Antitrust Compliance Update. D. Bruce Hoffman David A. Higbee Hunton & Williams LLP April 17, 2012

Transcription

1 Antitrust Compliance Update D. Bruce Hoffman David A. Higbee Hunton & Williams LLP April 17, 2012

2 Overview I. Background II. Overview of Antitrust Law and Recent Enforcement Highlights III. International Aspects: E.U. and Beyond 2

3 What s New in Antitrust? New people Sharis Pozen leaving DOJ at end of month; new Acting AAG will be Joe Wayland pending confirmation of nominee Bill Baer Maureen Ohlhausen sworn in as FTC Commissioner, April 4, 2012 DOJ Auto parts cartel investigation AT&T/ T-Mobile merger blocked H&R Block merger blocked E-Books case against Apple and book publishers FTC Pharmacy Benefit Managers (PBMs) (Express Scripts/Medco Health Solutions cleared) Hospitals (ProMedica; Phoebe Putney; OSF/Rockford Hospital) Intel Contracts that Reference Rivals ( CRRs ) 3

4 Enforcement President Obama called for reinvigorated antitrust enforcement during his campaign: DOJ appears to be more aggressive in civil conduct cases. FTC continues to aggressively enforce the competition laws. Defendants have won all but one antitrust case at the Supreme Court since Bell Atlantic Corp. v. Twombly makes it harder for plaintiffs to allege anticompetitive activity without specific details; Verizon Communications Inc. v. Law Offices of Curtis V. Trinko limits claims against single firm conduct (as opposed to conspiracies); Leegin Creative Leather Products v. PSKS Inc. abandoned a long-established per se rule against resale price maintenance. 4

5 US Department of Justice Antitrust Division Executive agency Dual criminal/civil jurisdiction Shares merger jurisdiction with FTC 5

6 U.S. Federal Trade Commission Civil jurisdiction: no criminal powers Shares merger jurisdiction with DOJ 5 FTC Act: unfair competition powers, consumer protection, privacy, advertising 6

7 Antitrust from 30,000 Feet Antitrust laws seek to ensure competitive markets. Some conduct (e.g., price-fixing) is clearly prohibited; other conduct creates antitrust risk. Enforcement: U.S. Dept. of Justice ( DOJ ) and Federal Trade Commission ( FTC ); states and foreign antitrust enforcement agencies; private rights of action. Penalties: jail time for individual employees; fines for companies and individuals; treble damages in private litigation; Injunctive, conduct or structural relief; suspension or disbarment from eligibility for government contracts; adverse publicity; impact on stock price. 7

8 U.S. Antitrust Laws Sherman Act Section 1 anticompetitive agreements Sherman Act Section 2 monopolization & attempted monopolization Clayton Act Section 7 merger review FTC Act Section 5 unfair methods of competition Robinson-Patman Act price discrimination 8

9 Section 1: Anticompetitive Agreements I love the beauty, the break from family life, and the camaraderie but what will always make this place for me is the price-fixing. 9

10 Section 1: Anticompetitive Agreements 1 Sherman Act prohibits agreements that unreasonably restrict competition. General rule: only naked agreements between competitors not to compete are per se illegal: cartels and price-fixing; market allocation and market division. Cartels are the top priority for government enforcers. 10

11 Section 1: Anticompetitive Agreements Most conduct is analyzed under the rule of reason : court weighs anticompetitive effects against procompetitive benefits; fact-based analysis: hard to resolve on a motion to dismiss; can lead to expensive, time-consuming litigation. Heavily economic and document/data intensive. 11

12 Section 1: Recent Enforcement Criminal Enforcement - Cartels Fines of over $567 million in FY2012 alone Auto parts case: Yazaki Corporation fined $470 million. Investigation yielding large fines and prison sentences. Civil Enforcement Interchange fees AMEX, MasterCard, Visa MasterCard and Visa have settled E-Book pricing Three publishers settled Apple, Macmillan, and Penguin have not settled Agreements not to hire in the tech world Adobe, Apple, Google, Intel, Intuit, and Pixar prohibited from colluding to prevent employees from one company to be hired by another company 12

13 Section 2: Monopolization 2 Sherman Act prohibits monopolization, attempted monopolization, and conspiracy to monopolize. Monopolization : the willful acquisition or maintenance of monopoly power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident. (U.S. Supreme Court in Trinko (2004)) Areas of particular antitrust risk include: long-term exclusivity agreements that tie up major suppliers or customers; tied or bundled packages that make it more difficult for other firms to compete; predatory pricing below cost to drive competitors out of business; termination of existing supply relationship with a competitor. 13

14 Section 2: Exclusionary Conduct No single test; variety of tests tailored to specific conduct. [A]ttempting to exclude rivals on some basis other than efficiency. Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 605 (1985). No economic sense test (previously advocated by DOJ). Balancing test; like rule of reason (D.C. Circuit). Even monopolists can compete vigorously. The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system. The opportunity to charge monopoly price at least for a short period is what attracts business acumen in the first place; it induces risk taking that produces innovation and economic growth. To safeguard the incentive to innovate, the possession of monopoly power will not be found unlawful unless it is accompanied by an element of anticompetitive conduct. Trinko, 540 U.S. at

15 Section 2: Recent Enforcement United Regional Healthcare DOJ filed suit in February 2011; settled in September Section 5: Recent Enforcement Intel Settled with FTC in 2010 Sued by AMD; settled for $1.25 billion 15

16 Robinson-Patman Act Robinson-Patman Act prohibits sellers from discriminating in price between similarly-situated buyers when such discrimination harms competition. Heavily criticized: hard to reconcile with modern antitrust policy and economic theory but can still be dangerous. Government enforcement is extremely rare but private actions are not uncommon. Narrow criteria for liability: requires simultaneous sales to different buyers at different prices (a bid is not a sale!); sales must be of the same product; defenses include cost justification, meeting competition, and the functional availability of the lower price to both buyers. 16

17 Section 7: Mergers I don t know how to draw a merger you ll have to go back and kill them. 17

18 Section 7: Mergers Mergers and acquisitions may be prohibited or made subject to conditions (e.g., divestitures) if they harm competition in one or more antitrust markets. includes joint ventures and other collaborations HSR process: notification to DOJ & FTC; waiting period; Second Request ; result: clearance/remedies/challenge. 18

19 Mergers: Recent Enforcement DOJ: H&R Block/TaxACT blocked AT&T/T-Mobile merger blocked FTC: Express Scripts/Medco allowed Seeking Supreme Court review for Phoebe Putney/ Palmyra Park OSF/Rockford County blocked Acquisition and use of patents 19

20 Merger Guidance Key compliance issue: document creation and maintenance. M&A, corporate strategic planning, business development Bad documents can be taken out of context in merger enforcement 20

21 International Antitrust Enforcement We would like to request a change of venue to an entirely different legal system. 21

22 Global Spread of Antitrust Laws:

23 to today 23

24 International Antitrust Law Most major jurisdictions have antitrust laws and enforcement agencies: European Union (including individual Member States); China; Japan; Most systems of antitrust law resemble U.S. law but can have different standards and/or additional rules. Key points: conduct with international effects can raise international antitrust issues; foreign conduct with domestic effects can raise issues under U.S. antitrust laws. 24

25 International Antitrust Enforcement Outside the United States, the European Commission is the most aggressive antitrust enforcer. Article 101 TFEU: anticompetitive agreements Article 102 TFEU: abuse of dominant position EU Merger Regulation: merger control Jurisdiction is based on effects in European Union even if conduct is in the United States. Approach to single-firm (i.e., monopolization) conduct is more intrusive than U.S.: In the U.S., cowboy capitalism is welcomed, while gentlemanly competition is demanded in the E.U. 25

26 International Antitrust Enforcement Differences in monopolization doctrine in E.U.: Article 102 also prohibits exploiting a dominant position (e.g., by charging monopoly prices). But enforcement is rare. Broader refusal to deal liability: no requirement of preexisting relationship; poor supply to a competitor can constitute constructive refusal to deal ; above-cost price squeeze can be illegal. See 2009 Communication on Enforcement Priorities under Article 102. Case C-481/01 IMS Health (2004): a refusal to license is unlawful if it: (a) prevents the emergence of a new product; (b) is objectively unjustified; and (c) excludes all competition. No proof of actual anticompetitive effect is required in the E.U.: conduct must be capable of having, or likely to have, such an effect. Case T-219/99 British Airways (2003). 26

27 International Antitrust Enforcement Enforcement of antitrust laws continues to spread outside U.S. and E.U. China: New Anti-Monopoly Law ( AML ) took effect in 2008; modeled on E.U. law. Article 17 prohibits dominant firms from selling at unfairly high prices or buying at unfairly low prices. What constitutes unfair is not defined. This appears to reflect a continued desire by the government to regulate pricing. Concern that AML will be used to gain access to IP of multinational firms. India: Newly active antitrust regime. Korea: Prepared to apply meaningful scrutiny to U.S. firms active in Korea. E.U. Member States: Active at the national level. 27

28 Questions? 28

29 Thank you! Bruce Hoffman David Higbee

30 Antitrust Compliance Update D. Bruce Hoffman David A. Higbee Hunton & Williams LLP April 17, 2012