EU (TFEU) to technology transfer agreements.

(more…)



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US and EU Requirements for Pre-Merger Notification of an Acquisition of a Minority Shareholding Interest

by and | Aug 31, 2016 | , , , ,

In May, the Federal Trade Commission (FTC) required Hikma Pharmaceuticals PLC to divest its 23 percent interest in Unimark Remedies, Ltd. and its US marketing rights to a generic drug under manufacture by Unimark as a condition to allowing Hikma to complete its acquisition of Roxane Laboratories. The FTC was concerned that Hikma’s continued holding of a 23 percent interest in Unimark after consummation of its proposed acquisition of Roxane would create the incentive and ability for Hikma to eliminate future competition between Roxane and Hikma/Unimark in the sale of generic flecainide tablets (a drug used to treat abnormally fast heart rhythms) in the United States.

The FTC’s divestiture requirement was unusual but not unprecedented. The Horizontal Merger Guidelines identify three theories of competitive harm associated with an acquisition or holding of a small but significant minority interest in a competitor.

  1. Minority ownership, and any associated rights, such as veto rights over the competing firm’s budget or strategic decisions, or representation on its board of directors, may allow the shareholder to forestall, delay or otherwise hamper the competing firm’s further development or marketing of competitive products
  2. The holder of a minority interest in a competing firm has diminished incentives to compete aggressively with the competitor firm because the holder obtains an economic benefit from the success of the competing firm through its partial ownership of that competitor.
  3. The holder of a minority interest in a competing firm may have access to non-public, competitively sensitive information of the competing firm, and thus may be better able to coordinate its business decisions—such as pricing, output, or research and development efforts—with those of the competing firm, thus diminishing competition.

These theories of potential antitrust harm from minority interest acquisitions are not unique to the United States; other competition agencies, including the European Union’s competition directorate, accept and apply these theories when considering the competitive impact of a firm’s actual or proposed partial ownership interest in a competitor. However, the United States applies a significantly lower threshold than the European Union (and other competition agencies) for the pre-acquisition notification of an entity’s acquisition of a minority, non-controlling interest in another firm.

Read the full article here.



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