Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC Bureau of Competition issues Spring 2016 report, (Apr 11, 2016)

By Linda O’Brien, J.D., LL.M.

Deborah L. Feinstein, Director of the FTC Bureau of Competition has issued a report outlining the Bureau’s litigation workload over the course of the past year. The “Director’s Report Spring 2016” provides an overview of the agency’s litigation efforts and highlights the ways in which the Bureau has worked to prevent consumer harm from anticompetitive conduct or mergers through negotiated settlements, HSR enforcement, amicus briefs, industry guidance, and projects that are designed to improve agency processes.

Merger activity has increased, which means that merger review continues to require significant Bureau resources, Feinstein reported. Currently, the agency has four merger challenges in various stages of active litigation, as well as three federal court injunction cases involving anticompetitive conduct by pharmaceutical companies. These cases follow last year’s preliminary injunction trials in Sysco/US Foods, Steris/Synergy, and FTC v. Cephalon, a landmark settlement of $1.2 billion in disgorged profits, the Bureau’s first monetary settlement in a reverse patent settlement case. While the year has been unusual for the amount of merger litigation, merger review remains a mainstay of the Bureau’s work, she noted.

“While our litigated challenges grab headlines, most agency antitrust enforcement occurs through challenges settled by a consent order,” Feinstein stated. In particular, she highlighted consent orders that were reached in the pharmaceutical, medical devices, and consumer goods markets. Endo International and Par Pharmaceuticals agreed to divest Endo’s rights to two generic drugs. Hikma Pharmaceuticals agreed to sell the rights for two generic drugs regarding its acquisition of Roxane Laboratories. Medical device company Zimmer Holdings agreed to divest U.S. rights to certain implants concerning its proposed acquisition of Biomet, Inc. In the consumer goods market, the FTC required Dollar Tree to divest 330 Family Dollar stores in its takeover of Family Dollar.

In discussing non-merger matters, Feinstein noted a number of important developments. Last year, the Commission issued a Statement of Enforcement Principles for the use of Section 5 of the FTC Act when the harmful conduct lies beyond the scope of the Sherman Act. The policy statement reaffirms that the promotion of consumer welfare is the cornerstone of antitrust enforcement and confirms that Section 5’s ban on unfair methods of competition covers not only those acts and practices that violate the Sherman Act or the Clayton Act, but also those that violate the spirit of the antitrust laws.

Stopping anticompetitive reverse payment settlements remains one of the Commission’s top priorities, the Director noted. The Commission continues to devote significant resources to this effort, with three matters pending in federal court—FTC v. Actavis, FTC v. AbbVie, Inc., and FTC v. Endo Pharmaceuticals Inc. A breakthrough in the Commission’s efforts was the settlement in FTC v. Cephalon. Cephalon’s parent, Teva Pharmaceuticals, agreed to stop using certain types of anticompetitive patent settlements and paid $1.2 billion to reimburse drug wholesalers, pharmacies, and insurers who overpaid for the sleep disorder drug Provigil due to Cephalon’s conduct. The landmark settlement represents the first monetary relief the Commission has obtained for purchasers harmed by reverse payment settlement agreements, according to Feinstein.

The Director also discussed Hart-Scott-Rodino (HSR) premerger notification enforcement, noting that the Bureau brought three HSR enforcement actions, including one alleging the misuse of the “investment only” exemption. The report highlighted that in August the agency charged three affiliated hedge fund companies and their management company with violating the premerger reporting laws in connection with their 2011 acquisitions of stock in Yahoo! Inc.

Finally, Feinstein noted the ongoing Remedy Study, in which the FTC is conducting a review of all merger orders issued from 2006 through 2012 to determine how well they have met the goal of maintaining or restoring competition that would be lost due to a merger. This is a big undertaking for the Bureau, with attorneys from every merger firm participating in the interviews with competitors and customers. In addition, the agency has issued nearly 200 requests for data under Section 6(b) of the FTC Act. Currently, the Bureau is more than halfway through with interviews and data collection, Feinstein reported.

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