Wednesday, December 31, 2008

2008 Was Active Enforcement Year for FTC

This posting was written by CCH Trade Regulation staff.

In the last year of an administration that de-emphasized federal enforcement of antitrust and consumer protection law, the Federal Trade Commission nevertheless had a very active year.

In fact, the agency was recently lauded for its “very active consumer protection enforcement” in a recent 2008 Transition Report by the ABA Antitrust Section. That report commended the FTC on its “ongoing effort to conduct an extensive internal review and retrospective self-evaluation prior to its 100th anniversary,” but noted “an actual or perceived divergence regarding enforcement standards” between the FTC and the Department of Justice Antitrust Division. The report recommended that the agencies “work together to reduce any material differences in their approaches to civil antitrust enforcement.”

Amendments to Rules of Practice

As 2008 came to a close, the FTC finalized amendments to its rules of practice to expedite administrative proceedings, setting tighter time limits leading up to the issuance of an administrative law judge's initial decision. Evidentiary hearings will generally be held five months from the date of the complaint in most merger cases and eight months from the date of the complaint in non-merger cases. The time to answer a complaint will be shortened from 20 to 14 days. The amendments—which also change discovery and motions practice and the Commission’s handling of motions to dismiss or withdraw a case after a federal court’s denial of a preliminary injunction—will apply prospectively only to new cases initiated after publication in the Federal Register, which is anticipated in early January.

Antitrust Actions

Federal appellate courts handed the agency some victories in 2008. The FTC's determination that the conduct of the North Texas Specialty Physicians, an organization of independent physicians and physician groups around Fort Worth, amounted to horizontal price fixing was upheld by the U.S. Court of Appeals in New Orleans (2008-1 Trade Cases ¶76,146).

The U.S. Court of Appeals in Washington, D.C. reversed a lower court's decision denying the FTC's request for a preliminary injunction blocking the combination of Whole Foods Markets, Inc. and Wild Oats Markets, Inc. (2008-2 Trade Cases ¶76,233).

The U.S. Court of Appeals in New Orleans upheld a Commission order requiring Chicago Bridge & Iron Co., N.V. and its United States subsidiary to divest certain assets acquired from Pitt-Des Moines, Inc. and used in the business of designing, engineering, and building field-erected cryogenic storage tanks (2008-1 Trade Cases ¶76,019). The Commission had ruled that the acquisition would likely result in a substantial lessening of competition.

The agency suffered some setbacks as well. The U.S. Court of Appeals in Washington, D.C. vacated the Commission's determination that Rambus Inc.'s actions before a standard setting organization amounted to exclusionary conduct in violation of antitrust laws (2008-1 Trade Cases ¶76,121). The agency has petitioned the U.S. Supreme Court to review the case.

The FTC has actively filed suits in federal courts challenging antitrust violations. In February, the Commission filed a case charging that pharmaceutical manufacturer Cephalon engaged in illegal conduct to prevent competition for its branded drug, Provigil, by paying four competing firms to refrain from selling generic versions of the drug (Trade Regulation Reporter ¶16,110). In December, the agency alleged that Ovation Pharmaceuticals, Inc. preserved its monopoly in drugs to treat a potentially deadly congenital heart defect in premature babies by acquiring its only competitor in the market (Trade Regulation Reporter ¶16,231).

The Commission also concluded a long-pending matter involving a hospital acquisition in suburban Chicago. The FTC issued an order providing rules for how Evanston Northwestern Healthcare Corporation (ENH) had to negotiate with health insurance companies or managed care organizations in light of the Commission's 2007 determination that an ENH hospital acquisition in 2000 violated antitrust laws (2008-1 Trade Cases ¶76,130).

Consumer Protection

In the consumer protection area, two appellate court decisions stood out. The U.S. Court of Appeals in San Francisco affirmed an order against the marketers of a liquid dietary supplement to pay almost $120 million for failure to comply with an earlier FTC consent decree's consumer redress provisions (2008-1 Trade Cases ¶76,116). Second, the U.S. Court of Appeals in Chicago held that marketers of the "Q-Ray Ionized Bracelet" violated the FTC Act by claiming that tests proved the therapeutic claims they made about the product (2008-1 Trade Cases ¶75,991).

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