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. 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. 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.” Commissioner Ohlhausen’s lone dissent recognizes these potentially disconcerting developments for private industry. READ MORE
On June 17, 2015, the U.S. District Court for the Eastern District of Pennsylvania approved a consent order (the “Consent Order”) between the Federal Trade Commission and defendants Cephalon, Inc. and its parent, Teva Pharmaceutical Industries Ltd., resolved long-running antitrust litigation stemming from four “reverse payment” settlements of Hatch-Waxman patent infringement cases involving the branded drug Provigil®. Pursuant to its settlement with the FTC (the “Consent Order”), Cephalon agreed to disgorge $1.2 billion and to limit the terms of any future settlements of Hatch-Waxman cases. The FTC and its Staff have celebrated and promoted the terms of the settlement as setting a new standard for resolving reverse-payment cases. But their enthusiasm may be more wishful thinking than reality, and their speculation that the agreement may exert force on market behavior does not appear to be supported by a fair assessment of the state of the law. First, the restrictions on Cephalon’s ability to enter into settlements of Hatch-Waxman cases exceed anything a court has ever required, and conflict with settlement terms apparently approved in the U.S. Supreme Court’s seminal reverse-payment decision, Federal Trade Commission v. Actavis, 133 S. Ct. 2223 (2013). Second, the FTC’s use of disgorgement as a remedy remains controversial and Cephalon, despite initial opposition, might have voluntarily embraced that remedy as part of a strategy to achieve a global resolution of remaining private litigation. We write to put the Consent Order in perspective, so that industry participants can better assess its meaning.