Competition Currents | March 2022 - United States and Mexico
Federal Trade Commission
FTC approves Sartorius Stedim Biotech S.A.’s petition for prior approval of its acquisition of the chromatography equipment business of Novasep Process SAS
On Feb. 1, the FTC approved a petition from Sartorius Stedim Biotech S.A. to acquire the chromatography equipment business of Novasep Process SAS. Sartorius was the FTC-approved divestiture buyer in 2020, when the FTC ordered Danaher Corporation to divest assets as a condition of acquiring General Electric’s biopharmaceutical business, which included chromatography assets. Sartorius agreed to obtain the Commission’s prior approval if it proposed to acquire Novasep’s chromatography business. Sartorius filed its petition for prior approval of this acquisition Oct. 28, 2021.
Statement of FTC Bureau of Competition Director Holly Vedova regarding termination of U.S. chip supplier’s attempted acquisition of UK chip design provider.
On Feb. 14, 2022, the FTC’s Bureau of Competition issued a public statement noting that a U.S. chip supplier had terminated its proposed acquisition of a UK chip design provider. On Dec. 2, 2021, the FTC voted to file an administrative complaint to block the proposed transaction, charging that the acquisition would harm competition in three worldwide markets in which the U.S. chip supplier competes using products of the UK chip design provider. The complaint also alleged the acquisition would have harmed competition by giving the U.S. chip supplier access to competitively sensitive information of some of the UK chip design provider’s licensees, some of whom are the U.S. chip supplier’s rivals. In its statement, the Bureau said, “The termination of what would have been the largest semiconductor chip merger will preserve competition for key technologies and safeguard future innovation. This result is particularly significant because it represents the first abandonment of a litigated vertical merger in many years.”
FTC and Rhode Island attorney general seek to block merger of Rhode Island’s two largest health care providers.
The FTC authorized an administrative complaint Feb. 17, 2022, and a suit in federal court to block the proposed merger of Rhode Island’s two largest health care providers, alleging the deal would lead to higher prices and lower quality care. The FTC, jointly with the Rhode Island Office of the Attorney General, will file a complaint in federal district court seeking a temporary restraining order and preliminary injunction to stop the deal and to maintain the status quo pending an administrative trial on the merits of the case.
Lifespan Corp. and Care New England Health System offer a broad range of essential medical and surgical diagnostic and treatment services that require an overnight hospital stay, known as inpatient general acute care, or GAC, services. They also operate the only two standalone inpatient behavioral health facilities in Rhode Island. The complaint alleges the proposed merger of close competitors Lifespan and Care New England would likely reduce competition in the state of Rhode Island and 19 nearby Massachusetts communities for inpatient general acute care hospital services and inpatient behavioral health services. The complaint further alleges that if the merger were consummated, Lifespan Corp. and Care New England would control at least 70% of the Rhode Island market for inpatient general acute care hospital services, and at least 70% of the market for inpatient behavioral health services.
Administrative law judge dismisses FTC antitrust complaint against Altria Group and JUUL Labs, Inc.
In an Initial Decision announced Feb. 24, FTC Chief Administrative Law Judge D. Michael Chappell dismissed the antitrust charges in a complaint FTC staff issued against tobacco company Altria Group, Inc. and electronic cigarette maker JUUL Labs, Inc. The FTC’s April 2020 complaint alleged Altria and Juul had entered into a series of agreements, including Altria’s acquisition of a 35% stake in JUUL, that eliminated competition in violation of federal antitrust laws. According to the complaint, this series of agreements involved Altria ceasing to compete in the U.S. market for closed-system electronic cigarettes in return for a substantial ownership interest in JUUL, by far the dominant player in that market. Judge Chappell concluded that complaint counsel failed to demonstrate both the anticompetitive effects of the noncompete provision, and a reasonable probability that Altria would have competed in the e-cigarette market in the near future, through marketing a competing product independently, or through collaboration or acquisition. The FTC is expected to appeal ALJ Chappell’s initial decision for full Commission review.
FTC requests public comments on impact of pharmacy benefit managers’ practices.
On Feb. 24, the FTC announced it was soliciting public input on the ways that practices by large, vertically integrated pharmacy benefit managers (PBMs) are affecting drug affordability and access. PBMs are companies that manage prescription-drug benefits on behalf of private health insurers, Medicare Part D drug plans, large employers, and other payers. The FTC’s request for information covers a wide range of issues in the PBM market, including contract terms, rebates, fees, pricing policies, steering methods, conflicts of interest, and consolidation. The request seeks information on these practices and their impact on patients, physicians, employers, independent and chain pharmacies, and other businesses across the distribution system.
Department of Justice (DOJ)
Justice Department sues to block UnitedHealth Group’s acquisition of Change Healthcare.
On Feb. 24, 2022, DOJ filed a civil lawsuit to stop UnitedHealth Group Incorporated from acquiring Change Healthcare Inc. The complaint, filed in the U.S. District Court for the District of Columbia, alleges that the proposed $13 billion transaction would harm competition in commercial health insurance markets, as well as in the market for a vital technology used by health insurers to process health insurance claims and reduce health care costs. The complaint alleges the proposed transaction would give United, which owns the largest health insurer in the United States, large amounts of its rival health insurers’ competitively sensitive information and that, post-acquisition, United would be able to use its rivals’ information to gain an unfair advantage and harm competition in health insurance markets.
The complaint also alleges that the proposed transaction would eliminate United’s only major rival for first-pass claims editing technology, which the DOJ alleges is a critical product used to efficiently process health insurance claims and save health insurers billions of dollars each year, and would give United a monopoly share in the market. The DOJ complaint further alleges the proposed acquisition would eliminate Change, which provides a variety of participants in the health care ecosystem, including United’s major health insurance competitors, with vital software and services, including electronic data interchange (EDI) clearinghouse services, which transmit claims and payment information between insurers and providers, and first-pass claims editing solutions, which review claims under the health insurer’s policies and relevant treatment protocols.
Former Contech Engineered Solutions LLC executive convicted of rigging bids and defrauding North Carolina Department of Transportation.
On Feb. 1, 2022, DOJ announced that a former executive of Contech Engineered Solutions LLC was convicted, following a jury trial, for his participation in bid-rigging and fraud schemes targeting the North Carolina Department of Transportation (NCDOT), for participating in conspiracies to rig bids and submit false certifications of non-collusion for more than 300 aluminum structure projects the state of North Carolina funded between 2009 and 2018. DOJ showed at trial that the executive had instructed a co-conspirator to submit non-competitive bids to NCDOT and to hide his bid-rigging and fraud by varying the number of inflated bids submitted. The executive had also made clear to a co-conspirator that he would hide illegal conduct by deleting text messages he received about the conspiracy. The executive was convicted of conspiring to rig bids; conspiring to commit fraud; and three counts of mail fraud and one count of wire fraud, and faces a maximum penalty of 10 years in prison for conspiring to rig bids and 20 years in prison for each of the other counts. Contech had previously pleaded guilty to one count of bid-rigging under Section 1 of the Sherman Act and one count of conspiring to commit mail and wire fraud, and had agreed to pay a criminal fine of $7 million and restitution to NCDOT in the amount of $1,533,988.
In re: EpiPen (Epinephrine Injection, USP) Marketing, Sales Practices and Antitrust Litigation, Case No. 2:17-md-02785 (D. Kan. Feb. 28, 2022).
EpiPen buyers leading a class action against various Mylan NV defendants are seeking Kansas federal court approval for a $264 million settlement. This settlement, together with a previous settlement with defendant Pfizer, brings the class’s total recovery to $609 million.
The settlement provides that Mylan initially will deposit $5 million into an escrow account, with Mylan to deposit the remainder by July 1, or five days before the fairness hearing, whichever occurs first. There will be two pools of funds, one for individual buyers and one for third-party payers like insurers.
In 2016 and 2017, Mylan became the subject of multiple lawsuits after imposing significant price hikes for life-saving epinephrine auto-injectors. The prices led to charges that Mylan violated federal antitrust laws and the Racketeer Influenced and Corrupt Organizations Act (RICO).
The Kansas federal court lawsuits focused primarily on allegations that Mylan “traded” a settlement of its patent claims against another defendant for a deal resolving an unrelated infringement case. In June 2021, the court advanced claims that Mylan “paid” the other defendant to shelve its generic EpiPen by giving it suspiciously favorable terms in the other settlement the companies reached the same day. If true, the judge said in 2021, the allegations established the sort of “reverse payment” deal—so called because it involves concessions from a plaintiff to a defendant, rather than in the usual direction.
JSW Steel (USA) Inc., et al v. Nucor Corp., et al.; Case No. 4:21-CV-01842 (S.D. Tex. Feb. 17, 2022).
A federal court in Houston has dismissed claims against U.S. Steel Corp., Nucor Corp., AK Steel Corp., and Cleveland-Cliffs Inc. for an alleged scheme to cut off a rival’s access to steel slab, a critical component of finished steel products. The court stated that Plaintiff JSW Steel (USA) Inc. did not offer enough circumstantial evidence to make collusion—rather than parallel strategies by similar companies—the most likely explanation for the breakdown in its dealings with the other manufacturers.
While this finding alone merited the case’s dismissal, the court went on to determine that the Noerr-Pennington doctrine (a judicially created defense against certain business torts for activity that implicates a party’s First Amendment right) and the lack of a cognizable antitrust injury provided additional and alternative grounds for dismissal. As to the former, the only conduct by Nucor that the plaintiff alleged in the complaint involved Nucor’s public advocacy relating to the tariffs and objections it filed to oppose JSW’s exclusion requests. These constituted lawful acts of petitioning protected from antitrust liability under Noerr-Pennington. As to the issue of antitrust injury, JSW’s financial losses stemmed fundamentally from the government-imposed tariffs on imported steel slab. Furthermore, JSW never alleged that Nucor refused to sell it any domestic steel slab.
Roadwire, Inc. and Classic Soft Trim, Inc. v. Katzkin Leather, Inc., Case No. 1:22-cv-143 (W.D. Tex. Feb. 16, 2022).
Katzkin Leather, Inc. is facing federal antitrust litigation in Austin, Texas over its alleged “reign of terror” in the market for leather car interiors that owners looking to replace the upholstery sold with their vehicles can install.
The lawsuit accuses Katzkin of systematically monopolizing the leather upholstery aftermarket by defaming rival Roadwire, “strong-arming” and intimidating downstream companies (called “restylers”), and trying to decimate Roadwire’s top restyling partner. According to the complaint, “Katzkin did not gain its dominant market position as a consequence of a superior product, business acumen, or historical accident . . . .” Plaintiff alleged that defendant’s monopolistic and anticompetitive conduct in the aftermarket leather automotive upholstery industry has stifled Plaintiff Roadwire’s ability to compete with Katzkin and essentially driven Plaintiff Classic Soft Trim out of business. Plaintiff claims “Katzkin engaged in a systematic effort to exclude competitors and their products from the aftermarket leather automotive upholstery market.” Plaintiffs seek injunctive relief enjoining defendant from further conduct that would violate the Sherman Act.
Shields et al. v. FINA, Case No. 3:18-cv-07393, and International Swimming League Ltd. v. FINA, Case No. 3:18-cv-07394 (N.D. Cal. Feb. 11, 2022).
Professional swimming’s world governing body (FINA) defeated three-time Olympic gold medalist Katinka Hosszú of Hungary and U.S. gold medalist Michael Andrew’s bid for up to $75 million in class action damages. Hosszú and Andrew are leading federal antitrust litigation against the federation in San Francisco.
Magistrate Judge Jacqueline Scott Corley partly denied class certification to Hosszú, Andrew, and two-time U.S. Olympian Tom Shields, saying the pay structure of the swimming league behind a related case—and its links to Hosszú and Andrew—makes individual damages claims more appropriate.
At the hearing earlier in February, the magistrate judge said she was “troubled” by a proposed method for divvying up possible damages among professional swimmers seeking class certification in an antitrust suit alleging that FINA is using its power to scuttle competitions planned by a nascent swimming league. The magistrate judge further explained, “what I find the most problematic” is the “intraclass conflict” that comes with the plaintiffs’ formula for a classwide way of determining damages. She commented that the damages formula “necessarily favors certain swimmers over others.”
The swimmers were seeking classwide monetary and injunctive relief, claiming FINA has used its absolute monopoly and boycott power to threaten to strip them of their eligibility to compete in the Olympics if they participated in an event not sanctioned by FINA. The swimmers say this has caused them to lose out on prize money and appearance fees.
In re Packaged Seafood Products Antitrust Litigation, Case No. 3:15-md-02670, (S.D. Cal. Feb. 7, 2022).
StarKist Co., and its current and former parent companies, and a Bumble Bee Foods LLC affiliate must face trial on the full scope of antitrust claims major retailers brought over an alleged scheme to fix canned tuna prices, a federal judge in San Diego ruled March 1, 2022.
Judge Dana M. Sabraw denied the canned tuna companies’ partial summary judgment, which had invoked the four-year statute of limitations in a bid to narrow claims first asserted in 2015 by Dollar General Corp., Kroger Co., Meijer Inc., and others. The judge said the tuna companies did not try to directly rebut the evidence of the alleged concealment, instead claiming the class had enough knowledge by July 2008 to flag the alleged conspiracy. Were this true, the court would bar the claims filed seven years later, in 2015. But Judge Sabraw said the plaintiffs had presented enough evidence to raise genuine issues of material fact as to whether they had enough knowledge at that time to piece together the alleged wrongdoings. “It is entirely possible [the direct action plaintiffs] had access to supply and demand information (a lone puzzle piece), which delivered no further indication to the larger picture into which it fits,” the judge said. “When contextualized with later developing events such as a government investigation, extensive media coverage, and discovery in a federal court, the larger picture becomes more apparent.”
Since 2015, StarKist, Bumble Bee, and Chicken of the Sea—which together make up the bulk of canned tuna sales in the United States—have been hit with scores of lawsuits accusing them of engaging in a scheme to raise the price of the packaged fish.
COFECE fines IAC Holdco, GCM, and Franklin, auto parts manufacturers, for failing to obtain prior merger competition clearance.
COFECE (the Mexican competition authority) announced that in April 2018, GCM purchased and accumulated assets and/or control of IAC Holdco and its Mexican subsidiaries. In April 2019, Franklin Mutual Advisers sold GCM shares in IACNA, a firm that owns shares in IAC Holdco, constituting another acquisition by GCM of IAC Holdco and its subsidiaries.
Both transactions exceeded the economic thresholds set by the Federal Law on Economic Competition (LFCE). Accordingly, notification prior to completion of the transactions was mandatory. COFECE explained that the failure to notify prevented COFECE from analyzing the impact and risk these mergers could have on competition in the markets involved.
The companies attempted to file for authorization of the transactions post-closing. COFECE opened a case file to verify compliance with competition rules, as well as to analyze the impact on competition. While COFECE found the mergers did not risk harm to competition and were therefore authorized, it still imposed sanctions for failure to notify in compliance with LFCE in an amount exceeding nine million pesos ($450,000).
The following authors also contributed to this article: Edoardo Gambaro, Pamela J. Marple, Yuji Ogiwara, Stephen M. Pepper, Yuqing (Philip) Ruan, Gillian Sproul, Hans Urlus, Dawn Zhang, Robert Hardy, Alan W. Hersh, Filip Drgas, Pietro Missanelli, Anna Rajchert, Lucas Wüsthof, Mari Arakawa, Anna Bryńska, John Gao, Marta Kownacka, Jose Abel Rivera-Pedroza, Chazz Sutherland, Ippei Suzuki, and Rebecca Tracy Rotem.