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 Requires Dun & Bradstreet to Divest Previously Acquired Marketing Data Firm

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

To settle an FTC challenge to a 2009 acquisition, the Dun & Bradstreet Corporation has agreed to divestitures aimed at addressing the potential competitive harm caused by the transaction.

An FTC consent order resolves a May 2010 FTC complaint against Dun & Bradstreet, over its $29 million acquisition of Quality Educational Data (QED), a division of Scholastic, Inc.

The agency alleged that the transaction combined Dun & Bradstreet’s Market Data Retrieval and QED—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.

The $29 million acquisition was below the threshold that would have triggered pre-merger filing requirements, and therefore the companies were not required to notify the FTC and Department of Justice.

Divestiture, Customer Option

The FTC consent order requires Dun & Bradstreet to divest to MCH Inc.—an institutional and educational data company active in the K-12 data market—an updated K-12 database, the QED name, and certain associated intellectual property.

Dun & Bradstreet has also agreed to offer its customers the option to terminate their contracts with the firm without penalty so that they can consider doing business with MCH and to release certain Dun & Bradstreet employees from restrictions on their ability to work for MCH. In addition, Dun & Bradstreet is required to provide MCH with technical assistance for up to one year. Finally, the order calls for the appointment of a Commission-designated monitor to ensure compliance with its terms.

Expedited Order

To “enable MCH expeditiously to acquire the divested assets and begin to compete during the upcoming back-to-school selling season," the Commission took the unusual step of issuing its final order in advance of the comment period. Dun & Bradstreet was required to complete the divestiture of the QED K-12 data business assets not later than five days after the order became final.

Normally, the agency does not issue a final order until it considers all comments received during the comment period. The agency explained, however, that the settlement remained subject to public comment. The Commission could reopen and modify its Decision and Order or commence a new administrative proceeding if necessary in light of the public comments.

Dun & Bradstreet Response

Dun & Bradstreet said in a September 10 statement that although it did not believe that the acquisition violated the federal antitrust laws, “our agreement to sell a package of assets acquired in the 2009 acquisition of QED preserves important enhancements to MDR’s offerings, while addressing the concerns raised by the FTC.”

The administrative action is In the Matter of the Dun & Bradstreet Corporation, FTC Docket No. 9342. Further details will appear at CCH Trade Regulation Reporter ¶16,497.

Text of the agreement containing the consent order, the decision and order, and a news release appear here on the FTC website.