FTC Accepts Practical ‘Failing Firm’ Defense in Ending Challenge of Nonreportable Transaction

The Federal Trade Commission’s recently announced proposed settlement of its challenge of CentraCare Health’s acquisition of St. Cloud Medical Group (SCMG) is doubly noteworthy. The settlement ends the challenge of a transaction that apparently was not reportable under the Hart-Scott-Rodino (HSR) Act, and the settlement is premised on a “failing firm” defense that infrequently is accepted by government enforcers.

CentraCare is a nonprofit health system in central Minnesota that includes a multispecialty physician practice group, and SCMG is a physician-owned, multispecialty practice group with about 40 physicians who operate four clinics in central Minnesota. In early 2016, CentraCare announced its planned acquisition of SCMG. According to the FTC, this acquisition would combine the two largest providers of adult primary care, pediatric and OB/GYN services in the St. Cloud area. After the Minnesota Attorney General reportedly began an investigation of the acquisition and asked for the closing to be delayed, the FTC filed a complaint alleging that the acquisition agreement was an unfair method of competition in violation of Section 5 of the FTC Act, and that the acquisition, if consummated, would substantially lessen competition in violation of Section 7 of the Clayton Act. Continue Reading

How to Avoid Antitrust Trouble in Wake of North Carolina Dental Ruling on State Action Immunity

US Private Antitrust LitigationBakerHostetler Antitrust Litigation Partners Robert Abrams, Gregory Commins, and Danyll Foix authored an article for The Antitrust Review of the Americas 2016, published by Global Competition Review. The article, headlined “United States: Private Antitrust Litigation,” analyzes emerging cases in the wake of North Carolina State Board of Dental Examiners v. Federal Trade Commission. These cases, the authors note, “provide a roadmap for how quasi-government entities can avoid antitrust trouble ― including making sure their actions are consistent with state policy and actively supervised by the state.”

Read the article.

Caution: Sealed Package – There Is More At Risk Than Unsealing

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Parties litigating in courts across the country routinely file some documents under seal as a matter of course. Sealing filed documents often is a practical necessity – parties need not disclose certain confidential information in the public domain, and parsing through filings and conferring with opposing counsel and third parties to determine what is truly confidential can be contentious, expensive, time-consuming and ultimately burdensome for the courts. While these are valid reasons for filing sealed documents, a recent Sixth Circuit decision, although rising from unusual facts, should give parties pause before filing large numbers of documents under seal.

Shane Group, Inc. v. Blue Cross Blue Shield of Michigan, No. 15-1544, 2016 U.S. App. LEXIS 10264 (6th Cir. June 7, 2016), is a class action alleging that Blue Cross Blue Shield of Michigan (“BCBS MI”) used its market power to require hospitals in Michigan to enter most favored nation agreements that resulted in higher rates for “Blue Cross’s customers and everyone else – while preserving or expanding Blue Cross’s market share.” The class actions commenced following a similar lawsuit by the U.S. Department of Justice (“DOJ”). Information generated during the DOJ litigation, which had been designated “confidential,” was provided to the private litigants. Given the information had been designated confidential, BCBS MI, while defending itself against this class action, submitted voluminous filings under seal. Likewise, the plaintiffs filed the operative complaint (which cited previously designated confidential information) plus many other documents under seal. After the parties reached a class settlement, objecting class members claimed they were unable to scrutinize the settlement due to the broad extent of the sealed court filings. Regardless, the district court approved the settlement. Continue Reading

Antitrust, Appointments and Presidential Front-Runners: Part 1

Substantial and substantive issues of national importance are often ­obscured by the usual myopic and frenzied focus on political talking points, sensational sound bites and collateral name-calling. This is perhaps better exemplified in presidential elections than contests for other political offices. The current race to the presidency is plainly setting a new high (or low) watermark in that regard. In an ­effort to bring some clarity to a whirlpool of contentiousness clouded by the blue smoke and mirrors fueled by political pundits, our next columns will be offering an ­objective assessment of the presidential front-runners, Hillary Clinton and Donald Trump, and their views regarding antitrust, ­competition and related consumer protection issues. Such key issues affect the daily lives of millions of people and businesses, from the single consumer to the largest global ­corporations, yet are often ­overlooked in more sensational campaign news coverage. We begin this month by reviewing just a few of the key antitrust and consumer protection issues that will ultimately be decided by the next administration.

First, as we previously discussed, the death of U.S. Supreme Court Justice Antonin Scalia earlier this year creates an opening on the nation’s highest bench, which currently has only eight Supreme Court justices. The impact of this vacancy is at least twofold. For one, the court no longer has the unique voice of Scalia, a critic of the antitrust laws, and as we have explained, one who was often unlikely to find antitrust injury and harm where the relevant facts painted a colorable competition claim even where a jury had reached the opposite conclusion and found antitrust liability. Conversely, a new member of the court will of course bring his or her own unique voice to the court, and we have previously examined President Obama’s Supreme Court nominee, Chief Judge Merrick Garland of the U.S. Court of Appeals for the D.C. Circuit, and his own antitrust perspective and expertise.

In addition to bringing a necessary unique perspective to the bench, the newest justice will also find himself or herself in the midst of a court frequently divided over antitrust issues. By our own rough count, approximately 40 percent of the court’s substantive antitrust opinions in the last 10 years have been decided along 5-4 or 6-3 votes. Thus, the next Supreme Court justice has the potential to be a key swing vote in important cases, thereby ­amplifying his or her potential impact on the court, particularly in the wake of Scalia’s death. Continue Reading

Second Circuit Resurrects LIBOR Antitrust Case Against Bank Defendants, But Reprieve May Be Short-Lived

On May 23, 2016, the Second Circuit breathed new life into the class action case against 16 banks belonging to the British Bankers’ Association (the Banks), vacating the Southern District of New York’s dismissal of the case for lack of antitrust injury and remanding the case on the portion of antitrust standing that requires the plaintiffs to be “efficient enforcers of the antitrust laws.” In re: LIBOR-Based Financial Instruments Antitrust Litigation (No. 13-3565). The plaintiffs’ revived opportunity to pursue their case, however, may last only as long as it takes the district court to consider the factors laid out by the Second Circuit, because it identified several troubling issues raised by the peculiar nature of the case.

The Claims

The plaintiffs, purchasers of financial instruments that carried a rate of return indexed to the London Interbank Offered Rate (“LIBOR”), alleged that the Banks colluded to depress LIBOR by violating rate-setting rules. As a result, the payout for the instruments was lower than it would have been without the collusion.

The District Court Opinion

The Southern District determined that there could not have been anticompetitive harm, because the LIBOR-setting process was collaborative rather than competitive. At most, the lower court concluded, the plaintiffs might have a fraud claim based on misrepresentation, but they had no antitrust claim. Continue Reading

Is That a Carrot or a Stick in Your Hand? The Third Circuit Examines the Line Between Competition and Coercion in De Facto Exclusive Dealing Agreements

We recently wrote about attempts to force exclusivity onto customers. But firms with large or dominant market shares often must walk a fine line between properly offering customers percentage-based discounts and improperly coercing customers into de facto exclusivity. For example, if a dominant firm offers a 25 percent price reduction to a customer that purchases all of its needs for a particular product from the dominant firm, does that offer constitute a competitive 25 percent volume discount, or an anticompetitive 25 percent penalty for purchasing any product from the dominant firm’s competitor? Not surprisingly, it usually depends on whom you ask: the dominant firm or the competitor.

The Third Circuit provided some guidance on the line between price competition and coercion with its recent opinion in Eisai, Inc. v. Sanofi Aventis U.S., LLC, No. 14-2017 (3d Cir. May 4, 2016).[1] In Eisai, the Sanofi defendants, manufacturers of the anticoagulant Lovenox, offered customers the “Lovenox Acute Contract Value Program,” which provided percentage-based discounts. Customers who joined the program received a 1 percent discount from Sanofi’s wholesale price, and increasingly higher discounts if Lovenox exceeded 75 percent of the customer’s total purchases of low-molecular-weight heparin, with the discounts potentially reaching 30 percent. If a customer left the program, the customer lost its discount but could still purchase Lovenox at regular wholesale prices. During the relevant time period, Lovenox’s market share ranged from 81.5 percent to 92.3 percent. Continue Reading

Forcing Exclusivity on Your Customers May Not Be the Best Competitive Response

In the words of the director of the Federal Trade Commission’s (FTC’s) Bureau of Competition, the recent enforcement against Invibio, Inc., the first company to sell implant-grade polyetheretherketone, known as PEEK, to medical device makers, “affirms that the first company to enter a market cannot rely on anticompetitive contract terms to lock up customers and box out rivals.” But what if you are not the first company to enter the market? More on that below, but first, what exactly did Invibio do when faced with new rivals?

According to the FTC’s administrative complaint, Invibio responded to new rivals seeking to sell PEEK at lower prices by adopting a strategy of expanding the scope and coverage of exclusivity terms in its own PEEK supply contracts. Concerned that if it did not block these new rivals, it would be forced to engage in painful price competition, Invibio implemented its exclusivity strategy through negotiations with existing and potential customers. Continue Reading

Scalia’s Antitrust Legacy: Part 2, The Dissenting Opinions

In March, we wrote about Justice Antonin Scalia’s three majority opinions in substantive antitrust cases. Notably, Scalia also authored three dissenting opinions in substantive antitrust cases, in rapid-fire succession in 1991, ’92 and ’93. In the majority opinions, Scalia seized upon alternative, innocuous explanations for alleged anticompetitive conduct, even when an anticompetitive motive was equally if not more plausible, and in two cases reversed jury verdicts for plaintiffs. In the dissents, Scalia’s skepticism regarding the antitrust laws is even more evident: Scalia does not attempt to explain away what some (including two juries) characterized as anticompetitive conduct, as in the majority opinions; rather, he recognized and accepted plaintiffs’ characterizations of defendants’ conduct (as required by the posture of the cases), but concluded that even so, plaintiffs could not find a remedy in the antitrust laws. Furthermore, in each dissent, he also would have had the court reverse the U.S. Court of Appeals for the Ninth Circuit and affirm the particular California federal district court in the case, and grant judgment for defendants on the pleadings or on summary judgment. Continue Reading

Sounding the Alarm: White House Agency Warns of Decreasing Competition Across U.S. Economy

The Council of Economic Advisors, a White House agency charged with advising the president on economic policy, recently issued a report, Benefits of Competition and Indicators of Market Power, addressing the state of competition in the United States economy. The report expresses concern that competition is being eroded in many industries across the U.S. economy, and recommends reversing that trend through government action, including increased enforcement action by the Department of Justice and Federal Trade Commission.

The report also identifies several emerging issues the Council believes may require antitrust enforcement or other governmental action to address competitive concerns. Continue Reading

There Was a Panel on What?? Notes on the ABA Antitrust Spring Meeting Panel on Marijuana Law

Attendees at this year’s Spring Meeting may have been surprised by an unexpected panel: an overview of the status of the law related to the legalization of marijuana and antitrust issues facing the nascent industry. However, a single number explains why the ABA and others are beginning to address a topic that many legal practitioners still view as taboo: $4,000,000,000.00. That’s right, the fastest growing industry in the United States is marijuana cultivation and sale, which currently represents a $4 billion-per-year industry, with $1 billion flowing to Colorado alone. At its current rate of growth, the marijuana industry is expected to dwarf the revenues of the NFL and is poised to grow 10 times, into a $40 billion-per-year industry.

At “Marijuana, Twenty-Three States and Counting,” panel members from various parts of the industry addressed the current state of the law and the legal issues on the horizon. At the core of the legal issues facing the industry is the tension between federal law, which classifies marijuana as a Schedule 1 drug, and the now 23 states that have legalized some form of marijuana. Driving that shift in state law are the 40 million marijuana users in the United States and the 61 percent of Americans who believe marijuana should be legalized who identify this as a major issue to be addressed by lawmakers. Continue Reading