The House passed H.R. 4899 yesterday which prohibits reverse payment patent (or pay to delay as the FTC likes to call them) settlements.  Bloomberg reports:

Companies could be fined under the measure if the FTC and courts find they are involved in settlements that preserve a brand-name pharmaceutical firm’s patent by delaying a generic- drug maker’s introduction of a lower-priced product. The proposal, included in a war-funding bill that passed the House last night, now goes to the Senate.

…

The restriction was included in an amendment to the war- funding bill, approved on a 239-182 vote.

Drugmakers are lobbying against the provision, and passage in the Senate isn’t assured. At a June 9 hearing, Senators Orrin Hatch, a Utah Republican, and Arlen Specter, a Pennsylvania Democrat, said they were concerned the FTC campaign against the deals may discourage agreements that benefit consumers.

You can read the legislation here.

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On Friday, June 18, the U.S. Department of Agriculture proposed new regulations that would make it easier for farmers to prove an antitrust violation.  According to the AP:

Farmers who now sue under the act must show a company has not only harmed them but that it has hurt competition in the overall meat industry, Carstensen said. The new law would change that, making it clear that the law only requires a farmer to show a company has engaged in “unfair” or “discriminatory” acts against the farmer. That sole provision could unleash a wave of litigation, and prompt courts to overturn earlier rulings, Carstensen said.

H/t: Truth on the Market

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After rumors that the FTC would move to block Google’s acquisition of the mobile advertising provider AdMob, the agency today announced that it would not oppose the deal. In a 5-0 Commission vote, the decided to close the investigation. The biggest factor, it appears, was Apple’s entry through the acquisition of Quattro, a competitor of AdMob in the mobile advertising space. From the FTC press release:

[T]the Commission said that although the combination of the two leading mobile advertising networks raised serious antitrust issues, the agency’s concerns ultimately were overshadowed by recent developments in the market, most notably a move by Apple Computer Inc. – the maker of the iPhone – to launch its own, competing mobile ad network. In addition, a number of firms appear to be developing or acquiring smartphone platforms to better compete against Apple’s iPhone and Google’s Android, and these firms would have a strong incentive to facilitate competition among mobile advertising networks. “As a result of Apple’s entry (into the market), AdMob’s success to date on the iPhone platform is unlikely to be an accurate predictor of AdMob’s competitive significance going forward, whether AdMob is owned by Google or not,” the Commission’s statement explains.

Especially since AdMob’s current revenue derives largely from the iPhone platform. The Commission’s statement adds more detail:

During the investigation, Apple acquired the third largest mobile ad network, Quattro Wireless, in December 2009 and then introduced its own mobile advertising network, iAd, as part of its iPhone applications package. The Commission has reason to believe that Apple quickly will become a strong mobile advertising network competitor. Apple not only has extensive relationships with application developers and users, but also is able to offer targeted ads (heretofore a strength of AdMob) by leveraging proprietary user data gleaned from users of Apple mobile devices. Furthermore, Apple’s ownership of the iPhone software development tools, and its control over the developers’ license agreement, gives Apple the unique ability to define how competition among ad networks on the iPhone will occur and evolve.

In other words, Google/AdMob may lose the iPhone revenue if Apple shuts down the platform to anyone not using iAd. The iPhone developer community has expressed similar concerns. An article in the NY Times offers some of the comments that companies have posted on their blogs about their conversations with FTC regarding the deal:

The F.T.C. staff was “very reluctant to accept my argument that Apple/Quattro was a bigger threat for an iPhone developer like us,” wrote an executive at Naan Studio, which makes Twitter applications for phones, in one such blog account. “One of the staff told me it was irrelevant, and curtailed the discussion.” Google would have likely submitted such statements to the court as evidence that developers did not believe they would be harmed by the deal.

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About a month ago, DOJ said “it [would] not challenge a proposal by the Hospital Value Initiative (HVI) to establish an information exchange program that will provide data on the relative costs and resource efficiency of more than 300 hospitals in California.”  The DOJ press release explains that “The HVI is a coalition of three organizations – the Pacific Business Group on Health, the California Public Employees’ Retirement System and the California Health Care Coalition – that represent group purchasers of health care services, who purchase health care for more than 7 million people.”

amednews.com (American’s Medical News) reports that “Under the proposal, health plans would submit participating hospitals’ inpatient and outpatient claims data from the preceding year. The initiative would use an outside consulting firm to aggregate the information and develop a system that would allow participating health plans, hospitals and group purchasers to compare hospitals’ relative costs and efficiency.”  It also reported that the California Hospital Association (CHA) was not in favor of this project: “‘Every hospital’s cost structure is different,’ CHA spokeswoman Jan Emerson said in a statement. For example, costs vary based on the number of uninsured, Medicare and Medicaid funding, and the availability of specialty services.  She also criticized the HVI proposal because it ‘focuses primarily on cost, and not quality information.’”

In the health care world, what something costs a hospital, what it charges, and what it receives (i.e., the reimbursement amount from Medicare or the insurer or the patient) are all different.  Under the HVI proposal, it appears that the information that will be collected is the amounts that the payors (generally the insurance company or the self-funded employer/union fund or Medicare or Medicaid) reimburse the hospitals.  amednews.com explains that DOJ believed this project would not be anticompetitive for three reasons, one of which is that “HVI reports would not disclose the actual prices a hospital charges for its services.”  Because the reimbursement amount can vary a good bit (for example, Medicare is know for paying a lower reimbursement amount than private insurance companies) one might think that this project might not provide any insight other than identifying the good negotiators who are able to bargain for lower reimbursement rates (which might not be a bad thing).  But California has laws regarding disclosure of hospital charges.  Which makes me wonder if this project will identify more than that.  And since charges are public (see, for example, Kaiser’s charges in its northern California hospitals here) it makes me wonder if one DOJ’s three reasons for not challenging this project is valid.

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DOJ is looking for someone to fill the position of chief of its New York field office.  More details on the department’s website.

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Congratulations to John (“Jack”) Fornaciari, Robert Disch & Jeremy Keim who have joined Baker Hostetler from Sheppard, Mullin, Richter & Hampton (via The BLT).

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I leave town for a few days for some running and camping and there are developments all over the place.

• The U.S. Court of Appeals for the Second Circuit upheld the dismissal in Cipro (a reverse payment patent settlement case) but invited en banc review. 
• Assistant Attorney General Christine Varney and Federal Trade Commission Chairman Jon Leibowitz addressed the proposed changes to the merger guidelines at the ABA Section of Antitrust Law spring meeting.
• Bloomberg reports that the FTC staff wants to challenge Google’s acquisition of AdMob.
• DOJ and the FTC are reportedly trying to decide if they should open an antitrust inquiry into Apple over its recent actions restricting developers writing apps for its iPhone operating system.
• Ohio’s Attorney General filed a brief in the Google-MyTriggers lawsuit alleging that Google’s argument that the state’s antitrust act does not apply because the federal Communications Decency Act precludes state regulations would threaten Ohio’s state law.
• Congratulations to Howard Morse who joined Cooley from Drinker Biddle.
• Congratulations to Alasdair Balfour who joined Fried Frank from Olswang.
• Congratulations to Jonathan M. Grossman who joined Cozen O’Conner from Hogan & Hartson.

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Dan Wall and I wrote a bulletin about the likely impact of the proposed merger guidelines on technology companies, or more generally firms with high upfront costs and low variable costs. The bottom line is that high margin businesses could be subjected to significantly greater scrutiny, even if those firms operate in highly competitive markets.

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Every year, right before the ABA Antitrust Spring Meeting, it seems like DOJ and/or the FTC do something to get our attention and generate cocktail chatter (or more).  This year is no different.  Yesterday, DOJ and FTC released their proposed update to the horizontal merger guidelines.  The FTC press release identifies the following changes:

The proposed Guidelines clarify that merger analysis does not use a single methodology, but is a fact-specific process through which the agencies use a variety of tools to analyze the evidence to determine whether a merger may substantially lessen competition.

The proposed Guidelines introduce a new section on “Evidence of Adverse Competitive Effects.”  This section discusses several categories and sources of evidence that the agencies, in their experience, have found informative in predicting the likely competitive effects of mergers.

The proposed Guidelines explain that market definition is not an end itself or a necessary starting point of merger analysis, but instead a tool that is useful to the extent it illuminates the merger’s likely competitive effects.

The proposed Guidelines provide an updated explanation of the hypothetical monopolist test used to define relevant antitrust markets and how the agencies implement that test in practice.

The concentration levels that are likely to warrant either further scrutiny or challenge from the agencies are updated in the proposed Guidelines. 

The proposed Guidelines provide an expanded discussion of how the agencies evaluate unilateral competitive effects, including effects on innovation. 

The proposed Guidelines provide an updated section on coordinated effects.  They clarify that coordinated effects, like unilateral effects, include conduct not otherwise condemned by the antitrust laws.

The proposed Guidelines provide a simplified discussion of how the agencies evaluate whether entry into the relevant market is so easy that a merger is not likely to enhance market power. 

The proposed Guidelines add new sections on powerful buyers, mergers between competing buyers, and partial acquisitions.  

You can see the entire set of proposed guidelines here.  Public comments are due by May 20, 2010.

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• Bloomberg (via Sf. Chron) reports that at least five states (CA, NY, FL, OR and WA) are involved in the review of the NBC-Comcast merger.
• The court dismissed the last two claims brought by Novell against Microsoft.
• The NY Times reports that John Doerr left Amazon’s board due to an FTC inquiry (or investigation).  Mr. Doeer is also on Google’s board.
• The Eastern District of Pennsylvania district court recently denied the defendants’ motions to dismiss in the Provigil (Cephalon) reverse payment antitrust litigation.
• The Southern District of Ohio district court recently dismissed the reverse payment antitrust case in the Plavix (Sanofi/BMS) litigation.

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The BLT (The Legal Times’ blog) reports that a provision banning such settlement was struck from the House bill (it was not in the Senate version):

The measure, which was backed by the Federal Trade Commission, would in most cases have barred so-called “pay for delay” settlements of patent cases brought by generic companies against brand-name drug makers. In such cases, the brand name maker pays the generic company to delay the market entry of a lower-cost generic drug alternative.

The FTC estimated that such reverse payment deals cost consumers $3.5 billion per year. But the provision in the House version of the health care bill was unpopular with both generic and brand name drug companies. (The Senate bill does not include it.)

“Imposing a ban on patent settlements would have the unintended consequence of preventing pro-consumer settlements that would actually allow generic competition sooner than if the generic company had taken the case to its conclusion and lost—always a possibility in patent litigation,” said Kathleen Jaeger, president of the Generic Pharmaceutical Association, in a statement.

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Herbert Hovenkamp has posted a paper on SSRN regarding the FTC’s case against Intel (via the Antitrust & Competition Policy Blog).  From the abstract:

One important concern that arises when the FTC reaches beyond the Sherman Act is that the remedy itself not be contrary to the consumer welfare goals of the antitrust laws. Pricing is particularly complex in a market with high fixed costs and short product cycles, as is the case for Intel’s processor chips. …

In this case the FTC requests that Intel be required to keep prices at an irrationally high level. Limitations on “below cost” pricing would require Intel to include a mandated multiple of fixed costs into its bids, even though any firm in Intel’s situation could profitably bid prices down to its incremental costs. Some market share discounts would apparently be forbidden without any proven relationship to cost. Relief such as this will serve the goal of giving Intel’s rivals a price umbrella under which they can profit, but it is not calculated to produce competitive solutions that will benefit consumers.

In the article he writes that four of the possible reasons the FTC chose to bring a section 5 case are:

a. The FTC has procedural advantages as fact finder or expertise advantages as law maker;

b. The FTC might wish to condemn conduct without inviting tagalong private lawsuits;

c. The FTC may use §5’s “unfair methods of competition” language to reach conduct that falls outside the prohibitory language of the Sherman Act; [and]

d. The FTC would like to address the same practices that the Sherman Act addresses, but under more aggressive standards than the courts’ current interpretations of §2 permit.

Hovenkamp’s support for the second possibility is a quote Chairman Leibowitz and Commissioner Rosch’s statement that concern over class actions and treble damages available in private actions has caused the courts to limit the reach of antitrust law.  This statement, however, concerns Hovenkamp’s fourth possibility (unless he too believes that class actions and treble damages have resulted in bad law; but the remainder of the article leads me to believe that is not the case).  In any event, the article is a good read.

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• D.O.J. “is considering whether to investigate the BCS under the antitrust laws.”
• The Wall Street Journal reports that even though the FTC and DOJ may want to bring more antitrust cases they are hindered from doing so becuase case law is against them.
• Congratulations to David Evans who moved from Arent Fox to Chadbourne & Parke.

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DOJ approved the merger with some conditions.  The Wall Street Journal reports:

Under the concessions demanded by the DOJ, Ticketmaster’s Paciolan division, which sells tickets to college sporting events, is to be sold to a unit of Comcast. The merged company also is barred from retaliating against venue operators that want to use ticketing services from competitors. For instance, the merged company would be prevented from blocking artists it represents from playing in those venues.

The companies also will be required to offer ticketing and concert-promotion services separately, rather than as a bundle. And divisions of the company won’t be allowed to share certain kinds of data so as to reduce the competitive edge afforded by its vast scope.

Many antitrust lawyers believed the deal was about the best the Justice Department could have hoped for, given the circumstances. It is far more difficult for prosecutors to develop a compelling case that competition would be harmed as a result of such a vertical merger—in which the companies involved operate at different stages in the supply chain—than in a horizontal merger involving direct competitors. Had the Justice Department brought a tricky vertical case and lost, these lawyers said, they would have ended up with nothing.

DOJ’s documents on the case can be found online.

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You can read the transcript here.  From Lyle Denniston’s report on the always excellent SCOTUSBlog:

The Court heard 70 minutes of oral argument in American Needle v. NFL (08-661), a case that supposedly was to focus on a single, simple question: is the NFL, along with its 32 teams, a “single entity” and therefore immune to the Sherman Antitrust Act when they act jointly in a business effort? But Justice after Justice insisted strenuously that that is not really the issue, and that the case probably needs to go back to the lower courts for a potentially penetrating inquiry into what kinds of commerce are closely enough related to pro football itself that they escape antitrust liability.

The specific kind of activity under legal attack in the case is the joint effort of the NFL and its teams to sell, through only one dealer, hats, jerseys, and other fan gear displaying the teams’ trademarked logos.  While the NFL insists that that is crucial to promoting the popularity of the games on the field, it did not appear that any Justice was firmly convinced — right now — of that.  From the bench, for example, came the question of whether the NFL could escape antitrust liability if it decided, jointly, to build houses.  While the NFL’s lawyer said that would not promote the game, Chief Justice John G. Roberts, Jr., shot back, reciting the other side’s contention that selling trademarked goods was closer to selling houses than it was to promoting football games.  And that, it seems, is precisely the issue that would dominate a subsequent trial on the legality of joint selling of fan goods.

The whole post is worth reading.

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