Regional Developments: United States

Second Circuit Denies Enforcement of Arbitration Agreement’s Antitrust Class Action Waiver. In In re American Express Merchants’ Litigation (2d Cir. Feb. 1, 2012), a purported Sherman Act Section 1 class action brought by merchants against American Express, the Second Circuit ruled that American Express could not enforce an arbitration agreement containing a class action waiver provision (i.e., a provision which forbids the parties from pursuing anything other than individual claims in the arbitral forum). The Second Circuit distinguished the Supreme Court’s recent decisions in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), and Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010). Concepcion, in particular, had bolstered the enforceability of arbitration provisions, ruling that the Federal Arbitration Act preempts certain state laws. The Second Circuit found that those cases did not address the issue of whether a class action arbitration waiver clause is enforceable even if the plaintiffs can demonstrate that the practical effect of enforcement would be to preclude their ability to vindicate their federal statutory rights. In so ruling, the Second Circuit relied upon evidence demonstrating that the cost of individually arbitrating the merchants’ claims would be prohibitive. (The merchants had alleged that when American Express entered the commodity credit card business, American Express forced merchants to pay “excessive” rates equal to American Express’s more attractive business and personal charge cards by tying the credit and charge cards together.)

Congressional Reports on Pharmaceutical Settlements and Authorized Generics. The Congressional Research Service has issued two reports with respect to pending legislation regarding the pharmaceutical industry. One report, “Pharmaceutical Patent Litigation Settlements: Implications for Competition and Innovation,” addresses, among other pending legislation, S. 127, the Preserve Access to Affordable Generics Act, which would establish a presumption that payments from a branded manufacturer to a generic manufacturer to delay entry of the generic are unlawful. The report provides background regarding the Hatch-Waxman Act, the applicable antitrust principles, and summaries of the leading decisions from the Second, Sixth, Eleventh, and Federal Circuits. Although it does not advocate specific Congressional action, the report provides Congress with options for regulating Hatch-Waxman Act settlements. The second report, “Authorized Generic Pharmaceuticals: Effect on Innovation,” provides background for H.R. 741 and S. 373, which would prohibit the branded manufacturer from manufacturing, marketing, selling, or distributing an authorized generic drug. For more information regarding authorized generics, see the FTC’s report on “Authorized Generic Drugs: Short-Term Effects and Long-Term Impact.”

FTC and DOJ Review of Mergers and Acquisitions. In the past few months, the Federal Trade Commission and the Department of Justice have taken significant actions with respect to a number of mergers and acquisitions. For example:

  • The DOJ forced AT&T to abandon its proposed acquisition of T-Mobile USA after suing to block the transaction in August 2011.
  • The DOJ required Exelon Corporation and Constellation Energy Group to divest three electricity generating plants in order to proceed with their $7.9 billion merger.
  • The FTC required AmeriGas LP and Energy Transfer Partner L.P., distributors of propane gas, to amend the agreement by which AmeriGas would acquire ETP’s Heritage Propane business. Under the agreement, AmeriGas will not acquire ETP’s Heritage Propane Express (HPE). Among other things, (1) ETP is required to maintain HPE as a viable business for two years unless it is sold before then; (2) AmeriGas is required to provide services to HPE; and (3) ETP is prohibited from selling HPE Express without FTC approval.
  • An FTC administrative law judge ruled that ProMedica Health Systems, Inc.’s consummated acquisition of St. Luke’s Hospital harmed competition and issued an order requiring ProMedica to divest St. Luke’s hospital to a buyer approved by the FTC within 180 days after the order becomes final.
  • The FTC forced Omnicare to abandon its attempt to take over rival drug-supply company PharMerica after suing to block the transaction in January 2012.

This recent activity, which demonstrates a range of remedies at the agencies’ disposal, indicates that the agencies are taking a more aggressive position in challenging some mergers and acquisitions.