By Linda O’Brien, J.D., LL.M.
The FTC and the Department of Justice, Antitrust Division, highlighted their current antitrust enforcement activities and their priorities for the future, during a hearing before the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights entitled “Oversight of the Enforcement of the Antitrust Laws.”
In her prepared remarks, FTC Chairwoman Edit Ramirez noted that competitive markets are the foundation of the economy and the FTC has worked to protect consumers through the robust enforcement of antitrust laws. One of the Commission’s primary responsibilities is to prevent mergers that may substantially lessen competition.
During calendar year 2015, the FTC challenged 27 mergers. While most of the actions resulted in negotiated settlements that preserved competition in the affected markets, the Commission filed suit to block six transactions, according to Ramirez. The six litigated merger challenges included a successful effort to block Sysco’s acquisition of its rival US Foods. Four actions are ongoing, including three seeking to stop anticompetitive hospital mergers and a pending challenge—FTC v. Staples Inc.— to the merger of the two largest sellers of office supplies to large business customers.
In the last two years alone, the testimony noted, the FTC has taken action in 17 pharmaceutical industry mergers, ordering divestitures in the sale of dozens of both branded and generic drugs used to treat a variety of conditions, such as hypertension, cirrhosis, and bipolar disorder.
The testimony also highlighted the FTC’s robust program to identify and stop anticompetitive business conduct. Recent cases include stopping the two leading suppliers of propane exchange tanks from colluding to push a key customer to accept a reduction in fill levels and putting an end to a state dental board’s efforts to prevent non-dentists from providing teeth-whitening services.
A priority for the Commission for almost 20 years has been stopping anticompetitive reverse payment settlements of patent litigation. In these cases, a brand name drug manufacturer pays a generic rival to abandon a patent challenge and delay entry of a lower-priced generic drug into the market. According to the testimony, the Commission is much better positioned to protect consumers from anticompetitive reverse-payment settlements of patent litigation after the U.S. Supreme Court’s decision in FTC v. Actavis, Inc., 570 U.S. 756 (2013).
Among the positive signs following the Actavis decision have been the decreases in the number of potential pay-for-delay deals in pharmaceutical patent settlement agreements in fiscal year 2014 and the increase in patent dispute settlements without reverse payments. In addition to enforcement work, the FTC continues to monitor private pay-for-delay cases and file amicus briefs where the agency’s expertise could prove helpful to the courts, the testimony noted.
Ramirez observed that the FTC maintains an active research and policy agenda. The agency currently has two formal competition-related studies underway—one examining patent assertion entities and the other evaluating the effectiveness of FTC merger remedies. The FTC also has hosted a number of workshops on emerging business practices and technologies over the past year. Finally, the Commission has engaged in a considerable amount of competition-related advocacy, often urging policymakers to consider the competitive implications of pending legislation or regulations.
Bill Baer, Assistant Attorney General in charge of the Justice Department’s Antitrust Division, testified that antitrust agencies play a key role in promising consumers lower prices, higher quality, and unparalleled innovation. In his prepared statement, Baer noted that the Antitrust Division’s enforcement efforts have included preserving competition and choice for major household cooking appliances by suing to block Electrolux’s acquisition of General Electric’s appliance business; setting forth concerns about the proposed Comcast-Time Warner Cable merger that caused the companies to abandon the merger; and exposing price fixing by major banks that threatened the integrity of important financial markets.
While acknowledging that fiscal resources are limited, Baer noted that 50 percent of the Division’s funding is offset by Hart-Scott-Rodino premerger filing fees paid by companies planning to merge. In addition, criminal fines that are obtained are routinely more than ten times the agency’s annual direct appropriation.
Stopping and deterring price fixing cartels is a top priority for the Division. According to Baer, over the last seven years, the Division has prosecuted more than 400 individuals who committed antitrust crimes and will continue to prosecute local, regional, and national criminal conspiracies. The use of technology to manipulate the prices for products and services is a growing concern. Recently, the Division charged two individuals and a U.K. corporation for fixing the prices of certain posters sold online through Amazon Marketplace. Consumers have the right to a free and fair marketplace online as well as in brick and mortar businesses, Baer noted.
Antitrust enforcement needs to be nimble and forward looking, he stated. Antitrust misconduct takes many forms, and enforcement efforts should focus on behavior that limits meaningful competition. When a merger between rivals risks decreasing competition in one or more markets, the Division invariably is urged to accept some form of settlement, typically a modest asset divestiture. Every offer of settlement is reviewed thoroughly to ensure that the remedy will fully protect consumers from anticompetitive harm.
Other vital tools for improving competitive concerns include the work done with the FTC, as well as other agencies, various states, and international antitrust authorities. Collaboration bolsters the Division’s enforcement program and enhances the agency’s ability to make positive change in a number of markets for American consumers, Baer concluded.
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