Federal/State Antitrust Cooperation Continued in 2010

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

In 2010, the states joined with the federal antitrust agencies to challenge anticompetitive conduct in some of the year's most high profile antitrust enforcement actions.

Restrictive Credit Card Rules

A total of 20 states have now joined the Department of Justice Antitrust Division in challenging the allegedly restrictive rules of the three largest credit and charge card transaction networks in the United States. The Department of Justice and seven states originally filed their civil antitrust suit against Visa, MasterCard and American Express in October 2010. The complaint was amended in December to add the additional states. Visa and MasterCard have entered into proposed settlements; however, American Express has announced its intention to defend itself in court.

Acquisitions and Mergers

Illinois, Michigan, and Wisconsin also joined forces with the U.S. Department of Justice in an action against Dean Foods Company—the nation’s largest dairy processor—to undo the company's 2009 acquisition of Dean Foods and Foremost Farms USA's Consumer Products Division. The case is ongoing.

In other merger news, Ohio Attorney General Richard Cordray, co-chair of the Antitrust Committee of the National Association of Attorneys General, announced in September plans to open a preliminary review of the combination of Southwest Airlines and AirTran Airlines.

Health Care

The State of Michigan and the U.S. Justice Department filed suit in October against Blue Cross Blue Shield of Michigan, the largest provider of commercial health insurance in Michigan, over its use of “most favored nation” (MFN) clauses in contracts with hospitals across the state. The suit alleges that Blue Cross’s contracting practices violated Sec. 1 of the Sherman Act and Sec. 2 of the Michigan Antitrust Reform Act.

Also in the health care area, the State of Nevada reached a settlement with Universal Health Services, one of the nation’s largest hospital management companies, over its proposed acquisition of Psychiatric Solutions, Inc. Under a final judgment resolving the state's antitrust concerns, Universal Health Services was required to divest two local psychiatric hospitals, which also had to be divested under a separate FTC consent order.

Price Fixing

In 2010, the states resolved a number of price fixing actions. In September, a $25 million multi-state settlement involving an alleged price fixing conspiracy in the vitamins industry was announced. The suit, brought in 2009, asserted that 12 vitamin manufacturers had schemed to inflate the prices of 16 vitamins, causing government health care programs to overpay for those vitamins. Resolution of a long-running price fixing action brought by 33 states was announced in June. Six of the world’s top manufacturers of dynamic random access memory (DRAM) computer chips agreed to a $173 million settlement. The proposed settlement would resolve both of these litigations, as well as lawsuits by private plaintiffs

Antitrust Division Active in Health Care, Financial Sectors in 2010

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

With the nation focused on government efforts to overhaul the health care and financial services sectors in 2010, it is not surprising that two of the Department of Justice Antitrust Division's most notable enforcement actions last year were in these industries.

In October, the U.S. Justice Department and the Michigan Attorney General filed a civil action in the federal district court in Detroit against Blue Cross Blue Shield of Michigan, the largest provider of commercial health insurance in Michigan, over its use of “most favored nation” clauses in contracts with hospitals across the state.

Also in October, the U.S. Justice Department and seven states filed a civil antitrust suit in the federal district court in Brooklyn, New York, against the three largest credit and charge card transaction networks in the United States, challenging rules that allegedly restrict price competition at the point of sale.

MasterCard and Visa agreed to settle the charges under the terms of a proposed consent decree; however, American Express announced that it had no intention of settling the case.

The government’s investigation into anticompetitive and fraudulent conduct in the municipal bond industry continued in 2010 as well. Among the most recent developments in the investigation, the Justice Department announced in December that Bank of America agreed to pay a total of $137.3 million in restitution to federal and state agencies for its participation in a conspiracy to rig bids in the municipal bond derivatives market. The restitution was a condition of the bank’s admission into the Justice Department’s antitrust corporate leniency program.

Employee Recruiting, Agriculture

Jobs were also a major issue for Americans in 2010, and the Department of Justice took action to prohibit a number of high-tech companies from conspiring to restrict employee recruiting. In September, the Justice Department announced a settlement with six firms that allegedly agreed not to cold call any employee at the other company, a practice which prevented the companies from directly soliciting each other’s employees. In late December, a seventh company agreed under a proposed U.S. consent decree to refrain from engaging in similar practices.

The livelihood of farmers, ranchers, and other participants in the agricultural industry were considered at a series of workshops exploring competition issues in agriculture. The workshops, which were announced in August 2009 and held throughout 2010, included Department of Justice and Department of Agriculture leadership.

Merger Enforcement, Review

As at the FTC, the issuance of the revised joint Horizontal Merger Guidelines (CCH Trade Regulation Reporter ¶13,100) in August was among the major 2010 merger review and enforcement developments for the Antitrust Division. In addition, a number of high profile mergers were reviewed by the Justice Department in 2010.

In January 2010, the Antitrust Division approved the Ticketmaster/Live Nation acquisition, subject to structural and behavioral remedies. Another merger challenge that was filed at the start of the year remains ongoing. Last January, the Antitrust Division, along with state attorneys general from Illinois, Michigan and Wisconsin, challenged Dean Foods Company's April 2009 acquisition of Dean Foods and Foremost Farms USA's Consumer Products Division.

In August, the Justice Department approved the proposed merger of UAL Corporation, the parent of United Airlines, after the parties agreed to transfer slots at Newark Airport to Southwest Airlines. Now pending before the agency is Southwest's proposed acquisition of low-cost rival AirTran.

The Antitrust Division is also currently reviewing the proposed acquisition of U.S. global media and entertainment giant NBC Universal by Comcast Corporation. Regulatory approval of the Comcast-NBC combination was anticipated in January 2011.

Blue Cross Blue Shield of Michigan Seeks Dismissal of Government Antitrust Suit

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

Blue Cross Blue Shield of Michigan has asked the federal district court in Detroit to dismiss an antitrust suit brought by the U.S. Department of Justice and the State of Michigan, challenging provisions in the company's contracts with Michigan hospitals.

Blue Cross has raised four separate and independent grounds for dismissal of the government's attack on the health insurance provider's use of “most favored nation” (MFN) clauses.

The government alleges that Blue Cross raised hospital prices to competing health care plans and inflated the costs of health care services and insurance through the use of MFN clauses in its agreements with hospitals.

Some of the MFN clauses require hospitals to provide services to Blue Cross’s competitors at no less than Blue Cross pays. Other MFN clauses give Blue Cross an even better rate than the rate available to other plans.

Immunity, Abstention

In a December 17 motion to dismiss and brief, Blue Cross argues immunity under the state action doctrine of Parker v. Brown, 317 U.S. 341, 1940-1943 Trade Cases ¶56,250. According to the dismissal motion, state action immunity is appropriate because the State of Michigan created Blue Cross pursuant to a comprehensive health care regulatory structure under Michigan Public Act 350 of 1980.


The company contends that, as a quasi-public, state-created health care corporation, it only needs to show that the challenged conduct reasonably flowed from Michigan's policy to displace competition. The company asserts that, although it did not need to show that the conduct was actively supervised, the conduct was in fact actively supervised.

Blue Cross also makes the argument that, independent of the state action doctrine, the principles of abstention, set forth in Burford v. Sun Oil. Co., 319 U.S. 315 (1943), require the court to refrain from hearing the case because of its disruptive effect on state policy.

Sufficiency of Allegations

The complaint fails to allege viable legal claims under the U.S. Supreme Court's decisions in Bell Atlantic Corp. v. Twombly, 2007-1 Trade Cases ¶75,709, and Ashcroft v. Iqbal, 2009-2 Trade Cases ¶76,785, Blue Cross also argues. The insurer questions the alleged relevant markets and contends that the government failed to plausibly allege facts supporting a viable theory of legal harm.

“The government has failed to allege any specific facts that support their conclusion that anticompetitive effects of most favored nation clauses outweigh the benefits to payers and consumers,” said Jeffrey Rumley, Blue Cross vice president and chief legal counsel in a December 17 statement. “They rely upon conclusory allegations because they have no facts. Competition worked as it should here.”

Lastly, Blue Cross seeks dismissal of the Michigan antitrust law claims on the ground that the state laws specifically exempt the challenged conduct from their reach.