Legal Library: Cases and Proceedings

The FTC authorized legal action to block the merger of the two largest daily fantasy sports sites, DraftKings and FanDuel, alleging that the combined firm would control more than 90 percent of the U.S. market for paid daily fantasy sports contests. The FTC, jointly with the Offices of the Attorneys General in the State of California and the District of Columbia, filed a complaint in federal district court seeking a preliminary injunction to stop the deal and to maintain the status quo pending an administrative trial. The Commission also issued an administrative complaint alleging that the proposed merger violates Section 7 of the Clayton Act and Section 5 of the FTC Act by creating a single provider with by far the largest share of the market for paid daily fantasy sports contests in the United States.

On July 13, 2017, the parties abandoned the transaction, and the Commission dismissed the administrative complaint.

Mallinckrodt ARD Inc., formerly known as Questcor Pharmaceuticals, Inc., and its parent company, Mallinckrodt plc, agreed to pay $100 million to settle charges that they violated the antitrust laws when Questcor acquired the rights to a drug that threatened its monopoly in the U.S. market for adrenocorticotropic hormone (ACTH) drugs. Acthar is a specialty drug used as a treatment for infantile spasms, a rare seizure disorder afflicting infants, as well a drug of last resort used to treat other serious medical conditions. The complaint alleges that, while benefitting from an existing monopoly over the only U.S. ACTH drug, Acthar, Questcor illegally acquired the U.S. rights to develop a competing drug, Synacthen Depot. The acquisition stifled competition by preventing any other company from using the Synacthen assets to develop a synthetic ACTH drug, preserving Questcor’s monopoly and allowing it to maintain extremely high prices for Acthar. In addition to the $100 million monetary payment, the proposed stipulated court order, which must be approved by the federal court, requires that Questcor grant a license to develop Synacthen Depot to treat infantile spasms and nephrotic syndrome to a licensee approved by the Commission.

DaVita, Inc. agreed to divest its ownership interest in seven dialysis clinics – five in suburban and urban areas of New Jersey and two on the outskirts of Dallas, Texas – to proceed with its $358 million acquisition of competitor Renal Ventures Management, LLC. DaVita is the second-largest  provider of outpatient dialysis services in the United States and Renal Ventures is the seventh-largest. DaVita will divest the seven clinics to PDA-GMF Holdco, LLC, a joint venture between Physicians Dialysis and GMF Capital LLC. Physicians Dialysis has been in business since 1990 and currently operates several outpatient dialysis clinics. According to the FTC's complaint, the acquisition would lead to significant anticompetitive effects in the New Jersey markets of Brick, Clifton, Somerville, Succasunna, and Trenton, and in the Dallas-area markets of Denton and Frisco. Currently, DaVita and Renal Ventures clinics compete directly with each other in these markets, and the merger would represent either a merger to monopoly or a reduction of competitors from three to two. Without that competition, the likely result would be reduced quality and higher prices for dialysis patients. Under the terms of the proposed settlement, DaVita, Inc. must obtain agreements from the medical director of each divested clinic to continue providing physician services after it transfers ownership to PDA-GMF Holdco; obtain consent from the relevant landlords to transfer leases for the facilities to the buyer; and provide the buyer an opportunity to interview and hire employees from the divested clinics. Also under the proposed settlement, DaVita is barred from contracting with the medical directors of the seven clinics for three years, and it must provide transition services for up to 24 months.

Discount retailers Dollar Tree, Inc. and Family Dollar Stores, Inc. agreed to sell 330 Family Dollar stores to a private equity firm, Sycamore Partners, to settle FTC charges that Dollar Tree’s proposed $9.2 billion acquisition of Family Dollar would likely be anticompetitive. Their stores compete head-to-head in terms of price, product assortment, and quality, as well as location and customer service in local markets nationwide. The FTC identified 330 stores in local markets from 35 states where competition would be lost if the acquisition went forward as proposed. Without a remedy, according to the FTC, the acquisition is likely to lessen competition by eliminating direct competition between Dollar Tree and Family Dollar, and increasing the likelihood that Dollar Tree will unilaterally exercise market power.

Hedge fund founder Ahmet H. Okumus has agreed to pay $180,000 in civil penalties to resolve charges that he violated the Hart-Scott-Rodino Act by failing to report his purchases of voting securities in the internet services company Web.com Group Inc. The FTC alleged that Okumus violated the HSR Act by exceeding the filing threshold and failing to file as required when he bought shares of Web.com through his hedge fund, Okumus Opportunistic Value Fund, Ltd. According to the complaint, he was in violation of the HSR Act from June 27, 2016, when he purchased the shares, to July 14, 2016, when he sold enough shares so that he did not exceed the threshold. Although the Commission found his HSR violation to be inadvertent, it determined to seek penalties because, as noted in the complaint, this was Okumus’s second HSR violation in two years regarding Web.com.

Supermarket operators Albertsons and Safeway Inc. agreed to sell 168 supermarkets to settle FTC charges that their proposed $9.2 billion merger would likely be anticompetitive in 130 local markets in Arizona, California, Montana, Nevada, Oregon, Texas, Washington, and Wyoming. Under the settlement, Haggen Holdings, LLC will acquire 146 Albertsons and Safeway stores located in Arizona, California, Nevada, Oregon, and Washington; Supervalu Inc. will acquire two Albertsons stores in Washington; Associated Wholesale Grocers, Inc. will acquire 12 Albertsons and Safeway stores in Texas; and Associated Food Stores Inc. will acquire eight Albertsons and Safeway stores in Montana and Wyoming. It is expected that Associated Wholesale Grocers, Inc. will assign its operating rights in the 12 Texas stores it is acquiring to RLS Supermarkets, LLC (doing business as Minyard Food Stores) and that Associated Food Stores Inc. will assign its rights in the eight Montana and Wyoming stores it is acquiring to Missoula Fresh Market LLC, Ridley’s Family Markets, Inc., and Stokes Inc.