Antitrust Advocate

Antitrust Advocate

News, Developments and Practical Advice from Antitrust Leaders

EU Tells Google to Try Harder

Posted in Antitrust Compliance

It’s official: on Wednesday, in a formal Statement of Objections, the European Union’s antitrust chief formally accused Google of abusing its dominant position in the web search arena.European union concept

The European Commission is focused on Google’s alleged practice of skewing search results to divert users of Google’s search engine to other Google-owned websites, products, and services, particularly travel, shopping, and navigation websites. In addition, the EC is separately investigating allegations of alleged agreements between Google and mobile device manufacturers related to Google’s Android platform – it is claimed that such phone manufacturers that agree to use Google’s open-source Android platform face contractual obligations to place Google’s other apps in prominent positions on the mobile devices. Furthermore, Margrethe Vestager, the competition commissioner, has indicated that the inquiry may expand over time. Continue Reading

BakerHostetler Releases White Paper on FTC Act Section 5 Symposium

Posted in FTC Act

BakerHostetler’s Antitrust and Competition team is delighted to share with you a white paper we prepared highlighting points of interest from the February 26, 2015 Symposium we hosted on Section 5 of the Federal Trade Commission Act. We hope you enjoy the white paper’s insider perspective on interpretation and enforcement of Section 5. Below is a list of other resources on the discussion that took place at the Symposium:

If you have any questions about the material presented in this white paper or about the Symposium in general, please contact Carl W. Hittinger at chittinger@bakerlaw.com or 215.564.2898.

Symposium Advances Debate Over FTC’s Section 5 Enforcement Powers

Posted in Articles, BakerHostetler, Events, Sherman Act 5

What is an “unfair method of competition” for purposes of the Federal Trade Commission’s enforcement powers? For more than 100 years, lawyers, economists and other experts—as well as courts—have debated that question, trying to determine exactly what conduct Congress meant to prohibit, beyond conduct already condemned by the antitrust laws, when it enacted Section 5 of the FTC Act of 1914. The Baker & Hostetler-sponsored Symposium on Section 5, held in Washington, D.C., on Feb. 26, assembled, for the first time in a public forum, key decision-makers and experts from all three branches of government to debate the future of FTC’s competition enforcement authority as the agency embarks on its second century. (The last symposium on Section 5 took place in 2008 but was an internal workshop for the FTC.) The vigorous exchange of opinions among the 14 distinguished symposium speakers clarified the terms of the dialogue over whether the FTC should adopt formal guidelines to finally define “unfair methods of competition” and place limits on its enforcement discretion under its “stand-alone” Section 5 authority—that is, its power to pursue anti-competitive conduct not reached by the Sherman or Clayton antitrust acts. Continue Reading

Oregon Federal Court Weighs In on Disputed Umbrella Theory of Damages

Posted in Antitrust Litigation

An Oregon federal court recently relied on the so-called umbrella theory of damages to decide that the plaintiffs had an antitrust injury necessary to pursue an injunction. While this decision has garnered attention for enjoining the defendants from completing an acquisition, it also is noteworthy for its reliance on the disputed umbrella theory of damages.

This theory generally refers to antitrust damages that may result when non-conspiring market participants adjust their prices to correlate with the defendants’ alleged fixed prices. It is said that non-conspirators are able to make these adjustments because the alleged conspiracy creates a “price umbrella” under which the non-conspirators can shelter without fear of being challenged on prices. Litigants have disputed for many years whether this theory supports damages recoverable under federal antitrust law. Continue Reading

CFIUS Report Reflects Continued Need to Plan for Government Scrutiny of Cross-border Transactions

Posted in CFIUS

The Committee on Foreign Investment in the United States (CFIUS) recently reported its 2013 activities, confirming the continuation of its heightened review and investigation of certain foreign direct investments in U.S. businesses.

CFIUS, a panel of high-level Washington bureaucrats, was described in a prior post. CFIUS reviews and investigates mergers and acquisitions that could result in foreign control of entities engaged in interstate commerce in the United States and determines (or recommends to the U.S. president) whether to disallow or block transactions when there is credible evidence that they threaten national security, which was covered in a prior post. Continue Reading

FTC’s Appellate Win Reflects Focus on Health Care Consolidation

Posted in Antitrust Litigation, Articles, FTC Act, Healthcare, Merger

In an important victory for the Federal Trade Commission in the appellate courts, the U.S. Court of Appeals for the Ninth Circuit recently affirmed last year’s decision from the District of Idaho in Saint Alphonsus Medical Center v. St. Luke’s Health System, No. 14-35173, in which the FTC successfully sued to undo a 2012 merger of two health care providers in Nampa, Idaho.

As reported in this column last year, the FTC—joined by the state of Idaho and certain competitor hospitals—filed an action in the U.S. District Court for the District of Idaho in 2013 to unwind a merger between St. Luke’s Health Systems, an Idaho health care system, and Saltzer Medical Group, an Idaho-based physician group. St. Luke’s operated several hospitals in Idaho and employed 500 physicians, including eight primary care doctors based in Nampa. Saltzer employed 16 primary care doctors in Nampa. After years of negotiation regarding potential affiliation, St. Luke’s acquired the assets of Saltzer in December 2012. Following the Saltzer acquisition, St. Luke’s controlled 80 percent of the adult primary care physicians in Nampa. The FTC’s complaint asserted that the combination violated Section 7 of the Clayton Antitrust Act, which prohibits mergers if “the effect of the acquisition may be substantially to lessen competition, or tend to create a monopoly.”

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FTC Commissioner Wright Calls for Vote on Section 5 Guidelines

Posted in BakerHostetler, Events, Sherman Act 5

B-yaPLiUYAEWOTdFTC Commissioner Joshua Wright, during yesterday’s keynote speech at BakerHostetler’s Section 5 Symposium, announced his plan to call for the FTC Commissioners to vote on three proposed definitions of Section 5’s “unfair methods of competition.”

Covering the Section 5 Symposium and Commissioner Wright’s announcement, Global Competition Review wrote:

“Joshua Wright will ask his four Federal Trade Commission colleagues to vote next week on three different definitions of section 5 of the FTC Act and perhaps formally pin down, for the first time in 100 years, what an ‘unfair method of competition’ is.”

Also covering the event, Law360 wrote:

“A stable definition of what constitutes an ‘unfair method of competition’ would provide businesses with important guidance about what conduct is lawful and what conduct is unlawful under Section 5,” [Commissioner Wright] said, at a conference held by BakerHostetler. “The benefit of added business certainty is less important than ensuring Section 5 enforcement actions — including consents — actually reach and deter anti-competitive conduct rather than chill pro-competitive conduct.”

BakerHostetler’s antitrust attorneys will be analyzing Commissioner Wright’s proposal and its implications for practitioners and the business community. Stay tuned.

Symposium on Section 5 of the Federal Trade Commission Act

Posted in Events

Companies and institutions may be vulnerable to FTC claims of antitrust or consumer fraud violations without realizing it. Learn how to help prevent such potentially damaging issues through a groundbreaking, BakerHostetler-sponsored symposium on Section 5 of the Federal Trade Commission Act on Thursday, Feb. 26, 2015, from 8:30 a.m. – 5:15 p.m. at The Willard InterContinental in Washington, D.C.

Section 5 broadly prohibits “[un]fair methods of competition” and “unfair or deceptive acts or practices.” It has been aggressively used by the FTC in recent years to challenge sales and marketing conduct by companies as being antitrust or consumer fraud and deception violations. The FTC has challenged conduct that might otherwise be permissible under the Sherman Antitrust Act, an interpretation some courts have endorsed in the past. Recent public investigations against major companies have ensued, seeking consent decrees as well as restitution and disgorgement of profits. Congress has also joined the debate about Section 5, calling for guidelines, which some commissioners have proposed. These important developments have thrust Section 5 back into the sphere of antitrust and unfair competition enforcement, thereby compelling companies and their counsel to take prudent steps to protect themselves from Section 5 prosecutions.

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To Report or Not to Report, That Is the CFIUS Question

Posted in CFIUS, Government Investigations, Merger, Merger Review, Premerger Notification

With the complexities inherent in many cross-border transactions – from cultural differences to the growing number of competition authorities demanding paperwork – the last thing one may want to think about is whether to submit a voluntary report of a transaction to the Committee on Foreign Investment in the United States (CFIUS). The recent decision to block a transaction on CFIUS grounds, however, demonstrates that CFIUS should not be overlooked. So, deciding whether to report to CFIUS is one more issue that should be considered when doing transactions.

CFIUS

CFIUS reviews certain mergers or acquisitions that could result in foreign control of entities engaged in interstate commerce in the United States, and determines, or recommends to the president, whether to disallow or block transactions when there is credible evidence that they threaten national security. (This process was explained in detail in a prior post.)

The CFIUS process begins with a voluntary filing seeking review of a proposed (or consummated) transaction that is covered by CFIUS regulations. Unlike the Hart-Scott-Rodino process, there is no filing threshold or other definitive criteria that mandate notice to the CFIUS. Rather, the parties to a transaction determine themselves whether and when to provide a notice. Depending on the nature of the transaction, deciding whether to submit notice to CFIUS can raise a number of strategic considerations that can impact the outcome of the transaction at issue. Continue Reading

“Oh help me, please doctor, I’m damaged”*—What does the Future Hold for Hospital-Physician Acquisitions?

Posted in Government Investigations, Healthcare, Merger Review

With the ink still drying on the Ninth Circuit’s opinion affirming the Idaho federal district court’s order requiring St. Luke’s Health System to unwind its acquisition of Saltzer Medical Group—a for-profit, physician-owned, multi-specialty group comprising approximately 44 physicians located in Nampa, Idaho—you may ask what the decision means for other providers?  Hospitals considering future acquisitions of physician groups, and those that the Federal Trade Commission may view as having failed to make good on promises to improve care without hiking prices, better take notice.

The Ninth Circuit affirmed that the district court did not err in holding St. Luke’s would likely use its post-merger power to negotiate higher reimbursement rates from insurers for primary care physician services.  This shows the theory of harm articulated by the FTC in hospital merger cases—that a transaction can increase bargaining leverage with health insurance plans resulting in higher reimbursement—is fully applicable to physician acquisition cases.

The Ninth Circuit also affirmed that the district court did not err in holding “the claimed efficiencies”—improved patient care resulting from a “team of employed physicians with access to Epic, the electronic medical records system used by St. Luke’s”—“were not merger-specific.”  The appellate court went on to say that “even if we assume the claimed efficiencies were merger-specific, the defense would nonetheless fail” because St. Luke’s “did not demonstrate that efficiencies resulting from the merger would have a positive effect on competition.”

In other words, St. Luke’s did not show how the claimed efficiencies would “create a more efficient combined entity and thus increase competition.”  This makes it clear that unless one can “clearly demonstrate” the claimed efficiencies will allow more effective competition through “lower prices, improved quality, enhance services, or new products,” affiliation models short of employing physicians need to be considered where a proposed deal may raise competitive concern.

What are some of the affiliation models short of employing physicians?  There are several, including (1) physician advisory council, (2) advanced medical directorship, (3) co-management, (4) Professional Services Arrangement (“PSA”), and (5) a PSA/Management Services Agreement (“MSA”).  Each of these arrangements carries a set of strategic, economic, and operational dimensions for both parties to consider.

What should you do if you are considering an acquisition?  You should hire antitrust counsel and consultants (economic and others) early in the process to help assess and understand the competitive dynamics and the potential benefits of the proposed transaction.  It may well be the case that the proposed transaction raises no competitive concern.  Most do not.  With some upfront work, you will be able to identify any that do raise concern and position them so they may become doable in the end.

*Dear Doctor by Mick Jagger and Keith Richards