• On March 29, the Commission received a petition to reopen and modify the final decision and order in the 2003 transaction concerning Nestlé Holdings Inc., File No. 021-0174, Docket No. C-4082, regarding Nestlé’s acquisition of Dreyer’s Grand Ice Cream Holdings, Inc. According to their filing, the respondents have petitioned the FTC on behalf of CoolBrands International, Inc., and its subsidiary Integrated Brands, Inc., the Commission-approved divestiture buyer in this proceeding. Through the confidential petition, the respondents have requested that the Commission reopen and modify the final order to extend portions of the Transitions Services Agreement for an additional 12 months.

    Comments on the petition may be submitted for 30 days, until April 26, 2005. The companies have requested expedited Commission consideration of the petition and a waiver of the public comment period, which, if granted, could result in an earlier decision.

  • On March 29, the Commission approved the issuance of a final consent order in the matter concerning Cemex, S.A. de C.V. and RMC Group PLC, and the issuance of a letter to the commenter of record. The vote approving the final order was 4-0-1, with Chairman Deborah P. Majoras recorded as recused.
  • On March 22, Magellan Midstream Partners, L.P. (“Magellan”) filed a petition withdrawing its request that the Commission approve the proposed divestiture of certain assets recently acquired from Shell Oil Company (“Shell”). Under the terms of the FTC’s consent order concerning Magellan’s acquisition of pipeline and terminal assets from Shell, Magellan is required to divest a gasoline terminal in Oklahoma City, Oklahoma. Through this application, Magellan is withdrawing its request for approval to divest the former Shell Oklahoma City Terminal to SemFuel, L.P.
  • At the request of Virginia State Delegate Harry Purkey, staff of the Federal Trade Commission’s Office of Policy Planning, Bureau of Competition, and Bureau of Economics submitted a letter on March 14 commenting on three House Bills (“HB”) that the Virginia Assembly considered during the legislative session: HB 2518, which would loosen current restrictions on competition between commercial and independent optometrists; and HB 160 and SB 272, which would further impair competition between these groups of eye care professionals. According to the staff, HB 2518 is likely to benefit consumers with lower prices and is unlikely to reduce the quality of eye care. By contrast, if enacted, HB 160 and SB 272 are likely to cause Virginia consumers to pay higher prices for eye examinations and optical goods, without providing any countervailing benefits in the form of higher-quality eye care.

    HB 160 and SB 272, which are identical, would amend the current Virginia law to include a prohibition on an optometrist working in any location that provides direct access to a commercial establishment. HB 2518, conversely, would ease current restrictions by eliminating the prohibitions on optometrists leasing from, and working in, a commercial establishment.

    The letter notes that empirical work by the FTC and others has found “that restrictions on commercial optometric practices tend to increase prices, but provide no improvement in the quality of eye care.” Drawing on this research, the staff wrote that, “Although retaining some of the current law’s restrictions on impediments to competition, HB 2518 would at least ease some of the restrictions on commercial optometric practice. HB 2518 is likely to benefit consumers with lower prices and is unlikely to reduce the quality of eye care.”

    By contrast, HB 160 and SB 272 “would place further restrictions on the commercial practice of optometry,” which may have the effect of requiring some commercial practices that comply with the current Virginia law to reconfigure their physical structures to prevent customers from having any “direct access” to the area of their store that sells optometric goods. These new restrictions, moreover, may fall disproportionately on wholesale club chains, which are low-cost sellers of optical goods. “Thus, HB 160 and SB 272 are likely to cause Virginia consumers to pay higher prices for eye examinations and optical goods without providing any countervailing benefits in the form of higher quality eye care.”

    The Commission vote authorizing the staff to submit the letter to Virginia Delegate Harry Purkey was 5-0.

  • In a comment submitted on March 11 to North Dakota State Senator Richard L. Brown at his request, staff of the Federal Trade Commission’s Office of Policy Planning, Bureau of Economics, and Bureau of Competition stated that House Bill (“HB”) 1332, which currently is pending in the legislature, might have the unintended consequences of increasing the price of pharmaceuticals within the state and ultimately decreasing the number of North Dakotans with insurance coverage for pharmaceuticals. In his letter, Senator Brown asked the FTC to examine the bill to determine “whether the proposed legislation is anticompetitive and will likely result in the increased cost of pharmaceutical care for consumers.”

    According to the comment, HB 1332 would regulate PBM’s contracts with pharmacies and prohibit certain drug substitutions. By prohibiting a PBM from discriminating “on the basis of copayments or days of supply” when contracting with pharmacies and requiring that “a contract must apply the same coinsurance, copayment, and deductible to covered drug prescriptions” to all pharmacies or pharmacists in a network, staff wrote, HB 1332 would prevent health plans from designing benefit plans to encourage participants to use network pharmacies that provide drugs to the plan at a lower cost than other network pharmacies. As a result, HB 1332 would cause both the consumers and health plans to miss out on the savings they could have shared by using the low-cost pharmacy. A potential secondary effect, staff wrote, is that low-cost pharmacies may lose the incentive to offer lower prices to plans under such a uniform copayment structure.

    The Comment also noted that HB 1332 may limit some drug substitutions to those that are “for medical reasons that benefit the covered individual.” As a result, according to FTC staff, the bill would prevent a PBM from switching a prescription for one brand-name drug to a less-expensive equivalent with similar therapeutic effects, unless the switch was made for medical reasons. By making safe and price-reducing substitutions less common, the bill is likely to increase the price of drugs, leading to higher health insurance premiums and reductions in the availability of pharmaceutical insurance coverage. At the same time, according to the staff, because North Dakota law already requires physician approval before one branded drug may be switched for another, there already are safeguards in place to protect consumers from inappropriate substitutions.

    In concluding its comment, the staff wrote, “HB 1332 is likely to limit a PBM’s ability to reduce the cost of prescription drugs, without providing consumers any additional protections. Any such cost increases are likely to undermine the ability of some consumers to obtain the pharmaceuticals and health insurance they need at a price they can afford. Accordingly, we would urge the North Dakota legislature not to adopt HB 1332.”

    The Commission vote authorizing the staff to submit the comment to North Dakota State Senator Richard L. Brown was 5-0.

  • On March 8, the Commission received a petition to reopen and set aside an existing consent order from Entergy-Koch, LLC (“EKLP”), in connection with FTC Docket No. C-3998. The order, dated January 31, 2001, establishes procedures for Entergy and EKLP to follow in connection with Entergy’s procurement of natural gas transportation services to carry natural gas to any electric power generating facility or local natural gas distribution facility that uses, distributes, stores, or transports natural gas, and is owned, operated, or controlled by an Entergy subsidiary that is subject to a state regulator’s rules governing the recovery cost of buying the relevant product. The Commission is seeking public comments on the companies’ petition for 30 days, until April 5, 2005.
  • On March 4, the FTC filed a motion in U.S. District Court for the District of Columbia, pursuant to Section 7A(g)(2) of the Clayton Act, 15 U.S.C. § 18a(g)(2), to require Blockbuster, Inc. to comply with the statutory rules of the Hart-Scott-Rodino Act (HSR). In its motion, the FTC asked the court to act before March 11, 2005, the date on which Blockbuster contends that it is free to consummate its acquisition of Hollywood Entertainment Corporation. The Commission’s filing states that Blockbuster has not yet substantially complied with the Second Request because it provided insufficient and inaccurate pricing data. The HSR Act prohibits Blockbuster from proceeding with the acquisition until 30 days from the date it has substantially complied with the Second Request.

    On March 11, the U.S. District Court for the District of Columbia entered an order, signed and entered by Judge Ellen Segal Huvelle, which provides that pursuant to an agreement between the Federal Trade Commission and Blockbuster, Blockbuster will not acquire any interest in Hollywood before 11:59 p.m. on March 21, 2005. Shortly thereafter, Blockbuster abandoned its efforts to acquire Hollywood.

  • Under a consent order announced by the FTC on March 2, Preferred Health Services, Inc. (“Preferred Health”), a physician-hospital organization consisting of more than 100 doctors and the Oconee Memorial Hospital in northwestern South Carolina, has been barred from collectively negotiating and fixing the prices it charges payors on behalf of its doctor members. Preferred Health is a physician-hospital organization made up of more than 100 doctors and Onconee Memorial Hospital. The organization does business in the Seneca, South Carolina area of northwestern South Carolina. Under its operating model, Preferred Health acts as a “contracting representative” for its physician members in negotiating with health plans, and as a “collective bargaining unit for the negotiation of managed care contracts.”

    According to the FTC, Preferred Health acts as a “contracting representative” for its member doctors, developing pricing contracts that it then presents to health plans and other payors. Because the organization’s doctors make up approximately 70 percent of the independently practicing physicians in and around Seneca, South Carolina, health plans must have access to many of its members to provide services for consumers. Accordingly, the FTC contends, the plans are forced to pay higher, collectively negotiated prices for health care services.

    The Commission’s consent order remedies the illegal conduct alleged in the complaint by prohibiting Preferred Health from entering into or facilitating any agreement between or among any physicians: 1) to negotiate with payors on any physician’s behalf; 2) to deal, or not to deal, or threaten not to deal with payors; 3) to designate the terms on which to deal with any payor; or 4) to refuse to deal individually with any payor, or to deal with any payor only through an arrangement involving Preferred Health. To reinforce these provisions, the order also bars Preferred Health from helping physicians exchange information regarding whether, or on which terms, to deal with a payor, and contains “fencing-in” relief that will be imposed for three years. This fencing-in relief prohibits Preferred Health from: 1) acting as an agent for any physicians in connection with health plan contracting; or 2) using an agent with respect to contracting.

  • On March 1, the FTC announced it allowed Cytec Industries, Inc.’s (“Cytec”) proposed $1.8 billion acquisition of the Surface Specialties Business of Belgium’s UCB S.A. (“UCB”), provided Cytec divests UCB’s Amino Resins Business to a Commission-approved buyer within six months. According to the FTC’s complaint in this matter, for many years Cytec and UCB have been direct and substantial competitors in the market for amino resins, and absent the relief the consent order ensures, this competition would be lost and not easily replaced. The result, the FTC contends, would be higher prices for consumers in the markets for amino resins for industrial liquid coatings and adhesion promotion in rubber. Both Cytec and UCB manufacture and sell amino resins used for industrial liquid coatings and rubber adhesion promotion. The resins the companies make are used as cross-linking agents in thermoset surface coatings for a range of applications, including automotive coatings, coil coatings, can coatings, appliance coatings, and general maintenance coatings. Amino resins also are used, primarily in tires, to promote the adhesion of rubber to materials such as steel or fiber.

    The consent order remedies the alleged anticompetitive effects of the proposed transaction by requiring Cytec to divest the UCB Amino Resins Business to a Commission-approved acquirer within 180 days. The business to be divested includes two manufacturing facilities, in Massachusetts and Germany, where UCB makes amino resins, and also includes UCB’s rights to obtain amino resins under an agreement between UCB and Solutia Canada, Inc. UCB’s resins business also includes lines of certain additives and other products made at the Germany plant. In addition, Cytec is required to divest the patents and other intellectual property that UCB has used in its amino resins business, as well as other records related to the business. Cytec also must assign contracts related to the amino resin business and take all steps necessary to ensure that, until the divestiture is completed, the Amino Resins Business remains viable so the acquirer will be competitive in the post-merger environment.

Authored by:
Robert W. Doyle, Jr.