Legal Library: Cases and Proceedings

Red Ventures and Bankrate agreed to divest Bankrate’s Caring.com business unit to settle FTC charges that their $1.4 billion merger would likely harm competition in the market for third-party paid referral service for senior living facilities. According to a complaint filed by the FTC, Red Ventures and Bankrate supply proprietary internet content and customer leads for a variety of industries. Caring.com is a wholly-owned subsidiary of Bankrate, while two of Red Ventures’ largest shareholders jointly own A Place for Mom.com, the largest provider of such services. According to FTC’s complaint, Caring.com and A Place for Mom.com are each other’s closest competitors, competing for national and local business. The complaint alleges that the two Red Venture shareholders have the collective ability to significantly influence management of Red Venture and Caring.com. Thus, if consummated, the transaction may increase the chance for Red Ventures to unilaterally exercise market power and the potential for coordinated interaction between Caring.com and A Place for Mom. Under the terms of the proposed settlement, the parties will divest Caring.com no later than six months after the acquisition and provide transition services to an FTC-approved buyer.

Broadcom Limited has agreed to establish a firewall to remedy the FTC’s concerns that its proposed $5.9 billion acquisition of Brocade Communications Systems, Inc. is anticompetitive. These concerns arise because of Broadcom’s current access to the confidential business information of Brocade’s major competitor, Cisco Systems, Inc., that could be used to restrain competition or slow innovation in the worldwide market for fibre channel switches.Fibre channel switches are part of storage area networks that transfer data between servers and storage arrays in data centers. Because fibre channel switches can quickly and securely transfer large amounts of data, they are often used for mission-critical applications. According to the complaint, San Jose, California-based Broadcom makes the fibre channel application specific integrated circuits, or ASICs, that are custom-tailored to carry out the functions of each switch. Brocade and Cisco are the only two competitors in the worldwide market for fibre channel switches, and Broadcom supplies both companies with ASICs to make fibre channel switches. The complaint alleges that Broadcom’s acquisition of Brocade could harm worldwide competition in the fibre channel switch market because as Cisco’s supplier, Broadcom has extensive access to Cisco’s competitively sensitive confidential information.  The FTC order prevents Brocade from using Cisco’s competitively sensitive confidential information for any purpose other than the design, manufacturing and sale of fibre channel ASICs for Cisco. It requires Broadcom’s business group responsible for developing, producing, selling and marketing fibre channel ASICs for Cisco to have separate facilities and a separate information technology system with security protocols that allow access only to authorized individuals, and provides for other information firewall protections. To assure compliance, the Commission will appoint a monitor for five years, and the Commission may extend the appointment for up to an additional five years.

The Sherwin-Williams Company agreed to settle charges that its proposed $11.3 billion acquisition of Valspar Corporation is likely anticompetitive by selling Valspar’s North America Industrial Wood Coatings Business to Axalta Coating Systems Ltd. The transaction would combine Sherwin-Williams and Valspar, two of the top three industrial wood coatings manufacturers. According to the complaint, the acquisition as originally proposed likely would reduce competition in the North American market for industrial wood coatings used to make furniture, kitchen cabinets, and building products. Under the terms of the consent agreement, Sherwin-Williams will divest to Axalta two Valspar industrial wood coatings plants, one in High Point, North Carolina, and the other in Cornwall, Ontario. Axalta will also receive the research and development facilities, warehouses and testing facilities of Valspar’s Industrial Wood Coatings Business, as well as customer contracts, intellectual property, inventory, accounts receivable, government licenses and permits, and business records.

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.

iSpring Water Systems, LLC, a Georgia-based distributor of water filtration systems, agreed to stop making misleading unqualified claims that its products are made in the United States, under a settlement with the Federal Trade Commission. In its complaint against the company, the FTC alleged that it deceived consumers with false, misleading, or unsupported claims that its water filtration systems and parts are made in the USA. The order prohibits iSpring from making unqualified “Made in USA” claims for any product unless it can show that the product’s final assembly or processing – and all significant processing – take place in the United States, and that all or virtually all ingredients or components of the product are made and sourced in the United States. iSpring also is prohibited from making any country-of-origin representation about its products unless it possesses and relies upon a reasonable basis for that representation. On April 18, 2017, the Commission announced that the proposed order had been made final.