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Annual European Competition Review 2019

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

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

This review was prepared by the Firm’s European Competition Team in Brussels and Paris. Throughout 2019 they have monitored legal developments and drafted the summary reports.

Access the full report.




California Attorney General Announces Historic $575 Million Settlement of Antitrust Suit Against Sutter Health

California Attorney General Xavier Becerra (AG Becerra) announced on Friday, December 20, 2019, the terms of a comprehensive settlement agreement reached with Sutter Health (Sutter), the largest hospital system in Northern California.

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Interim Measures Imposed on Broadcom: The Re-Awakening of a Once-Dormant Tool?

The European Commission (EC) has found, on a prima facie basis, that Broadcom abused its dominant position. In order to avert the risk of serious and irreparable damage to competition, Broadcom has been ordered to cease its prima facie abusive conduct with almost immediate effect. This is the first time in 18 years that the EC has made use of such measure and could signal the re-awakening of a once-dormant tool.

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EU Competition Commissioner Vestager Nominated for a Second Term – a Tale of Two Hats

What Happened:

On 10 September 2019, European Commission President-elect Ursula von der Leyen nominated Margrethe Vestager as Competition Commissioner for a second consecutive term. As part of a structural shake-up of the Commission, involving the institution of eight Vice-Presidents, three of whom will be “Executive Vice Presidents”, she will additionally serve as “Executive Vice President for a Europe fit for the Digital Age”. As head of the competition portfolio Ms. Vestager will be supported by DG-Comp. As chief coordinator of the digital portfolio she will be supported by the Commission’s Secretariat-General. With respect to the latter role in particular, Ms. Vestager will be charged with ensuring that “Europe fully grasps the potential of the digital age and strengthens its industry and innovation capacity” and will be responsible for specific initiatives including new laws governing digital platforms and a potential tax on digital companies. Subject to European Parliament consent, which is expected to be given, she will carry out this dual rule until 2024.

What This Means:

Ms. Vestager’s mission as Competition Commissioner will be based on the following priority actions:

  1. Strengthening competition enforcement in all sectors: this tenet focuses on improving case detection, expediting investigations and facilitating cooperation with and between EU national competition authorities, including global cooperation among competition authorities.
  2. Evaluate and review Europe’s competition rules: this will cover antitrust regulations that are due to expire during her mandate (e.g. the Verticals Block Exemption Regulation (Reg. 330/2010), the ongoing review of the merger control rules and the review of State aid rules and guidance.
  3. Use of the sector inquiry instrument in new and emerging markets: in the context of new and emerging markets, sector inquiries will be carried out in markets that the Commission believes are not working as well as they should, and that breaches of the antitrust rules might be a contributory factor. Ms. Vestager already presided over the Commission’s sector inquiry into the e-commerce sector in 2015.
  4. Develop tools and policies to address the distortive effects linked to state-owned companies or subsidized companies from outside the EU but operating in the EU.

While it is somewhat unusual for a Competition Commissioner to be re-elected for a second term, her re-nomination serves as a testament to widespread appreciation for her unwavering commitment to ensuring consumer welfare. That being said, and against the Commissioner’s mandate to secure enhanced global cooperation amongst competition authorities, the move will likely raise eyebrows on Capitol Hill. This is principally because of Ms. Vestager’s alleged crusade against many of the biggest U.S. tech companies, a path likely to be pursued during the Commissioner’s second term in office. Indeed, her mandate over rule-making related to the digital economy could also give her increased influence over global tech regulation. Furthermore, her mission appears to be heavily influenced by the fall-out of the failed Alstom/Siemens railway merger. It will be interesting to see, for example, what role, if any, industrial policy will play under the EU Merger Regulation going forward. With Ms. Vestager’s focus [...]

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Antitrust Litigation Update for Health Care Providers

2018 saw a significant upswing in antitrust litigation against health care providers; 27 cases were filed in 2018 versus 17 in 2017. In the latest Antitrust Update for Health Care Providers, we discuss what caused the notable rise, what kinds of cases were brought over the past two years and how they were decided, and what cases warrant particular attention in 2019.

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Federal Judge Finds Qualcomm Violated the FTC Act Through Monopolistic and Exclusionary Conduct

On May 21, a California federal judge ruled in favor of the Federal Trade Commission (FTC) in its suit against Qualcomm in a much-anticipated decision, concluding that Qualcomm violated the FTC Act by maintaining its monopoly position as a modem chip supplier through a number of exclusionary practices, including refusing to license standard essential patents (SEPs) on fair, reasonable and non-discriminatory (FRAND) terms. Qualcomm likely will appeal the decision to the US Court of Appeals for the Ninth Circuit, but in the meantime, the court’s sweeping decision is likely to affect the course of dealing between SEP-holders and licensees. The decision is likely to substantially affect the ways in which SEP-holders take their technology and associated components that they manufacture to market.

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Federal Court Opinion Reminds Health Care Providers to Assess the Antitrust Risks of Competitor Affiliations

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

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



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

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

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

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Annual EU Competition Review 2018

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

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

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

Access the full report.




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

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

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

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