Presentation Transcript

1. The Pendulum Swings BackA Review of Antitrust Enforcement in 2013 and Predictions for 2014

   Devin Laiho, Assistant Attorney General, State of Colorado Rich Cunningham, Of Counsel, Gibson, Dunn & Crutcher LLP April 16, 2014
2. Overview New leadership at both DOJ and the FTC Overview of state antitrust enforcement Criminal enforcement Civil conduct enforcement Merger review
3. New DOJ & FTC Leadership Antitrust Division: Assistant Attorney General Bill Baer Federal Trade Commission: New Chairwoman – Edith Ramirez Director of the Bureau of Competition – Deborah Feinstein Director of the Bureau of Economics – Martin Gaynor New Democratic Commissioner – Terrell McSweeny
4. Antitrust Fundamentals Per se / rule of reason Price fixing Horizontal, vertical, or both Bid rigging Market allocation Group boycott Tying arrangement Joint venture Information sharing
5. State AGs enforce state and federal antitrust laws Work as individual states for matters of pure local concern Work as multistate groups for regional or national matters Joint enforcement with federal agencies Simultaneous investigations reduce burden & costs Civil law enforcement actions Civil penalties and injunctive relief Relief for consumers as parens patriae Not mass actions subject to CAFA Unlike Rule 23 actions, class certification not required States have Article III standing and prudential standing Represent state agencies harmed by anticompetitive acts State Enforcement
6. Remains DOJ’s “First Priority” Law is fairly steady – liability limited to “hard core” cartel violations Price fixing Quantity limits Market allocation (geographic, customer, or product) Amnesty program remains primary case generation mechanism Cases are not numerous, but are very large, and incredibly high risk Criticaldecisions are made from the earliest moments that an issue is uncovered: Amnesty, disclosures, privilege, multiple jurisdictions Criminal Enforcement
7. Criminal Enforcement: Auto Parts Many companies are involved To date, 23 companies (most of them Japanese) have agreed to pay U.S. fines totaling more than $1.8 billion (USD).
8. Criminal Enforcement: 2014 Predictions Expect a “second wave” of auto parts cases: new investigations will open, new subpoenas and search warrants will issue Expect developments in new investigations underway in financial sector Interest-rate swaps North Sea Brent crude oil Foreign currency exchange Expect the unexpected
9. Civil Conduct Enforcement Monopolization cases, boycotts, MFNs and “other” conduct subject to the antitrust laws Recent agency successes Patents, patents, patents
10. Civil Conduct Enforcement: Apple E-Books Litigation DOJ and 33 states filed suit against Apple and 5 book publishers alleging they conspired to increase prices of e-books Raised questions related to use of “agency” contracts and MFNs The judge said: “The Publisher Defendants conspired with each other to eliminate retail price competition in order to raise e-book prices.” “Apple played a central role in facilitating and executing that conspiracy. Without Apple’s orchestration of this conspiracy, it would not have succeeded as it did in the Spring of 2010.” Appeal and damages proceedings upcoming
11. Civil Conduct Enforcement: Pharmaceutical Pay-for-Delay Settlements Hatch-Waxman Act encourages entry by generic drug manufacturers But also creates incentive for branded manufacturers to sue generics for patent infringement Settlements sometimes involve payments by a branded maker for delay in entry by generic FTC v. Actavis – Pay-for-delay agreements are subject to a rule of reason analysis (most Circuits had held the settlements per se legal)
12. Civil Conduct Enforcement: Standard Essential Patents SEPs: Patents adopted as part of an industry-wide technology standard Licensing: often a commitment by owner to license on fair, reasonable, and nondiscriminatory basis (FRAND). What constitutes “fair” and “reasonable” licensing terms may be open to interpretation: Charging higher royalties relative to past licensing practices? Comparison of royalty rate to value of end consumer device? Charging competitors higher royalties than other firms?
13. Civil Conduct Enforcement: Patent Assertion Entities (“Patent Trolls”) PAE: Entity whose primary business is to acquire patents for purpose of asserting them against existing products or services, not to practice, enable, or develop the technology DOJ: various theories of harm to competition identified, but no one-size-fits-all antitrust theory Concerns regarding “privateering,” in which a practicing entity transfers patents to a PAE to be used against competitors of the practicing entity Potential for operating entities to collude with each other through PAEs to raise rivals’ costs and exclude competitors
14. Civil Conduct Enforcement:Section 5: “Unfair Methods of Competition” Long-standing debate in antitrust law FTC relied solely on Section 5 “unfair methods of competition” authority as basis in recent enforcement cases Intel—alleged product pricing and design practices Bosley/Hair Club—exchange of competitively sensitive information U-haul—invitations to collude/coordinate Commissioner Wright has proposed a Section 5 Policy Statement to guide enforcement Acts or practices that “harm or are likely to harm competition significantly,” and “lack cognizable efficiencies”
15. Civil Conduct Enforcement:Data Privacy and Security Issues Data can be a particularly critical asset Mergers can create market power through the aggregation of complementary (or competing) datasets All manner of subsidiary privacy and data issues can be uncovered, leading to follow-on investigations
16. Civil Conduct Enforcement: Predictions for 2014 Increased scrutiny of the healthcare provider, insurance, and technology markets Targeting of “most favored nation” clauses Patent-related enforcement actions, possibly under Section 5 Focus on reducing burden of investigations on businesses, particularly improving electronic discovery Growing efforts to review investigations post hoc, develop division-wide best practices Spillover from Consumer Protection cases, particularly in areas of data privacy and security
17. Civil Conduct Enforcement: Practice Tips When you receive a government subpoena… Almost always the best strategy is to cooperate Identify information that is particularly accessible Investigations have momentum Can be responsive without showing an unwillingness to fight Consider coordinating across enforcers Facts and evidence more persuasive than saber-rattling Consider document preservation obligations Resources http://www.ftc.gov/tips-advice DOJ / FTC Guidelines for Collaboration Among Competitors
18. Merger Enforcement Several merger challenges last year – all successful American Airlines/U.S. Airways Imbev/Modelo Bazaarvoice Ardagh(Bottles) Multiple hospital cases Agencies are taking concentration thresholds much more seriously Agency remedy demands are becoming more onerous
19. Merger Enforcement: American Airlines In August 2013, DOJ sued to enjoin the $11 billion merger between American Airlines and U.S. Airways, which would create the world’s largest airline. DOJ contended that it would increase airline pricing, including pricing on ancillary fees like baggage and flight change charges. Trial was set for November 25, 2013. On November 12, airlines announced a settlement with DOJ. Divestitures: airlines agreed to give up 69 takeoff and landing slots at LaGuardia and Reagan National, gate and support facilities at other airports. Stated goal of concessions is to enhance low-cost carriers’ ability to compete system-wide. Other recent airline mergers have not faced litigation challenges: Delta/Northwest (2008) Southwest/Air Tran (2008) United/Continental (2010)
20. Merger Enforcement: Bazaarvoice Bazaarvoice, an internet-based product rating and review platform, acquired a competitor, PowerReviews, for $168 million in June 2012 Transaction was not submitted for pre-merger review under HSR DOJ sued, alleging that the consummated merger created an illegal monopoly Heavy reliance on damaging internal Bazaarvoice documents After a three-week trial, Court ruled almost completely for DOJ Take-always: Bad documents can be damning DOJ focused on emerging technologies Consider giving notice of a non-reportable deal
21. Merger Enforcement: Health Care! FTC v. St. Luke’s Health System, Ltd. (D. Idaho) FTC v. Phoebe Putney Health System, Ltd. (M.D. Ga.) FTC v. Mercy Hot Springs United States v. United Regional Health Care System (N.D. Tex.)
22. Merger Enforcement: Predictions for 2014 Aggressive enforcement will likely continue through the second Obama term FTC pursues a potential competition case Both agencies seek to block a merger with mid-range HHIs and a “big name” party More hospital & medical services cases Link between “consumer protection” data privacy & security issues and merger enforcement at FTC Increased international coordination & enforcement
23. Merger Enforcement: Keys to Clearance & Practice Tips Structure matters Nearly deal that can be classified as a 5-to-4 will receive some scrutiny Deals viewed as 4-to-3 have a near presumption of illegality absent a very strong defense story Clean documents Pro-competitive motivation Explain the benefits to consumers rather than doomsday for the parties without the merger Deal structure matters, particularly with: Joint ventures, failing firms, antitrust risk provisions Agencies are open to creativity Pull & refile “quick looks”
24. Contact Information Rich Cunningham Gibson, Dunn & Crutcher LLP 1801 California Street Denver, CO 80202 Tel: 303-298-5752 rhcunningham@gibsondunn.com Devin Laiho Colorado Attorney General’s Office Ralph L. Carr Colorado Judicial Center 1300 Broadway, Seventh Floor Denver, CO 80203 Tel: 720-508-6219 Devin.Laiho@state.co.us