2019 ANTITRUST YEAR IN REVIEW - Wilson Sonsini
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
2019 ANTITRUST YEAR IN REVIEW AUSTIN BEIJING BOSTON BRUSSELS HONG KONG LONDON LOS ANGELES NEW YORK PALO ALTO SAN DIEGO SAN FRANCISCO SEATTLE SHANGHAI WASHINGTON, DC WILMINGTON, DE
Wilson Sonsini 2019 Antitrust Year in Review
Table of Contents
Introduction.................................................................................................................................................................1
Mergers ........................................................................................................................................................................2
Merger Enforcement: Focus on Technology and Nascent and Potential Competition ................................2
Traditional Merger Enforcement.......................................................................................................................2
Vertical Mergers...................................................................................................................................................3
Unusual Actions: Tunney Act Review ..............................................................................................................3
Enforcement of HSR Violations.........................................................................................................................3
International Mergers................................................................................................................................................ 4
European Commission Unafraid of Exercising Veto Powers.......................................................................... 4
Continued Enforcement of Procedural Issues...................................................................................................5
UK CMA Flexing Its Procedural Powers............................................................................................................5
Minority Stakes Under Review in the UK........................................................................................................ 6
Agency Investigations................................................................................................................................................7
DOJ........................................................................................................................................................................7
DOJ Ramps Up Investigations of “Big Tech”.............................................................................................7
DOJ Courts Controversy with Investigation of Automaker Emissions Settlements..............................7
DOJ Continues a Policy-Forward Agenda..................................................................................................7
FTC....................................................................................................................................................................... 8
FTC Amazon Investigation Ramps Up...................................................................................................... 8
New Technology Enforcement Division .................................................................................................. 8
Significant Democratic Dissents Seek to Advance Antitrust Policy Debates........................................ 9
FTC Hearings Seek to Chart Future of U.S. Competition Enforcement................................................10
FTC Wins at Trial in Qualcomm...............................................................................................................10
Health Care Conduct Cases at the FTC.....................................................................................................10
State AGs............................................................................................................................................................. 11
State AG Investigations into Google and Facebook................................................................................ 11
Washington Charts a Separate Course on No-Poach..............................................................................12
Criminal/Cartel Investigations................................................................................................................................12
Notable Developments in the DOJ’s Criminal Antitrust Enforcement Program......................................... 12
Notable DOJ Prosecutions in 2019: Corporations and Individuals............................................................... 13
Policy Initiatives and Developments................................................................................................................16Wilson Sonsini 2019 Antitrust Year in Review
Table of Contents (cont.)
DOJ Announces Policy Incentivizing Corporate Antitrust Compliance ..............................................16
DOJ Launches Procurement Collusion Strike Force ..............................................................................16
DOJ Holds Roundtable on ACPERA.........................................................................................................16
DOJ’s Approach to “No-Poach” Hiring Agreements............................................................................... 17
Efforts to Promote and Coordinate Leniency Programs Across Jurisdictions...................................... 17
Enforcement Against Collusive Conduct Outside the U.S............................................................................. 17
European Commission............................................................................................................................... 17
United Kingdom.........................................................................................................................................19
Japan............................................................................................................................................................19
South Korea.................................................................................................................................................19
China........................................................................................................................................................... 20
Canada........................................................................................................................................................ 20
Brazil........................................................................................................................................................... 20
Civil Litigation..........................................................................................................................................................22
Competitive Restraints of Trade.......................................................................................................................22
Price Fixing Litigation ..............................................................................................................................22
Section 1 Litigation in Pharmaceuticals and Life Sciences....................................................................23
Section 1 in the Labor Market...................................................................................................................25
Other Section 1 Litigation......................................................................................................................... 26
Monopolization and Single Firm-Conduct Litigation...................................................................................28
Section 2 Litigation ....................................................................................................................................28
Monopolization Cases in the Pharmaceutical Industry................................................................................ 30
Class Certification .............................................................................................................................................32
Uninjured Class Members as a Bar to Class Certification – the Progeny of Asacol..............................32
Nationwide Class........................................................................................................................................34
Damages......................................................................................................................................................35
Beyond Uninjured Class Members – Class Certification in the Pharmaceutical Industry..................35
Conclusion.................................................................................................................................................................37
Endnotes ...................................................................................................................................................................37
About Wilson Sonsini’s Antitrust Practice.............................................................................................................38Wilson Sonsini 2019 Antitrust Year in Review
Introduction
Wilson Sonsini Goodrich & Rosati that state attorneys general offices have U.S., including in Canada, China,
(Wilson Sonsini) is pleased to present taken a much more prominent role in the EU, Hong Kong, Japan, South
its 2019 Antitrust Year in Review, enforcing antitrust laws, sometimes Korea, and the United Kingdom. This
which summarizes the most significant even when at odds with positions taken report concludes with an update on
antitrust matters and developments by federal enforcers. private antitrust litigation, where the
of the past year. Over the past few stakes (and correspondingly, the size
years, the use of antitrust laws and In this report, we examine the Trump of settlements) seem to grow every
regulations has become a highly Administration’s antitrust enforcement year. Multi-district litigation and
debated subject in public discourse, approach and analyze actions by both the consolidation of multiple actions
and this year saw antitrust become U.S. antitrust agencies across a range of presents unique and new procedural
the fashionable tool to cite on a wide civil and criminal enforcement matters. and due process issues, as well as
variety of issues. The tech sector We also examine international civil substantive challenges.
continues to be in the spotlight, with enforcement trends at the European
both federal antitrust enforcement Commission (EC), where tech is also We hope you find our 2019 Antitrust
agencies forming specialized divisions top of mind. The criminal enforcement Year in Review to be a useful resource.
to focus solely on mergers and conduct section provides an overview of As always, should you have any
of technology companies. Meanwhile, trends in the Department of Justice’s questions or comments on any of
government enforcers and private (DOJ’s) criminal enforcement the matters, trends, or controversies
plaintiffs remain focused on the life program, including changes in the discussed in the report, please contact
sciences industry, intellectual property DOJ’s approach to leniency. We also your regular Wilson Sonsini attorney
issues, and traditional price-fixing and highlight cartel investigations in or any member of the firm’s antitrust
bid-rigging conduct. We note the trend active jurisdictions outside of the practice.
1Wilson Sonsini 2019 Antitrust Year in Review
Merger Sabre, one that has “spurred innovation
and brought more competitive pricing
the FTC’s divestiture requirements in a
highly concentrated market. Fidelity and
to an industry that has for decades Stewart abandoned the transaction days
Merger Enforcement: Focus been plagued by tepid competition and after the complaint was filed.16
on Technology and Nascent outdated technology.”7 The DOJ argued
and Potential Competition that Farelogix’s current market share The FTC also challenged the proposed
($42 million in 2018 revenues, compared merger of Evonik and PeroxyChem,
In 2019, antitrust enforcement continued to Sabre’s $3.9 billion)8 substantially two of the five suppliers of hydrogen
to focus on technology, including understates its competitive significance, peroxide in North America, alleging that
acquisitions involving large incumbent because its disruptive presence has the merger would reduce competition17
firms and nascent or potential given airlines leverage to negotiate by increasing the likelihood of
competitors. In testimony before the lower prices9 and it is poised to grow coordination in an “already vulnerable”
Senate, the Federal Trade Commission significantly.10 The case is scheduled to market18 and eliminating head-to-head
(FTC) Bureau of Competition Director go to trial in January 2020.11 competition.19 Litigation is ongoing in
Bruce Hoffman highlighted this as this matter.
an area of concern stating that “the For its part, in November 2019, the FTC
Commission pays particularly close upheld the administrative law judge’s The DOJ challenged the merger of Quad/
attention when an industry leader seeks finding that Otto Bock’s acquisition of Graphics Inc. and LSC Communications,
to acquire an up-and-coming competitor Freedom substantially reduced both alleging the transaction would
that is changing customer expectations current and potential competition combine the only two significant
and gaining sales.” 1 in the market for microprocessor- providers of magazine, catalog, and
equipped prosthetic knees (MPKs).12 book printing services.20 The DOJ’s
Consistent with that focus, the FTC The commission found that Freedom’s Antitrust Division focused closely
formed a new division within its forthcoming MPK product, the Quattro, on the parties’ documents, including
Bureau of Competition, the Technology was poised to compete closely with statements describing “intense rivalry”
Enforcement Division, to focus on and take share from Otto Bock’s C-Leg between “#1 competitor[s]”21 and the
“prospective merger reviews in the product (indeed, Freedom nicknamed LSC CEO’s comments to investors
technology sector and reviews of the Quattro the “C-Leg killer”)13 and that months before the deal was announced
consummated technology mergers.” Otto Bock saw the Quattro as a serious that combining the companies would
2
The FTC is reportedly examining competitive threat.14 eliminate competitive “battles” and
Facebook’s past acquisitions, facilitate “pricing stability.”22 The parties
particularly Instagram and WhatsApp, Traditional Merger abandoned the transaction shortly after
to determine whether they were part of Enforcement the complaint was filed.
a strategy to snap up potential rivals and
head off competitive threats.3 The FTC The FTC and the DOJ also continued to The DOJ also took action to block
also announced plans for the FTC to challenge mergers that would increase Novelis’s acquisition of Aleris,
publish guidance by the end of 2019 on concentration in well-established two of only four North American
how to properly apply the antitrust laws industries, with a keen eye towards the manufacturers of rolled aluminum
to competition within the technology companies’ business documents. sheet for automotive applications. In
sector.4 an unusual step, the DOJ has agreed to
The FTC challenged Fidelity’s proposed refer the matter to binding arbitration
In addition, both of the agencies brought acquisition of Stewart which would have to resolve the issue of product market
enforcement actions against technology allegedly eliminated one of “the Big 4” definition. This marks the first time
companies involving nascent or suppliers of title insurance underwriting the DOJ’s Antitrust Division is using
potential competition. In August 2019, and title information services. The this arbitration authority to resolve a
the United States Department of Justice merger agreement acknowledged matter.23
(DOJ) sued to block Sabre Corporation’s antitrust risk by requiring Fidelity to
proposed acquisition of Farelogix, divest assets/businesses worth $75- We continue to see activism on behalf of
Inc.5 The merging firms provide online $225 million to address any antirust State Attorneys General, most notably in
platforms for airline booking services.6 concern.15 However, this was insufficient T-Mobile’s proposed merger with Sprint.
The DOJ complaint described Farelogix to facilitate clearance for the deal, In July, the DOJ and five State Attorneys
as a nascent and growing competitor to because it is often difficult to satisfy General24 approved T-Mobile’s merger
2Wilson Sonsini 2019 Antitrust Year in Review
with Sprint and imposed conditions a rejection of future vertical merger but in practice, companies do not
requiring sale of some businesses to challenges. typically wait for final court approval
Dish Network.25 Departing from typical before closing their transactions.37 In
coordination between state and federal The FTC investigated and cleared a an unusual Tunney Act review of the
antitrust authorities, several other number of vertical mergers during 2019 CVS and Aetna settlement, Judge Leon
State Attorneys General filed a suit over the strenuous objections of the of the U.S. District Court of the District
to enjoin the transaction alleging the two Democratic commissioners, who of Columbia held a two-day evidentiary
transaction would harm competition, have called for increased scrutiny of hearing allowing third parties to argue
with others joining after the suit was vertical mergers. In January 2019, the against the merger and the DOJ’s
filed.26 The FCC cleared the transaction FTC found that the merger of Staples, proposed settlement. Notably, these
in November with a 3-2 vote along party a large reseller of office products, and third parties raised concerns about
lines;27 the Republican majority found Essendant, a wholesale distributor of the settlement that went beyond the
that the transaction and T-Mobile’s office supplies, was likely to reduce competitive issues identified by the DOJ.
commitments will help close the digital competition in the market for office Judge Leon rejected the DOJ’s argument
divide and advance United States supply products sold to small and that the scope of the Tunney Act review
leadership in 5G, the next generation of mid-sized businesses.31 The FTC was limited to the settlement itself and
wireless connectivity.28 Today 10 states was concerned that Staples would the problems it was supposed to fix.38
have joined the DOJ in settlement while have access to Essendant’s reseller The settlement was first filed in October
13 states and the District of Columbia are customers’ commercially sensitive
2018 and on September 4, 2019, the court
litigating to block the transaction.29 The business information, and would be
approved the DOJ settlement of the
trial is ongoing. able to exploit that information when
CVS-Aetna merger.39 “If the Tunney Act
competing against those customers.32
is to mean anything,” Judge Leon wrote,
Vertical Mergers To resolve those concerns, the parties
“it surely must mean that no court
agreed to implement a firewall that
should rubber-stamp a consent decree
Both agencies continue to examine would limit Staples’ access to the
approving the merger of ‘one of the
vertical mergers (those involving competitively sensitive information
largest companies in the United States’
business operating at different levels of of Essendant’s reseller customers.33
and ‘the nation’s third largest health-
a supply chain). Vertical mergers most Commissioners Chopra and Slaughter
insurance company,’ simply because the
often raise competition concerns when dissented, arguing that the FTC has
Government requests it!”40
the buyer’s competitors are reliant on been too permissive in clearing vertical
the asset being acquired, and the buyer mergers, and should be challenging
more vertical mergers in court.34 The Enforcement of HSR
has the incentive and ability to withhold
the asset’s products or services. While FTC similarly split 3-2 in the Frenesius/ Violations
the agencies have always reviewed and NxStage matter, with Commissioners
challenged vertical mergers, they are Chopra and Slaughter dissenting HSR violations continued to be a source
receiving increased attention in recent from the majority’s finding that the of enforcement for the Agencies in 2019.
years. transaction did not support a vertical The HSR Act mandates that transactions
theory of harm.35 The Democratic that meet specific thresholds be notified
The DOJ appealed the 2018 decision commissioners also raised concerns to the antitrust agencies for review.
dismissing its challenge to the AT&T/ after the FTC cleared the United/DaVita If after a 30-day waiting period the
Time Warner—the first vertical merger merger, but did not dissent because the pertinent agency still has doubts about
case that has gone to judgment in Colorado Attorney General obtained a the antitrust impact of the transaction,
40 years. The government argued on behavioral settlement addressing the the agency will issue a second
appeal that the district court erred in deal’s vertical concerns.36 request, opening an in-depth review.
rejecting its theory that the merger Importantly, the HSR Act applies
would increase the combined firm’s Unusual Actions: Tunney Act regardless of any substantive antitrust
bargaining leverage in negotiating with Review issues and can apply even where a single
distributors. The D.C. Circuit rejected the investor is acquiring voting securities
appeal finding no clear error that would The Tunney Act requires that a court of an issuer. The agencies frequently
require reversal.30 Given the fact-bound must independently determine that the bring enforcement actions for failure to
nature of the opinion, the government’s DOJ’s proposed consent is in the “public comply with HSR obligations, which
loss in this case should not be read as interest” before entering the final order continued to be true in 2019.
3Wilson Sonsini 2019 Antitrust Year in Review
Canon and Toshiba agreed to pay $5 were also fined in other jurisdictions, as and DuPont, were subject to filing under
million to settle allegations that the discussed below. the HSR Act. The three Third Point
companies devised a scheme to avoid funds made corrective filings with the
observing the waiting period required The FTC reached a settlement with three
federal antitrust agencies on Nov. 8,
by the HSR Act for Canon’s acquisition Third Point Funds over HSR violations,
2017, and the waiting period for those
of Toshiba Medical Systems Corporation resulting in payment of $609,810 in civil
corrective filings expired on Dec. 8,
(TMSC).41 According to the complaint, penalties.42 The FTC found that on Aug.
the scheme devised by “had no purpose” 31, 2017, the conversion of shares held by 2017. The settlement addresses the FTC’s
other than to complete the sale by March the three Third Point funds from Dow allegations that each defendant fund
31, 2016, and avoid the HSR Act’s waiting Inc. to the newly formed DowDuPont was in violation of the HSR Act each day
period requirements. Canon and Toshiba Inc. following the merger of Dow Inc. between Aug. 31, 2017 and Dec. 8, 2017.
International backed the creation of a European
“global champion” to compete with
proven difficult to implement (involving,
as they did, the continued dependency
Merger China’s state-owned CRRC Corp.
Ltd.44 The parties are the two largest
on the merged entity for certain licenses
and service agreements). Highlighting
suppliers in Europe (supplying trains its well-established preference for
European Commission to Germany’s Deutsche Bahn, France’s clear-cut and standalone structural
Unafraid of Exercising SNCF/TGV, and the Eurostar) and hold remedies, the EC blocked the deal to
Veto Powers leading positions in worldwide markets. protect competition in the European rail
The EC received a number of complaints industry.46
At ease with its position as one of during its in-depth investigation from
the more mature and interventionist a range of stakeholders (customers, In Wieland/Aurubis, the EC prohibited
global antitrust agencies, the European competitors, industry associations, a merger which would have combined
Commission (EC) issued three and trade unions), and the deal producers of rolled copper products.
prohibition decisions in 2019, despite drew criticism from several national According to the EC, a number
intense lobbying from both industry and competition agencies, with the UK, of European industrial customers
national governments. Belgium, Spain, and the Netherlands expressed strong concerns about the
submitting a joint letter rejecting the deal during the regulator’s in-depth
Prohibition decisions are still relatively parties’ remedies proposal.45 The EC investigation. The EC raised serious
rare in the EU, and indeed only 10 raised serious concerns that the deal concerns that the deal would create a
vetoes have been exercised since the would harm competition and reduce dominant player and significantly reduce
revamp of the EU’s merger rules in 2004. innovation in signaling systems and competition. Wieland’s remedy offer was
However, on February 6, 2019, the EC very high-speed rolling stock, and lead deemed inadequate and the EC blocked
announced that it was blocking two to the foreclosure of smaller competitors the deal.47
deals on one day: Siemens’ (Germany) and to higher prices and less choice
proposed acquisition of Alstom (France), for customers. Rejecting the parties’ The two vetoes lead to a politically-
and Wieland’s proposed acquisition arguments, the EC found that Chinese charged debate about merger control
of Aurubis Rolled Products and suppliers were not present in the EEA reform and the role of industrial
Schwermetall (Germany).43 and that it was highly unlikely that policy in EC reviews. In response to
new entry from China would exert a the EC’s decision, the French and
In Siemens/Alstom, the parties planned competitive constraint on the merging German governments put forward
to create a European rail champion parties in the foreseeable future. The EC a manifesto outlining proposals to
through the merger—supported by believed that the remedies offered by the relax EU competition rules to allow
the French and German governments. parties (a complex mix of assets from the EC to give greater weight to global
The French Minister of Economy was each of the parties, the partial transfer markets and future competitors,
vocal in his support of the creation of of certain assets, and restrictive licenses and allow EU ministers to veto EC
a “French-German world champion” subject to carve-outs) were inadequate decisions. With Commissioner Vestager
while German politicians likewise to address its concerns and would have chosen for a second mandate of five
4Wilson Sonsini 2019 Antitrust Year in Review
years, stakeholders from industry has since acquired TNT and UPS is suing has on the EC’s substantive analysis, as
and national governments alike will the EC for damages arising out of the the EC is entitled to take enforcement
be keeping a keen eye on the EC’s prohibition. action against both negligent and
response to the ongoing debate around intentional provision of inaccurate or
European champions and the potential Continued Enforcement of incomplete information.
politicization of EU merger control. Procedural Issues
In February 2019, the EC sent a
On June 11, 2019, the EC blocked its statement of objections (“charge sheet”)
On June 27, 2019, the EC levied a fine
third deal of the year: the proposed to Telefónica Deutschland alleging the
of €28 million (approx. $31 million)
merger between Tata Steel (India) and company breached commitments it had
against Canon for gun-jumping. Canon
ThyssenKrupp (Germany). The parties offered to secure the EC’s approval of
acquired TMSC by way of a two-step
are the second and third largest steel its acquisition of E-Plus in 2014.53 This
warehousing structure involving
producers in the EEA and the EC raised is the first time that the EC has sent a
an interim buyer, which—ruled the
serious concerns about the deal’s impact charge sheet alleging that a company has
EC—effectively allowed it to acquire
upon competition. It concluded that breached merger commitments offered
control of TMSC prior to obtaining
the remedies offered by the parties were under the EU Merger Regulation.54 The
merger approval and in violation of the
inadequate as they addressed only a EC’s investigation is ongoing. If the EC
standstill obligation. Like in the U.S.,
small part of the overlap between the concludes that Telefónica did breach a
EU merger control rules require that a
parties and did not include certain commitment given as part of the EC’s
buyer notify the EC of a deal that meets
manufacturing assets deemed necessary clearance decision, it could impose a
its jurisdictional thresholds and refrain
by the EC.48 ThyssenKrupp appealed fine of up to 10 percent of Telefónica
from implementation before clearance.51
the EC’s decision on August 22, 2019, Deutschland’s annual worldwide
The parties were also fined for the same
arguing that the EC set overly restrictive turnover and/or revoke the decision.
gun-jumping conduct in the U.S., in
product and geographic market China (in 2017), and were reprimanded
definitions and that the proposed in Japan (2016). UK CMA Flexing Its
remedies would have resolved any Procedural Powers
competition concerns. In April 2019, the EC imposed a €52
million fine (approx. $57 million) on With Brexit on the horizon, the UK
Given the recent criticism of the EC by General Electric (GE) for providing Competition and Markets Authority
the EU’s highest court in UPS/TNT at the incorrect information during the (CMA) has been flexing its muscles
start of this year, it will be interesting 2017 investigation of its planned and coming down hard on procedural
to see if the agency is again taken to acquisition of LM Wind.52 In its original breaches of its merger control regime.
task for the conduct of its reviews.49 notification, GE stated that it did not
In UPS/TNT, the econometric model have any higher power output wind While historically the CMA has tended
ultimately used in the EC’s final decision turbines for offshore applications in to use a mix of informal and formal
was materially different from all the development, beyond its existing 6 MW information gathering powers during
versions that had been shared with UPS turbine. However, the EC was informed merger reviews, the publication of
during the administrative procedure. In by a third party that GE was in fact updated guidance on internal document
a judgment highlighting the importance offering a 12 MW offshore wind turbine production in January 2019 signaled
of respect for the parties’ rights and to potential customers. Despite the fact an intention to move towards a stricter
transparency in merger reviews, the that GE withdrew its notification and approach as standard.55 This is in line
court found that this was a breach of the re-filed with corrected information, with global enforcement trends, where
rights of defense and annulled the EC’s the EC opened a separate procedural agencies are increasingly tough on
decision. The judgment notably upheld investigation and ultimately fined GE procedural breaches.56
a lower court’s finding that given that for negligently providing incorrect
UPS’s rights of defense were infringed, information—notwithstanding that In October 2019, in a signal to industry
the decision should be annulled where the error had no impact on the EC’s that it will not allow the merging
“there was even a slight chance that substantive review. The decision clearly parties to withhold responsive internal
[UPS] would have been better able to underlines the importance of ensuring documents, the CMA made public its
defend itself” – a relatively low bar for the accuracy of information provided to decision in Sabre/Farelogix to penalize
companies seeking to challenge an EC the EC at all steps of the merger review Sabre £20,000 (approx. $26,000) for
decision on procedural grounds.50 FedEx process, regardless of the impact that it procedural breaches.57 In April 2019,
5Wilson Sonsini 2019 Antitrust Year in Review
Sabre had responded to two formal hold separate orders, which require the unconditionally after an in-depth Phase
information requests from the CMA. parties to cease or undo integration II review, but the penalty levied by the
However, in June, the company updated efforts pending completion of the CMA highlights the caution required in
its response with an additional set CMA’s review. In March 2019, the CMA global integration efforts while the UK
of documents, of which 188 had not issued its first order requiring parties is still subject to a carve-out. The CMA’s
previously been provided to the CMA. to a completed merger to “undo” their recent decisions make it clear that the
These documents had either been completed merger.58 In Tobii/Smartbox, CMA’s interim measures impose all
entirely withheld from the CMA or the parties completed their deal in the constraints and consequences of a
produced in redacted form. The issue October 2018. Post-completion, the mandatory and suspensory regime.
arose from a disclosure gap with the CMA called the merger in for review and
parallel U.S. review of the transaction, required the parties to cease any further
where a number of documents initially integration activities. The CMA then
Minority Stakes Under
withheld as privileged in the U.S. were referred the case to Phase II and issued Review in the UK
later re-classified and produced to the an “unwinding order”, stipulating that
U.S. Department of Justice (DOJ). Sabre all pre-closing acts which prejudiced the While the ability of certain national
then provided these documents to the CMA’s investigation be reversed. For competition authorities to review
CMA. While the CMA acknowledged all intents and purposes, this required non-controlling minority investments
that it had been on notice that Sabre the parties to undo an agreement that is nothing new (e.g., in Austria and
was providing the same universe of Smartbox discontinue certain products Germany), the UK’s pending review
documents that it had given to the and halt work on R&D. The CMA of Amazon’s investment in Deliveroo
DOJ, that the failure to hand over blocked the deal in August 2019. Similar (an online food delivery business) is
certain materials was not intentional, unwinding orders were issued in the likely to be closely watched. The review
that Sabre had been transparent, and course of CMA reviews in Bottomline/ highlights the increasing scrutiny of
that the documents were “only of Experian59 and Ecolab/Holchem.60 the conduct and policies of the largest
limited relevance” to its review, the UK technology companies, particularly as
enforcer still sanctioned the company. In PayPal/iZettle, the CMA imposed regards M&A activity, on both sides
In its decision, the CMA ruled that a record fine of £250,000 (approx. of the Atlantic. Amazon was the lead
withholding the documents gave rise $325,000) on PayPal for failing to
investor in a $575 million fundraising
to a “material risk” that the CMA’s comply with the terms of an IEO.61
round into Deliveroo in May 2019.
decision would be taken on the basis of The parties completed their deal on
Stemming from this, the CMA said
incomplete evidence. September 20, 2018, the day following
that it would examine Amazon’s stake
the CMA’s decision to make an IEO
in Deliveroo as it believed the two
As a matter of law, there is no obligation that the businesses be held separate,
companies had “ceased to be distinct”
to pre-notify mergers to the UK CMA, after the CMA’s merger intelligence
meaning logically that the parties are committee had identified the transaction or had made plans to that effect—despite
free to close their transaction once as warranting an investigation. A the fact that Amazon is only a minority
all other mandatory approvals have derogation from the IEO was granted shareholder in the food-delivery
been secured. The CMA does however regarding integration planning which company. The CMA issued an IEO
have the power to impose an “initial did not impact the UK, but the parties in June this year requesting that the
enforcement order” (IEO) or other were found by the CMA to be in breach parties cease any integration efforts and
interim measures on parties to an when cross-selling campaigns intended formally launched a merger inquiry on
anticipated merger (i.e., one that has to target customers based in France October 16. As the year comes to an end,
not yet closed), and does so routinely for and Germany were found to have hit the CMA has decided to open a Phase II
completed mergers. These are essentially 76 UK customers. The deal was cleared investigation into the transaction.62
6Wilson Sonsini 2019 Antitrust Year in Review
Agency after reports in late May and early June
that DOJ was preparing an antitrust
Observers have also expressed
concern that the investigation was
Investigations investigation of Google.66 In September,
Google announced that it had received
politically motivated and intended
to aid the Trump Administration’s
2019 was a perfect storm of civil a civil-investigative demand from separate dispute with California
enforcement activity in “Big Tech,” DOJ seeking information about past over automotive emission standards.
with the DOJ, FTC, and state enforcers investigations into the company.67 Also Both the Senate and House Judiciary
jockeying to investigate the technology in September, it was reported that antitrust subcommittees sent document
industry.63 Building on the trend of the the DOJ would open an investigation requests to DOJ and the White House
past several years, civil enforcers also into Facebook.68 The DOJ has not seeking “any information relating to
brought significant actions in the health commented on the scope of either of the President’s dispute or disagreement
care industry involving pay-for-delay these investigations. with the State of California’s position
and other anticompetitive tactics in on the auto emission standards.” The
pharmaceuticals. The federal agencies The DOJ investigations come against a subcommittees expressed concern over
were joined in their investigations by backdrop of significant scrutiny of tech “the weaponization of the antitrust laws
multiple state attorneys general, who giants from state antitrust enforcers for political purposes.” AAG Delrahim
were uncharacteristically assertive and from Congress. In July, the House denied any political involvement in the
this year in conducting investigations Judiciary Antitrust Subcommittee decision to open the investigation in a
separate from, and sometimes in partial obtained testimony from executives from September Senate hearing.73
opposition to, the federal agencies. The Amazon, Apple, Facebook, and Google.69
year was also marked by significant The panel issued requests for documents DOJ Continues a Policy-Forward Agenda
and sometimes controversial policy from the companies in September.70 On
development activity, including the September 9, a group of fifty attorneys a) Amicus program
FTC’s landmark Hearings on Competition general, representing Puerto Rico, the
in 21st Century and the DOJ’s efforts District of Columbia, and every state AAG Delrahim has made the filing of
to influence IP policy and reform except California and Alabama, made amicus briefs a priority since taking
longstanding consent decrees governing a high profile announcement of a over as head of the Antitrust Division
the film, music, and other significant Texas-led investigation into Google.71 in September 2017.74 At a September
industries. Shortly before the DOJ investigation 2019 Senate hearing, AAG Delrahim
of Facebook was reported, a group reiterated his support of DOJ’s continued
DOJ of state attorneys general led by New intervention, stating that the filings
York (which has since grown to 47) allow the DOJ “to address developments
DOJ Ramps Up Investigations of “Big announced their own inquiry.72 in the case law earlier and more
Tech” frequently, offering us the opportunity
DOJ Courts Controversy with to have an outsized impact with our
The DOJ’s Antitrust Division announced Investigation of Automaker Emissions resources.”75
on July 23 that it had begun a review Settlements
of “whether and how market-leading During AAG Delrahim’s tenure, the
online platforms have achieved market On August 28, the Antitrust Division DOJ has filed thirty-two amicus
power and are engaging in practices launched an investigation of BMW, briefs, including some submitted to
that have reduced competition, stifled Honda, Ford, and Volkswagen based on the Supreme Court. Nineteen of the
innovation, or otherwise harmed a voluntary agreement the automakers underlying have been resolved to date:
consumers.”64 DOJ’s initial press release had made with California regarding eight in favor of DOJ’s position, five
referred generally to “widespread vehicle emissions requirements. The against, and six dismissed without a
concerns that consumers, businesses, DOJ’s announcement was met with ruling on the substance. The DOJ’s most
and entrepreneurs have expressed about criticism that the agreement is very notable intervention this year came
search, social media, and some retail likely immune to antitrust challenge in the FTC’s suit against Qualcomm,
services online” without specifically under (i) the Noerr-Pennington doctrine, spurring an inter-agency dispute
naming any companies or practices it which protects government petitioning regarding the application of competition
may be investigating.65 from antitrust scrutiny, and (ii) the state- law to the technical standard-setting
action doctrine, which exempts certain process. DOJ submitted three separate
DOJ’s announcement of a broad “Big conduct done pursuant to state policy briefs—one at the district court level
Tech” investigation came several weeks from federal antitrust law. and two on appeal—that contradicted
7Wilson Sonsini 2019 Antitrust Year in Review
the views of the FTC. DOJ filed amicus The DOJ filed to terminate the competition for American workers.83
briefs in support of Qualcomm’s request Paramount Consent Decrees in The workshop included, among other
to stay the district court’s injunction November.80 These decrees were things, discussions of labor monopsony,
pending a Ninth Circuit ruling and entered in a series of cases from the employer collusion in franchise
another brief arguing that the district 1930s and 1940s involving horizontal settings and the sharing economy, the
court decision should be overturned. conspiracies to control motion picture competition concerns facing collegiate
The Ninth Circuit is expected to hear distribution and exhibition markets and athletes, and the scope of the statutory
arguments on the case in January. required movie studios to separate their and non-statutory labor exemptions for
distribution and exhibition businesses. collective bargaining and other labor
b) Consent Decree Review The decrees also banned bundling films union activities. The DOJ workshop
in a single license, entering a license was the first event in a two-part series
In April, the DOJ announced that covering an entire theater circuit, resale with the FTC. The next workshop will
it would review all of the agency’s price maintenance, and over-broad be hosted by the FTC and will focus
“legacy” antitrust judgments.76 The licenses for specific geographic areas. on the legal, economic, and consumer
DOJ’s statement argued that the “vast DOJ concluded that these decrees have protection issues associated with the use
majority of these judgments no longer served their purpose and “may actually of non-compete clauses.
protect competition because of changes harm American consumers by standing
in industry conditions, changes in in the way of innovative business models FTC
economics, changes in law, or for for the exhibition of America’s great
other reasons.”77 DOJ posted allegedly creative films.”81 FTC Amazon Investigation Ramps Up
outdated judgments to its website for
c) Workshops The FTC reportedly ramped up its
public comment and has sought to
terminate some of the judgments in the investigation into Amazon’s business
In May, the DOJ held a public workshop practices in September, focusing on
appropriate court.
on competition in television and how Amazon’s policies might have an
digital advertising to explore industry impact on small businesses selling in
In June, the DOJ opened a review of the
dynamics in media advertising its marketplace.84 Earlier in the year,
78-year-old consent decree that dictates
and the implications for antitrust the Commission reportedly conducted
the way music performance license
enforcement and policy, including interviews with Amazon’s competitors
agreements are negotiated.78 The DOJ
merger enforcement.82 AAG Delrahim regarding Amazon’s business practices.85
had previously reviewed this consent
kicked off the two-day workshop by The investigation has reportedly now
decree in 2015, concluding that changes
saying that the agency must understand been expanded to cover Amazon’s cloud
to the decrees were not warranted.
whether advertisers view ads on digital business, Amazon Web Services.86
The American Society of Composers,
media as a substitute for television The FTC has not confirmed any of
Authors, and Publishers (“ASCAP”) and
ads or as a “useful complement.” The these reports. However, in November,
Broadcast Music Inc. (“BMI”), two of workshop consisted of a series of panels Commission Chairman Joseph Simons
the US’s biggest music license holders, examining (i) television advertising; said that, in addition to its investigation
submitted comments to the DOJ to (ii) internet and mobile advertising; of Facebook, the FTC was conducting
push the agency to terminate. BMI and (iii) the competitive dynamics in investigations of other major tech
ASCAP argued that the composition of media advertising; and (iv) trends and platforms but that he could not divulge
music licensees has changed in recent predictions for advertising generally. details of those investigations.87
decades and “free market” licensing is Some of the key topics discussed
required. Music licensees expressed included whether the Division should New Technology Enforcement Division
concern that termination of the recognize increased competition in
consent decree would enable license advertising, the influence of large players Complementing its investigations
holders to arbitrarily raise prices and in the online and digital advertising of “Big Tech” firms, in early 2019 the
harm the music industry. The public industry, and an evaluation of the DOJ’s FTC created a Technology Task Force
comment period for the DOJ’s review antitrust actions to block mergers of ad to monitor technology markets and
ended August 9, and the comments are networks. investigate potential anticompetitive
published for review.79 DOJ has not conduct. In October, the FTC
indicated when it will reach a decision The DOJ held a workshop in September announced that its Technology Task
on whether to terminate or modify the on the role of antitrust enforcement in Force was now being converted into a
decree. labor markets and promoting robust permanent division within the Bureau of
8Wilson Sonsini 2019 Antitrust Year in Review
Competition. This new division would In February, the FTC voted 3-2 on party emphasis on bringing cases where
be called the Technology Enforcement lines to settle a merger between Staples theories are supported by facts.
Division or TED.88 and office supply wholesaler Essendant But the incipiency standard under
with a remedy that would establish Section 7 imposes meaningful
The FTC is also working on tech a firewall for competitively sensitive obligations on the government before
platform guidance for antitrust law dealer information held by Essendant.95 allowing it to block a transaction.
enforcers grappling with the conduct Commissioners Chopra and Slaughter Specifically, it requires us to establish
of large technology platforms.89 The both strongly dissented in the decision. more than a theoretical concern—it
guidance will examine the application of Commissioner Chopra argued that must be probable (not certain) and
existing antitrust law to tech platforms the Commission was “jumping to substantial. Simply theorizing a harm
and whether new legislation should conclusions” by not sufficiently that might arise out of a merger is not
be considered.90 The FTC’s Office of investigating the potential for increased enough. We must be able to explain
Public Policy is leading the preparation buyer power and relying too heavily on and to prove with facts how a given
of this guidance, and it will be released an underdeveloped economic model.96 vertical merger is likely to cause
by the end of the year, according to Commissioner Slaughter’s dissent harm in the case at hand. We must
Commissioner Christine Wilson.91 offered a sweeping criticism of the state provide evidence.100
of vertical merger enforcement, seeking
Significant Democratic Dissents Seek to to set the stage for a broader policy Commissioners Chopra and Slaughter
Advance Antitrust Policy Debates discussion: have been active advocates for changes
in antitrust policy outside of FTC
Minority FTC Commissioners continued Right now, a great debate is taking enforcement actions as well. For
the trend toward more aggressive place in Washington policy circles instance, in September, Commissioner
and even around the country at Chopra filed a comment criticizing
statements, particularly in matters
family dinner tables. The debate DOJ for failing to use its criminal
concerning tech platforms. For instance,
concerns the consequences for enforcement authority to curb no-
Commissioner Chopra issued a strong
American citizens of fewer and more poach and wage-fixing agreements.101
dissent in the FTC’s July settlement
dominant companies controlling In written testimony given to the
with Facebook. In July, the FTC found
large swaths of industries and firms House Judiciary Committee in October,
that Facebook had violated its 2012
across sectors of the economy. While Commissioner Chopra recommended
consent agreement with the FTC. The
mergers between direct competitors that structural remedies should be
settlement between the Commission and
contribute to this phenomenon and applied to bring about a change in
Facebook resulted in a fine of $5 billion
raise competitive concerns, vertical the behavior of tech platforms.102
on Facebook, along with the imposition
mergers that integrate trading Commissioner Chopra also proposed
of a new privacy structure and new
partners can be just as pernicious in opening up intellectual property rights
tools to allow the FTC to monitor to underlying technologies so that the
sapping our economy’s vitality.97
Facebook.92 Commissioner Chopra alleged rule-breakers cannot rely on the
dissented, arguing that the settlement Commissioner Slaughter argued that legal framework to prevent others from
did nothing to change Facebook’s vertical mergers are underenforced using and copying their intellectual
behavioral advertising business model because close calls are either not property and that one-sided or take-
and the financial incentives which led to challenged at all or are cleared with it-or-leave-it contract terms should be
the violations, and that the settlement ineffectual behavioral commitments voided by the courts. To manage the
allowed Facebook to continue its mass based on unreliable assumptions and issue of data collection and privacy,
surveillance and advertising tactics.93 predictions about how vertically- he argued that the government should
Commissioner Rebecca Slaughter integrated firms will operate.98 place an outright ban on tech companies
also dissented, arguing that the FTC Commissioner Slaughter called for a from collecting and monetizing
should have pursued litigation rather general policy of retrospectives for “close certain types of data.103 Commissioner
than accepting a settlement, including cases.”99 The Staples majority responded Slaughter suggested at the American
expressing discomfort with the release pointedly to Commissioner Slaughter’s Antitrust Institute annual conference
of liability for Facebook, the inclusion of dissent: that the FTC should more strongly
officers and directors in the release, and assert its own enforcement views and
decision not to name Mark Zuckerberg More broadly, the dissent seems to should sue to block mergers it views as
in the complaint and order.94 take issue with the Commission’s anticompetitive even if it may lose. She
9Wilson Sonsini 2019 Antitrust Year in Review
said that “an optimal win record is not Subcommittee in November indicated Health Care Conduct Cases at the FTC
100%.”104 that the agency was still “distilling”
input from the hearings but reiterated a) Pay-for-delay
FTC Hearings Seek to Chart Future of the priorities mentioned in Simons’
U.S. Competition Enforcement speech.108 In 2009, the FTC initiated a lawsuit
(FTC v. Actavis) alleging that the brand-
The FTC’s Hearings on Competition and FTC Wins at Trial in Qualcomm name drug company Solvay entered into
Consumer Protection in the 21st Century illegal patent infringement settlement
that began in September 2018 continued The twists and turns of the Qualcomm agreements with generic drug makers,
through June 2019.105 As the FTC put it, case attracted much attention from pursuant to which Solvay paid generic
the hearings were intended to assess the legal community this year. The drug makers to keep generic versions of
whether “broad-based changes in the FTC had initially sued Qualcomm in AndroGel off the market for a number
economy, evolving business practices, 2017, claiming that Qualcomm used of years.114 This lawsuit resulted in the
new technologies, or international its monopoly position as a supplier of landmark ruling by the Supreme Court
developments might require adjustments wireless chips to force mobile phone in Actavis, which held that reverse
to competition and consumer manufacturers to pay high license fees payment patent settlements were subject
protection enforcement priorities of the for Qualcomm’s patent portfolio. In to antitrust scrutiny.115 In February
Commission.”106 The FTC hearings had a the Northern District of California, 2019, the FTC reached a settlement
diverse roster of speakers, including FTC Judge Lucy Koh held a trial in January with the last remaining defendant in
Commissioners and staff, state attorneys 2019 and then, in May, issued a lengthy
Actavis, AbbVie (Solvay’s current owner).
general, economists, law firm attorneys, decision against Qualcomm. Judge
Pursuant to the settlement, AbbVie is
academics, and others. Koh’s decision included a sweeping
prohibited from entering into patent
injunction requiring Qualcomm to
infringement settlement agreements
Totaling 14 sessions in all, the FTC renegotiate its contracts with mobile
that restrict generic entry.116
Hearings covered numerous topics, phone manufacturers and license its
including common ownership, consumer patents to rivals.
b) Product Hopping
protection, and vertical mergers. But it
is fair to say that much of the focus was The decision created an unusual amount
Product hopping refers to the strategy
on competition issues related to so- of tension between the FTC and DOJ.
of a brand-name drug manufacturer
called tech “platforms.” Specific sessions While the FTC pursued the case at the
introducing formulation changes,
covered included nascent competition, district court level and on appeal to
modification of dosage, or other
privacy, innovation, data security and the Ninth Circuit, DOJ filed multiple
alterations in order to avoid competition
big data. Numerous speakers advocated amicus briefs in favor of Qualcomm,
from typically lower-priced generic drugs.
for new approaches to these issues, arguing that the FTC’s position would
while others defended the applicability have significant negative consequences This can involve a “soft switch,” where
of the existing consumer welfare for the application of antitrust to IP law, the brand firm does not withdraw the
standard. The FTC also accepted public and, potentially, for national security.109 old version of the drug from market but
comments for the hearings, which Numerous other interested parties have discourages its use, or a “hard switch,”
attracted hundreds of comments across also filed amicus briefs.110 Additionally, where the brand firm withdraws the
all of the topics. In a September speech the case against Qualcomm attracted old version from market, thus giving
at Fordham University, FTC Chairman opposition from FTC Commissioner consumers and payers no choice but
Joe Simons stated that the FTC is Christine Wilson111 and the Departments to buy the new version of the drug.
preparing a staff report on international of Defense and Energy.112 The Ninth Because generic manufacturers must
aspects of competition enforcement, Circuit stayed Judge Koh’s decision, show that their version of the drug and
guidance on antitrust issues for concluding that Qualcomm should the currently marketed brand-name
technology platforms, guidance on not have to renegotiate its agreements drug are bioequivalent (i.e., have a
vertical mergers, and commentary on given the possibility that Qualcomm similar formulation and effect), a brand
how nascent competition and non-price might prevail at the appellate level.113 manufacturer’s alterations to a drug can
competition factors into horizontal The Ninth Circuit has yet to hear oral force generics to incur costly delays in
merger analysis.107 A FTC written argument or issue a decision on the development and approval (especially
statement before the House Antitrust appeal. when done just prior to generic entry).
10You can also read
