Earlier this month, over 2,700 antitrust and competition lawyers and government enforcers—from around the world—convened at the American Bar Association Section of Antitrust Law’s Annual Spring Meeting. Dentons antitrust and competition lawyers were among those attending the myriad programs.
The meeting highlighted the international dimensions of antitrust and competition systems whose statutes and policies converge in many respects, but vary considerably in others—and often in a nuanced way.
Enforcement officials at the meeting offered views in areas such as enforcement priorities and initiatives, investigative processes, distribution practices, and criminal antitrust cases.
From The “Enforcers Roundtable”
US Department of Justice - Antitrust Division
On the job for three months, William Baer, Assistant Attorney General, Antitrust Division, pointed to:
- Sixty-three (63) criminal cases filed last year, with fines totaling over $1 billion. In the last five years the average criminal fines have been roughly eight times the appropriations for the Division’s operations.
- Modifications to the agency’s “carve out” practices with respect to corporate plea agreements in criminal cases.
- Recent merger actions (e.g., AT&T/T-Mobile, Anheuser-Busch InBev/Grupo Modelo), and the Division’s ongoing efforts to conform articulation of enforcement policy with actual enforcement practice.
- Noteworthy non-merger actions (e.g., actions against book publishers and Apple relating to e-books, and against Michigan Blue Cross Blue Shield for its use of a most-favored-nations clause).
US Federal Trade Commission
On the job for just over a month, new FTC Chairwoman Edith Ramirez (who had previously served as a Commissioner since April 2010) offered the following key points:
- The FTC’s recent victory in the Supreme Court in the Phoebe Putney case (where the Court unanimously adopted its position that the state action doctrine did not exempt a hospital acquisition from antitrust scrutiny), and the Court’s recent oral argument in FTC v. Actavis, where the Court is considering what antitrust standards should apply to patent settlements in the pharmaceutical industry.
- Hospital mergers would be an area of particular focus and concern, as would strategies of branded pharmaceutical companies that she characterized as aimed at protecting their drug products from generic competition. (She identified branded companies’ refusing to provide generics with drug samples for testing and their introducing slightly different formulas to transfer patients from a drug about to expire as examples of such strategies.)
- The extent to which Section 5 (which prohibits unfair methods of competition) reaches conduct that may not violate the Sherman Act) has been a subject of considerable debate. Chairwoman Ramirez expressed the view that an expanded use of Section 5 should be used in a judicious and careful way, on an incremental basis, providing guidance to the business community. (At another program, new Commissioner Joshua Wright urged that the FTC issue guidance on the scope of Section 5 and said that he aims to offer his own proposal on its use.)
- There is continued interest in technology markets, particularly issues arising in the context of standard-setting organizations.
- There is also continued focus on privacy issues (especially in the context of the mobile phone arena) and preventing fraud on consumers.
EU Commissioner Joaquin Almunia, responsible for the competition portfolio on the European Commission, noted:
- Current economic difficulties have not led to a more lenient approach to competition law enforcement, but instead to even more intense enforcement initiatives, with competition policy enforcement viewed as a means to improve economic and job growth.
- In the 2012 – 2013 period, the Commission issued its largest fine ever (€1.4 billion in the cathode ray tube cartel), and in the near future will investigate suspected cartel activity in various modern sectors of the economy.
- The Commission continues its efforts at controlling state aid or public subsidies.
Andreas Mundt, President of the Bundeskartellamt (Federal Cartel Office (FCO)), observed:
- Although mergers have been a major focus of the FCO historically, attention has shifted to cartel enforcement recently. In 2012, cartel cases against 59 companies led to fines of €303.
- The FCO’s second priority has been vertical restraints, including those involving (i) on-line best price guarantees for online platforms, and (ii) seller restrictions on online sales (to protect “bricks and mortar” outlets).
- The increased cooperation among competition law agencies, not only in bilateral interchanges, but also through the International Competition Network (on whose Steering Group he serves).
US State Multistate Antitrust Task Force
Kathleen Foote, Senior Assistant Attorney General of the California Department of Justice, and Chair of the National Association of Attorneys General’s (NAAG) Multistate Task Force, pointed to the following:
- NAAG has a number of task forces and committees, including an Amicus Committee, a pharmaceutical working group focusing on pharmaceutical patent settlements, and two new working groups (health care and class actions).
- Formation of a class action group was spurred by the phenomenon that the states often find themselves as members of a plaintiff class (in their role as purchasers of goods or services) and as counsel bringing an action in their parens patriae capacity).
- In certain areas—e.g., resale price maintenance, which is no longer per se illegal under federal law—the states may have different views on the applicable legal standard under their state antitrust statutes. In this regard, she noted, certain state enforcers take the position that RPM is per se illegal under their statutes, and the views of others remain to be seen.
Investigative Process Involving Mergers and Other Practices
Reducing Discovery Burdens
In connection with Civil Investigative Demands and second requests in merger investigations, Antitrust Division official Leslie Overton urged parties to (a) communicate early and often with the staff on compliance issues; (b) work with the Division in identifying decisive issues and negotiating document custodians and data sources bearing on those issues; (c) review carefully instructions for compliance with the specifications (which may change over time); (d) engage in rolling productions of responsive material.
Focusing the Inquiry
The FTC’s Bureau of Competition Director Richard Feinstein urged parties to engage in a dialogue with the staff to identify one or two dispositive issues for focused inquiry in cases where staff interest in the deal is anticipated. Whereas the staff and parties previously have tended to focus on overall market conditions, he stated that the current emphasis is often on the pre-merger relationship between the parties: to what extent do the data and internal documents reflect competition between the two of them?
EU and FTC regulators offered their views on how firms can best present complaints about their competitors when urging enforcement agencies to take action against those competitors (whether it be in a merger or other case). Competitor complaints are most credible when buttressed by a strong factual showing that the challenged conduct harms consumers.
FTC Antitrust Priorities
In addition to the views of Chairwoman Ramirez, Bureau of Competition Director Feinstein stated that substantial resources (including experienced legal staff and a number of staff economists with strong health care markets expertise) are being devoted to the health care industry. He noted that staff is prepared to recognize “quality” efficiencies and other integration efficiencies as pro-competitive justifications in connection with health care ventures and practices, when they are factually supported, but that “mere promises are not enough.”
Mr. Feinstein also identified high-tech markets as a priority area for resource allocation. In this area, he and Bureau of Economics Director Howard Shelanski offered support for expanded study (using Section 6(b) of the FTC Act) of how “patent assertion entities” (which accumulate large numbers of patents for the purpose of asserting them in infringement suits) affect the market for intellectual property. Mr. Shelanski said that they have been looking at PAE’s carefully (reflected in the FTC’s and Antitrust Division’s conducting a PAE workshop in December 2012). Subsequent to the meeting, Commissioner Wright, suggesting caution, stated that “the appropriate scope of antitrust policy related to PAE’s must ultimately be determined by what we learn in the years to come about the competitive effects of their activities.”
Resale Price Maintenance
Counseling international sellers on use of resale price maintenance agreements is challenging—even with relaxation of the applicable legal rules in many jurisdictions. Thus, in 2007, the US Supreme Court held that minimum resale price maintenance (RPM) would no longer be per se illegal under US federal antitrust law. However, as noted above, some states take the position that RPM continues to be per se illegal under their state antitrust laws, and the position of other states remains to be seen. An increasing number of sellers seem to be embracing the use of pricing and advertising policies based on the Colgate doctrine (which raise their own implementation issues). Canadian treatment of RPM is now considerably more liberal than in the past. In the EU and its national member states (and elsewhere) minimum RPM still tends to be treated harshly, despite some relaxation of “hard core restraint” treatment in special situations. All of this points to the need for multi-jurisdictional legal expertise, and counsel who fully understand the underlying strategic business reasons for resale price-oriented policies.
One program examining treatment of territorial restraints in a global economy further illustrated some general international convergence on analytical approach (resembling the “rule of reason” analysis in the US), but with some distinctions that cannot be ignored—such as EU rules pertaining to resale restrictions on territories and customers (and, more specifically, rules governing internet selling and selective distribution).
Resolving US Department of Justice Criminal Investigations with a Plea Agreement
- Lisa Phelan, Chief, National Criminal Enforcement Section, of the US Department of Justice Antitrust Division, discussed her view of the benefits to a company’s resolving a criminal antitrust investigation by pleading guilty and entering into a plea agreement, and the steps involved in the process of doing so. In addition to avoiding trial and more severe punishment, she stated, a guilty plea and cooperation with DOJ brings the company certainty and finality in the short term and allows it to put the matter behind it and return its full focus to the business. She stated that if the company initiates its cooperation at the earliest possible time, it can receive the most benefits, including immunity for itself, immunity for its employees, or at least a substantial discount in the fine the DOJ will ask the court to impose.
- However, as panelists on the program discussed, a significant downside in agreeing to plead guilty and entering into a plea agreement is its effect in civil treble damages following on the criminal case. But the language in a plea agreement may be able to narrow the charges and conduct, thus limiting its consequences in civil cases.
- Ms. Phelan said that in the event a company’s internal investigation leads it to conclude that the company had been or is involved in criminal conduct: (a) the first company to contact and cooperate with DOJ can obtain full immunity from prosecution for itself and its employees who were participants in the illegal conduct; (b) the second company to cooperate can receive an agreement from the DOJ that it will seek the imposition of fine of 30-35% less than the fine called for by US Sentencing Guidelines, as well as immunity for some of its employees; (c) the third or fourth company to cooperate can expect lesser, but still significant, discounts in fine and immunity for some of its employees. If not one of the first four to cooperate, a company can expect little or no discount in fine.
- She described at some length how the DOJ, when considering the extent of benefits to give a cooperating company, evaluates the completeness of the information provided by it and its quality (in providing assistance in investigating and prosecuting others). In this regard, she emphasized that the company must submit itself to a complete and thorough internal investigation by its counsel, which must discover all information, and identify all persons, relevant to the investigated conduct.