Legal Library: Cases and Proceedings

Abbott Laboratories agreed to divest two medical device businesses to settle FTC charges that its proposed $25 billion acquisition of St. Jude Medical, Inc. would likely be anticompetitive. The FTC’s complaint alleges that without a remedy, the proposed acquisition would harm competition in the U.S. markets for vascular closure devices, which are used to close holes in arteries from the insertion of catheters, and for “steerable” sheaths, which are used to guide catheters for treating heart arrhythmias. Without a remedy, the merger will cause significant harm to competition in these two markets. The consent order requires the parties to divest to Tokyo-based medical device maker Terumo Corporation all rights and assets related to St. Jude’s vascular closure device business and Abbott’s steerable sheath business. The order requires both companies to assist Terumo with establishing its manufacturing capabilities. Under the order, Abbott is also required to notify the FTC if it intends to acquire lesion-assessing ablation catheter assets from Advanced Cardiac Therapeutics, known as ACT. Lesion-assessing ablation catheters provide feedback to physicians regarding the force being applied by the catheter or the temperature of the ablation target. Currently, only St. Jude and one other company provide lesion assessing ablation catheters in the United States. Abbott and ACT have formed a partnership to develop these catheters. After the acquisition of St. Jude, if Abbott acquired lesion-assessing ablation catheter assets from ACT, it could eliminate additional competition that would result from an independent ACT.

Valeant Pharmaceuticals, the parent of Bausch + Lomb, agreed to sell Paragon Holdings I, Inc. to settle charges that its May 2015 acquisition of Paragon reduced competition for the sale of FDA-approved buttons used for three types of gas permeable, or GP, lenses: orthokeratology lenses, worn to reshape the cornea; large-diameter scleral lenses, which cover the white of the eye and are used after eye surgery, for corneal transplants, and to treat eye disease; and general vision correction lenses. Valeant will sell Paragon in its entirety to a newly created entity, Paragon Companies LLC, headed by the former president of Paragon, Joe Sicari. Under the settlement, Paragon Companies also will acquire the assets of Pelican Products LLC – a contact lens packaging company that Valeant acquired after its purchase of Paragon – that is the only producer of FDA-approved vials used for shipping some GP lenses.

Investment firm founder Fayez Sarofim agreed to pay $720,000 in civil penalties to resolve allegations that he violated the Hart-Scott-Rodino Act by failing to report stock purchases from several issuers between 2001 and 2012. The HSR Act exempts acquisitions of up to ten percent of voting securities if they are made solely for investment purposes, but this exemption is not available to individuals who serve on the board of directors of the issuer at the time the shares are acquired. The FTC alleged that because Sarofim was serving as a board member at each company for which he acquired voting shares, he was ineligible for an investment-only exemption from filing and his failure to report a series of transactions to U.S. antitrust authorities violated the Act. From 2001 to 2012, Sarofim acquired voting shares of energy infrastructure company Kinder Morgan, Inc., crossing three different filing thresholds without making the filings required under the HSR Act. In 2007, he acquired voting shares in insurance holding company Kemper Corporation and did not file as required under the Act. According to the complaint, he was already serving as a board member at Kinder Morgan and at Kemper’s predecessor company, Unitrin Inc., before he made the respective stock purchases.

ON Semiconductor Corporation agreed to sell its Ignition IGBT business in order to settle charges that its proposed $2.4 billion acquisition of Fairchild Semiconductor International, Inc. would likely substantially lessen competition in the worldwide market for Ignition IGBTs, resulting in higher prices and reduced innovation. Ignition IGBTs are semiconductors that function as solid-state electronic switches in the ignition systems of automotive internal combustion engines.  The order preserves competition by requiring ON to divest its Ignition IGBT business to Chicago-based manufacturer Littelfuse, Inc. The divestiture includes design files and intellectual property that Littelfuse needs to manufacture ON’s Ignition IGBTs. ON must also facilitate the transfer of its customer relationships to Littelfuse, and supply Ignition IGBTs for Littlefuse to sell to customers while Littelfuse sets up its manufacturing operations.

Teva Pharmaceutical Industries Ltd. agreed to sell the rights and assets related to 79 pharmaceutical products to settle FTC charges that its proposed $40.5 billion acquisition of Allergan plc’s generic pharmaceutical business would be anticompetitive. The remedy requires Teva to divest the drug portfolio to eleven firms, and will preserve competition in U.S. pharmaceutical markets where Teva and Allergan compete now or would likely have competed in the future if not for the merger. The divested products include anesthetics, antibiotics, weight loss drugs, oral contraceptives, and treatments for a wide variety of diseases and conditions, including ADHD, allergies, arthritis, cancers, diabetes, high blood pressure, high cholesterol, mental illnesses, opioid dependence, pain, Parkinson’s disease, and respiratory, skin and sleep disorders. The acquirers of the divested products are Mayne Pharma Group Ltd., Impax Laboratories, Inc., Dr. Reddy’s Laboratories Ltd., Sagent Pharmaceuticals, Inc., Cipla Limited, Zydus Worldwide DMCC, Mikah Pharma LLC, Perrigo Pharma International D.A.C., Aurobindo Pharma USA, Inc., Prasco LLC and 3M Company.  In addition to the product divestitures, to address the anticompetitive effects likely to arise in markets for 15 pharmaceutical products where Teva supplies active pharmaceutical ingredients to current or future Allergan competitors, the FTC order additionally requires Teva to offer these existing API customers the option of entering into long-term API supply contracts.

Mylan Inc. agreed to divest the rights and assets related to two generic pharmaceutical products in order to settle FTC charges that its proposed $7.2 billion acquisition of Swedish drug maker Meda would be anticompetitive. The FTC order preserves competition in the markets for 250 mg generic carisoprodol tablets, which treat muscle spasms and stiffness, and for 400 mg and 600 mg generic felbamate tablets, which treat refractory epilepsy. Under the proposed order, the U.S.-based generic pharmaceutical company Alvogen Pharma US, Inc. will acquire all of Mylan’s rights and assets related to 400 mg and 600 mg felbamate tablets. The proposed order also requires Mylan to provide transitional services and take all actions that are necessary for Alvogen to obtain FDA approval to manufacture and market 400 mg and 600 mg generic felbamate tablets. According to the FTC’s complaint, Meda and one other company currently market 250 mg generic carisoprodol tablets, and Mylan, which owns the U.S. marketing rights to a recently approved carisoprodol product, is the next likely entrant. Without a remedy, the acquisition would eliminate Mylan’s entry as a third independent competitor, delaying beneficial competition and future price decreases. Under the proposed order, Mylan must relinquish its U.S. marketing rights for the drug. With the settlement, Indicus Pharma LLC, which owns the product, manufactures it, and markets it internationally, will compete independently in the U.S. market.

Energy companies Energy Transfer Equity, L.P. (“ETE”), and The Williams Companies, Inc., agreed to divest Williams’ interest in an interstate natural gas pipeline to proceed with ETE’s proposed acquisition of Williams. According to the complaint, the proposed merger, if consummated, would have reduced competition in the market for “firm” – i.e., guaranteed – pipeline capacity to deliver natural gas to points within the Florida peninsula. In Florida, natural gas is extensively used for electric power generation, making competitive access to constant and reliable sources of supply critical. The complaint alleges that absent a remedy, the acquisition would eliminate the competition between FGT and Gulfstream, which historically has enabled Florida customers to obtain lower transportation rates and better terms of service. It also would have resulted in a pipeline monopoly at many natural gas delivery points within the peninsula.  The complaint also alleges that the proposed merger likely would harm future competition from a new interstate pipeline, Sabal Trail Transmission LLC, which is scheduled to start transporting natural gas to parts of the Florida peninsula in May 2017. According to the complaint, Sabal Trail and its future customers will rely on leased access to a segment of the Transco Pipeline, a Williams-owned, large interstate pipeline, for natural gas supply. The complaint alleges that the newly merged company would have an incentive to deny Sabal Trail additional capacity expansions on Transco because ETE’s FGT pipeline is a closer competitor to Sabal Trail than was Williams’ Gulfstream pipeline.

Ball Corporation has agreed to sell to Ardagh Group S.A. eight U.S. aluminum can plants and associated assets in order to settle charges that its proposed $8.4 billion acquisition of Rexam PLC is likely anticompetitive. According to the complaint, the acquisition would eliminate direct competition in the United States between Ball and Rexam, which are the first and second largest manufacturers of aluminum beverage cans in both the United States and the world. The complaint alleges without a divestiture, it is likely that the proposed merger would substantially lessen competition for standard 12-ounce aluminum cans in three regional U.S. markets – the South and Southeast, the Midwest, and the West. The complaint also alleges that the proposed merger would substantially lessen competition for specialty aluminum cans nationwide. Ball and Rexam produce specialty aluminum cans that range in size from 7.5 ounces to 24 ounces, come in different shapes, and are used to market a wide variety of different products such as portioncontrolled drinks and energy drinks. Under the terms of the consent agreement, Ball and Rexam are required to divest eight aluminum can plants and related assets in the United States to Ardagh, one of the world’s largest producers of glass bottles for the beverage industry and metal cans for the food industry. Ardagh will acquire aluminum can body plants in Fairfield, Calif., Chicago, Ill., Whitehouse, Ohio, Fremont, Ohio, Winston-Salem, N.C., Bishopville, S.C., and Olive Branch, Miss., and Rexam’s aluminum can end plant located in Valparaiso, Ind.. Ardagh also will acquire Rexam’s U.S. headquarters in Chicago, Ill., and Rexam’s U.S. Technical Center in Elk Grove, Ill.

Invibio agreed to settle charges that it used long-term supply contracts to exclude rivals and maintain its monopoly in implant-grade polyetheretherketone, known as PEEK, which is sold to medical device makers. The FTC’s complaint alleges that two other companies,Solvay Specialty Polymers LLC and Evonik Corporation, later entered the implant-grade PEEK market, but Invibio’s anticompetitive tactics impeded them from effectively competing for customers. Through these exclusive contracting practices, the complaint alleges that Invibio has been able to maintain high prices for PEEK, despite entry from Solvay and Evonik; to prevent its customers from using more than one source of supply, despite their business preference to do so; and to impede Solvay and Evonik from developing into fully effective competitors. Under the consent order, Invibio, Inc. and Invibio Limited, along with their corporate parent, Victrex plc, are generally prohibited from entering into exclusive supply contracts and from preventing current customers from using an alternate source of PEEK in new products. In addition, the companies must allow current customers meeting certain conditions to modify existing contracts to eliminate the requirement that the customer purchase PEEK for existing products exclusively from Invibio.

The FTC filed an administrative complaint charging that the proposed $982 million merger of Canadian chemical suppliers Superior Plus Corp. and Canexus Corp. would violate the antitrust laws by significantly reducing competition in the North American market for sodium chlorate – a commodity chemical used to bleach wood pulp that is then processed into paper, tissue, diaper liners, and other products. Superior and Canexus are two of the three major producers of sodium chlorate in North America. If the merger takes place, the new company and rival AkzoNobel will control approximately 80 percent of the total sodium chlorate production capacity in North America.  By combining more than half of all North American sodium chlorate production capacity in the merged Superior and Canexus, the acquisition is likely to lead to anticompetitive reductions in output and higher prices, the complaint alleges. Additionally, by removing Canexus as an independent sodium chlorate producer, with its large scale and low-costs, the acquisition will also increase the likelihood of coordination in an already vulnerable market, according to the complaint.  The FTC also authorized staff to seek a temporary restraining order and a preliminary injunction in federal court to prevent the parties from consummating the merger and to maintain the status quo pending the administrative proceeding. The FTC and the Canadian Competition Bureau collaborated in this investigation.  On June 30, the parties abandoned their plans.

Holding company Leucadia National Corporation has agreed to pay $240,000 in civil penalties to resolve FTC allegations that it violated federal premerger reporting laws by failing to report a conversion of its ownership interest in the financial services company Knight Capital
Group, Inc. In July 2013, Knight Capital consolidated with another financial services company, GETCO Holding Company, LLC to become KCG Holdings, Inc. That transaction converted Leucadia’s ownership interest in Knight Capital into nearly 16.5 million voting shares of the new entity, KCG Holdings, worth approximately $173 million. Leucadia did not report the transaction, according to the complaint, because it thought that it qualified for an exemption applicable to institutional investors. Although Leucadia consulted experienced HSR counsel in connection with the transaction, their counsel erroneously concluded that the exemption applied. Leucadia made a corrective filing in September 2014, acknowledging that the acquisition was reportable under the HSR Act. Even though Leucadia relied on the advice of counsel, the FTC determined to seek civil penalties because, as noted in the complaint, Leucadia had previously violated the HSR Act in 2007, which led to a corrective filing in 2008.

The Commission filed an administrative complaint alleging that Cabell Huntington Hospital’s proposed acquisition of St. Mary’s Medical Center – two hospitals located three miles apart in Huntington, West Virginia--would create a dominant firm with a near monopoly over general acute care inpatient hospital services and outpatient surgical services in the adjacent counties of Cabell, Wayne, and Lincoln, West Virginia and Lawrence County, Ohio likely leading to higher prices and lower quality of care than would be the case without the acquisition. The Commission also authorized staff to seek a preliminary injunction to maintain the status quo pending the outcome of the administrative proceeding.  On March 24, 2016, the Commission withdrew the matter from adjudication.  On July 6, 2016, the Commission returned the matter to adjudication and dismiss the complaint without prejudice and issued a statement.