Our Antitrust practice group recently co-authored a series of articles in Inside Counsel discussing major antitrust issues facing in-house counsel today. Our articles expand on topics that we have covered in this blog, including the Actavis litigation, the change in the competition landscape across the globe and antitrust reforms in Europe and Asia, antitrust enforcement in e-commerce, the implications of the Supreme Court’s decision in North Carolina State Board of Dental Examiners on antitrust liability for professional boards, and the Department of Justice’s recent guidance on antitrust compliance programs.
The FTC’s Bureau of Competition recently issued new “Best Practices” guidance for parties involved in merger investigations. This is the Commission’s first guidance on the merger review process since the Merger Process Reforms were issued in 2006. As the Commission explains, it issued the updated guidance because parties rarely have been invoking the Merger Process Reforms and also have been relying on the “withdraw and refile” process in the initial review period of Hart-Scott-Rodino filings.
We have been following developments in People of the State of New York v. Actavis, the New York Attorney General’s “product hopping” suit against Actavis and its subsidiary, Forest Laboratories LLC (together, “Actavis”). Now, an FTC Commissioner and a D.C. Circuit Judge have weighed in as well—and they are criticizing a key portion of the Second Circuit’s ruling.
We have previously posted about the New York Attorney General’s “product hopping” suit against Actavis and its subsidiary, Forest Laboratories LLC (together, “Actavis”), including our analysis of the District Court’s opinion enjoining Actavis from discontinuing sales of the Alzheimer’s drug Namenda IR, and of the Second Circuit’s decision affirming the district court’s ruling. The Second Circuit panel that heard the appeal has now denied rehearing, and the active members of the Second Circuit have also denied rehearing en banc.
Portions of a reverse payment suit against Endo Pharmaceuticals and others were recently dismissed by Judge William H. Orrick of the Northern District of California. The case was brought by plaintiffs who allege that a settlement agreement resolving a patent dispute over the drug Lidoderm illegally delayed the release of a generic version.
On July 9, 2015, the Southern District of New York heard oral argument on Keurig Green Mountain’s motions to dismiss the three complaints filed by the following plaintiffs: Keurig’s competitors (Treehouse Foods, Inc., Bay Valley Foods, LLC, and Sturm Foods, Inc.); Keurig’s direct purchasers; and Keurig’s indirect purchasers.
On June 26, 2015, the Third Circuit extended Actavis to non-cash settlements and held that Actavis can cover a no-AG agreement – “a settlement in which the patentee drug manufacturer agrees to relinquish its right to produce an ‘authorized generic’ of the drug” during the statutorily guaranteed 180 days of market exclusivity for the first-filing generic drug manufacturer.
The U.S. Department of Justice’s Antitrust Division has filed a civil suit to block the acquisition of General Electric’s appliance business by Electrolux. According to the complaint, the U.S. market for cooking appliances—specifically ovens, cooktops, and ranges—is dominated by GE, Electrolux (which manufactures the Frigidaire brand), and Whirlpool.
As we previously reported, the FTC sought a preliminary injunction to block a merger between Sysco and U.S. Foods pending the outcome of its administrative trial challenging the deal. Yesterday, Judge Amit Mehta of the federal district court for the District of Columbia granted the agency’s request, finding that “there is a reasonable probability that the proposed merger will substantially impair competition in the national customer and local broadline markets and that the equities weigh in favor of injunctive relief.”
EU Competition Commissioner Unveils Investigation into Amazon, Continuing Probe into the Tech Giants
On Thursday, the European Commissioner for Competition announced a formal investigation into whether Amazon, the largest distributor of e-books in Europe, has abused its dominance in the market for e-books. The investigation deals with specific clauses in Amazon’s contracts with publishers, which require the publishers to inform Amazon of more favorable or alternative terms offered to competitors and to offer similar terms to Amazon.
We’ve previously covered the New York State Attorney General’s (“NYS AG”) lawsuit against Actavis PLC and Forest Laboratories seeking to prevent them from discontinuing sales of the Forest drug Namenda IR, which is used to treat Alzheimer’s disease. New York has alleged that Actavis and Forest are engaging in “product hopping”—attempting to force prescribers and patients to switch to a new extended-release version of Namenda (Namenda XR) before a generic version can be launched.
Following Actavis, California Supreme Court Crafts “Structured Rule of Reason” Test for Evaluating Pay-for-Delay Settlements
Last Thursday the Supreme Court of California decided In re Cipro Cases I & II, No. S198616 (Cal. May 7, 2015), holding that reverse payment, or “pay-for-delay,” settlements can be challenged as unreasonable restraints on trade. In so doing, it followed the U.S. Supreme Court’s 2013 decision in Federal Trade Commission v. Actavis, Inc., 133 S.Ct. 2223 (2013).
Promoting competition among health care providers remains a top priority for the Federal Trade Commission and it is expected that the FTC will continue to challenge mergers in the health care industry.
In a long line of European regulators taking aggressive stances against American tech companies, Margrethe Vestager, the European Union’s (EU) antitrust chief, is determined to pursue antitrust claims against Google. In addition to bringing formal charges against Google for allegedly abusing its dominance in web searches, Vestager has opened a formal investigation into Google’s practice of “pre-installing its apps and services onto Android smartphones,” presumably based on the theory that doing so gives Google’s software preferential treatment compared to its competitors.
In today’s technology-heavy world, technical interoperability standards are quite common. Because those standards are often patented, patent owners may have the ability to extract a monopoly price and some argue those owners can “reduce the number of competitors practicing the standard.”
On April 13, 2015 the Second Circuit (Hon. Walker, Raggi, Droney) heard oral argument in People of the State of New York v. Actavis PLC.
On March 29, 2015, StubHub, Inc. brought an antitrust action against the Golden State Warriors LLC (the “Warriors”) and Ticketmaster, L.L.C. (“Ticketmaster”), alleging that they monopolized the ticket resale market by forcing Warriors fans to use only secondary ticket exchange services provided by the Warriors, and excluding competing secondary ticket exchange services. The action is pending before the Honorable Vince Chhabria in the Northern District of California.
Allegations of conspiracy to restrain trade and exclusive dealing may read like textbook antitrust claims, but if the allegations are made by a plaintiff who is not an “efficient enforcer” of the antitrust laws, the complaint is vulnerable to a motion to dismiss.
St. Luke’s Health System and Saltzer Medical Group last week asked the full Ninth Circuit to reconsider its ruling that their merger violated federal antitrust laws.
In In re Lipitor Antitrust Litigation, No. 12 Civ. 2389 (D.N.J.), U.S. District Judge Peter G. Sheridan has confirmed his prior ruling that under the Supreme Court’s decisions in Twombly, Iqbal, and FTC v. Actavis, Inc., 133 S. Ct. 2223 (2013), plaintiffs claiming an antitrust violation based on a non-monetary settlement must allege the value of the settlement to survive dismissal of their complaint.
This past Wednesday, Judge Amit Mehta of the U.S. District Court for the District of Columbia set a hearing from May 5 through May 8, with up to three additional days if necessary, to consider the FTC’s request for a preliminary injunction to block Sysco Corp. and U.S. Foods, Inc. from merging prior to the conclusion of the FTC’s administrative trial.
Second Circuit Agrees to Earlier Oral Arguments in Actavis, Although Preliminary Injunction Will Remain in Place
The Second Circuit announced on Monday that it would hear Actavis PLC’s appeal to overturn the preliminary injunction issued by Judge Robert Sweet of the Southern District of New York as soon as possible, with a projected date for oral argument during the week of April 13.
Court Rules Against American Express Based on Both Direct and Indirect Evidence of Harm to Competition
On February 19, 2015, the District Court for the Eastern District of New York issued its ruling on liability in United States v. American Express. Following a seven-week trial, the Court found that American Express violated Section 1 of the Sherman Act by imposing certain restrictions on merchants that prevent the merchants from offering their customers incentives to use competing credit cards with lower retail charges.
The Ninth Circuit on Tuesday held that St. Luke’s Health System’s purchase of a physician practice group violated federal antitrust laws. In doing so, it upheld a district court’s order that the merger be dissolved.
The expedited appeal to the Second Circuit pits New York State’s arguments for facilitating competition in a “molecule market” (a product market defined by the active ingredient of a prescription drug) against the brand name manufacturer’s arguments about innovation and compelled support of potential competitors.
As we reported earlier, the jury in In re: Nexium found that AstraZeneca had violated the antitrust laws by acting to keep generics off the market but that no generic would have been introduced earlier in the market even without the violation. Thus, the jury found that the plaintiffs were not entitled to relief.
Following the S.D.N.Y.’s award to the New York State Attorney General of an injunction requiring Actavis to continue distributing the immediate-release tablet version of its dementia drug, Namenda, the Second Circuit Court of Appeals has denied Actavis’ request for a stay of the injunction pending appeal.
As reported previously, the first post-Actavis jury verdict in a “reverse payment” antitrust case handed a win to the defendants. Now, plaintiffs in In re: Nexium (Esomeprazole) Antitrust Litigation have moved for a new trial, arguing that the Massachusetts federal district court committed error in formulating the jury charge and in excluding some of plaintiffs’ evidence.
The Federal Trade Commission staff recently issued a report detailing the number of “potential pay-for-delay settlements” that took place in fiscal year 2013. The FTC is a staunch opponent of so-called “pay-for-delay”—also known as “reverse payment”—settlements.
Last week, we briefly reported on the injunction granted by the U.S. District Court for the Southern District of New York in the New York Attorney General’s “product hopping” suit against Actavis and its subsidiary, Forest Laboratories LLC. On Monday, the court held a hearing on the injunction and released a copy of its decision (portions of which are redacted from public view).
Yesterday, Judge Robert Sweet granted the New York Attorney General’s request to block Actavis and its New York-based subsidiary Forest Laboratories LLC from pulling Namenda, a dementia drug commonly used to treat Alzheimer’s, off the market. In this “product hopping” case brought in the Southern District of New York, the Attorney General has alleged that the defendants are attempting to force prescribers and patients to switch to a new extended-release version of Namenda before a generic version of the drug can be introduced into the market.
District Court Allows Monopolization Claims to Move Forward on Allegations of Direct Evidence of Monopoly Power
Traditionally, plaintiffs asserting claims under Sections 1 and 2 of the Sherman Act allege the existence of one or more product markets relevant to the defendants’ anticompetitive conduct and the defendants’ shares of those markets in order to state a plausible claim of defendants’ market power and/or monopoly power in a product market. But plaintiffs can also convince courts they can proceed to trial by alleging “direct evidence” of defendants’ market power.
Court Allows “Product Hopping” Claims to Proceed in Suboxone Litigation Based on Allegations of Removal of Prior Formulation and Disparagement of Generic Competition
We’ve previously discussed antitrust claims related to “product hopping”—allegations that pharmaceutical manufacturers have reformulated or otherwise altered their products to prevent automatic generic substitution. Earlier this week, the district court for the Eastern District of Pennsylvania in In re Suboxone Antitrust Litigation denied a motion to dismiss similar allegations regarding the drug Suboxone, which is used to treat opioid dependence.
Last Friday, Magistrate Judge Paul S. Grewal of the Northern District of California denied a motion by Oracle to dismiss three counterclaims based on a tying theory in Oracle America, Inc. v. Terix Computer Co. In doing so, the court followed (if begrudgingly) the Supreme Court’s decision in its seminal tying case, Eastman Kodak Co. v. Image Technical Services, Inc.
The current debate over whether Amazon holds the power of a monopolist or a monopsonist is likely to be narrowed to one question in a court room: What is the relevant product market that Amazon is allegedly dominating? Since our last post on the Amazon and Hachette dispute, there has been increased discussion in the general press, culminating with 2008 Nobel Prize winner for economics Paul Krugman telling readers of the New York Times that Amazon is a monopsonist.
In re Credit Default Swaps Antitrust Litigation: Big Banks Still Must Face Section 1 Sherman Act Claim
In a decision upholding most of the class action antitrust claims against 12 of the world’s largest financial institutions, Judge Cote of the Southern District of New York held that the plaintiffs had standing and alleged sufficient facts to satisfy their Section 1 claim under the Sherman Act. While Judge Cote denied plaintiffs’ conspiracy to monopolize claim under Section 2 of the Sherman Act, she did suggest two ways antitrust plaintiffs could bring a conspiracy to monopolize claim even where an oligopoly, not a monopoly, is present.
Reverse Payments, Actavis, and the Lower Courts at Sea, Part 2: The Brewing Conflict Over Non-Cash Settlements
Our first post in this series was titled “What Is a Reverse Payment?” As the recent cases discussed in today’s post show, the courts are struggling with a fundamental component of that question: What, for that matter, is a payment?
Among the issues left unresolved by the Supreme Court’s Actavis opinion is the question of whether a reverse payment settlement can run afoul of antitrust laws when no actual cash changes hands. Instead, these arrangements might include a promise by the brand name manufacturer to delay the introduction of an authorized generic, a settlement of unrelated litigation on terms beneficial to the generic manufacturer, or a licensing agreement whereby the generic manufacturer gains rights to market the brand name product overseas. These can be of tremendous value to the generic manufacturer, but they are different from the “pay[ment of] many millions of dollars” that was the focus of Justice Breyer’s opinion for the Actavis majority.
Previously, we discussed a recent lawsuit that alleged “product hopping” by a brand pharmaceutical manufacturer as part of a broader pay-for-delay claim. On Monday, the New York Attorney General filed a suit in the U.S. District Court for the Southern District of New York regarding Forest Laboratories’s Alzheimer’s drug Namenda, in which alleged product hopping plays the central role.
In the seminal decision, Aspen Skiing Co. v. Aspen Highlands Skiing Corp 472 U.S. 585, 611 (1985), the U.S. Supreme Court affirmed a jury verdict for a plaintiff on a Section 2 claim and set forth the standard for unilateral refusal-to-deal claims. More recent U.S. Supreme Court and Second Circuit cases suggest that Aspen Skiing may reflect the “outer boundary” of liability under Section 2. What are the markers of that boundary?
Earlier this week, India’s competition regulator─the Competition Commission of India (“CCI”)─raided two offices of JCB India Limited (“JCB”), a UK-based manufacturer of construction equipment. This raid marks the first time that CCI has exercised its search-and-seizure power under the Competition Act, 2002.
China’s antitrust regulators have been on a tear lately. Last year the State Administration for Industry and Commerce (“SAIC”) began its investigation of Qualcomm for allegedly violating China’s 2008 Anti-Monopoly Law. SAIC recently released a statement indicating that this investigation is coming to an end, but Qualcomm may be facing a fine of over $1 billion. Then, in July of this year, SAIC raided offices of Microsoft and its partner Accenture PLC throughout China in connection with an investigation into Microsoft’s alleged anti-competitive bundling of software. And during the last month alone, the National Development and Reform Commission (“NDRC”) accused Chrysler, Mercedes Benz, Volkswagen, and a dozen Japanese auto parts makers of various violations of the Anti-Monopoly law in connection with their pricing of auto parts.
The Pennsylvania Employees Benefit Trust Fund (“PEBTF”) recently filed a purported class-action antitrust complaint relating to the brand name drug Opana ER, an extended-release formulation of a medication used to treat pain and other conditions. The core of PEBTF’s allegations are that the brand manufacturer paid more than $100 million to prevent the launch of a generic version for approximately two and a half years. But PEBTF also alleges that the manufacturer reduced generic competition even further by introducing a crush-resistant version of the drug (which helps prevent abuse) called Opana ER CRF.
The FTC has submitted an amicus brief in Mylan Pharmaceuticals Inc. v. Celgene Corp., 2:14-CV-2094 (D.N.J.), offering support in favor of Mylan’s claims. Mylan sued Celgene in April 2014, bringing claims related to its attempts to develop generic versions of Revlimid and Thalomid, brand drugs used to treat certain forms of cancer.
On June 30, 2014, the FTC announced in a series of orders that it would consent to Actavis PLC’s acquisition of Forest Laboratories only under certain conditions. Under a February 2014 Merger Agreement, Actavis plans to acquire Forest for approximately $25 billion. The FTC filed a complaint alleging that the proposed merger would negatively impact the market for four drugs, resulting in violations of Section 7 of the Clayton Act and Section 5 of the FTC Act.
Direct Evidence of Patent Holder’s Pricing Power Doesn’t Lead to Summary Judgment on Existence of Monopoly Power
We wrote earlier about the DOJ’s efforts to use direct evidence to show that the rules Amex imposes on merchants harm competition. The district court’s decision denying summary judgment to the plaintiff in Apotex v. Cephalon presents an apparently novel attempt to use direct evidence of market power to prove an antitrust case at the summary judgment stage and avoid tricky issues of market definition.
The intersection of IP and antitrust has always been fraught. The raison-d’être of the Sherman, Clayton, and FTC Acts is to bust trusts and promote competition. Meanwhile, intellectual property laws create lawful exclusionary rights.
This series will explore one particular point of tension: the battle over “reverse payment settlements” pursuant to which the plaintiff in a patent infringement action agrees to “pay” the alleged infringer to keep the infringer’s product off the market for a period of time. In these “pay-for-delay” arrangements, the province of the pharmaceuticals industry, the settling parties are a brand-name drug manufacturer and the maker of a generic equivalent.
Last week we posted a discussion concerning effective antitrust corporate compliance programs, and provided some factors that in-house counsel should consider in developing compliance programs governing employees’ communications with competitors and dealings with customers and suppliers. Today we continue that discussion by addressing the relevant factors in compliance programs concerning monopolization and dominance and price discrimination.
With DOJ’s Antitrust Division and the FTC ramping up antitrust enforcement, it is critical for companies to take a hard look at their compliance programs and update them on a regular basis to avoid potential antitrust violations and discover antitrust malfeasance early on so a company can have the option of self-reporting and applying for leniency under DOJ’s leniency program. The United States Sentencing Guidelines provide guidance to companies in the organization of their corporate antitrust compliance programs; Guidelines considerations include establishing standards and procedures to prevent and detect criminal conduct and monitoring, auditing and periodically evaluating compliance with the program, including providing anonymous or confidential means for reporting potential breaches. In addition to these threshold requirements, it is important that any antitrust compliance program provide guidance in a number of areas that present potential pitfalls. Today, we discuss guidance on communications with competitors and dealing with customers and suppliers.
A panel of the U.S. Court of Appeals for the First Circuit heard oral argument this week in In Re: Nexium (Esomeprazole) Antitrust Litigation in an appeal of a lower court’s decision certifying a class of drug consumers and third-party payors challenging AstraZeneca’s “pay-for-delay” patent suit settlements, as reported by the National Law Journal.
Chinese antitrust officials have confirmed that they are investigating Microsoft Corp. for possible monopoly violations and have raided Microsoft offices in four cities, according to a report this morning in the Wall Street Journal.
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