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FTC Ratchets up Scrutiny on Pharmaceutical Deals

WHAT HAPPENED: Recent developments indicate that pharmaceutical deals are attracting greater scrutiny from the Federal Trade Commission (FTC). In September 2019, FTC Chairman Joseph Simons reportedly stated that the FTC will more closely scrutinize deals with overlaps involving products that are still in clinical study or development. Because of the high failure rate of products in early phases of study, the FTC typically has focused on overlaps between marketed products or products near Federal Drug Administration (FDA) approval, g., products in Phase III of the FDA pipeline. Chairman Simons’s statement makes clear that the FTC plans to examine earlier stage products while reviewing deals. In 2018, the director of the FTC’s Bureau of Competition announced in a speech that the FTC would favor divestitures of marketed drugs over pipeline drugs in pharmaceutical deals. Traditionally, when the FTC has had a concern about overlapping products, it has allowed the...

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Recent Indictments Demonstrate Increased Focus on Bid-Rigging in Government Procurements

Companies involved in the government contracting industry should take note that the government is honing in on anticompetitive conduct affecting government procurements. The federal government has demonstrated an increased interest in this area, and companies should refresh and audit their compliance programs to avoid hefty civil and criminal penalties and potential prison terms for implicated employees. Access the full article.

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

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...

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DOJ Consent Decree Changes Reduce Room for Error

WHAT HAPPENED The Department of Justice Antitrust Division (DOJ) implemented new provisions in merger consent decrees that: Make it easier for DOJ to prove violations of a consent decree and hold parties in contempt; Allow DOJ to apply for an extension of the decree’s term if the court finds a violation; and Shift DOJ’s attorneys’ fees and costs for successful enforcement onto the parties. DOJ has implemented these provisions in four decrees to date1, and has communicated that it will require the same in future decrees. WHAT THIS MEANS For merger decrees, by reducing its burden of proof for decree violations, DOJ is shifting additional risk to parties for divestitures that do not go as planned. Willfulness is not a required element of civil contempt2, so the change to the burden of proof is significant. Parties will need to be sure to commit to realistic divestiture timelines and asset packages that will not present undue implementation challenges. For...

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Beware of “Gun Jumping”: EU Court Upholds EUR 20 Million Fine Imposed On Norwegian Seafood Company

Between 2012 and 2013, Marine Harvest ASA (“Marine Harvest”), a Norwegian seafood company, acquired Morpol ASA (“Morpol”), a Norwegian producer and processor of salmon. Marine Harvest notified the transaction to the European Commission under the European Union’s Merger Regulation (“EUMR”), but implemented it prior to the European Commission having granted clearance. In 2014, the European Commission imposed a EUR 20 million fine on Marine Harvest for “jumping the gun”. On 26 October 2017, the General Court of the European Union (“General Court”) confirmed the European Commission’s decision (“Decision”). WHAT HAPPENED: On 14 December 2012, Marine Harvest entered into a share and purchase agreement (“SPA”) with companies owned by Jerzy Malek, the founder and former CEO of Morpol. Under the SPA, Marine Harvest acquired 48.5% of the shares in Morpol (“Initial Transaction”). The Initial Transaction was closed on 18 December 2012. On 15 January 2013, Marine Harvest...

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Significant Fine Imposed by the French Competition Authority in Floor Coverings Cartel

On October 19, 2017, the French Competition Authority (the “FCA”) imposed a EUR 302 million fine on the three leading companies in the PVC and linoleum floor coverings sector; Forbo, Gerflor and Tarkett, as well as the industry’s trade association, SFEC (Syndicat Français des Enducteurs Calandreurs et Fabricants de Revêtements de Sols et Murs), for price-fixing, sharing commercially sensitive information, and signing a non-compete agreement relating to environmental performance advertising. The FCA said the significant fine reflected the gravity of the offence and the long duration of the anticompetitive behavior, which for one company lasted 23 years. WHAT HAPPENED The proceedings were originally initiated by unannounced inspections carried out in the floor coverings industry in 2013 by the FCA, acting on information submitted by the DGCCRF (Directorate General for Competition Policy, Consumer Affairs and Fraud Control), which resulted in the discovery of...

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THE LATEST: Enforcers Continue Recent Focus on Innovation Concerns with Emerson/Pentair Consent Agreement

The FTC’s recent consent agreement addressing concerns regarding Emerson Electric Co.’s (Emerson) acquisition of Pentair Plc (Pentair) demonstrates a continued focus on whether transactions will reduce the incentive for merging parties to develop new, innovative products in the future. This is the latest in a string of cases which show that when the antitrust regulators raise innovation concerns, the merging parties need to propose a remedy that will involve the necessary research and development resources for the products at issue. WHAT HAPPENED: The FTC alleged that the acquisition combines the two largest suppliers of switchboxes, which monitor and control certain valves that regulate the follow of liquids through pipes in industrial applications. The FTC found that switchbox customers have a distinct preference for Pentair’s and Emerson’s switchbox brands, which account for approximately 60 percent of the switchbox market in the United States. The FTC was...

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THE LATEST: Entanglements and Concentrated Markets Require Divestiture in the Dairy Industry

On July 6, 2016, Danone S.A. (Danone) agreed to acquire The WhiteWave Foods Company (WhiteWave) for $12.5 billion. WhiteWave is the leading manufacturer of fluid organic milk in the United States and one of the top purchasers of raw organic milk. Danone is the leading US manufacturer of organic yogurt (Stonyfield). Nearly 90 percent of the raw organic milk used by Danone to manufacture organic yogurt is supplied via a strategic agreement by CROPP Cooperative (CROPP). As of 2009, the strategic supply agreement between Danone and CROPP also includes Danone providing CROPP with an exclusive license for the production and sale of Stonyfield branded fluid organic milk. WhiteWave and CROPP are the two largest purchasers and top competitors for purchasing raw organic milk from farmers in the Northeast US. Additionally, WhiteWave, CROPP and Danone-CROPP are the only nationwide competitors for the sale of fluid organic milk to retailers and have a 91 percent share of...

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Rolls-Royce Proposed Acquisition of Spanish Rival Industria de Turbo Propulsores. The European Commission Invites Interested Third Parties to Submit Comments

On 4 March 2017, the European Commission (Commission) published a notice concerning the notification of the proposed acquisition of the Spanish aircraft company Industria de Turbo Propulsores SA (Spain, ITP), by Rolls-Royce Holdings plc. (UK, Rolls-Royce). Interested third parties, such as competitors, suppliers or customers can provide the Commission with their observations on the likely impact of the proposed transaction on competition in order to facilitate its substantive assessment. Interested third parties’ observations must reach the Commission no later than 14 March 2017. Rolls-Royce is active in the development and manufacture of aircraft engines and power systems for civil aerospace, defense aerospace, marine and energy applications. ITP is a joint venture between Rolls-Royce and Sener Grupo de Ingenieria SA, and it is active in the design and manufacture of aircraft engine components.

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