WHAT HAPPENED:

  • On August 7, the FTC published a new Model Timing Agreement. Timing agreements are agreements between FTC staff and merging parties that outline the FTC’s expected timing for various events in order for it to conduct an orderly investigation during a Second Request.
  • The FTC expects the Model Timing Agreement to be used as drafted (or in a similar form) for all transactions that receive a Second Request. The FTC has used timing agreements frequently in the past, as has the DOJ, but the FTC has now published a model, which means this is likely to become the standard practice moving forward.
  • Parties are not required to enter into a timing agreement. However, in practicality, if parties do not agree to the timing agreement, the agency will proceed as if it must be in court to block the deal within 30 days of compliance. Therefore, it will prepare for litigation and will not consider settlement options or engage with the parties on the issues in the same way it would if the agency had more time under a timing agreement.
  • Some highlights of the new Model Timing Agreement are provided below (Note: All days listed refer to calendar days):
    • Parties must provide 30 days’ notice before certifying substantial compliance, and such notice cannot be provided until at least 10 days after signing the timing agreement.
    • Parties cannot close a proposed transaction until a specified time period after substantial compliance with the Second Request. The model indicates this will be 60 days in less complex matters or 90 days in more complex matters, but could be longer than 90 days in “matters involving particularly complicated industries.”
    • Parties must provide 30 days’ notice before consummating the proposed transaction and cannot provide notice more than 40 days before the date on which they have a good faith basis to believe they will have cleared other closing conditions and will be able to complete the transaction, absent an FTC action to block the transaction.
    • The agreement includes a stipulated Temporary Restraining Order (TRO) which will be entered in the event of a challenge. The TRO prevents the parties from consummating the transaction until after five days following a ruling on a motion for preliminary injunction.
    • The timing agreement contains other timing-related provisions such as for document productions and investigational hearings as part of the FTC’s investigation.

WHAT THIS MEANS:

  • Though the Model Timing Agreement does not affect the statutory expiration of the HSR waiting period, it commits the parties not to consummate the transaction for a much longer period and, therefore, effectively extends the waiting period far longer than the 30 days specified under the HSR Act.
  • The 40-day notice required before the closing date means that if there is another condition in the way of closing, such as an ongoing investigation before the European Commission or in China, the parties cannot provide their notice of the anticipated closing date to the FTC. The FTC will not be forced to litigate until the parties are in a position to complete their transaction in the near term, absent an FTC challenge.
  • The FTC has made clear that parties either have to sign up to a much longer period for the HSR review process than the statute specifies or be in an adversarial posture that is less likely to lead to the agency closing its investigation or settling the matter and more likely to lead to a court challenge.

United States: April – June 2018 Update

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

EU: April – June 2018 Update

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

A recent settlement shows that the US Federal Trade Commission (FTC) will use its enforcement authority to target employer collusion in the labor market.

WHAT HAPPENED

  • The FTC brought a complaint against a medical staffing agency, Your Therapy Source, LLC, and the owner of a competing staffing agency, Integrity Home Therapy, for allegedly agreeing to reduce the rates they would pay to their staff. Simultaneously, the FTC settled the case with a consent order that forbids the parties from any future attempt to exchange pay information or to agree on the wages to be paid to their staffs.
  • This was the first FTC wage-fixing enforcement action since the FTC and US Department of Justice (DOJ) issued their joint Antitrust Guidance for Human Resource Professionals in October 2016. That guidance stated that naked wage-fixing and no-poach agreements—e.g., agreements separate from or not reasonably necessary to a larger legitimate collaboration between the employers—are per se illegal under the Sherman Act.
  • The respondents in the Your Therapy Source case are staffing agencies that allegedly provided therapists such as physical therapists, speech therapists and occupational therapists to home health agencies on a contract basis. The respondents were responsible for recruiting the therapists and paying them a “pay rate” per visit or per patient.
  • According to the complaint, the alleged unlawful agreement began when one home health agency unilaterally notified Integrity that it was going to reduce the “bill rates” that it paid Integrity for its therapists, thus cutting into Integrity’s profit margins. Integrity’s owner then reached out through one of his therapists to the owner of Your Therapy Source and the two exchanged information about their respective rates paid to therapists. The two firms then reached an agreement via text message to reduce the rates they paid therapists.
  • Once the respondents had reached the agreement to reduce therapists’ pay, Integrity’s owner allegedly reached out via text to four other competing therapy-staffing agencies to solicit their participation in the agreement.
  • The FTC’s complaint alleged that this conduct violated Section 5 of the FTC Act, which prohibits unfair and deceptive acts and practices.

WHAT THIS MEANS

  • Wage-fixing cases have been notable in the health care industry, with prior DOJ enforcement against a hospital buying group and several class actions against health care providers in the 2000s that alleged the fixing of nurses’ pay.
  • Companies should strictly avoid colluding with other firms on wages, salaries, fringe benefits or other remuneration paid to workers. Companies should also exercise extreme caution in information exchanges regarding wages and benefits, which can lead to improper agreements or result in independent antitrust liability if not properly supervised.
  • Firms should be mindful of the DOJ/FTC’s joint guidance on information sharing in the health care industry (see link at p. 50), which also provides a useful template for how the US antitrust agencies will analyze information sharing more generally. The joint guidance provides a safety zone for wage, salary and benefit surveys where:
    • The survey is managed by a third party
    • The information provided by survey participants is more than 3 months old
    • There are at least five providers reporting data on which each statistic is based, no individual provider’s data represents more than 25 percent on a weighted basis of that statistic, and any information disseminated is sufficiently aggregated that it would not allow recipients to identify the prices charged or compensation paid by any particular provider.
  • Although FTC’s settlement in this matter was civil in nature, these same facts could also have led to a criminal investigation by the DOJ Antitrust Division. The agencies’ 2016 Human Resources Guidance specified that naked wage-fixing or no-poach agreements among employers could be prosecuted criminally. More recently, the DOJ has stated that it has several criminal investigations open into employer collusion in the labor market.

WHAT HAPPENED

On July 18, 2018, US Food and Drug Administration (FDA) Commissioner Scott Gottlieb delivered a speech at The Brookings Institution in Washington, DC, discussing how to bolster competition from biosimilars while maintaining innovation.

The Commissioner noted the absence of true competition among biologics from biosimilar products in the United States, similarly to what the country experienced 30 years ago with respect to generics. The Commissioner said that this situation is caused, in part, by what he views as anticompetitive practices implemented by branded manufacturers, such as:

  • Rebating schemes in which drug manufacturers bundle discounts to health insurers and employers across different pharmaceutical products;
  • Multi-year contracts granting important rebates to payors, often entered into right before the entry of a biosimilar on the market;
  • Volume-based rebates;
  • Tying rebates, i.e., when rebates are offered if a product is bought together with a biologic;
  • Patent thickets, i.e., when branded manufacturers’ own dense portfolios of overlapping intellectual property rights cover biologics; and
  • Bundling biologics with other products, i.e., when a product is sold together with a biologic.

Continue Reading THE LATEST: FTC to Look Closely at Competition between Biologics and Biosimilars and Patent Protection Strategies of Branded Manufacturers

The recent FTC decision in the Northrop Grumman / Orbital ATK matter has shed light on the agency’s vertical merger enforcement policy and outlined a path to antitrust merger clearance for the Aerospace and Defense industry. The FTC’s June 5 consent decree shows behavioral remedies remain a viable solution if the parties can prove both that the DoD would benefit from the transaction and that those benefits would be lost if the agency required a divestiture.

Continue Reading.

 

WHAT HAPPENED

In March, we discussed the US Department of Justice (DOJ) Antitrust Division’s move to update its standard consent decree language to enhance decree enforceability. Among other things, the changes:

  • Reduced the burden of proof for DOJ to demonstrate a decree violation in court, and
  • Shifted DOJ’s attorney’s fees to the losing party in the event that a decree enforcement action became necessary.

Now, DOJ Antitrust Division Assistant Attorney General Makan Delrahim has further intensified the Division’s compliance focus by announcing the creation of an Office of Decree Enforcement at the Division (Office). The Office would have “the sole goal to ensure compliance with, and enforcement of, [Antitrust Division] decrees.” Continue Reading THE LATEST: DOJ Continues Its Intense Focus on Decree Compliance

United States: January – March 2018 Update

One year into the Trump administration, the US antitrust agencies are finally starting to implement their enforcement policies. Most notably, trial began in the US Department of Justice’s (DOJ) challenge of the AT&T/Time Warner merger, which is the Antitrust Division’s first significant vertical challenge in several decades. Judge Richard J. Leon’s opinion in that case could alter the outlook for several other vertical transactions pending before the agencies. While the DOJ was preparing for trial, the Federal Trade Commission (FTC) was preparing for a transition to five new commissioners, who were approved by the Senate in April. It remains unclear whether the new, Republican-led FTC will be more moderate in its enforcement efforts, similar to prior Republican administrations, or will follow in the footsteps of President Trump’s DOJ, which has been surprisingly aggressive.

EU: January – March 2018 Update

The European Commission (EC) continued to be quite active in the first quarter of 2018, clearing five mergers. The most significant decision was the approval of a megamerger in the agrochemical sector—Bayer/Monsanto—where the parties submitted a remedy package that totalled over €6 billion. This remedy package included divestitures of research and development assets that addressed the EC’s concerns about innovation, similar to the EC’s Dow/DuPont clearance last year. In addition to Bayer/Monsanto, two other proposed acquisitions in the chemicals sectors fell through, most notably Celanese/Blackstone, due to excessive divestiture requests required by the Commission. Continue Reading Antitrust M&A Snapshot

On April 27, 2018, the United States Senate confirmed President Trump’s five nominees for Commissioners of the Federal Trade Commission (FTC). Three are Republicans: Chairman Joseph Simons, Noah Phillips and Christine Wilson, and two are Democrats: Rohit Chopra and Rebecca Slaughter. The Senate’s vote returns the FTC to a full complement of Commissioners for the first time under the Trump Administration. Of note to participants in the health care sector: the FTC shares civil antitrust law enforcement jurisdiction over the health care industry with the Department of Justice Antitrust Division, but takes the lead when it comes to the health care provider, pharmaceutical and medical device industries. Continue Reading THE LATEST: Health Care Antitrust Enforcement Remains a Top Priority for New FTC Commissioners

The Federal Trade Commission (FTC) recently announced that it has challenged a merger between Wilhelmsen Maritime Services (Wilhelmsen) and Drew Marine Group (Drew) because of an overlap in service to “global fleet customers,” a narrow customer segment that purchases marine water treatment chemicals and services.

WHAT HAPPENED:

  • The FTC issued an administrative complaint and filed a complaint in federal court seeking a temporary restraining order and preliminary injunction, asserting that Wilhelmsen’s proposed $400 million acquisition of Drew would significantly reduce competition in the market for marine water treatment chemicals and services used by global fleets.
  • The FTC enforcement action focuses on a narrow sub-segment of customers, global fleet customers, that buys marine water treatment chemicals and services.
  • The FTC distinguished global fleet customers from other marine water treatment chemical customers on the basis that:
  • (1) global fleets have specialized needs that only a few suppliers can meet
    (turn-key global sales, service and delivery capabilities, as well as consistent and reliable product supply); and
  • (2) these customers seek out suppliers via requests for proposal and direct negotiation and therefore potential suppliers can price discriminate to that subset of customers.
  • Because of the specific needs of global fleet customers and because global fleet suppliers can identify which customers are seeking service for global fleets, suppliers are able to price discriminate to the global fleet customer set.
  • The FTC alleged a harm to competition because their investigation showed Wilhelmsen and Drew are each other’s closest competitors based on company documents, statements by the business personnel, and bid data showing that the companies are most frequently the first and second choice for global fleet customers. In addition, the FTC noted that Wilhelmsen and Drew would control at least 60 percent of the market with the next largest competitor having less than a 5 percent share.
  • The FTC complaint disparaged the remaining market participants as unable to practicably compete with Wilhelmsen and Drew to service global fleets because they are perceived as offering lower quality products with less reliability, having more limited service capabilities, and failing to price competitively.

WHAT THIS MEANS:

  • The FTC’s enforcement action continues a trend of applying price discrimination markets. These markets are characterized by: (1) buyers with special requirements that only select suppliers can service; and (2) sellers who can identify the buyers with those special requirements and selectively price based upon the knowledge of those special needs.
  • Antitrust enforcement of price discrimination markets lead to narrower product market definitions. Therefore, applying price discrimination markets may result in antitrust enforcers challenging mergers that appear lawful when viewed as a broader market.
  • There is increased risk of price discrimination markets being applied by antitrust enforcers in industries in which:
    • The customers’ end uses differ for the same product;
    • Merging companies’ documents recognize distinctions among customer groups; and
    • Groups of customers require unique product characteristics.

United States: July – December 2017 Update

Although delays in antitrust appointments continued throughout the second half of 2017, the Federal Trade Commission (FTC) and Department of Justice (DOJ) continued to actively investigate and challenge mergers and acquisitions. Notably, the DOJ challenged the vertical AT&T/Time Warner transaction, the first vertical merger the DOJ has tried since the 1970s. The end of 2017 showed a trend where the FTC and DOJ are focusing on structural remedies rather than behavioral remedies. Additionally, at the end of 2017, the FTC and DOJ challenged several consummated transactions, as well as transactions that were not reportable under the Hart-Scott-Rodino Antitrust Improvements Act.

European Union: July – December 2017 Update

After two concentrations within the agrochemicals sector in the second quarter of 2017 — Dow/DuPont and ChemChina/Syngenta — the European Commission continued to see megamergers notifications in the agrochemical sector in the second half of 2017. The fourth quarter of 2017 saw the second Commission merger decision challenged successfully this year and the fourth case of annulment of a clearance decision since the implementation of the EU Merger Regulation.

Snapshot of Events (Legislation/Agency Remarks/Speeches/News, etc.)

United States

  • Seats at the FTC Remain Unfilled Despite Continued Progress in the Appointment of New Antitrust Leadership

After a long wait, on September 27, the Senate confirmed Makan Delrahim, President Trump’s nominee to head DOJ’s antitrust division. The DOJ has also named several deputies to serve under Delrahim: Andrew Finch, Bernard Nigro, Luke Froeb, Donald Kempf and Roger Alford. These positions are not subject to Senate confirmation.

President Trump nominated four Commissioners for the FTC, including Joseph Simons to lead the FTC as Chairman. Joe Simons is an experienced antitrust attorney who was previously Director of the FTC’s Bureau of Competition. He has mainstream Republican views. Until the new Commissioners are confirmed, there must presently be unanimity between the two Commissioners for the FTC to take action.

  • FTC Warns That It May Challenge Vertical Mergers

Acting Bureau of Competition Director, Bruce Hoffman, gave remarks at the Global Antitrust Enforcement Symposium on September 13, 2017. He said that the FTC would be ready to challenge vertical mergers if there were competition issues to resolve. He added that the FTC may impose structural remedies in vertical mergers where it views the remedy as necessary to prevent competitive harm.

  • Senator Amy Klobuchar (D-Minn) Introduces New Legislation to Curtail Market Concentration and Enhance Antitrust Scrutiny of Mergers and Acquisitions

On September 14, 2017, two bills were introduced by Senator Amy Klobuchar to the Senate: the Consolidation Prevention and Competition PromotionAct (CPCPA) and the Merger Enforcement Improvement Act (MEIA). Both bills are part of the Senate Democrats’ “A Better Deal” antitrust agenda. The CPCPA would impose extra scrutiny on so-called “mega deals” by shifting the burden of proof from antitrust enforcers to the companies. It would also update the Clayton Act to refer to “monopsonies” in addition to “monopolies.” The MEIA would increase the resources allocated to antitrust enforcers, both in terms of substantive information and financial terms.

  • DOJ To Focus on Structural Remedies

Assistant Attorney General Makan Delrahim gave remarks at the American Bar Association Section of Antitrust Law’s Fall Forum on November 16, 2017. He announced that DOJ would seek to reduce the number of long-term consent decrees and focus on structural remedies instead of behavioral remedies.

  • Senator Elizabeth Warren (D-Mass) Criticizes Recent Antitrust Enforcement

In a speech at the Open Markets Institute on December 6, 2017, Senator Elizabeth Warren advocated steps to improve antitrust enforcement. On mergers, she stated that increased enforcement is needed not just for horizontal mergers between direct competitors, but also for vertical mergers.

European Union

  • Application of EU Merger Control Clarified: Non-Full Function Existing Joint Ventures Fall outside the Scope of EU Merger Control

On September 7, 2017, the European Court of Justice decided that, where joint control is acquired over a new or existing undertaking (or parts of an undertaking), that transaction can only fall within the scope of the EU Merger Regulation where the resulting entity will be ‘full-function.’

  • Marine Harvest Gun Jumping Fine Upheld by the General Court

On October 26, the General Court confirmed the €20 million fine imposed by the Commission on Norwegian salmon farmer Marine Harvest in 2014 for allegedly implementing its acquisition of salmon producer Morpol ASA before notifying and receiving clearance from the Commission.

While Marine Harvest had been in contact with the Commission since December 2012, it only formally notified the acquisition of Morpol ASA on 9 August 2013. The Commission held, and the General Court agreed, that the company’s merger filing obligation was triggered several months earlier, when Marine Harvest acquired a 48.5 percent controlling shareholding in Morpol ASA in December 2012.

  • EC Is Ramping Up Enforcement: Conditional Merger Clearances Doubled during Margrethe Vestager’s First Three Years

Since the start of Vestager’s tenure on November 1, 2014, the Commission cleared a total of 70 deals subject to commitments, whereas between February 2010 and February 2013 — Joaquin Almunia’s first three years in the Commission — 34 deals were approved conditionally. Vestager sought remedies in 6.8 percent of cases, while Almunia only required them in 3.9 percent.

In 2014–2017, 55 conditional clearances were granted in Phase I, while 15 were Phase II cases. Between 2010 and 2013 there were 25 Phase I conditional clearances and 9 Phase II, according to data from the EC’s merger database.

Read the full report here.