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Executive Order Encourages FTC, DOJ to Address Hospital Consolidation, Vigorously Enforce Antitrust Laws

President Biden recently issued an executive order affirming his administration’s policy of enforcing the antitrust laws to “combat the excessive consolidation of industry” and cited healthcare markets as one of several priorities. The Federal Trade Commission (FTC) and US Department of Justice (DOJ) already have been actively enforcing the antitrust laws in provider consolidation matters. The FTC is currently challenging the proposed merger of two health systems in New Jersey, and in the past year unsuccessfully challenged the combination of Jefferson Health and Einstein Health in Philadelphia and successfully challenged the proposed combination of two health systems (Methodist Le Bonheur and Saint Francis) in Memphis.

The executive order follows a proposed bill to increase budgets for the FTC and DOJ, FTC resolutions on compulsory process in healthcare investigations, congressional calls to investigate the use of COVID-19 Provider Relief Fund payments for acquisitions, the FTC physician practice acquisition retrospective and other health antitrust developments.

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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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THE LATEST: Ninth Circuit Affirms Dismissal of Antitrust Counterclaim against Labor Union Clarifying Scope of Noerr-Pennington Doctrine and the Implied Labor Exemption

On July 24, 2017, the US Court of Appeals for the Ninth Circuit affirmed the dismissal of an antitrust counterclaim brought by ICTSI Oregon, Inc. (ICTSI), the operator of a marine shipping facility, against the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA). ILWU is a labor union that represents many ICTSI employees, including longshoremen and mechanics. PMA is a multi-employer collective bargaining association covering the West Coast of the United States, which represents employers, including ICTSI, in negotiations with labor unions.

The opinion elucidates the current law surrounding the scope of Noerr-Pennington immunity and the implied labor exemption to antitrust liability.

WHAT HAPPENED
  • ICTSI’s antitrust counterclaim arose out of a labor dispute concerning ILWU’s collective bargaining agreement (CBA) with PMA, which required that all “reefer work” (i.e., plugging, unplugging and monitoring refrigerated shipping containers) performed by PMA members must be assigned to ILWU workers. When ICTSI instead assigned its reefer work to a rival union, the collective bargaining agreement administrator, the Joint Coast Labor Relations Committee, notified ICTSI that it was in violation of the CBA and faced monetary fines and expulsion from the collective bargaining association.
  • ICTSI initiated a proceeding before the National Labor Relations Board (NLRB) to resolve the dispute. The NLRB ruled that the rival union workers were entitled to the reefer work. While the NLRB proceedings were pending, ILWU and PMA filed suits in the US District Court for the District of Oregon seeking an injunction ordering ICTSI to comply with the Joint Committee decision and assign the work to ILWU.

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FTC Opinion Finds Domestic Pipe Fitter Unlawfully Maintained Its Monopoly

On February 6, 2014, the Federal Trade Commission (FTC) released its opinion and final order against McWane Inc., finding the company unlawfully maintained its monopoly by excluding competitors.  McWane Inc. is the largest domestic supplier of ductile iron pipe fittings, which are used in municipal and regional water distribution systems to change water flow or allow connectivity for hydrants, valves and water meters.

The administrative complaint alleged that McWane conspired with two of its competitors that altogether supply the majority of domestic fittings, to raise and stabilize prices.  Additionally, McWane was alleged to have excluded its competitors from the domestic pipe fittings market in order to unlawfully maintain its monopoly in violation of antitrust laws.

The Commission found McWane liable for unlawfully maintaining its monopoly in domestic pipe fittings, which constitute a separate market because many local, state and federal regulations required special fittings.  Consequently, imported products were not substitutable and domestic distributors required access to special fittings to supply all the project needs of their customers.  While one of McWane’s competitors sold the commonly used fitting sizes and configures that could be used in nearly 80 percent of projects, as a new entrant, it did not sell more specialized fittings.  Knowing that the competitor did not supply a full line of pipe fittings, McWane established an unlawful exclusive dealing program.  Under McWane’s “Full Support Program,” it threatened that distributors purchasing domestic fittings from Star would be prohibited from purchasing domestic fittings from McWane.  Thus, McWane was able to unlawfully maintain its monopoly by “foreclose[ing] [its competitor] and other potential entrants from accessing a substantial share of distributors.”  The Commission further found that McWane “created a strong economic incentive for distributors to reject Star’s products, artificially diminishing Star’s competitive prospects in the domestic fittings market.”

While the Commission’s opinion found McWane liable for unlawfully maintaining its monopoly, the remaining counts in the administrative complaint were dismissed for a variety of reasons.  Although the two commissioners found McWane engaged in price-fixing behavior, the counts were dismissed in the public interest due to a lack of majority position.  The Commission’s final order precludes McWane from requiring exclusivity from its distributors, but still permits McWane to lure customers through discounts, rebates and other price and non-price incentives.




Be Aware of the EU Watch Dog:  Commission Blocks Merger Between Aegean Airlines and Olympic Air

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.

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