Trade Regulation Tidbits

This posting was written by Jeffrey May and John W. Arden.

News, updates, and observations:

 On November 27, the European Commission (EC) announced the appointment of Joaquin Alumnia as the new Commissioner-designate for Competition, for a term running through October 31, 2014. Almunia, 61, previously served as the EC Commissioner for Economic and Monetary Affairs. A career politician, he was the Socialist Party candidate for prime minister of Spain in 2000. He would replace Neelie Kroes, who served as Commissioner for Competition since November 2004 and has been appointed as Commissioner-designate of the EC Digital Agenda. The appointments must be approved by the European Parliament, which is expected to hold individual hearings on the Commissioners-designate January 11-19 and to vote on the new Commission as a whole on January 26, 2010. Further details appear here on the European Union's Europa website.

 A group of 59 senators from both sides of the aisle have sent a letter to the Acting Head of the Delegation of the European Commission (EC) to the United States, requesting that the EC complete expeditiously its investigation of Oracle Corporation's proposed acquisition of Sun Microsystems Inc. Oracle announced on November 9 that the EC had issued a statement of objections (SO) concerning the proposed merger, despite U.S. approval of the transaction. The U.S. Department of Justice approved the plan in August, concluding the merger would not be anticompetitive. In a November 24 statement, Senator John Kerry (D, Massachusetts), who signed the letter, said: “The EC is within its sovereign rights to set the rules for operation in its market, but with our Department of Justice having made a compelling case that the merger does not pose a threat to competition, it is fair to ask the EC for the basis on which a delay on decision making is warranted and to make a decision one way or the other.” Orrin Hatch (R, Utah), another signatory, said “I have become increasingly concerned about the growing body of evidence that foreign regulatory agencies are unfairly using their review processes to impede the business of American corporations,” said Senator Orrin Hatch (Utah), another signatory.

 An increase in false advertising litigation and other dispute resolution might be the product of the “dismal economy,” according to a November 22 New York Times article. The number of complaints filed with the National Advertising Division of the Council of Better Business Bureaus is on track to set a record this year. The 82 formal complaints so far in 2009 follows 84 challenges in 2008, 62 challenges in 2007, and 52 challenges in 2006. Although there are no numbers available regarding the Lanham Act false advertising lawsuits filed this year, lawyers are reporting a corresponding increase. “In this economy, where margins are a bit tighter, a lot of marketing departments have decided to become more aggressive in going after their competitors in hopes that they can either protect their market position or capture an additional market share,” said John E. Villafranco, partner at Kelley, Drye & Warren and contributor to CCH Advertising Law Guide. (“Best Soup Ever? Suits Over Ads Demand Proof.)”

 A number of appointments of FTC senior staff were announced by the agency on November 30. Among them, Cecelia Prewett was named as Director of the Office of Public Affairs; Jessica Rich and Charles Harwood were named as Deputy Directors in the Bureau of Consumer Protection; and Norm Armstrong, Jr. was named Deputy Director in the Bureau of Competition. FTC Chairman Jon Leibowitz also announced a number of personnel changes within the Bureau of Consumer Protection. Joel Winston was named Associate Director of the Division of Financial Practices; Maneesha Mithal was named Associate Director of the Division of Privacy and Identity Protection; and Mark Eichorn was named Assistant Director of the Division of Privacy and Identity Protection. An announcement appears here on the FTC website. A list of senior FTC enforcement personnel appears at CCH Trade Regulation Reporter ¶9557.

After U.S. Clearance, EC Questions Oracle’s Acquisition of Sun

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

Oracle Corporation announced on November 9 that the European Commission (EC) has issued a statement of objections (SO) concerning the company’s proposed acquisition of Sun Microsystems Inc.

The SO follows a decision by the U.S. Department of Justice not to challenge the transaction. The Justice Department terminated the waiting period under the Hart-Scott-Rodino Act in August.

“Oracle plans to vigorously oppose the [European] Commission’s Statement of Objections as the evidence against the Commission’s position is overwhelming,” according to a company statement. “Given the lack of any credible theory or evidence of competitive harm, we are confident we will ultimately obtain unconditional clearance of the transaction.”

At the time of Oracle’s disclosure, the EC had not made the SO public. However, the EC announced in September that it had opened an in-depth investigation into Oracle’s acquisition of Sun.

Competition Concerns in Databases Market

According to the EC, its initial market investigation indicated that the combination of the U.S. technology companies would raise serious competition concerns in the market for databases—a key element of company IT systems.

EC Competition Commissioner Neelie Kroes said the transaction would combine “the world’s leading proprietary database company” and “the world’s leading open source database company.”

In its November 9 statement, Oracle said that “the database market is intensely competitive with at least eight strong players, including IBM, Microsoft, Sybase and three distinct open source vendors.”

According to Oracle, “there is no basis in European law for objecting to a merger of two among eight firms selling differentiated products. Mergers like this occur regularly and have not been prohibited by United States or European regulators in decades.”

Justice Department Reaction

In response to the EC’s action, Deputy Assistant Attorney General Molly Boast of the Department of Justice Antitrust Division issued a statement on November 9, reiterating the Antitrust Division’s earlier determination that “the merger is unlikely to be anticompetitive.”

Boast pointed to the number of open-source and proprietary database competitors to justify the U.S. position. “We remain hopeful that the parties and the EC will reach a speedy resolution that benefits consumers in the Commission’s jurisdiction,” Boast said.

The Department of Justice statement appears here on the DOJ website.

Justice Department Forces Transistor Maker to Divest Acquired Assets . . .

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

The Department of Justice announced on August 20 that it has reached a proposed settlement with California-based semiconductor device maker Microsemi Corporation, requiring the company to divest all of the assets it acquired from rival Semicoa Inc. in July 2008.

The Department challenged the deal in December 2008, alleging that it eliminated or reduced competition in the development, manufacture, and sale of certain semiconductor devices used in critical military and space programs, thereby resulting in increased prices and slower delivery of components essential to the security of the United States.

The devices at issue—small signal transistors and ultrafast recovery rectifier diodes—are used to control the flow of electric current. Both are used in critical military and civil applications, ranging from satellites to nuclear missile systems.

Prior to the acquisition, Microsemi and Semicoa were the only manufacturers of small signal transistors qualified for these applications and were each poised to become qualified for their ultrafast recovery rectifier diodes, which were in short supply, according to the Department.

The proposed settlement—which has been filed but not yet approved by the federal district court in Santa Ana, California—would resolve the lawsuit.

The action is U.S. v. Microsemi Corp. A news release on the settlement appears here. Other documents can be found here on the Department of Justice Antitrust Division website.

. . . While Approving Oracle’s Takeover of Sun Microsystems

Oracle Corporation and Sun Microsystems Inc. announced on August 20 that the Department of Justice has approved their proposed combination and terminated the waiting period under the Hart-Scott-Rodino Act.

The deal—valued at approximately $7.4 billion, or $5.6 billion net of Sun’s cash and debt—was approved by Sun’s shareholders on July 16. Closure awaits certain other conditions, including clearance by the European Commission, which has until September 3 to decide whether to allow the acquisition or launch an investigation into its legality.

Sun and Oracle initially announced the proposed acquisition in April. According to company statements, the deal is aimed at combining “best-in-class enterprise software and mission-critical computing systems” so that Oracle could engineer and deliver an integrated system—applications to disk—to its customers.

A press release on the Department of Justice’s approval of the deal appears here on the Oracle website.