• The FTC is enjoying some good results regarding subpoenas.
• Congratulations to Tim Cornell who has joined Clifford Chance from Simpson Thacher & Bartlett.
• The 5th circuit upheld the dismissal of an antitrust lawsuit accusing Harrah’s Operating Co. and Pinnacle Entertainment of conspiring to monopolize riverboat gambling in Louisiana (decision).
• Looks like the FTC will jump on the anti-Intel boat.
• And it is investigating CVS Caremark.

Share on Facebook

Share on Facebook

The House Judiciary Committee voted Wednesday to strip federal antitrust protections shielding health insurers from investigations into price fixing and other business practices, the first step in a legislative bid to clamp down on the much-maligned industry. Although Democrats have led the repeal push in recent weeks, the committee’s 20-9 vote came with the support of three Republicans. The legislation would repeal portions of the 1945 McCarran-Ferguson Act that allows states to regulate health insurance providers without federal intervention.

Share on Facebook

Share on Facebook

Share on Facebook

The Department is generally opposed to exemptions from the antitrust laws, whether they be industry-specific or general, in the absence of a strong showing of a compelling need. The antitrust laws reflect our society’s belief that competition enhances consumer welfare and promotes our economic and political freedoms. Exceptions from that policy should be–and fortunately are–relatively rare. Those who advocate the creation of a new antitrust exemption, or the preservation of a longstanding exemption such as that contained in the McCarran-Ferguson Act, rightfully bear a heavy burden in justifying the exemption.

…

There are strong indications that possible justifications for the broad insurance antitrust exemption in the McCarran-Ferguson Act when it was enacted in 1945 are no longer valid today. To the extent that the exemption was designed to enable the states to continue to regulate the business of insurance, it is no longer necessary. The “state action” defense, which had been announced by the Supreme Court in Parker v. Brown in 1943, but was undeveloped in 1945 when the McCarran-Ferguson Act was enacted, has now been the subject of many Supreme Court opinions. This defense allows a state effectively to immunize what the antitrust laws otherwise may proscribe by clearly articulating and affirmatively expressing a policy to displace competition, and by actively supervising any private conduct that might be involved.

Moreover, the application of the antitrust laws to potentially procompetitive collective activity has become far more sophisticated during the 62 years since the McCarran-Ferguson Act was enacted. Some forms of joint activity that might have been prohibited under earlier, more restrictive doctrines are now clearly permissible, or at very least analyzed under a rule of reason that takes appropriate account of the circumstances and efficient operation of a particular industry. Thus, there is far less reason for concern that overly restrictive antitrust rulings would impair the insurance industry’s efficiency.

In sum, the Department of Justice generally supports the idea of repealing antitrust exemptions. However, we take no position as to how and when Congress should address this issue. In conjunction with the Administration’s efforts to strengthen insurance regulation and states’ role in setting and enforcing policies, the Department supports efforts to bring more competition to the health insurance marketplace that lower costs, expand choice, and improve quality for families, businesses, and government. …

Those points are all well-taken but one wishes the Department could have brought itself to not only “generally” support the repeal of antitrust exemptions, but to specifically recommend the repeal of McCarran-Ferguson, which is one of the broadest exemptions to federal antitrust laws on the books.

Share on Facebook

Share on Facebook

Share on Facebook

UPDATE: the Solicitor General filed her brief on Friday.

Update 2: Additional amicus briefs:

• Brief for the National Football League Players Association, the Major League Baseball Players Association, the National Basketball Players Association, and the National Hockey League Players Association in Support of Petitioner
• Brief for the American Antitrust Institute and the Consumer Federation of America in Support of Petitioner
• Brief for Economists in Support of Petitioner
• Brief for the National Football League Coaches Association in Support of Petitioner
• Brief for the Merchant Trade Association in Support of Petitioner and Reversal

Share on Facebook

From the FTC side we have Rich Feinstein, Director of the Bureau of Competition, Joe Farrell, Director of the Bureau of Economics, and Howard Shelanski, Deputy Director for Antitrust in the Bureau of Economics. … From the Antitrust Division we have Deputy Assistant Attorneys General Molly Boast, Carl Shapiro, and Phil Weiser.

Also at the Symposium, AAG Christine Varney delivered remarks during lunch. She said that efforts will be focused on three areas: market definition (including, for example, the issue whether the Guidelines need to be revised to make clear that the location of customers is the relevant consideration for determining geographic market), market concentration, and competitive effect. On market concentration, Varney pointed out that the disparity between the Guidelines’ HHI thresholds and agency practice leads to confusion, a lack of predictability, and vitiates the agencies broader goal of transparency. (Varney’s speech at the International Bar Association’s meeting on transparency and procedural fairness is here.) Varney also said that, unless the workshops and public comments tell the agencies otherwise, the plan is to leave the basic structure of the Guidelines in place, for instance the hypothetical-monopolist test or the three-part test for market entry. The text of the Varney’s speech has already been posted on the DOJ webpage.

In response to a question by Jim Rill (under whose leadership the 1992 Guidelines were issued), Varney said that “market definition is here to stay.” The question is pertinent since both Carl Shapiro and Joseph Farrell appeared as panelists at the Symposium. Shapiro in particular spoke to the “upward price pressure” test he and Farrel have developed to permit a direct inquiry into competitive effects without (upfront) market definition in unilateral effects cases in differentiated products markets. Bob Willig, always a treat to listen to at events, described UPP as a “beautiful idea” that may be the next big thing, and even suggested considering it in coordinated effects cases (which surprised me). He also voiced the concern that if UPP were to be used by the agencies to assess mergers, the parties would need to be prepared to conduct analyses early on, such as diversion analysis, natural experiments, and economic regressions, before a Second Request would issue. But given Varney’s comment and the fact that the FTC got chided by Judge Brown in Whole Foods for not treating market definition as the central and foremost issue (when the FTC finally made unilateral effects arguments on appeal), I doubt UPP will be more than a wrinkle in merger analysis even during Shapiro’s tenure at the DOJ.

But there is definitely movement. The question of the market definition’s centrality also came up in Varney’s remarks on the upcoming Guidelines workshops. Varney said that three areas of competitive effects would be of particular interest: unilateral effects in differentiated-products markets (not surprising, since unilateral effects are given a bare-bones treatment in the Guidelines), price discrimination to vulnerable customers, and finally “more direct types of evidence” to consider. On the last point, Varney said:

Third, we are interested in your views on the use of more direct evidence that is not strictly based on inferences drawn from increases in market concentration. There are several categories of such evidence worth exploring: (1) evidence of the actual, post-merger competitive effects of consummated mergers, (2) evidence of “natural experiments” obtained by looking across different geographic markets, time periods, customer categories, or similar product markets; (3) evidence of the firms’ post-merger plans; (4) evidence of customer views of post-merger competition; (5) historical evidence of actual head-to-head competition between the merging firms; and (6) historical evidence of actual or attempted coordination in the industry. Although the Agencies routinely rely heavily on these kinds of evidence to assess competitive effects, the Guidelines address their relevance only in passing and only secondarily, after the relevant market is defined and concentration in that market is measured. Courts also regularly rely on this type of evidence in assessing competitive effects. We are interested in views on whether we should adjust the Guidelines to address explicitly what kinds of direct evidence are pertinent and how they should be weighed.

Notice that UPP is absent from the list.

Share on Facebook

First, Randy Picker has some very detailed analysis of the DOJ filing in the Google-Book Search case.

Second, the EC has posted a non-confidential version of its decision in the Intel matter.  Also, there is a press release.

Share on Facebook

Share on Facebook

[M]erger law today focuses on changed incentives that flow from changes in industry structure; the Rosch opinion suggests that adverse incentive effects can also flow from changes in the structure of the surviving competitor. … Changes in industry structure are often a useful tool when predicting the likelihood of a price effect, but sound economics does not necessarily require that this structural change be an element of the offense.

The problem with this argument is the implication that higher post-transaction prices as such are of concern under Section 7. That, however, is not correct. Section 7 is concerned with acquisitions the effect of which “may be substantially to lessen competition, or tend to create a monopoly.” In other words, if we focus on price, then only those price effects are relevant to Section 7 that are the result of a lessening of competition. Price effects that are not the result of a lessening of competition are not actionable under Section 7. And that is why there is a more meaningful difference between a change in the industry structure and a change in the firm structure as a result of the acquisition than Leary suggests. There is ample evidence that higher industry concentration permits some inference as to diminished market performance — with all the important and customary caveats. But a change in firm structure does not permit an inference of diminished competition. Put simply, Section 7 is focused on competition, not price, whereas Rosch’s concurrence is focused on price, not competition.

Share on Facebook

Share on Facebook

Share on Facebook

Share on Facebook

Share on Facebook

Share on Facebook

Update (7/08): Day three and still down.  At some point this becomes embarrassing.  (Even if, as some have speculated, there was a DDoS attack. Another Update: The Washington Post reports that it is a DDoS attack and that 26 websites (including the Post) were targeted.  The FTC, however, seems to be the only website that has been down the entire time and is still down).

The FTC website is again down today.  PC World reports that “agency representatives said they don’t know what caused the problem.”

Share on Facebook

Private agreements that include reverse payments are properly evaluated under the antitrust rule of reason, which takes into account efficiency-related justifications as well as anticompetitive potential.  The anticompetitive potential of reverse payments in the Hatch-Waxman context in exchange for the alleged infringer’s agreement not to compete and to eschew any challenge to the patent is sufficiently clear that such agreements should be treated as presumptively unlawful under Section 1 of the Sherman Act.  Defendants may rebut that presumption by providing a reasonable explanation of the payment, so that there is no reason to find that the settlement does not provide a degree of competition reasonably consistent with the parties’ contemporaneous evaluations of their prospects of litigation success.

If/when I figure out how to upload a pdf file I will attach the brief (or link to it if/when DOJ posts the brief on its website).

Share on Facebook

Both the district court and the seventh circuit found that the defendants (i.e., the NFL entities) were a single entity.  AR coverage of the seventh circuit decision is here.

An interesting aspect of this case is that the Supreme Court asked the Solicitor General for her opinion and the Solicitor General recommended the Court deny cert.  Granting cert after the SG has weighed in to the contrary is extremely rare.

The Sports Law Blog has noted that the “NFL—and other professional sports leagues in the U.S.—have a tremendous amount to gain from the Supreme Court’s decision, but not much to lose.”  At the Antitrust & Competition Policy Blog, Chris Sagers has a lengthy (and passionate) post in which he speculates that “in short, there are probably four pretty solid votes for affirmance, one more (Kennedy) that seems only marginally less solid for defendants, and either of two (Breyer and Sotomayor) that might also sign on for affirmance.”

American Needle’s Cert Petition.

The NFL’s brief.

American Needle’s supplemental brief.

The Solicitor General’s brief.

Seventh Circuit opinion.

Share on Facebook

The Interim Report finds that drug prices are lower when authorized generics are marketed against a single generic drug than when they are not. With authorized generic competition during the 180-day marketing exclusivity period, retail drug prices are on average 4.2 percent lower than the pre-generic branded price, and wholesale drug prices are on average 6.5 percent lower than the pre-generic branded price.

Authorized generic entry during this time also substantially reduces the revenues of a first-filer generic firm, with declines ranging from 47 to 51 percent. As a result, because a generic can earn greater revenues if an authorized generic does not enter the market, a generic firm may be willing to agree to defer its market entry in return for a brand’s promise not to launch a competing authorized generic during the 180-day marketing exclusivity period. A review of patent settlement agreements, the Interim Report states, reveals that such agreements appear to be more common now than in the past.

(I personally wonder if a 4% decline can be accurately be termed “substantial”).

The report itself is available here.

Share on Facebook

an internal FTC analysis projects that stopping collusive “pay-for-delay” settlements between brand and generic pharmaceutical firms would save consumers $3.5 billion a year and also reap significant savings for the federal government, which pays approximately one-third of all prescription drug costs.  Chairman Leibowitz urged Congress to pass pending legislation to ban or restrict such anticompetitive patent settlements, in which manufacturers of brand-name drugs pay potential generic competitors to stay out of the market, as a way to control prescription drug costs, restore the benefits of generic competition, and help pay for health care reform.

The full text of the speech is here.

Share on Facebook

The U.S. Supreme Court rejected a lawsuit challenging Bayer AG’s (BAYRY) deal with Barr Pharmaceuticals Inc. (BRL) to delay producing a generic version of Cipro, an antibiotic drug.

…

Separate litigation on the Cipro agreements brought by drug wholesalers and retailers is still pending in a lower court. The Obama administration intends to file a brief in that case, which is in the 2nd U.S. Circuit Court of Appeals in New York.

Bayer paid $398 millionto Barr and other generic drug makers in return for an agreement that they would not market a generic version of Cipro until Bayer’s patent on the drug expired. Drug purchasers and advocacy groups challenged the agreement as anticompetitive, saying it violated federal and state antitrust laws as well as state consumer protection laws.

The lawsuit was thrown out by a U.S. trial judge in New York in 2005. Last year the U.S. Court of Appeals for the Federal Circuit affirmed the rejection, agreeing that Bayer’s patent rights gave it the ability to enter into agreements limiting generic alternatives to its antibiotic.

Share on Facebook

has launched an investigation into whether some of the nation’s largest technology companies violated antitrust laws by negotiating the recruiting and hiring of one another’s employees, according to two sources with knowledge of the review.

The review, which is said to be in its preliminary stages, is focused on the search engine giant Google; its competitor Yahoo; Apple, maker of the popular iPhone; and the biotech firm Genentech, among others, according to the sources, who spoke on condition of anonymity because the investigation is ongoing.

…

The sources said the review includes other tech companies and is “industry-wide.” By agreeing not to hire away top talent, the companies could be stifling competition and trying to maintain their market power unfairly, antitrust experts said.

Share on Facebook