Competition/Antitrust Law.

Author:Walker, Sandy
 
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Focus on the US

Cartel enforcement activity and stiffer criminal penalties against price fixing

The Department of Justice (DOJ) continues to investigate and seek criminal charges against worldwide cartels. This enforcement activity will remain at heightened levels and continue to be a huge moneymaker for the DOJ. Fiscal 2014 and fiscal 2015 saw billions of dollars in criminal fines paid by companies in a wide variety of industries. In 2015, the DOJ continued its focus on auto parts manufacturers and on enforcing criminal antitrust laws in the tech industry, including electrolytic capacitors and an e-commerce executive for allegedly using algorithm-based software to fix prices. The DOJ continues to prosecute individual wrongdoers, charging 66 individuals in 2015, up from 44 in 2014, while the average prison sentence of 24 months in 2010-2015 has increased by a factor of three since the 1990s. Individual prosecutions will continue in 2016, consistent with the so-called "Yates Memorandum", the September memorandum from Deputy Attorney General Sally Yates that details DOJ policy to target individual wrongdoers involved in corporate misconduct, underscoring the importance of effective compliance programs.

Merger investigations and suits to block certain combinations will continue in 2016

Bolstered by litigation wins in 2015, the DOJ and Federal Trade Commission (FTC) will continue to focus on mergers and bring enforcement actions based on narrow market definitions. DOJ investigations resulted in parties abandoning major acquisitions, including Comcast/Time Warner Cable, Applied Materials/Tokyo Electron, GE/Electrolux, and Bumble Bee/Chicken of the Sea, after incurring huge expenses and paying large break-up fees. The FTC successfully enjoined the proposed Sysco/US Foods combination after an eight-day hearing with the court agreeing with the FTC's narrow market definition and rejecting the parties' argument that the FTC's market was based on an unrepresentative sample of subjective customer preferences. Similarly, the FTC is presently seeking to block the Staples-Office Depot merger on the same basis. In addition, the health care-related sector has also been under scrutiny. The FTC is and will continue to be active in seeking to block health care combinations. The FTC filed three suits near the end of 2015, all of which are anticipated to be resolved in 2016. For its part, the DOJ will also decide whether to allow several huge health insurance company mergers in 2016.

Pharmaceutical pricing under scrutiny

Pharmaceutical pricing will be under heavy fire in 2016, with investigations by both the DOJ and FTC. While unilateral pricing behavior is not usually subject to antitrust attack, the agencies will look hard for a remedy here. The DOJ continues to expand its ongoing probes of generic drug pricing, with subpoenas seeking information from seven pharmaceutical companies. Both the House of Representatives and the Senate are focused on drug pricing, with the Senate Select Committee on Aging holding a hearing and sending inquiries to a number of drug companies. In November, Democrats launched an Affordable Drug Pricing Task Force and sought hearings on Turing and Valeant. In addition, the Connecticut and New York attorneys general, and the US Department of Health and Human Services are conducting investigations while the FTC, state attorneys general, and private plaintiffs continue to aggressively litigate pharmaceutical companies' conduct at the expiration of patent life.

Challenges to "reverse payments" have proliferated in the wake of the US Supreme Court's FTC v. Actavis decision. In King Drug v. Smithkline Beecham, the Third Circuit court held that antitrust challenges can reach more than cash payments, including other forms of consideration, likely encouraging even more government and private suits. The FTC has also demonstrated an increased proclivity to seek significant monetary relief in reverse payments cases; its long-standing suit against Cephalon Inc. was US$1.2 billion. So-called "product hopping" was the subject of its first appellate decision in New York v. Actavis, in which the court upheld an injunction requiring Actavis to continue to make available an older drug until generic entry, after introducing a new version of the drug, to facilitate generic competition. At the same time, a lower court decision which took a dimmer view of antitrust challenges to product hopping in Mylan v. Warner-Chilcott is on appeal before a circuit court and will likely be decided in 2016. If the lower court decision is upheld, the circuit split could be ripe for Supreme Court review.

FTC report on patent assertion entities

The FTC has been studying patent assertion entities, which are "firms with a business model based primarily on buying patents and then attempting to generate revenue by asserting them against businesses that are already practicing the patented technologies." The FTC issued requests for information from 25 such entities across various industries, and 15 non-practicing entities and firms in the wireless chipset sector. The FTC is specifically targeting the wireless industry because of the intensity of patent assertion claims in that sector. The FTC's report, expected in early 2016, may influence court decisions and legislation involving these firms.

Focus on Europe

EU competition authorities focus on internet platforms

Competition authorities are looking at "platforms"-a ubiquitous feature of the "sharing economy"-from a variety of angles. New services, such as Uber, Air B&B and Just Eat, which do not make sales by themselves but instead pair up buyers and sellers, are examples. Platforms such as Uber have been undercutting traditionally highly regulated markets such as metropolitan metered taxis. Is this fair competition, or the sidestepping of important employee, consumer and public protections?

In 2015, the UK's Competition and Markets Authority spoke up in favor of Uber and against Transport for London's proposed restrictions on such services. More such interventions are possible. However, despite looking similar on the outside, platforms tend to offer a slightly different service in different cities (for example, Uber only connects licensed minicab drivers in London, which has not been the case elsewhere), and regulatory responses vary from place to place for each platform. Across the EU, Uber is opening in some cities and closing in others (e.g., the German cities of Hamburg, Frankfurt and Dusseldorf), as the different regulatory environments affect its model in different ways.

The ultimate platform provider is Google. Its primary function as a search engine (a market in which it holds higher market shares in the EU than in its native US), coupled with its use of sponsored and non-sponsored links (including links to its own services), make it a key facilitator between buyers and sellers. As a result, its behaviour has caught...

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