ANTITRUST ALERT
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
Monopolization/Abuse of Dominance
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Federal Court Opinion Reminds Health Care Providers to Assess the Antitrust Risks of Competitor Affiliations

by and | Mar 4, 2019 | , ,

The Attorney General of the State of Washington (the State) scored another victory last week in its federal antitrust challenge to Franciscan Health System’s (Franciscan) affiliations with two competing physician practices, Washington v. Franciscan Health System, Case No. C17-5690 (W.D. Wa.), pending in the United States District Court for the Western District of Washington. Specifically, the district court ruled that Franciscan cannot assert as an affirmative defense that its affiliations are legal because the competing physician practices with which it affiliated would have been financially weakened without them.

WHAT HAPPENED
  • The Washington case arises out of two transactions that Franciscan and the Franciscan Medical Group (FMG) entered with competitors in the Kitsap Peninsula immediately west of Seattle, one of which was with The Doctors Clinic (TDC), a 54-physician practice.
  • After reviewing Franciscan’s contractual relationship with TDC, the district court ruled in an Order granting the State’s Motion for Partial Judgment on the Pleadings that the Defendants cannot assert the so-called “weakened competitor” defense. The court held that whether TDC was financially weak absent Franciscan’s affiliation can be evidence at trial under certain circumstances, but is not an affirmative defense justifying what is otherwise allegedly illegal price-fixing.
  • This decision comes on the heels of a prior decision in July 2018 in which the district court struck the defendants’ related affirmative defense that TDC was a “failing company.”
WHAT THIS MEANS
  • Together, the district court’s decisions indicate that parties entering affiliations without a complete unity of economic interests should be wary of relying on arguments or defenses that can carry greater weight in the merger context. The only way to defeat a price- or wage- fixing claim on the pleadings is to show either that 1) the parties achieved sufficient unity of economic interests to be considered one entity for antitrust purposes, or 2) the complaint did not sufficiently allege any agreement to restrain trade.
  • Health care providers should be careful to comply with the antitrust laws even in situations where the parties believe an affiliation will result in real benefits for patients, efficiencies, higher quality of care or other improvements specific to the health care industry. These factors play no role when providers have engaged in price- or wage-fixing—for example, through joint payor contracting or jointly implementing employee salaries—without having achieved a full unity of economic interests.


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THE LATEST: FTC’s New “Technology Task Force” Has Broad Mandate Including Review of Consummated Transactions

by and | Mar 1, 2019 | , , , ,

The US Federal Trade Commission’s (FTC) Bureau of Competition announced the launch of a new Technology Task Force that will investigate anticompetitive conduct, review past transactions, as well as contribute to pending merger reviews. The FTC’s investigation of consummated transactions will not be limited to large transactions that meet the HSR filing thresholds, but will also include so-called “non-reportable” transactions. The launch of this task force along with the ongoing FTC Hearings on Competition and Consumer Protection in the 21st Century is further evidence of US antitrust enforcers’ increasing focus on the technology sector.

WHAT HAPPENED:
  • On February 26, the FTC’s Bureau of Competition announced the creation of a Technology Task Force dedicated to monitoring competition in US technology markets. The mandate is expansive allowing for investigations of anticompetitive conduct, mergers and industry practices.
  • Importantly, the task force is not only charged with aiding in the review of prospective mergers, but also investigating consummated mergers of any size. For consummated mergers, the task force has the authority to reconsider prior matters and seek the full set of remedies (e.g., divestiture, licensing, etc.) that would be available during the review of a prospective transaction.
  • Patricia Galvan, currently the Deputy Assistant Director of the Mergers III Division, and Krisha Cerilli, currently Counsel to the Director, will lead the task force. Their team includes approximately 17 existing staff attorneys with experience in complex technological markets such as online advertising, social networking and mobile operating systems.
  • Bureau of Competition Director Bruce Hoffman explained that “by centralizing [the FTC’s] expertise and attention, the new task force will be able to focus on these markets exclusively—ensuring they are operating pursuant to the antitrust laws, and taking action where they are not.”
WHAT THIS MEANS:
  • The launch of the Technology Task Force together with the ongoing FTC Hearings on Competition and Consumer Protection in the 21st Century highlights the FTC’s and DOJ’s increasing focus on maintaining “free and fair competition” in the technology sector.
  • FTC Chairman Joseph Simons’s prior work at the FTC involved launching the Merger Litigation Task Force, which focused on hospital merger retrospectives, and sharpened the FTC’s approach in challenging health care transactions. This appears to be a similar move to sharpen the FTC’s knowledge and approach, but now directed at the technology sector.
  • Technology companies that have recently completed mergers should take care not to draw scrutiny from antitrust enforcers.
  • Typically, investigations of consummated transactions and anticompetitive conduct will begin with a review of publicly available materials before burdening targets with compulsory process and seeking information from customers, competitors and industry experts.
    • Upon receiving information requests from the FTC, targets of the investigations should engage quickly to understand the scope and focus of the investigation. An information request likely means the FTC investigation has progressed beyond the initial phase.
    • Industry participants (competitors, customers) could also receive significant information associated with FTC investigations. Those parties should also engage with the FTC quickly to jointly develop a reasonable plan for addressing [...]

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Annual EU Competition Review 2018

by | Feb 21, 2019 | , , , , , ,

McDermott’s Annual EU Competition Review summarizes key developments in EU competition rules. During the previous year, several new regulations, notices and guidelines were issued by the European Commission. There were also many interesting cases decided by the General Court and the Court of Justice of the European Union. All these new rules and judicial decisions may be relevant for your company and your day-to-day practice.

In our super-connected age, we can be inundated by information from numerous sources and it is difficult to select what is really relevant to one’s business. The purpose of this review is to help general counsel and their teams to be aware of the essential updates.

This review was prepared by the Firm’s European Competition Team in Brussels, Paris and Germany.

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THE LATEST: DOJ Announces Settlement with Carolinas Health System (Atrium Health) After Two Years of Litigation

by , , and | Nov 20, 2018 | , ,

The Department of Justice (DOJ) announced last week that it and the State of North Carolina have reached a settlement with Carolinas Healthcare System / Atrium Health relating to provisions in contracts between the health system and commercial insurers that allegedly restrict payors from “steering” their enrollees to lower-cost hospitals. The settlement comes after two years of civil litigation, and serves as an important reminder to hospital systems and health insurers of DOJ’s continued interest in and enforcement against anti-steering practices.

WHAT HAPPENED:
  • On June 9, 2016, the DOJ and the State of North Carolina filed a complaint in the Western District of North Carolina against the Charlotte-Mecklenburg Hospital Authority, d/b/a Carolinas Healthcare System, now Atrium Health (Atrium).
  • In its complaint, DOJ accused Atrium of “using unlawful contract restrictions that prohibit commercial health insurers in the Charlotte area from offering patients financial benefits to use less-expensive health care services offered by [Atrium’s] competitors.”
  • DOJ alleged that Atrium held approximately a 50 percent share of the relevant market and was the dominant hospital system in the Charlotte area. DOJ defined the relevant product market as the sale of general acute care inpatient hospital services to insurers in the Charlotte area.
  • DOJ alleged that Atrium used market power to negotiate high rates and impose steering restrictions in contracts with insurers that restrict insurers from providing financial incentives to encourage patients to use comparable lower-cost or higher-quality providers. Such financial incentives include health plan designs that charge consumers lower out-of-pocket costs (such as copays and premiums) for using top-tier providers that offer better value, or for subscribing to a narrow network of providers.
  • Atrium also allegedly prevented insurers from offering tiered networks with hospitals that competed with Atrium in the top tiers, and imposed restrictions on insurers’ sharing of value information with consumers about the cost and quality of Atrium’s health care services compared to its competitors. These “steering restrictions” allegedly reduced competition and resulted in harm to consumers, employers, and insurers in the Charlotte area.
  • Atrium allegedly included these steering restrictions in its contracts with the four largest insurers who in turn provide coverage to more than 85 percent of commercially insured residents in the Charlotte area.
  • On March 30, 2017, the court denied Atrium’s motion for judgment on the pleadings, finding that the government met its initial pleading burden. Atrium had argued that the complaint failed to properly allege that the contract provisions actually lessened competition or lacked procompetitive effects.
  • More than a year later, on November 15, 2018, DOJ announced that the State of North Carolina and DOJ had reached a settlement with Atrium, which prohibits Atrium from continuing its practices of using alleged steering restrictions in contracts with commercial health insurers. The proposed settlement also prevents Atrium from “taking actions that would prohibit, prevent, or penalize steering by insurers in the future.” The agreement lists certain prohibitions and permissions for Atrium; for example, that Atrium [...]

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Antitrust M&A Snapshot

by , and | Nov 7, 2018 | , , , , ,

United States: July – September 2018 Update

Both US antitrust agencies marked the third quarter of 2018 with significant policy announcements regarding the merger review process. The announced reforms seek to expedite the review process through cooperation between the agencies and the merging parties. Moving first, the Federal Trade Commission (FTC) revealed a Model Timing Agreement that provides the FTC Staff with earlier notice of the parties’ intent to substantially comply with a Second Request. Earlier notice allows the FTC Staff to create a more effective timeline for meetings with division management, front office staff and the Commissioners. Less than two months after the FTC revealed its Model Timing Agreement, the Antitrust Division of the US Department of Justice (DOJ) announced procedural reforms aimed at resolving merger investigations within six months of filing. The DOJ will commit to fewer custodians and depositions in exchange for the merging parties providing key information earlier in the investigation. Overall, these reforms appear to be a positive step forward for parties considering future transactions, but their effectiveness remains uncertain as the agencies start a difficult implementation period. While the FTC timing agreement may provide more certainty around the process, it does not reduce the review timing and actually extends it.

EU: July – September 2018 Update

The European Commission (EC) remained quite active clearing mergers in the third quarter of 2018. Most notably, the EC cleared Apple’s acquisition of Shazam without imposing conditions despite the EC’s stated concerns about access to data as a competitive concern. The EC opened a Phase II investigation into the transaction to investigate the potential for Apple to obtain a competitive advantage over competing music streaming services by accessing Shazam’s consumer data obtained through its music recognition services. In this case, the EC did not find evidence that the access to Shazam’s data would provide Apple a competitive advantage. In addition, the EC found that there were no concerns about Apple potentially restricting Shazam as referral source for Apple’s competitors. Going forward, it is clear that access to data is an issue that the EC will continue to investigate, but it is also clear that the EC is taking a careful approach in assessing when that access will truly lead to a competitive harm.  (more…)



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Antitrust M&A Snapshot

by , and | Aug 6, 2018 | , , , , ,

United States: April – June 2018 Update

The second quarter of 2018 ushered in a trial defeat for the US Department of Justice (DOJ) and the beginning of a new era at the Federal Trade Commission (FTC). In June, Judge Richard J. Leon of the US District Court for the District of Columbia denied the DOJ’s requested injunction of the AT&T/Time Warner acquisition. The case marked the first litigated vertical challenge by the Antitrust Division in nearly 40 years. DOJ filed a notice of appeal of the district court’s decision. At the FTC, four new commissioners were sworn in in May, with a fifth to join upon the approval of current commissioner Maureen Ohlhausen to the US Court of Federal Claims. With the transition nearly complete, new FTC Chairman Joseph Simons announced plans to re-examine and modernize the FTC’s approach to competition and consumer protection laws, possibly charting a new course for FTC antitrust enforcement.

EU: April – June 2018 Update

In this quarter, we saw two significant developments concerning the issue of gun-jumping. First, the Court of Justice of the European Union (CJEU) clarified the scope of the gun-jumping prohibition, ruling that a gun-jumping act can only be regarded as the implementation of a merger if it contributes to a change in control over the target. Second, the European Commission (EC) imposed a €124.5 million fine on Altice for having breached the notification and the standstill obligations enshrined in the EUMR by gun-jumping. The EC also issued two clearance decisions following Phase II investigations in the area of information service activities and the manufacture of basic metals. (more…)



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China to Consolidate Antitrust Law Enforcement Power

by | Mar 20, 2018 | , ,

The Chinese government announced on March 13, 2018, that it will consolidate the duties of three competition agencies into a new government agency to handle all antitrust matters. While it is too early to tell how this reorganization will impact China’s review of transactions and conduct cases, we believe that this change could lead to greater consistency and potentially more experienced attorneys reviewing competition matters.

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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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French Competition Authority Fines a Pharmaceutical Laboratory EUR 25 Million for Anti-Generic Practices

by and | Jan 4, 2018 | , ,

On 20 December 2017, the French Competition Authority (the FCA) imposed a EUR 25 million fine on a pharmaceutical laboratory, for delaying entry onto the market of the generic version of Durogesic, and for hindering its development through a disparagement campaign.

No public version of the decision is available yet, nonetheless the FCA has already published a detailed press release (available in French).

WHAT HAPPENED

Durogesic is a powerful opioid analgesic, which active substance is fentanyl, usually prescribed in the form of transdermal patch for the treatment of severe pain, including chronic cancer pain. In 2007, a competing pharmaceutical company launched its generic equivalent. (more…)



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Significant Fine Imposed by the French Competition Authority in Floor Coverings Cartel

by and | Oct 25, 2017 | , , , ,

On October 19, 2017, the French Competition Authority (the “FCA”) imposed a EUR 302 million fine on the three leading companies in the PVC and linoleum floor coverings sector; Forbo, Gerflor and Tarkett, as well as the industry’s trade association, SFEC (Syndicat Français des Enducteurs Calandreurs et Fabricants de Revêtements de Sols et Murs), for price-fixing, sharing commercially sensitive information, and signing a non-compete agreement relating to environmental performance advertising.

The FCA said the significant fine reflected the gravity of the offence and the long duration of the anticompetitive behavior, which for one company lasted 23 years.

WHAT HAPPENED

The proceedings were originally initiated by unannounced inspections carried out in the floor coverings industry in 2013 by the FCA, acting on information submitted by the DGCCRF (Directorate General for Competition Policy, Consumer Affairs and Fraud Control), which resulted in the discovery of three distinct anticompetitive practices.

Price-fixing

The FCA found that the three main manufacturers of floor coverings in France met secretly at so-called “1, 2, 3” meetings, from October 2001 to September 2011, at hotels, on the margins of official meetings of the SFEC or through dedicated telephone lines, in order to discuss minimum prices and price increases for their products. The manufacturers also entered into agreements covering a great deal of other sensitive information, such as the strategies to adopt with regard to specific customers or competitors, organization of sales activities and sampling of new products.

Confidential information exchange via the trade association

The FCA found that from 1990 until the start of the FCA’s investigations in 2013, Forbo, Gerflor and Tarkett also exchanged, in the context of official meetings of the SFEC, very precise information relating to their trading volumes, revenues per product category and business forecasts. In its decision, the FCA also raised the active role played by the SFEC, supporting companies in their conduct.

Non-compete agreement relating to environmental performance advertising

The three main manufacturers of floor coverings in France, together with the trade association, also signed a ‘non-compete’ agreement which prevented each company from advertising the individual environmental performance of its products. The FCA considered that this agreement may have acted as a disincentive for manufacturers to innovate and offer new products, earmarked by better environmental performance, compared to the products offered by their competitors.

Neither the manufacturers nor the trade association disputed the facts and all of them sought a settlement procedure. In addition, Forbo and Tarkett, leniency applicants, benefited from fine reductions corresponding to the respective dates they approached the FCA (the sooner, the higher the fine reduction), the quality of the evidence they provided and their cooperation during the investigation.

WHAT THIS MEANS

The FCA’s decision in the floor coverings cartel case has significant impact due to the total amount of the fines imposed which is (i) higher than the aggregate amount of sanctions imposed by the FCA in 2016 (i.e., EUR 202,873,000), and (ii) until now the highest fine imposed by the FCA in 2017, the FCA having imposed a EUR 100 million fine on Engie for abusing its dominant position in the [...]

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