Legal Library: Cases and Proceedings

In December 2008, the Commission settled antitrust concerns raised by the proposed $8.9 billion acquisition of Barr Pharmaceuticals by Teva Pharmaceutical Industries. The proposed acquisition would have lessened competition in the markets for 17 commonly used generic medications including drugs used in the treatment of cancer, bacterial infections, diabetes, acid reflux, and depression as well as several varieties of oral contraceptives. According to the Commission’s complaint, the acquisition would have likely led to higher prices for consumers through the removal of one of only four competitors in each of these markets. The Commission’s consent agreement requires both Teva and Barr to sell assets in 29 U.S. markets to either Watson Pharmaceuticals or Qualitest Pharmaceuticals.

The Commission challenged the conduct of AllCare IPA, alleging that AllCare restrained competition in fee-for-service contracts by fixing prices and other contract terms with payers, engaging in collective negotiations over the terms and conditions of dealing with payers, and preventing group members from negotiating with payers except on terms approved by All Care. The Commission issued a consent order prohibiting All Care from entering into agreements between or among physicians: 1) to negotiate on behalf of any physician with any payer; 2) to refuse to deal, or threaten to refuse to deal, with any payer; 3) to designate the terms, conditions, or requirements upon which any physician deals, or is willing to deal, with any payer, including, but not limited to price terms; 4) not to deal individually with any payer, or not to deal with any payer through any arrangement other than one involving All Care.

In late 2008, the Commission issued a consent order to restore competition in the market for oral long-acting opioids (LAOs). The FTC intervened in King Pharmaceutical’s proposed $1.6 billion acquisition of rival drug-maker Alpharma Inc. because the transaction would have joined the two leading producers of morphine sulfate oral LAO’s in the United States, a market which was already highly concentrated and which had annual sales of $4 billion in 2007. In order to maintain competition in the market, the Commission’s consent order requires King to divest its Kadian business to Actavis, a company which already manufactured the drug for King, and which could then produce a generic equivalent of the drug sooner than would have been permitted under King’s patent, which would not have expired until 2010.

In order to restore competition in the U.S. market for consumer pregnancy tests, the Commission effectively reversed a consummated transaction in which Inverness Medical Innovations, a 70% market share holder, purchased the assets related to the development of a water-soluble dye based pregnancy test from ACON Laboratories in order to protect its monopoly power in the market. According to the Commission’s complaint, Inverness restrained competition in two ways. First, Inverness issued covenants not to compete to ACON, took profits from ACON’s joint venture with Church & Dwight, and purchased intellectual property rights which would restrict ACON from developing competing products. Second, Inverness limited product innovation by purchasing, but not using, the water-soluble dye test technology purchased from ACON, one of the only companies utilizing that technology. The Commission’s consent order ended any restrictions Inverness had over the joint venture between ACON and Church & Dwight, and required that Inverness divest its assets relating to the water-soluble dye technology, and its related pregnancy test product.

In October of 2008, the Commission issued a consent order to settle charges that Golf Galaxy, a subsidiary of Dick’s Sporting Goods Inc., entered into an illegal agreement with Golf Canada to allocate the market for golf merchandise in the United States and Canada. The agreement barred Golf Canada from opening stores in the United States in exchange for privileged business information from Golf Galaxy, including blueprints, merchandising plans, and sales reports. The Commission’s consent order prevents Golf Galaxy from further dividing or allocating the market, and rendered its 2004 non-compete agreement with Golf Canada unenforceable.

In August 2006, the FTC approved a final consent order relating to the proposed $14.4 billion acquisition of the BOC Group by Linde requiring Linde to divest Air Separation Units (ASUs), bulk refined helium assets, and other assets in eight localities across the United States. The consent order aims to maintain competition in the markets for liquid oxygen, liquid helium, and bulk refined helium in several U.S. markets.

The Commission charged that Agrium, Inc.’s $2.65 billion proposed acquisition of UAP Holding Corporation would substantially lessen competition in the market for the retail sale of bulk fertilizer and, in some cases, related services by farm stores, in several local markets in Michigan and Maryland. The Commission’s order requires the divestiture of seven farm stores, five UAP stores in Michigan, and two Agrium locations on the eastern shore of Maryland.

The Commission challenged Fresenius Medical Care’s proposed purchase of an exclusive sublicense for the manufacture and supply of the drug Venofer to US dialysis clinics from Daiichi Sankyo Company. Venofer is an intravenously administered iron sucrose preparation used primarily to treat iron-deficiency anemia in dialysis patients with chronic kidney disease. The agreement would have given Fresenius, the largest operator of dialysis clinics in the country, the ability to artificially inflate its internal costs for Venofer, and effectively increase Medicare reimbursement payments for all buyers of the drug. In order to settle these concerns about anticompetitive self-dealing, the Commission issued a consent order restricting Fresenius from reporting internally inflated Venofer prices by mandating that the current market price for the drug be used in reporting the average selling price to Medicare.

The Commission challenged Pernod Ricard SA’s proposed $9 billion acquisition of V&S Vin & Spirit as harmful to competition among suppliers of “super-premium” vodka. The proposed deal would have merged the two leading brands, Absolut and Stolichnaya, and allowed Pernod to raise prices profitably on both brands. Additionally, the complaint alleges that the markets for cognac, domestic cordials, coffee liqueur, and popular gin would be subject to anticompetitive effects because sensitive pricing and promotion information for Beam Global Brands, a competitor in these product markets, would be available to Pernod after the acquisition as a result of Beam’s joint venture with V&S. The Commission settled the charges by requiring Pernod to divest its distribution interests in Stolichnaya Vodka, and to erect a firewall to prevent the sharing of any competitively sensitive information from Beam Global Brands with Pernod employees.

The Commission charged that Negotiated Data Solutions LLC (N-Data) violated Section 5 of the FTC Act by engaging in unfair methods of competition. N-Data acquired patent rights originally held by National Semiconductor Corp. which were included in an IEEE industry standard for autonegotiation technology, which allows Ethernet devices made by different manufacturers to work together. Ethernet is a computer networking standard that is used in nearly every computer sold in the U.S. N-Data reneged on National Semiconductor’s commitment to charge a one-time royalty of $1000 to manufacturers or sellers of products using the IEEE standard, and demanded higher royalties from users. In a consent agreement resolving the charges, N-Data must stop enforcing the patents at issue unless N-Data has first offered a license under the original terms.

The Commission challenged the proposed acquisition by Carlyle Partners IV, L.P. of INEOS Group Ltd., alleging that the deal would be anticompetitive in the highly concentrated Midwestern market for sodium silicate. Sodium silicates are used in detergents and other products, and are important chemicals used by the pulp and paper industry. The acquisition would have joined market leader PQ Corporation, which is owned by Carlyle, with INEOS, the third-largest sodium silicate provider. Under the Commission’s order, Carlyle must divest PQ’s sodium silicate plant in Utica, Illinois, and all associated intellectual property required to operate the plant to Oak Hill Company within five days of consummating the transaction.

The Commission charged that Sun Pharmaceutical Industries Ltd’s proposed acquisition of Taro Pharmaceuticals Industries, Ltd would substantially reduce competition, likely resulting in higher prices for three distinct generic formulations of the anticonvulsant drug carbamazepine, used widely as an antiepileptic and to prevent and control seizures. The proposed deal would have reduced the number of drug suppliers to a level where the number of competitors has a direct and substantial impact on prices. In order to remedy these concerns, Sun agreed to divest all of its rights and assets needed to develop three generic forms of carbamazepine: 1) immediate-release tablets; 2) chewable tablets; and 3) extended-release tablets.

The Commission challenged McCormick & Company’s $605 million acquisition of Lawry’s and Adolph’s brands of seasoned salt products from Unilever N.V., alleging that the transaction would be detrimental to competition in the highly concentrated U.S. market for seasoned salts. According to the Commission’s complaint, the proposed deal would combine the two companies that comprise almost the entire $100 million market for seasoned salt, increasing the likelihood that McCormick would be able unilaterally to increase prices. McCormick agreed to divest its Season-All business to Morton, an FTC approved buyer, within 10 days of completing the acquisition.

The Commission challenged Flow International Corporation’s proposed $109 million acquisition of rival waterjet manufacturer OMAX Corporation. Both corporations develop, manufacture, and sell computerized waterjet cutting systems which use pressurized water mixed with abrasive garnet particles to cut various materials, including steel and stone. The proposed acquisition would have united the two largest competitors in the market for the manufacture and sale of computerized waterjet cutting systems and allowed Flow to exercise market power and increase prices. Furthermore, the Commission charged that entry would be very unlikely because OMAX received two broad patents relating to the control systems for waterjet cutting systems. The Commission approved a consent agreement requiring OMAX to grant any request for a royalty-free license for its controller patents.

The Commission challenged a series of acquisitions by TALX Corporation, a fully owned subsidiary of Equifax, Inc., that lessened competition in the markets for outsourced unemployment compensation management (UCM) and verification of income and employment (VOIE) services. Unemployment compensation management services consist of the administration of unemployment compensation claims filed with a state or territory. Verification of income and employment services consists of providing income and employment information on behalf of employers to third parties, such as lenders or other creditors. According to the Commission’s complaint, TALX’s series of acquisitions from 2002 to 2005 substantially reduced competition in the nationwide provision of VOIE services and in the provision of outsourced UCM services, and enhanced TALX’s ability to unilaterally increase prices and decrease the quality of its services. Under the Commission consent order designed to restore competition, TALX agreed to allow certain customers terminate their agreements and give notice to the FTC before acquiring, or entering a management contract with, a UCM or VOIE service provider.

Under the terms of the proposed consent order, the Missouri Board of Embalmers and Funeral Directors agreed to settle charges that it deterred competitive entry in the retail sale of caskets by adopting a rule that only licensed funeral directors could sell caskets to consumers on an at-need basis. Under the proposed settlement, the Board is required to communicate to the public that it is not necessary to obtain a license from the Board to offer for retail sale caskets and other funeral merchandise to customers in Missouri.

The consent order settled charges that Service Corporation International’s (SCI) proposed acquisition of Alderwoods Group Inc. would likely lessen competition in 47 markets for funeral or cemetery services, leaving consumers with fewer choices and the prospect of higher prices or reduced levels of service. Under the settlement, SCI must sell funeral homes in 29 markets and cemeteries in 12 markets across the United States. In six other markets, SCI must sell certain funeral homes that it plans to acquire or end its licensing agreements with third-party funeral homes affiliated with SCI.

Nine West Group Inc. settled charges that it entered into agreements with retailers; coerced other retailers into fixing the retail prices for their shoes; and restricted periods when retailers could promote sales at reduced prices. The order, which lasts 20 years, prohibits Nine West from fixing the price at which dealers may advertise, promote or sell any product. Nine West is one of the country’s largest suppliers of women’s shoes. In 2008, Nine West petitioned to have the order modified in light of the 2007 Supreme Court decision, Leegin v. PSKS, Inc., which eliminated the per se rule for minimum resale pricing agreements.   The Commission modified the order in part to allow Nine West to enter into resale price maintenance agreements that do not unreasonably restrict competition, and requiring Nine West to provide periodic reports of any RPM agreements with retailers.

The FTC challenged a group boycott between two Connecticut chiropractic associations in which the health care providers refused to deal with a cost-saving Connecticut health plan. The Commission issued a consent order ending the agreement and preventing the involved parties from entering into such agreements in the future.

Multiple Listing Service, Inc. (MLS), a group of real estate professionals based in Milwaukee, Wisconsin, settled charges that its rules unreasonably restrained competition among real estate brokers in Milwaukee.  The complaint alleges that MLS acted anticompetitively by adopting rules and policies that limit the publication and marketing of certain sellers’ properties, but not others, based solely on the terms of their respective listing contracts. The Commission alleged that the rules were collusive and exclusionary and served to withhold valuable benefits of the MLS from brokers who did not use traditional listing contracts with their customers.  Under the terms of the December 2007 consent, MLS is barred from adopting or enforcing any rule that treats one type of real estate listing agreement more advantageously than any other, and from interfering with the ability of its members to enter into any kind of lawful listing agreement with home sellers.