Buckle up for Japan’s new plea bargaining!

Over the past decade, the Japan Fair Trade Commission (JFTC) has increased its criminal enforcement of Japan’s antitrust law, the “Act on Prohibition of Private Monopoly and Maintenance of Fair Trade,” commonly known as the Anti-Monopoly Act.  This trend is likely to continue because last month Japan’s Diet amended the Code of Criminal Procedure to introduce a plea bargaining system that creates an incentive to report antitrust violations committed by others.  The new plea bargaining system, which applies to crimes such as antitrust, fraud, bribery and tax evasion, will be implemented in Japan within 2 years.

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Antitrust Implications of the U.S. Supreme Court’s Decision in RJR Nabisco v. European Community

For the past several years, plaintiffs and defendants in international price-fixing cases have battled over the extraterritorial application of the Sherman Act in light of the Foreign Trade Antitrust Improvements Act of 1982 (“FTAIA”), 15 U.S.C. § 6a, and the U.S. Supreme Court’s seminal decision in F. Hoffman-LaRoche Ltd. v. Empagran, S.A., 542 U.S. 155 (2004).  Although the Supreme Court passed on an opportunity to clarify the scope of the FTAIA when it denied petitions for certiorari following decisions in Hsuing v. United States, 778 F.3d 738 (9th Cir. 2014), as amended (Jan. 30, 2015), and Motorola Mobility LLC v. AU Optronics Corp., 775 F.3d 816 (7th Cir. 2014), as amended (Jan. 12, 2015),[1] the Court’s decision in RJR Nabisco v. European Community—which addresses the extraterritorial application of the federal RICO statute—may provide some insight into how it views antitrust claims based on foreign injuries under the FTAIA.

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U.S. District Court Denies FTC’s Motion for a Preliminary Injunction Blocking Chicago-area Advocate Health / NorthShore Hospital Merger

On June 14, 2016, U.S. District Judge Jorge Alonso, of the Northern District of Illinois, denied a motion for preliminary injunction by the Federal Trade Commission (“FTC”) and the Attorney General for the State of Illinois, seeking to block the proposed merger between Advocate Health Care and the NorthShore University Health System (“NorthShore”) in the Chicago metropolitan area.[1]  According to Judge Alonso’s opinion released on June 20, the Plaintiffs failed to prove a relevant geographic market, the lack of which the Court deemed fatal to the Plaintiffs’ case.[2]

This loss could be a blow for the FTC’s health care competition enforcement program.  It is the agency’s second loss in district court this year in a hospital merger challenge.  Additionally, as we noted in our May 13, 2016 blog post concerning the FTC’s earlier loss on the Hershey merger—now on appeal to the Third Circuit—both cases reflect push-back by courts against what to this point have been highly successful FTC market definition and consumer harm arguments in hospital merger cases.

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Confidential Settlement Amounts Are Not Necessarily Confidential

Courts in the Northern District of California, which have been handling price-fixing class actions in the electronics industry for more than a decade, are continuing to develop ground rules about whether defendants in a price-fixing case are entitled to know the amount for which an opt-out Direct Action Plaintiff (DAP) settles its cases against other defendants. On May 27, 2016, Judge Jon S. Tigar overruled objections to a Special Master’s Report and Recommendation compelling two DAPs to disclose settlement amounts in the Cathode Ray Tube (CRT) Antitrust Litigation, No. 3:07-cv-5944 (N.D. Cal.). Judge Tigar compelled both companies to provide that information to a Special Master so he can determine whether the information should be provided to other defendants to facilitate settlements—even though both companies had already settled all of their claims against all defendants.  ECF 4661.

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Supreme Court’s Request for Views of the United States on Cert. Petition in Lamictal “Reverse-Payment” Case Flags Potential Issues for Practitioners

On Monday, June 7, the Supreme Court requested the views of the Solicitor General in connection with a petition for certiorari filed by the U.S. subsidiary of GlaxoSmithKline plc (“GSK”) in SmithKline Beecham Corp. v. King Drug Co. of Florence, No. 15-1055.  The Supreme Court’s request seems less directed to rethinking its seminal ruling in FTC v. Actavis on the lawfulness of “reverse-payment” settlements of Hatch-Waxman cases than to a concern that, in some specific ways, its decision may have created some unintended consequences.

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Health Check for Hospitals in Germany

Are patients receiving the best care in hospitals? The German competition authority – Bundeskartellamt – has now decided to apply a health check to the German hospitals market.

On May 31, 2016, the German competition authority announced that it was launching a so-called “sector inquiry” into the hospital services market to examine the degree of competition in that sector of the economy.

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The European Commission’s Priorities in Pursuing Enforcement Actions

Businesses often wonder how competition authorities pick and choose the cases they decide to bring.  Companies with operations in Europe now have some guidance as a result of a recent speech by European Competition Commissioner Margrethe Vestager, in which she outlined how the Commission prioritizes its enforcement efforts.

Commissioner Vestager explained that the Commission uses three main criteria in prioritizing which cases to pursue.  Not every case needs to satisfy all three criteria, but the Commission tries to keep these three objectives in mind in determining whether to pursue an enforcement action.

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No Easy Answers: Ohlhausen Challenges Notion of “Monopoly Problem” In the US

On June 1, 2016, FTC Commissioner Maureen Ohlhausen delivered remarks in Hong Kong, pushing back on recent news reports implying that the United States currently suffers from a “monopoly problem” causing a reduction of competition in the marketplace.  Recent articles and opinion pieces in The Economist and The New York Times suggest that the consolidation of market power, and lack of antitrust enforcement preventing such consolidation, are having a noticeable effect and harming consumers and innovation.  Indeed, the precursor to these reports—an April 14, 2016 report from the Council of Economic Advisers (“CEA”), entitled “Benefits of Competition and Indicators of Market Power,” argues there has been a decline of competition in certain parts of the U.S. economy due the concentration of monopoly power in the hands of a select few players in certain industries (e.g., airlines, cable, networking).  The CEA report suggests U.S. agencies should explore how certain factors—the use of Big Data, increased price transparency, and common stock ownership—affect competition.  As a result of the CEA report, President Obama issued an Executive Order on April 15, 2016, directing antitrust enforcement agencies to use their authority to “promote competition.”

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FTC Provides New Guidance on Classifying Foreign Entities Under the HSR Pre-Merger Notification Program

On May 19, 2016, the Federal Trade Commission (“FTC)” issued an important clarification regarding how the agency will determine whether a foreign entity is classified as corporate or non-corporate for the purpose of the agency’s premerger notification program.[1]  Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976[2] (also referred to as the “HSR Act”), parties to certain mergers or acquisitions must notify both the Federal Trade Commission and the U.S. Department of Justice prior to consummating the transaction.  Under this program, whether a party to the transaction is a corporate or non-corporate entity (e.g., an LLC, partnership) can have significant implications for determining whether a filing is required and whether an exemption might apply.[3]  While evaluating party status has historically been straightforward for U.S. entities, foreign entities pose a number of challenges.

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Third Circuit Rejects Drug Manufacturer’s Single-Product Bundling Claim – But Prescription for the Future Is Unclear

You know what they say: one man’s price is another man’s bundle.  No?  Well maybe they should, after this recent decision out of the Third Circuit in Eisai, Inc. v. Sanofi Aventis U.S., LLC involving allegedly exclusionary discounting.  The court ultimately found Sanofi’s conduct was not unlawful.  But the decision raises questions about how such conduct – a hybrid of price discounts and single-product bundling – will be treated going forward, at least in the Third Circuit.

At issue was Sanofi’s marketing of its anticoagulant drug Lovenox to hospitals through its Lovenox Acute Contract Value Program.  Under the Program, hospitals received price discounts based on the total volume of Lovenox they purchased and the proportion of Lovenox in their overall purchase of anticoagulant drugs.  A hospital that chose Lovenox for less than 75% of its total purchase of anticoagulants received a flat 1% discount regardless of the volume purchased.  But when a hospital’s purchase of Lovenox exceeded that percentage, it would receive an increasingly higher discount based on total volume and percentage share, up to a total of 30% off the wholesale price.  A hospital that did not participate in the Program at all was free to purchase Lovenox “off contract” at the wholesale price.

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Four Takeaways From the Court’s Decision Blocking the Office Depot-Staples Merger

On May 17, 2016, Judge Emmet G. Sullivan (D.D.C.) issued a memorandum opinion explaining his decision to enjoin the Office Depot/Staples merger under Section 13(b) of the FTC Act.  The court conducted a two-week trial in which the FTC called ten witnesses and 4000 exhibits were admitted into evidence, after which defendants opted to rest.  The court found that the FTC “established their prima facie case by demonstrating that Defendants’ proposed merger is likely to reduce competition in the Business to Business (“B-to-B”) contract space for office supplies.”  Defendants largely relied on Amazon’s development of on-line B-to-B services to replace or restore any reduction in competition resulting from the merger, but the court found that argument unpersuasive and enjoined the merger.

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FTC Settles Charges of Illegal Exclusive Contracts with Medical Device Input Supplier Invibio

On April 27, 2016, Invibio—a supplier of polyetheretherketone (“PEEK”) used in medical implants—agreed to settle charges asserted by the Federal Trade Commission (“FTC”) that its exclusive supply contracts with medical device manufacturers, including some of the world’s largest, violated Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45.[1]  This consent decree may signal a renewed interest at the agency to scrutinize exclusive contract arrangements. The decree also serves as a reminder that, while exclusive contracts are not per se unlawful, companies that have market power and use exclusive contracts face risks under the antitrust and consumer protection laws.

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U.S. District Court Denies FTC’s Motion for a Preliminary Injunction Blocking Penn State Hershey / PinnacleHealth Hospital Merger

On May 9, 2016, U.S. District Judge John Jones III, of the Middle District of Pennsylvania, rejected a motion for preliminary injunction by the Federal Trade Commission (“FTC”) and the Pennsylvania Attorney General to halt the proposed merger between Penn State Hershey Medical Center (“Hershey”) and PinnacleHealth System (“Pinnacle”).  The Court’s decision represents a potential setback for the FTC’s enforcement against hospital consolidation around the country.  The opinion raises further questions about recent analyses endorsed by the agency and other federal courts when reviewing hospital mergers.  The Court has extended the temporary restraining order in effect until May 27, 2016, to allow the FTC and the Attorney General to seek relief from the 3d Circuit.

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No Parking Zone: Chinese Antitrust Agencies Put the Boot on Foreign Patent Rights

Ever tried parking legally in the Big Apple, only to find a ticket awaiting upon your return?  We’ve all been there, unfortunately.  And now it appears that the same frustration may be coming to patent holders that own technology that other Chinese companies find to be attractive.

For the past year, antitrust enforcement agencies in China have published draft guidelines designed to inform companies how the agencies will apply antitrust law to the exercise of patents and other intellectual property rights.  But do those guidelines provide meaningful guidance in an area of regulatory uncertainty, or are they written in a way to lend themselves to whatever interpretation the regulators see fit in the interest of giving Chinese companies a competitive advantage?

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Observations on “Brexit” and the EU/UK Competition Law Regime

Rightly considered to be a “once in a generation decision,” the UK electorate will on 23 June 2016 have a chance to vote on whether the UK should remain a member of the European Union (“EU”).

This upcoming referendum has resulted in emotional rhetoric and heated discussions in the media (and no doubt around dining tables throughout the UK and elsewhere) on which way to vote, and why. However, what is striking to us is the relative lack of focus on the legal implications of so-called “Brexit,” including on EU and UK competition law.

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DOJ Heightens Focus on Hospital Systems and Market Allocation

On April 14, 2016, the U.S. Department of Justice and two West Virginia hospitals entered into a consent decree requiring the hospitals to cease allocating territories for marketing their healthcare services.  The complaint and consent decree can be viewed here and here.  This consent decree follows a similar consent decree that the DOJ entered into with three Michigan hospitals in June 2015, perhaps signaling the DOJ’s increased focused in policing allegedly anticompetitive agreements among hospitals and medical centers.

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Quo Vadis FTC: What Does the Commission’s Complaint Against Endo Pharmaceuticals and Others Say About the Future of Post-Actavis Hatch-Waxman Litigation and Reverse Payment Settlements?

This alert, the title of which is adapted from a March 30, 2016 FTC Staff Attorney blog post[1], considers the FTC’s first lawsuit challenging a so-called “no-AG” agreement.  No-AG agreements are components of Hatch-Waxman patent infringement litigation settlements in which the brand manufacturer agrees, expressly or through exclusive licenses, not to launch an “Authorized Generic” for a period of time after the generic manufacturer’s entry.  The FTC’s complaint attacks two such settlements that Endo Pharmaceuticals Inc. and the Japan-based patent holder for one of the relevant patents reached with generic manufacturers Watson Laboratories (and Watson’s current owner, Allergan plc) and Impax Laboratories, to settle Hatch-Waxman litigation involving Endo’s two most important products—the pain relievers Opana ER® and Lidoderm®.[2]  The FTC’s complaint, and its simultaneous settlement with the Japanese patent holder and its U.S. subsidiary (collectively, “Teikoku”), are less a window into the FTC’s thinking, which at this point is hardly unpredictable, than they are into its litigation strategy and what drug manufacturers need to consider regarding potential FTC and private actions as they continue to wrestle with the many issues that remain unresolved post-Actavis[3].

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1st Circ. Charts Conservative Post-Actavis Course In Loestrin

Members of Orrick’s Life Sciences practice with experience addressing pharmaceutical industry antitrust and IP issues recently published an article analyzing the recent decision of the U.S. Court of Appeals for the Federal Circuit in In re Loestrin, No. 14-2071 (1st Cir. Feb. 22, 2016).  In that decision—only the second appellate decision applying the Supreme Court’s seminal 2013 decision in FTC v. Actavis , the First Circuit addresses a few of the antitrust issues surrounding so-called “reverse-payment” settlements of patent infringement litigation between branded and generic drug manufacturers.  To read the published article, please click here.

Now in force: Major amendments to the antitrust damages regime in the UK

The Consumer Rights Act 2015 (“CRA”) comes into force today, 1 October 2015.1 It introduces major reforms to the antitrust damages actions regime in the UK.2 In particular, the CRA broadens the type of cases that can be heard by the UK’s specialist antitrust court, the Competition Appeal Tribunal (the “CAT”), to include opt-out class actions, and makes other procedural amendments aimed at facilitating and streamlining private damages actions in the UK.

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FTC Puts “Standalone” Section 5 Enforcement Approach on the Record

For the first time in its 101-year history, the Federal Trade Commission yesterday issued a policy statement outlining the extent of its authority to police “unfair methods of competition” on a “standalone” basis under Section 5 of the Federal Trade Commission Act.[1]  In a terse Statement of Enforcement Principles, the Commission laid out a framework for its Section 5 jurisprudence that was predictably tethered to the familiar antitrust “rule of reason” analysis but also sets forth a potentially expansive approach to enforcement.[2]  Indeed, the Commission’s approach could encompass novel enforcement theories premised on acts or practices that “contravene the spirit of the antitrust laws” as well as those incipient acts that, if allowed to mature or complete, “could violate the Sherman or Clayton Act.”[3]  Commissioner Ohlhausen’s lone dissent recognizes these potentially disconcerting developments for private industry.[4] Read More