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 Alleges Merger-to-Monopoly in Market for Education Marketing Information

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

Dun & Bradstreet Corporation’s 2009 acquisition of the assets of Quality Education Data (QED), a division of Scholastic, Inc., “is in practical effect a merger-to-monopoly” in the market for kindergarten through twelfth grade educational marketing data, the Federal Trade Commission alleged in an administrative complaint announced today. The agency is seeking divestitures of assets necessary to restore the competition that allegedly was lost as a result of the acquisition.

Prior to the transaction, Dun & Bradstreet's Market Data Retrieval and QED were the only two significant competitors in the K-12 data market, according to the agency. As a result of the acquisition, Market Data Retrieval, which describes itself as “the market’s first choice for marketing information and services for the K-12, higher education, library, early childhood, and related education markets,” allegedly holds over 90 percent of the K-12 data market.

Educational marketing data includes contact, demographic, and other information relating to teachers, administrators, schools, and individual school districts, that is sold or leased to customers, the FTC explained. The data sold by these companies is used to sell books, education materials, and other products to teachers and other educators nationwide.

Low-Dollar-Value Transaction

Dun & Bradstreet acquired the QED assets for approximately $29 million. Because the transaction fell below the threshold for premerger notification filings under the Hart-Scott-Rodino (H-S-R) Act, the federal antitrust agencies did not have had an opportunity to require the parties to wait to consummate the transaction while its potential competitive effects were considered pursuant to the H-S-R program. Nevertheless, the FTC ultimately discovered the transaction.

“Despite its relatively low dollar value, this transaction dramatically decreased competition in the marketplace,” said FTC Bureau of Competition Director Richard Feinstein. “When Dun & Bradstreet acquired QED, it bought its closest competitor and created a monopoly. That’s going to get the FTC’s attention every time.”

The Commission vote approving the administrative complaint was four-to-one, with Commissioner J. Thomas Rosch voting against. The complaint, In the Matter of The Dun & Bradstreet Corporation, FTC Docket No. 9342, will appear at CCH Trade Regulation Reporter ¶16,445.