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From Antitrust Law Daily, October 3, 2018

Antirust agency heads open to higher HSR fees for mega-mergers

By Jody Coultas, J.D.

Makan Delrahim, Assistant Attorney General in charge of the Department of Justice Antitrust Division, and FTC Chairman Joseph Simons testified today at an antitrust oversight hearing before the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights on the enforcement of antitrust laws by the two agencies. Subcommittee Chairman Senator Michael Lee (R-Utah) and Ranking Member Senator Amy Klobuchar (D-Minn.) welcomed the two antitrust enforcers to discuss their agencies’ enforcement priorities, especially in light of the 50 percent increase over the last five years in merger reviews and the ongoing discussions of the proper focus of antitrust laws and regulations.

In her questions, Klobuchar sought support from the agencies for her proposed antitrust legislation. She discussed the proposed "Merger Enforcement Improvement Act" (S. 1811), which is intended to adjust premerger filing fees in order to increase antitrust enforcement resources. When asked about the possibility of Hart-Scott-Rodino Act fee increases for deals valued at more than $1 billion, Delrahim said he didn’t think that the increase would hurt enforcement. Simons acknowledged that it has been quite a while since the fee numbers have been revised.

The agency heads appeared to differ on their views about the best antitrust approach to patent hold-ups and hold-outs in the context of standard setting. Lee, who suggested that the lack of clarity could undermine U.S. leadership on antitrust issues, pointed out that Delrahim has questioned whether antitrust enforcers have gone too far in accommodating concerns of technology implementers who participate in standard setting organizations relative to the concerns of intellectual property creators. At the hearing, Delrahim said that he is encouraging a debate on the issue. Simons suggested that antitrust enforcers need to pay attention to both problems.

Justice Department testimony. In his opening statement, Delrahim provided testimony concerning the Antitrust Division’s efforts in criminal and civil enforcement, as well as recent new initiatives to promote competition in the form of changing the merger review process.

The most public efforts of the Antitrust Division over the last year has been the challenge of AT&T’s acquisition of Time Warner, the first vertical merger case that went to judgment in 40 years; a decision that is being currently appealed by the Justice Department. Delrahim also noted the challenge to Bayer’s proposed $66 billion acquisition of Monsanto, in which the Antitrust Division secured a $9 billion divestiture to protect American farmers and consumers, and important divestitures associated with Dow’s acquisition of DuPont.

Delrahim highlighted his recent announcement of changes to the merger review process at the Antitrust Division. In response to increased time and resources being spent on merger reviews, the Antitrust Division plans to shorten the time from the parties certifying compliance to the Antitrust Division making a decision to 60 days or less, with the proviso that the responsible deputy can extend that time period if he or she deems it necessary. Also, in order to "strengthen our civil enforcement program," Delrahim stated that the Antitrust Division is streamlining and improving the its use of consent decrees and other remedies, guided by the view that antitrust enforcement is law enforcement, not regulation, Lastly.

Delrahim also noted the Justice Department’s effort to review nearly 1,300 "legacy" judgments. Senator Orrin Hatch (R-Utah) sought assurances that the Justice Department would not terminate consent decrees with performing rights organizations American Society of Composers, Authors, and Publishers (ASCAP) and Broadcast Music, Inc. (BMI) before a framework for governing the market could be established. Delrahim said that he understood the disruption that this could cause and that he would consider the senator’s concerns.

"Criminal enforcement has long been a vital tool to protect competition and consumers," said Delrahim. The Antitrust Division has brought in over $1.3 billion in criminal enforcement cases between 2016 and 2017. Many of those criminal cases were focused on prosecuting bid rigging and fraud relating to real estate foreclosure auctions in California, Alabama, North Carolina, Georgia, and Mississippi. Charges were also filed against executives of a generic pharmaceutical company for price fixing, bid rigging, and customer allocation for an antibiotic and a drug used to treat diabetes. Finally, Delrahim noted that the Division was "put employers on notice" that no-hire and non-solicitation agreements (no poach agreements) between employers are per se violations of the Sherman Act when they are not ancillary to legitimate collaborations.

Finally, Delrahim discussed various Justice Department policy and procedural initiatives designed to advance competition both nationally and internationally. In June, the U.S. partnered with other antitrust agencies around the world to better align with one another on a core set of procedural norms through the Multilateral Framework on Procedures in Competition Law Investigation and Enforcement (or "MFP"). The Division also established formal internal working groups that incorporate staff from all sections in the Division with the goal of learning about new and ongoing international issues, sharing ideas, discussing best practices, and identifying the people and resources that can help address these challenges. The Division recently expanded our amicus program to increase our participation in private litigation not only in the Supreme Court, but at the district and appellate courts as well. Finally, the Justice Department has held workshops and roundtables for industry participants, academics, consumer advocates, and other interested parties "to discuss important developments in particular business sectors, the appropriate scope of various legal doctrines, or recent advancements in our understanding of relevant economic principles," said Delrahim.

FTC testimony. Chairman Joseph Simons testified to a number of recent FTC competition enforcement matters, as well as public hearings the FTC is holding on a variety of competition and consumer protection issues.

Over the past two years, the FTC has challenged 55 mergers, with the FTC bringing litigation to block five mergers last year alone. In one case, the court temporarily blocked the merger pending trial. In two of those cases, the parties abandoned the merger, a federal court judge has temporarily blocked the merger pending a full trial. Three other cases remain in litigation. However, most horizontal merger cases are resolved through settlements that require divestitures that sufficiently replace lost competition. The FTC reviewed transactions involving retail gas stations and convenience stores, cement, agricultural chemicals, medical instruments, and pharmaceuticals, and services such as specialty veterinary services and air ambulance services. The FTC has also reviewed vertical mergers, including that of Northrup Grumman, a leading provider of missile systems to the Department of Defense, and Orbital ATK, a key supplier of solid rocket motors. "The FTC worked closely with the Department of Defense, and the resulting proposed FTC order imposes non-discrimination requirements and a firewall to preserve competition, according to the testimony," said Simons.

Chairman Simons "the FTC is reaching the point where it will be unable to meet these needs without compromising its ability to fulfill other aspects of the agency’s mission.

Like the Antitrust Division, the FTC Bureau of Competition has developed a more robust system of tracking key developments in the merger review process to determine whether reviews are taking longer and, if so, why some reviews may be taking longer. The Bureau will then determine how to make the process more efficient and less burdensome, while still ensuring the right outcome for consumers. The Bureau also has released a Model Timing Agreement, which adds greater transparency and certainty to the merger review process, said Simons.

A key area of enforcement for the FTC has been challenging reverse payment agreements the generic drug market. Recently, the FTC obtained a landmark $1.2 billion settlement in which Cephalon, Inc. and its parent company, Teva Pharmaceutical Industries Ltd., agreed to settle a long-running "pay-for-delay" action over alleged efforts to block generic competition for the sleep-disorder drug Provigil. The FTC is currently litigating three other matters involving reverse payment agreements.

Similarly, the FTC has challenged anticompetitive conduct by drug manufacturers that seek to maintain a monopoly through sham litigation or repetitive regulatory filings that slow the approval of new drugs. In one such case, a federal court ruled that AbbVie Inc. used sham litigation to illegally maintain its monopoly over the testosterone replacement drug Androgel and ordered $493.7 million in monetary relief.

As with Delrahim, Simons noted that the FTC is focused on collusive practices that restrain competition for employees. In July, the FTC charged three parties—a Texas company that provides therapists to home health agencies, its owner, and the former owner of a competing staffing company—with violating the antitrust laws by agreeing to reduce rates paid to therapists, and by inviting other competitors to join their collusive scheme.

The proliferation of "smart" devices and the widespread use of technology and data has raised new competition issues. "When appropriate, the Commission will take action to counter the harmful effects of coordinated or unilateral conduct by technology firms," said Simons.

In order to stay current with emerging trends in economy, the FTC has announced a series of public hearings to consider whether broad-based changes in the economy, evolving business practices, new technologies, and international developments warrant adjustments to competition and consumer protection law, enforcement priorities, and policy. The series, titled Hearings on Competition and Consumer Protection in the 21st Century, consider the consumer welfare standard, market competitiveness and enforcement policy, and vertical merger analysis.

Finally, Simons, much like Delrahim, concluded by highlighting the FTC’s collaboration with foreign antitrust agencies on cross-border cases and "convergence toward sound competition policies and procedures."

MainStory: TopStory AcquisitionsMergers Antitrust AntitrustDivisionNews ConsumerProtection FederalTradeCommissionNews

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