Legal Library: Cases and Proceedings

On 4/8/2013, Bosley, Inc., the nation’s largest manager of medical/surgical hair restoration procedures, settled Federal Trade Commission charges that it illegally exchanged competitively sensitive, nonpublic information about its business practices with one of its competitors, HC (USA), Inc., commonly known as Hair Club, in violation of Section 5 of the FTC Act. In settling the FTC’s charges, Bosley has agreed not to communicate such information in the future, and will institute an antitrust compliance program. The FTC alleged that for at least the past four years, Bosley exchanged competitively sensitive, nonpublic information about its business operations with Hair Club. The information exchanged by the companies’ CEOs included details about future product offerings, surgical hair transplantation price floors and discounts, plans for business expansion and contraction, and current business operations and performance.

On 9/25/2012, Biglari Holdings, Inc., a publicly traded holding company, agreed to pay $850,000 to resolve Federal Trade Commission allegations that it violated premerger reporting laws in connection with its 2011 acquisition of a stake in the restaurant operator Cracker Barrel Old Country Store, Inc. At the request of the FTC, the U.S. Department of Justice has filed a complaint for civil penalties, alleging that Biglari improperly failed to report the transaction to U.S. antitrust authorities by claiming the purchases were a “passive” investment when, in reality, Biglari intended to become actively involved in the management of Cracker Barrel. The complaint alleges that, at the time of its acquisitions, Biglari Holdings intended to actively participate in the management of Cracker Barrel, including seeking a seat on the company’s board of directors. As a result, Biglari Holdings was ineligible for the passive investor exemption and was required to submit an HSR notification before acquiring shares of Cracker Barrel in excess of $66 million.

The FTC required drug supplier Novartis AG to give up its marketing rights to four topical skin care medications, under a settlement resolving charges that Novartis' acquisition of pharmaceutical firm Fougera Holdings, Inc. would harm competition in the market for these topical drugs. The settlement order requires Novartis to end a marketing agreement that allows it to sell three topically-applied generic drugs and return all rights to a fourth generic drug in development to its manufacturer, Tolmar, Inc. According to the FTC's complaint, Novartis' acquisition of Fougera would violate Section 5 of the FTC Act and Section 7 of the Clayton Act by reducing competition in the generic drug markets for three skin care drugs: 1) generic calcipotriene topical solution, 2) generic lidocaine-prilocaine cream, and 3) generic metronidazole topical gel. The complaint also alleges that the acquisition would eliminate potential competition in the market for the sale of diclofenac sodium gel.

The FTC reached a settlement with Healthcare Technology Holdings, Inc., the parent company of market research firm IMS Health Inc., according to which IMS has agreed to sell two product lines of rival SDI Health LLC, as a condition of allowing it to proceed with its acquisition of SDI. The proposed settlement order requires the sale of SDI's promotional audit and medical audit businesses to an FTC-approved buyer to resolve the agency's charges that IMS's acquisition of SDI, as originally proposed, is anticompetitive and likely would increase prices for market research products in the health care industry. On1/10/2012, the FTC approved a modified final order settling the charges.

The Commission required laboratory testing companies Laboratory Corporation of America Holdings and Orchid Cellmark Inc. to divest a portion of Orchid's paternity testing business, to resolve the FTC complaint alleging that LabCorp's $85.4 million acquisition of Orchid would have an anticompetitive impact in the market for paternity testing services used by government agencies. Under the proposed settlement order, the portion of Orchid's U.S. paternity testing business that is focused on sales to government agencies, and related assets, will be sold to another testing company, DNA Diagnostics Center (DDC). On 2/1/2012, the FTC approved a final order.

The Commission required Hikma Pharmaceuticals PLC (Hikma) to divest two generic injectable pharmaceuticals – phenytoin and promethazine – as part of a settlement allowing it to acquire certain assets from Baxter Healthcare Corporation, Inc. (Baxter). Hikma proposes to acquire Baxter’s entire generic injectable pharmaceutical business for $111.5 million, including Baxter’s Cherry Hill, New Jersey, manufacturing facility and a warehouse and distribution center in Memphis, Tennessee. Phenytoin is an anti-convulsant drug used to control and prevent seizures during or after surgery and Promethazine is used to prevent some types of allergies or allergic reactions, to prevent or control motion sickness, nausea, vomiting, and dizziness, and to help patients go to sleep and control their pain or anxiety before or after surgery.

Dow settled antitrust concerns relating to its proposed merger with Union Carbide Corporation. Dow agreed to divest and license intellectual property necessary to the production of linear low-density polyethylene -an ingredient used in premium plastic products such as trash bags and sealable food pouches -to BP Amoco plc.

The FTC challenged Laboratory Corporation of America’s $57.5 million acquisition of rival clinical laboratory testing company Westcliff Medical Laboratories, Inc., alleging that the transaction would lead to higher prices and lower quality in the Southern California market for the sale of clinical laboratory testing services to physician groups. The complaint also alleges that LabCorp’s acquisition of Westcliff would leave only two significant laboratories in Southern California competing to provide critical testing services to most physician groups.The FTC also filed an action in federal court to prevent LabCorp from integrating the Westcliff assets while the case is being tried in the administrative court. The federal court denied the FTC motion for an injunction pending appeal. Staff filed an emergency motion for an injunction pending appeal with the 9th Circuit, which denied the Commission's appeal. The Commission dismissed its complaint and closed the investigation.

Agricultural products supplier Agrium Inc. has agreed to sell a range of assets as part of an agreement with the FTC that will allow the company to move forward with its acquisition of competitor CF Industries Holdings, Inc. The consent order settles charges that the acquisition would have eliminated competition in the market for anhydrous ammonia fertilizer, a product that farmers rely on to grow their crops.

The FTC preserved competition in the North American market for alumina wear tile by imposing conditions on Keystone Holdings, LLC and Compagnie de Saint-Gobain in a settlement involving Keystone’s planned acquisition of Saint-Gobain’s Advanced Ceramics Business. According to the FTC’s complaint, the deal as originally structured would have reduced competition in the relevant markets by eliminating direct competition between CoorsTek – the Keystone subsidiary that manufactures its tiles – and Saint-Gobain. In addition, the deal would increase CoorsTek’s market share substantially, eliminate CoorsTek’s most significant alumina wear tile competitor in North America, allow the combined company to raise prices for alumina wear tile, and increase the likelihood that the remaining firms could act together to raise prices for alumina wear tile.