New Administration Signals New Enforcement Priorities for 2009 Antitrust Division

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

A new administration meant new leadership and new enforcement priorities at the Department of Justice Antitrust Division in 2009.

Former FTC Commissioner Christine A. Varney was confirmed by the Senate in April to serve as Assistant Attorney General in charge of the Department of Justice Antitrust Division. Soon thereafter, Varney took steps to reverse some of the policies set by the prior administration.

First, in May, Varney withdrew a September 2008, Antitrust Division report, entitled “Competition and Monopoly: Single-Firm Conduct Under Section 2 of theSherman Act” (CCH Trade Regulation Reporter ¶50,231), which examined whether and when specific types of single-firm conduct violate Section 2 of the Sherman Act.

The antitrust chief said that withdrawing the report “is a shift in philosophy and the clearest way to let everyone know that the Antitrust Division will be aggressively pursuing cases where monopolists try to use their dominance in the marketplace to stifle competition and harm consumers.”

Patent “Reverse Payments”

The current Antitrust Division has also taken a tougher stand on patent litigation settlements involving a “reverse payments.” In July, the Department of Justice filed a brief with the U.S. Court of Appeals in New York City, considering an action challenging a settlement agreement between drug maker Bayer AG and the generic defendant Barr Laboratories, Inc.

The Justice Department said that a patent litigation settlement involving a “reverse payment” to the alleged drug patent infringer in exchange for its agreement to withdraw its challenge to the patent and delay bringing its generic drug to market should be viewed as presumptively unlawful.

The move brings the Justice Department’s position closer to that espoused by the FTC on “pay-for-delay” patent settlement agreements between drug makers.

Horizontal Merger Guidelines

Another example of increased coordination between the Antitrust Division and the FTC was the September announcement to explore the possibility of revising the agencies’ joint horizontal merger guidelines. The agencies kicked off workshops in December to consider changes to the guidelines. The workshops will continue in January 2010.

Mergers and Acquisitions

Despite the Antitrust Division’s efforts to strengthen antitrust enforcement, the agency still faced criticism. Some in the tech sector took issue with the Justice Department’s decision in August not to challenge the merger of Oracle Corporation and Sun Microsystems Inc., which is valued at $7.4 billion.

Since the Justice Department’s announcement approving the deal, Oracle has offered some proposed remedies in an effort to satisfy the competition concerns of the European Commission regarding the maintenance of MySQL as an open source database in competition with Oracle’s proprietary databases following the merger.

Cartel Enforcement

In 2009, as in past years, the Justice Department continued to make cartel enforcement a priority. The Justice Department continued to obtain guilty pleas from companies and executives in connection with investigations into conspiracies to fix cargo rates for international air shipments and to fix prices for Thin Film Transistor-Liquid Crystal Display panels.

A new focus for the Antitrust Division in 2009 was bid rigging in the municipal bonds industry

FTC Action Challenging Patent Settlement Agreements Transferred

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

An action brought by the FTC and the State of California—challenging agreements in which Solvay Pharmaceuticals, Inc. allegedly paid generic drug makers Watson Pharmaceuticals, Inc. and Par Pharmaceutical Companies, Inc. to delay generic competition to Solvay’s branded testosterone-replacement drug AndroGel—has been transferred to the federal district court in Atlanta.

The patent settlement agreements at issue were entered into in the federal district court for the Northern District of Georgia.

The FTC and the state brought the action in the federal district court in Los Angeles, alleging that the settlement agreements harmed competition by having brand-name and generic pharmaceutical companies agree not to compete and instead share monopoly profits. (See “FTC, California Sue Drug Makers for Delaying Generic Competition,” Trade Regulation Talk, February 10, 2009)

Avoiding Eighth Circuit

In arguing for the transfer, the defendants suggested that the FTC sought to avoid Eleventh Circuit law and to create a split among the federal appellate courts regarding the legality of reverse-payment patent settlement agreements. The FTC in 2005 lost a challenge to a patent settlement agreement in the U.S. Court of Appeals in Atlanta (2005-1 Trade Cases ¶74,716).

“Because of the close ties between this antitrust case and the underlying patent cases, the judge in the Northern District of Georgia is more appropriate to hear this case,” the federal district court in Los Angeles held. The court decided that the FTC was not forum shopping when it filed the action in California.

While the court noted the agency’s efforts to create the circuit split, it concluded that this strategy “bears little weight on the determination of transfer in the interest of justice and convenience of the parties and witnesses.”

Application for Stay of Transfer

The court ordered the transfer of the case on April 8. The next day, the court denied the FTC’s emergency ex parte application for a stay pending transfer. Thus, the defendants’ joint motion to dismiss will be heard in the federal district court for the Northern District of Georgia. Private actions that followed the government suit in the federal district court in Los Angeles were transferred as well.

The April 8 decision in FTC v. Watson Pharmaceuticals, Inc., will appear in CCH Trade Regulation Reporter.