July American Bar Association Section of Antitrust Law by jolinmilioncherie


									                  Antitrust Update
                for In-House Counsel
  American Bar Association
   Section of Antitrust Law
    Corporate Counseling
                July 25, 2006
July 25, 2006                          0

        Bill Baer: DOJ/FTC Civil and Criminal
         Enforcement and AMC Developments

        Debbie Feinstein: Merger Developments

        Jonathan Gleklen: Civil Litigation Developments

        Marleen Van Kerckhove: Developments in

July 25, 2006                                              1
 DOJ and FTC Civil and Criminal Developments
      and Developments at the Antitrust
         Modernization Commission

                  Bill Baer

July 25, 2006                                  2
FTC v. Austin Board of Realtors
 FTC challenges ABOR policy of not listing “exclusive agency listings”
  on public websites
     – Exclusive agency listings give the home seller the right to sell on its own
       without paying the selling broker a commission – they’re often used by
       discount brokers
 FTC says:
     – ABOR rule is joint action by competitors with market power – a refusal to
       deal except on specified terms
     – Consumers are harmed by discouraging use of lower-cost listings
     – No procompetitive justifications; not needed to prevent “free riding”
       because rules already prevent FSBO listings where no broker is paid
     – We told real estate brokers not to do this in a half-dozen cases in the
       1980s and 1990s involving refusal to include exclusive agency listings in
       the MLS
 Settled by consent decree: stop it and don’t do it again

July 25, 2006                                                                        3
FTC Continues Review of Pharmaceutical
Patent Settlements
 Denial of cert. in Schering seems not to have slowed the
 Cephalon reveals in an SEC filing that the FTC is looking
  at its settlements with Mylan, Barr, Ranbaxy and Teva in
  patent cases relating to its narcolepsy drug Provigil
     – No official word from the FTC
 Bristol-Myers and Sanofi settlement with Apotex on Plavix
     – In late June the parties amended a March settlement agreement to
       permit Apotex to enter earlier
     – Parties say the FTC is investigating whether the settlement
       nevertheless violates an earlier FTC consent decree

July 25, 2006                                                        4
FTC/DOJ Hearings on Exclusionary Conduct

 Hearings on July 18 addressed unilateral refusals to
  deal: when must a monopolist deal with its competitors?
       – Alternatives
          • Bill Kolasky – Rule of reason style balancing, with no special
             rule for IP
          • Hew Pate, Mark Whitener – Never, because it decreases
             incentives to invest and is unworkable (e.g. requires price-
          • Bob Pitofsky – Rare, but never say never
          • Steve Salop – Whenever consumer welfare is harmed (with
             complicated calculations of consumer welfare)

July 25, 2006                                                                5
AMC Hearing on July 13
 Standards for Exclusionary Conduct
     – Commissioners believe current case law generally takes the
       correct approach, that clear standards are desirable, and that
       further development should come from the courts, not Congress
     – Concern about unclear standards for refusals to deal and bundling
 Market Power
     – All but 2 commissioners support Independent Ink’s elimination of a
       presumption of power from a patent
 State Action Doctrine
     – Significant dispute on the AMC about whether the state action
       doctrine is too lenient (with a substantial minority favoring limiting
       the doctrine to cases involving government compulsion)

July 25, 2006                                                                   6
AMC Hearing on July 13 (cont.)
 Exemptions and Immunities
     – General agreement that exemptions should be disfavored, with a
       strong consensus favoring automatic sunset provisions
 Regulated Industries
     – Substantial minorities of the AMC favor giving the DOJ and FTC
       the exclusive right to review the antitrust consequences of
       mergers or requiring other agencies (e.g. the FCC) to give DOJ or
       FTC determinations presumptive weight.
     – Small majority of the AMC expresses concern about reading
       Trinko to displace antitrust law in regulated industries

July 25, 2006                                                           7
DOJ Criminal Enforcement Developments
 Air Cargo investigation intensifies: UPS and FedEx announce
  receipt of grand jury subpoenas.

 New orthopedic implant investigation: Biomet, DePuy (a unit of
  J&J), Smith & Nephew, Stryker and Zimmer announce receipt of
  grand jury subpoenas and/or execution of search warrants.

 Flint Energy Services and a regional manager for Flint agreed to
  plead guilty to participating in a bid-rigging conspiracy in connection
  with bids submitted to BP. Flint is a natural gas pipeline
  construction company.

 President of a marine products company in California agreed to
  plead guilty to bid-rigging with respect to the sale of foam-filled
  marine fenders and buoys.

July 25, 2006                                                               8
                Merger Developments

                  Debbie Feinstein

July 25, 2006                         9
Hologic/Fischer Imaging
 Non-reportable transaction consummated in 2005
 Breast cancer screening and diagnosis – stereotactic
  breast biopsy systems (SBBSs)
 FTC alleged “virtual monopoly”
     – Giotto, only other competitor, has minimal sales
     – Entry unlikely because of patent position of combined company
 Order required Hologic to divest to Siemens the Fischer
  SBBS assets
     –    Up-front buyer set forth in consent
     –    Siemens already a competitor in breast cancer screening
     –    Consent contained various covenants not to sue
     –    Consent required Fischer not to interfere with Siemens ability to
          deal with vendors

July 25, 2006                                                                 10
 Linde and BOC supply industrial and medical gases and
  related supplies
 Product markets are individual gases distributed by
  specific means
 Geographic markets for liquid products are regional due
  to high transportation costs
 Both coordinated and unilateral affects alleged for liquid
  oxygen/liquid nitrogen
 In helium, Linde was smallest of 5 rivals; only coordinated
  interaction alleged
 Divestiture required
     – No up-front buyer in liquid oxygen/liquid nitrogen
     – Up-front buyer required in helium

July 25, 2006                                               11
ATT/SBC – The Tunney Act Dispute
 DOJ and parties reached settlement last year and
  transaction closed
     – Requires ATT and Verizon to provide competitor access to fiber
 Tunney Act requires court to approve DOJ settlements
 Congress bolstered Tunney Act in 2004 to require judicial
  review of terms of settlement
 Court expressed concern about decree and held a
  hearing earlier this month
 AAI has requested permission to intervene on the basis
  that the hearing record is incomplete – though it did not
  put in comments during 60 day review period

July 25, 2006                                                           12
                Civil Litigation Developments

                     Jonathan Gleklen

July 25, 2006                                   13
Section 1: Minimum Advertised Prices

 Worldhomecenter.com, Inc. v. Thermasol, 2006 WL
  1896344 (E.D.N.Y. July 10, 2006)
       – Plaintiff distributes Thermasol products on the Internet and
         claims injury from a new MAP policy that bans advertising prices
         less that 20% below MSRP.
       – Issue: Where’s the conspiracy?
           • Court cites Twombly (cert. granted) and finds a barebones
             allegation that the MAP policy is the product of an agreement
             between Thermasol and competing distributors sufficient.
       – Elephant in the room: legality of a MAP policy not linked to
         promotional support.

July 25, 2006                                                            14
Section 1: Boycotts and Exclusive Dealing

 Insignia, Inc. v. News America Mktg. In-Store, Inc., 2006
  WL 1851137 (D. Minn. June 30, 2006)
       – Insignia alleges a conspiracy between NAMI (a competitor) and
         NAMI’s grocer store customers.
       – Motion to dismiss denied:
           • Evidence of conspiracy based upon identical letters sent by
             grocery stores to their managers, and alleged
             communications between the stores
           • Group boycott claim stated because grocery stores have
             87% combined share
           • Exclusive dealing claim stated because plaintiff alleges
             foreclosure from 87% of the potential market

July 25, 2006                                                              15
 In re Abbott Norvir Antitrust Litig., 2006 WL 1867677
  (N.D. Cal. July 6, 2006)
     – Abbott raises the price of Norvir, a “booster” for AIDS drugs, by
       400%. Plaintiffs challenge this as an attempt to monopolize, by
       steering customers to Abbott’s Kaletra, a single pill including both
       Norvir and another protease inhibitor (“PI”).
     – Abbott’s motion for summary judgment is denied:
                • Disputed issue of fact on monopoly power.
                • Leveraging monopoly in the booster market via exercise of patent
                  rights can be monopolization of the PI market.
                • High prices can be antitrust injury because they raised barriers to
                  entering a second market.
                • Citing ITS v. Kodak (9th Cir.), rejects Abbott’s “patent immunity”
                  defense because a disputed issue of fact over whether patents cover
                  the “boosted” market, or just the “booster” market and whether it has
                  granted an implied license to use the patents in the “boosted” market.
July 25, 2006                                                                         16
Market Definition

 Mumford v. GNC Franchising LLC, 2006 WL 1835947
  (W.D. Pa. June 29, 2006)
       – Plaintiff need not allege a relevant market to withstand a motion
         to dismiss, but if it does allege a relevant market dismissal may
         be appropriate if the facts alleged fail to support the alleged
                • Court rejects market limited to supplies needed for a GNC
                • Court rejects Kodak-style aftermarket because GNC supplies are
                  interchangeable with non-GNC supplies (ignoring whether there is
                  elasticity between supply prices and franchise prices)

July 25, 2006                                                                        17

 Mumford v. GNC Franchising LLC, 2006 WL 1835947
  (W.D. Pa. June 29, 2006)
       – Court holds that sales from a manufacturer to a wholly-owned
         subsidiary do not count as sales for purposes of the R-P Act.

July 25, 2006                                                            18
Other Issues: Standing
 Tal v. Hogan, --- F.3d ----, 2006 WL 1775371 (10th Cir. June 29, 2006)
     – Affirms district court decision denying standing to the president of
       companies allegedly injured by antitrust violations because the claims
       belong to the companies and “injury to his reputation, dignity and
       emotional damages are not the type of injuries redressable by the
       antitrust laws.”
 James Cape & Sons Co. v. PCC Construction Co., --- F.3d ----, 2006
  WL 1751886 (7th Cir. June 28, 2006)
     – Affirms dismissal of antitrust claim by construction company claiming it
       was underbid by colluding competitors because the injury is not antitrust
 Alaska Gasline Port Authority v. ExxonMobil, 2006 WL 1718195 (D.
  Alaska June 19, 2006)
     – Plaintiff lacks standing to complain about producers’ refusal to supply gas
       because it lacks “intent and preparedness” to build a pipeline

July 25, 2006                                                                   19
Other Issues: Exemptions & Immunities
 State Action
     – Ticket Center, Inc. v. Banco Popular, --- F.Supp.2d ----, 2006 WL
       1991737 (D.P.R. July 18, 2006)
                • Exclusive contract between ticketing agent and state-owned stadium
                  not immunized under Parker v. Brown because there was no “active
 Local Government Immunity
     – Shepard v. City of Batesville, 2006 WL 1896206 (N.D. Miss. July
       11, 2006)
                • Dismisses claims against city claiming it participated in a conspiracy
                  with competing construction companies. Rejects the argument that
                  the Local Government Antitrust Act requires the “active supervision”
                  of Parker v. Brown.

July 25, 2006                                                                          20
Other Issues: Exemptions & Immunities (cont.)

 Noerr-Pennington
      – Hynix v. Rambus, 2006 WL 1883353 (N.D. Cal. July 7, 2006)
         • Grants summary judgment to Rambus, holding that filing of
           patent infringement action is immune under Noerr-Pennington.
         • But Rambus does not seek summary judgment on any claim
           that the lawsuits were part of an unlawful course of conduct
           under Kobe v. Dempsey Pump.

 July 25, 2006                                                       21
                Developments in Europe

                Marleen Van Kerckhove

July 25, 2006                            22
Sony BMG Merger Clearance Overruled
 The investigation
     – January 2004, Sony and Bertelsmann notify merger of their global
       recorded music activities to EU
     – In May 2004, EU Commission expresses concern over
       reinforcement of collective dominant position amongst 5 majors,
       but in July 2004 clears deal without conditions
 The appeal
     – In December 2004, Impala, association of independent music
       production companies, challenges clearance decision before EU
       Court of First Instance (“CFI”)
 The judgment (July 13th, 2006)
     – CFI annuls clearance for failure to state reasons to requisite legal
       standard and for manifest error of assessment re findings of
       collective dominance

July 25, 2006                                                             23
EU Tightens Guidelines on Setting Fines

 Revision of 1998 Guidelines to tighten policy of fines
 Maximum level remains at 10% of total world-wide
 Three important changes:
     – New entry fee for major infringements (e.g. cartels) of 15% to 25%
       of annual revenue in relevant product
     – Fines linked to individual companies’ revenue in relevant product:
       up to 30% multiplied by number of years of infringement
     – Stricter on repeat offenders
        • Up to 100% increase (instead of 50%)
        • For each prior infringement
        • Also taking into account findings of infringement by national
           competition authorities

July 25, 2006                                                          24
Penalty Payment of EUR 280.5 million Imposed
on Microsoft by EU
 Background
       – In March 2004, EU Commission finds that Microsoft has abused
         a dominant position (Art 82 EC) by, inter alia, failing to provide
         interoperability information to competing developers of work
         group server OS
       – It orders Microsoft to make such information available on
         reasonable terms
       – Microsoft appeals the Decision and also applies to the Court to
         have the remedies suspended pending the appeal – the Court
         refuses to grant suspension – the main appeal is still pending
       – EU Commission announces that it will impose daily penalty of
         EUR 2 million as from December 15, 2004 if Microsoft fails to
         comply with the obligations imposed

July 25, 2006                                                             25
EU Imposes Penalty Payment of
EUR 280.5 million on Microsoft
 Working out specifics of remedies
     – Monitoring Trustee gives technical assistance to EU Commission
       as regards Microsoft’s compliance
     – EU Commission also appoints external technical advisors,
       TAEUS, to advise it as regards Microsoft’s compliance
     – Intense negotiations between EU Commission and Microsoft as to
       what constitutes ‘complete and accurate’ information – extensive
       input from competitors
 EU penalty decision (July 12th, 2006)
     – EU Commission imposes retroactive penalties of EUR280.5m plus
       daily penalties of EUR1.5m, and announces its intention to
       increase daily penalties to EUR3m if Microsoft fails to comply by
       July 31st

July 25, 2006                                                         26
EU Intensifies Payment Card Investigations

 June 30th: EU sends further Statement of Objections to
  MasterCard for alleged infringement of Art 81 EC
     – Supplements earlier SO from September 2003
     – Focuses on cross-border interchange fees paid by merchant
       banks to card issuing banks
 July 20th: EU sends Statement of Objections to
  Groupement des Cartes Bancaires
     – Replaces previous SO to French bank members of Groupement
     – Alleges that tariffs are set by Groupement at such level as to
       hinder issuing of cards by new entrants at lower price than
       incumbent banks
 Preliminary steps – separate from sector enquiry

July 25, 2006                                                           27
EU Challenges Certain Aspects of SkyTeam
Global Airline Alliance
 Involves Aeromexico, Air France, Alitalia, Continental
  Airlines, CSA, Delta Airlines, KLM, Korean Air Lines and
 Statement of Objections issued on June 19th
     – No objections to alliance as a whole
     – Concerns about a limited number of EU-third country routes
     – Issue is whether better connectivity, cost savings and synergies
       lead to a better overall deal for passengers
 Preliminary step
 Complements earlier analysis of Air France/KLM merger
  and Air France/Alitalia alliance

July 25, 2006                                                             28
                Arnold & Porter’s Antitrust Practice
                        and Speaker Bios

July 25, 2006                                          29
Recognition of Our Antitrust Expertise
 Chambers USA
       – Ranked #1 antitrust law firm in DC by
         Chambers USA 2006-2007 for the fifth
         consecutive year
       – 8 Arnold & Porter antitrust lawyers ranked as
         “Leading Individuals” by Chambers
 FTC Watch
       – Twice surveyed FTC staff to rate firms on
         effective representation
       – Ranked Arnold & Porter first both times
 PLC Global Counsel's Competition Super
  League 2005
       – Ranked Arnold & Porter LLP among the top
         ten firms in the world
       – Recommended the firm for its U.S. and EU
         competition advice
July 25, 2006                                            30
Recognition of Our Values

    Fortune’s “One Hundred Best
     Companies to Work For” in 2003, 2004,
     2005, and 2006

    Working Mother Magazine’s "100 Best
     Companies for Working Mothers" in
     2002, 2004, and 2005

    Thomas L. Sager Award from the
     Minority Corporate Counsel Association
     in honor of the firm's recruitment,
     retention, and promotion of minority

July 25, 2006                                 31
Bill Baer heads Arnold & Porter’s antitrust group. He represents a broad
range of companies in US and international cartel investigations, mergers
and acquisition reviews by antitrust enforcers (FTC, DOJ and European
Commission), and antitrust litigation. He divides his time between the firm’s
Washington, DC and Brussels offices.

Representative Matters
      Micron Technology Inc., in price-fixing investigations and follow-on litigation
      General Electric Company, including mergers & acquisitions, class action litigation, and
       securing acquittal on price fixing charges
      Pfizer, in its $60 billion acquisition of Pharmacia Corporation
      Cisco Systems, in mergers & acquisitions
      SAP, in mergers & acquisitions and other matters
      Visa, in class action litigation
Government Experience
      Director, Bureau of Competition, Federal Trade Commission
      Assistant General Counsel & Director of Congressional Relations, FTC
      Attorney Advisor to the Chairman, FTC
Awards & Honors
      Named the leading competition lawyer in the world by International Who's Who of Business Lawyers (2006)
      Named to The Best Lawyers in America® 2007 for Antitrust Law
      Named to Euromoney's Expert Guides to the World's Leading Lawyers "Best of the Best 2006" for Antitrust
      LawDragon500, one of the “Top Leading Litigators in America” (2006)
      Legal Times Leading Lawyers in Antitrust 2005
      Chambers USA: America’s Leading Lawyers for Business. Leading Antitrust/Competition Attorney (2003, 2004, 2005, and 2006).
      Practical Law Company, Which Lawyer? Leading Competition Attorney in Washington, D.C. (2005-06)

    July 25, 2006                                                                                                           32
Deborah Feinstein is a leading antitrust lawyer, principally focusing on merger
and acquisition matters before the Federal Trade Commission (FTC) and
Department of Justice (DOJ). She is named to The Best Lawyers in America®
2007 for Antitrust Law and Global Competition Review named her on its
international list of the “Top 100 Women in Antitrust.” Ms. Feinstein has advised
clients on hundreds of transactions, involving virtually all sectors of the

Representative Matters
     Loews Cineplex Entertainment Corporation in its merger with AMC Entertainment Inc. Together the firms
      will own or operate 334 theatres nationwide. The matter was resolved with the DOJ and various state attorneys
      general with the divestiture of only 10 theatres.
     The Kroger Co. in its $13.5 billion merger with Fred Meyer, Inc., successfully negotiated with the FTC to require the divestiture of
      only 8 stores. The combined company became, at the time, the largest grocery retailer in the United States.
     General Electric Corporation’s $2.1 billion acquisition of Instrumentarium OYJ, a manufacturer of high-technology medical
     Phillip Morris and Kraft in their $18.9 billion acquisition of Nabisco Holdings Corporation, creating the world’s largest food
      company. Negotiations with the FTC resulted in the divestiture of only minimal assets.
     PepsiCo in its $14 billion acquisition of The Quaker Oats Company. The merger strengthened PepsiCo's food businesses
      and added Gatorade, the leading sports drink brand, to its portfolio.
     Genzyme's acquisition of Novazyme. The acquisition combined the only two companies performing research and development on
      a rare disease.
Government Experience
     Federal Trade Commission, Bureau of Competition, Assistant to the Director and Attorney Adviser to Commissioner Yao
Awards & Honors
     Chambers USA: America’s Leading Business Lawyers. Leading Antitrust/Competition Attorney (2003, 2004, 2005, and 2006).
     Global Competition Review's international list of "Top 100 Women in Antitrust" (2004).

    July 25, 2006                                                                                                                      33
Jonathan Gleklen’s antitrust practice encompasses civil litigation, government
investigations, counseling, and transactional matters with a particular focus on
antitrust and intellectual property issues affecting clients in high technology
industries. He was one of four Americans identified by Global Competition
Review as among the “world’s 40 brightest young antitrust lawyers and
economists” in its 40 Under 40 issue.

Representative Transactions
     Adobe in its $3.4 billion acquisition of Macromedia, a leading developer of software used by creative
      professionals and web developers. Transaction permitted to close without divestitures after second request.
     SAP AG as a third-party witness in the DOJ’s challenge to the Oracle/PeopleSoft merger.
     GE Security in its $900 million acquisition of InVision Technologies, a maker of explosive detection equipment. The transaction
      combined InVision’s CT-based technologies with GE’s complementary ion-detection technologies. InVision’s nondestructive
      testing business was divested pursuant to a consent decree.
     GE Inspection Technologies in its $437 million acquisition of Agfa’s nondestructive testing business.
Representative Litigation
     Medical Supply Chain v. General Electric. As lead counsel to GE, obtained dismissal of Sherman Act § 1 and § 2 claims alleging
      foreclosure of an online healthcare marketplace. Defended dismissal on appeal and obtained reversal of district judge’s refusal
      to award sanctions.
     CCS v. Xerox. Lead counsel to Xerox in a § 2 case challenging Xerox’s refusal to sell unpatented parts to a service competitor.
     Independent Service Organizations Antitrust Litigation. As counsel to Xerox, obtained summary judgment on monopolization
      claims and defended judgment on appeal in precedent-setting case on refusals to sell or license intellectual property. Obtained
      judgment of more than $1 million plus attorney’s fees on Xerox’s copyright infringement counterclaims.
Awards & Honors
     One of four U.S. antitrust lawyers identified as among the “world’s 40 brightest young antitrust lawyers and economists under
      40” by Global Competition Review (February 2004).
     Chambers USA: America’s Leading Business Lawyers. Named a leading Antitrust/Competition Attorney (2006-2007).

    July 25, 2006                                                                                                                     34
Marleen Van Kerckhove leads Arnold & Porter’s European Competition Practice
and its Brussels office. Her practice encompasses advice and representation
before EU and national antitrust agencies on merger control, abusive conduct,
price fixing and other restrictive practices, as well as litigation before European
courts. She has advised extensively on the application of EU competition law to
the pharmaceutical sector, and on the interplay between antitrust and
intellectual property law.

Representative Matters
     Pfizer in its acquisition of Warner-Lambert. Obtained clearance in the EU and multiple other jurisdictions world-wide.
     Pfizer in its acquisition of Pharmacia. Obtained clearance in the EU and multiple other jurisdictions world-wide.
     General Electric in its proposed acquisition of Honeywell, assisting both with the notification to the European Commission and the
      subsequent appeal to the Court of First Instance.
     SBC in its acquisition of AT&T. Obtained clearance in multiple jurisdictions world-wide.
     Cisco in its acquisition of Scientific-Atlanta. Obtained clearance in the EU.
     Boston Scientific in its acquisition of Guidant. Obtained clearance in the EU and multiple other jurisdictions world-wide.
     Group of consumer electronics companies before the European Commission with respect to an Article 82 EC Treaty complaint
      regarding abusive licensing conduct.
     European Federation of Pharmaceutical Industries Associations (EFPIA) before the Court of First Instance in its intervention
      supporting AstraZeneca in its appeal against the European Commission’s decision finding an Article 82 infringement with respect
      to certain of its alleged regulatory and IP conduct.
Awards & Honors
     Global Competition Review’s International Who's Who of Competition Lawyers
     Chambers Global, Leading Antitrust/Competition Attorney
     PLC Global Counsel's Competition Law, highly recommended for competition/antitrust in the EU and Belgium
     PLC Global Counsel's Life Sciences, highly recommended for competition/antitrust in the EU and Belgium
     Global Competition Review's international list of "Top 100 Women in Antitrust" (2004)

    July 25, 2006                                                                                                                  35

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