Cross Subsidization For Purpose Of Enhanced Grocery Sales Through Alleged Below Cost Gasoline Discounts Found Not To Violate California Unfair Practices Act

Injury to competing retail fuel stations is non-actionable where market conditions demonstrate that an “incipient antitrust violation” is not imminent. Dixon Gas Club LLC v. Safeway Inc., Case No. A139283 (Court of Appeal 1st Dist. July 20, 2015) (not for publication). Continue Reading

FTC “Enforcement Principles” for Section 5 of the FTC Act: Is Something Better than Nothing?

For many years, antitrust practitioners have struggled to understand exactly how the FTC will analyze and enforce Section 5’s prohibition of “unfair methods of competition.”  Counseling clients has been challenging.  In a short one-page release on August 13, 2015, the FTC published its first ever policy statement in an apparent effort to address those uncertainties.  Continue Reading

Regulatory Capture Vitiates State Action Immunity

The Supreme Court has ruled that when an oversight mechanism created by a State—here a State Board—is under the control of those it was supposed to be regulating (sometimes referred to by economists as “regulatory capture”)[1], anticompetitive actions taken by the State Board on its own without further official government review or approval enjoy no immunity under the state action doctrine.  North Carolina State Board of Dental Examiners v. Federal Trade Commission, 574 U.S.___, 135 S.Ct. 1101 (Feb. 25, 2015) (“N.C. State Board“). Continue Reading

There Is Potential Federal Inconsistency Over ACOs

On June 4, 2015, the Centers for Medicare & Medicaid Services issued final revisions to regulations governing accountable care organizations participating in the Medicare Shared Savings Program (“MSSP”). Among them is one explicitly requiring the formation of an ACO as a formal, separate legal entity for governance purposes whenever there are two or more ACO participants with unique tax identification numbers.[1] In its revised state, CMS’ requirement now appears to be at odds with certain positions taken by the Federal Trade Commission and U.S. Department of Justice.

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Federal Trade Commission Continues March “to Set a Standard for the Industry” with Cephalon Settlement

On May 28, the Federal Trade Commission (“FTC”) announced it had reached a $1.2 billion settlement with Teva Pharmaceuticals,[1] which acquired Cephalon in 2012, over reverse payment for its narcolepsy drug, Provigil.  The Cephalon settlement also has non-monetary terms that bar Cephalon from entering agreements that include (i) payments to a generic filer and (ii) an agreement by a generic filer not to develop or market a drug within 30 days of a patent settlement that impedes generic entry.[2]  The FTC has lauded the outcome of Cephalon—its first settlement post-Actavis[3]—with FTC Chairwoman Edith Ramirez hailing it as a “landmark settlement” and “an important step in the FTC’s ongoing effort to protect consumers from anticompetitive pay for delay settlements.”[4] Continue Reading

State Regulatory Scheme Offering Antitrust Immunity to Healthcare Collaborations Creates Tension Between Federal and State Antitrust Enforcement

On April 22, 2015, the Federal Trade Commission submitted a public letter to the New York State Department of Health (DOH) expressing “strong concerns” over state regulations offering to provide antitrust immunity to certain healthcare collaborations undertaken with DOH’s approval and supervision.  This letter is consistent with the FTC’s continued opposition to grants of immunity from federal antitrust laws based on state action.  The letter also presents a meaningful opportunity to re-evaluate the interplay between state and federal antitrust enforcement authority, and the related doctrine of state action immunity, particularly in the healthcare arena which has seen an unprecedented spike in collaborative arrangements following passage of the Affordable Care Act. Continue Reading

California Supreme Court Delineates a Structured Rule of Reason Analysis for Evaluating Reverse Payment or Pay-for-Delay Settlements

On May 7, 2015, the California Supreme Court issued its long-awaited decision in In re Cipro Cases I & II, Case No. S198616 (May 7, 2015) (Cipro).  Cipro holds that reverse payment settlements can be challenged under California’s Cartwright Act, thereby reviving class actions filed by California indirect purchasers.  The California Supreme Court, however, went further, by delineating a structured rule of reason analysis to be used in evaluating the legality of reverse payment settlements, something the U.S. Supreme Court had left up to future lower courts to develop.[1]  Continue Reading

U.S. Supreme Court Lets Natural Gas Act Preemption Seep Away

In Oneok, Inc. v. Learjet, Inc., No. 13-271 (April 21, 2015), the U.S. Supreme Court held in a 7-2 opinion that state law antitrust claims against defendant natural gas pipeline companies did not fall within the field of matters preempted by the Natural Gas Act (the “NGA”), 15 U.S.C. § 717 et seq., even though the claims challenged industry practices bearing on the setting of wholesale natural gas rates—an area traditionally recognized as squarely within the NGA’s exclusive jurisdictional scope.  This decision has implications reaching far beyond the litigation itself.  Oneok opens the door to new, but yet unknown, state-level antitrust regulation of the wholesale natural gas market, and the uncertainty that will follow.  As antitrust enforcement can vary by state, Oneok also subjects natural gas pipeline companies to potentially conflicting regulations and increased compliance costs. Continue Reading

Eleventh Circuit Affirms FTC Finding that Rebate Program Served to Unlawfully Maintain Monopoly Power

The Eleventh Circuit recently affirmed a Federal Trade Commission finding that a manufacturer’s rebate program requiring exclusivity from its distributors was an unlawful maintenance of monopoly power under Section 5 of the FTC Act.  McWane, Inc. v. Fed. Trade Comm., No. 14-11363 (11th Cir. April 15, 2015).  The Court found that the rebate program’s practical effect was to make it economically infeasible for distributors to switch from defendant McWane to its only competitor, Star Pipe Products (“Star”).  Unable to attract sales, Star was therefore incapable of generating enough revenue to become an efficient and effective competitor to challenge McWane’s near 100% monopoly over domestic water-pipe fittings. Continue Reading

China Ripe For Enforcing AML Based On Concerted Action

So far in China there have not been any published decisions regarding price-fixing or other anti-competitive agreements based on concerted action by competitors.  There is also no Chinese legal precedent for including potential competitors in the analysis of antitrust law compliance.  But China’s antitrust enforcers are very much aware of how the U.S. and EC enforce antitrust laws.  We may thus begin to see more cases where the Chinese enforcers enforce the Anti-Monopoly Law’s (“AML”) prohibition of anti-competitive agreements among competitors based on concerted action using the same approach as the EC, whose decision to fine banana suppliers for fixing the price of green and ripe bananas was recently upheld by the European Court of Justice (“Court”) in Dole Food and Dole Germany v. Commission, case number C‑286/13 P.  While this is not the first time the EC has fined companies based on concerted action, it reinforces some of the broad sweeping concepts that make it easy to punish a company in an administrative process, such as in China, where the enforcer, investigator and judge are essentially the same body. This is particularly of concern in China given the discretionary power of the Chinese enforcement authorities. Continue Reading