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					Antitrust Update for In-House Counsel
        ABA Section of Antitrust Law
      Corporate Counseling Committee

                                       September 21, 2005

    • Washington News
         Debra J. Pearlstein
    • Horizontal Restraints, Vertical Restraints and
         Scott Martin
    • Mergers and Acquisitions
         Steven K. Bernstein
    • Antitrust and Intellectual Property
         Adam C. Hemlock
    • Consumer Protection
         Helene D. Jaffe
    • EU Update
         Doug Nave

    Washington News

    Debra J. Pearlstein

Washington News
Department of Justice

   Tom Barnett, now Acting Assistant Attorney General, has
    been nominated to fill the post
       In the acting position since June 2005 and previously Deputy
        Assistant Attorney General for Civil Enforcement since April
       He led the DOJ‟s team on Oracle/Peoplesoft. Safe
        assumption is that DOJ will take a hard look at Oracle/Siebel
        deal just announced.

Washington News
Department of Justice

 Personnel Changes
     Gerald F. Masoudi named as Deputy Assistant Attorney
      General for International, Policy and Appellate matters on
      September 1st
      • Comes to DOJ from Deputy Chief Counsel post at FDA (joined
        FDA in 2004)
      • Previously a partner at Kirkland & Ellis
      • Clerked for Frank Easterbrook on the Seventh Circuit
      • Represented Beech-Nut in the “Baby Food Case” when Beech-
        Nut and Heinz (#2 and #3) attempted to combine. District court
        denied the FTC‟s preliminary injunction request, but D.C. Circuit
        blocked the deal.
      • Other clients include GTE and pharmaceutical companies
Washington News
Department of Justice

 Recent DOJ Activity
     Opposed antitrust immunity for Delta/Northwest participation in
      SkyTeam consortium
       • SkyTeam includes Alitalia, Czech Airlines, Delta, KLM, Northwest and Air
       • First time an international alliance has sought immunity for two U.S. airlines
         (as compared, for example, to immunity for KLM/Northwest alliance)
          • DL and NW have largely overlapping domestic networks
          • DOJ found “significant risk that the requested immunity would reduce . . .
            domestic competition related to the immunized international routes.”
       • DOJ concluded that alliance members could integrate to a legitimate
         degree without immunity and therefore immunity could permit
         anticompetitive activity
     DOT gets last word

Washington News
Department of Justice

 Recent DOJ Activity (Cont‟d)
     Brought lawsuit against National Association of Realtors
      • DOJ and FTC have announced a one-day workshop on antitrust
        and the real estate industry for October 25th in Washington
     Signed consent decree with two digital jukebox companies
     Filed amicus brief (with FTC) in the Dagher case calling for
      reversal of Ninth Circuit decision

Washington News
Federal Trade Commission

 Personnel changes
     One vacancy at the Commission now (Orson Swindle‟s seat); William
      Kovacic, former FTC general counsel and professor at George
      Washington University has been nominated
     Commissioner Thomas Leary‟s term expires this month, but he is
      expected to stay until his successor is named
 Recusals
     Chairman Majoras is recusing herself from matters relating to Jones Day,
      her former (and husband‟s current) law firm. If Kovacic‟s nomination is
      approved, it is uncertain if he too will have to recuse himself from Jones
      Day matters because his wife is a partner at Jones Day.
     Currently having only three commissioners on many matters has resulted
      in some anomalies, with the Democrat Jon Liebowitz and Independent
      Pamela Jones Harbour able to outvote the Republican Leary

Washington News
Federal Trade Commission

 Recent FTC Activity
     Cleared Federated/May merger
     Sought cert in Schering-Plough case
     Issued report on pharmacy benefit company mergers
     Testified on initiatives to preserve competition in the
      petroleum industry
     Dismissed Aloha Petroleum case
     Proposed new HSR rules

Washington News
The Supreme Court

 Chief Justice Rehnquist‟s death combined with Justice O‟Connor‟s
  announced retirement leaves possibility of a vacancy on the Court when
  the new term begins
 Supreme Court docket already includes several potentially significant
  antitrust cases
     Dagher – whether per se test can be applied to joint venture participants
      setting price at which joint venture sells products (briefing on merits now
     Independent Ink – whether patent creates presumption of market power in
      tying case (hearing: 11/11)
     Volvo – Robinson-Patman secondary line case (hearing: 10/31)
 Potential cases (requests for certiorari filed)
     Schering-Plough – petition for cert filed 8/29
     Dentsply – petition for cert filed 9/14
Washington News
Antitrust Modernization Commission

 Upcoming hearing (9/29) on state action doctrine
      Scheduled panelists include a representative from the FTC and
       several private lawyers
 Upcoming hearing (9/29) on refusals to deal and loyalty
      Scheduled panelists include Bob Pitofsky, Tim Muris, Hew Pate,
       Prof. Steve Salop, and Ken Glazer from Coca-Cola
 Next round of hearings (10/26) will cover government
  institutions (dual federal/state antitrust enforcement)

 Horizontal Restraints, Vertical Restraints
 and Monopolization

 Scott Martin

Horizontal Restraints Update
National Association of Realtors
United States v. National Association of Realtors, No. 05C-5140 (N.D. Ill.)

 Multiple Listing Service policy favors brick-and-mortar?
 Internet delivery of brokerage services more efficient?
 Alleged NAR working group admission: Opt-out right vs.
  web-based brokers would be “abused beyond belief” and
  “not in sellers‟ best interest.”
 NAR tried 11th hour fix (customer‟s written consent)
  to no avail
 Does DOJ “get” MLS and Virtual Office Websites? What
  about market demands? What about
 Where are the private suits?

Horizontal Restraints Update
In re: Canadian Import Antitrust Litigation
2005 WL 2082934 (D. Minn. 2005)

 Consumers brought federal and state claims that drug
  companies colluded to suppress import of Canadian
  prescription drugs for personal use
 Drugs are misbranded when introduced into U.S. commerce
  (e.g., “Rx only” symbol)
 Federal antitrust laws not designed to protect unlawful
  activity, therefore consumers lack standing; supplemental
  state law claims consequently dismissed

Vertical Restraints and Monopolization Update
In re: Wireless Telephone Services
Antitrust Litigation
2005 WL 2143335 (S.D.N.Y. 2005)

 Question: Requiring customers to purchase specifically
  approved phones constitutes unlawful tying under Section 1?
 Judge Cote: No genuine issue of necessary market power in
  wireless market to coerce purchase of phones and no
  showing of anticompetitive effect on phone market
 No collusive behavior
 Faulty economics from plaintiffs

Vertical Restraints and Monopolization Update
Class Certified: Cox v. Microsoft
No. 105193/00 (N.Y. Sup., released Sept. 2, 2005)

 NY GBL § 349(a): no “deceptive acts or practices in the
  conduct of any business, trade or commerce or in the
  furnishing of any service” in the State of New York
 Microsoft: No exposure to/deception by challenged conduct
 Microsoft: Don‟t certify because not every member of the
  class suffered damages. (Don‟t hold your breath . . .)
 Reliance not an element of the New York General Business
  Law claim; it‟s causation between the alleged deceptive act
  and injury that must be shown class-wide
 Importance of consumer choice

Vertical Restraints and Monopolization Update
Denial of Class Certification Upheld:
Rodney v. Northwest Airlines, Inc.
2005 WL 2009178 (6th Cir. 2005)

 Class alleged harm from attempted monopolization of travel
  to/from NW hubs; named plaintiff flew only one allegedly
  monopolized route
 Sixth Circuit affirmed finding of no predominance on issues of
  monopoly power, antitrust injury and damages; plaintiff
  inadequate representative
 74 routes at issue: Substitutes? Monopoly power? Injury?

 Mergers and Acquisitions Update

 Steven K. Bernstein

Mergers and Acquisitions Update
FTC v. Aloha Petroleum, Ltd and
Trustreet Properties, Inc.
No. CV05 00471 HG KSC (Ha. D. 2005)

 Because of changed circumstances, the FTC asked the
  District Court in Hawaii to dismiss the FTC‟s preliminary
  injunction action seeking to block Aloha‟s $18 million
  acquisition of certain Trustreet petroleum assets in Oahu,
  Hawaii. The complaint had alleged that the acquisition would
  substantially lessen competition in two markets:
      the marketing of gasoline by bulk suppliers, by reducing the
       number of marketers with ownership, or guaranteed access to,
       a refinery or import-capable terminal from five to four; and
      the retail sale of gasoline on Oahu and geographic subdivisions
       within Oahu, by reducing from three to two the number of bulk
       suppliers willing to sell to un-integrated retailers

Mergers and Acquisitions Update
FTC v. Aloha Petroleum, Ltd and
Trustreet Properties, Inc.

 The Commission asked the court to dismiss its case after
  Aloha announced that it would enter into a 20-year
  throughput agreement giving Mid Pac Petroleum rights to use
  Aloha‟s gasoline import terminal
 According to the FTC, Mid-Pac would essentially substitute
  for Trustreet as a bulk gasoline marketer in Hawaii
 The agreement would enable Mid-Pac “to import virtually
  unlimited quantities of gasoline into Hawaii.”

Mergers and Acquisitions Update
FTC v. Aloha Petroleum, Ltd and
Trustreet Properties, Inc.

 FTC action shows that even small, non-reportable
  transactions may be challenged by the antitrust agencies
 The FTC continues to take a close look at petroleum mergers
 FTC dismissed complaint without requiring a consent order
 FTC noted close cooperation with the Hawaii Attorney
  General‟s Office
 Chairman Majoras was recused from the matter. Original
  vote to challenge was 2-1.

Mergers and Acquisitions Update
FTC Federated Department Stores, Inc./
The May Department Stores Company
FTC File No. 051-0111

 FTC closed its investigation of this $17 billion proposed
 Federated owned or operated 456 stores under the Macy‟s
  and Bloomingdale‟s names
 May owned or operated 491 stores under names that
  included Marshall Field‟s, Lord & Taylor and Hecht‟s
 FTC noted that the transaction would “create by far the
  largest chain of so-called „traditional‟ or „conventional‟
  department stores in the country” and would “create high
  levels of concentration among conventional department
  stores in many areas of the country.”
Mergers and Acquisitions Update
FTC Federated Department Stores, Inc./
The May Department Stores Company

 FTC found that product market could not be limited to conventional
  department stores:
      “product market must be defined to include, at the very least, all
       department stores and all specialty stores that collectively sell
       substantially similar products to those offered by Federated and May.”
 Precedent for separate relevant product market comprised only of
  department stores (The Bon-Ton Stores, Inc. v. The May Department
  Stores Company, 881 F. Supp. 860 (W.D.N.Y. 1994))
 FTC noted the rapid evolution of retail markets
 FTC found no evidence that the merging companies priced their goods
  strategically in relationship to one another. Instead, they charged uniform
  prices over broad geographic areas and those prices did not vary based
  on number of department stores in the area.

Mergers and Acquisitions Update
FTC Federated Department Stores, Inc./
The May Department Stores Company

 FTC noted that the geographic market depended on the type of
  merchandise being purchased
 FTC concluded that the geographic market was at least as broad as an
  MSA, and may be larger in some areas of the country
 Even though Federated had announced plans to divest 75 overlapping
  department stores, the FTC did not require them to do so in a consent
 Federal/State enforcement
      FTC noted that in cases with multiple diverse geographic areas,
       participation by state agencies, which are familiar with specific local
       conditions may be particularly helpful
      State antitrust agencies in NY, California, Pennsylvania, Massachusetts
       and Maryland announced settlements that involved divestitures

Mergers and Acquisitions Update
FTC Federated Department Stores, Inc./
The May Department Stores Company

 The FTC is willing to consider changes in industry conditions
  even when there is established precedent
 In the retail industry, pricing data may be given significant
  weight by the antitrust agencies
 Even if the FTC does not take action, state agencies provide
  another level of scrutiny

Mergers and Acquisitions Update
Other Notable Merger Clearances

 Pfizer/Vicuron Pharmaceuticals
      $1.9 billion transaction
      Biopharmaceutical company focused on development of anti-
       infective products
 Scansoft/Nuance
      $221 million transaction
      Voice automated solutions

Mergers and Acquisitions Update
Pending Mergers

 Number of significant mergers are still pending at the
  antitrust agencies:
      Procter & Gamble/Gillette
      Johnson & Johnson/Guidant
      Whirlpool/Maytag
      Intelsat/PanAmSat
      UnitedHealthCare/Pacificare
      Oracle/Siebel
 Several of these transactions under review in the U.S. are
  also being reviewed, or have been reviewed, by the
  European Commission and other foreign antitrust agencies

Mergers and Acquisitions Update
Pending Mergers

 Critical that when dealing with multi-jurisdictional
  investigations to have a coordinated legal strategy.
      Timing
      Waivers
      Encourage cooperation
      Consistency of arguments

Mergers and Acquisitions Update
Other Procedural Developments

 FTC proposes amendment to HSR rules to allow internet
  links to SEC filings, instead of hard copies
 FTC proposes amendment to HSR rules provide for
  expiration of merger notifications after 18 months if a second
  request remains outstanding
 Growing efforts by merging parties to contact agencies early
  and provide information up-front in hopes of avoiding a
  second request

 Antitrust and Intellectual Property

 Adam C. Hemlock

Antitrust and Intellectual Property
FTC Files Supreme Court Petition for Writ of
Certiorari in FTC v. Schering-Plough Corp.

 FTC v. Schering-Plough involves the antitrust legality of so-called
  “reverse payment” settlements (settlement between brand and
  generic in which generic agrees to keep its product off market for
  certain period, and in exchange brand pays generic)
 Overview of Hatch-Waxman
      Permits Abbreviated New Drug Applications (ANDA) which allows
       generic to obtain FDA approval by showing that generic is
       [bioequivalent] to brand drug
      Requirement to make “Paragraph IV” certification as to whether
       branded drug‟s patent(s) are invalid or uninfringed
      If brand sues for infringement within 45 days of receiving
       Paragraph IV certification, FDA automatically institutes 30 month
       delay on the generic‟s ANDA approval
Antitrust and Intellectual Property
FTC Files Supreme Court Petition for Writ of
Certiorari in FTC v. Schering-Plough Corp.

 In Hatch-Waxman patent litigation, the generic defendant has
  not yet sold the infringing product
      In contrast to traditional patent litigation, when defendant has
       already made infringing sales for which the patentee seeks to
       recover damages

Antitrust and Intellectual Property
FTC Files Supreme Court Petition for Writ of
Certiorari in FTC v. Schering-Plough Corp.

 Eleventh Circuit opinion Schering-Plough Corp., et al. v FTC,
  402 F. 3d 1056 (11th Cir. 2005)
      Neither per se rule nor rule of reason are appropriate standards
       for determining antitrust legality in this case
      Proper analysis of antitrust liability requires an examination of:
       (1) the scope of the exclusionary potential of the patent; (2) the
       extent to which the agreements exceed that scope; and (3) the
       resulting anticompetitive effects
      Reverse payments are a natural by-product of the Hatch-
       Waxman process
      No evidence on the record that generic could have attained an
       earlier entry without the reverse payments
Antitrust and Intellectual Property
FTC Files Supreme Court Petition for Writ of
Certiorari in FTC v. Schering-Plough Corp.

 Two questions presented in FTC‟s petition
      Whether an agreement between a pharmaceutical patent holder
       and a would-be generic competitor, in which the patent holder
       makes a substantial payment to the challenger for the purpose
       of delaying the challenger‟s entry into the market, is an
       unreasonable restraint of trade
      Whether the court of appeals grossly misapplied the pertinent
       “substantial evidence” standard of review, by summarily
       rejecting the extensive factual findings of an expert federal
       agency regarding matters within its purview

Antitrust and Intellectual Property
FTC Files Supreme Court Petition for Writ of
Certiorari in FTC v. Schering-Plough Corp.

 FTC‟s main arguments
      11th Circuit‟s approach conflicts with pro-consumer policy goal
       of Hatch-Waxman to encourage speedy entry of low-cost
       generic drugs
      While 11th Circuit focused on “exclusionary potential” of the
       patent, FTC notes that generics prevailed in 73% of ANDA
       patent litigations
      Payment must have reflected a quid pro quo for a delayed entry,
       and absent the payment, the generic would have entered earlier
       to compete against the branded drug
 Only third time in FTC‟s history that it has represented itself
  in front of Supreme Court
Antitrust and Intellectual Property
Eleventh Circuit
Andrx Pharmaceuticals Inc. v. Elan Corp. PLC
No. 03-03481 (11th Cir. 2005)

 Facts
      Generic #1 filed first ANDA to manufacture generic version of
       controlled release naproxen, and Brand sued for patent
       infringement; Brand and Generic #1 settled, and Brand granted
       license to Generic #1
      Generic #2 filed ANDA and was sued by Brand for patent
      Hatch-Waxman grants 180-day exclusivity period to first generic
       to file ANDA. 180-day period starts when first generic starts
       marketing its product. Generic #2 alleges that Generic #1 had
       no intention to market product, thus never triggering the 180-
       day period and precluding Generic #2‟s entry into market.

Antitrust and Intellectual Property
Eleventh Circuit
Andrx Pharmaceuticals Inc. v. Elan Corp. PLC

 Generic #2 filed suit under Sections 1 and 2 of Sherman Act
  and the Florida antitrust laws, claiming:
      Brand‟s patent action against Generic #2 was baseless, due to
       invalidity of patent, and therefore was filed solely to preserve its
       monopoly over “controlled release naproxen market in the US”
       (Sherman Act section 2 claim)
      Settlement agreement between Brand and Generic #1 was
       illegal restraint of trade (Sherman Act section 1 and 2 claims)

Antitrust and Intellectual Property
Eleventh Circuit
Andrx Pharmaceuticals Inc. v. Elan Corp. PLC

 District Court for Southern District of Florida granted
  judgment on the pleadings pursuant to rule 12(c)
      Patent litigation was protected by Noerr-Pennington doctrine,
       and did not fall within sham exception because two previous
       courts rejected basis for Generic #2‟s claim of invalidity
      Generic #2‟s allegations regarding license agreement were
       insufficient to support claims under Sections 1 and 2
      Denied motion for leave to amend

Antitrust and Intellectual Property
Eleventh Circuit
Andrx Pharmaceuticals Inc. v. Elan Corp. PLC

 11th Circuit Opinion
      Affirmed dismissal of claims based on patent litigation, agreeing
       that Noerr-Pennington shielded Brand from Sherman Act liability
      Reversed and remanded on dismissal of claims based on
       settlement agreement
       • Repeat of standard in Schering-Plough for evaluating patent
         litigation settlement
       • Plaintiff sufficiently pled violations of Sherman Act Sections 1 and 2
      No abuse of discretion in denial of motion to amend

Antitrust and Intellectual Property
Proposed Consent Decree
US v. Ecast, Inc.
No. 1:05CV01754 (D.D.C.)

 DOJ settles with two suppliers of “digital jukebox platforms”
  (NSM and Ecast)
 Ecast was one of two US suppliers of platforms when it
  learned of NSM‟s plans to enter
 Ecast and NSM entered agreement whereby NSM would
  manufacture digital jukeboxes with only Ecast‟s platform, and
  not with NSM‟s own platform
 DOJ alleges that NSM‟s entry into US market for digital
  jukebox platforms would have stimulated competition

 Consumer Protection

 Helene D. Jaffe

Consumer Protection
Deceptive Advertising: Fraudulent Weight Loss Claims

 FTC is increasing scrutiny of clinical study results cited in ads
  for weight-loss supplements
      FTC Assistant Director of Advertising Practices, Richard
       Cleland, said in the World Obesity & Weight Loss Congress that
       the FTC would evaluate such studies to determine whether the
       results were accurately reflected by the ad and whether it was a
       legitimate study
      Cleland also stated that the FTC is closely monitoring the use of
       expert endorsers in product advertisements to verify their
       credentials and determine whether they have substantiation for
       the endorsement

Consumer Protection
Deceptive Advertising: Fraudulent Weight Loss Claims
FTC v. No. 1025798 Ontario, Inc., 03-CV-00910A (SC) (W.D.N.Y. 2005)

 FTC settled false advertising suits against U.K. based defendants
  concerning weight-loss claims about seaweed-based patches
      FTC in 2003 sued the producers of Hydro-Gel Slim Patch and
       Slenderstrip for allegedly false and unsubstantiated weight-loss
       claims for these two patches
      U.K. based defendants were added to the original complaint when
       the Commission discovered that they were allegedly orchestrating
       the manufacturing, advertising, and selling of the patches in the
       United States
      Original U.S.-based defendants settled in September 2004
      The U.K.-based defendants settled in September 2005

Consumer Protection
Deceptive Advertising: Fraudulent Weight Loss Claims

      Under the announced settlement, the U.K. based companies will pay
       $150,000. However, if it is found that they misrepresented their
       financial status, defendants will be responsible for the full judgment of
       $5.3 million – the total U.S. sales of the two patches.
      Defendants will be banned in the U.S. from making, advertising, or
       selling any dietary supplement, food, drug, or weight-loss product, and
       from making claims about other health-related products or services
       unless the claims are backed by scientific evidence.
      The settlement also requires the defendants to give the FTC a list of
       people who bought the patches, and prohibits them from disclosing
       their mailing lists to others, except as required by law.

Consumer Protection
Deceptive Advertising: Fraudulent Weight Loss Claims
FTC v. Chinery, No. 05-3460 (D.N.J. 2005)

 FTC filed a complaint against Robert Chinery, Jr., Tracey Chinery and RTC
  Research and Development LLC over allegedly false and misleading claims made
  in ads for the popular dietary supplement Xenadrine EFX
    According to the FTC, since its introduction in 2002, Xenadrine EFX‟s sales
     have topped $160 million
    The allegedly misleading ads relied heavily on testimonials from supposedly
     satisfied customers, some of whom claimed to have lost over 100 pounds
 On the date the complaint was filed, the FTC announced a settlement with
  another group of entities: Cytodyne, LLC, Evergood Products Corp., and Melvin
  Rich, for their role in the advertising and marketing of Xenadrine EFX
    The settlement prohibits making any claims that “Xenadrine EFX or any other
     substantially similar product causes rapid and substantial weight or fat loss
     and . . . that any weight-loss product causes rapid and substantial weight loss
     without diet or exercise.”
    The settlement also requires a payment of $100,000 to the FTC

Consumer Protection
Deceptive Advertising: Smoking Related Health Claims
FTC v. Emerson Direct, Inc., No. 2:05-CV-377-FtM-33 (M.D. Fla. 2005)

 FTC settled with the marketers of “Smoke Away,” a dietary
  supplement product that was advertised as a smoking
  cessation product
      Defendants required to pay $1.3 million
      The settlement prohibits the defendants from making any claims
       about the benefits, performance, efficacy, safety, or effects of
       Smoke Away or any other smoking cessation product or
       program unless those claims are true, non-misleading, and

Consumer Protection
Deceptive Advertising: Smoking Related Health Claims
State of Vermont V. R.J. Reynolds Tobacco Co., Nos. 744-97 CnC & S-816-98 (Chittenden Sup. Ct. 2005)

 Nine states and the District of Columbia filed suit in Vermont
  against R.J. Reynolds alleging that the company‟s claims that
  its Eclipse brand of cigarettes may carry less risk of cancer
  and other health ailments were misleading
      Reynolds claims that smokers‟ risk of contracting cancer,
       chronic bronchitis, and possibly emphysema are reduced
       compared with conventional cigarettes because of how Eclipse
       cigarettes work – smokers do not light tobacco

Consumer Protection
“Do-Not Call” Issues

 Federation of the Blind v. FTC, No. 04-1378 (4th Cir. 2005)
    FTC‟s amended Telemarketing Sales Rule (TSR) was within the
     FTC‟s authority
    The TSR did not violate charitable organizations‟ First Amendment
     rights because organizations were still permitted to make telephone
 United States v. Columbia House Co., No. 05C4064 (N.D. Ill. 2005)
    Columbia House settled FTC charges that it violated the Do-Not-Call
     law by calling existing and past subscribers of its home entertainment
     clubs after the subscribers had placed their telephone numbers on the
     National Do-Not-Call Registry and specifically requested that the
     company not call them
    Columbia House will pay a $300,000 civil penalty and is barred from
     making illegal calls in the future

Consumer Protection
FTC V. Trustsoft, Inc., No. 05-1905 (S.D. Tex. 2005)

 The FTC continues to pursue injunctions against companies that
  falsely lead consumers to believe that their computers are infected
  with spyware in order to sell consumers ineffective programs to
  remove the spyware
 FTC won an injunction against Trustsoft, Inc. to prevent it from
  promoting its “SpyKiller” program
      The FTC alleged that the defendant used pop-up and e-mail
       messages that informed consumers that spyware had been “detected”
       on their computer through a remote scan. The defendant would then
       direct consumers to a website for a free scan, at which point it would
       inform consumers that their computers were infected and would advise
       them to purchase SpyKiller software.

 EU Update

 Doug Nave

EU Update: Mergers and Acquisitions
Johnson & Johnson / Guidant

 Acquisition with horizontal overlaps in cardiovascular medical products
 Parties agreed to remedy Commission concerns through divestiture:
      Guidant‟s endovascular stent business is to be divested (parties were
       found to be the two leading suppliers in EEA, with high barriers to
      No divestiture was required in coronary stents, where J&J was found
       to be one of two “major” suppliers and Guidant was viewed as a
       potential entrant, because other companies were deemed to be likely
       entrants as well
      Divestitures were also agreed in two smaller businesses (coronary
       guidewires and endoscopic vessel harvesting systems)
 Transaction cleared prior to completion of US review

EU Update: Mergers and Acquisitions
Other EC Decisions

 Substantive clearances – horizontal:
    BenQ/Siemens – mobile telephones
    Flint Ink/Aster 2 – printing inks
    Gaz de France/Centrica/SPE – supply of electricity and gas
     (Belgian regions)
    Lauritzen/NYK Reefers – JV in refrigerated sea transport (#2
     worldwide, leading position in various geographical corridors to EU)
    Sun Microsystems/StorageTek – data storage solutions
    Tele2/Versatel Telecom – fixed/mobile telephony (Benelux)
 Substantive clearances – vertical:
    CVC Capital/Ruhrgas Industries – utility meters / meter data collection
    Rheinmetall/Diehl/AIM – infrared components / German
     defence products
 Numerous clearances under simplified procedure (no “affected markets”)

EU Update:
EU Cartel Challenges – Industrial Threads

 Industrial thread producers fined €43 million (in total).
      Outcome of “dawn raids” in November 2001
      Sixteen participants
      Regular meetings/bilateral contacts to agree price increases
       and target prices, exchanges of customer-specific pricing
      Fines for 11-year cartel against Benelux/Nordic industrials and
       2-year cartel against EEA automakers
       • 6-year cartel re UK industrials found outside statute of limitations
      Range of fines: €18 million to €175,000

EU Update:
EU Cartel Challenges – Dutch Brewers

 Statements of Objections sent to four brewers alleging
  cartelization of Dutch beer markets in 1996-99
 Outcome of a “dawn raid” on Heineken in 2002
 S/Os concern alleged price fixing, customer allocation, and
  improper information sharing
 Part of ongoing examination of sector:
      France: Two brewers fined €2.5 million in 2004
      Belgium: Four brewers fined €91 million in 2001 (on appeal)
      Luxembourg: Three brewers fined €450,000 in 2001

EU Update:
EU Court Cases

 Case C-176/03, Commission v. Council (ECJ 13 Sept 2005):
  Commission (with approval of the European Parliament and
  qualified majority of Member States) may require Member
  States to establish criminal sanctions for serious
  infringements of EC law
      Decision concerned environmental law and conflict between
       decision-making powers of the Commission and Council – but
       appears broader in scope
      Commission President José Manuel Barroso promises “careful
       and proportionate” use of power to address “particularly serious

EU Update:
EU Court Cases

 Case T-325/01, DaimlerChrysler AG v. Commission v. Council (CFI 15
  Sept 2005): Reduces fine from €72 million to €10 million
 Instruction that German agents not sell outside their territories, and
  require 15% deposit for out-of-territory orders, did not infringe Art. 81
  (there was no agreement between independent parties)
      Commission‟s determination that the “agents” bore sufficient
       commercial risks to be deemed independent traders lacked factual
      Limits on Spanish dealers‟ supply to leasing companies was found
       lawful because it complied with Spanish law
 Agreements restricting the grant of discounts in Belgium was found
  an infringement of Art. 81 (€10 million fine upheld)

EU Update: EC Commission Communication
Competition in Professional Services

 Part of Lisbon Strategy (improving regulation, ensuring competition, etc)
      “Informal” counterpart to sector inquiries in energy and financial services
 Focus on national and professional bodies‟ regulations:
      Lawyers, notaries, engineers, architects, pharmacists, accountants
      Competition restrictions (e.g. monopoly rights, price fixing, advertising bans)
 Commission occasionally intervenes, but looks primarily to NCAs for --
      Justification (explicitly stated public interest objective)
      Proportionality (least restrictive means to effectively attain objective)
 Commission finds that overly restrictive regulation remains common
      Denmark, Netherlands, and UK lead in reforms
      Minor reforms and “analytical work” are underway in many Member States
       (including Benelux, France, Germany, Hungary, Ireland, and Poland)

EU Update: EC Commission
Significant Policy Initiatives

 Article 82 (“abuse of dominance”)
      The last major element in modernization of the rules
       • Continuing debate inside the Commission over the relative
         importance of per se rules and economics/effects
      Draft guidelines to be published before year‟s end
 Private enforcement (damage actions)
      Part of ongoing effort to expand local (national/private) action
      Green Paper to be published before year‟s end

 Weil, Gotshal & Manges
 and its Competition Practice Group

Weil Gotshal Has One of the World’s
Leading Competition Practices

 One of the top three antitrust firms in the world - Chambers Global:
  The World’s Leading Lawyers, 2004
 Shared # 1 rank among New York antitrust practices and over 50
  attorneys recognized by Chambers USA: America’s Leading Lawyers for
  Business, 2004
 “Law firm of the Year” for the Americas – Global Counsel, 2002
 One of the top six litigation firms in the US; the only New York based firm
  recognized - American Lawyer, 2004
 Ranked # 4 among the top US firms; with over 40 partners individually
  recognized – Chambers Global: The World’s Leading Lawyers, 2003
                                 Steven K. Bernstein is a partner in the Washington, DC office of Weil, Gotshal & Manges LLP. Mr. Bernstein‟s
                                    practice focuses on antitrust counseling and litigation, with an emphasis on mergers and acquisitions. He joined
                                    the firm in January 2004 after serving more than 12 years at the Federal Trade Commission, most recently as
                                    Assistant Director of the FTC‟s Bureau of Competition, where he oversaw the Bureau‟s Mergers I Division.
                                    While at the FTC, Mr. Bernstein was involved in supervising the FTC‟s merger enforcement program in a wide
                                    range of industries, including aerospace and defense, healthcare, and industrial products. Mr. Bernstein played
                                    a significant role in a number of important antitrust enforcement actions in these industries, including the
                                    successfully litigated challenge of Alliant Techsystems‟ proposed acquisition of Olin‟s Ordnance Division. He
                                    was also responsible for negotiating numerous consent agreements, including settlements in Lockheed
                                    Martin/Loral, Astra/Zeneca, Boeing/Rockwell Aerospace and Defense, ABB/Elsag Bailey, Illinois Tool
                                    Works/Hobart Brothers, and S.C. Johnson/DowBrands. Mr. Bernstein received numerous awards at the FTC
                                    and in 2002 was recognized by Corporate Board Member Magazine as one of the nation‟s best and brightest
                                    attorneys under the age of 40.
     Tel: 202 682 7502

                                 Adam C. Hemlock is a partner in the firm‟s Antitrust practice. He represents clients in a variety of antitrust,
                                    intellectual property, commercial litigation, and other legal matters, and has particular experience in the
                                    antitrust/intellectual property and international antitrust areas. Mr. Hemlock also has extensive experience
                                    working with Japanese clients on a wide variety of litigation, transactional and counseling matters. Mr. Hemlock
                                    has represented clients in various transactions involving Hart-Scott-Rodino (HSR) filings and federal
                                    government antitrust investigations. Mr. Hemlock was a member of the Weil Gotshal team that obtained
                                    Department of Justice clearance of American Airlines‟ acquisition of TWA. He and other Weil Gotshal attorneys
                                    represented NYNEX in its merger with Bell Atlantic, and Hughes Aircraft in its merger with Raytheon. Mr.
                                    Hemlock recently represented a major motion picture studio in a Department of Justice investigation of a joint
                                    venture that was closed without any enforcement action. Mr. Hemlock has developed a strong
                                    antitrust/intellectual property practice and has advised US and foreign clients on the antitrust implications of
                                    various technology transactions, including joint ventures, technology licensing, joint development agreements,          patent pooling, standard setting, information sharing, and other joint conduct.
     Tel: 212 310 8281

                             Helene D. Jaffe is the Global co-head of the firm's Antitrust/Competition practice and has as principal areas of
                                practice the transactional, counseling and litigation aspects of advertising, marketing and antitrust issues
                                (particularly regarding mergers, acquisitions, and Hart-Scott-Rodino matters). Ms. Jaffe has been involved in
                                numerous Lanham Act advertising, trademark, and trade dress cases (injunctions as well as judge/jury trials)
                                involving a broad spectrum of consumer products and services, such as over-the-counter drugs, cosmetics,
                                and foods, as well as challenges for these products, among others, at the networks, industry self-regulatory
                                boards, and various international, federal, and state regulatory agencies. She appears regularly before both
                                the international, federal, and state antitrust enforcement agencies and the federal judiciary representing
                                clients who are either buying or selling companies here or abroad as well as clients whose pricing,
                                promotional, or marketing practices are under investigation. She lectures and writes extensively on antitrust,
                                merger, advertising, and marketing issues. Ms. Jaffe has been recognized in Chambers USA, Chambers
                                Global, The International Who‟s Who of Competition Lawyers and Economists, The Best Lawyers in America
                                and The Euromoney Expert‟s Guide. She is ranked among the Top 100 Women in Antitrust by Global
     Tel: 212 310 8572

                             Scott Martin is a partner in the Litigation/Regulatory practice of the New York office focusing in the areas of
                                antitrust and complex commercial litigation. Mr. Martin has extensive experience in complex litigation and
                                class actions, including bench and jury trials in federal and state courts. Mr. Martin has been involved in many
                                of the most significant antitrust class action litigation and civil and criminal international cartel cases in recent
                                years. His experience spans industries including graphite electrodes, carbon fiber, textiles, and health care,
                                and consumer goods such as recorded music, apparel, and automotive parts, among many others. Mr.
                                Martin‟s matters frequently involve complexities of federal multidistrict actions, FTC or DOJ investigations, opt-
                                out actions, multiple state indirect purchaser actions, parens patriae cases brought by multiple states‟
                                attorneys general, proceedings in other countries, and even qui tam litigation. He is a frequent speaker on
                                these and other antitrust and litigation issues before the Practising Law Institute, ABA, Conference Board, and
                                elsewhere. He also has written, co-authored, or edited articles and treatise chapters on issues of international
                                antitrust litigation, business torts, and price discrimination. Mr. Martin currently serves as Vice-Chair of the      Business Torts and Civil RICO Committee of the ABA Section of Antitrust.
     Tel: 212 310 8481

                                 Doug Nave heads up the European Competition Law practice in our London office. A US-qualified partner who
                                    has practiced in London and Brussels since 1998, he has a broad regulatory practice focusing on EC, UK
                                    and US competition and international trade law. Mr Nave has represented companies in numerous economic
                                    sectors, including emerging technologies, heavy industrial products, consumer branded goods, and public
                                    media. Transactions of note in the past year include Kodak‟s acquisition of Creo (cleared by the European
                                    Commission), Great Lakes Chemical Corp‟s merger with Crompton Corp (cleared by the European
                                    Commission), Staples‟ acquisition of Office World (cleared by the UK Office of Fair Trading), and numerous
                                    strategic acquisitions in the food and beverage sector. Mr Nave has acted for Coca-Cola Enterprises and
                                    others in regulatory inquiries regarding possible abuse of dominance and other rules of competitive conduct.
                                    He also has a broad advisory practice under the competition laws, sector-specific regulations (e.g. the EU
                                    automotive block exemption regime) and rules governing the licensing and use of intellectual property.
     Tel: +44 20 7903 1288

                                 Debra J. Pearlstein specializes in antitrust litigation and counseling. At Weil Gotshal since 1985 and a partner
                                 since 1993, she has extensive experience in complex private antitrust litigation (including concurrent federal and
                                 state class actions), lawsuits brought by the federal antitrust agencies, and merger investigations. Understanding
                                 her clients‟ business needs and making practical assessments of litigation and enforcement risk are key strengths
                                 of Ms. Pearlstein‟s practice. Ms. Pearlstein‟s counseling practice covers joint ventures and other collaborations with
                                 competitors, trade associations, Hart-Scott-Rodino regulations, gun jumping concerns, relations with distributors
                                 and customers, and the antitrust aspects of patent licensing. Her industry knowledge ranges from retailing to hi-
                                 tech, from airlines to managed care, and issues arising for companies ranging from local businesses to international
                                 megafirms. Ms. Pearlstein was named as one of the New York area‟s best lawyers in the August 1, 2005 issue of
                                 New York magazine. She is listed in Woodward/White, Inc.'s Best Lawyers in America (2006). She was named by
                                 Global Competition Review‟s “GCR 100” (2004) to its elite list of the top 100 women lawyers in the world
                                 specializing in competition. She was named among the leading competition lawyers in New York in Chamber‟s
                                 Global 2004-2005 The World‟s Leading Lawyers.). She is a frequent speaker at the ABA, Practicing Law Institute,   and Conference Board antitrust programs. She was the editorial chair of Antitrust Law Developments (5th ed.
     Tel: 212 310 8686           2002), the leading treatise on antitrust law, and currently is an officer of the ABA‟s Section of Antitrust Law.

Weil Gotshal Lawyers
Advise on All Aspects of Competition Law

 Provide antitrust counseling and compliance programs to
  ensure our clients the best chances of avoiding antitrust
 Trusted with some of the largest mergers in the decade
 Global presence and international experience to handle
  multi-national regulatory issues, particularly involving US and
  EU competition laws and enforcement
 Represent clients in major government criminal and civil
  investigations and litigations

Weil Gotshal Lawyers
Advise on All Aspects of Competition Law

 Handle private antitrust litigation for some of the largest corporations in
  the world, in US federal and state courts, as well as before European and
  national competition agencies and courts
      Significant expertise in antitrust claims and misuse defenses in
       intellectual property cases
      Special expertise defending complex class actions
 Advise clients in competition policy, distribution, dealer relations,
  emerging technology and intellectual property, and legislative initiatives
  both in the US and Europe
 Our team has been at the forefront of antitrust policy and procedure for
  many years, assisting in drafting the federal Merger Guidelines used
  today, influencing the body of HSR rulings and designing the FTC merger
  discovery process


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