Welcome to this month’s edition of the Sidley Antitrust Bulletin — thoughts on topics that are top of mind for Sidley’s Global Antitrust team and why they may matter to you. In the U.S., the Federal Trade Commission (FTC) recently filed a petition to enforce a Civil Investigative Demand (CID) against a third party in an ongoing price discrimination investigation under the Robinson-Patman Act, and it sued to block a hospital merger. The Department of Justice (DOJ) filed a consent decree in the agricultural sector preventing so-called de facto noncompete clauses. In Europe, the German competition authority’s powers related to sector inquiries were boosted, and the UK’s Competition and Markets Authority (CMA) published prioritization principles for its work. Interested? Keep reading.…

Our Take on Top-of-Mind Global Antitrust Issues

FTC files a petition to enforce a third-party CID: On October 20, 2023, the FTC filed a petition and supporting memorandum in district court in the Eastern District of Virginia to enforce compliance with a third-party CID issued to Retail Systems & Services, Inc. (Total Wine) in the FTC’s investigation into whether Southern Glazer’s Wine & Spirit, LLC violated the Robinson Patman Act. This petition followed Total Wine’s administrative petition to limit the CID, which was denied. On November 14, 2023, Total Wine responded, noting that it had produced nearly 9,000 documents and data on 38 million transactions and questioning the relevance of some of the outstanding requests.

Why it matters: Both the FTC and the DOJ may issue CIDs to third parties in antitrust investigations. While petitions to enforce a CID are rare, the agencies do ask the courts to enforce demands on occasion. When they do, third parties have an opportunity to be heard on why the information requested is burdensome and not relevant or necessary to the investigation. A hearing is scheduled for December 11, 2023, unless Total Wine and the FTC come to an agreement in advance. Any clarity provided by Judge Anthony Trenga regarding the scope of (1) the FTC’s CID powers and (2) the obligations of third parties to respond likely will more broadly affect CIDs and the associated negotiations for third parties in antitrust investigations.

The FTC challenged a hospital acquisition: On November 17, the FTC sued to block John Muir Health’s proposed acquisition of San Ramon Regional Medical Center. The FTC alleged that the transaction would lessen competition for general acute healthcare services in the I-680 corridor, leading to higher rates for insurers and lower-quality care. It claimed that the proposed transaction would lead to John Muir Health’s market share of general acute care services to exceed 50%, and it alleged that the transaction was presumptively anticompetitive under the market share concentration thresholds set out in the 2010 Horizontal Merger Guidelines.

Why it matters: The FTC continues to make enforcement in the healthcare sector a priority. In the past two years, the FTC challenged four hospital mergers, alleging anticipated anticompetitive effects, and it also challenged one transaction for a failure to file a Hart-Scott-Rodino notification. Given the political pressure around healthcare competition, the FTC is likely to continue to closely scrutinize hospital mergers.

DOJ files proposed consent decree with Koch Foods, Inc. to prevent so-called de facto noncompete clauses: On November 9, 2023, the DOJ filed a proposed consent decree that would prohibit Koch Foods, Inc., the fifth-largest poultry processor in the United States, from (among other things) “penalizing” chicken growers for switching processors. In its complaint, the DOJ alleged that Koch Foods’ exit penalties — imposed on growers who switched processors within 10 to 15 years of contracting with Koch — acted as a de facto noncompete clause in violation of the Packers and Stockyards Act and Section 1 of the Sherman Act. According to the DOJ, the exit penalties suppressed compensation for growers by preventing Koch from having to pay farmers competitive rates to keep them from switching to one of Koch’s competitors.

Why it matters: The DOJ’s lawsuit against — and settlement with — Koch Foods highlights the agencies’ heightened focus on agricultural antitrust issues, including renewed enforcement of the Packers and Stockyards Act. And, though the DOJ previously signaled that it believed noncompete provisions violated the Sherman Act, this action marks the first time in this administration that the DOJ has alleged as much in federal court (joining the FTC, which earlier in the year brought enforcement actions against companies that used noncompete provisions, alleging violations of the FTC Act). The settlement should serve as a reminder to all companies that any noncompete provision in any form may be intensely scrutinized by the agencies.

German competition authority’s sector inquiry powers significantly bolstered: As of November 7, 2023, the German competition authority (the Bundeskartellamt (BkA)) may impose behavioral and structural remedies following its so-called “sector inquiries” (general investigations into whether competition in a sector is working, as opposed to investigations into whether particular companies have broken the law). It gained this power as a result of amendments to the German Competition Act. Prior to the amendments, absent separate enforcement action following a sector inquiry, the BkA was typically only able to give a set of recommendations to the government and companies involved in the sector inquiry. Now, where the BkA finds a “significant and continuing malfunction of competition” following a sector inquiry, it has the power to impose remedies on companies in the name of improving competition (up to and including divestment remedies) even where those companies have not been found to have breached competition law.

Why it matters: The ability to impose remedies to “fix” systemic competition problems even without finding an infringement gives the BkA very broad powers. In theory, the BkA could decide to reduce the market share of an operator it finds too powerful. There are numerous checks and balances (such as evidential thresholds to be met and procedural rights and appeals for potentially affected parties), so it is expected that the powers will be used sparingly and reserved for relatively severe cases of market dysfunction. Nonetheless, it permits a degree of direct market intervention that most competition regulators do not have. One example of another jurisdiction with similar powers is the UK’s CMA market investigation regime, where the CMA may impose remedies to address an adverse effect on competition identified in one of its market investigations (also without having to find an individual infringement).

CMA adopts new Prioritisation Principles: After receiving support from businesses and consumer bodies during a consultation period, the CMA published its Prioritisation Principles on October 30, 2023. In areas where the CMA has discretion to act, these principles set out five key considerations that the CMA will take into account in deciding whether to use its powers. The CMA states that it will generally want to prioritize its work according to the strategic significance and impact of the work, which it will balance against the risks and resources involved as well as whether the CMA (or another regulator) is best placed to act.

Why it matters: When considering whether or not a matter is of strategic significance, the Principles cross-refer to the CMA’s Annual Plan. The CMA’s Annual Plan for 2023-24 has areas of focus for the CMA that include (among others) ensuring access to competitive digital markets and emerging technologies as well as deterring anticompetitive behavior in areas that may have direct effects on public and household expenditure (see our previous bulletin here). In combination, the two documents provide some insight into the issues that the CMA is likely to take forward in its work when seeking to initiate, or continue, its work through its various discretionary enforcement and policy tools.

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