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

by Carrie Amezcua

The next step of the on-going Phoebe Putney litigation is completed.  On Wednesday, April 15, the district court for the Middle District of Georgia granted the Federal Trade Commission's (FTC) motion for a Temporary Restraining Order (TRO) in Federal Trade Commission v. Phoebe Putney Health System, Inc., No. 1:11-cv-58 (M.D. Ga.).  In its order, the court stated that the FTC "carried its burden of persuasion to establish the need for the imposition of the 'extraordinary and drastic remedy' of a TRO pending the outcome of the court’s decision on the [Preliminary Injunction] Motion."  The TRO prohibits Phoebe Putney Memorial Inc. from taking further steps to consolidate with Palmyra Park Hospital.  Further, the court stated "In response to Plaintiff’s request that the Court order Defendants to refrain from instituting any price changes, the Court ordered that Defendants are prohibited from making any price changes to existing contracts; however, said prohibition does not extend to the formation of any new contracts."  Richard A. Feinstein, Director of the FTC's Bureau of Competition issued a brief statement on the district court's ruling saying "We are pleased that the Court has issued a Temporary Restraining Order prohibiting any further steps to consolidate the two hospitals in Albany, and prohibiting any price changes to existing health-plan contracts, pending our Motion for Preliminary Injunction." 

The district court had granted a TRO the FTC filed in 2011 to stop the acquisition, but dissolved that TRO upon the district court's finding that the transaction was exempt under the state action immunity doctrine.  The 11th Circuit affirmed, but in February of this year, the Supreme Court reversed holding that Georgia's enabling statute did not clearly articulate an affirmatively expressed policy for displacing competition.    

The district court's grant of the TRO is another victory for the FTC in this long litigation.  Now that the Supreme Court ruled the transaction is not exempt from the antitrust laws, the hospitals will have to defend what the FTC calls a merger to monopoly.  The TRO will stay in place until a hearing on the motion for Preliminary Injunction, which is scheduled for June 14, 2013.  The FTC has a successful track record in getting preliminary injunctions granted in hospital mergers, so it would not be surprising if the district court also granted the Motion for Preliminary Injunction.  This case is further evidence of the high priority the FTC places on challenging health care mergers it views as anticompetitive and shows the FTC is willing to commit resources over an extended period of time to challenge such mergers.

The administrative hearing is scheduled to begin July 15, 2013.  More information on the district court and adjudicative proceedings can be found at http://www.ftc.gov/os/caselist/1110067/index.shtm and http://www.ftc.gov/os/adjpro/d9348/index.shtm.

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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 Hillary Webber

In remarks made this week at the International Competition Network annual conference, Federal Trade Commission (FTC) Chairwoman Edith Ramirez stated that health care will continue to be a top priority for the FTC.   Referring to health care and hospital mergers in particular, she said that the Commission will "guard[] against what we consider to be consolidation that may end up having adverse consequences for consumers."  The Chairwoman's comments indicate that the recent leadership change at the FTC from former Chairman Jon Leibowitz to Chairwoman Ramirez has not altered the Commission's priorities.

Recent months have seen a flurry of FTC activity in the courts related to health care.  For example, two FTC cases came before the U.S. Supreme Court this term -- the FTC's challenge to Phoebe Putney's acquisition of Palmyra Park Hospital in Georgia and the FTC's challenge to "pay-for-delay" patent infringement litigation settlements between branded and generic pharmaceutical manufacturers. 

In February, the Supreme Court ruled that the state action doctrine did not immunize Phoebe Putney's hospital transaction from federal antitrust scrutiny, and the FTC has subsequently filed renewed motions in federal district court to stop further integration of the two hospitals even as it prepares for a full administrative hearing on the merits that will begin in August. 

A decision on the "pay-for-delay" case is expected in June.  The Supreme Court’s ruling may have a large impact on further FTC efforts against what it perceives as anticompetitive efforts to delay generic drug entry.

Health care clients considering acquisitions are advised to consult antitrust counsel early in the transaction process.  Given the FTC and DOJ's close scrutiny of health care transactions, early advocacy before the antitrust agencies is often critical to a deal closing on schedule.  

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by Henry Chen, Frank Schoneveld and Alex An

China’s Ministry of Commerce recently issued two new draft regulations.  The first provides a wider range of potential remedies to obtain the clearance of a concentration (e.g., a merger, acquisition, joint venture, etc.); the other defines the standards for “simple” merger cases that are eligible for a “fast-track” clearance procedure.

To read the full article, click here.

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by Martina Maier, Philipp Werner and Robert Bäuerle

The German Federal Cartel Office (FCO) has imposed an administrative fine for the submission of incomplete information in a merger notification.  The missing information concerned details about shareholdings essential for the competitive assessment analysis.  The shareholdings belong to a private individual who controlled the notifying party.  Companies and their shareholders required to submit notifications should be aware that the omission of information in merger notifications before the FCO can result in fines not only for the notifying company but also for the company(ies) and individual(s) controlling it.

To read the full article, click here.

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

The Federal Trade Commission recently announced higher reporting thresholds for pre-merger notifications filed on or after February 11, 2013.

To read the full article, click here.

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by Henry L.T. Chen, Frank Schoneveld, Jared Nelson and Sean Pan

China’s Ministry of Commerce recently announced that it opened four investigations during 2012 into suspected non-compliance with China’s merger control notification procedures.  The outcomes of the investigations are still uncertain, but the actions clearly show increased efforts to ensure compliance through enforcement of the law.  Although the number of investigations was fairly low in 2012, the four cases are part of a new, larger trend of enforcement that began with a 2011 announcement to prioritize these investigations and was reinforced by new interim measures aimed at specifying compliance obligations and enforcement procedures.  Multinational companies with operations in China are encouraged to increase compliance efforts in this area in order to avoid becoming targets of this new enforcement priority.

To read the full article, click here.

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by Philip Bentley, QC and Philipp Werner

Polish legislators have confirmed their commitment to change significantly the provisions of the Polish Competition Act.  The proposed amendments will undoubtedly change Polish competition law substantially, by improving and strengthening the position of enterprises and enhancing legal certainty.  Furthermore, the intended increase in procedural efficiency will likely translate into a faster and more effective system that will not only speed up the relevant processes, but will also allow the stakeholders to obtain the necessary knowledge about their legal situation, enabling them to adjust their market strategies accordingly.

To read the full article, click here.

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by Jeffrey Brennan, Ashley Fischer, David Marx and Carrie Amezcua

In oral argument in FTC v. Phoebe Putney Health System, Supreme Court Justices focused on whether the state legislature clearly articulated a state policy to displace competition with regulation, in a case challenging the application of the state action doctrine to a hospital merger to monopoly.

To read the full article, click here.

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by Stephen Wu

During an American Bar Association (ABA) program on antitrust and health care issues on October 1, 2012, U.S. Federal Trade Commission (FTC) Deputy Director for Health Care and Antitrust, Leemore Dafny, said that the FTC will focus on how patients purportedly react to price increases, as measured by "diversion ratios," when deciding which hospital mergers to investigate further for potential anticompetitive effects. 

Dafny stated that the FTC will focus on diversion ratios rather than geographic markets because relying on geographic market overlaps in hospital mergers may do a poor job of identifying the true source of potential competition problems.  Instead, the FTC has and will continue to evaluate hospital mergers to look at whether patients would be willing and able to substitute one hospital for the other if one hospital decided to raise prices for services, using the diversion ratio or the proportion of patients who would switch between them in response to a change in prices.  Importantly, the diversion ratio does not rely on any one particular geographic market definition to give the FTC what it believes to be an accurate idea of how a hospital merger might affect competition. 

To the extent the FTC considers geography, its staff begins by examining the primary service area of the hospitals – the area from which the hospitals draw about 75 percent of their patients – when conducting a preliminary evaluation of a merger to determine whether overlaps exist.  According to Dafny, the more significant the overlaps, the higher the likelihood of a potential competition problem.

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by Veronica Pinotti, Martino Sforza and Nicolò Di Castelnuovo

In response to significant feedback, the Italian Competition Authority (the Authority) clarified the following issues concerning the new mandatory fee that was discussed in our recent blog post, Italian Competition Authority Mandatory Fee Due by 30 October 2012:

• In relation to foreign companies, only those registered in the Companies Register (Registro delle Imprese) before any of the Italian Chambers of Commerce, will pay the mandatory fee (provided that their revenues exceed €50 million).  Foreign companies are subject to registration with the Companies Register if they have an administrative/secondary seat in Italy, or their main business is in Italy.
• Companies belonging to a group are subject individually to the mandatory fee, provided that their revenues exceed the €50 million threshold.  When several companies which are subject to the mandatory fee, belong to the same group, the maximum amount—equal to €400,000 for the year 2013—refers to the entire group.  The payment may be carried out by the parent company, individually for each of the subsidiaries that are subject to the fee.  However, if the group’s liability reaches the maximum threshold, a single payment by the parent company is allowed.  In this situation, the Authority must be provided with a chart specifying the details of all companies subject to the fee and for which the payment is being made.
• For the companies drafting their financial statements in accordance with international accounting standards, the bases for calculating the fee are the revenues corresponding to item A1 on the Income Statement, drafted in accordance with Italian accounting standards.  The Authority has not provided any further guidance on this specific issue but it should be possible to determine those revenues by reclassifying the Income Statement’s items on the basis of the criteria set out in Article 2425 of the Italian Civil Code.

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by Veronica Pinotti and Martino Sforza

From 1 October 2012 until 30 October 2012, public limited companies based in Italy that have total revenues exceeding EUR 50 million must pay to the Italian Competition Authority (ICA) a new mandatory fee, which replaces the current filing fees for merger transactions.

Entities Subject to the Fee

• Public limited companies (e.g., S.p.A. or S.r.l.) with total revenues—according to the latest financial statements (item A1 of the income statement)—exceeding EUR 50 million are subject to the fee.
• For banks and financial institutions, the amount of revenue for the purposes of calculating the fee is one-tenth of the institution’s assets on its balance sheet.
• The revenues of insurance companies are equal to the amount of premiums collected. Subsidiaries and associate companies belonging to a group must each pay the fee separately on the basis of the revenues set out in their financial statements.

Contribution Amount

• The amount of the fee is equal to 0.08 ‰ of the revenues set out in the latest financial statements. The fee cannot exceed EUR 400,000.

Terms of Payment

For 2013, the fee must be paid in advance to the ICA from 1 October 2012 until 30 October 2012, and the payment must be communicated to the ICA by 30 November 2012.
 

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by Philipp Werner and David Henry

There is a general presumption that the grant of public access to documents relating to merger control proceedings would undermine the purpose of those proceedings. The Commission does not therefore have to carry out an individual examination of each document before deciding to refuse access under EU transparency legislation.

To read the full article, click here.

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by Henry L.T. Chen, Frank Schonveld and Brian Fu

The Ministry of Commerce of China (MOFCOM) recently promulgated a new amended merger notification form along with instructions for completing the form.  In doing so, MOFCOM aims to further regulate the procedures regarding antitrust review of large mergers, acquisitions and joint ventures; to promote transparency in the notification procedure; and to improve the efficiency of antitrust review.

To read the full article, please visit: http://www.mwechinalaw.com/news/2012/chinalawalert061c.htm.

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by Jeffrey W. Brennan, Ashley McKinney Fischer and James Buchanan Camden

In addition to the federal antitrust enforcement agencies, state attorneys general continue to take an active role in antitrust enforcement, especially in the health care industry.  Last week, the Pennsylvania Attorney General announced that it had entered into a settlement agreement with two merging hospitals requiring the hospitals to contract separately with payors post-closing.  Early on in transaction planning, hospitals and health systems considering transactions with potential competitive implications should identify the rationale for and benefits of the transaction, in preparation for both state and federal antitrust agency review.

To read the full article, click here. 

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by Lionel Lesur

The EU Commission was notified of the Seagate/Samsung transaction and the Western Digital/Hitachi transactions – both mergers involving hard drive disk businesses – within days of each other. In its decision on the Seagate/Samsung transaction (published on May 10, 2012), the EU Commission explains its different treatment of the two mergers. 

The EU Commission explains that the 'priority principle' requires them to review a deal's impact on competition according to the date the deal was notified. Therefore, because Seagate/Samsung was notified first, the EU Commission examined the deal based upon the competitive conditions existing at the time of notification and without considering the potential impact of a second deal which was notified only one day later.

Reminder of the facts

Seagate Technology had prenotification contacts with the Commission March 14, 2011 and publicly announced and notified its acquisition of Samsung’s hard disk drive business on April 19, 2011. After a Phase II investigation, the EU Commission unconditionally cleared the transaction on October 19, 2011, concluding that it would not significantly impede effective competition in the hard disk drive market because four competitors would remain.

Western Digital proposed to acquire Hitachi’s hard drive business and notified this transaction on April 20, 2011, after Seagate/Samung. Western Digital and Hitachi publicly announced the deal on March 7, 2011 and had prenotification contacts with the Commission on March 10, 2011 – both dates earlier than the same events for Seagate and Samsung. The Western Digital/Hitachi transaction was also cleared by the EU Commission after a Phase II investigation on November 23,  2011, but was subject to several significant remedies (and application of the ”up-front buyer" system) unlike Seagate/Samsung because the EU Commission carried out its competitive analysis on the basis that only three hard disk drive competitors would remain.

Explanation of the 'priority principle' applied by the EU Commission

In its decision concerning the Seagate/Samsung transaction, the EU Commission recognizes having assessed the transaction according to a “priority principle” ("first come, first served" approach), based on the date of notification. The EU Commission defended the application of this “priority principle” and noted that it had already been applied in several previous cases (most recently in TomTom/Tele Atlas, Commission Decision of May 14, 2008) but the EU Commission had not expressly explained its approach as they have in the present case.

According to the EU Commission, the relevant framework to evaluate the effects of a transaction is the competitive conditions existing at the time of notification ("It is neither necessary nor appropriate to take into account future changes to the market conditions resulting from subsequently notified transactions that require approval from the Commission."). The EU Commission states that the date of notification is a clear and objective criterion for applying the priority principle. It "takes the view that the priority principle, based on the date of notification, is the only one that ensures sufficient legal certainty, transparency and objectivity and respect the other provisions and aims of the Merger Regulation."

The EU Commission explains that the fact that the Western Digital/Hitachi transaction was notified only one day after the Seagate/Samsung transaction is irrelevant ("The principle of legal certainty requires that the same priority rule is applied irrespective of the various time-periods that may lie between the notifications of transactions affecting the same market.").

Criticism of the application of the 'priority principle' by the EU Commission and lessons to be learned

This 'priority principle' should be taken into account when working on a transaction that has to be notified to the EU Commission in a heavily concentrated economic sector if there are rumors of other possible transactions between or involving competitors, or even more so in case public announcements of other transactions have been made. In such a specific context, companies and their counsel should consider notifying the transaction to the EU Commission as soon as possible and reduce the duration of, or even remove, the pre-notification time period.

It remains to be seen what the EU Commission’s position would be if, during the course of two concurring transactions within a highly concentrated sector, one transaction is notified before the other, but the notification file for the second transaction is completed before the one for the first transaction (i.e., will the EU Commission give the priority to the first notified transaction or to the second one?). However, in light of the abovementioned cases, particular efforts should be made to file a complete notification file immediately in order to circumvent any risk deriving from this uncertainty.

Western Digital has challenged both (i) the EU Commission's decision to apply the “priority principle” when deciding to open a Phase II (Case T-452/11), and (ii) the Commission's final conditional clearance decision of the Western Digital/Hitachi transaction (Case T-60/12). For the time being, only limited information is available on these appeals, but we believe that the first appeal should be rejected/declared inadmissible because the EU Commission's application of the “priority principle” when deciding to open a Phase II can be challenged under EU law.

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by Jeff Brennan

On June 7, 2012, Pennsylvania, through its Attorney General (AG), filed an antitrust complaint and consent order in U.S. District Court (M.D. Pa.), settling charges that Geisinger Health System's acquisition of Bloomsburg Hospital violated section 7 of the Clayton Act and the state common law prohibition on suppression of competition.  The core allegation is that the merging of Geisinger and Bloomsburg -- two of three principal rival hospitals in the Columbia County area and employers of physicians -- would lead to higher prices for (i) primary and secondary inpatient acute care services and (ii) primary and non-tertiary specialist physician services.  Notably, the AG did not seek to enjoin the deal but elected to accept a multi-faceted "conduct" remedy.  

Probably the most significant of the many conduct restrictions is the enablement of health plans to trigger (with AG involvement) independent third party review of Geisinger's price proposals.  Geisinger's prices must be based on Bloomsburg Hospital costs, not System costs, to obtain "a reasonable profit margin for similarly sized and well run community hospitals."  In other words, Geisinger may not readily apply System prices to Bloomsburg.  The settlement also prohibits Geisinger from requiring payors to contract with the whole System in order to contract with Bloomsburg, and from requiring a payor to exclude a competitor hospital from the network in order to obtain a contract with Geisinger.   A few observations:

1. PA implied that it accepted a conduct remedy over an injunction in light of Bloomsburg's dire financial condition.  Bloomsburg said that by October 2012 it would have insufficient cash to meet its obligations and could not continue operations.  The AG said it consented to the order "[g]iven the Acquired Parties' financial condition and the potential for the loss of 900 jobs."
2. The Federal Trade Commission (FTC) was not a party to this action, for reasons we do not know.  The FTC has traditionally been unwilling to accept conduct restrictions in lieu of divestitures to resolve concerns that a prospective hospital merger is anticompetitive.  An exception was in the unusual case of a merger that had been consummated for seven years prior to the FTC's finding of antitrust liability, at which point the FTC concluded that divestiture would do more harm than good and instead required separate contracting between the merged hospitals.  (This was 2007's decision in Evanston Northwestern/Highland Park.)
3. The Geisinger case is one of "good news/bad news" for hospitals.  The good news is that, at least at the state level, it shows a potential path forward for deals that raise antitrust concerns.  The bad news is that consummation came with the cost of an extensive set of restrictions on contracting and other activities that require rigorous monitoring for compliance.  Especially for hospitals facing difficult financial challenges, moreover, there is -- again, from the limited perspective of state enforcement -- the good news that alliances with a large and financially sound competitor may be obtainable, but also the bad news that the rival's more favorable rate structure may not be fully available.  

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by Veronica Pinotti and Martino Sforza. 

The main developments in antitrust are:

1. Merger Control (Art. 5-bis)

From January 1, 2013:

• The Italian merger control thresholds will be cumulative and no longer alternative (i.e. the combined turnover in Italy of all undertakings concerned exceeds € 468 million AND the Italian turnover of the target exceeds € 47 million);
• The current mandatory merger control filing fee (i.e. 1.2 percent of the value of the transaction in a range of € 3,000 and € 60,000) will be replaced by a mandatory fee of 0.08 per thousand of the turnover applicable (regardless of a transaction being filed) to all companies having a turnover exceeding € 50 million (such contribution shall be paid by October 30, 2012 for the first year, and July 31, 2013 for the following years).

2. New Bodies

• Business Courts (Art. 2) - by September 24, 2012, the IP specialized sections of Italy’s Tribunals and Appeal Courts (renamed “business specialized sections”) will have jurisdiction also over all claims for damages caused by national and EU antitrust infringements, as well as corporate and public procurement matters involving limited companies.
• Transport Authority (Art. 36) - it will be created within May 31, 2012 and will have supervising powers on the transport sector and the access to relevant infrastructures (it will be fully operative following the adoption of its implementing decrees).

3. Main New Powers of the Authority

• Unfair clauses (Art. 5) – since March 24, 2012, the Authority is responsible to ensure protection against unfair contractual clauses in business to consumer agreements and it may impose fines up to € 50,000.
• Unfair commercial practices (Art. 7) - since March 24, 2012, extension of the Authority’s powers in the enforcement of the unfair commercial practices rules to protect, not only consumers, but also small enterprises (with less than 10 employees and a turnover of less than € 2 million).
• Food sector (Art. 62) - from October 25, 2012, the Authority will have the power to supervise and may apply fines up to € 500,000, in case of breach of the new rules concerning agreements in the food sector (i.e. written form and other specific requirements; obligation to pay within 30 days for perishable goods and within 60 days for all other goods).
• Public Utilities (Art. 25) – since March 24, 2012, the Authority shall now be consulted in various fields, including the public utilities local award procedures (where the population is above 10,000 inhabitants).

4. Banks and Insurance

• Banks (Art. 28) – from July 1,2012, banks shall propose to their customers the offers of at least two different insurance groups, if they require a life insurance as a condition to issue a mortgage.
• Insurance (Art. 34) - no later than July 24, 2012, car insurance intermediaries will be required to inform their customers about the contractual conditions proposed by at least three different insurance groups.

5. Class Action (Art. 6)

Amendments to the current rules (entered into force since March 24, 2012):

• It is possible to start a class action to protect collective interests (in addition to individual homogeneous consumer rights);
• The requirement for the "identity" of situations is replaced by their "homogeneity";
• The judge may assign a 90 day term to reach an agreement on the damage award.

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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 Henry L.T. Chen, Frank Schoneveld, Alex An, Brian Fu and Angel Wang

McDermott Will & Emery has released the latest China Law Alert: Focus on Competition, which provides insight on current issues surrounding cross-border antitrust and transactional issues. 

China’s New Merger Control Regime Makes Major Progress in Its First Three Years

It is now just more than three years since China’s Anti-Monopoly Law (AML) was introduced. Compared with the well-established practices of US antitrust and EU competition authorities, AML enforcement is still in its infancy. However, China’s AML regulators, especially the authority in charge of merger control, the Ministry of Commerce (MOFCOM), has moved quickly to make its mark on international business. Now, most large, cross-border mergers, acquisitions and joint ventures must also successfully pass the rigors of review by MOFCOM as well as the European Commission and the US Department of Justice (DOJ) and/or Federal Trade Commission (FTC).  Read the full article here.

NDRC and SAIC’s Actions in 2011 and Prospects in 2012

China’s National Development and Reform Commission (NDRC) and State Administration for Industry and Commerce (SAIC) are the two authorities in charge of investigation and supervision of “monopoly” agreements and abuses of dominant market position. NDRC focuses on price-related cases while SAIC takes care of non-price related violations of the law. Compared to MOFCOM, which is responsible for merger control, NDRC and SAIC have been relatively quite since China’s AML came into force on 1 August 2008.  Read the full article here.

Civil Litigation under China’s Anti-Monopoly Law

Since the introduction of the China AML in August 2008, Chinese courts have experimented with various methods of civil dispute adjudication based on breach of the AML. In general, China’s courts have very limited judicial experience with such cases. A number of civil cases have been brought before the courts, but very few, if any, have resulted in a successful judgment for breach of the AML.  Read the full article here.

Might the Ministry of Industry and Information Technology (MIIT) Become A New Enforcement Authority for China’s Competition Laws?

In addition to MOFCOM, SAIC and NDRC, the three major enforcement authorities for the anti-unfair competition and anti-monopoly laws, it seems the MIIT might also become a regulator of competition in the telecommunications sector. In addition to a Draft Regulation on Internet Information Services, published for consultation in January 2012, MIIT released an “Opinion on Regulating the Business Activities of Basic Telecommunications Carriers on Campuses” (the Opinion) on 30 June 2011.  Read the full article 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 Henry L.T. Chen, Frank Schoneveld and James Jiang

Recently China’s Ministry of Commerce (MOFCOM) approved Western Digital’s proposed acquisition of Hitachi’s hard disk drive business on a conditional basis.  Containing the most comprehensive clearance conditions ever imposed by MOFCOM, this decision mirrors previous guidance issued by the European Commission and illustrates that at least two authorities in two of the world’s major economies are working toward imposing similar clearance conditions in their respective jurisdictions.

Read more here.

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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 Henry L.T. Chen, Frank Schoneveld and Alex An

Recently, ENN Energy Holdings Limited and China Petroleum & Chemical Corporation jointly announced the acquisition of all outstanding shares in China Gas Holdings Limited.  This acquisition triggers a requirement to notify and obtain clearance from China’s Ministry of Commerce (MOFCOM).  Therefore, MOFCOM’s approval will be one of the preconditions for ENN Energy and Sinopec to close the transaction.

To read the full article, please click here. 

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

The U.S. Federal Trade Commission (FTC) recently announced revised thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) and 2012 thresholds for determining whether parties trigger the prohibition against interlocking directors under Section 8 of the Clayton Act.

Notification Threshold Adjustments

Pursuant to the amendments passed by the U.S. Congress in 2000, the FTC published revised thresholds for HSR pre-merger notifications in the Federal Register on January 27, 2012.  These revised thresholds will become effective on February 27, 2012.  Any transaction completed and any HSR pre-merger notifications filed on or after February 27, 2012, must comply with these new thresholds.

As required, the FTC adjusted the notification thresholds based on the change in the gross national product (GNP) for the fiscal year ending September 30, 2011.   Most notably, the base filing threshold of $50 million, which frequently determines whether a transaction requires filing of an HSR notification, will increase from $66.0 million to $68.2 million.  The changes also will affect other dollar-amount thresholds:

• The alternative statutory size-of-transaction test, which captures all transactions valued above $200 million regardless of the “size-of-persons,” will be adjusted to $272.8 million.
• The statutory size-of-person thresholds (applicable to transactions valued at less than $272.8 million, but more than $68.2 million) will increase from $13.2 million to $13.6 million and from $126.9 million to $131.9 million.

The adjustments will affect parties contemplating HSR notifications in various ways.   Parties may be relieved from the obligation to file a notification for transactions closed on or after February 27, 2012, that result in holdings below the adjusted base threshold.  For example, a transaction resulting in the acquiring person holding voting securities or assets valued at less than $68.2 million would not be reportable on or after the effective date.  The adjustments will also affect various exemptions under the HSR rules.  For example, acquisitions of foreign assets and voting securities of foreign issuers will now be exempt unless they generated U.S. sales in excess of $68.2 million or, in the case of foreign voting securities, the issuer has assets in the United States valued in excess of $68.2 million.

Parties may also realize a benefit of lower notification filing fees for transactions that just cross current thresholds.   Under the rules, the acquiring person must pay a filing fee, although the parties may allocate that fee amongst themselves.  Filing fees for HSR-reportable transactions will remain unchanged for now (although the FTC is pursuing filing fee increases).  However, the applicable filing fee tiers will shift upward as a result of the GNP-indexing adjustments:

• Transactions valued at or in excess of $68.2 million, but less than $136.4 million require a $45,000 filing fee.
• Transactions valued at or in excess of $136.4 million, but less than $682.1 million require a $125,000 filing fee.
• Transactions valued at or above $682.1 million require a $280,000 filing fee.

Interlocking Directorate Thresholds Adjustment

On January 27, 2012, the FTC published revised thresholds for interlocking directorates, which are effective immediately.   The FTC revises these thresholds annually based on the change in the level of GNP.  Section 8 of the Clayton Act prohibits a person from serving as a director or officer of two competing corporations if certain thresholds are met.  The prohibition against interlocking directors applies if each corporation has more than $10 million (as adjusted) in capital, surplus and undivided profits; however, the prohibition does not apply if either corporation has less than $1 million (as adjusted) in competitive sales.  Pursuant to the recently revised thresholds, Section 8 of the Clayton Act applies to corporations with more than $27,784,000 in capital, surplus and undivided profits, while it does not apply where either corporation has less than $2,778,400 in competitive sales.

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by Carla A. R. Hine

Today, the Federal Trade Commission (FTC) announced revised, higher Hart-Scott-Rodino (HSR) pre-merger notification filing thresholds.  The FTC adjusts the HSR thresholds annually to represent the increase or decrease in gross national product (GNP).  These revised thresholds will become effective 30 days from the date on which notice is published in the Federal Register, which should occur within the next week.  As such, we expect that these new thresholds will become effective near the end of February.  

Most notably, the size-of-transaction threshold, which frequently determines whether a transaction requires an HSR notification, will increase from $66.0 million to $68.2 million.  Other thresholds will increase as well, including thresholds for the size-of-person test, filing fees and certain exemptions.  The revised thresholds are as follows:

Generally, a transaction requires an HSR notification if it meets the applicable size-of-transaction and/or the size-of-person tests, described briefly below, and does not fall within any exemptions.

A transaction meets the size-of-transaction test if as a result of the transaction the acquiring party holds assets, voting securities or a controlling interest in a non-corporate entity valued in excess of

• $50 million, as adjusted ($68.2 million upon the effective date of these revised thresholds), assuming the size-of-person test is met, or
• $200 million, as adjusted ($272.8 million upon the effective date of these revised thresholds) -- this threshold applies to transactions even if the size-of-person test below is not met.

For the size-of-person test, upon the effective date of these revised thresholds, a transaction resulting in the acquiring party holding assets, voting securities or a controlling interest in a non-corporate entity valued at $68.2 million or more, but less than $272.8 million is generally reportable if one party has assets or sales of at least $10 million, as adjusted ($13.6 million upon the effective date of these revised thresholds), and the other party has assets or sales of at least $100 million, as adjusted ($136.4 million upon the effective date of these revised thresholds).

Although the filing fees for HSR notifications will not change at this time (although this is something currently under review), the thresholds (based upon the size-of-transaction) that determine the correct filing fee will also adjust:

Again, these revised thresholds will become effective 30 days after publication of notice in the Federal Register.

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by Martino Sforza

The Italian Competition Authority has updated its merger control turnover thresholds.  Effective as of today, November 21, 2011, Section 16(1) of Law no. 287 of October 10, 1990, requires prior notification of all mergers and acquisitions where either of the following conditions is fulfilled:

• Aggregate turnover in Italy of all undertakings involved is above EUR 468 million
• Aggregate turnover in Italy of the target company is above EUR 47 million

No notification is required if the target is a foreign company which did not generate any turnover in Italy in the last three years and is not expected to do so as a result of the transaction.

Italy's merger control thresholds are adjusted annually to take into account increases in the GDP deflator index.  The updated thresholds are published in the Competition Authority's Bulletin once this increase in index is announced officially.

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by Martina Maier and Philipp Werner

The European Union’s (EU) national competition authorities (NCA) and the European Commission have agreed upon best practices on cooperation in cross-border mergers.  The best practices’ stated aim is to enhance cooperation in merger cases where the European Commission Merger Regulation does not apply and the merger needs to be notified in more than one EU Member State.The best practices follow a public consultation on draft best practices started earlier this year.

The best practices do not make cooperation between NCAs compulsory. The merging parties will not be able to insist that NCAs should cooperate in a multi-jurisdictional filing. Rather, NCAs will apply them in cases where they think cooperation could be beneficial for the NCAs, the merging parties and third parties, in particular where the merger raises similar comparable jurisdictional or substantive questions and concerns similar or the same product markets.

The best practices discuss a number of areas and instruments for facilitating a multi-jurisdictional merger review process, such as:

• Exchange of certain basic non-confidential information
• Aligning timelines in the review process and with regard to remedies
• Regular contacts and updates between NCAs with regard to timing and with regard to decisions to open in-depth investigations
• Dicussions of substantive analysis such as market definitions or possible anti-competitive effects of the merger

Merging parties are encouraged to contact each NCA where the merger will be filed and provide them with basic information, such as the jurisdiction where the merger will be filed, the date of the proposed filing and the sectors involved, to facilitate cooperation among the agencies. Also, the best practices support joint pre-notification contacts where useful. The best practices further highlight, that it will be for the merging parties to coordinate the timing and also the substance of possible remedies, e.g. where a remedy accepted in one Member State has an impact on the effectiveness of the remedy in another Member State.

Most important, the best practices clearly point out that it is fully within the merging parties’ respectively third parties’ discretion to provide waivers to the NCAs to exchange confidential information, that such information will be protected under national law in all Member States and that it will not be used for any purpose other than the review of the relevant merger. To this end a model waiver form can be found in the annex to the best practises. However, it should be noted that the best practice paper states that once a waiver has been provided, the parties will not be informed about the actual scope and timing of the exchange of the confidential information.

The best practices and its annex can be accessed here.

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by Andrea L. Hamilton, David Henry, Martina Maier and Joseph F. Winterscheid

Brazil’s House of Representatives passed a long-awaited competition bill (the Competition Bill) on 5 October 2011, making significant changes to Brazilian competition law. The Competition Bill has yet to be signed into law by the Brazilian President and will take effect 180 days after signing. Once in force, it will have wide-reaching implications across a number of areas, but from the perspective of international companies, some of the most important changes relate to merger control.

At the moment, Brazil’s competition authority (CADE), requires notification by companies that reach relatively low thresholds—which are based currently on revenues or market share—within 15 working days of the signing of the first documents relating to the deal. Once the parties have notified CADE, they are free to complete the deal; there is no obligation to suspend the deal pending clearance.

This will change substantially once the Competition Bill takes effect, and will have major implications for the strategy and timing of transactions that must be notified in Brazil.

• Notification threshold. The Competition Bill requires CADE to be notified of a merger when one of the parties has achieved group-wide revenues of at least R$400 million (approximately €160 million/US$210.5 million) in Brazil in the previous financial year, and another party to the transaction has achieved group-wide revenues in Brazil of R$30 million (approximately €12.5 million/US$15.8 million). Significantly, this removes the market share threshold, which is likely to be welcomed by companies.
• Suspension of the transaction. Parties will no longer be able to close the deal simply after notifying CADE. Instead, parties will need to wait to receive clearance from CADE before closing, which can mean potential delays. Closing a deal without clearance will expose parties to substantial penalties for “gun-jumping” and risk having the transaction deemed void. The fines that can be imposed range from R$60,000 to R$60 million (approximately €24,000-€24 million/ US$32,000-US$32 million).
• Timing. As parties cannot close a deal notified in Brazil until CADE clears it, timing is critical. The Competition Bill envisages a two-phase merger procedure similar to those used in the United States and the European Union. In total, CADE will have a maximum of 240 days to complete its review of a proposed merger. This is subject to a 60 day extension (if requested by the applicant) or 90 days if required by CADE for a justifiable reason. It is expected, however, that CADE will endeavour to complete its review in a much shorter time period in most cases, to align itself with international practice.

International companies with interests or potential interests in Brazil are urged to be aware of these important changes and to consider the implications of the new rules on their business objectives.

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by Louise-Astrid Aberg and Lionel Lesur

The French Competition Authority has taken a hard stance by withdrawing its authorization of French broadcaster Canal Plus' purchase of rival commercial television company TPS, formerly the two most powerful players on the pay TV market.  This decision reasserts the importance of respecting imposed remedies.  In this case, Canal Plus was sanctioned with a fine of EUR 30 million for failing to fulfill the 59 remedies imposed by the Authority in 2006, and has been given one month to re-notify the transaction to the Authority.

While Canal Plus had "only" failed with respect to 10 of the 59 remedies, the Authority did not consider this to be an attenuating circumstance because several of these remedies were "essential" and that the entire "package" of commitments should have been implemented due to the likely impact of the concentration on competition in the market.  In particular, Canal Plus was blamed for being too slow in providing downstream distribution companies (principally represented by internet access providers) access to channels and content. The downstream distributors needed this content to be able to offer competitive packages of pay TV. The Authority considered this obligation essential and at the heart of the commitments necessary for the maintenance of competition.

In France, the Competition Authority can act on its own to take action against companies that fail to respect commitments entered into in the context of an antitrust investigation.  In the past, fines have been imposed on companies, but the amounts were quite symbolic (i.e., EUR 200,000 for two companies active in the postage sector).  This recent decision will force companies submitting to remedies to resolve a planned concentration to be certain it can accept/effectuate those constraints, as the ultimate failure to respect them could lead to disastrous outcomes.  Indeed, not only could companies risk a withdrawal of the Authority's authorization and the imposition of very high fines, such as in the present case, but also, the parties could be ordered to reverse the concentration if the commitments would prove impossible to honor.  Canal Plus, which has one month to renotify the concentration, will therefore be forced to undergo a new investigation by the Authority which could in theory end with an obligation to demerge.

It still remains unclear which type of remedies are considered essential by the Authority and, consequently, which breach could lead the Authority to impose the obligation to renotify and fines as significant as in the present case.  More specific details from the Authority about which remedies are considered essential are necessary so that companies can be informed during their considerations of whether or not to accept certain types of remedies. This case is, however, very specific as the conditional authorization granted by the French Competition Authority in 2006 led to the creation of a monopoly.  Moreover, many authors and practitioners highly criticized this decision, particularly several remedies which appeared to be impractical to implement immediately.

The decision (in French) and the press release (in English) can be read respectively at http://www.autoritedelaconcurrence.fr/pdf/avis/11d12.pdf and http://www.autoritedelaconcurrence.fr/user/standard.php?id_rub=389&id_article=1697.

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by Henry L.T. Chen, Frank Schoneveld and Brian Fu

On 3 February 2011, the State Council promulgated the “Notice of the General Office of the State Council on Launching the Security Review Mechanism for Mergers and Acquisition of Domestic Enterprise by Foreign Investors,” which established the national security review system for merger and acquisition (M&A) transactions by foreign investors in China.  On 25 August 2011, after a trial implementation period of about six months of an interim regulation on the security review system, the Ministry of Commerce finalised and issued the “Regulation on Implementing of the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors,” which came into effect 1 September 2011.  The national security review system as established and specified under the notice and the regulation may have a broad impact on prospective M&A transactions by foreign investors in China.

To read the full article, click here.

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by Henry L.T. Chen, Frank Schoneveld and Brian Fu

To evaluate the competitive impact of an anti-monopoly review on the mergers and acquisitions market (or concentration) and to guide business operators when notifying a concentration, the Ministry of Commerce of China introduced new measures for evaluating competitive influence.  The new rules have been in effect since 5 September 2011.

To read the full article, click here.

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by Philipp Werner, Martina Maier and David Henry

On 21 July 2011, the German Federal Cartel Office (FCO) published a consultation paper on substantive merger control called “Draft Guidance on Substantive Merger Control” (Draft Guidance).  This is the first time the FCO has consulted on a guidance paper.  Comments on the draft guidance can be submitted until 21 September 2011.

Against the fact that the German merger control regime catches a large number of mergers (around 1000 mergers a year) and that the FCO has a strong enforcement record (15 Phase II- proceedings in 2010), the Draft Guidance provides detailed insight in the approach taken by the FCO in assessing mergers.

German merger control is applicable if the following three cumulative turnover thresholds are met: the aggregate worldwider turnover of all undertakings concerned exceeds € 500m, the turnover in Germany of one undertaking concerned exceeds € 25m and the turnover in Germany of another undertaking concerned exceeds € 5m.  In addition, German merger control catches the acquisition of control as well as the acquisition of a minority shareholding of 25 percent or – in cases of “competitively significant influence” even shareholdings below 25 percent.  The Draft Guidance does not deal with the question under which conditions German merger control is applicable, it only concerns the substantive analysis of mergers which fall under German merger control.

The Draft Guidance reflects the existing approach of the FCO rather than proposing an new way of thinking. While it also encorporates economic considerations, it largely provides a agency friendly interpretation of the FCO’s decision practice and relevant case-law.  Still, it shows a move towards more economic analysis and a deviation from the FCO’s traditional, more market structure oriented approach.  But it seems unlikely that the strict enforcement policy of the FCO will change as a result of the new guidance paper.

The Draft Guidance focuses on the question whether a merger will lead to the creation or strengthening of dominance.  Unlike in other jurisdictions, such as the US and EU, the creation or strengthening of a dominant position is the criterion for the prohibition of a merger in German merger control.  While discussions are under way about the introduction of the  SIEC test (“significant impediment to competition”) in an effort to harmonize German with EU merger control rules, the FCO makes it clear that it anticipates that the Draft Guidance will remain relevant even if the underlying test changes.

In terms of substance, the Draft Guidance distinguishes between horizontal, vertical and conglomerate mergers and between single firm dominance and collective dominance.  The definition of dominance and the substantive assessment relies on standard theories of harm and recognised economic theories that are also used by other competition authorities such as the European Commission.

Some elements of the Draft Guidance reflect a traditional German understanding of merger control which may differ from the approach in other jurisdictions.  Thus, the Draft Guidance suggests that the purpose of merger control is to protect competition as an effective process, which will also protect the interests of consumers, not necessarily in the short term but rather in the longer term. It further suggests that protecting competition may sometimes coincide with protecting competitors.  Concerning the threshold for the FCO’s intervention in a merger case, it is sufficient if competition is weakened due to changes in the market structure and market power increases correspondingly.  An appreciable effect of the merger on the market is not required.  Equally, the FCO is not required to proof an impairment of total welfare or consumer welfare but it is sufficient to prove that the merger threatens the functioning of competition.

The Draft Guidance states that market shares are an appropriate starting point for the assessment, but the value of market shares as an indication for market position depends largely on the conditions prevailing on the individual market in question.  The Draft Guidance does not contain any presumptions based on particular market shares or market concentration levels (HHI).  It only notes that the statutory presumption of dominance may apply if neither the existence or the absence of market power can be proved.  This presumption kicks in at a market share of 33 percent for single firm dominance (50 percent for collective dominance of three or less undertakings, 66 percent for collective dominance of five or less undertakings).

The Draft Guidance recognises that vertical mergers have a less pronounced and more indirect effect on competition because they do not lead to a reduction of the number of actual competitors in the market.  However, they may have anti-competitive effects in terms of input foreclosure, customer foreclosure or exchange of commercially sensitive information.  With respect to conglomerate mergers, the Draft Guidance notes the standard theories of harm.  Unlike the EU Commission’s guidance, there are no safe harbour market shares in the Draft Guidance.

The Draft Guidance also discusses the failing firm defence as well as the possibility of balancing the anti-competitive effects with pro-competitive effects on different markets. The Draft Guidance is rather restrictive here.  Pro-competitive effects are only taken into account if they are structural.  Potential advantages to the economy as a whole, other policy objectives and public interest considerations will not be taken into account, nor are mere commercial benefits for the merging partiers, such as improved capacity utilisation or cost savings.  Efficiencies resulting from the merger will not be taken into account, unless these efficiencies also have a structural impact.

The German and English versions of the Draft Guidance are available on the FCO’s website at www.bundeskartellamt.de.
 

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by Jon B. Dubrow, Carla A. R. Hine and Carrie G. Amezcua

Revisions to the Hart-Scott-Rodino (HSR) notification rules and form (as detailed here) will become effective August 18, 2011.  Parties planning to file an HSR premerger notification on or after August 18 must comply with the new disclosure requirements and use the newly revised HSR form.

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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 Veronica Pinotti, Riccardo Franceschi and Martino Sforza

Compliance with EU and national antitrust merger control rules can significantly impact the feasibility, timing and costs of M&A transactions.  Parties to a proposed transaction in the EU should assess the merger control issues early in the process and evaluate and comply with any procedural antitrust requirements to avoid unnecessary delay, or even civil or criminal penalties, in any EU transactions.

To read the full article, click here.

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by Martina Maier and Philipp Werner

More than 100 countries worldwide have merger control regimes.  In the majority of these regimes, including the U.S., EU and most EU Member States, parties to a transaction may not close a deal without approval from the competition antitrust regulator.  An infringement of this obligation, or "gun-jumping", carries risks that are generally well understood.  But companies should be aware that the German Federal Cartel Office (FCO) has recently taken a more aggressive approach in its enforcement of gun-jumping, in particular concerning the fining policy for gun-jumping.

To read the full article, 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 Henry L.T. Chen and Frank Schoneveld

There is considerable speculation in China that many large transactions that should have been notified for clearance by China’s Ministry of Commerce (MOFCOM) have not been properly notified, and Chinese government is going to go after the concerned concentrating parties.  Recently, the speculation came into being and all public comments must be filed before 23 June 2011.  New Draft Regulations, “Preliminary Regulations on the Investigation & Treatment of Failure to Report Concentration of Undertakings (Opinion Solicitation Draft),” clarify and provide MOFCOM with the power to investigate, fine and order divestiture of mergers and acquisitions that should have been, but have failed to be, notified and cleared by MOFCOM.

To read the full article, please visit: http://www.mwechinalaw.com/news/2011/chinalawalert0611b.htm.

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by Henry L.T. Chen and Frank Schoneveld

To evaluate the competitive impact of an anti-monopoly review on the market of mergers and acquisitions (or concentration) and to guide business operators when filing notification of a concentration, the Ministry of Commerce of China has introduced Interim Measures on Evaluating Competitive Influence Caused by the Concentration of Business Operators (Draft for Comments) for public comment.  The deadline for submission of comments is June 13, 2011.

To view the full article, click here.

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by Jon B. Dubrow and Carrie G. Amezcua

On Tuesday the FTC published its comments to FERC's Notice of Inquiry (NOI), in which  FERC had asked for comments on whether, (and if so, how), it should revise its approach for examining market power concerns arising from horizontal mergers to reflect the revised 2010 Horizontal Merger Guidelines published by the FTC and DOJ.  The NOI also asked for comments on what impact the revised Merger Guidelines should have on FERC's analysis of horizontal market power in its electric market-based rate program.

The theme of the FTC's comments focus on encouraging FERC to adopt the broader set of concepts from the 2010 Horizontal Merger Guidelines, not just the revised HHI thresholds, as FERC's NOI suggests.  HHI (Herfindahl-Hirschman Index) is a measure of market concentration, based on market share analysis.  The FTC points out that a "critical thrust" of the 2010 Merger Guidelines is that "merger analysis should examine all dimensions of a transaction's likely competitive effects," not just market concentration.  The FTC cautions that focusing only on HHI calculations can be misleading - either too lenient or too restrictive-- especially given characteristics of electricity markets, notably, relatively inelastic demand, capacity-constrained firms, transmission congestion and long-term supply contracts.  While market shares are one indicator of competitive effects, other types of evidence include actual effects, direct comparison based on experience, substantial head-to-head competition and the potentially disruptive role of a merging party.  The FTC's comments also note that strict market definition is not the only appropriate starting point for merger analysis, and may not even be required in some circumstances when there is evidence of anticompetitive effects.

If FERC adopts the principles in the 2010 Horizontal Merger Guidelines, FERC's competition analysis would become similar to the comprehensive competitive effects analysis in FTC and DOJ investigations.

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by Martina Maier and Philipp Werner

The majority of merger control regimes around the world impose standstill or waiting period requirements for notifiable transactions, e.g. the US, the EU and most EU Member States. If a transaction meets the filing thresholds, it must be notified to the competent antitrust regulator and must not be closed without prior approval by the antitrust regulator or the expiration of the applicable waiting period.

Under German merger control rules, a notifiable merger must not be implemented without prior clearance decision. An infringement of the standstill obligation can (theoretically) lead to fines of up to 10 percent of the group's worldwide turnover. In addition, the infringement of the standstill obligation renders the contracts ineffective under German merger control rules.

The German Federal Cartel Office (FCO) has recently taken a stricter approach to the enforcement of the merger standstill obligation. In the past, the risk of fines was minor if the merger did not lead to any serious competition concerns, if it was the group's first infringement of the standstill obligation and if the company itself notified the FCO ex post of the implemented merger.

We see now a growing number of decisions imposing fines for the infringement of the standstill obligation (sometimes referred to as "gun jumping" in the United States). In May 2011, in the latest of a string of such decisions, the FCO imposed a substantial fine for infringement of the standstill obligation although the merger did not lead to any serious competition concerns and although the company had itself notified the implemented merger. These facts were only taken into account as mitigating factors for the calculation of the fine.

The European Commission has also recently imposed fines for the infringement of the standstill obligation.

In this changing environment, the filing requirement and the standstill obligation cannot be seen as a pure formality. It is therefore essential to always verify whether and in which jurisdictions a transaction is notifiable - and not to close the deal before the relevant competition authorities have cleared the deal.

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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 Martina Maier and Philipp Werner

In January 2011, the European Commission decided that the proposed merger between Aegean Airlines and Olympic Air should be prohibited because it would have resulted in a quasi-monopoly on the domestic Greek air transport market.  This decision shows that traditional airline merger remedies, such as slot releases, are sometimes insufficient to allay concerns of monopolization.  It also illustrates that the Commission will take a tough stance on competition policy, even when facing strong political pressure to clear the merger for the sake of the economy.

To read the full article here, click here. 

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by Philipp Werner and Christoph Voelk

The European Commission started a public consultation on a draft document which seeks to establish best practices on cooperation between national competition authorities (NCAs) in the EU when reviewing mergers.  Although cooperation between NCAs exists already, especially through the European Competition Network (ECN), the best practices seek to formalize the cooperation between NCAs and thus providing more security and predictability for the parties and their legal advisers.

The best practices should enhance cooperation between NCAs in cases where the same merger is assessed by several NCAs because it does not meet the thresholds for review under the EU Merger Regulation.  The Commission considers cooperation between NCAs as beneficial not only for the authorities but also for the merging parties:  it will speed up the investigation process, reduce burdens on the merging parties and may help NCAs in designing remedies.  Particularly in cases where serious concerns about the post merger situation exist, close cooperation between competition authorities will secure a non-conflicting and coherent outcome. 

The object of the Commission's draft is twofold: 

First, NCAs should keep each other informed of important developments related to their investigation into the merger.  Also, NCAs should liaise in cases where closer cooperation is necessary and keep each other informed about their progress.  Most importantly, the Commission proposes that NCAs should in future discuss market definition, theories of harm, empirical evidence and the possible impact of a proposed merger. 

Second, the draft also assigns a role to the merging parties.  Merging parties should, as far as possible, provide NCAs with information as to where the merger will be filed, the dates of the proposed filing, geographic areas, sectors involved etc.  Also, merging parties should assist in ensuring that remedies do not lead to inconsistencies and that such remedies are effective.  Of importance is further the proposal that the merging parties, but also third parties, shall - as far as possible - grant waivers of confidentiality so that NCAs actually are permitted to discuss particular issues of a proposed transaction.

Comments on the Commission's draft can be submitted until 27 May 2011 to comp-a2-mergers@ec.europa.eu.

The consultation page can be accessed via http://ec.europa.eu/competition/consultations/2011_merger_best_practices/index_en.html

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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 Stephen Wu

Earlier today, the FTC dismissed its complaint against LabCorp after failing to obtain a preliminary injunction in federal district court to prevent LabCorp from further integrating with WestCliff. 

LabCorp had acquired WestCliff, a bankrupt lab services competitor in Southern California, in 2010, but the FTC chose to challenge the transaction in front of one of its administrative law judges and had sought a preliminary injunction from a federal district court to prevent LabCorp from integrating WestCliff pending the outcome of the administrative trial. 

After losing its bid for a preliminary injunction at the district court, the FTC filed an emergency motion for an injunction pending an appeal that the Ninth Circuit Court of Appeals denied.  This meant that LabCorp was free to integrate WestCliff pending the outcome of any appeal of the denial of the preliminary injunction or the FTC's related administrative trial on the merits of the acquisition.

The FTC's press release can be found at:  http://www.ftc.gov/opa/2011/04/labcorp.shtm.

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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 Jon B. Dubrow, David Marx, Jr. and Rachael Lewis

The Federal District Court in Minnesota recently decided Ovation Pharmaceutical did not violate federal or state antitrust laws when it acquired Indocin IV and NeoProfen, the only two drugs approved for treatment of a specific heart condition that primarily affects premature babies, because the challengers failed to establish that the drugs were in the same product market.  The decision raises significant issues to consider when evaluating antitrust risks in future transactions.

To read the full article, please visit: http://www.mwe.com/info/news/ots0910i.htm.
 

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McDermott Will & Emery's International News, Issue 2, 2010, covers a range of legal developments of interest to those operating internationally.  This issue focuses on Antitrust and Competition.

In this issue...

• Merger Control: Gun Jumping Goes Global
• International Cartel Enforcement: On the Rise and More Severe
• China's Anti-Monopoly Law: Experience and Lessons Learned After Two Years
• Antitrust Enforcement Under the Obama Administration: One Year Later
• Class Actions: An EU Update
• Information Sharing under EU Competition Law: Handle with Care

The full issue can be found at: http://www.mwe.com/info/news/int0210.htm.
 

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by Veronica Pinotti and Martino Sforza

The Italian Competition Authority has updated its merger control turnover thresholds.  Effective as of 31 May 2010, Section 16(1) of Law no. 287 of 10 October 1990 requires prior notification of all mergers and acquisitions where either of the following conditions is fulfilled:

• Aggregate turnover in Italy of all undertakings involved is above EUR 472 million (revised under the terms of the same Section 16(1))
• Aggregate turnover in Italy of the target company is above EUR 47 million (as revised)
   

No notification is required if the target is a foreign company which did not generate any turnover in Italy in the last three years and is not expected to do so as a result of the transaction.

Italy's merger control thresholds are adjusted annually to take into account increases in the GDP deflator index.  The updated thresholds are published in the Competition Authority's Bulletin once this increase in index is announced officially.
 

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by Veronica Pinotti and Martino Sforza

The Italian Competition Authority announced today that the amount of its merger control filing fee will remain unchanged in 2010. The amount of the fee will therefore continue to be 1.2 per cent of the value of the notified transaction, in a range of EUR 3,000 to 60,000.  For the purpose of the calculation of the filing fee, the value of the transaction is the agreed consideration. In the case of acquisitions of companies or parts of companies generating turnover outside of Italy, the value of the transaction is adjusted applying the correction factor given by the ratio between the domestic and worldwide turnover realized by the company which is to be acquired.

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by Veronica Pinotti and Martino Sforza

The Italian Competition Authority today updated its merger control turnover thresholds.

As of 27 July 2009, Section 16(1) of Law no. 287 of 10 October 1990, requires prior notification of all mergers and acquisitions involving the following:

• aggregate turnover in Italy of all undertakings involved above EUR 461 million (revised under the terms of the same Section 16(1)); or
• aggregate turnover in Italy of the target company above EUR 46 million (as revised)
   

No notification is required if the target is a foreign company, which did not generate any turnover in Italy in the last 3 years, and it is not expected to do so as a result of the transaction.

Thresholds are adjusted each year to take account of increases in the GDP deflator index.  The resolution is published in the Authority's Bulletin after the increase in the index has been officially announced (as to the thresholds in force, see the Authority's resolution No.20074, published in Italian language in the Bulletin No. 27 of 27 July 2009).
 

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