A. Federal Trade Commission (FTC)
1. FTC enters final order in Broadcom semiconductor monopolization case.
On Nov. 4, 2021, the FTC approved a final order settling charges that Broadcom Inc. had illegally monopolized markets for semiconductor components used to deliver internet services through exclusive dealing and related conduct. Under the FTC’s final order, Broadcom is prohibited from entering into certain types of exclusivity or loyalty agreements for the supply of key semiconductor chips for traditional broadcast set top boxes and DSL and fiber broadcast internet services. Broadcom also is required to stop conditioning access to, or requiring favorable supply terms for, these chips on customers committing to exclusivity or loyalty for the supply of related chips.
2. FTC orders divestiture in Price Choppers and Tops Markets’ merger.
On Nov. 9, 2021, the FTC entered an order requiring Price Choppers and Tops Markets to divest 12 Tops supermarkets to C&S Wholesale Grocers to settle FTC charges that their proposed merger likely would be anticompetitive in 11 local markets across upstate New York and Vermont. The FTC complaint alleged the proposed merger would result in highly concentrated markets in these 11 local markets and likely would enable the newly merged entity to increase prices above competitive levels either unilaterally or in coordination with competitors. In addition to mandating the required divestitures, the FTC’s order prohibits C&S from selling any of the divested stores for a period of three years without prior FTC approval and also, for an additional seven-year period, requires that C&S obtain prior approval to sell any of the divested stores to a buyer that operates one or more supermarkets in any of the 11 identified counties.
3. FTC requires divestiture in ANI and Novitium pharmaceutical merger.
On Nov. 10, 2021, the FTC entered an order requiring ANI Pharmaceuticals and Novitium Pharma LLC to divest ANI’s development rights to one generic drug (sulfamethoxazole-trimethprim aka SMX-TMP) used to treat common infections, as well as assets relating to another generic drug (dexamethasone) used to treat inflammation to settle FTC charges that ANI’s acquisition of Novitium likely would be anticompetitive. ANI is a current participant and Novitium is one of a limited number of entrants in the SMX-TMP market, and both ANI and Novitium have products in the market treated by dexamethasone. Under the terms of the FTC’s order, ANI and Novitium are required to divest rights and assets to generic SMX-TMP and dexamethasone to Prasco LLC. The proposed order also requires that the parties obtain prior FTC approval for any future acquisitions in these two markets as well as in two related markets.
4. FTC agrees to modify divestiture in Bristol-Myers Squibb’s acquisition of Celgene.
On Nov. 12, 2021, the FTC agreed to modify divestiture agreements relating to Bristol-Meyer Squibb’s 2019 acquisition of Celgene. The modifications relate to confidential provisions of the divestiture agreements pertaining to maintaining Amgen, Inc.’s continuation as a viable competitor with the Otezla product. As a condition of its 2019 acquisition of Celgene, Bristol-Meyers Squibb was required to divest to Amgen the psoriasis treatment drug Otezla.
5. FTC expands criminal referral program.
On Nov. 18, 2021, the FTC approved an expansion of its criminal referral program as part of its efforts to stop and deter corporate criminal misconduct in the consumer protection and antitrust areas. The new measures are intended to ensure that cases are promptly referred to local, state, federal, and international criminal law enforcement agencies so that corporations and their executives are held accountable for criminal conduct.
6. FTC modifies prior order relating to NEXUS’s acquisition of Generation Pipeline.
On Nov. 24, 2021, the FTC agreed to modify its 2019 order entered in conjunction with NEXUS Gas Transmission, LLC’s acquisition of Generation Pipeline LLC. The 2019 order had required the parties to remove a noncompete provision in the acquisition agreement and prohibited NEXUS and its joint venture parents from participating in any agreement that restricted competition with one another in the provision of natural gas pipeline transportation in certain Ohio counties. The FTC’s order modification relates to the deletion of DTE Energy and inclusion of DT Midstream Inc. as parties to the order, given the sale by DTE of its natural gas pipeline, storage, and gathering business to DT Midstream. Through that sale, DT Midstream has become a successor to DTE with respect to the FTC order and has agreed to comply with the order’s obligations.
7. FTC orders information relating to supply-chain disruptions.
On Nov. 29, 2021, the FTC ordered nine large retailers, wholesalers, and consumer goods suppliers to provide detailed information relating to the FTC’s section 6(b) study of ongoing supply disruptions and resulting hardship to U.S. consumers and competition. The FTC’s study will examine whether supply chain disruptions are leading to specific bottlenecks, shortages, and anticompetitive practices, or contributing to rising consumer prices. Section 6(b) of the FTC Act authorizes the FTC to conduct wide-ranging studies that do not have a specific law enforcement purpose.
B. Department of Justice (DOJ)
1. DOJ announces conditions on Lactalis acquisition of Kraft Heinz.
On Nov. 10, 2021, the DOJ announced that it would require Lactalis and Kraft Heinz to divest Kraft Heinz’s Athenos and Polly-O businesses as a condition to Lactalis’s proceeding with its proposed acquisition of Kraft Heinz’s natural cheese business in the United States. The DOJ complaint alleges the proposed acquisition would result in higher-priced and lower-quality feta and ricotta cheeses. Lactalis and Kraft Heinz are the two largest suppliers of feta and ricotta cheeses to grocery stores and other retailers in the New York City metropolitan and in four Florida metropolitan areas. The proposed settlement requires the divestiture of Kraft Heinz’s Athenos business to Emmi Roth USA and the divestiture of Kraft Heinz’s Polly-O brand to BelGioioso Cheese Inc.
2. S&P Global required to divest three price reporting agencies.
On Nov. 12, 2021, the DOJ announced it would require S&P Global Inc. to divest three of IHS Markit Ltd.’s price reporting agency (PRA) businesses to resolve antitrust concerns arising from their proposed $44 billion merger. PRAs provide critical price discovery for numerous commodity markets. The divestitures of Oil Price Information Services (OPIS); Coals, Metals, and Mining; and Ptrochem Wire will maintain competition in PRA services and protect consumer access to essential pricing information. The settlement will also require OPIS to end a 20-year noncompete agreement with GasBuddy, which is a crowd-sourced retail price information app that has provided OPIS with pricing data for resale to commercial customers. According to the DOJ complaint, absent the agreed-upon divestitures, the merger would have eliminated significant head-to-head competition between S&P’s Platts division and IHS’s OPIS as well as other IHS commodity price discovery services; PRA price assessments are frequently used as a price term in supply agreements and used for settling hedging instruments like futures contracts. The proposed settlement requires the divestiture of these business lines to Dow Jones as well as waiving the exclusivity and noncompete provisions contained in the data license agreement between OPIS and Gas Buddy.
3. Jonathan Kanter sworn in as assistant attorney general for Antitrust Division.
Jonathan Kanter was sworn in as assistant attorney general for the DOJ’s Antitrust Division on Nov. 18, 2021. AAG Kanter previously was in private law practice in several national law firms and also worked as a staff attorney in the FTC’s Bureau of Competition.
4. DOJ sues to block U.S. Sugar acquisition of Imperial Sugar Co.
On Nov. 23, 2021, the DOJ filed a civil lawsuit seeking to stop U.S. Sugar’s proposed acquisition of its rival Imperial Sugar Company. The complaint alleges the proposed transaction will put an overwhelming majority of refined sugar sales in the southeast U.S. in the hands of only two producers, and consequently American businesses and consumers will pay more for refined sugar. The complaint alleges that U.S. Sugar and Imperial Sugar compete head-to-head to supply refined sugar to customers in the southeast U.S., and that that competition has resulted in lower prices, better-quality products, and more reliable service for customers in that region. If the proposed transaction is permitted to proceed, the complaint alleges it would leave only two significant sugar producers (U.S. Sugar and Domino) in that region, a market already significantly concentrated. U.S. Sugar is the world’s largest vertically integrated sugar milling and refining operation.
C. U.S. Litigation
1. Wolfire Games LLC. v. Valve Corporation, Case No. C21-0563, 2021 WL 5415305 (W.D. Wash. Nov. 19, 2021).
A federal judge in Seattle has dismissed claims by Wolfire Games related to Valve Corporation’s Steam distribution platforms for PC games, allowing Wolfire to replead with additional details, if possible.
Judge John C. Coughenour dismissed the case without prejudice, saying the stability over time of Steam’s commission rate—which has remained 30% for years, despite its growing share of the $10 billion annual market—undermined allegations that Valve began squeezing developers as it cemented its dominance. The ruling references the fact that Valve’s fees have remained a constant, even with competition and even when it was not the market leader. The ruling also notes that other platforms have charged less than Valve and failed:
The market reality, at least as plead in the [Complaint] is that, in spite of Defendant’s “supracompetitive” fee, others who charge less have failed, even though they had significant resources at their disposal. Therefore, it would appear that the market reality, at least as plead, is that Defendant’s fee is commensurate with the Steam Platform’s- value to game publishers.
The opinion also gives short shrift to allegations that Valve’s actions have resulted in a reduction in output and quality. According to the court, “If anything, the facts provided by the [Complaint], at least with respect to output, suggest the opposite—a consistent increase in the number of games available in the market and on the Steam Platform.” Plaintiffs have thirty days to replead.
2. Prevent USA Corp. v. Volkswagen AG, 17 F.4th 653 (6th Cir. Nov. 8, 2021).
Volkswagen AG secured a technical victory in a $750 million antitrust lawsuit brought by affiliates of European auto-parts supplier Prevent Group, when a federal appeals court in Cincinnati upheld a ruling sending the dispute to Germany.
The U.S. Court of Appeals for the Sixth Circuit affirmed a decision by Judge Bernard A. Friedman, who in March dismissed claims that VW engaged in a wide-ranging campaign to block Prevent from acquiring smaller suppliers. According to the district court in ruling on Volkswagen’s forum non conveniens challenge, and affirmed by the Sixth Circuit, Prevent is already engaged in protracted litigation against Volkswagen in Germany over essentially the same issues. In that case, the German court has the jurisdiction to reach more conduct and more alleged injuries than the district court. Moreover, many of the documents are in German and Portuguese, which makes the German court a better forum than the district court sitting in Michigan.
Prevent also argued that the court cannot dismiss an antitrust case under forum non conveniens grounds, citing Industrial Investment Development Corp. v. Mitsui & Co., 671 F.2d 876, 890–91 (5th Cir. 1982). The Sixth Circuit disagreed, citing Cap. Currency Exch., N.V. v. Nat’l Westminster Bank PLC, 155 F.3d 603, 606 (2d Cir. 1998), which held that antitrust claims may be dismissed under forum non conveniens. Further, the court stated that Prevent overstated the impact of dismissing an antitrust claim based on forum non conveniens. “The U.S. Department of Justice, the fifty state attorneys general, and any consumers harmed by higher car prices could still sue the company under the Sherman Act and would be less likely to have their lawsuits dismissed under forum non conveniens.”
3. In re Pre-filled Propane Tank Antitrust Lit., Case No. MDL No. 2567, 2021 WL 5632089 (W.D. Mo. Nov. 9, 2021).
A federal court denied a class certification motion by indirect purchasers in a proposed $351 million federal antitrust suit against Ferrellgas LP, which sells propane tanks under the Blue Rhino name. The named plaintiffs are able to pursue their claims individually. The case arises out of claims that Ferrellgas pressured retailers to sell underfilled tanks at full price.
In denying class certification, U.S. District Judge Gary A. Fenner stated that the indirect purchasers could not show predominant legal issues among the members of the putative class, which is a key test for class certification. The court also determined that the putative class’s expert’s use of averaging and aggregating data covered up the existence of uninjured class members, which prevented certification of the class. Further, even though the plaintiffs’ common proof with respect to overcharges failed, the court also addressed the expert’s use of pass-through studies to show that the indirect purchasers had been injured. According to the court: “the fundamental problem with [the expert’s] pass-through analysis is that its reliance on averages and its miniscule sampling of retailer data cannot reliably account for the variation in wholesale and retail prices across AmeriGas’s and Ferrellgas’s thousands of retailer customers. The evidence is undisputed that those retailer customers paid individually negotiated wholesale prices and then resold AmeriGas and Blue Rhino propane exchange tanks at individually-set retail prices. [The expert’s] pass-through studies do not account for any of this variation….”
A. COFECE warns that president’s order deeming Mexican government’s projects and works of public interest and national security carries risks to competition.
The Federal Economic Competition Commission (COFECE) warns that the presidential order published in the Federal Official Gazette Nov. 22, 2021, requiring agencies to carry out projects and works deemed important to the public interest, national security, and national development poses serious risks to competition.
According to COFECE, the order grants preferential treatment to a wide range of projects considered to be of public interest and national security. The order instructs the agencies and entities of the Federal Public Administration—inconsistently with the applicable laws in different areas—to grant within a maximum term of five business days a 12-month provisional authorization for permits or licenses necessary for public works. Even when provisional authorization is not granted, the order establishes an automatic approval (“afirmativa ficta”) without justification. According to COFECE, this could grant agencies asymmetric and preferential treatment with respect to public and private projects, without regard to established, risk-based requirements and procedures.
COFECE further claims that, according to the order, even if a project is declared of public interest and national security, this should not imply that the related projects fall into an exception to the public-bidding process pursuant to various statutes. COFECE believes that public bidding should be favored so that the Mexican government can obtain the best contracting conditions. “Exceptions must respond to specific and delimited cases, where there is a clear rationale of danger, risk or alteration to public safety in accordance with the applicable regulations.”
Pamela J. Marple, Yuji Ogiwara, Stephen M. Pepper, Gillian Sproul, Hans Urlus, Dawn (Dan) Zhang, Mari Arakawa, Anna Bryńska, Filip Drgas, John Gao, Marta Kownacka, Pietro Missanelli, Massimiliano Pizzonia, Anna Rajchert, Jose Abel Rivera-Pedroza, Chazz Sutherland, Ippei Suzuki, Rebecca Tracy Rotem and Alan W. Hersh contributed to this article.
©2021 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume XI, Number 343