GT Competition Currents August 2021: United States and Mexico
A. Federal Trade Commission (FTC)
FTC Votes to Update Rulemaking Procedures, Sets Stage for Stronger Deterrence of Corporate Misconduct
In April 2021, in AMG Capital Management, LLC v. FTC, the U.S. Supreme Court reached a unanimous decision finding that Section 13(b) of the FTC Act does not authorize the FTC to seek, or a court to award, equitable monetary relief such as restitution or disgorgement. Following that decision, on July 1, 2021, the FTC voted (3-2) to amend its Rules of Practice, specifically relating to promulgating Trade Regulation Rules under Section 18 of the FTC Act. The updates relate to the FTC’s procedure to initiate rulemaking proceedings and how the public can seek an informal hearing in rulemakings. It is expected that the new rules will allow for civil penalties and damages against violators.
FTC Rescinds 2015 Policy that Limited Its Enforcement Ability Under the FTC Act
Also on July 1, 2021, the FTC voted (again 3-2) to rescind its 2015 antitrust policy statement relating to the use of its authority to stop “unfair methods of competition.” The 2015 FTC statement established a framework for how the FTC would decide to use its authority under Section 5 on a standalone basis, noting that the FTC would be less likely to challenge an act or practice as an unfair method of competition with Section 5 of the FTC Act if the Sherman or Clayton Acts could address the relevant competitive harm. With the rescission of its statement, the FTC will consider revising its approach to regulating unfair methods of competition, using congressional statements, case law, and other considerations.
FTC Authorizes Investigations into Key Enforcement Priorities
In another 3-2 vote on July 1, 2021, the FTC authorized investigations into a number of key enforcement priorities, including a focus on mergers (including proposed transactions and consummated transactions); repeat offenders; big tech companies; the health care industry; harms against workers and small businesses; and COVID-19 scams. The FTC plans to use compulsory process (i.e., subpoenas) in conducting these investigations.
FTC Charges Broadcom with Illegal Monopolization and Orders the Semiconductor Supplier to Cease Its Anticompetitive Conduct
On July 2, 2021, the FTC issued a complaint against Broadcom Inc., alleging that Broadcom had illegally monopolized markets for semiconductor components or chips (used for television and broadband internet devices) by entering into long-term exclusive purchasing agreements with its customers. At the same time, the FTC issued a proposed consent requiring Broadcom to stop requiring its customers to exclusively (or near exclusively) purchase these components or chips from Broadcom.
Statement of FTC Chair Lina Khan and Antitrust Division Acting Assistant Attorney General Richard A. Powers on Executive Order’s Call to Consider Revisions to Merger Guidelines
On July 9, 2021, President Joe Biden signed an executive order on “Promoting Competition in the American Economy,” which includes, among other things, encouraging: revisions to the FTC and DOJ’s horizontal and vertical merger guidelines; bans or limits to noncompete agreements; removal of unnecessary occupational licensing restrictions; removal of “pay for delay” and similar deals between generic and brand name manufacturers; and restoration of the Obama-era rules on net neutrality. This order is more fully described in a GT alert. In response, Khan and Powers issued a statement that they plan to launch a review of the FTC and DOJ merger guidelines and update them.
Statement Regarding Berkshire Hathaway Energy’s Termination of Acquisition of Dominion Energy, Inc.’s Questar Pipeline in Central Utah
On July 12, 2021, Dominion Energy and Berkshire Hathaway Energy announced that in response to HSR clearance concerns, they had agreed to terminate their proposed sale of Questar Pipelines to Berkshire Hathaway Energy, with Dominion Energy to begin a new competitive sale process. In response to the abandonment of the proposed transaction, the FTC noted its concerns with the proposed transaction, as the parties are the only two pipelines bringing natural gas to central Utah, and the deal would eliminate that competition.
FTC Rescinds 1995 Policy Statement that Limited Its Ability to Deter Problematic Mergers
In yet another 3-2 vote, on July 21, 2021, the FTC voted to rescind a 1995 policy statement that ended what at the time was longstanding FTC practice to require all companies that had proposed unlawful mergers to, going forward, receive prior approval and give prior notice for future transactions. Specifically, the FTC said it is under-resourced during the current surge in merger filings and has had to review the same deals multiple times in a number of instances, initiating new investigations and court proceedings each time, and that requiring prior approval would alleviate some of this burden.FTC Rescinds 1995 Policy Statement that Limited Its Ability to Deter Problematic Mergers
FTC to Ramp Up Law Enforcement Against Illegal Repair Restrictions
In a unanimous vote, on July 21, 2021, the FTC voted to increase enforcement against certain repair restrictions that prevent businesses, workers, and consumers from repairing their own products. The FTC plans to target such repair restrictions through the antitrust laws and the FTC Act.
FTC Withdraws Case Against AbbVie after Supreme Court Decision Strips Consumers of Relief
In September 2014, the FTC filed a complaint alleging that AbbVie Inc., along with Besins Healthcare Inc., engaged in filing sham patent infringement lawsuits against potential generic competitors in an attempt to delay generic versions of Androgel (a testosterone replacement drug) from entering the market. During the pendency of these lawsuits, AbbVie and Teva Pharmaceuticals USA, Inc., a counter-party to one of the lawsuits, entered into a settlement agreement with AbbVie agreeing to drop the patent infringement lawsuit in exchange for a license granted to Teva to launch its competitor testosterone replacement drug to the market prior to patent expiry. In June 2018, a district court dismissed the claim relating to the settlement but found AbbVie and Besins had violated the antitrust laws by engaging in sham litigation, with a damage award of $493.7 million for consumers. The Third Circuit in September 2020 affirmed the district court’s ruling on the sham litigation claim; however, at the same time it denied the equitable relief to consumers (while also reinstating the pay-for-delay claim). In June 2021, the U.S. Supreme Court declined not to hear AbbVie and Besins’s further appeal on the sham litigation claim, meaning the Third Circuit’s denial of equitable relief would also stand. As a result, the FTC withdrew the remaining count in its complaint.
On July 30, 2021, FTC Acting Director of the Bureau of Competition Holly Vedova said of the U.S. Supreme Court’s decision: “Here, the FTC would have been able to return almost a half billion dollars directly to AndroGel consumers. Instead, AbbVie and Besins can retain all of the ill-gotten gains resulting from their illegal anticompetitive conduct. This case highlights the pressing need for legislation reinstating the FTC’s authority to seek equitable monetary relief for consumers in competition cases. Congress should act quickly to restore Section 13(b) of the FTC act and the Commission’s ability to return to consumers money lost due to illegal anticompetitive behavior by pharmaceutical companies.”
B. Department of Justice (DOJ)
Belgian Security Services Company and Three Former Executives Indicted for Bid Rigging on U.S. Department of Defense Contracts
On June 30, 2021, the DOJ announced that a federal grand jury returned an indictment against a Belgium-based company Seris Security NV (Seris) and three of executives relating to violations of the Sherman Act, including a conspiracy to fix prices, rig bids, and allocate customers. The actions specifically related to defense-related security services, including a 2020 contract to provide services to the U.S. Department of Defense in Belgium. This indictment follows the guilty plea of another company, G4S Secure Solution NV (G4S), in the same investigation. The DOJ’s Procurement Collusion Strike Force worked on the investigation.
Major International Automotive-Parts Suppliers Restructure Deal to Resolve Antitrust Concerns
On July 1, 2021, the DOJ announced that Brazilian Tupy S.A. will restructure its acquisition of Italian Teksid S.p.A. (a subsidiary of Netherlands-based Stellantis), due to DOJ concerns. Both companies are significant providers of parts for heavy-duty engines in North America. The DOJ alleged that the merger would lead to higher prices and reduced quality and speed of service in these components. The original proposed acquisition included Teksid’s plant and assets in Mexico that manufactured these iron blocks and heads for U.S. customers. Under the revised agreement, Tupy will acquire Teksid’s operations in Brazil and Portugal, with Teksid retaining its Mexico operations, enabling it to continue to compete with Tupy in the United States.
DOJ Withdraws from Settlement with the National Association of Realtors
In November 2020, the DOJ filed suit against National Association of REALTORS® (NAR), alleging that NAR established and enforced certain rules that illegally restrained competition in the market for residential real estate services. The DOJ simultaneously filed a proposed settlement that required NAR to update its rules, but also limited the DOJ’s ability to investigate other conduct. On July 1, 2021, the DOJ announced it was withdrawing from the settlement and voluntarily dismissing its complaint, in order to allow it to more broadly investigate NAR’s conduct and rules.
DOJ and Federal Maritime Commission Sign Memorandum of Understanding to Support Interagency Collaboration
On July 12, 2021, the DOJ and the Federal Maritime Commission (FMC) signed an interagency Memorandum of Understanding (MOU) to foster communication (including regular discussions and periodically scheduled meetings) and cooperation between the parties with the goal of enhancing competition in the maritime industry. The parties entered into the MOU to meet the competition objectives of the president’s competition executive order, discussed above.
Justice Department Requires Divestitures in Transaction between Global Industrial and Agricultural Equipment Component Manufacturers
The DOJ announced on July 14, 2021, that Danish Danfoss A/S and Irish Eaton Corporation Plc will be required to divest assets in order to consummate Danfoss’s proposed asset purchase of Eaton’s hydraulics business. The complaint alleges that the two companies are the two largest suppliers in the United States of orbital motors (for off-road equipment) and hydraulic steering units. The DOJ is requiring divestitures from each of Danfoss and Eaton’s orbital motor and hydraulic steering unit manufacturing businesses, arguing that without the divestitures, the proposed transaction would substantially lessen competition in the design, manufacture, and sale of orbital motors and hydraulic steering units, leading to higher prices and decreased quality and innovation.
Amazon Marketplace Seller Pleads Guilty to Price Fixing DVDs and Blu-ray Discs
A Tennessee man was charged with conspiring with others to raise and fix prices of DVDs and Blu-ray Discs sold on Amazon Marketplace from 2018 to 2019, in violation of the Sherman Act. On July 23, 2021, he pled guilty. He was the first person to be charged and plead guilty relating to this alleged conspiracy.
Attorney General Merrick B. Garland’s Statement on Aon and Willis Towers Watson Decision to Terminate Merger Agreement
As discussed in the July 2021 issue of Competition Currents, 0n June 16, 2021, the DOJ filed a civil antitrust lawsuit to block Aon’s $30 billion proposed acquisition of Willis Towers Watson, a transaction that would combine two of the “Big Three” global insurance brokers. As a result, the parties agreed to abandon the transaction. On July 26, 2021, Attorney General Merrick B. Garland released a statement opining that the abandoned transaction “is a victory for competition and for American businesses, and ultimately, for their customers, employees and retirees across the country… The decision to abandon this anticompetitive merger will help preserve competition in insurance brokering.”
C. U.S. Litigation
Deslandes v. McDonald’s USA, LLC, 2021 WL 3187668, (N.D.Ill., July 28, 2021)
Two McDonald’s Corp. workers leading antitrust litigation against the fast food company lost their bid for class action status when a federal judge in Chicago rejected claims that a “no poach” pact among the chain’s locations—discontinued in 2017—had a uniform impact on employees nationwide. Judge Jorge L. Alonso declined to certify the case as a class action, finding that the issues facing all McDonald’s workers were dwarfed in significance by regional variations in the labor market. Those differences would defeat the purpose of collective litigation, he said. According to the judge, because the geographic markets for such workers tend to be small, those differences would defeat the purpose of collective litigation, making it inappropriate to allow a nationwide class in the 2017 lawsuit to proceed. The judge noted that about 92% of McDonald's employees work within 10 miles of home, and that only about 900 of McDonald's 3,000 U.S. franchisees operate a restaurant near a McDonald’s operating company. As a result, the judge said, the no-poach agreements could have anticompetitive effects in some labor markets and not others. “Even looking at the rough contours of the relevant markets in which plaintiffs sell their labor suggests there are hundreds or thousands of local relevant markets in this case,” Alonso wrote.
In re Opana ER Antitrust Lit., Case No. 21-8017 (7th Cir., July 23, 2021)
Endo International Plc and Impax Laboratories Inc., which face antitrust litigation for allegedly delaying generic versions of the prescription painkiller Opana ER, tentatively won their bid to have a federal appeals court in Chicago overturn a ruling designating the case a class action. The U.S. Court of Appeals for the Seventh Circuit sent the case back to Judge Harry D. Leinenweber, directing him either to carve out two groups of categorically unharmed Opana buyers from the class definition or to explain why they “were not a barrier to certification” of the class action.
Consumers with health insurance who pay a flat rate for all generics, and those with plans that charge the same amount for brand and generic versions of a drug, “fall squarely within the ‘could not have been harmed’ category of plaintiffs who do not belong in a certified class,” the appeals court wrote. The case has been remanded so the district court can revisit class certification in light of the unharmed groups and plaintiffs’ proposed amended class definition.
A. The Competition Commission and the President of Mexico address competition concerns in the LPG Market.
LPG (Liquefied Petroleum Gas) is a critical commodity in Mexico, due to its daily use among households. Recently, oil prices have experienced volatility, and LPG prices tied to oil prices have been affected due to less supply and higher demand. Higher prices are creating political problems for the president of Mexico, who campaigned in 2018 offering lower LPG prices. Prices are also a concern of the Competition Authority (COFECE), which in 2018 issued a vast study with recommendations to foster more competition and recommended several regulatory changes to induce it.
To address this issue, the president of Mexico announced that Pemex (the state-owned petroleum company) would launch a subsidiary called “Gas Bienestar” (“Wellbeing Gas”), and that authorities would seek to establish a maximum LPG price. COFECE publicly announced that it has two ongoing investigations into the LPG market: (i) one seeks to determine whether “effective competitions” exist in the market; (ii) the other is examining possible collusion and price manipulation by distributors. Regarding the first probe, if COFECE determines that there is no effective competition in a national, regional or local market, the Energy Regulatory Commission (CRE) would be able to regulate prices. The second procedure regarding cartel conduct could result in high fines to LPG companies.
Eduardo Gambaro, Pamela J. Maple, Yuji Ogiwara, Stephen M. Pepper, Gillian Sproul, Hans Urlus, Dawn Zhang, Mari Arakawa, Filip Drgas, Marta Kownacka, Pietro Missanelli, Massimiliano Pizzonia, Anna Rajchert, Jose Abel Rivera-Pedroza, Ippei Suzuki, Chazz Sutherland, Rebecca Tracy Rotem, and Alan Hersh contributed to this article.