Issuance of New Merger Guidelines Highlighted FTC's Accomplishments in 2010

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The FTC’s efforts to substantially revise the Horizontal Merger Guidelines for the first time since 1992 were among the agency’s major accomplishments of 2010.

Working with the Department of Justice Antitrust Division, the FTC issued new joint guidelines in August (CCH Trade Regulation Reporter ¶13,100). The issuance of the guidelines marked the culmination of a process that began in September 2009.

Merger Enforcement Actions

Last year also saw a number of notable merger enforcement actions brought by the Commission. The agency resolved more than a dozen merger challenges in 2010 through consent decrees. Among these was an administrative challenge to Dun & Bradstreet’s consummated acquisition of Quality Educational Data, its nearest rival in the education marketing business.

The FTC's focus on consummated mergers was evidenced by another administrative complaint issued in November. The agency challenged Laboratory Corporation of America’s already-completed acquisition of rival clinical laboratory testing company Westcliff Medical Laboratories, Inc. An administrative trial is set for May 2011.

Before the year ended, the Commission ordered complete divestiture in another administrative action involving a consummated merger. In December, the Commission announced that Polypore International, Inc. must divest assets of a rival manufacturer of battery components acquired in 2008.

The FTC's decision not to take action against Google with respect to the search engine's acquisition of the mobile advertising company AdMob was also a notable development. The Commission unanimously closed its investigation in May after determining that Apple was in a position to nullify any anticompetitive effects of the merger.

The agency also suffered a tough loss in a federal district court challenge to an acquisition in the pharmaceuticals industry in 2010. The federal district court in Minneapolis rejected an action brought by the agency along with the State of Minnesota against global pharmaceutical company Lundbeck, Inc., challenging its predecessor’s acquisition of drugs used to treat premature infants with a heart condition known as patent ductus arteriosus (PDA) (2010-2 Trade Cases ¶77,160). In October 2010, the FTC and State of Minnesota appealed the decision to the U.S. Court of Appeals in St. Louis.

Non-Merger Enforcement Efforts

Also in the pharmaceutical sector, the FTC continued its efforts to target “pay-for-delay” drug patent settlements in 2010. FTC Chair Jon Leibowitz has said that ending these settlements, under which a branded drug company compensates a generic competitor for not bringing its lower-cost drug to market for a certain period of time, is one of the agency's highest priorities.

Legislative efforts to address the conduct failed in 2010. However, the agency will likely weigh in again as private litigants seek U.S. Supreme Court review of a decision of the U.S. Court of Appeals in New York City (2010-1 Trade Cases ¶76,989) rejecting an antitrust challenge to a settlement in a patent infringement lawsuit involving the antibiotic ciprofloxacin hydrochloride (Cipro).

A number of other important non-merger enforcement efforts were highlights of 2010. The agency's August settlement with computer chip giant Intel Corporation after eight months of litigation over the company's alleged monopolistic conduct was one of the them. Last year, Transitions Optical, Inc., the maker of photochromic treatments that darken corrective lenses used in eyeglasses, also agreed to settle FTC charges that it used anticompetitive practices to maintain a monopoly.

Consumer Protection

On the consumer protection front, the FTC in 2010 continued to focus on deceptive practices aimed at financially-distressed consumers. It also proposed revised “green” marketing guides. As the year came to a close, the staff of the agency threw their support behind the implementation of a “do-not-track” mechanism for Internet users that would provide them with a method to opt-out from having their online activity tracked by data-gathering firms.

FTC Closes Investigation into Google-AdMob Merger

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

The FTC will not challenge Google’s proposed acquisition of mobile advertising network company AdMob under federal antitrust law. After thoroughly reviewing the deal, the agency decided that it was unlikely to harm competition in the emerging market for mobile advertising networks.

Mobile ad networks, such as those provided by Google and AdMob, sell advertising space for mobile publishers, who create applications and content for websites configured for mobile devices, primarily Apple Inc.’s iPhone and devices that run Google’s Android operating system.

By "monetizing" mobile publishers’ content through the sale of advertising space, mobile ad networks play a vital role in fueling the rapid expansion of mobile applications and Internet content.

Apple’s Market Entry

In a May 21 statement issued in conjunction with the closing of its investigation into the transaction, the Commission said that, although combination of the two leading mobile advertising networks raised serious antitrust issues, the agency’s concerns ultimately were overshadowed by recent developments in the market, most notably the move by Apple to launch its own, competing mobile ad network.

In addition, a number of firms appear to be developing or acquiring smartphone platforms to better compete against the iPhone and Android systems. These firms would have a strong incentive to facilitate competition among mobile advertising networks, according to the FTC.

"As a result of Apple’s entry [into the market], AdMob’s success to date on the iPhone platform is unlikely to be an accurate predictor of AdMob’s competitive significance going forward, whether AdMob is owned by Google or not," the Commission’s statement explained.

Questions about Transaction

According to the FTC’s statement, evidence gathered by the agency raised important questions about the transaction. Google and AdMob have competed head-to-head for the past few years, with a notable increase in intensity during the past year. This competition has spurred innovation and allowed mobile publishers to keep a large share of the revenue generated from the sale of their ad space. The companies also have economies of scale that give them a major advantage over smaller rivals in the business, the statement says.

These concerns, however, were outweighed by recent evidence that Apple is poised to become a strong competitor in the mobile advertising market, having recently acquired Quattro Wireless and used it to launch its own iAd service.

In addition, Apple could leverage its close relationships with application developers and users, its access to a large amount of proprietary user data, and its ownership of iPhone software development tools and control over the iPhone developers’ license agreement to compete effectively.

The FTC announcement appears here on the Commission’s website, along with a statement, a closing letter to counsel for Google, Inc. and a closing letter to counsel for AdMob, Inc. These documents appear at CCH Trade Regulation Reporter ¶16,453.

Concerns About Combination

The Commission made its decision, despite public expressions of concerns that the combination would allow Google to leverage its dominance of the search advertising market into the emerging mobile advertising market.

On April 6, Senator Herb Kohl (D, Wis.) sent a letter to FTC Chariman Jon Leibowitz, urging the agency to closely scrutinize the acquisition. (See Trade Regulation Talk, April 8, 2010 posting).

Senator Kohl cautioned that the combination could result in higher mobile advertising prices and lower revenues for applications developers. The stakes were high in an emerging market where revenues are predicted to increase from $416 million in 2009 to $1.56 billion in 2013.

Kohl urged the Commission to safeguard consumer privacy if the deal were approved, since the combined company would gain access to “a treasure trove of data on millions of consumers’ behavior, search and product preferences.”

Senator Calls for Close FTC Scrutiny of Google’s Acquisition of Mobile Ad Provider AdMob

This posting was written by Cheryl Beise, Editor of CCH Guide to Computer Law.

A key U.S. Senator this week urged the Federal Trade Commission to closely scrutinize Google’s proposed acquisition of mobile advertising service provider AdMob. Senator Herb Kohl (Wisconsin), Chairman of the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy, and Consumer Rights, expressed his concerns in an April 6 letter to FTC Chairman Jon Leibowitz. Shortly after Google announced its acquisition of AdMob for $750 million last November, the FTC requested further information.

Senator Kohl pointed out that the deal’s critics argue that the combination would allow Google to “leverage its dominance of PC-based search advertising market into the emerging mobile advertising market.” Google-AdMob’s combined market dominance potentially could result in higher mobile advertising prices and lower revenues for applications developers, Kohl said.

Google and AdMob contend that the mobile advertising market is too nascent to determine if any one transaction will result in dominance. According to Senator Kohl, however, the stakes are too high to avoid protecting competition in an emerging market where revenues are predicted to leap from $416 million in 2009 to $1.56 billion in 2013. “[T]he incipiency of the smart phone advertising market is not in itself a reason for the FTC to desist from taking any necessary action to enforce the antitrust laws or protect competition,” Senator Kohl wrote. Advertising accounted for 97% of Google’s $23.7 billion in revenues in 2009.

Senator Kohl also urged the Commission to ensure that consumers’ privacy would be safeguarded if the deal is approved. “[T]he combined firm will gain access to a treasure trove of data on millions of consumers’ behavior, search and product preferences,” Senator Kohl noted.

Senator Kohl’s letter arrived amidst news reports that FTC lawyers are preparing to challenge the Google-AdMob deal on antitrust grounds. Any action taken by the FTC would need to be cleared by the agency's Bureau of Competition and approved by the FTC Commissioners.