Antitrust Alert : International Antitrust Attorneys: McDermott Will & Emery Law Firm

by Carla A. R. Hine

Earlier this week, the Federal Trade Commission (FTC) issued its Hart-Scott-Rodino (HSR) report for fiscal year 2012 (FY2012), which summarizes enforcement actions and key statistics regarding number of filings, second requests and challenges.  The press release and a link to the report can be found here.

Filings were relatively flat from 2011 to 2012.  There were fewer second requests and there wasn't a remarkable difference in the overall percentage of filings resulting in second requests (3.9 percent in 2011; 3.5 percent in 2012).  In 2012, the FTC issued more second requests than the U.S. Department of Justice (DOJ).  However, when looking at the number of second requests each agency issued as a percentage of the filings each agency was "cleared" to investigate, the FTC only issued second requests in 14.8 percent of the filings it was cleared to investigate, whereas the DOJ issued second requests in 40.8 percent of filings the agency was cleared to investigate.  Overall, it is hard to read too much into these statistics other than reportable transactions remain steady and there do not seem to be any wild swings in enforcement trends.

The report also notes that of 60 corrective filings (i.e., filings where the parties closed the transaction and later realized they should have filed), two resulted in enforcement actions with civil penalties ($500,000 and $850,000).

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by Jeffrey Brennan and Carrie Amezcua

On Tuesday, the North Carolina legislature has enacted into law, pending the governor's signature, a prohibition on the use of most favored nations (MFN) clauses in contracts between commercial health insurers and providers. 

The two-page bill, titled “Freedom to Negotiate Health Care Rates,” lists "prohibited contract provisions related to reimbursement rates."  The bill prevents a commercial health insurer from prohibiting a health care provider with which it contracts from entering into a contract with another insurer at equal or lower rates.  In addition, insurers are not permitted to require a provider to accept a lower rate from the contracting insurer, or to require a renegotiation of rates, in the event that the provider agrees to provide equal or lower rates to another commercial health insurer.  Next, the bill prohibits an insurer from terminating a provider that agrees to provide services at lower rates to another insurer.  An insurer is also prevented from requiring that a provider charge another commercial health insurer a higher rate.  Finally, insurers can no longer require that providers disclose the provider's contractual rate with another health insurer.  

MFN clauses have been attracting attention in recent years, particularly in the health care field.  North Carolina's bill follows closely on the heels of Michigan's ban on MFN clauses passed in March 2013.  That action led the Department of Justice (DOJ) to file a motion asking the court to dismiss an antitrust suit against Blue Cross Blue Shield of Michigan (BCBSM), in which the DOJ alleged the MFN clauses in BCBSM's contracts with hospitals stifled competition, raised health care costs and harmed consumers.  Ohio has a similar ban on MFN clauses. 

Last year, the DOJ and the Federal Trade Commission (FTC) held a public workshop specifically to discuss the competitive effects of MFN clauses.  The workshop featured panels discussing economic theories concerning MFN clauses and why they are used, and the legal treatment of and industry experiences with MFN clauses, among other topics. 

MFN clauses are evaluated under the antitrust law rule of reason, because, depending on the applicable facts and circumstances, such provisions have been found to have procompetitive or anticompetitive effects.  A recognized procompetitive feature of MFN clauses is lower transaction costs, which provides price stability over time and ensures that a buyer is not treated any worse than its rivals.  The DOJ argued in the BCBSM case, on the other hand, that the MFN clauses there reduced incentives to lower prices, facilitated coordination and prevented entry. 

Health care clients using or considering the use of MFN clauses should consult antitrust counsel to assess their legal risks in light of these developments.    

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by Jon B. Dubrow and Cerissa Cafasso

On Monday, April 22, 2013, after rejecting the initial settlement agreement, Judge Richard Matsch (D. Colo.) approved a revised settlement of a suit brought by the U.S. Department of Justice (DOJ) against two energy companies for conspiring not to compete for mineral rights leases.  Gunnison Energy Corp. (GEC) and SG Interests I Ltd. and SG Interests VII Ltd. (collectively "SGI”) will each pay a fine of $275,000 to the DOJ to settle allegations of agreeing not to bid against each other in violation of antitrust law for natural gas leases on government land in western Colorado.  These fines are in addition to those related to alleged False Claims Act violations, for which SGI and GEC paid government fines of $206,250 and $245,000 respectively.  The new settlement is twice the amount of the fines in the original settlement.

McDermott Will & Emery wrote an article in February 2012 analyzing the DOJ's initial complaint against the parties, and the competitive implications of joint bidding.  At the time, the parties had agreed to pay a total of $550,000 in fines.  The court rejected the settlement in December 2012 finding that it was not in the public interest.  "There is no basis for saying that the approval of these settlements would act as a deterrence to these defendants and others in the industry, particularly as GEC considers 'joint bidding' to be common in the industry."  Further, the settlement amount was "nothing more than the nuisance value of [the] litigation."  Additionally, as reflected in the newly approved deal, the court wanted the alleged Sherman Act violations and False Claims Act violations settled separately, with a payment for the Sherman Act claims separate from, and in addition to, any amount due under the False Claims Act.  At heart, it appears Judge Matsch wanted any settlement he approved to be meaningful enough to have a deterrent effect on future agreements.

This was the DOJ's first challenge to an anti-competitive bidding agreement for mineral rights leases, but it is just one of the recent cases in which joint bidding activities have become the focus of antitrust scrutiny.  In Summer 2012, the DOJ opened an investigation into Chesapeake Energy's acquisition of oil and gas properties in Michigan and the possibility that Chesapeake conspired with Encana Corp. to allocate bids on those properties.  In 2006, the DOJ began investigating the joint bidding practices of private equity firms in connection with leveraged buyouts.  That investigation led to class action suits against private equity firms.  One of those suits survived a motion for summary judgment last month.

It is important to note that the DOJ is paying attention to joint bidding practices and taking action.  As noted in the SGI/GEC matter, while joint bidding may in fact be common practice in the energy field, it is not necessarily lawful.  Each arrangement should be evaluated for potential anticompetitive effects.

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by Stephen Wu

On January 16, the U.S. Department of Justice Antitrust Division issued a Business Review Letter in which it disclosed its intention not to challenge the Greater New York Hospital Association's (GNYHA) voluntary "gainsharing" program for its hospital members and the physicians who practice at their hospitals. 

GNYHA's program is designed to encourage physicians to become more cost-conscious in their treatment decision-making and reward them for greater efficiency.  Important aspects of the program include:

• that it is non-exclusive and voluntary;
• each participating hospital will have its own quality-standards;
• it will apply to commercial health insurance and Medicaid and Medicare managed care products;  
• each hospital will choose how much savings to share with its physicians (or none at all) subject to other regulatory requirements; and
• the information that will be shared among GNYHA members is already publicly available.

The Antitrust Division concluded that the program was neither an agreement among competitors to set physician compensation levels nor an anticompetitive information exchange.

The Antitrust Division's business review letter should provide guidance to hospitals and physicians looking to reduce costs of care.  Importantly, however, the program and the Antitrust Division's business review letter only addressed gainsharing between hospitals and their physicians and not joint contracting or "clinical integration" arrangements among competing providers, for example. 

To read the Antitrust Division's press release, click here.

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by Stefan M. Meisner and Daniel Powers

Federal antitrust enforcement agencies are closely studying the growing activity of patent assertion entities (PAE).  At a recent joint workshop sponsored by the Federal Trade Commission (FTC) and U.S. Department of Justice (DOJ), participants from academia, industry and the legal world discussed the competitive impact of these organizations and considered whether antitrust law offers regulators any tools to grapple with potential anticompetitive activity.  No new policy prescriptions emerged during the daylong session, but the agencies continue to seek comment and study this rapidly developing area.

To read the full article, click here.

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by David Henry, Wilko van Weert and Philipp Werner

Chief Economists from the US Federal Trade Commission, the US Department of Justice and the EU Directorate General for Competition, have agreed on a set of four, non-binding suggestions that should—if followed by standard-setting organizations - increase the level of protection afforded to consumers and promote innovation.

To read the full article, click here.

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by Daniel Powers

The Acting Assistant Attorney General Joseph Wayland delivered a speech on Friday regarding how antitrust enforcement agencies can “balance patent rights, competition and innovation in the information age.”  Wayland covered familiar ground on topics ranging from the dangers of patent hold-up to the importance of patent holders’ commitments to license essential patents on F/RAND terms.  He stressed that the enforcement agencies continue to closely monitor the competitive impact of patent portfolio acquisitions, particularly in the wireless industry.  He also reiterated the agencies’ views about the appropriate standards for injunctive relief and the impact on competition of ITC exclusion orders to enforce standards essential patents.  Wayland’s prepared remarks also offered some specific suggestions about possible additions to the intellectual property policies of standard setting organizations that would limit opportunities to exploit the ambiguities of a F/RAND licensing commitment.  Suggestions included, for example, requiring patent holders’ make clear their F/RAND commitments bind both the current patent holder and subsequent purchasers of the patents.   He also warned that even if patent holders are not enforcing standard-essential patents, efforts to force licensees to accept certain kinds of anti-competitive contract terms might nevertheless trigger antitrust scrutiny.  Wayland said he has made it a priority to examine use or misuse of patents that goes beyond standard-essential patents.

Wayland’s prepared remarks are available on the Antitrust Division’s website at: http://www.justice.gov/atr/public/speeches/287215.pdf.

News coverage highlighting Wayland's additional comments is available at: http://www.law360.com/competition/articles/380674?nl_pk=13f0a320-0811-47df-83bc-07f151d901ad&utm_source=newsletter&utm_medium=email&utm_campaign=competition.

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by Jon B. Dubrow and Carla A. R. Hine

Today the Federal Trade Commission (FTC) announced proposed changes to the Hart-Scott-Rodino (HSR) premerger notification rules that will impact the types of transactions for which pharmaceutical companies will be required to file HSR notifications with the Department of Justice and FTC.  The proposed rulemaking is meant to clarify when a transfer of exclusive rights to a patent in the pharmaceutical industry results in a potentially reportable acquisition of assets under the HSR Act.

Previously -- although never actually codified -- the FTC would determine whether the transfer of rights to a patent (usually in the form of a license) was a reportable event under the HSR Act by focusing on whether the licensor transferred the exclusive rights to "make, use and sell" under a patent.  The emphasis on the transfer of the exclusive right to manufacture would result in scenarios where parties would not be required to report the transfer of patent rights because although the licensor transferred the rights to commercialize the product, it retained the right to manufacture the product. 

In an effort to place substance over form, the proposed rulemaking instead suggests an "all commercially significant rights" test, where a transfer of "the exclusive rights to a patent that allow only the recipient of the exclusive patent rights to use the patent in a particular therapeutic area (or specific indication within a therapeutic area)" would constitute a potentially reportable acquisition of assets if the size-of-transaction and size-of-person (if applicable) thresholds are met, and no exemption is applicable.  The proposed rules further explain that all commercially significant rights are transferred even if the patent holder retains limited manufacturing rights to provide the licensee with product(s) covered by the patent, or co-rights to assist the licensee in developing and commercializing the product(s) covered by the patent.  Please note that this rule would only apply to patents within the pharmaceutical industry (as this is the industry in which these scenarios most often occur).

The text of the proposed rulemaking can be found here.  The FTC is accepting comments until October 25, 2012.
 

UPDATE:  The U.S. Federal Trade Commission’s new proposed Hart-Scott-Rodino Act rules will apply only to transfers of pharmaceutical patent rights and are expected to increase the number of filings.  Click here to read the full article, "FTC’s Proposed Rules Would Generate More HSR Filings for Transfers of Pharmaceutical Patent Rights."

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by Stefan M. Meisner and Daniel Powers

Recent testimony from the U.S. Department of Justice’s Antitrust Division and the Federal Trade Commission (FTC) before the Senate Judiciary Committee focused on issues relating to standard-setting activities and competition policy.  Antitrust Division Acting Assistant Attorney General Joseph Wayland and FTC Commissioner Edith Ramirez discussed the issue of injunctive relief to enforce standard-essential patents and emphasized the importance of pending actions before the International Trade Commission.

To read the full article, click here.

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by Jon B. Dubrow and Shauna A. Barnes

Recently published reports of land acquisition activities between Chesapeake Energy and EnCana senior executives will likely expose those companies to a Department of Justice (DOJ) antitrust investigation and challenge, as well as, if accurate, civil antitrust claims.  This matter highlights the risks that energy companies face when discussing lease arrangements with their competitors. 

Joint Bidding or Bid Rigging for Property Rights Can Violate the Antitrust Laws

In February 2012, DOJ settled its first challenge to a bidding agreement for mineral rights, alleging that agreements between Gunneson Energy Corporation and SGI Interests to bid jointly for government mineral leases were anticompetitive.  In a previous post, we explained the potential issues and pitfalls related to joint bidding for oil and gas properties.  We suggested various factors that companies can use to assess, or manage, their antitrust exposure. 

Reuters Obtains and Publishes Confidential Communications Between Chesapeake and EnCana Appearing to Coordinate to Reduce Prices Paid for Properties

On June 25, 2012, Reuters published a special report indicating that Chesapeake and EnCana agreed to suppress bids for mineral rights at public and private land auctions.  Citing dozens of highly inflammatory emails, the article purports to detail how Chesapeake’s CEO, Aubrey McClendon, and other senior executives at Chesapeake and EnCana discussed how to avoid creating a bidding price war in acquiring drilling rights for Northern Michigan properties. 

According to Reuters, throughout 2010, EnCana and Chesapeake were the leading buyers in Michigan and they aggressively competed to acquire properties for hydraulic fracturing (fracing) operations.  During a May 2010 land auction, they paid approximately $1,413 per acre.  Following the auction, private landowners sought competing bids, leading to a bidding war resulting in offers of more than $3,000 per acre.

Reuters indicates that Chesapeake and EnCana discussed via email entering into a formal venture, including some areas of mutual interest that would allow the parties to share in the risks and rewards of developing properties.  However, they did not enter into any venture.  Instead, they purportedly discussed in emails ways, as independent bidders, to refrain from bidding up land prices, and to allocate various properties between themselves.  These emails were followed by significant price reductions in the offers made by Chesapeake and EnCana. 

Oil and Gas Industry Companies Need to be Sensitized to the Risks in Joint Activities Related to the Acquisitions of Mineral Rights

The Chesapeake-EnCana situation, following quickly on the heels of the DOJ’s joint bidding challenge earlier this year, serves as a reminder that companies in the oil and gas industry must exercise care in situations where they may want to work with potentially competing bidders.  In the oil and gas industry, firms frequently work together to acquire and develop properties, and that can often be lawfully accomplished through a legitimate collaboration.  Firms, and their executives, may often have opportunities to discuss property acquisition in the context of a legitimate, integrated venture, including with firms that might otherwise be competitors.  However, while some joint activities may be permissible, other conduct may create antitrust liability.  Companies, and their personnel interacting with potentially competing land purchasers, need to be aware of the conditions under which a joint bid is likely to pass antitrust review, as well as when the proposed activity would likely be viewed as a simple market allocation or bid-rigging conspiracy.  An individual may believe, based on prior collaborative activities, that he or she is discussing a legitimate topic without realizing that the contemplated conduct is creating substantial legal exposure in the present circumstances. 

As these cases demonstrate, it is important for companies to be sensitive to the antitrust issues involved in coordinating bidding activities with competitors.  In some cases, working jointly on property acquisitions can be accomplished lawfully, but if done improperly it can create substantial risks.  The fact that there have been two instances arising this year in which energy companies have apparently engaged in activities creating antitrust issues indicates that companies operating in this field may not be properly sensitized to the antitrust issues.

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by Jon Dubrow, Cerissa Cafasso and Carla Hine.

Failing to comply with premerger document disclosure rules can lead to civil and criminal penalties for companies and their executives.

To read the full article, click here. 

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by Hillary Webber

Last week, Sharis Pozen, Acting Assistant Attorney General for the Antitrust Division of the U.S. Department of Justice, spoke at the World Annual Leadership Summit on Mergers and Acquisitions in Health Care, where she affirmed that protection of competition in the health care industry is a top priority of the Division.  Pozen highlighted the Division's recent enforcement activities in insurance and provider markets, including challenges to insurance company mergers and contracting practices used by dominant insurers or providers such as Most Favored Nation (MFN) provisions and exclusivity agreements. 

Of note, Pozen remarked that the Division undertook a comprehensive evaluation of health insurance markets, the results of which have caused the Division to regard with increasing skepticism the ability of new entry to constrain a merged health insurance firm.  Pozen explained that new entrants face obstacles because they need provider discounts to attract enrollees but have difficulty obtaining them without a large number of enrollees.  Pozen stated that the Division will focus more attention on entry analysis to protect markets from harmful consolidation, especially markets dominated by one or two plans.  Regarding provider markets, Pozen described the Division as "on the lookout for agreements or arrangements purported to improve quality but where the real goal is simply to raise prices."  This is especially relevant given the Affordable Care Act's encouragement of provider collaboration in the form of Accountable Care Organizations (ACOs).

Pozen's remarks are available at: http://www.justice.gov/atr/public/speeches/281236.pdf.

Pozen's comments highlight the need for health care companies considering collaborative arrangements with competitors or contracting arrangements such as MFNs or exclusivity agreements to consult counsel and articulate a clear pro-competitive basis for such conduct. 

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by Jon Dubrow and Cerissa Cafasso

Public utilities could face different levels of scrutiny in merger reviews before the U.S. Federal Energy Regulatory Commission, and the Department of Justice and the Federal Trade Commission (the Antitrust Agencies).

To view the full article, please click here. 

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by Jon B. Dubrow and Shauna A. Barnes

The U.S. Department of Justice’s recent action challenging a joint bidding arrangement for natural gas leases highlights the antitrust risks of joint bids.  This newsletter describes considerations parties considering joint bids can take to evaluate and potentially manage their antitrust risks.

To read the full article, click here.

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by Joseph Winterscheid

In December 2011, the United States Department of Justice (DOJ) announced that a public company chief executive officer (CEO) will pay a $500,000 civil penalty to settle charges that he violated Hart-Scott-Rodino Act (H-S-R Act) premerger reporting and waiting period requirements.  The DOJ, acting at the request of the Federal Trade Commission, charged the executive for failing to satisfy the H-S-R Act's requirements before acquiring common stock under the company's stock-based compensation program.  The CEO allegedly exceeded the H-S-R Act filing threshold ($59.8 million when the alleged violation occurred) upon the vesting of outstanding restricted stock units awards and the reinvestment of dividends and short term interest through his 401(k) account.

Violations of the H-S-R Act's reporting and waiting period requirements are subject to fines of up to $16,000 per day.  The DOJ's recent enforcement action illustrates the potentially costly consequences of a failure to consider H-S-R Act compliance in connection with investment planning for corporate executives (and other individuals) who will hold or acquire stock valued in excess of the H-S-R Act's notification threshold (currently $66 million and moving to $68.2 million effective February 27, 2012), and that violations may occur under somewhat obscure circumstances.  In this connection, it is also important to remember that the relevant valuation is determined by reference to the total value of the voting securities that will held following any given acquisition of shares.  Thus, for example, if an executive already holds shares valued at $65,999,999, a reporting obligation could be triggered by acquiring just one additional share.  Likewise, if the executive's existing holding has already crossed the $66 million valuation threshold through appreciation, any further acquisitions could trigger a reporting obligation.               

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by Jeffrey W. Brennan, Ashley McKinney Fischer, David Marx, Jr. and Hillary A. Webber

On October 20, 2011, the Federal Trade Commission and Department of Justice issued a final policy statement on accountable care organizations (ACOs) participating in the Medicare Shared Savings Program (MSSP).  Significantly, the Agencies eliminated mandatory antitrust review of certain ACOs seeking to participate in the MSSP, but declined to adopt other stakeholder recommendations.

To read the full article, please visit: http://www.mwe.com/info/news/ots1111c.htm.  

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by Jon B. Dubrow and Carla A. R. Hine

In recent years, the Federal Trade Commission (FTC) and the Department of Justice (DOJ)—the two US agencies responsible for reviewing and challenging transactions that may lessen competition—have increasingly challenged non-reportable and consummated transactions.  There have been several such challenges so far in 2011, and at least nine in 2010 (all but one of which resulted in a settlement).

To read the full article, click here.

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by Jon B. Dubrow, Joseph F. Winterscheid and Carla A. R. Hine

Companies should begin regularly collecting required data—in particular revenues by North American Industry Classification System code and information about “associates”—in advance of need to file Hart-Scott-Rodino notification.

To read the full article, click here.

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by Frank Schoneveld and Joseph F. Winterscheid

On June 24, 2011, Assistant Attorney General Christine Varney announced that the U.S. antitrust enforcement agencies will be signing a cooperation agreement with their Chinese counterparts.  As a consequence, companies can now expect to see the Chinese authorities participating in coordinated “dawn raids” and related cooperative enforcement initiatives with the U.S. and EU antitrust enforcers in international cartel cases. 

To read the full article, click here.

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by William Diaz

The head of the United States Department of Justices's (DOJ) Antitrust Division, Christine Varney, gave a speech to the Chamber of Commerce on June 24, 2011.  One of the topics she discussed involved IP/antitrust issues regarding standard-setting organizations (SSOs).  Provided below is the excerpt from her remarks dealing with this topic.  While her remarks do not signify a change in the way the DOJ analyzes SSOs, they serve as a reminder that the DOJ is vigilant of anticompetitive practices related to standard-setting.

Christine Varney's Remarks on SSOs:

One issue that arises in the context of civil non-merger enforcement, and which I understand is of considerable interest to the business community, is the application of the antitrust laws to standard setting.  I have examined standard setting since my days as a Federal Trade Commissioner, when I voted to challenge Dell Computer Corporation’s anticompetitive conduct in a Standard Setting Organization (SSO).  The FTC alleged that Dell—as a member of an SSO—restricted competition in the personal computer industry and undermined the standard-setting process by threatening to exercise undisclosed patent rights against computer companies that had adopted the standard.   In that settlement, the FTC made clear that the antitrust laws do not allow firms to commit to an open standard, and only after the standard is adopted, assert patent rights to block use of the design or increase prices.

However, if structured appropriately, standards promulgated by an SSO can be permissible under the antitrust laws. As you well know, standard setting creates enormous benefits for businesses and consumers, including reducing production costs and fostering public health and safety. The Division has expressed this support for SSOs in a joint report with the FTC, in business review letters and in speeches.

I personally support the role of standard setting in promoting innovation as long as such standards comply with the basic and fundamental principles of the antitrust laws. This requires that standards be open and published, with clear disclosure and license rules, and should be apportioned fairly and efficiently, with no company able to distort the process. In addition, standards should be limited to technical and operational functions that support individual business decisions—not thwart the competitive process by enabling collective and collusive business decisions. The best SSO framework may vary by industry, but these fundamental principles remain.

To view Christine Varney’s full comments, please click here. 

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by Joel R. Grosberg and Megan Morley

The DOJ has released an updated merger remedies guide that provides an overview on how the DOJ Antitrust Division staff will analyze proposed remedies in merger matters.  The revised guide places an increased emphasis on behavioral or conduct remedies to address issues raised by vertical transactions.

To view the full article, click here.

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by Gregory E. Heltzer and Carrie G. Amezcua

On May 10, the U.S. Department of Justice (DOJ) filed a civil lawsuit against George's Inc. to block its $3M acquisition of Tyson  Foods Inc.’s, Harrisonburg, Virginia chicken processing plant, showing that deals of all sizes face scrutiny.  This case also continues the trend of challenges to non-reportable transactions by both the DOJ and FTC, as well as the DOJ's current focus on the agriculture sector. It is also notable because the DOJ is alleging that the merger leads to monopsony power, a relatively rare allegation, but one that is increasingly used in challenging deals in the agriculture business.

The DOJ began investigating the acquisition when it was announced in mid-March, and issued Civil Investigative Demands to the parties on April 18, 2011.  Despite their awareness of the DOJ’s concerns and ongoing data and document productions, the parties consummated the deal.

George's and Tyson are two of only three chicken processors in the Shenandoah Valley.  Chicken processors process and distribute "broilers," which are chickens raised for meat products.  The processors compete for contracts with growers, who care for and raise chicks from the time they are hatched until the time they are ready for slaughter.
 
In its complaint, the DOJ alleges that the relevant product market is the "purchase of broiler grower services from chicken farmers."  The DOJ then asserts that, following the proposed merger, chicken farmers would have only a single processor to sell their growing services to – in part because the only other processor in the 50-75 mile range, Pilgrim’s Pride, is at capacity. The DOJ alleges that the consolidation would not only harm grower’s contract prices but also lead to inferior contract terms on other, non-price factors.  The DOJ argues that the relevant geographic market is limited to the Shenandoah Valley because of transportation costs for feed and live birds.

The full complaint can be found on the DOJ website: http://www.justice.gov/atr/cases/f270900/270983.pdf.

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by Stefan M. Meisner

Yesterday, the U.S. Department of Justice announced that CPTN Holdings, LLC,  a joint venture owned equally by Microsoft Corp., Apple, Inc. , Oracle Corp., and EMC Corp,  has agreed to modify its agreement to acquire certain patents from Novell, Inc. in order to allay antitrust concerns raised by the transaction.  The Department had expressed concerns that the original deal would threaten the ability of open source software to innovate and compete in critical software markets.  The modifications to the deal will allow it to go forward, but the Department emphasized that it will continue to monitor distribution of the patents to ensure continued competition. The transaction also received antitrust clearance from Germany's Federal Cartel Office.  The German and American authorities cooperated closely on the matter, aided by waivers from the parties that allowed information sharing between the two agencies.  Regulators are increasingly attuned to the effects of intellectual property transactions on competition.

For more information on the CPTN Holdings, LLC transaction, you may find the following links useful:

Department of Justice Press Release
http://www.justice.gov/atr/public/press_releases/2011/270086.htm

Law 360 article
http://www.law360.com/competition/articles/240355?utm_source=newsletter&utm_medium=email&utm_campaign=competition

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by Jon B. Dubrow, Joseph F. Winterscheid and Carla A. R. Hine

In M&A transactions, early involvement of antitrust counsel is essential to avoid unnecessary expense, delay and antitrust risks.  Failure to involve antitrust counsel early on in the process may not only jeopardize the parties’ ability to obtain antitrust clearance, but it can also give rise to potential exposure for independent antitrust violations and deal risk.  This article discusses five avoidable antitrust pitfalls to keep in mind early in any transaction planning process.

To read the full article, click here. 

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by Carrie G. Amezcua

Earlier this week, The Tribune (Greely, Colorado) published the article below discussing proposed changes to livestock marketing rules.  The article discusses the pros and cons of the Grain Inspection, Packers and Stockyards Administration proposed rule - commonly referred to as the GIPSA rule.  

"New rules were mandated by the 2008 Farm Bill, which required the U.S. Department of Agriculture to conduct rulemaking that 'improves fairness in the marketing of livestock and poultry.'"

The rule aims to promote fairness and transparency, and would make it easier for a plaintiff to bring a case under the Packers & Stockyards Act by no longer requiring that the plaintiff  first show harm to competition in a complaint alleging certain unfair trade practices.  However, critics say that the changes will promote unnecessary litigation and would result in anywhere from 22,800 to 104,000 jobs lost.

Comments on the new rule were due November 22, 2010 and are currently being reviewed.  However, on January 21, 2011, the USDA published one change to their regulations requiring testing of scales twice per year, at defined 6 month intervals. 

More information on GIPSA  and the 2008 Farm Bill can be found here: http://www.gipsa.usda.gov/GIPSA/webapp?area=home&subject=landing&topic=landing

Proposed changes in livestock marketing rules prompt fears, confusion
Link to article:  http://www.greeleytribune.com/article/20110123/NEWS/701229893/1002&parentprofile=1

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by Greg E. Heltzer, Carrie G. Amezcua and Jennifer L. Westbrook

The DOJ and USDA just completed a series of five workshops on competition in the agriculture industry.  The two agencies have a renewed their focus on competition in this industry and have promised more activity in this area.  The highlights from each of the workshops is described below.

An overview of all five workshops:
Issues of Concern to Farmers, March 12, 2010, Iowa

• Opening statements and roundtable remarks by Attorney General Eric Holder, Assistant Attorney General Christine Varney and Secretary of Agriculture Tom Vilsack.
• There was discussion about concentration in the seed industry and lack of choice among seed trait companies.  Also, farmers voiced concern about patents that nearing expiration where there are no generics yet in the pipeline.  (Subsequent to this workshop Monsanto announced it would pay for all regulatory approvals of Round Up Ready soybean patent through 2021 even though the patent expires in 2014).
• The discussion from pork and livestock farmers centered on fairness, transparency and increased enforcement of existing laws such as the Packers and Stockyards Act.

Poultry Industry, May 21, 2010, Alabama

• Opening statements and roundtable remarks by Attorney General Eric Holder, Assistant Attorney General Christine Varney and Secretary of Agriculture Tom Vilsack.
• Mr. Holder announced the launch of the Agriculture Competition Joint Task Force, which is comprised of individuals from the DOJ and USDA.
• There was discussion about the fairness of poultry contracts and transparency in the industry.
• There were also comments on the lack of concentration of poultry processing companies, which reduces the choice farmers have.

Dairy Industry, June 25, 2010, Wisconsin

• Opening statements and roundtable remarks by Assistant Attorney General Christine Varney and Secretary of Agriculture Tom Vilsack. (AG Eric Holder did not attend).
• There was discussion about the gap between the prices consumers pay (relatively high) and prices that dairy farmers are paid by processors (relatively low).  The farmers are getting squeezed and having to sell below cost.
• Consolidation in grocery retailing and the price pressure exerted by large retailers on dairy coops, as well as consolidation in dairy processors, were cited as a cause of low prices to farmers.

Livestock Industry, August 27, 2010, Colorado

• Opening statements and roundtable remarks by Attorney General Eric Holder, Assistant Attorney General Christine Varney and Secretary of Agriculture Tom Vilsack.
• The workshop focused on issues regarding the ability of cattle and hog producers to earn sustainable returns.
• There was discussion about whether reducing the market power of the packers and increasing bid competition for cattlemen’s animals would raise prices that cattlemen could obtain.
• There was also discussion about how concentration of packers and concentration among retail grocers negatively affects prices producers can get for their livestock.

Margins, December 8, 2010, Washington, D.C.

• Opening statements and roundtable remarks by Attorney General Eric Holder, Assistant Attorney General Christine Varney and Secretary of Agriculture Tom Vilsack.
• The workshop focused on margins at each stage in the farm to table process.
• There was discussion about the gap between the prices consumers pay (relatively high) and prices that producers in all industries are paid by processors (relatively low).  The farmers are getting squeezed and cannot meet their costs.
• There was discussion about retail and that there is fierce competition in the retail (grocery) industry.  It was also noted that consumers are demanding more information about the source of the food that they are buying.  The producers noted that they are not seeing the same competition and transparency at the producer level that is at the retail level.
• There was general discussion on the need for more transparency and fairness across the board, and perhaps a change in the antitrust laws, or new laws altogether are needed.

Relatedly, an article on the Capper-Volstead Act by Christine Varney (http://www.americanbar.org/content/dam/aba/publishing/antitrust_source/Dec10_FullSource.authcheckdam.pdf) references these workshops and discusses enforcement of the Act.  The article discusses the origins and history of the Capper-Volstead Act generally, then focuses on the production restriction debate, including a brief highlight of pending lawsuits suits against United Egg Producers, Inc., United Potato Growers of America, Inc., and United Potato Growers of Idaho, Inc.  Varney points out that whether the Capper-Volstead Act immunizes production restrictions between cooperatives and their members is of particular interest to the Division.  While the Division has historically contended that the Capper-Volstead Act does not exempt production limits, it will be monitoring developments in the courts to evaluate any potential impacts on antitrust enforcement.

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