Legal Library: Cases and Proceedings

Two of the world’s largest auto parts suppliers, ZF Friedrichshafen AG and TRW Automotive Holdings Corp., agreed to divest TRW's linkage and suspension business in North America and Europe, to settle FTC charges that their proposed $12.4 billion merger would likely harm competition in the North American market for heavy vehicle tie rods. Under the consent agreement, the combined company is required to divest TRW’s North American and European linkage and suspension business for heavy and light vehicles (which includes heavy vehicle tie rods). The business includes five manufacturing plants in Michigan, Canada, the Czech Republic, and Germany, and leased space in a research and development lab in Germany. At the divestiture buyer’s request, ZF must provide transition services for logistical and administrative support as well as transitional supply agreements for key manufacturing inputs needed to fulfill existing customer contracts.

On February 19, 2015, the FTC filed an administrative complaint charging that the proposed merger of Sysco and US Foods would violate the antitrust laws by significantly reducing competition nationwide and in 32 local markets for broadline foodservice distribution services. The FTC alleged that if the merger goes forward as proposed, foodservice customers, including restaurants, hospitals, hotels, and schools, would likely face higher prices and lower levels of service than would be the case but for the merger. The FTC also authorized staff to seek in federal court a temporary restraining order and a preliminary injunction to prevent the parties from consummating the merger, and to maintain the status quo pending the administrative proceeding. The PI action was filed on February 20, 2015. According to the FTC complaint, a combined Sysco/US Foods would account for 75% of the national market for broadline distribution services. In addition, the parties would also hold high shares in a number of local markets. The Commission also charged that the proposed sale of 11 US Foods distribution centers to Performance Food Group would neither enable PFG to replace US Foods as a competitor nor counteract the significant competitive harm caused by the merger. The following state attorneys general have joined the FTC’s complaint for a preliminary injunction to be filed in federal district court: California, Illinois, Iowa, Maryland, Minnesota, Nebraska, Ohio, Virginia, Pennsylvania, Tennessee, and the District of Columbia. Following a June 23, 2015 ruling by the U.S. District Court for the District of Columbia granting the Federal Trade Commission request for a preliminary injunction, Sysco and US Foods abandoned their proposed merger, and the Commission dismissed its administrative complaint.

The FTC issued an administrative complaint against Ferrellgas Partners, L.P and Ferrellgas, L.P. (doing business as Blue Rhino) and UGI Corporation and AmeriGas Partners, L.P. (doing business as AmeriGas Cylinder Exchange), alleging that they illegally agreed on reducing the amount of propane in their tanks sold to a key customer. The complaint alleges that, together, Blue Rhino and AmeriGas controlled approximately 80 percent of the market for wholesale propane exchange tanks in the United States. In 2008, Blue Rhino and AmeriGas each decided to implement a price increase by reducing the amount of propane in their exchange tanks from 17 pounds to 15 pounds, without a corresponding reduction in the wholesale price. On 10/31/14, AmeriGas and Blue Rhino agreed to settle FTC charges of restraining competition. Faced with resistance from Walmart, the two companies colluded by secretly agreeing to coordinate their negotiations with Walmart in order to push it to accept the reduction. The consent agreements prohibit the companies from soliciting, offering, participating in, or entering or attempting to enter into any type of agreement with any competitor in the propane exchange business to raise, fix, maintain, or stabilize the prices or price levels of propane exchange tanks through any means – including modifying the fill level contained in propane tanks or coordinating communications to customers. The companies also are prohibited from sharing sensitive non-public business information with competitors except in narrowly defined circumstances.

Akorn, Inc. has agreed to sell its rights to develop, manufacture, and market the generic injectable tuberculosis drug, rifampin, in order to settle FTC charges that Akorn’s proposed acquisition of VersaPharm Inc. and its parent company, VPI Holdings Corp., would likely be anticompetitive. According to the FTC’s complaint, only VersaPharm and two other firms currently have FDA approval to sell generic injectable rifampin and there are no viable substitutes for rifampin as a course of treatment for tuberculosis. The FTC’s proposed settlement with Akorn requires the company to divest its Abbreviated New Drug Application for generic injectable rifampin – which is currently pending before the Food and Drug Administration – to Watson Laboratories, Inc.

The Commission approved an administrative complaint, alleging that a combined Jostens/American Achievement Corp. ("AAC") would control an unduly high percentage of the high school and college rings markets, making it a dominant firm with only one smaller meaningful competitor in both markets.  The Commission charged that the proposed combination of Jostens and AAC would likely have been anticompetitive and led to higher prices and reduced service for both high school and college students who buy class rings.  The FTC also voted to seek a preliminary injunction in federal court to stop Jostens from proceeding with the proposed acquisition of its close rival, AAC.  On April 17, 2014, the parties abandoned their plans to merge.