ANTITRUST ALERT
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
FTC
Subscribe to FTC's Posts

DOJ Signals Heightened Scrutiny on Information Exchanges and Competitor Collaborations

by , , and | Feb 15, 2023 | ,

WHAT HAPPENED

On February 3, 2023, the US Department of Justice’s (DOJ) Antitrust Division announced the withdrawal of three policy statements related to antitrust enforcement in healthcare. Although the withdrawn statements focus on healthcare, DOJ’s decision to withdraw these statements will have broad impacts across industries.

The three policy statements, issued in 1993, 1996, and 2011, relate to competitor collaboration and information sharing, and established “safety zones” of activities shielded from antitrust scrutiny. The 1996 Statements of Antitrust Enforcement in Health Care (1996 Statements) were revised and expanded upon the 1993 Statements. Though ostensibly related to healthcare, the guidance has been relied upon by all industries and understood to cover all manner of competitively sensitive information. Two of the safety zones most often relied on by companies relate to competitor exchanges of price and cost information, and competitor joint purchasing arrangements.

Information Exchanges

The safety zone on information exchanges (Statement 6 of the 1996 Statements) stated that, in general, the agencies would not challenge an exchange of price or cost information (e.g., employee compensation) if the following three conditions were met:

  1. The exchange is managed by a third party (e.g., a trade association or consultant).
  2. The information is more than three months old.
  3. The exchange has five or more participants contributing data, and no individual participant’s data represents more than 25% of any statistic; and no individual participant’s data can be identified.

Companies have relied on this safety zone in conducting surveys and benchmarking related to pricing, supply costs, and salaries. These surveys have served as critical compliance tools. Organizations exempt from federal income tax often use surveys to demonstrate fair market value compensation to safeguard against claims of private inurement and private benefit. Similarly, healthcare companies routinely use benchmarking studies to demonstrate fair market value compensation for compliance with fraud and abuse laws.

Group Purchasing Organizations

The safety zone on joint purchasing arrangements (Statement 7 of the 1996 Statements) stated that, in general, the agencies would not challenge joint purchasing arrangements (e.g., group purchasing organizations (GPOs)) if the following two conditions were met:

  1. The purchases account for less than 35% of the total sales of the purchased product or service.
  2. The cost of the products or services purchased jointly accounts for less than 20% of the participants’ revenues.

DOJ cited changes in the healthcare landscape as the rationale for withdrawing these policy statements, specifically indicating that the statements were “overly permissive” on information sharing. In a speech the day before DOJ’s announcement, Principal Deputy Assistant Attorney General (DAAG) Doha Mekki stated that the safety zone factors “do not consider the realities of a transformed industry” and “understate the antitrust risks of competitors sharing competitively sensitive information.” DAAG Mekki explained that:

  • Information exchanges managed by third parties can have the same anticompetitive effects—and the use of a third party enhances anticompetitive effects.
  • New algorithms and AI learning increase the competitive value of historical information (more [...]

    Continue Reading


read more

Antitrust M&A Snapshot | Q4 2022

by , , and | Jan 19, 2023 | , , , ,

Topics covered in this edition:

• DOJ Sees First Merger Win After String of Losses
• FTC Brings Suit Against Microsoft/Activision
• Updated Merger Guidelines Expected Soon
• Merger Fees Changing
• The EC Launches a Consultation on Its Draft Revised Market Definition Notice
• UK Orders a Chinese Firm to Divest Its 83% Controlling Stake in a Welsh Semiconductor Wafer Factory Based on National Security Concerns

Access the full issue.

McDermott Will & Emery Juriste Nabil Lakhal contributed to this newsletter. 



read more

Navigating the FTC’s Expanded Unfair-Competition Stance

by , and | Nov 21, 2022 |

On November 10, 2022, the Federal Trade Commission (FTC) voted to approve a new policy statement interpreting the FTC’s authority under Section 5 of the Federal Trade Commission Act, which prohibits “unfair methods of competition in or affecting commerce.” The newly adopted policy statement provides a significantly more expansive interpretation of the FTC’s authority and replaces all prior FTC guidance on the scope and meaning of unfair methods of competition under Section 5. The policy statement asserts that the FTC was set up to be an expert body charged with determining what constitutes unfair methods of competition and, accordingly, the FTC is entitled to great weight in its findings.

In this Law360 article, McDermott’s Greg Heltzer, Graham Hyman and Raymond Jacobsen discuss the significance of the new policy interpretation and what it means for Section 5 enforcement actions.

Access the article.



read more

Antitrust M&A Snapshot | Q3 2022

by , , , and | Nov 18, 2022 | , , , , ,

In the United States, the US Department of Justice (DOJ) and the Federal Trade Commission (FTC) lost four merger challenges (Illumina/GRAIL, UnitedHealth/Change Healthcare, U.S. Sugar/Imperial Sugar and Booz Allen/EverWatch) in September. The losses demonstrate that parties willing to litigate can have success in court. The absence of “smoking gun” documents and lack of a presumption of anticompetitive effects (based on market shares and concentration) made these cases very difficult for the government. The judges in these cases tended to credit structural and behavioral remedies that the government felt were insufficient and were persuaded by real-world testimony from executives and third parties contradicting the government’s theories of changed economic incentives from the transactions.

In July 2022, the European Parliament published the final text of the European Union’s upcoming instrument to address distortive foreign subsidies, following a provisional political agreement reached between the EU lawmakers in June (Foreign Subsidies Regulation). The Foreign Subsidies Regulation introduces a new mandatory screening mechanism including notification obligations and the European Commission’s right of ex officio investigations, which will have a considerable impact on M&A transactions and procurement procedures.

The Foreign Subsidies Regulation will enter into force once it is formally adopted by EU lawmakers and published in the Official Journal. It will become directly applicable across the European Union six months after entry into force. The notification obligations will start to apply nine months after entry into force. The Commission also is currently drafting procedural rules on how to notify transactions, how to calculate time limits, and the process for preliminary reviews and in-depth probes when there is a suspicion of distortive foreign subsidies.

Access the full issue.



read more

Why Courts Are Rejecting Agencies’ Merger Challenges

by , and | Oct 24, 2022 | , ,

The US Department of Justice’s and the Federal Trade Commission’s losses in three merger challenges in September and a fourth in October demonstrate that merging parties can close difficult transactions if willing to fight the agencies in court. In this Law360 article, McDermott’s Jon B. Dubrow, Joel R. Grosberg and Matt Evola discuss these four cases and what they mean for merging parties.

Access the article.



read more

Seven Corporate Directors Resign: DOJ Ramps Enforcement Against Board Members Serving on Competitors’ Boards

by , and | Oct 21, 2022 |

WHAT HAPPENED

  • Seven directors resigned from corporate boards following promises of enforcement of Clayton Act Section 8 (15 U.S.C. § 19) by the US Department of Justice (DOJ), Antitrust Division (the Division), the Division announced Wednesday.
  • The directors served on the boards of corporations that the DOJ asserted competed in a variety of sectors, including information technology, software, and manufacturing.

WHAT’S THE LEGAL CONCERN

  • Section 8 prohibits “interlocking directorates” (per se violation), which occur when the same individual serves simultaneously as an officer or director of two competing companies (direct interlocks) or when different individuals on boards of competing companies act on behalf of and at the direction of a single firm (indirect interlocks through deputization). In its press release, the DOJ noted that some of the interlocks arose because a private equity firm appointed different personnel to the boards of competing companies.
  • The goal of Section 8 and the DOJ action is to decrease potential opportunities for the exchange of sensitive information between competitors and the risk of anticompetitive conduct more generally.
  • Exemptions might apply. There are de minimis exemptions if a) the competing sales are less than $4.1 million (threshold updated annually); b) the competing sales of either corporation represent less than 2% of its total sales; or c) the competing sales of each corporation are less than 4% of its total sales. A careful analysis (similar to that done in merger analysis) is necessary to determine whether an exemption might apply.
  • Not just corporations? While the plain language of Section 8 refers to interlocks involving “corporations,” the DOJ has stated its view that Section 8 also covers interlocks between non-corporate entities, such as LLCs (this is an open area of law).
  • Not just the same person? While the plain language of Section 8 states that it applies when the same “person” sits on the board or acts as an officer of two competitors, the DOJ interprets Section 8 broadly to mean that two different individuals appointed by a common entity cannot serve on boards of competitors because the entity is a “person” and is serving on the boards through its designees.

WHAT ARE THE RISKS

  • Interlocks can create significant antitrust risk. While the DOJ’s concerns with interlocks seem to be assuaged with the quick removal of the Corporate Director identified, interlocks have served as the factual underpinning for antitrust conspiracy claims. Therefore, companies should be proactive in eliminating problematic interlocks, as the interlock combined with parallel action by competitors in an industry could serve as the factual basis for long and costly conspiracy investigations or litigation and could support complaint allegations to defeat a Twombly-based motion to dismiss.

ANTICIPATE CONTINUED ENFORCEMENT

  • While the resignations are not novel, they represent a major amplification of corporate responses to what Assistant Attorney General Jonathan Kanter has described as “an extensive review of interlocking directorates across the entire economy” and [...]

    Continue Reading


read more

Antitrust M&A Snapshot | Q2 2022

by , , , , and | Sep 26, 2022 | , , , , , , ,

In the United States, parties continue to be cautious in litigating challenged transactions. Since January 2021, the US Federal Trade Commission (FTC) and Department of Justice (DOJ) filed lawsuits (or threatened to sue) to block 16 transactions. Of those transactions, 12 were abandoned and six are in various stages of litigation. The data suggest that the FTC’s and DOJ’s aggressive merger enforcement policy is raising the stakes for parties to potential mergers and acquisitions, including an increased willingness by the agencies to litigate potentially problematic transactions.

Between May 6 and June 3, 2022, the European Commission (Commission) held a public consultation to seek views on the draft revised Merger Implementing Regulation (Implementing Regulation) and the Notice on Simplified Procedure. This consultation was launched in the context of the Commission’s review process of the procedural and jurisdictional aspects of EU merger control.

On April 20, 2022, the UK government proposed new measures to boost consumer protection rights and competition rules. In particular, the UK government’s reforms aim to strengthen the Competition & Markets Authority’s (CMA) powers and alleviate burdens on smaller companies.

Access the full issue.



read more

FTC Flexes Its Muscle in Suit against Kochava (But May Not Like the Results)

by , and | Sep 1, 2022 | , ,

On August 29, 2022, the Federal Trade Commission (FTC) filed a lawsuit against Kochava, Inc. alleging that Kochava engaged in unfair and deceptive practices by selling the “precise location information” of consumers. This suit comes on the heels of the FTC’s announcement earlier this month that it would “crack down” on “commercial surveillance practices” and July’s warning that the agency would be exercising its enforcement authority against the “illegal” use and sharing of sensitive consumer data.

IN DEPTH

The FTC alleges that Kochava amassed a large amount of sensitive data by tracking the mobile advertising IDs from hundreds of millions of mobile phones, and that such data could be used to track people visiting abortion clinics, domestic abuse shelters, places of worship and other sensitive locations. The FTC then said that Kochava sold that data without first anonymizing it, allowing anyone who purchased the data to use it to track the movements of the mobile device users. The FTC wants to not only block Kochava from selling such data, but also require them to delete and destroy it. In its complaint, the FTC relied on the FTC Act’s general prohibition against “unfair and deceptive acts or practices” and alleged that the company unfairly sold the sensitive data.

Kochava, which beat the FTC to the courthouse and preemptively filed a lawsuit against the FTC prior to the FTC’s complaint, asserted that all of the location data came from third-party data brokers who obtained the information from consenting consumers. Despite the alleged consent, Kochava says it is in the process of implementing steps to remove health services location data from its database. Kochava argued that the litigation was the outcome of the FTC’s failed attempt to implement a vague settlement that had no clear terms and made the problem a moving target.

The Kochava suit brings to the forefront several competing policy considerations, the determination of which could shape the scope of the FTC’s enforcement authority for years to come. The first and foremost issue that the Kochava suit raises is whether the FTC has the authority to effectively impose a consent-based regime for the sale of sensitive consumer information when no federal law enforced by the FTC (other than the Children’s Online Privacy Protect Act (COPPA), which applies to data collected about children under 13) expressly provides for that requirement. While it is not uncommon for the FTC to take expansive views of its enforcement authority, that authority has been successfully challenged in recent years. (See AMG Capital Management, LLC v. FTC, which held that the FTC does not have the statutory authority to seek equitable monetary relief under Section 13(b) of the FTC Act).) Now, Kochava will test the FTC’s authority to regulate in the privacy space—and the FTC may not like the result.

In the unlikely event that Kochava were to litigate against the FTC all the way to the Supreme Court of the [...]

Continue Reading



read more

FTC Takes Action Limiting Overbroad M&A Non-Compete

by | Jun 24, 2022 | ,

WHAT HAPPENED

  • GPM Investments (GPM) acquired 60 gas stations from Corrigan Oil (Corrigan).
  • As part of the acquisition agreement, Corrigan agreed not to compete for a period of time with the gas stations purchased from Corrigan. In addition, Corrigan agreed not to compete with GPM for another 190 gas stations that GPM already owned.
  • Few of the 190 existing GPM locations were “anywhere near an acquired Corrigan” gas station.
  • Because the transaction would reduce the number of competitors from 3-to-2 or fewer in five areas, the Federal Trade Commission (FTC) required divestitures in those areas.
  • Additionally, the FTC determined that the non-compete was overbroad, noting that the non-compete was “untethered to protecting goodwill acquired in the acquisition” because it affected gas stations in “areas geographically distinct from the acquired” gas stations. For this reason, the non-compete was highly suspect and warranted FTC scrutiny.
  • The FTC required the parties to revise the transaction agreement non-compete such that it was no longer in duration than 3 years and impacted an area no greater than 3 miles from each acquired gas station.

WHAT’S NEXT

  • FTC Chairwoman Lina Khan confirmed that some non-compete agreements that are part of a transaction agreement are “necessary to protect a legitimate business interest in connection with the sale of a business, such as the goodwill acquired in a transaction.”
  • Here, the non-compete terms were determined, however, to be “facially” overbroad in scope and unrelated to protecting any goodwill GPM was acquiring with the Corrigan stations.
  • The FTC’s action suggests that it is on the lookout for overbroad non-competes that are not reasonably related to a legitimate purpose even if part of a legitimate transaction agreement.
  • The action by the FTC provides sellers with an example to argue that onerous non-competes demanded by buyers have the potential to raise antitrust issues that could slow deal timelines, particularly if a non-compete is overbroad in relation to the products impacted, the duration of the non-compete, and/or the breadth of the geography covered.

Alex Grayson, a summer associate in the Washington, DC, office, also contributed to this article.



read more

Antitrust M&A Snapshot | Q1 2022

by , , , and | May 6, 2022 | , , , , , ,

In the United States, antitrust agencies continue with their aggressive merger enforcement posture. The agencies challenged four transactions this quarter, including multiple vertical mergers. The agencies are increasingly skeptical of merger remedies, including behavioral remedies and divestitures. The Federal Trade Commission (FTC) and the Department of Justice (DOJ) are working together to update the current Horizontal Merger Guidelines. The updated guidelines will likely signal a more aggressive enforcement posture.

The European Commission (Commission) blocked one transaction in Phase II and cleared two transactions. Three transactions were abandoned after the Commission initiated a Phase II investigation. The Commission made use of partial referrals to member state national competition authorities in two cases. It also ordered Hungary to withdraw its decision to prohibit Vienna Insurance Group’s (VIG) acquisition of AEGON Group’s Hungarian subsidiaries on foreign direct investment grounds, holding that Hungary’s prohibition decision infringed Article 21 of the EU Merger Regulation.

In the United Kingdom, the first quarter of 2022 also saw a number of Phase II investigations. Specifically, the Competition and Markets Authority (CMA) cleared one transaction in Phase II and blocked two other transactions in Phase II. One transaction was abandoned after the CMA initiated a Phase II investigation. The CMA blocked the merger of Cargotec and Konecranes just one month after the EC cleared the transaction subject to commitments in Phase II. The parties abandoned the transaction following the CMA’s decision.

Access the full issue.



read more

BLOG EDITORS

Gregory E. Heltzer

STAY CONNECTED

Subscribe

TOPICS

ARCHIVES

Ranked In Chambers USA 2022
US Leading Firm 2022