# Competition Matters Blog Posts

- Insights into contact lenses: FTC workshop will focus on the Contact Lens Rule Insights into contact lenses: FTC workshop will focus on the Contact Lens RulercusterMarch 1, 2018 | 11:54AM  Insights into contact lenses: FTC workshop will focus on the Contact Lens Rule            By                  Tara Isa Koslov, Office of Policy Planning, and Christopher Grengs, Bureau of Competition                    The FTC is eyeing its Contact Lens Rule and has announced the agenda for a March 7, 2018 workshop, The Contact Lens Rule and the Evolving Contact Lens Marketplace.The Contact Lens Rule, in place since 2004, requires prescribers to give patients their complete contact lens prescription after a fitting, whether the patient asks for it or not. The Rule also says that prescribers must verify the prescription – or provide a copy – in response to a request from an authorized third party. With this framework in place, consumers are empowered to comparison shop for the lenses their healthcare professionals have prescribed, if they choose to do so. Giving consumers a “shoppable” prescription promotes competition between prescribers who also sell lenses, various brick-and-mortar retailers, and online retailers.How well is the Rule working? To what extent are consumers able to comparison shop under the Rule’s prescription release and verification framework? How have new technologies, including electronic health records, affected the prescription verification process? How might other innovations, including telehealth options, impact competition going forward? Would any modifications to the Rule foster additional competition and maximize health and financial benefits to consumers? Are there particular medical or safety issues that should inform discussion of these topics?To address these questions and more, we are convening a public workshop on March 7th featuring healthcare professionals, industry members, consumer advocates, law enforcers, and others. We are hosting the workshop in conjunction with the FTC’s regulatory review of the Contact Lens Rule. (A Notice of Proposed Rulemaking was issued in December 2016 announcing proposed changes.)We encourage you to check out the agenda for more details about our roster of speakers. After introductory remarks by Thomas Pahl, Acting Director of the FTC’s Bureau of Consumer Protection, Panel #1 will offer an overview of the contact lens marketplace. Panel #2 will feature medical professionals sharing insights on the health and safety issues the Rule implicates. Panel #3 will delve into competition in the contact lens marketplace. Panel #4 will examine the prescription verification process and Panel #5 will take on issues surrounding prescription release and consumer choice. The final panel will look to the future, and consider how market disruptors may have an impact on competition, consumer protection, and the Rule.The event is free and open to the public. Registration begins at 7:45 a.m. at the FTC’s Constitution Center Conference Center, 400 7th Street, S.W., in Washington, DC.Can’t make it to Washington on March 7th? We’ll post a link on the event page just before 9:00 ET that morning so you can watch the webcast live.
- Antitrust review at the FTC: staying the course during uncertain times Antitrust review at the FTC: staying the course during uncertain timesjwolfApril 6, 2020 | 11:36AM  Antitrust review at the FTC: staying the course during uncertain times            By                  Ian Conner, Bureau of Competition                    As we navigate uncharted waters in our work and home lives in response to the COVID-19 pandemic, a few changes have happened quickly.  We claimed “home office” space to take on the challenges of working remotely.  Bureau of Competition staff shifted from in-person meetings to conference calls, made from unlikely venues (such as couches) without all the usual professional trappings (sweatpants optional, children entirely possible).  Most significantly, our Premerger Notification Office flipped the switch almost overnight, crafting a temporary solution to accept Hart-Scott-Rodino filings electronically for the first time.The manner in which we conduct our investigations has adapted to the constraints of physical distancing, but make no mistake about it: the substance of our work remains the same.The antitrust laws are flexible enough to account for changing market conditions, even during uncertain times.  As we saw during the 2008 financial downturn and countless other difficult periods in our nation’s history, “emergency” exceptions to the antitrust laws are not needed.  Now more than ever, FTC staff must continue to analyze carefully the potential effects of proposed transactions and business conduct.We will not suspend our usual rigorous approach to ferreting out anticompetitive harm and seeking appropriate relief, even in the face of uncertainty.  It might be tempting, for example, for parties to urge us to relax the rules in a time of crisis.  But we know what the likely long-term negative consequences of such a reactionary policy would be:  fewer competitors, reduced innovation, and higher prices.  Therefore, we must stay the course.  We will continue to follow the facts, adjust to changing market conditions, and master the many details that comprise a thorough antitrust review.This continued diligence is particularly important as we analyze divestiture remedies in merger matters, including evaluating proposed buyers of divestiture assets.  As always, we are happy to entertain reasonable settlement options.  What we will not do, however, is lower the Commission’s long-held standards for effective relief.  Any prospective buyer of divested assets must be able to maintain or restore competition in the markets of concern, so the Commission can ensure that the merger will not cause harm.  FTC staff will continue to vet potential buyers, taking full account of current financial and economic realities.  Now, more than ever, it is important for us to conduct thorough due diligence to ensure the success and viability of proposed divestitures.For example, FTC staff will continue to evaluate whether the buyer has the current financial capability to acquire and operate the divestiture assets, as well as the buyer’s ability to compete in the relevant markets with those assets.  We will look at whether the buyer can successfully integrate the assets into its business, and evaluate that execution risk.  We understand that both current and future financial stability may become issues for buyers as they are considering purchases during these uncertain times.  However, the Bureau cannot sacrifice effective relief by rushing to approve a less-than-financially-stable buyer.The Bureau of Competition has provided proposed buyers with guidance regarding their obligations during the evaluation process.  As a reminder, buyers should be prepared to provide detailed information about how the proposed acquisition would be financed.  In addition, a buyer should:explain the structure of the funding for the investment, including any limitations of the funds;provide all sources of financing for the acquisition of the divested assets, including private equity or other investors, and explain the criteria used for evaluating such sources;explain how the buyer and the financial entities reviewed and evaluated the transaction and formed the basis for authorizing the purchase;make representatives from the financing entities available for discussions with staff;provide detailed financial and business plans, with supporting documentation;explain the underlying assumptions of the financial and business plans, including contingency plans if sales and other financials do not meet projections; andmake management, sales and marketing representatives, and accounting and other personnel available for discussions with FTC staff.We look forward to the return of some of the trappings of the regular order (although it may be hard to give up the sweatpants).  When that time comes, we want to make sure the work we did during this difficult time helped preserve competition—now and for the future.
- Have a plan to comply with the bar on horizontal interlocks Have a plan to comply with the bar on horizontal interlocksrcusterJanuary 23, 2017 | 12:18PM  Have a plan to comply with the bar on horizontal interlocks            By                  Debbie Feinstein, Bureau of Competition                    With some exceptions, Section 8 of the Clayton Act prohibits the same individual from serving as an officer or director of two competing corporations. Like other portions of the forward-looking Clayton Act (including Section 7 with its proscription on mergers that are likely to harm competition), Section 8 was designed to “nip in the bud incipient violations of the antitrust laws by removing the opportunity or temptation to such violations through interlocking directorates.” U.S. v. Sears, Roebuck & Co., 111 F. Supp. 614, 616 (S.D.N.Y. 1953).As enacted in 1914, Section 8’s interlock ban was nearly absolute: any two corporations (other than banks, trust companies and common carriers) worth more than $1 million with competing lines of business could not share a board member (or later, an officer) even if the interlock was not likely to harm competition. (Indeed an interlock may occur even if different individuals serve on the respective Boards; both the FTC and DOJ have brought enforcement actions involving indirect interlocks.) But near the end of the 20th century, advocates for reform argued that the low bar for interlocks was discouraging qualified individuals from serving on boards even when the risk to competition was low. Consequently, in 1990, Congress amended Section 8 to raise the jurisdictional threshold from $1 million to $10 million, and to create safe harbors to permit interlocks involving very small competitive overlaps. However, if the jurisdictional thresholds are met and no safe harbor applies, the ban on interlocks remains absolute: in antitrust terms, Section 8 is a per se statute that does not require proof that the interlock results in harm to competition.Now Section 8’s higher jurisdictional threshold is adjusted every year based on changes in GNP, and, with the adjustments announced last week, excludes corporations that have capital, surplus and undivided profits aggregating less than $32,914,000. In addition, there are three de minimis exceptions to the interlock ban that permit horizontal interlocks for two companies with few overlapping products:the competitive sales of either corporation are less than $3,291,400 (also adjusted annually for changes in GNP),	the competitive sales of either corporation are less than 2 percent of that corporation’s total sales, or	the competitive sales of each corporation are less than 4 percent of that corporation’s total sales.Because the thresholds change annually and the exceptions require an assessment of relative competitive sales levels, any company with an interlock will need an effective compliance program to monitor the firm’s capital position, as well as each firm’s sales of overlapping products. This is especially true if either (or both) firms are changing in ways that result in more of their business competing with the interlocked competitor. Depending on the size of the company, even small increases in competitive sales (or decreases in overall sales) may push a company outside the safe harbors.Note that these thresholds and exemptions only apply to horizontal interlocks that would otherwise violate Section 8. Other statutes, such as Section 1 of the Sherman Act, still apply without exception to limit collusive behavior or unreasonable information sharing among competitors, including when such conduct occurs in the context of an exempt interlock. In addition, Section 5 of the FTC Act may also reach interlocks that do not technically meet Section 8’s interlock requirements but violate the policy against horizontal interlocks expressed in Section 8. For example, Section 5 can reach interlocks involving banks, which are exempt from Section 8, and competing non-bank corporations. In re Perpetual Fed. Savings & Loan Ass’n, 90 F.T.C. 608, 657 (1977)).Lessons from Section 8 enforcementThe Commission has generally relied on self-policing to prevent Section 8 violations, and as a result, litigated Section 8 cases are rare (with none construing the 1990 amendments). In recent Section 8 investigations, once staff raised concerns, an individual agreed to step down from one company in order to eliminate the interlock. For example, FTC staff closed an investigation into interlocks involving Google, Inc. and Apple, Inc. after a common member resigned from Google’s board and Google’s CEO resigned from Apple’s Board. A resignation that eliminates the interlock may effectively bring each company back into compliance with Section 8 and may lead the Commission to determine that there is no need for any further action where there is little risk of recurrence. (The FTC’s remedy for a Section 8 violation is injunctive relief – an order to cease and desist. Section 8 does not provide for civil penalties or other monetary relief.) Note, also, that Section 8(b) provides a grace period of one year for an interlocking director or officer to resign if there is a change that renders him or her ineligible to serve on both boards.Recent experience with reviewing interlocks revealed certain practices that could help companies avoid interlocks that run afoul of Section 8. These steps could also help companies avoid creating potential Section 8 issues as part of a proposed acquisition that grants management rights that could, if exercised, create an illegal interlock.Monitor your company’s assets and check annually against the adjusted jurisdictional threshold. As required by the 1990 amendments, the FTC announces adjustments to the minimum thresholds for Section 8 each January, to take effect immediately. If your company relies on staying below the minimum size threshold, be sure to do an annual assessment of your company capital, surplus, and undivided profits and compare those figures to the adjusted amount. (Because the thresholds adjust to changes in GNP, some years the threshold goes up and some years it goes down.)Track new products or offerings for each interlocked company that may create new areas of competitive sales. Section 8 applies to “competitors” in the sense that “the elimination of competition by agreement between them” would violate the antitrust laws. But courts have rejected the argument that this is the same as the market definition analysis found in other antitrust cases. In TRW, Inc., v. Federal Trade Commission, the Ninth Circuit found that especially in emerging industries, competition in the Section 8 sense can encompass more than an assessment of the cross-elasticity of demand for existing products:In a developing industry in which product variation is just beginning and customer needs are not yet standardized, it is unlikely that two companies will produce products nearly equivalent in their ability to satisfy the needs of a range of customers. Nonetheless, these companies compete. Their competition consists of the struggle to obtain the patronage of the same prospective customers, accompanied by representations of a willingness to modify their respective products. Competition also consists of efforts to make a sale, even if neither succeeds in persuading the buyer to purchase. It was in this manner that TRW and A-M competed. Their willingness to respond to requests regarding credit verification and EFT systems, and in many instances aggressively to pursue the same prospective purchaser, indicates that neither company perceived the range of competitive possibilities in terms as narrow as those advanced by petitioners.This broad view of competitive sales that would trigger Section 8 review has not been challenged or revisited by courts. In fact, in 1990, Congress considered but rejected amendments that would have required a more rigorous Section 7-style market analysis. See Sen. Rep. 101-286 at 6 (1990).Companies need to be aware of changes not only in their own competitive portfolio but also those of any firms with which there is an existing interlock. Using public information to keep tabs on offerings of interlocked firms may reveal new areas of competitive sales that will need to be assessed and possibly added in to calculations of relative sales levels. With so many changing data points, companies need a plan for monitoring changes in the market.Be sure to check with employees who are knowledgeable about market participants and review documents that track market developments. An accurate assessment of competitive sales should include review of ordinary course business documents that reveal how closely the interlock companies compete, as well as discussions with front-line employees who monitor the competitive offerings of the interlocked competitor. High-level corporate documents or interviews with high-level executives may not contain sufficient detail to determine each company’s relative market position. For instance, in a recent matter, high-level executives indicated that certain products did not compete with the interlocked company; company documents we obtained pursuant to compulsory process showed otherwise. As a matter of prosecutorial discretion, the Commission took no action in that matter because the companies involved had attempted to comply with Section 8, removed the interlock upon learning of our investigation, and improved their compliance efforts. Nevertheless, the interlocked companies were subject to a significant investigation. In the past, the FTC has issued a consent order requiring IBM to consult with “appropriate personnel in IBM’s manufacturing, marketing and other divisions most knowledgeable regarding the source and nature of products and services in competition with” IBM and its subsidiaries.In addition, if you are relying on the other company to report its competitive sales in order to comply with the ‘less than 4 percent’ requirement, check with your own employees to see if the competitive assessment comports with your own assessment of which products or services compete. Relying solely on the representations of the interlocked firm may not be sufficient to maintain compliance with Section 8 safe harbors. Indeed, it may be necessary for outside counsel to share information on a confidential basis to ascertain that an unlawful interlock is not created. We will not necessarily excuse a company from its obligation to comply with Section 8 merely because it relied on representations of the interlocked company.Take care when acquisitions create interlocks. Acquisition agreements sometimes include a provision that grants one party the ability to appoint a board member to another firm, and occasionally, this right, if exercised, would create an interlock that would violate Section 8. Even before the rights are exercised, such provisions may raise antitrust concerns. Recently, the DOJ required Tullett Prebon and ICAP to restructure a $1.5 billion transaction that would have resulted in ICAP owning nearly 20 percent of Tullett Prebon and having the right to nominate one member of its board of directors. DOJ, in its press release announcing the changes, noted that Section 8 requires that firms that compete remain independent. Because the two firms would continue to compete after completing the proposed transaction, the revised agreement left ICAP without an ownership stake or the right to appoint a member to the Tullett Prebon board.Sometimes, there are antitrust concerns with the underlying merger as well as any potential interlock. For instance, in United States v. CommScope Inc., the DOJ alleged violations of both Section 7 and 8 of the Clayton Act in a proposed merger between CommScope and Andrew Corporation, a transaction that included Andrew’s interests and management rights in another company, Andes Industries, Inc. CommScope competed with Andes in the U.S. market for drop cable used by cable television companies. Andrew’s interest in Andes included a 30 percent equity position, plus warrants to acquire additional stock, as well as several governance rights, such as the ability to designate members of Andes’ board. According to DOJ, CommScope’s acquisition of Andrew’s holdings in Andes would violate Section 7, by giving CommScope both the ability and incentive to coordinate with Andes or undermine its competitive decisionmaking. The proposed purchase agreement with Andrew also violated Section 8 by giving CommScope the ability to appoint Andes board members, a firm with sufficient competitive sales to trigger Section 8. To settle charges related to both sections, CommScope agreed to divest Andrew’s entire ownership interest in Andes, and forfeit any rights to appoint members of Andes’ board.Conversely, a spin-off of a business unit or other assets may lower your company’s total sales in a way that increases the percentage of competitive sales above the 2 percent safe harbor. All the more reason to make Section 8 compliance part of an annual audit.
- From the antitrust mailbag: What can the FTC do about prescription drug price spikes? From the antitrust mailbag: What can the FTC do about prescription drug price spikes?rcusterMay 18, 2015 | 12:31PM  From the antitrust mailbag: What can the FTC do about prescription drug price spikes?            By                  Alan Friedman, Bureau of Competition                    Consumers frequently contact the Bureau of Competition to alert us that the cost of a prescription drug suddenly spiked up, and ask if the FTC can take antitrust action to bring the price back down. The answer in a nutshell is that it depends on the reason for the price change.We’ve examined this issue a number of times and often found that price changes (up or down) are due to normal market forces and thus do not present an antitrust issue. One common cause of a sudden spike in the price of a drug is the development of a supply problem, such as an ingredient shortage. It’s a normal market event for prices to rise after a fall in supply. The U.S. Food and Drug Administration has the authority to address and prevent drug shortages, and that agency maintains a list of drugs that are in short supply, including the market reason for the shortage and the estimated time required to resolve the shortage. When there is no supply problem, sometimes the answer is that the drug was recently acquired by a company, and the new owner has independently increased the price. Other times, the price varies from retailer to retailer, or is due to a coverage change by the pharmacy benefit manager. In these situations, the drug may be available at a better price at another retailer or from another health plan.For our part, we remain watchful for information that suggests the possibility that unlawful anticompetitive activity is the reason for a price increase. Although the FTC has no authority to regulate the price of any product, including prescription drugs, protecting American consumers from anticompetitive activity in the health care sector has long been one of our most important responsibilities. Congress has empowered the FTC to prevent unfair methods of competition, such as illegal anticompetitive agreements among competitors to increase prices or restrict supply, and illegal exclusionary or predatory practices.For example, several years ago, the FTC and 32 state Attorneys General sued a drug manufacturer and the only suppliers of a key ingredient for signing illegal agreements that increased wholesale prices of two widely-prescribed anti-anxiety drugs by 2000-3000 percent. The FTC alleged that the drug maker, Mylan Laboratories, Inc., and three suppliers of a key ingredient entered into exclusive supply contracts to deny Mylan’s competitors access to ingredients necessary to manufacture the drugs. In exchange for their participation in the scheme, Mylan agreed to share its profits with the suppliers, and then raised the price of the drugs exponentially — in the case of one product, from $7.30 for a 500-count bottle to $190. The FTC’s antitrust suit led to one of the largest monetary settlements in FTC history, with $100 million returned to overcharged consumers and state agencies. The companies also agreed not to engage in similar unlawful conduct in the future.Congress also has empowered the FTC to prevent mergers that may substantially lessen competition or tend to create a monopoly. In reviewing proposed mergers between pharmaceutical companies, the FTC looks to see if the two companies have competing products and whether the elimination of one independent competitor may lead to higher prices for an essential therapy or course of treatment. Since last year alone, the FTC has required divestitures in ten merger cases involving dozens of pharmaceutical products, including over-the-counter motion sickness medications, nicotine patches, generic eye drops, Retin-A for the treatment of acne, and generic multivitamin fluoride drops for children in the United States who do not have access to fluoridated water, as well as drugs that treat hypertension and bacterial infections. These divestitures preserve competition, ensuring that consumers do not pay higher drug prices as a result of the merger.Protecting consumers from anticompetitive activity in the pharmaceutical industry remains a top priority at the FTC. Inquiries from the public, including emails, phone calls, and letters describing marked price increases for pharmaceuticals or other products or services, provide information that we may use to develop or support antitrust enforcement efforts. Contact the Bureau of Competition if you have concerns about pricing or other activity that may raise antitrust issues. To help you shape your complaint, take a look at our Guide to the Antitrust Laws and other materials that describe FTC efforts to maintain competition in health care markets.Having trouble paying for your medications? Sometimes consumers can significantly reduce medication costs simply by comparing prices at different retail pharmacies, talking to their physicians about the suitability of prescribing a lower-cost alternative, filing an appeal with their health plan if appropriate, or switching to another health plan. Check out the FTC’s consumer information about assistance programs for qualifying patients who do not have prescription drug coverage, and potential cost savings from using a generic version of a brand name drug.
- Coming Soon: what’s new in residential real estate brokerage competition? Coming Soon: what’s new in residential real estate brokerage competition?jwolfMay 29, 2018 | 10:46AM  Coming Soon: what’s new in residential real estate brokerage competition?            By                  Jessica Drake, Bureau of Competition                    More than ten years ago, the FTC and the Department of Justice published a joint report outlining some concerns about impediments to competition in the residential real estate industry.   At an upcoming June 5 workshop co-hosted by both agencies, a wide range of experts will explore what competition looks like today.  When the 2007 report was issued, the internet was young, and innovative real estate agents had just begun to create “virtual office websites” to market homes for sale.  Discount and limited-service brokers were also arriving on the scene to offer an alternative to traditional full-service real estate brokers.  These changes were good for consumers.  But as the FTC/DOJ report cautioned, other developments were impeding competition and reducing consumers’ choices for real estate brokerage services.  In particular, the report identified certain industry practices and state laws that restricted the flow of listing information and reduced competition among residential real estate brokers.Fast forward to today: consumers can view homes for sale anywhere in the world from their mobile phones. As a consequence, sellers want their home to appear wherever buyers are searching, including on portals that are not affiliated with a real estate brokerage.  Consumers who are ready to buy can set up alerts for new listings in neighborhoods where they want to live.  They can search, sort, and take virtual tours of homes for sale whenever and wherever it is convenient for them.  According to industry sources, home buyers and sellers routinely rely on these sources to learn about local housing markets prior to contacting a real estate professional. In light of how consumers now typically start the home buying and selling process, what is the state of competition among residential real estate brokers today?  The FTC and DOJ will explore this question with industry stakeholders at the June 5 workshop, for which the agenda is now available. The event promises to be an interesting look back – and look forward – at trends in the real estate industry.The day will start at 9 am with introductory remarks by FTC Chairman Joe Simons.  Panel #1 will offer an overview of developments in technology and listings information flow, and how these advances have changed the consumer experience and the structure of the real estate industry.  Panel #2 will feature real estate professionals sharing insights on emerging and evolving fee and service models.  Panel #3 will delve into regulatory and policy issues affecting competition in the residential real estate marketplace and ask what obstacles to competition remain.  The workshop will conclude with remarks from Bob Potter, Chief of DOJ’s Competition Policy and Advocacy Section.The event is free and open to the public.  Registration begins at 7:45 a.m. at the FTC’s Constitution Center Conference Center, 400 7th Street, S.W., in Washington, DC.  We are also accepting public comments on the topics discussed at the workshop through July 31, 2018.Can’t make it to Washington on June 5th? We’ll post a link on the event page just before 9:00 ET that morning so you can watch the webcast live.  You can also follow us on Twitter at @FTC.gov using the hashtag #RealEstateFTCDOJ.
- Resuming early termination of HSR reviews Resuming early termination of HSR reviewsrcusterMarch 27, 2020 | 2:08PM  Resuming early termination of HSR reviews            By                  Ian Conner, Bureau of Competition                    On Friday, March 13, as part of the Bureau’s response to the COVID-19 coronavirus situation, and in partnership with the Antitrust Division of DOJ, we announced that the Bureau’s Premerger Notification Office would adopt a temporary e-filing program for notifications under the Hart-Scott-Rodino Act. Among other changes, this transition involved the temporary suspension of the Bureau’s processing of requests to grant early termination of the Act’s waiting periods.We are pleased to announce that, in light of the success of the temporary e-filing program to date, we will return to processing requests for early termination, but with some changes in our ordinary process. Effective Monday, March 30, the FTC and DOJ will resume the practice of granting early termination of the HSR Act’s waiting periods when both have determined that no enforcement action will be taken during the waiting period.Parties to transactions that are notifiable under the Act, and their counsel, should be aware of the following:Early termination is not a right. Parties to a transaction are not entitled to early termination of the HSR Act’s required waiting periods.Parties should not reach out to request early termination. Parties and their counsel should not call the PNO or the litigation shops to advocate for early termination of the waiting period applicable to a notified transaction. We understand that all parties who request it would like early termination of the waiting period, but current conditions require us to prioritize processing filings that raise competitive concerns. Premerger staff is at capacity, and both Agencies’ litigation teams are already working hard to evaluate the extent to which individual transactions might present competitive concerns. Forcing our staff to spend additional time engaging with parties or their counsel will slow our review, not expedite it, and will increase the stress on the premerger program.Early termination will be granted but only as time and resources allow. Early termination will, for the duration of the COVID-19 pandemic crisis, be available on a more limited basis than has historically been the case. Specifically, it will be granted in fewer cases, and more slowly, than under normal circumstances.Competitive concerns will be fully investigated in every case, and doubts will be resolved against granting early termination. Neither the legal standards that apply to transactions nor the Bureau’s investigational standards have been relaxed in light of the coronavirus pandemic. If the Bureau’s competitive concerns cannot be eliminated or resolved during the initial waiting period, the Bureau will issue a Second Request and will continue to investigate those concerns. This practice reflects the Bureau’s broader policy that its scrutiny of anticompetitive transactions and practices will not be relaxed, notwithstanding the difficult circumstances caused by the coronavirus pandemic. Accordingly, and consistent with the Bureau’s normal practice, investigations will not be closed if doubts remain, and early termination will not be granted for any transaction for which enforcement action may be necessary.We will continue to monitor our workflow and make adjustments at any time. The resumption of early termination is being implemented based on the best information available to us right now. We may modify or rescind this policy at any time, in light of changes in circumstances, new information, availability of resources, and/or further experience with the temporary e-filing system.Our teams are working very hard under difficult circumstances to ensure that competition and consumers are fully protected despite the challenges caused by the pandemic. In the meantime, we thank you for your continued understanding.Any questions about our early termination policy or the e-filing system can be directed to Premerger@ftc.gov.
- Antitrust Violation vs. Injury-in-Fact:  A distinction that makes a difference Antitrust Violation vs. Injury-in-Fact:  A distinction that makes a differencercusterFebruary 26, 2016 | 11:16AM  Antitrust Violation vs. Injury-in-Fact:  A distinction that makes a difference            By                  Dan Butrymowicz, Bureau of Competition                    There is a basic but important difference between antitrust cases brought by the government and those brought by private parties: All plaintiffs, including government enforcers like the FTC, must prove an antitrust violation, which requires showing harm to competition. But private plaintiffs must make an additional showing: to establish antitrust ‘standing,’ private plaintiffs must prove that the antitrust violation caused harm to them. This distinction is deeply rooted in our system of antitrust enforcement, which permits many types of enforcers but limits standing to those with a cognizable claim of injury. In private cases, the distinction between harm to competition and harm to an individual often seems academic because the private plaintiffs typically attempt to prove harm to competition by showing they were injured. But when courts and litigants miss this doctrinal distinction on the road to resolving a case, it can have significant implications for antitrust law and policy.This is what happened in the Nexium reverse-payment litigation, the first case to go to trial since the Supreme Court’s decision in FTC v. Actavis. The plaintiffs are purchasers of Nexium—including health insurers, drug wholesalers, and retail pharmacies that bought the drug directly from the manufacturers. The plaintiffs alleged that Nexium’s owner, AstraZeneca Pharmaceuticals, made substantial payments to generic challenger Ranbaxy Laboratories and, in return, Ranbaxy gave up its patent claim and stayed out of the market for six years. After trial, the jury concluded that AstraZeneca had made a large and unjustified reverse payment to Ranbaxy that had an anticompetitive effect. But it also found that the plaintiffs did not prove that AstraZeneca and Ranbaxy would have agreed to an earlier entry date even without the payment. Interpreting the jury’s verdict, the district court held that the plaintiffs had not proved that they actually paid more for Nexium than they otherwise would have, and therefore had not established an antitrust violation.The FTC recently filed an amicus brief with the Court of Appeals for the First Circuit, where the case is pending on appeal. The brief takes no position on the merits of the case, but instead explains that the district court missed the important distinction between an antitrust violation and an injury-in-fact. Under both the Supreme Court’s 2013 decision in FTC v. Actavis and other longstanding precedent, an antitrust violation requires a general showing of harm to the competitive process, and many courts have found that plaintiffs can prove an antitrust violation without showing that actual prices were higher than they would have been absent the conduct.Our brief argues that the district court’s analysis threatens to add an unwarranted additional burden to federal antitrust enforcement by requiring the government to show that an agreement is not only anticompetitive in character, but actually caused a specific injury to someone. This additional requirement is particularly inappropriate in the context of a reverse payment, which, the Supreme Court explained, can harm competition by eliminating the risk of potential competition. Preventing uncertain competition is anticompetitive regardless of whether that potential competitor would otherwise have entered the market earlier. The question of whether the conduct actually caused an injury to any particular plaintiff is a separate question that, under longstanding precedent, should remain separate.
- Have a good plan for HSR compliance Have a good plan for HSR compliancercusterAugust 21, 2014 | 12:16PM  Have a good plan for HSR compliance            By                  Dan Ducore, Bureau of Competition                    Our recent civil penalty action involving Berkshire Hathaway’s failure to file the required Hart-Scott-Rodino notification is a reminder to investors to be alert to common filing mistakes. It is also a reminder that every investor—companies and individuals alike—needs to have a program in place to ensure compliance with HSR filing obligations.In a nutshell, Berkshire Hathaway acquired voting securities of USG Corporation in December 2013 through a conversion of notes that gave it shares with a value over the $283.6 million threshold, but it failed to make the required HSR filing. Under Rules 802.31 and 801.32, no HSR filing was required when acquiring the convertible notes, but filing was required prior to their conversion.Berkshire Hathaway realized its mistake and made a corrective filing in January. However, it was the company’s second corrective filing in six months. Last year, it failed to file an HSR notification before exercising warrants for shares of voting securities in another company, Symetra Financial Corporation, a transaction that similarly pushed it over the $283.6 million threshold. In the Symetra deal, Berkshire Hathaway failed to follow the aggregation rules. Under Rule 801.13, for the purposes of determining what voting securities will be held as a result of a transaction, the voting securities to be acquired must be aggregated with the voting securities of the same issuer already held by the acquirer. The Premerger Notification Office has identified this as a common filing mistake: typically, company executives exercise a very small number of options or warrants with a value well below the size-of-transaction threshold, but fail to aggregate the value of the converted shares with what they already hold. This is exactly the scenario that led to Berkshire Hathaway’s first corrective filing.After the first failure to file, Berkshire Hathaway assured the FTC that it would institute an HSR compliance program. With that promise, the Commission did not seek penalties. The Agencies may determine not to seek civil penalties when parties inadvertently and mistakenly fail to file if: (1) the violation was the result of understandable or simple negligence; (2) the parties make corrective filings promptly after discovering the mistake; (3) they did not benefit from the violation; (4) they submit an acceptable explanation for the failure to file and explain what they will do to prevent another violation; and (5) they have not previously violated the HSR Act. With the second oversight so quickly on the heels of the first, however, the Commission determined to seek civil penalties on the second violation in order to ensure that the HSR rules are enforced in a way that is fair to all investors.This is not the first time the Commission has obtained civil penalties for a second mistake. Last year, the Commission obtained civil penalties from MacAndrews & Forbes for a second corrective filing just over a year after the first. The Commission previously obtained civil penalties from ValueAct Capital Partners, James Dondero and William Gates for second violations that occurred within eighteen months of the first filing error. And in some circumstances, the FTC has obtained civil penalties for a first mistake, see, e.g., The Loewen Group Inc., or ESL Partners. Additionally, we will continue to bring actions in other cases of a first violation that do not involve mere mistakes, such as where the company does not acknowledge that they should have made a filing or has failed to put in place any reasonable HSR compliance program.Not all acquisitions of voting securities require an HSR filing, and buyers sometimes make mistakes in applying the HSR rules to particular combinations of buyer, seller, asset or voting security, value, location, timing, etc. For that reason, when companies make corrective filings, explain their mistake, and then make changes in their internal review process to ensure compliance in the future, the FTC may decide not to seek civil penalties. But especially when the same investor makes another mistake shortly after the first, something more is needed to ensure the company takes seriously its obligations to comply with the HSR Act.
- Lessons from FTC v. Wilhelmsen for merger practitioners Lessons from FTC v. Wilhelmsen for merger practitionersrcusterSeptember 10, 2018 | 1:53PM  Lessons from FTC v. Wilhelmsen for merger practitioners            By                  Amy Dobrzynski, Bureau of Competition                     Last month, Judge Tanya S. Chutkan of the United States District Court for the District of Columbia granted the FTC’s Motion for Preliminary Injunction, halting Wilhelmsen’s proposed acquisition of Drew Marine following a 10-day hearing. The opinion, a redacted version of which is now public, contains insights on esoteric but important areas of merger analysis of interest to antitrust practitioners, namely cluster markets, product markets for targeted customers, and the use of economic tools such as the Gross Upward Pricing Pressure Index (GUPPI) and merger simulation to predict competitive effects.The BackstoryIn a complaint filed in February 2018, the FTC alleged that Wilhelmsen and Drew Marine are the two largest competitors for the supply of marine water treatment products and services to global fleets and each other’s closest competitor. The companies compete to offer products and services that treat water in operational equipment aboard ships, including engine cooling water and boiler water. The FTC alleged that owners and operators of global fleets benefit from competition between Wilhelmsen and Drew Marine, and that the proposed acquisition threatened to eliminate those benefits, thereby substantially reducing competition in violation of the Clayton Act.The FTC called eight fact witnesses and two expert witnesses at the hearing, in addition to highlighting evidence from Defendants’ business documents. After considering all the evidence presented, the court found that the FTC had established a strong prima facie case of anticompetitive effects based on high market concentration and had bolstered that case with additional evidence that the proposed acquisition would substantially lessen competition. The court did not accept the Defendants’ rebuttal arguments regarding ease of entry and expansion, buyer power, and efficiencies. Following the court’s decision, Wilhelmsen abandoned the transaction.Cluster Market: Marine Water Treatment Products and ServicesThe FTC’s alleged relevant product market grouped boiler water treatment (BWT) products and services and cooling water treatment (CWT) products and services together in a cluster market of marine water treatment products and services. BWT and CWT products and services are used to treat water in different systems on a vessel—boilers and engines—and are not reasonably interchangeable substitutes for each other. However, the FTC argued that it was appropriate to cluster BWT and CWT products and services into one relevant market for analytical convenience because they are subject to similar competitive conditions. Defendants argued that this cluster market was either over-inclusive—because it combined two product categories that are not reasonably interchangeable—or under-inclusive—because it left out other categories of marine products and services that the Defendants sell to the same customers.The court concluded that the FTC appropriately clustered BWT and CWT products and services into a single relevant market for analytical convenience given the similar competitive conditions and market dynamics relating to both of these types of marine water treatment products and services. This analysis reaffirms the market definition principles addressed by the court in FTC v. Staples, Inc. There, the court also relied on similar competitive conditions to find a cluster market of consumable office supplies, including a broad range of non-substitute office products, such as pens and binder clips, while excluding certain office products, such as ink and toner, which faced different competitive conditions. Importantly, in both cases, market definition was bolstered by extensive evidence showing likely anticompetitive effects.Targeted Customers: Global FleetsThe Horizontal Merger Guidelines §4.1.4 counsel that a market based on targeted customers may be appropriate in certain circumstances, including where “prices are individually negotiated and suppliers have information about customers” that would allow for price discrimination. Price discrimination can affect market definition, the measurement of market shares, and the evaluation of competitive effects.Using this analysis, Judge Chutkan found that global fleets constitute a distinct customer group. Compared to local or regional fleets, these customers have distinct needs, including centralized negotiation of contracts, worldwide delivery, product consistency, and product availability. The FTC’s testifying economic expert, Dr. Aviv Nevo, defined global fleets as customers with ten or more globally trading vessels. According to the court, there need not be a magic number or dividing line driving the threshold cutoff for the boundary of the targeted customer group; rather a reasonable cutoff may be useful and necessary for “practical analytical purposes.” The court found that the “choice of ten globally trading vessels was not intended as an exact statement of the threshold cutoff of globally trading vessels a fleet must have in order to manifest distinct product-related needs and preferences.” Rather, this cutoff served as part of a reasonable and appropriate method of estimating the targeted customer group. Dr. Nevo conducted additional sensitivities using other reasonable estimates of the boundary of the targeted customer group to check the robustness of this threshold, showing directionally consistent results supporting the FTC’s targeted customer market definition.This analysis tracks similar inquiries performed by the court in FTC v. Sysco and FTC v. Staples, Inc. In Sysco, the court found that national customers have a number of distinct requirements for broadline foodservice distribution services, including a wider variety of services and national footprint. The court confirmed that the needs of customers operated to define the relevant product market, as regional suppliers were insufficient options for national customers. In Staples, the court found a targeted customer market made up of large business-to-business customers that spent at least $500,000 on office supplies annually. In each of these cases, the determination that the merger was likely to substantially lessen competition was rightly focused on post-merger competition faced by these targeted customers.Economic Tools: GUPPIs and Merger SimulationIn addition to evidence of head-to-head competition and high market shares, Judge Chutkan also considered the results of different modeling techniques used by Dr. Nevo to assess the likelihood of competitive harm. Dr. Nevo calculated several variations of GUPPIs and used a merger simulation. Both techniques yielded results that were consistent with other evidence that the merger likely would result in anticompetitive harm. While the data in merger cases are often imperfect, a quantitative analysis can bolster documentary evidence and witness testimony to help courts assess the likely effects of a merger.
- Leadership Changes in the Anticompetitive Practices Division Leadership Changes in the Anticompetitive Practices Divisionbjames@ftc.govMay 29, 2020 | 9:45AM  Leadership Changes in the Anticompetitive Practices Division            By                  Ian Conner, Bureau of Competition                    I am pleased to announce the appointment of a new manager in the Bureau of Competition: Patty McDermott has joined the Anticompetitive Practices Division as Deputy Assistant Director. Patty has served in the FTC’s Health Care Division since 2014, and received the Commission’s Louis D. Brandeis Award in 2018 for leading the trial team in FTC v. AbbVie. Before joining the FTC, Patty worked in private practice and clerked for the Honorable Cameron McGowan Currie in the U.S. District Court for the District of South Carolina. We are delighted to congratulate Patty and welcome her to her new role.