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Organisation de Coopération et de Développement Économiques

Organisation for Economic Co-operation and Development

19-Aug-2010

___________________________________________________________________________________________

English - Or. English

DIRECTORATE FOR FINANCIAL AND ENTERPRISE AFFAIRS

COMPETITION COMMITTEE

DAF/COMP(2010)12/07

Unclassified

Cancels & replaces the same document of 10 August 2010

ANNUAL REPORT ON COMPETITION POLICY DEVELOPMENTS IN THE UNITED STATES

-- 2009 --

This report is submitted by the US Delegation to the Competition Committee FOR INFORMATION at its

forthcoming meeting to be held on 16-17 June 2010.

English - Or. English

JT03287411

Document complet disponible sur OLIS dans son format d'origine

Complete document available on OLIS in its original format

DAF/COMP(2010)12/07

TABLE OF CONTENTS

Introduction ................................................................................................................................................. 3

Senior DOJ and FTC staff ........................................................................................................................... 3

Changes in law or policies ................................................................................................................... 3

1.1

1.2

Enforcement of antitrust law and policies: actions against anticompetitive practices ......................... 5

2.1

2.2

2.3

2.4

2.5

2.6

International Antitrust Cooperation Developments .................................................................. 21

Outreach .................................................................................................................................... 22

Regulatory and Trade Policy Matters ................................................................................................ 22

5.1.

5.2.

Enforcement of Pre-merger Notification Rules ........................................................................ 15

Significant Merger Cases .......................................................................................................... 15

International antitrust cooperation and outreach ................................................................................ 21

4.1

4.2.

Staffing and Enforcement Statistics ............................................................................................ 5

Antitrust Cases in the Courts ...................................................................................................... 6

Statistics on Private and Government Cases Filed...................................................................... 7

Significant DOJ and FTC Enforcement Actions......................................................................... 7

Advisory Letters from the FTC................................................................................................. 14

Business Reviews Conducted by the Department of Justice .................................................... 14

Enforcement of antitrust laws and policies: mergers and concentrations .......................................... 15

3.1

3.2.

Changes in Antitrust Rules, Policies, or Guidelines ................................................................... 3

Proposals to Change Antitrust Laws, Related Legislation or Policies ........................................ 4

Regulatory Policies ................................................................................................................... 22

DOJ and FTC Trade Policy Activities ...................................................................................... 25

New studies related to antitrust policy ............................................................................................... 26

6.1

6.2.

FTC Conferences, Reports, and Economic Working Papers .................................................... 26

Department of Justice Conferences, Reports, and Economic Working Papers ........................ 28

Appendices ................................................................................................................................................... 29

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Introduction

This report describes federal antitrust developments in the United States for the period October 1,

2008, through September 30, 2009 (“FY 2009”). It summarizes the competition enforcement and policy

activities of both the Antitrust Division (“Division”) of the U.S. Department of Justice (“Department” or

“DOJ”) and the Bureaus of Competition and Economics of the Federal Trade Commission (“Commission”

or “FTC”).

Senior DOJ and FTC staff

On November 18, 2008, Thomas Barnett resigned as Assistant Attorney General (“AAG”)

responsible for the Antitrust Division. President Barack Obama appointed Christine A. Varney to be the

new AAG, and she was sworn in on April 21, 2009. On April 22, AAG Varney announced the new

leadership team at the Antitrust Division, including Sharis Arnold Pozen as Chief of Staff and Counsel,

Molly S. Boast as Deputy Assistant Attorney General (“DAAG”) for Civil Matters, William F. Cavanaugh,

Jr. as DAAG for Civil Matters, Carl Shapiro as DAAG for Economic Analysis, Philip J. Weiser as DAAG

for International, Policy, and Appellate Matters, and Gene I. Kimmelman as Chief Counsel for

Competition Policy and Intergovernmental Relations. In January 2010, Rachel Brandenburger joined the

Division as the AAG’s special advisor for international matters.

President Obama designated Commissioner Jon Leibowitz as FTC Chairman on March 2, 2009.

On April 14, Chairman Leibowitz announced the appointments of Richard Feinstein as Director of the

Bureau of Competition, Joseph Farrell as Director of the Bureau of Economics, David Vladeck as Director

of the Bureau of Consumer Protection, Susan DeSanti as Director of the Office of Policy Planning, and

Joni Lupovitz as Chief of Staff. On May 21, Chairman Leibowitz announced the appointment of Willard

Tom as General Counsel, Pete Levitas as Deputy Director of the Bureau of Competition, and Howard

Shelanski as Deputy Director of the Bureau of Economics, and on November 30, he announced the

appointment of Cecelia Prewett as Director of the Office of Public Affairs and Norm Armstrong, Jr. as

Deputy Director of the Bureau of Competition.

In November 2009, President Obama announced the nomination of Edith Ramirez and Julie Brill

as FTC Commissioners. Their nominations were confirmed by the U.S. Senate on March 3, 2010, and

Commissioner Ramirez and Commissioner Brill were sworn in by FTC Chairman Jon Leibowitz on April

5 and April 6, 2010, respectively. Pamela Jones Harbour resigned as Commissioner effective April 6,

2010, after six-and-a-half years on the Commission.

Changes in law or policies

1.1

Changes in Antitrust Rules, Policies, or Guidelines

On September 22, 2009, the FTC and DOJ (“Agencies”) announced that they would solicit public

comment and hold joint public workshops to review and update the Horizontal Merger Guidelines. The goal

of the workshops was to determine whether the Guidelines accurately reflect the current practice of merger

review at the Agencies as well as to take into account legal and economic developments that have occurred

since the last significant revision in 1992. The five workshops took place in December 2009 and January

2010, in Washington, Chicago, New York, and San Francisco. On April 20, 2010, the FTC released a

proposed revision of the Guidelines for public comment. See http://www.ftc.gov/os/2010/04/100420hmg.pdf.

On August 6, 2009, pursuant to its authority under the Energy Independence and Security Act of

2007, the Commission issued its Petroleum Market Manipulation Rule. The Rule became effective in

November 2009. In a rulemaking proceeding that generated over 150 comments from consumers and

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businesses, the Commission crafted a Rule that prohibits fraud or deceit in wholesale petroleum markets,

including omission of material information, that is likely to distort petroleum markets. The Commission

staff prepared a compliance guide for businesses that sets out examples of Rule violations, such as false

public announcements of planned pricing or output decisions, false statistical or data reporting, and wash

sales intended to disguise the actual liquidity of a market or the price of a particular product. See

http://www.ftc.gov/opa/2009/08/mmr.shtm.

On May 11, 2009, the Division withdrew the report “Competition and Monopoly: Single-Firm

Conduct under Section 2 of the Sherman Act,” which had been issued in September 2008 (see FY 2008

Annual Report, ¶¶78-79), explaining that it would be guided by Supreme Court precedent with regard to

Section 2 of the Sherman Act. In withdrawing the report, AAG Varney commended the efforts of those

who participated in the Section 2 hearings and stated that the report provided a valuable discussion of the

issues surrounding Section 2 enforcement.

In May 2009, the Division launched its Recovery Act initiative to help detect fraud in the award

of stimulus projects resulting from the $787 billion American Recovery and Reinvestment Act of 2009.

The Division’s initiative is designed to help procurement officials prevent collusion and fraud in the award

of stimulus projects and to detect and prosecute collusion and fraud if they do occur. As part of the

initiative, the Division is training procurement and grant officials, government contractors, and agency

auditors and investigators regarding signs of collusion and fraud and will assist agencies in investigating

and prosecuting collusion and fraud that occurs. The Division has already trained thousands of federal and

state procurement and grant officials nationwide. Consumers, contractors, and agencies can report

suspicious activity and review information about antitrust laws through the Division’s Recovery Act

Initiative website, located at www.justice.gov/atr/public/criminal/economic_recovery.htm.

1.2

Proposals to Change Antitrust Laws, Related Legislation or Policies

On October 14, 2009, AAG Varney testified before the Senate Committee on the Judiciary at a

hearing on “Prohibiting Price Fixing and Other Anticompetitive Conduct in the Health Insurance

Industry.” With respect to the 1945 McCarran-Ferguson Act and its broad antitrust exemption for the

business of insurance, AAG Varney noted the Department’s general opposition to exemptions from the

antitrust laws in the absence of a strong showing of a compelling need. She also highlighted the general

consensus that health insurance reform should be built on a strong commitment to competition in all health

care markets, including those for health and medical malpractice insurance. Without taking a position as to

how or when Congress should address the issue of repealing antitrust exemptions, she emphasized that the

flexibility of the antitrust laws and their crucial importance to the economy argue strongly against antitrust

exemptions that are not clearly and convincingly justified.

10.

During FY 2009, the FTC twice presented testimony to committees of the U.S. House of

Representatives supporting legislation to ban anticompetitive “pay-for-delay” patent settlements between

generic and brand-name drug companies that keep lower-cost generic drugs off the market. On June 3,

2009, Richard A. Feinstein, Director of the Bureau of Competition, testified on behalf of the Commission

before the U.S. House Subcommittee on Courts and Competition Policy of the Committee on the Judiciary

in support of the Protecting Consumer Access to Generic Drugs Act of 2009, H.R. 1706, which would

prohibit pay-for-delay settlements.

11.

On March 31, 2009, Commissioner J. Thomas Rosch testified on behalf of the FTC before the

U.S. House Subcommittee on Commerce, Trade, and Consumer Protection of the Committee on Energy

and Commerce. In his testimony, Commissioner Rosch said that anticompetitive patent settlements in the

U.S. pharmaceutical industry “impose enormous costs on consumers and the health care system,” and that

congressional action to prohibit these pay-for-delay settlements is “both appropriate and timely.” The

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testimony explained that pay-for-delay agreements were successfully challenged by FTC enforcement

actions between 2000 and 2004, but recent appellate decisions have significantly undermined these efforts,

leading to a dramatic increase in the number of these agreements.

12.

The FTC is committed to use its authority under Section 5 of the Federal Trade Commission Act

(“FTC Act”) to prohibit “unfair methods of competition,” including conduct that violates Section 2 of the

Sherman Act. In October 2008, the FTC held a workshop to examine possible interpretations of Section 5,

its relationship to other antitrust statutes, and examples of business conduct that it may address.

Enforcement of antitrust law and policies: actions against anticompetitive practices

2.1

Staffing and Enforcement Statistics

2.1.1

FTC

13.

During FY 2009, the FTC had 509 staff working on competition enforcement, including 301

lawyers, 74 economists, and 134 “other” professionals, including investigators, merger analysts, compliance

specialists, industry analysts, research analysts, financial analysts/accountants, paralegals, and support staff.

The FTC’s Maintaining Competition Mission expended approximately $108 million in FY 2009.

14.

During FY 2009, 713 proposed mergers and acquisitions were reported for review under the HSR

Act. Commission staff opened 135 initial phase investigations and issued requests for additional

information (“second requests”) in 15 transactions. The Commission challenged 19 mergers, nine of which

were settled with consent orders. Five transactions were abandoned following the FTC’s filing of a

preliminary injunction in federal court and concurrent issuance of an administrative complaint, and three

mergers were abandoned after the Commission informed the parties of its concerns about the proposed

transaction. In addition, the Commission filed a permanent injunction in federal court to undo a

consummated acquisition; the matter is currently pending. The Commission also brought an administrative

action to challenge a merger; the matter was settled with divestitures.

15.

During FY 2009, the Commission brought seven non-merger enforcement actions challenging a

variety of anticompetitive conduct, six of which were resolved by consent agreement. The Commission

also filed a preliminary injunction. Practices challenged included alleged refusals to deal, price fixing,

market allocation agreements, and a trade association’s anticompetitive sharing of sensitive information.

16.

The Commission filed amicus curiae briefs in two cases (one jointly with the United States

before the Supreme Court and one before the Federal Circuit) and a petition for writ of certiorari in

another case. The FTC provided one advisory letter and submitted nine advocacy filings, including one

submitted jointly with the DOJ.

2.1.2

DOJ

17.

At the end of FY 2009, the Division employed 792 persons: 353 attorneys, 57 economists, 174

paralegals, and 208 other professional staff. For FY 2009, the Division received an appropriation of $157.8

million.

18.

During FY 2009, the Division opened 214 investigations and filed 81 civil and criminal cases in

federal district court. In FY 2009, the Division was party to three antitrust cases decided by the federal

courts of appeals.

19.

During FY 2009, the Division filed 72 criminal cases in which it charged 22 corporations and 65

individuals. Sixteen corporate defendants and 27 individuals were assessed fines totaling $974.3 million

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and 35 individuals were sentenced to a total of 25,396 days of incarceration. Another 9 individuals were

sentenced to spend a total of 2,195 days in some form of alternative confinement.

20.

The Division investigated 66 mergers and challenged seven of them in court; five transactions

were restructured or abandoned prior to the filing of a complaint as a result of the Division’s

announcement that it would otherwise challenge the transaction. In addition, the Division screened a total

of 463 bank mergers. The Division opened 123 civil investigations (merger and non-merger), and issued

510 civil investigative demands (a form of compulsory process). The Division filed two non-merger civil

complaints. Also during FY 2009, the Division issued five business review letters.

2.2

Antitrust Cases in the Courts

2.2.1

United States Supreme Court

21.

In American Needle, Inc. v. NFL, 130 S. Ct. 2201 (May 24, 2010), the Supreme Court addressed

the issue whether a sports league structured as a joint venture of separately owned teams should be

considered a single economic entity for purposes of the Section 1 concerted action requirement. The

United States filed an amicus curiae brief in the case on September 25, 2009. The United States urged the

Supreme Court to vacate the judgment of the U.S. Court of Appeals for the Seventh Circuit, which had

upheld a district court’s summary judgment in favor of the NFL and its separately owned teams on the

grounds that they had acted as a single entity when licensing and marketing their logos and trademarks

under an exclusive licensing agreement with Reebok International, Ltd. In discussing whether a sports

league and its member teams should be deemed to function as a single entity, the brief argued that such

treatment is only appropriate if (1) the teams and the league have effectively and legitimately merged the

relevant aspect of their operations, thereby eliminating actual and potential competition among the teams;

and (2) the challenged restraint does not significantly affect actual or potential competition among the

teams outside their merged operations. In addition to urging the Supreme Court to vacate the judgment, the

brief suggested that the case be remanded for further proceedings and application of the correct legal

standard for single-entity analysis. On May 24, 2010, the Supreme Court unanimously reversed the court

of appeals on the basis that the NFL teams compete in the market for intellectual property so collective

licensing decisions by the NFL teams deprive the marketplace of independent centers of decision-making.

Even if the relevant decisions were not directly made by the teams, but rather the league’s licensing entity,

the Court held that its actions were not those of a single economic entity because it acted as an

instrumentality of the teams. Consequently, the Court remanded the case to the lower court for further

proceedings consistent with the Supreme Court’s holding, so the collective conduct at issue can be

analyzed under the rule of reason.

22.

In Pacific Bell Tel. Co. v. linkLine Communications, Inc., et al., 129 S. Ct. 1109 (2009), the

Supreme Court addressed the unilateral conduct of Pacific Bell, which was a local exchange carrier with a

comprehensive local telephone network. Its parent company, AT&T Corp., had agreed with the Federal

Communications Commission as a condition of permitting an acquisition that it would provide wholesale

digital subscriber line (“DSL”) transport (a form of broadband Internet service) to Internet service

providers that compete with it at the retail level. Although AT&T provided the transport service, linkLine

and three other independent Internet service providers filed suit under Section 2 of the Sherman Act, 15

U.S.C. §2, alleging that AT&T was seeking to monopolize the retail market by engaging in a “price

squeeze,” charging them high wholesale prices, while charging its retail customers low prices, leaving

insufficient margin between them for the plaintiffs to make a profit. The district court denied a motion to

dismiss, but certified its order for interlocutory appeal. The court of appeals affirmed. When the Supreme

Court granted certiorari, the United States filed a brief as amicus curiae urging reversal, and the Supreme

Court agreed. In the Court’s view, its earlier decision in Verizon Communications Inc. v. Law Offices of

Curtis V. Trinko, LLP, 540 U.S. 398 (2004), precluded any challenge to the wholesale price; since there

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was no antitrust duty to provide wholesale transport, there was no duty to provide it on any particular

terms. Conversely, competition policy encourages low prices unless they are predatory as defined in

Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993), and there was no

allegation of predatory retail pricing in the complaint. The Court declined to hold unlawful the relationship

between lawfully established wholesale and retail prices of a vertically integrated firm. It remanded to the

court of appeals, however, the question whether an amended complaint the plaintiffs had filed adequately

pleaded predatory retail pricing.

23.

The Supreme Court also denied two petitions for writs of certiorari filed in connection with the

FTC’s antitrust enforcement actions. In denying a petition for a writ of certiorari, the Supreme Court does

not rule on the merits of a dispute, but is simply deciding not to hear a further appeal in the matter. The

first petition was filed by North Texas Specialty Physicians in response to an appellate decision upholding

the FTC’s opinion that this group of independent competing physicians had restrained competition by

orchestrating a price agreement among its member physicians, negotiating price terms in payor contracts

on behalf of its physicians, and refusing to deal with payors except on collectively agreed-on terms. The

second petition was filed by the FTC in response to an appellate decision vacating the agency’s cease-anddesist order against Rambus, Inc., which the FTC claimed had unlawfully monopolized markets for four

computer memory technologies that were incorporated into industry standards for dynamic random access

memory chips. The Supreme Court denied both petitions on February 23, 2009.

2.2.2

•

U.S. Court of Appeals Cases

Significant FTC Cases Decided in FY 2009

No U.S. Court of Appeals issued a decision on an FTC antitrust enforcement action in FY 2009.

On December 31, 2009, however, Realcomp filed a petition for review of an FTC order with the

U.S. Court of Appeals for the Sixth Circuit. On November 2, 2009, the FTC had found that this

realtors’ group had violated Section 5 of the FTC Act by restricting the ability of member real

estate agents to offer consumers lower-priced alternatives to traditional real estate services, and

ordered Realcomp to take certain actions in response. The matter is pending.

•

Significant DOJ Cases Decided in FY 2009

There were no reported FY 2009 decisions in antitrust cases in which the United States was a

party or participated as amicus curiae.

2.3

Statistics on Private and Government Cases Filed

24.

According to the 2009 Annual Report of the Director of the Administrative Office of the U.S.

Courts, 812 new civil antitrust actions, both government and private, were filed in the federal district courts

in 2009.

2.4

Significant DOJ and FTC Enforcement Actions

2.4.1

DOJ Criminal Enforcement

25.

At the close of FY 2009, the Division had 144 pending grand jury investigations, the greatest

number of pending grand jury investigations since 1992. The Division filed 72 cases against 65 individuals

and 22 companies, which is the greatest number of criminal cases in a fiscal year since 1993. The Division

obtained the second highest fine total in its history, with over $1 billion in fines. Courts imposed more than

25,000 jail days against Division defendants, also the second highest total in Division history, with an

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average jail sentence of 24 months. The Division prosecuted price fixing, bid rigging, market and customer

allocations, and other fraudulent, anticompetitive schemes involving sales of household and personal

electronics, air transportation services, ocean shipping services, oil transportation products, Internet

services for disadvantaged schools and libraries, supplies and services for War Zone locations, and

hurricane remedial work. The Division also launched a major initiative to prevent and detect fraud and

abuse in procurement projects associated with The American Recovery and Reinvestment Act of 2009.

26.

Liquid Crystal Display Panels: The ongoing investigation of multiple price-fixing conspiracies

in the thin-film transistor liquid crystal display (“TFT-LCD”) panel industry has resulted in charges against

six non-U.S. manufacturers, one U.S. subsidiary of one of the manufacturers, and nine non-U.S.

executives. By the end of 2009, defendants had paid or agreed to pay fines of over $860 million. In

December 2008, Japanese manufacturer Sharp Corporation pleaded guilty to participating in three separate

conspiracies to fix prices of TFT-LCD panels sold to (1) Dell for computer monitors and laptops, (2) Apple

Computer for iPod portable music players, and (3) Motorola for Razr mobile phones. Sharp was sentenced

to pay a $120 million fine. In December 2008, Korean manufacturer LG Display Co., Ltd. (“LG”) and its

U.S. subsidiary LG Display America, Inc. pleaded guilty and were sentenced to pay a $400 million

criminal fine—the second largest fine in Division history. In January 2009, Taiwanese manufacturer

Chunghwa Picture Tubes, Ltd. (“Chunghwa”) pleaded guilty and was sentenced to pay a $65 million fine.

In May 2009, Japanese manufacturer Hitachi Displays Ltd. pleaded guilty and was sentenced to pay a $31

million fine. In August 2009, the Division charged Japanese electronics manufacturer Epson Imaging

Devices Corporation with fixing prices of TFT-LCD panels sold to Motorola. Epson pleaded guilty and

was sentenced to pay a $26 million criminal fine. Also, in the beginning of FY 2010, the Division charged

Chi Mei Optoelectronics with fixing prices of TFT-LCD panels; Chi Mei, a Taiwanese manufacturer,

agreed to plead guilty and pay a fine of $220 million.

27.

The Division has also charged nine non-U.S. executives from Korea, Japan, and Taiwan with

fixing TFT-LCD panel prices. Five of those executives have entered guilty pleas, including a former

Chairman and Chief Executive Officer of Chunghwa and the head of LG’s Taiwan subsidiary. They have

been sentenced to serve between six months and one year in prison and to pay fines ranging from $20,000

to $50,000. Four executives are under indictment, including another former Chairman and Chief Executive

Officer of Chunghwa.

28.

Cathode Ray Tubes: In FY 2009, the Division charged two non-U.S. executives in its

investigation of international cartels in the cathode ray tube industries. Both of these executives have also

been indicted in the TFT-LCD investigation on price-fixing charges. In February 2009, a former Chairman

and Chief Executive Officer of Chunghwa was charged in a two-count indictment with fixing prices,

reducing output, and allocating market shares of color display tubes (“CDTs”) and with fixing prices for

color picture tubes used in television sets. CDTs are a type of cathode ray tube used in computer monitors

and other specialized applications. In August 2009, a federal grand jury in San Francisco indicted a former

executive of a large Taiwanese CDT manufacturing company on the charge of conspiring to fix prices,

reduce output, and allocate market shares of CDTs.

29.

Air Transportation: The Division continued its prosecutions of price-fixing conspiracies in the

air transportation industries. These conspiracies affected both passenger fares and prices for innumerable

goods shipped by air transportation, including produce, clothing, electronics, and medicine. At the end of

FY 2009, a total of 15 companies and four individuals have pleaded guilty to participating in these

conspiracies. In addition, one executive is under indictment. Criminal fines of more than $1.6 billion have

been imposed, and four executives have been sentenced to serve prison sentences.

30.

In FY 2009, six airlines and two individuals were charged with fixing prices for the shipment of

cargo by air. In January 2009, LAN Cargo S.A. (“LAN Cargo”), Aerolinhas Brasileiras S.A. (“ABSA”),

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and El Al Israel Airlines Ltd. (“EL AL”) were charged with fixing air cargo prices. LAN Cargo, a Chilean

company, and ABSA, a Brazilian company that is substantially owned by LAN Cargo, pleaded guilty and

were sentenced to pay a single criminal fine of $109 million. EL AL, an Israeli company, pleaded guilty

and was sentenced to pay a criminal fine of $15.7 million. In April 2009, Luxembourg-based Cargolux

Airlines International S.A.; Japan-based Nippon Cargo Airlines Co., Ltd.; and Korea-based Asiana

Airlines, Inc. were each charged with fixing prices for international air shipments. Asiana was also charged

with fixing passenger fares for flights from the United States to Korea. Cargolux pleaded guilty and was

sentenced to pay a $119 million criminal fine. Nippon pleaded guilty and was sentenced to pay a $45

million criminal fine, and Asiana pleaded guilty and was sentenced to pay a $50 million criminal fine. Also

in April 2009, the Division charged the former Vice President of Cargo Sales in Europe for Martinair

Holland N.V with conspiring to fix prices for international air shipments. The executive pleaded guilty and

was sentenced to serve eight months in jail and to pay a $20,000 criminal fine. In August 2009, a grand

jury indicted the former Vice President of Global Sales of SAS Cargo Group A/S on charges of allocating

customers and coordinating increases in certain surcharges for international air shipments, conspiring to

obstruct justice, and obstructing justice.

31.

Coastal Shipping: In October 2008, the Division charged four shipping executives with

allocating customers, rigging bids, and fixing prices for coastal shipping services between the United

States and Puerto Rico. All of the defendants pleaded guilty to the charges. Sales of freight services in the

United States to Puerto Rico shipping lane total hundreds of millions of dollars every year, as ocean

shipping is a primary way for people in Puerto Rico to receive essential goods. The defendants’ employers

shipped a variety of goods, including heavy equipment, medicine, food, and consumer goods, between the

United States and Puerto Rico.

32.

In January 2009, one of the four executives was sentenced to serve 48 months in prison, which is

the longest jail sentence ever imposed on a single antitrust count. This case represents the first time that an

individual has been sentenced to more than three years for a single antitrust charge since Congress raised

the maximum prison sentence for antitrust crimes from three years to ten years in June 2004. A fifth

executive has pleaded guilty to obstruction of justice in the investigation.

33.

Marine Hose: During FY 2009, the Division continued its investigation of collusion in the

marine hose industry. Marine hose is used to transfer oil between tankers and storage facilities and is

purchased by companies that are involved in the off-shore extraction and transportation of petroleum

products. It is also purchased and used by the Department of Defense. During the conspiracy, the

conspirators sold hundreds of millions of dollars worth of marine hose and related products in the United

States and elsewhere. As of the end of 2009, the Division had charged 12 individuals and three companies

with fixing prices, rigging bids, and allocating market shares. Nine of the individuals have pleaded guilty,

and two were acquitted at trial. One remains a fugitive. All three companies have pleaded guilty. In FY

2009, the Division charged British manufacturer Dunlop Oil & Marine Ltd., French manufacturer

Trelleborg Industrie S.A.S., and a Japanese executive with allocating market shares, fixing prices and

rigging bids for sales of marine hose in the United States and elsewhere. The Japanese executive was also

charged with conspiring to make corrupt payments to foreign officials to secure business for his employer

and its U.S. subsidiary in violation of the Foreign Corrupt Practices Act. The executive pleaded guilty to

the charges and was sentenced to serve two years in prison and to pay an $80,000 fine. The companies

were sentenced to pay fines totaling more than $8 million.

34.

Procurement Fraud: The Division continues to play an active role in combating procurement

fraud, including through the Department’s National Procurement Fraud Task Force and Hurricane Katrina

Fraud Task Force. As of the end of 2009, the Division has charged more than three dozen defendants in its

War Zone investigations. In the last fiscal year, the Division brought cases that included various kickback,

bribery, and fraud charges involving contracts for private security services for the Afghanistan

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Infrastructure Rehabilitation Project, contracts for the delivery of bunkers and barriers and asphalt paving

services at Bagram Airfield in Afghanistan, contracts with the Army Corps of Engineers in Afghanistan

and Iraq, and contracts awarded at Camp Arifjan, Kuwait, including construction and fencing contracts.

35.

In FY 2009, the Division prosecuted the niece of a U.S. Army major for conspiring to obstruct

the investigation of bribes paid to her uncle for awarding contracts in support of Army troops in Iraq. The

major, his wife, and sister were prosecuted earlier for their roles in the bribery scheme, and all the family

members were sentenced in December 2009. The major pleaded guilty in 2008 to bribery, conspiracy to

defraud the United States and to commit bribery, and conspiracy to launder money for his participation in

the complex bribery scheme involving his work as an Army contracting officer in Kuwait. In return for

awarding contracts, he received more than $9 million in bribes, the largest amount of bribe money any U.S.

military officer has ever been prosecuted for taking. The major also directed contractors to pay his wife

and sister, among others, in order to conceal bribe payments. The major was sentenced to serve 17 ½ years

in prison, the longest prison sentence ever imposed in a Division prosecution, and to pay $9.6 million in

restitution. His wife and sister, who also pleaded guilty to conspiracy to commit money laundering, were

sentenced to prison and to pay restitution.

36.

In April 2009, the Division obtained convictions after trial of a former contractor consultant with

the U.S. Army Corps of Engineers and a dirt, sand and gravel subcontractor for bribery and conspiracy to

commit bribery in connection with a $16 million project for the reconstruction of a levee south of New

Orleans. The subcontractor was sentenced to five years in prison, and the Corps of Engineers employee

was sentenced to serve five years and ten months in prison. Another Corps of Engineers employee

previously pleaded guilty to bribery in connection with the scheme.

37.

The Division continued to bring charges in its military restraints and marine products

investigations relating to sales to the Department of Defense. In FY 2009, the Division charged the owner

of a New York designing and manufacturing company with conspiring to allocate a DOD contract for

Navy straps used to secure munitions and other supplies on ships and airplanes. The Division also charged

the Chief Executive Officer of a former Virginia marine products company with conspiring to rig bids and

allocate customers for sales of foam-filled fenders and buoys sold to the Navy, Coast Guard, and other

public and private entities. The fenders are used as a cushion between ships and structures such as piers,

docks, and other ships. The buoys are used as channel markers and navigational aids. The Division also

charged the former President of a California marine products company with conspiring to rig bids and

allocate customers for sales of plastic marine pilings sold to the Navy, Coast Guard, and other public and

private entities for use in port and pier construction. All of these defendants pleaded guilty to the charges

against them.

38.

The Division also continued to prosecute fraud in the Federal Communications Commission’s ERate program. This program is designed to provide Internet access and telecommunications services to

disadvantaged schools and libraries. In June 2009, the Division indicted a former Michigan school

superintendent on charges of conspiring to accept a bribe and to commit mail fraud in connection with the

receipt of free goods and services from an E-Rate vendor and with obstructing the Division’s investigation.

His trial is scheduled to begin in September 2010. As of the end of 2009, a total of seven companies and 19

individuals have pleaded guilty, been found guilty at trial, or entered civil settlements as a result of the

Division’s E-Rate investigations. These companies and individuals have been sentenced to pay more than

$42 million in fines and restitution. One individual defendant remains a fugitive.

39.

In FY 2009, the Division brought six cases charging subcontractors and an employee of a prime

contractor with conspiring to defraud the EPA at two New Jersey Superfund sites and with related

offenses. The conspirators subverted the competitive bid process by paying kickbacks to employees of a

DAF/COMP(2010)12/07

prime contractor in return for the award of subcontracts. The conspirators also inflated prices in order to

cover the kickbacks. All defendants except two have pleaded guilty.

2.4.2.

DOJ Civil Non-Merger Enforcement

40.

On September 18, 2009, the Department advised the U.S. District Court for the Southern District

of New York that it should not accept the proposed class action settlement in The Authors Guild Inc. et al.

v. Google Inc. due to concerns regarding class action, copyright, and antitrust law. The settlement

agreement between Google and the authors and publishers aims to resolve copyright infringement claims

brought against Google by the Authors Guild and five major publishers in 2005 raised by Google’s efforts

to digitally scan books contained in several libraries. In its filing, the Department proposed that the parties

should be encouraged to continue their productive discussions on changes to the agreement so as to address

several concerns, including imposing limitations on the most open-ended provisions for future licensing,

eliminating potential conflicts among class members, providing additional protections for unknown rights

holders, addressing the concerns of foreign authors and publishers, eliminating the joint-pricing

mechanisms among publishers and authors, and, whatever the settlement’s ultimate scope, providing some

mechanism by which Google’s competitors can gain comparable access. The Department filed another brief

in this matter on February 4, 2010. See http://www.justice.gov/atr/public/press_releases/2009/250181.htm.

41.

On May 4, 2009, the Department announced that it had reached a proposed settlement with

Consolidated Multiple Listing Service Inc. (“CMLS”) that requires CMLS to change its rules to allow lowpriced and innovative real estate brokers to compete with traditional brokers in the Columbia, South

Carolina area. A multiple listing service, like the one operated by CMLS, is a joint venture of real estate

brokers that combines its members’ home listings information into an electronic database that is made

available to all member brokers. Access to the database – and therefore membership in CMLS – was

critical for any broker seeking to service clients in the area. The Department’s settlement, finalized in

August 2009, required CMLS (1) to change rules imposing burdensome prerequisites to membership that

prevented some brokers, such as those who would compete most aggressively on price, from listing homes

for sale, and (2) to repeal rules that required brokers to provide a full set of brokerage services regardless

of the client’s desires. See http://www.justice.gov/atr/public/press_releases/2009/245505.htm.

42.

On April 16, 2009, the Department told the U.S. District Court responsible for the Microsoft final

judgment that it was necessary to extend the term of certain portions of that judgment by at least 18

months, through May 12, 2011. The Department said that an extension was necessary to ensure the quality

of the technical documentation Microsoft provides to licensees. Section III.E of the final judgment requires

that Microsoft make available to competing server software developers, on reasonable and nondiscriminatory terms, certain technology used by Microsoft to make its server operating systems interoperate

with client PCs running the Windows operating system. Microsoft must provide licensees with technical

documentation that is designed to enable them to use this technology in their own server products so that

those products work better with Windows. Microsoft and antitrust enforcers from 17 states and the District of

Columbia joined in the filing. See http://www.justice.gov/atr/public/press_releases/2009/244922.htm. The

court entered the modified judgment on April 22, 2009.

43.

On November 5, 2008, the Department announced that Yahoo! Inc. and Google Inc. had

abandoned their advertising agreement after the Department informed the companies that it would file an

antitrust lawsuit to block its implementation. The Department said that if implemented, the agreement

between these two companies accounting for 90 percent or more of each relevant market would likely

harm competition in the markets for Internet search advertizing and Internet search syndication. The

agreement would have enabled Yahoo! to replace a significant portion of its own Internet search results

advertisements with search results advertisements sold by Google. After an extensive investigation

facilitated by the companies’ cooperation and agreement to provide the Department time to investigate

DAF/COMP(2010)12/07

prior to implementation, the Department concluded that Google and Yahoo! would have become

collaborators rather than competitors for a significant portion of their search advertising businesses,

materially reducing important competitive rivalry between the two companies. See

http://www.justice.gov/atr/public/press_releases/2008/239167.htm.

2.4.3

Enforcement of DOJ Consent Decrees

44.

On January 14, 2009, the U.S. District Court for the District of Columbia found AT&T in civil

contempt of a March 2008 consent decree and a related court order in connection with AT&T’s acquisition

of Dobson Communications Corporation. Under the consent decree, AT&T was required to divest mobile

wireless telecommunication businesses in three rural service areas. The United States alleged that AT&T

violated the two court orders by failing to separate confidential customer account information of the

divested businesses from its own customer records and by failing to take other actions needed to prevent

unauthorized disclosure. AT&T personnel consequently obtained unauthorized access to the divested

businesses’ competitively sensitive customer information and used it to solicit and win away some of the

divested businesses’ customers. AT&T agreed to pay more than $2 million as part of a civil settlement

with the Department that resolved AT&T’s alleged court order violations. See

http://www.justice.gov/atr/public/press_releases/2009/241435.htm.

2.4.4.

FTC Non-Merger Enforcement Actions

45.

Cephalon, Inc. The Commission is charging Cephalon with an illegal pay-for-delay agreement

for its branded drug, Provigil. Provigil is a Food and Drug Administration (“FDA”)-approved treatment for

excessive sleepiness in patients with sleep apnea, narcolepsy, and shift-work sleep disorder, with annual

U.S. sales of over $800 million. The Commission charges that Cephalon paid four firms to refrain from

selling generic versions of Provigil until 2012. The Commission’s complaint was filed in February, 2008,

and the Commission argued in opposition to a motion to dismiss the complaint in October 2009. The

motion to dismiss was denied in March 2010 and the case is currently pending in the Eastern District of

Pennsylvania. See http://www.ftc.gov/os/caselist/0610182/index.shtm.

46.

Alta Bates Medical Group, Inc. Alfa Bates Medical, a 600-physician independent practice

association serving the Berkeley and Oakland, California area, agreed to settle FTC claims that it fixed

prices charged to health care insurers. The FTC’s complaint focused on Alta Bates’s contracts with health

plans to provide fee-for-service medical care. Under these arrangements, the payor compensates physicians

for services pursuant to agreed-upon fee schedules. According to the complaint, since at least 2001, Alta

Bates has orchestrated collective negotiations for fee-for-service contracts. The FTC order, approved in

July 2009, prohibits Alta Bates from collectively negotiating fee-for-service reimbursements or engaging

in a related group boycott. See http://www.ftc.gov/opa/2009/06/altabates.shtm.

47.

National Association of Music Merchants (NAMM). On March 4, 2009, the FTC settled

charges that the NAMM violated federal law by enabling and encouraging the exchange of competitively

sensitive price information among its 9,000 members nationwide. NAMM is a trade association whose

members include most U.S. manufacturers, distributors, and dealers of musical instruments. The FTC

alleged that NAMM organized meetings at which its members were encouraged to communicate, and did

in fact share, information about prices and business strategy. To the detriment of consumers, NAMM’s

conduct enhanced the members’ ability to coordinate price increases for musical instruments. According to

the FTC’s complaint, NAMM’s conduct crossed the line that divides legitimate trade association activities

from unfair methods of competition. While trade associations such as NAMM often provide valuable procompetitive functions, the FTC contended that NAMM violated federal law when the association engaged

in conduct that had the “principal tendency or likely effect of harming competition and consumers.” In

settling the complaint, NAMM has agreed to stop engaging in such conduct. See

http://www.ftc.gov/opa/2009/03/namm.shtm.

DAF/COMP(2010)12/07

48.

Bristol-Myers Squibb Company (BMS). On March 31, 2009, pursuant to Section 5(I) of the

Federal Trade Commission Act, the FTC brought its first civil penalty action to enforce the reporting

requirement of the Medicare Modernization Act (MMA). The Commission obtained $2.1 million – the

largest fine available by law – from BMS for failing to inform the FTC of agreements reached with

Apotex, Inc., regarding potential generic competition to its blockbuster drug Plavix. BMS’s conduct

allegedly violated a 2003 FTC Order and the MMA, which require that certain drug company agreements

be accurately reported to both the Commission and the DOJ. In this first action under the MMA, the

Commission charged the BMS failed to disclose that, as part of a patent settlement with Apotex, BMS

orally promosed that it would not compete with Apotex during the first 180 days that Apotex marketed its

new generic drug. See http://www.ftc.gov/opa/2009/03/bmsplavix.shtm.

49.

Watson Unimed. In February 2009, the Commission and the California Attorney General

challenged an agreement between Solvay Pharmaceuticals, Inc., maker of AndroGel, and two generic drug

manufacturers – Watson Pharmaceuticals and Par Pharmaceuticals – to abandon their patent challenges and

delay marketing a generic formulation until 2015. AndroGel is Solvay’s branded testosterone-replacement

drug, a prescription pharmaceutical with sales of more than $400 million a year. According to the FTC’s

complaint, the generic manufacturers each sought regulatory approval from the FDA to market generic

versions of AndroGel. In their FDA filings, both companies certified that their products did not infringe the

only patent Solvay had relating to AndroGel, and that the patent was invalid. The complaint charges that

Solvay agreed to pay the generic companies to abandon their patent challenges and agree not to bring a

generic AndroGel product to market for nine years. This case was transferred to the Northern District of

Georgia, and in February 2010, the court dismissed the FTC’s complaint. See

http://www.ftc.gov/os/caselist/0710060/index.shtm.

50.

West Penn Multi-List. West Penn, the operator of the only real estate multiple listing service

(MLS) in the Pittsburg, Pennsylvania metropolitan area, agreed to settle FTC charges that certain

restrictions on access to its MLS services were anticompetitive. The MLS provider limited brokers that

could utilize its services by mandating that each broker have a traditional full-time listing agreement with

their seller, thus constraining the ability of brokers with non-traditional listing agreements to compete, as

use of the service is necessary for a broker to provide effective residential real estate brokerage services to

buyers and sellers in the area. The FTC’s consent order was issued in January 2009. See

http://www.ftc.gov/opa/2009/01/westpenn.shtm.

51.

AllCare IPA. In December, 2008, the Commission challenged the conduct of AllCare Individual

Practice Association, alleging that AllCare restrained competition in fee-for-service contracts by fixing

prices and other contract terms with payors, engaging in collective negotiations over the terms and

conditions of dealing with payors, and preventing group members from negotiating with payors except on

terms approved by AllCare. The Commission issued a consent order prohibiting AllCare from entering into

agreements between or among physicians: 1) to negotiate on behalf of any physician with any payor; 2) to

refuse to deal, or threaten to refuse to deal, with any payor; 3) to designate the terms, conditions, or

requirements upon which any physician deals, or is willing to deal, with any payor, including, but not

limited to price terms; 4) not to deal individually with any payor, or not to deal with any payor through any

arrangement other than one involving AllCare. See http://www.ftc.gov/opa/2008/12/allcare.shtm.

52.

Boulder Valley IPA. The Commission challenged the conduct of Boulder Valley Individual

Practice Association for refusing to deal, or threatening to refuse to deal with insurance providers that failed

to increase fees paid to group doctors, and also prevented members from contracting with payors, except

through Boulder Valley. During the period between 2001 and 2006 Boulder Valley IPA threatened to

terminate contracts with payors unless they agreed to pay increased fees-for-service set by Boulder Valley,

effectively engaging in illegal price fixing, and harming Boulder county area consumers by charging higher

prices for the various physician services offered. On December 24, 2008, the FTC issued a consent order

against Boulder Valley in similar terms to the AllCare IPA. See http://www.ftc.gov/opa/2008/12/allcare.shtm.

DAF/COMP(2010)12/07

53.

Golf Galaxy Inc./Golf Town Canada, Inc. In October, 2008, the Commission issued a consent

order to settle concerns that Golf Galaxy, a subsidiary of Dick’s Sporting Goods Inc., entered into an

illegal agreement with Golf Canada to allocate the market for golf merchandise in the United States and

Canada. The agreement barred Golf Canada from opening stores in the United States in exchange for

privileged business information from Golf Galaxy, including blueprints, merchandising plans, and sales

reports. The Commission’s consent order prevents Golf Galaxy from further dividing or allocating the

market, and rendered its 2004 non-compete agreement with Golf Canada unenforceable. See

http://www.ftc.gov/opa/2008/10/dickssg.shtm.

2.5

Advisory Letters from the FTC

54.

Under its Rules, the Commission or its staff may offer industry guidance in the form of an

advisory opinion regarding proposed conduct in matters of significant public interest. In recent years, the

staff of the Bureau of Competition has issued several advisory opinions in the area of health care provider

collaboration. These competition advisory opinions, which can be found on the Commission website (see

http://www.ftc.gov/ftc/opinions.shtm), inform the public about the Commission’s analysis in novel or

important areas of antitrust law. In FY 2009, the FTC issued an advisory opinion on clinical integration.

•

2.6

On April 13, 2009, FTC staff issued an opinion letter on a proposal from TriState Health

Partners, Inc., a physician-hospital organization based in Hagerstown, Maryland, to clinically

integrate its operations, including joint contracting by its members with health plans and selfinsured employers. The advisory opinion explained that bona fide clinical integration efforts have

the potential to achieve significant cost savings while improving the quality of care, especially

when the members coordinate their clinical practice in a substantial way. FTC staff concluded

that even though the group has a large market presence, the program will be non-exclusive,

allowing members to contract individually outside of the proposed program. Under these

conditions, TriState’s joint contracting with payors would be subordinate and reasonably

necessary to achieve clinical integration of its members. Based on these representations, the FTC

staff did not recommend a challenge to the program in its opinion letter. See

http://www.ftc.gov/opa/2009/04/tristate.shtm.

Business Reviews Conducted by the Department of Justice

55.

Under the Department’s business review procedure, an organization may submit a proposed action

to the Department and receive a statement as to whether the Department would likely challenge the action

under the antitrust laws. The Department issued four business review letters in FY 2009. The Department’s

business review letters can be found at http://www.usdoj.gov/atr/public/busreview/letters.htm.

•

On September 8, 2009, the Department announced it would not challenge a proposal by seven

regional less-than-truckload (“LTL”) freight transportation companies to jointly bid and engage

in other collaborative activity as part of their LTL joint venture, Reliance Network. Each

company operates in a distinct North American region, and the collaboration will allow the

companies to offer “seamless” nationwide LTL services. The Department said that the proposed

conduct is not likely to reduce competition in regional LTL freight transportation markets and

could enhance competition in the long haul LTL market.

•

On September 4, 2009, the Department announced it would not challenge a proposal by

Memorial Health Inc. and St. Joseph’s/Candler Health System to enter into an exclusive joint

purchasing agreement to jointly evaluate and purchase certain medical and surgical supplies.

Both Memorial and St. Joseph’s/Candler said they will abide by the purchasing requirements of

the antitrust safety zone set forth in Statement 7 of the 1996 DOJ/FTC Statements of Antitrust

Enforcement Policy in Health Care.

DAF/COMP(2010)12/07

•

On November 24, 2008, the Department announced it would not challenge the proposed

formation of Concepta Services LLC, a consortium that will offer large commercial insurance

policies to companies. Concepta membership will be limited to insurers who do not have the

ability to offer such large policies on their own. It will allow commercial insurers to combine

their insurance capacity to jointly offer larger commercial insurance policies. The Department

said that the consortium might provide a competitive new option for those businesses looking to

purchase these large policies.

•

On October 21, 2008, the Department announced it would not challenge a proposal by RFID

Consortium LLC, a group of companies each holding at least one essential ultra high frequency

radio frequency identification (“UHF RFID”) patent, to jointly license patents needed to comply

with standards for UHF RFID technology. UHF RFID is a type of automatic identification and

data capture technology using radio frequency waves. The Department said that the proposed

arrangement would likely yield procompetitive benefits because it limits the ability of the

consortium’s members to use their intellectual property rights to block or delay the

implementation of the UHF RFID standards, thus creating cost savings and allowing greater

access to the technology.

Enforcement of antitrust laws and policies: mergers and concentrations

3.1

Enforcement of Pre-merger Notification Rules

56.

In FY 2009, the Department, at the request of the FTC, filed two lawsuits alleging violations of

the Hart-Scott-Rodino Act’s pre-merger notification requirements. First, on June 23, 2009, the DOJ

announced that it had filed a complaint and proposed civil settlement in which media executive John

Malone agreed to pay a $1.4 million civil penalty for acquiring voting securities in Discovery Holding Co.,

a leading provider of non-fiction television entertainment, in violation of the Act’s notification and waiting

requirements. Various acquisitions by Malone in 2005 through April 2008 resulted in holdings above the

notification thresholds then in effect, and after Malone made a corrective filing, he made additional

purchases of Discovery voting securities during the waiting period triggered by that filing. Second, on

December 15, 2008, the DOJ announced that two related investment funds, ESL Partners L.P. and ZAM

Holdings L.P., had agreed in a proposed settlement to pay civil penalties totaling $800,000 for acquisitions

in 2004 that resulted in each of them holding voting securities of AutoZone Inc. valued in excess of the

reporting threshold then in effect. The court in both cases promptly approved the civil penalty settlements.

3.2.

Significant Merger Cases

3.2.1.

FTC Merger Challenges and Cases

57.

K&S AG/Dow Chemical. In September, 2009, the Commission challenged K+S

Aktiengesellschaft’s $1.68 billion acquisition of Morton International, two major suppliers of bulk de-icing

salt to state and local governments. The Commission’s complaint alleged that the transaction as originally

proposed would have substantially reduced competition in both the Maine and Connecticut local markets,

leading to higher prices for this essential commodity sold to local and state governments to treat roads. In

order to remedy these concerns, the parties agreed to sell bulk de-icing assets in Maine and Connecticut to

FTC-approved buyers. Commission staff worked closely with the Attorneys General for Maine and

Connecticut in its investigation. See http://www.ftc.gov/opa/2009/09/mortonsalt.shtm.

58.

Thoratec Corporation/HeartWare International, Inc. The FTC successfully challenged

Thoratec’s proposed $282 million acquisition of rival medical device maker HeartWare in July 2009,

charging that the proposed acquisition would have enhanced Thoratec’s existing monopoly in the market

DAF/COMP(2010)12/07

for left ventricular assist devices (“LVADs”) used to treat patients with advanced heart failure. Prior to its

proposed acquisition, HeartWare was positioned to obtain FDA approval for its LVAD device in 2012,

making it the only LVAD device to challenge Thoratec’s LVAD monopoly. The parties abandoned the

transaction after the Commission announced its intention to challenge it. See

http://www.ftc.gov/opa/2009/07/thoratec.shtm.

59.

Carilion Clinic/Center for Advanced Imaging. On July 24, 2009, the FTC issued an

administrative complaint challenging Carilion Clinic’s 2008 acquisition of two outpatient clinics in the

Roanoke, Virginia area. According to the FTC’s administrative complaint, the two clinics – the Center for

Advanced Imaging and the Center for Surgical Excellence – had strong reputations for offering highquality care and convenient services at prices much lower than Carilion’s. The acquisitions therefore

eliminated important competition that benefitted patients, employers, and health plans in the Roanoke area.

Following the transaction, Carilion faced competition for outpatient imaging and surgical services from

only one other provider, HCA, the other major hospital system in the Roanoke area. In light of the FTC’s

challenge, Carilion agreed to sell the two outpatient clinics and related assets to FTC-approved buyers. See

http://www.ftc.gov/opa/2009/07/carilion.shtm.

60.

Talecris Biotherapeutics/CSL. On May 27, 2009, the FTC approved an administrative

complaint to block CSL Limited’s proposed $3.1 billion acquisition of Talecris Biotherapeutics. CSL and

Talecris are two of the world’s leading makers of plasma protein therapies (immune globulin (“Ig”),

Albumin, Rho-D, and Alpha-1) used to treat blood borne illnesses. The proposed acquisition would reduce

the number of competitors in the U.S. markets for Ig and Albumin from five to four. In addition, in the

U.S. markets for Rho-D and Alpha-1, the proposed transaction would reduce the number of competitors

from three to two. The FTC’s complaint alleged that a history of consolidation in the plasma industry has

shown that the industry uses consolidation as a tool to limit supply and drive prices higher. According to

the complaint, the proposed acquisition of Talecris was particularly concerning because it was undergoing

substantial expansion that – absent the acquisition – would have increased availability, and lowered prices,

of these life-saving therapies. In approving the administrative complaint, the Commission authorized the

staff to seek a preliminary injunction in federal district court in Washington, D.C., to stop the transaction

pending completion of the administrative trial. Soon after the FTC filed its complaint, the companies

announced their decision to abandon the merger. See http://www.ftc.gov/opa/2009/05/talecris.shtm.

61.

BASF/Ciba Specialty Chemicals. BASF settled FTC charges in April 2009, that its proposed

$5.1 billion acquisition of Ciba would lead to reduced competition for two widely used high performance

pigments (bismuth vanadate and indanthrone blue). High performance pigments provide color to a range of

products, including inks, coatings, plastics, and fibers, used in a wide variety of every day products. High

performance pigments offer superior durability and light-fastness compared to other types of chemical

pigments, making them particularly suited for products exposed to sunlight and weather, such as car

coatings and building materials. Under the terms of the Commission’s settlement, BASF agreed to sell all

assets, including intellectual property, related to the two pigments to an FTC-approved buyer. The FTC

and the European Commission cooperated extensively throughout the course of their investigations. See

http://www.ftc.gov/opa/2009/04/basf.shtm.

62.

Lubrizol/Lockhart Chemical. In February 2009, the FTC challenged Lubrizol Corporation’s

acquisition of the oxidate assets of The Lockhart Company, which had the effect of substantially lessening

competition in the already highly concentrated U.S. market for chemical rust inhibitors. These inhibitors

are commonly used to prevent rusting during the manufacture of metal products such as automobiles and

other heavy equipment. According to the Commission’s complaint, the acquisition removed Lubrizol’s last

substantial competitor in the relevant market. In addition, the Commission challenged a non-compete

agreement included in the terms of the acquisition which prevented Lockhart from competing in the

relevant market for 5 years as anticompetitive because it restrained the ability of new firms to enter the

DAF/COMP(2010)12/07

market. The Commission issued a consent order remedying its anticompetitive concerns requiring the

divestiture of the oxidate assets in question to Additives International and the elimination of the noncompete agreement. See http://www.ftc.gov/opa/2009/02/lubrizol.shtm.

63.

Dow Chemical/Rohm&Haas. In January, 2009, the Commission challenged Dow Chemical’s

$18.8 billion proposed acquisition of Rohm & Haas Company as anticompetitive in the markets for various

acrylics and other industrial chemicals used to make coated paper products, paints, and adhesives.

According to the Commission’s complaint, the product markets in question include acrylic monomers,

used in goods ranging from hygiene products to paints and industrial coatings, hollow sphere particles,

used in paper products, and acrylic latex polymers, used in traffic paints. Given the high concentration in

each of the product markets, the proposed acquisition would have represented a merger to monopoly. To

remedy its anticompetitive concerns, the Commission required Dow to divest its assets in the

aforementioned product markets to an FTC approved buyer. Throughout the course of the investigation,

the FTC cooperated extensively with the European Commission, the Canadian Competition Bureau, and

the Mexican Federal Competition Commission, to resolve competition concerns raised by the acquisition.

See http://www.ftc.gov/opa/2009/01/dow.shtm.

64.

Inverness Medical Innovations, Inc./ACON. To restore competition in the U.S. market for

consumer pregnancy tests, the Commission, in December 2008, effectively reversed a consummated

transaction in which Inverness Medical Innovations, purchased the assets related to the development of a

water-soluble dye based pregnancy test from ACON Laboratories. According to the Commission’s

complaint, Inverness, holding a relevant market share of 70%, restrained competition in two ways. First, it

issued covenants not to compete to ACON, took profits from ACON’s joint venture with Church &

Dwight, and purchased intellectual property rights which would restrict ACON from developing competing

products. Second, Inverness limited product innovation by purchasing, but not using, the water-soluble dye

test technology purchased from ACON, one of the only companies utilizing that technology. The

Commission’s consent order ended any restrictions Inverness had over the joint venture between ACON

and Church & Dwight, and required that Inverness divest its assets relating to the water-soluble dye

technology and its related pregnancy test product. See http://www.ftc.gov/opa/2008/12/inverness.shtm.

65.

King Pharmaceuticals/Alpharma. On December 28, 2008, the Commission issued a consent

order to restore competition in the market for oral long-acting opioids (“LAOs”), which are used to manage

moderate-to-severe chronic pain. The FTC intervened in King Pharmaceutical’s proposed $1.6 billion

acquisition of rival drug-maker Alpharma Inc. because the transaction would have joined the two leading

producers of morphine sulfate oral LAOs in the U.S., a market which was already highly concentrated and

which had annual sales of $4 billion in 2007. Other drugs such as short-acting opioids or non-oral opioids

are not close therapeutic substitutes for the oral LAO products. In order to maintain competition in the

market, the Commission’s consent order required King to divest its Kadian business to Actavis, a company

which already manufactured the drug for King, and which could then produce a generic equivalent of the

drug sooner than would have been permitted under King’s patent, which would not have expired until

2010. See http://www.ftc.gov/opa/2008/12/alpharma.shtm.

66.

Teva Pharmaceuticals/Barr Pharmaceuticals. In December 2008, the Commission settled

antitrust concerns raised by the proposed $8.9 billion acquisition of Barr Pharmaceuticals by Teva

Pharmaceutical Industries. The proposed acquisition would have lessened competition in the markets for

17 commonly used generic medications including drugs used in the treatment of cancer, bacterial

infections, diabetes, acid reflux, and depression as well as several varieties of oral contraceptives.

According to the Commission’s complaint, the acquisition would have likely led to higher prices for

consumers through the removal of one of only four competitors in each of these markets. The Commission

also contended that entry into the market for manufacturing and selling the relevant drugs would not be

timely, likely, or sufficient to counteract the anticompetitive impacts of the acquisition. It estimated that

DAF/COMP(2010)12/07

the combination of the time needed to develop new drugs and gain FDA approval would typically be at

least two years. Further, some of the relevant markets are relatively small and in decline, so the sales

opportunities for a new entrant likely would be insufficient to warrant the time and investment needed to

enter the relevant markets. The Commission’s consent agreement required both Teva and Barr to sell assets

in 29 U.S. markets. The rights to manufacture and market the drugs were to be divided between Watson

Pharmaceuticals or Qualitest Pharmaceuticals, both of which were already competitors in other generic

drug markets. See http://www.ftc.gov/opa/2008/12/tevabarr.shtm.

67.

Ovation Pharmaceuticals, Inc. The FTC filed a complaint in the U.S district court in

Minneapolis on December 16, 2008, seeking a permanent injunction to remedy harmful effects from

Ovation Pharmaceutical’s 2006 acquisition of the rights to sell NeoProfin, a drug used to treat congenital

heart disease in approximately 30,000 premature babies each year in the U.S. When it acquired NeoProfen,

Ovation already held the rights to Indocin I.V., the only other drug used to treat this serious condition.

Ovation purchased the rights to Indocin from Merck in August 2005. At that time, NeoProfen was awaiting

regulatory approval by the FDA. According to the FTC’s complaint, Ovation expected that NeoProfen,

once approved, would take a substantial portion of sales from Indocin. The FTC charged that to

eliminate the threat that NeoProfen posed, Ovation acquired the U.S. rights to NeoProfen from Abbott

Laboratories in January 2006. The NeoProfen transaction fell below the regulatory threshold for

reporting acquisitions to the federal antitrust authorities. In the week-long trial in December 2009 before

the U.S district court in Minneapolis, the FTC argued that Ovation used its monopoly position to raise

prices for the drug from $36 to $500 per vial. The FTC is seeking divestiture and disgorgement of all

unlawfully obtained profits since the merger; closing arguments were heard on March 11, 2010. See

http://www.ftc.gov/opa/2008/12/ovation.shtm.

68.

Huntsman Corporation/Hexion Specialty Chemicals Inc. On October 2, 2008, the FTC issued

a consent order in relation to Hexion LLC’s proposed $10.6 billion acquisition of rival chemical

manufacturer Huntsman Corporation. The order requires the divestiture of Hexion’s specialty epoxy

business, and prevents the sharing of sensitive and non-public information which could lead to

coordination of prices. Subsequently, Hexion LLC and Huntsman Corporation petitioned the Commission

to reopen and set aside two orders related to their proposed merger because they terminated their planned

merger and withdrew their premerger notification filings. The Commission determined that the firms have

satisfactorily shown that changed conditions require that the matter be reopened. In particular, the firms

have abandoned the acquisition that the Orders were intended to remedy. In its decision, the Commission

set aside the Asset Maintenance Order in its entirety, as well as the Decision and Order regarding

Huntsman. Throughout the investigation, the FTC coordinated with the European Commission, the

Canadian Competition Bureau, and the Mexican Federal Competition Commission, to resolve competition

concerns raised by the acquisition. See http://www.ftc.gov/opa/2008/10/hexion.shtm and

http://www.ftc.gov/opa/2009/06/hexion.shtm.

69.

CRH plc/Robert Schlegel. On January 14, 2009, the FTC issued an administrative complaint to

challenge Oldcastle Architectural’s (a subsidiary of CRH) proposed $540 million acquisition of Pavestone

Companies as anticompetitive in the US market for drycast concrete hardscape products sold to retailers

such as The Home Depot, Lowe’s, and Wal-Mart Stores. According to the complaint, the acquisition

would reduce competition by combining the only two companies capable of the national manufacture and

sale of these heavy products, which include concrete pavers, segmented retaining wall blocks, and concrete

patio products, due to the difficulty in distribution of such products, and the fact that both Oldcastle and

Pavestone already possess large distribution networks. The acquisition would result in Oldcastle gaining

a 90% market share for the manufacture and sale of these drycast products to home centers in the United

States. In addition to the administrative complaint, the Commission authorized staff to file a complaint

in Federal District Court for the District of Columbia seeking a temporary restraining order and

preliminary injunction to prevent consummation of the proposed transaction pending an administrative

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trial on the merits. Since the respondents announced that they decided not to proceed with the proposed

merger, the Commission dismissed the administrative complaint on January 29, 2009. See

http://www.ftc.gov/opa/2009/01/crh.shtm.

70.

Mitchell International/CCC Information Services. On November 25, 2008, the FTC filed suit

to block the acquisition of CCC Information Services by Mitchell International. The transaction valued at

$1.4 billion, and, according to the Commission, would be anticompetitive in the market for “estimatics,” a

database system used by auto insurers and repair shops to generate repair estimates for consumers. The

FTC’s administrative complaint alleged that the transaction would also harm competition in the market for

total loss valuation systems, which are used to inform consumers when their vehicle has been totaled. FTC

staff concurrently filed a complaint in federal district court and on March 9, 2009, the U.S. District Court

for the District of Columbia ordered a preliminary injunction and temporary restraining order preventing

the parties from consummating the transaction pending a full administrative trial on the merits. The

administrative complaint was dropped on March 13, 2009, since the respondents announced that they

decided not to proceed with the proposed merger. See http://www.ftc.gov/opa/2008/11/cccmitchell.shtm.

71.

Red Sky Holdings/Newpark Resources. On October 23, 2008, the FTC issued an administrative

complaint to block CCS Corporation’s proposed $85 million acquisition of Newpark Environmental

Services. According to the complaint, the proposed transaction was anticompetitive because it would

consolidate two of the leading providers of waste disposal services for the offshore oil and natural gas

exploration and production (“E&P”) in the Gulf Coast Region, leading to higher prices and decreased

service levels. E&P waste is generated during the drilling and production of oil and gas, and includes earth

and rock displaced from drilling, drilling fluids, and produced water. Because these wastes are toxic, they

must be handled and disposed of according to applicable environmental laws, using specialized techniques

and facilities. The FTC filed a complaint in federal district court seeking a temporary restraining order and

preliminary injunction to preserve the competitive status quo, pending an administrative trial on the merits.

The parties decided to abandon the transaction in November 2008 and the FTC dismissed its administrative

complaint in December 2008. See http://www.ftc.gov/opa/2008/10/redsky.shtm.

3.2.2

DOJ Merger Challenges and Cases

72.

Microsemi Corporation/Semicoa Inc. On August 20, 2009, the Department filed a proposed

settlement with the U.S. District Court for the Central District of California requiring Microsemi

Corporation (Microsemi) to divest all of the assets that it acquired from Semicoa Inc. (Semicoa) on July

14, 2008. Without the divesture, the original transaction would have reduced competition in the

development, manufacture and sale of certain semiconductor devices used in military and civil applications

ranging from satellites to nuclear missile systems. These semiconductor devices, small transistors and

ultra-fast recovery rectifier diodes, are used to control the flow of electric current. Prior to the acquisition,

Microsemi and Semicoa were the only manufacturers of small signal transistors qualified for military and

civil applications. Microsemi’s acquisition of Semicoa’s assets, as originally proposed, would have

resulted in increased prices and slower delivery of these semiconductor devices, including critical military

and space components. Microsemi, headquartered in Delaware, reported total sales of approximately $500

million in 2008. Semicoa, headquartered in California, reported sales of approximately $15 million in

2008. See http://www.justice.gov/atr/public/press_releases/2009/249246.htm. The court entered final

judgment on January 29, 2010.

73.

Sapa/Indalex. On July 30, 2009, the Department filed a proposed settlement with the U.S.

District Court for the District of Columbia that would require Sapa Holding AB (Sapa) and Indalex

Holdings Finance Inc. (Indalex) to divest a North Carolina aluminum sheathing facility in order to proceed

with Sapa’s proposed $150 million acquisition of Indalex. Sapa, a Swedish corporation, and Indalex, based

in Illinois, were the only two manufacturers of aluminum sheathing in the United States prior to the

DAF/COMP(2010)12/07

merger. Aluminum sheathing is used to make coaxial cables, which are purchased by cable television

companies for use in transmitting high frequency broadband signals to their subscribers. Without the

Department’s proposed modifications, the transaction would have substantially lessened competition for the

manufacture and sale of aluminum sheathing in the U.S., resulting in increased prices and reduced quality,

service and innovation. At the time of the proposed merger, Indalex had been in the process of filing for

bankruptcy. In 2008, Sapa’s sales of aluminum sheathing were approximately $30.7 million and Indalex’s

sales were approximately $12 million. See http://www.justice.gov/atr/public/press_releases/2009/248514.htm.

The court entered final judgment on January 15, 2010.

74.

PNC/National City. On December 11, 2008, the Department announced that the PNC Financial

Services Group Inc. (PNC) and National City Corporation (National City) had agreed to sell 61 of National

City’s branch banking offices in western Pennsylvania, with deposits totaling approximately $4.1 billion as

of June 30, 2008, in order to resolve competitive concerns about the companies’ pending merger. The

divestures also included the commercial loans associated with the divested branches. As a result of the

acquisition, PNC was to become the fifth largest bank in the U.S., with about $289 billion in assets and

about $180 billion in total deposits. Without the divestures, the original transaction would have reduced

competition in local markets for retail banking, small business banking and middle market banking

services. The proposed settlement also included a divesture of approximately half of National City’s

lending and related business that served customers seeking to borrow over $1 million in Pittsburgh, and

nearly all of the same business in Erie. PNC, headquartered in Pittsburgh, reported approximately $128

billion in assets in 2008. National City, headquartered in Cleveland, reported approximately $151 billion in

assets in 2008. See http://www.justice.gov/atr/public/press_releases/2008/240315.htm.

75.

InBev/Anheuser-Busch. On November 14, 2008, the Department filed a proposed settlement in

the U.S. District Court for the District of Columbia requiring InBev N.V./S.A. (InBev) to divest subsidiary

Labatt USA, along with a license to brew, market, promote and sell Labatt brand beer for consumption in

the U.S., in order to proceed with InBev’s $52 billion acquisition of Anheuser-Busch Companies Inc. The

transaction, as originally proposed, would have led to higher prices of beer in the Buffalo, Rochester and

Syracuse metropolitan areas of New York. Prior to the merger, Anheuser-Busch’s Budweiser brands,

including Budweiser and Bud Light, and InBev’s Labatt brands, including Labatt Blue and Labatt Blue

Light, were the two biggest selling beer brand families in these regions. The original transaction would

have eliminated competition between Labatt USA and Anheuser-Busch, resulting in higher prices to

consumers. See http://www.justice.gov/atr/public/press_releases/2008/239430.htm. The court entered final

judgment on August 11, 2009.

76.

JBS/National Beef. On October 20, 2008, the Department filed a civil antitrust lawsuit with the

U.S. District Court in Chicago to block the proposed acquisition by JBS S.A. (JBS), the third-largest U.S.

beef packer, of National Beef Packing Company LLC (National Beef), the fourth-largest U.S. beef packer.

If not blocked, the merger would have substantially changed the structure of the country’s beef packing

industry, eliminating a competitively significant packer and placing more than 80% of domestic fed cattle

(cattle ready for slaughter) packing capacity in the hands of three firms: JBS, Tyson Foods Inc., and Cargill

Inc. The combined entity would have become the largest beef packer in the country, with the ability to

slaughter more than one-third of the national fed cattle packing capacity. Beef packers purchase $30 billion

in fed cattle annually from feedlots, slaughter them, and process them into USDA-graded cuts of beef and

other products. Packers then package the cuts as boxed beef for sale to wholesalers and grocery chains. The

merger would have lessened competition among packers for the purchase of fed cattle in certain domestic

regions, as well as lessened competition among packers in the production and sale of USDA-graded boxed

beef nationwide. This would have resulted in lower prices paid to cattle suppliers and higher beef prices

paid by consumers. On February 20, 2009, JBS and National Beef announced their decision to abandon the

JBS/National Beef transaction. The Department consequently terminated the pending litigation. See

http://www.justice.gov/atr/public/press_releases/2008/238382.htm.

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77.

Manitowoc/Enodis. On October 6, 2008, the Department filed a proposed settlement in the U.S.

District Court for the District of Columbia requiring The Manitowoc Company Inc. (Manitowoc) and

Enodis plc (Enodis) to divest Enodis’s entire U.S. ice machines business in order to proceed with

Manitowoc’s proposed $2.7 billion acquisition of Enodis. The original transaction would have

substantially reduced competition in the development, production, distribution and sale of commercial

cube ice machines in the U.S., resulting in increased prices and reduced quality and innovation.

Commercial cube ice machines are used by restaurants, convenience stores, hotels and other businesses that

require significant volumes of cube ice. Manitowoc and Enodis were two of only three significant

manufacturers of commercial cube ice machines operating in the U.S. Headquartered in London, Enodis was

a global food service equipment company with sales of $153 million in commercial ice machines and related

equipment in the U.S. Under the terms of the proposed settlement, Manitowoc and Enodis were required to

divest Enodis’s entire business in the development, production, distribution and sale of ice machines, ice

machine parts and related equipment in the U.S. The remedy contained in the Department’s proposed

settlement was consistent with the remedy obtained in a concurrent antitrust investigation conducted by the

European Commission. The Department and the European Commission cooperated extensively throughout

the course of their investigations. See http://www.justice.gov/atr/public/press_releases/2008/237997.htm. The

court entered final judgment on February 17, 2009.

International antitrust cooperation and outreach

4.1

International Antitrust Cooperation Developments

78.

The Agencies have played a lead role in promoting cooperation and convergence towards sound

competition policies internationally, through both building strong bilateral ties with their major

enforcement partners and their participation in multilateral bodies such as the International Competition

Network (ICN), the Competition Committee of the Organisation for Economic Cooperation and

Development (OECD), the United Nations Conference on Trade and Development (UNCTAD), and the

Asia-Pacific Economic Cooperation (APEC). In June 2009, Assistant Attorney General Varney was

elected chair of the OECD Competition Committee’s Working Party No. 3 on Cooperation and

Enforcement.

79.

On November 10, 2009, the Agencies signed a Memorandum of Understanding (MOU) on

antitrust cooperation with the Russian Federal Antimonopoly Service (FAS). The purpose of the MOU is

to promote greater cooperation and further strengthen the relationships between the U.S. antitrust agencies

and the FAS through technical cooperation and regular communication. While the United States has

several cooperation agreements with foreign jurisdictions, this is the first antitrust cooperation MOU

entered into directly between competition agencies, and the Agencies expect that it will become a model,

as appropriate, for future MOUs.

80.

In FY 2009, the Agencies continued to play a lead role in the ICN. Based on the work of the

Merger Working Group, co-chaired by the DOJ and Irish Competition Authority, ICN members adopted

recommended practices addressing competitive effects in horizontal merger analysis. The ICN Unilateral

Conduct Working Group, co-chaired by the FTC and the German Bundeskartellamt, produced comparative

reports covering tying, bundled discounting, and loyalty discounts and rebates, and in March 2009 hosted a

workshop on assessing dominance/substantial market power and evaluating unilateral conduct. The Cartel

Working Group continued its series of international enforcer workshops in October 2009 and held a series

of discussions on the criminalization of hard core cartel conduct. In addition, FTC Commissioner Kovacic

serves as ICN’s Vice-Chair for Outreach and, with his FTC team, launched the ICN Blog and Bulletin

Board project (see http://www.icnblog.org).

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4.2.

Outreach

81.

In FY 2009, the Agencies continued to provide technical assistance on competition law and

policy matters to their international antitrust enforcement counterparts. The Agencies’ international

technical assistance programs conducted over 60 missions in over 30 countries. As part of U.S. efforts to

assist China as it implements its new antitrust laws, senior FTC and DOJ officials and staff held

discussions with the Chinese antitrust agencies in the United States and China. The Agencies are also

working with India’s Competition Commission as it begins to implement its 2002 Competition Act. The

Agencies’ training missions included programs in Brazil, Bulgaria, Egypt, Hungary, Kazakhstan, Kenya,

Russia, South Africa, Tanzania, and Turkey, and the FTC placed long-term resident advisors in Latin

America and Vietnam. Recognizing the importance and quality of the FTC’s work in this regard, Congress

provided the FTC additional funding to provide international technical assistance.

82.

In October 2009, the Agencies issued a report on the findings from their 2008 public workshop

on technical assistance (see ¶ 60, FY 2008 Annual Report). The workshop brought together panelists—

including officials from the competition authorities of Hungary, Italy, Mexico, and Peru, leading

academics, private practitioners, and international organizations such as OECD and the World Bank—to

discuss the FTC’s and the Antitrust Division’s technical assistance programs. The report is available at:

http://www.justice.gov/atr/public/reports/250908.htm.

83.

As part of its ongoing effort to build effective relationships, the FTC provides opportunities for

counterparts from foreign agencies to spend several months working directly with FTC staff on

investigations, subject to appropriate confidentiality protections. The FTC’s International Fellows and

Interns program is based on the FTC’s U.S. SAFE WEB Act authority, which also enables the FTC to send

staff members to work in foreign competition agencies. In FY 2009, the FTC hosted 12 International

Fellows and Interns from countries such as Argentina, Austria, Israel, Poland, and Singapore. It also sent

FTC staff to work in foreign competition agencies such as the EC’s Directorate General for Competition,

the U.K. Competition Commission, and the U.K. Office of Fair Trading. These assignments provide

valuable opportunities for participants to obtain a deep understanding of their international partners’ laws

and challenges. This knowledge provides critical support for coordinated enforcement and promotes

convergence toward sound policy.

Regulatory and Trade Policy Matters

5.1.

Regulatory Policies

5.1.1.

Joint DOJ-FTC Activities: Federal and State Regulatory Matters

84.

In a joint comment filed with the Supreme Court of Hawaii on April 20, 2009, the Agencies

advised that a proposed rule concerning the unauthorized practice of law could unduly restrict the activities

of non-lawyers in Hawaii. In January 2008, the Agencies had commented on the original version of the

rule proposed by the Hawaii State Bar Association, which adopted a broad definition of “practice of law”

that would restrict non-lawyers from competing with lawyers. Although the definition was revised to limit

the definition to instances in which there is a client relationship of trust or reliance, the joint comment

raised the concern that the definition was still too broad and created an irrebuttable presumption that the

identified activities are the practice of law. While the revised proposed rule contains many exceptions and

exclusions to allow non-lawyers to compete with lawyers in Hawaii, the Agencies’ April 2009 comment

states that “exceptions cannot capture every instance where consumers would benefit from lawyer/nonlawyer competition.” In August 2009, the Hawaii Supreme Court tabled the proposed rule “with no

immediate plans for further consideration.”

DAF/COMP(2010)12/07

5.1.2

FTC Staff Activities: Federal and State Regulatory Matters

85.

In September 2009, the FTC submitted comments to the Federal Communications Commission

(“FCC”) concerning the development of a National Broadband Plan. In its comments, the FTC states that

the FCC should take into consideration the FTC’s two primary missions – promoting competition and

protecting consumers in the marketplace. The FTC comments point out that competition and consumer

protection work together to benefit consumers. Competition pressures producers and service providers to

offer customers the most attractive array of choices with respect to price, quality, and other options. At the

same time, consumer protection policy promotes informed decision-making by customers and requires

sellers to provide meaningful, timely information about their products and services. The FTC’s comments

questioned whether there is significant competition within the broadband arena. To evaluate competition

and tailor appropriate regulatory policies, the FTC suggests that the FCC use some of the analytical tools

used by the FTC and DOJ in antitrust cases.

86.

On May 1, 2009, FTC staff provided comments to the Louisiana House of Representatives

concerning proposed Louisiana House Bill 687, which would restrict the practice of in-school dentistry in

the state. Among others, with a limited exception, the bill would prohibit dentists from offering in-schools

services unless they have provided services for at least six months during the past five years, even though

such services would expand and improve dental care. According to the comment, the FTC staff was

concerned that if the proposed legislation becomes law, “fewer students – especially the indigent and

economically disadvantaged – will receive dental care,” as they may not have access to dental treatments

outside of school. A comment was provided on May 22, 2009, on the amended version of the proposed

bill. After the bill was passed allowing dentistry to continue in schools but mandating that the Board of

Dentistry adopt rules to ensure safe delivery of care, the FTC filed additional comments in December,

advocating that the Board strike proposed rule provisions that would make it more difficult to conduct

dentistry in a mobile setting. The comment explained that, if enacted, the bill is likely to make the most

vulnerable of Louisiana’s children worse off by denying many the opportunity to receive dental care.

87.

On April 28, 2009, the FTC submitted a comment concerning the Federal Energy Regulatory

Commission’s (“FERC”) competitive assessments of partial acquisitions of electric power providers,

including acquisitions by private equity firms holding investments in competing electric power providers.

FERC policy is also relevant in evaluating the eligibility of a public utility to sell wholesale electricity at

market-based rates. In its comment, the FTC encouraged FERC to avoid adopting policies that assess

competitive effects based solely on control and that fail to examine closely the competitive effects of

partial acquisitions that fall short of control. The FTC urged FERC to engage in careful, case-by-case

analysis of the potentially significant competitive effects that can stem from partial – but not controlconferring – acquisitions.

88.

On March 31, 2009, FTC staff filed a comment stating that provisions of New York State Senate

Bill 58 would likely have the unintended consequence of increasing prices that New York consumers and

health plans pay for prescription drugs. As a result, the bill may also decrease the number of New York

citizens with insurance coverage for such drugs, the comment stated. Health plans often contract with

pharmacy benefit managers, which administer the plans’ prescription drug benefits. Portions of the New

York bill would mandate that the pharmacy benefit manager make certain disclosures relating to the cost of

its services, its contracts with manufacturers, and actual and potential conflicts of interest. The bill would

also impose certain types of contractual relationships between pharmacy benefit managers and health

plans. The bill appears to try to prevent possible conflicts of interest that a pharmacy benefit manager

could have in managing the drug benefit program for a health plan. The FTC’s Office of Policy Planning,

Bureau of Competition, and Bureau of Economics submitted the joint comment in response to State

Senator James L. Seward’s request.

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89.

On March 18, 2009, in response to a request from State Representative Tom Emmer for the

FTC’s views, the FTC filed a comment on legislation before the Minnesota legislature that seeks to

authorize collective bargaining by Minnesota health care cooperatives. The FTC staff comment observes

that the bills appear to authorize anticompetitive activities, including price fixing and concerted refusals by

the cooperatives and their members to deal with health plans and other purchasers. According to the

comment, “Nothing in the bills is likely to prevent the harmful effects that arise from immunizing price

fixing . . . [and] these bills would deprive health care consumers of the protections of the antitrust laws and

the benefits of competition.” The comment states that the bill is likely to harm Minnesota consumers

through higher prices for health care services, higher insurance premiums, lower levels of insurance

coverage, and lower wages.

90.

On January 26, 2009, the FTC submitted a comment on retail electricity competition to the Arizona

Corporation Commission (“ACC”). The comment, which addresses the possibility that retail electricity

competition may be reopened within Arizona, brings two documents to the ACC’s attention: 1) the FTC’s

December 2008 dynamic pricing comment to the Pennsylvania Public Utility Commission, and 2) a fiveagency report to Congress (to which FTC staff contributed) on electric market competition. Both documents

described the merits of establishing retail electricity prices that reflect the marginal cost of electricity.

According to the FTC’s comment, if the ACC determines that the benefits of retail electricity competition

outweigh the costs, the interagency report to Congress includes potentially useful recommendations about

how to increase the likelihood that such competition will work well. The FTC also encouraged the ACC to

examine dynamic pricing as a means to address a wide array of electric system problems.

91.

On December 17, 2008, the FTC filed a comment with the Pennsylvania Public Utility

Commission (“PA PUC”) concerning the PA PUC’s implementation plan for its Energy Efficiency and

Conservation Program. The comment also replies to the November 18, 2008 presentation made by the

Retail Energy Supply Association (“RESA”) at the PA PUC’s en banc hearing on demand-side response,

energy efficiency, and conservation. The FTC recommended that the PA PUC should: 1) encourage realtime or other dynamic pricing programs that increase economic efficiency; 2) urge utilities to design and

market dynamic pricing programs that appeal to customers; 3) eliminate regulatory provisions that

financially penalize power suppliers if they facilitate efficient dynamic pricing; 4) offer fair standby

pricing policies for customers with onsite generation investments; and 5) advocate for demand response

bid flexibility. The FTC comment states that “[d]ynamic pricing and demand response programs can be

powerful tools to empower customers to help manage peak and overall load.”

92.

On November 3, 2008, FTC staff submitted a letter to Administrative Law Judge G. Harris

Adams of the Colorado Public Utilities Commission (“CPUC”) regarding the application of Union Taxi

Cooperative for permanent authority to operate a taxi service in Denver. The staff’s letter did not address

the merits of the application, but instead was intended to provide general guidance to the CPUC in

considering whether allowing entry is likely to be in the public interest. According to the staff letter,

studies show that deregulation of taxicab markets has not led to significant harm to consumers or

competition and, in some instances, has generated consumer benefits in the form of lower prices and

improved service. The staff also noted that while special issues have sometimes arisen following regulatory

reform, as in the case of taxicab lines at airports and rail stations, these problems do not provide a justification

for restricting entry. The letter concludes that new entry is highly unlikely to harm the public interest.

5.1.3.

DOJ Activities: Federal and State Regulatory Matters

93.

On August 5, 2009, the Department and the U.S. Department of Agriculture announced that the

two agencies would hold joint workshops to explore competition issues affecting the agriculture industry in

the 21st century and the appropriate role for antitrust and regulatory enforcement in that industry. The

workshops began in March 2010 and have addressed the dynamics of competition in agriculture markets,

including buyer power and vertical integration.

DAF/COMP(2010)12/07

94.

On April 17, 2009, the Department submitted comments to the Montana Supreme Court on a

proposal by the Commission on the Unauthorized Practice of Law to revise the rules on the unauthorized

practice of law (UPL). If adopted, the revised definition of UPL could have barred non-lawyers from

competing with lawyers for a range of services and could have unnecessarily increased the prices paid by

Montanans for those services. In addition, on October 10, 2008, the Department submitted comments to the

Wisconsin Supreme Court regarding revisions to Supreme Court Rule 07-09 proposed by the State Bar of

Wisconsin. In each of the above submissions, the Department suggested that the definition of UPL should

be limited to activities for which specialized legal knowledge and training is demonstrably necessary to

protect consumers and an attorney-client relationship is present.

95.

On February 13, 2009, the Department submitted comments to the New Mexico Senate urging it

not to enact Senate Bill 398, which would have introduced minimum service requirements for consumers

of real estate brokerage services. The comments suggested that minimum service requirements harm

consumers by limiting options available to consumers and protecting full-service brokers from having to

respond to competition from non-traditional brokers. The comments noted that the vast majority of states

allow consumers to select and purchase only those real estate brokerage services that they want, thereby

allowing consumers to save thousands of dollars when selling their homes, and forcing traditional fullservice brokers to offer more competitive prices, more innovative solutions and higher quality services.

Enacting Senate Bill 398 would have led to reduced competition, higher prices, less innovation and lower

quality services for the majority of homebuyers and sellers in New Mexico.

5.2.

DOJ and FTC Trade Policy Activities

96.

Both the Division and the FTC are involved in interagency discussions and decision-making with

respect to the formulation and implementation of U.S. international trade and investment policy as

concerns competition policy. The Agencies participate in interagency trade policy discussions chaired by

the Office of the U.S. Trade Representative, and provide antitrust and other legal advice to U.S. trade

agencies. The Antitrust Division also works with other Justice components (including the Civil, Criminal,

and Environment and Natural Resources Divisions) on international trade and investment issues that affect

those components or the Department as a whole, such as the recent review of the “model” U.S. bilateral

investment treaty.

97.

Both the FTC and DOJ participate in bilateral and multilateral discussions and projects to

improve cooperation in the enforcement of competition laws. The Agencies participate in negotiations and

working groups related to regional and bilateral trade agreements. The Division and the FTC participate in

competition policy discussions associated with APEC and the Trans-Pacific Partnership negotiations. The

Agencies are active participants in the annual UNCTAD Intergovernmental Group of Experts meetings on

competition topics of interest to developing as well as developed countries, and they have also followed the

competition and intellectual property component of the World Intellectual Property Organization’s

(“WIPO”) Committee on Development and Intellectual Property.

98.

The Division co-chairs (with the Office of the U.S. Trade Representative) and the FTC

participated in the Cross-Sectoral Working Group under the U.S.-Japan Regulatory Reform and

Competition Policy Initiative. In these discussions, the United States has urged the Japanese government to

take a variety of actions to strengthen its enforcement of Japan’s antimonopoly law, take effective

measures to eliminate bid rigging, make its administrative procedures more fair and open, and accelerate

an effective program of deregulation to open markets to competition.

DAF/COMP(2010)12/07

New studies related to antitrust policy

6.1

FTC Conferences, Reports, and Economic Working Papers

6.1.1.

Conferences and Workshops

99.

How Will Journalism Survive the Internet Age? On December 1-2, 2009, and March 9-10,

2010, the FTC held workshops to consider how the Internet has affected journalism. Representatives from

print, online, broadcast and cable news organizations, academics, consumer advocates, and other new

media representatives discussed how journalism will evolve in the future as consumers increasingly turn to

the Internet for news and information. The workshops considered a wide range of issues, including the

economics of journalism in print and online; the wide variety of new business and non-profit models for

journalism online; factors relevant to the new economic realities for news organizations; and ways in

which the costs of journalism could be reduced without reducing quality. A final workshop was held in

June, 2010, and agency staff intends to publish a report on the project in the Fall of 2010. More

information on the workshops is available at http://www.ftc.gov/opp/workshops/news/index.shtml.

100.

The Evolving IP Marketplace. Between December 2008 and May 2009, the FTC conducted a

series of hearings to explore changes in intellectual property law, patent-related business models, and new

learning regarding the operation of the IP marketplace. The first hearing, held on December 5, 2008,

examined broad aspects of the evolving IP marketplace, including developing business models, recent and

proposed changes in remedies law, and legal doctrines that affect the value and licensing of patents. The

set of hearings held on February 11-12, 2009 focused on remedies in patent infringement cases. The

hearings held on March 18-19, 2009 examined the operation of markets for IP and technology, the notice

function of patents, and the impact of patent policies on those markets. The April 17, 2009 hearing looked

at how corporations, inventors, and patent intermediaries value and monetize patents, strategies for buying

and selling patents, and the role of secondary markets for intellectual property. The May 4-5, 2009 sessions

explored how markets for patents and technology operate in different industries, whether those markets

operate efficiently, and how patent policy might be adjusted to respond to problems in those markets in

order to better promote innovation and competition. During the course of the hearings, the Commission

heard from more than 100 experts and received 47 public comments. FTC staff is drafting a report

analyzing the competitive implications of information learned from the hearings. More information on the

hearings is available at http://www.ftc.gov/bc/workshops/ipmarketplace/.

101.

Resale Price Maintenance under the Sherman Act and the Federal Trade Commission Act.

In February and May 2009, the FTC held a series of workshops to explore, for the purposes of enforcing

Section 1 of the Sherman Act and Section 5 of the FTC Act, how to best distinguish between uses of resale

price maintenance (RPM) that benefit consumers and those that do not. More information on the

workshops is available at http://www.ftc.gov/opp/workshops/rpm/.

102.

Emerging Health Care Competition and Consumer Protection Issues. On October 30, 2008,

the FTC held two public workshops and roundtables on two distinct areas in which competition and

consumer protection policies are implicated: (1) competition among health care providers based on quality

information; and (2) competition provided by developing an abbreviated regulatory approval pathway for

follow-on biologic drugs. More information on the roundtables is available at

http://www.ftc.gov/bc/workshops/hcbio/index.shtml.

103.

HSR Premerger Notification. In recognition of the 30th anniversary of the HSR Act, the FTC

hosted a workshop on October 23, 2008, on the basics of HSR premerger notification, covering such topics

as how to determine whether premerger notification is required and how to prepare an HSR filing. More

information about the workshop is available at http://www.ftc.gov/bc/workshops/hsr/.

DAF/COMP(2010)12/07

104.

Section 5 as a Competition Statute. The FTC hosted a workshop on October 17, 2008 to

consider the appropriate scope of the prohibition of “unfair methods of competition” in Section 5 of the

FTC Act. Participants in the workshop considered the scope of Section 5 in light of legal precedent,

economic learning, and changing business practices in a global and high-tech economy. The workshop

focused on three subject areas: (1) the history of Section 5, including Congress’s enactment, the FTC’s

enforcement, and the courts’ response; (2) the range of possible interpretations of Section 5; and (3)

examples of business conduct that may be unfair methods of competition addressable by Section 5.

Participants included members of the legal, academic, and business communities. More information about

the workshop is available at http://www.ftc.gov/bc/workshops/section5/index.shtml.

6.1.2

Studies and Reports

105.

Authorized Generics: An Interim Report. On June 24, 2009, the FTC published the first set of

results from a study conducted to examine the short-term and long-term effects of “authorized generics” on

competition in the prescription drug marketplace. An authorized generic exists when a pharmaceutical

manufacturer sells a drug under both a brand-name and generic label. The interim report addressed effects

of authorized generic competition on wholesale and retail generic prices during the Hatch-Waxman Act’s

180 days of marketing exclusivity, as well as effects on the revenues and sales quantities of independent

generics during that period. The FTC conducted the study in response to requests from Congress as issues

related to generic drug competition are relevant to current legislative debates and health care reform. The

report also presented analysis of pay-for-delay agreements. The Commission’s Bureau of Economics found

that eliminating pay-for-delay settlements would save consumers $3.5 billion a year and $35 billion or

more over ten years as it would also reap significant savings for the federal government that pays

approximately one-third of all prescription drug costs.

The report is available at

http://www.ftc.gov/opa/2009/06/generics.shtm.

106.

Follow-on Biologic Drug Competition. On June 10, 2009, the FTC released a report entitled

“Emerging Health Care Issues: Follow-on Biologic Drug Competition” that examines whether the price of

biologic drugs – products manufactured using living tissues and microorganisms – could be reduced by

competition from so-called “follow-on biologics” (“FOBs”). Biologics are increasingly used to treat

arthritis, cancer, diabetes, and other diseases. No pathway currently exists for such FOBs to enter the

market and compete with their pioneer counterparts. Based on its study, the FTC concluded that special

procedures are unnecessary to encourage FOBs to enter and compete with branded biologics and would

likely harm consumers. Instead, the patent system and the ability to charge a monopoly price during the

patent term likely will continue to incentivize further innovation by brand companies and entry by FOB

firms. The report is available at http://www.ftc.gov/os/2009/06/P083901biologicsreport.pdf.

107.

Merger Efficiencies at the Federal Trade Commission 1997-2007. The FTC’s Bureau of

Economics released a report in February, 2009 that studies the treatment of efficiencies in FTC merger

matters. The study examined the ten years following the 1997 issuance of the expanded efficiencies

section of the Horizontal Merger Guidelines. Bureau of Economics staff undertook the paper to

determine the types of efficiency claims parties made in 186 merger matters before the Commission.

Further work explored how the staff treated specific types of claims. The report is available at

http://www.ftc.gov/opa/2009/02/bemergers.shtm.

6.1.3.

Bureau of Economics Working Papers

108.

The FTC’s Bureau of Economics issued the following working papers during FY 2009. The

papers may be obtained at http://www.ftc.gov/be/econwork.htm.

•

Viola Chen, The Evolution of the Baby Food Industry 2000-2008, April 2009.

DAF/COMP(2010)12/07

•

Steven Tenn and John M. Yun, The Success of Divestitures in Merger Enforcement: Evidence

from the J&J-Pfizer Transaction, April 2009.

•

Aileen Thompson, The Effect of Hospital Mergers on Inpatient Prices: A Case Study of the New

Hanover-Cape Fear Transaction, January 2009.

•

Deborah Haas-Wilson and Christopher Garmon, Two Hospital Mergers on Chicago’s North

Shore: A Retrospective Study, January 2009.

•

Steven Tenn, The Price Effects of Hospital Mergers: A Case Study of the Sutter-Summit

Transaction, November 2008.

6.2.

Department of Justice Conferences, Reports, and Economic Working Papers

6.2.1.

Conferences and Workshops

109.

The Department issued a report on November 17, 2008, highlighting the expanded product

offerings, increased quality of products, and increased competition from separate technology platforms that

have emerged in the market for consumer telecommunications services. The report, Voice, Video and

Broadband: The Changing Competitive Landscape and Its Impact on Consumers, available at

http://www.justice.gov/atr/public/reports/239284.pdf, followed a public symposium hosted by the

Department on November 29, 2007. The symposium examined the current state of competition in

telecommunications and multichannel video services and future prospects for additional competition. It

was structured around four panel discussions that examined entry into multichannel video services, entry

into telecommunications services, wireless technologies, and other alternative technologies including

satellite and broadband over power lines. The issues explored included the introduction of new facilitiesbased competition providing a bundle of voice, video and broadband services to consumers, the effects of

such competition on the price, quality and diversity of services, and the existence of regulatory and other

potential barriers to entry.

110.

On October 23, 2008, the Antitrust Division hosted a one-day workshop on recent developments in

airline antitrust and competition research to mark the 30-year anniversary of airline deregulation in the U.S.

6.2.2.

Department of Justice Economic Analysis Group Discussion Papers

111.

The Economic Analysis Group issued the following papers during FY 2009, which are available

at http://www.usdoj.gov/atr/public/eag/discussion_papers.htm.

•

Sheldon Kimmel, Why Prices Rise Faster than They Fall, EAG 09-4, July 2009.

•

Russell Pittman, Who Are You Calling Irrational? Marginal Costs, Variable Costs, and the

Pricing Practices of Firms, EAG 09-3, July 2009.

•

Russell Pittman, Railway Mergers and Railway Alliances: Competition Issues and Lessons for

Other Network Industries, EAG 09-2, May 2009. Published at Competition and Regulation in

Network Industries (2009).

•

Ken Heyer and Sheldon Kimmel, Merger Review of Firms in Financial Distress, EAG 09-1,

March 2009. Published at Competition Policy International (2009).

•

William W. Nye, Competitive Advocacy Opportunity: Zeroing in U.S. Antidumping

Enforcement, EAG 08-13, December 2008.

•

Jennifer K. Shanefelter, Restructuring, Ownership and Efficiency: The Case of Labor in

Electricity Generation, EAG 08-12, December 2008.

•

Ashley Langer and Nathan Miller, Automobile Prices, Gasoline Prices, and Consumer Demand

for Fuel Economy, EAG 08-11, December 2008.

DAF/COMP(2010)12/07

APPENDICES

Department of Justice:

Fiscal Year 2009 FTE1 and Actual Resources by Enforcement Activity

FTE

305

457

762

Criminal Enforcement

Civil Enforcement

Total

Amount ($ in thousands)

$63,256

$94,884

$158,140

Federal Trade Commission: Fiscal Year 2009 Competition

Mission FTE and Dollars by Program by Bureau/Office

FTE

Amount ($ in thousands)

Total Maintain Competition Mission

Bureau of Competition

Bureau of Economics

Regional Offices

Mission Support

509.0

273.3

74.1

27.3

134.3

$107,819.5

44,960.1

11,864.6

4,195.5

46,799.3

Premerger Notification

Bureau of Competition

Bureau of Economics

Regional Offices

21.4

0.0

0.4

3,083.7

3,023.3

0.0

60.4

Merger & Joint Venture Enforcement

Bureau of Competition

205.2

152.2

33,196.9

24,976.7

Bureau of Economics

Regional Offices

40.6

12.1

6,388.4

1,831.8

Merger & Joint Venture Compliance

Bureau of Competition

Bureau of Economics

5.6

5.3

0.3

810.1

763.0

47.1

An “FTE” or “full time equivalent” amounts to one employee working full time for a full year. Because

the number of employees fluctuates throughout the year through hiring, attrition, and varying schedules, an

agency typically has more employees than FTEs (e.g. two employees working 20 hours per week for one

full year equals one FTE).

DAF/COMP(2010)12/07

FTE

Amount ($ in thousands)

Regional Offices

---

Nonmerger Enforcement

105.1

17,535.4

Bureau of Competition

Bureau of Economics

Regional Offices

74.3

16.1

14.7

12,741.2

2,571.7

2,222.5

Nonmerger Compliance

Bureau of Competition

2.2

317.6

Bureau of Economics

Regional Offices

0.0

---

0.0

---

Antitrust Policy Analysis

Bureau of Competition

Bureau of Economics

9.5

--9.5

1,132.4

--1,132.4

Regional Offices

---

Other Direct

Bureau of Competition

Bureau of Economics

Regional Offices

25.7

18.0

7.6

0.1

3,413.0

2,765.9

647.1

---

Support

134.3

46,799.3

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.