Legal Library: Cases and Proceedings

American Air Liquide Holdings, Inc. and Airgas, Inc., agreed to divest certain production and distribution assets to settle charges that their proposed $13.4 billion merger likely would have harmed competition and led to higher prices in several U.S. and regional markets. The companies will sell assets used to produce and supply seven types of industrial gas: bulk oxygen, bulk nitrogen, bulk argon, bulk nitrous oxide, bulk liquid carbon dioxide, dry ice, and packaged welding gases sold in retail stores. These gases are used in a number of industries, including oil and gas, steelmaking, health care, and food manufacturing, according to the complaint. Under the proposed settlement order, Air Liquide will sell these assets to a Commission-approved buyer within four months after it acquires Airgas. The proposed consent agreement includes an asset maintenance order to ensure that Air Liquide and Airgas continue to act independently and maintain the relevant assets until they are divested.

Investment trust Caledonia Investments plc agreed to pay $480,000 in civil penalties to resolve charges that it violated federal premerger reporting laws by failing to report its purchase in 2014 of voting shares in the helicopter services company Bristow Group, Inc. According to the complaint, in June 2008, Caledonia first acquired voting shares in Bristow and reported its purchase to U.S. antitrust authorities, as required under the Hart-Scott-Rodino Act. Subsequently, Caledonia made additional purchases that were exempt from reporting under HSR rules. During that same timeframe, however, two Caledonia employees were designated to serve on Bristow’s board. Bristow awards restricted-stock voting securities to its board members, and by agreement, it set aside the securities for the two Caledonia board members for purchase by Caledonia. In February 2014, these voting shares vested, and Caledonia acquired them, according to the complaint. The Commission charged that Caledonia was required under the HSR Act to report this purchase but failed to do so. The HSR Act allows a company that has reported an initial purchase of voting shares to purchase additional voting shares from the same issuer – as long as those purchases do not cause the company’s total holdings to cross a higher reporting threshold over a five-year period following the initial purchase. The complaint charges that Caledonia’s 2014 purchase of voting shares in Bristow fell outside the five-year period following its initial purchase.

Fortiline, LLC, a company that distributes ductile iron pipe, fittings and accessories throughout much of the United States, agreed to  settle charges that it violated federal antitrust law by inviting a competitor to raise and fix prices. This is the first case where the FTC has challenged an invitation to collude by a firm that is both a direct competitor with, and a distributor for, the invitee. According to an administrative complaint filed by the FTC, on two occasions in 2010, Fortiline invited a competing firm, which mainly manufactures ductile iron pipe but also engaged in direct sales to contractors, to collude on pricing in North Carolina and most of Virginia. In some areas, Fortiline competes with this firm – identified in the complaint as “Manufacturer A” – by distributing ductile iron pipe (“DIP”) products made by another DIP manufacturer, identified as “Manufacturer B.” In other areas, Fortiline distributes the product of Manufacturer A. The FTC’s complaint alleges that on two occasions when Fortiline was competing with Manufacturer A, Fortiline communicated an invitation to collude on DIP pricing.The proposed consent order prohibits Fortiline from entering into, attempting to enter into, or inviting any agreement with any competitor to raise or fix prices, divide markets, or allocate customers.

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.

The FTC filed a complaint in federal district court alleging that Endo Pharmaceuticals Inc. and several other drug companies violated antitrust laws by using pay-for-delay settlements to block consumers’ access to lower-cost generic versions of Opana ER and Lidoderm with an agreement not to market an authorized generic – often called a “no-AG commitment” – as a form of reverse payment. The complaint, filed in the Eastern District of Pennsylvania, alleges that Endo paid the first generic companies that filed for FDA approval – Impax Laboratories, Inc. and Watson Laboratories, Inc. – to eliminate the risk of competition for Opana ER and Lidoderm, in violation of the Federal Trade Commission Act. Opana ER is an extendedrelease opioid used to relieve moderate to severe pain. Lidoderm is a topical patch used to relieve pain associated with post-herpetic neuralgia, a complication of shingles. The FTC is seeking a court judgment declaring that the defendants’ conduct violates the antitrust laws, ordering the companies to disgorge their ill-gotten gains, and permanently barring them from engaging in similar anticompetitive behavior in the future.  Teikoko Pharma USA and Teikoku Seiyaku Co., Ltd. agreed to a stipulated order resolving FTC charges.

In November 2016, the FTC voluntarily dismissed the complaint in this action.  On January 23, 2017, the FTC refiled charges related to the Lidoderm agreements in federal court in California (Federal Trade Commission vs. Allergan plc; Watson Laboratories, Inc., et al) and refiled charges related to the Opana ER agreement in a Part 3 administrative proceeding.  (In re Impax Laboratories, Inc.)

The National Association of Animal Breeders (NAAB) agreed to remove provisions in its Code of Ethics that the FTC charged limit competition among its members. The consent order settling the FTC’s allegations requires NAAB to end certain advertising restrictions, remove references to the restrictions from its website and official documents, publish and distribute an announcement regarding the consent agreement and the resulting changes to the Code of Ethics, and implement an antitrust compliance program.

The FTC issued an administrative complaint charging that Steris Corporation’s proposed $1.9 billion acquisition of Synergy Health plc would violate the antitrust laws by significantly reducing future competition in regional markets for sterilization of products using radiation, particularly gamma or x-ray radiation. The Commission also authorized agency staff to seek a temporary restraining order and preliminary injunction in federal court to maintain the status quo pending an administrative trial on the merits. According to the FTC, it is unlikely that new competitors in the market for contract radiation sterilization services would replicate the competition that would be eliminated by the merger. The Commission alleged that the challenged acquisition would eliminate likely future competition between Steris’s gamma sterilization facilities and Synergy’s planned x-ray sterilization facilities in the United States, thus depriving customers of an alternative sterilization service and additional competition. On September 25, 2015 the district court denied the FTC motion for a PI. On October 30, the Commission dismissed the administrative complaint.

As part of a settlement, The Coca-Cola Company agreed to restrict its access to confidential competitive business information of rival Dr Pepper Snapple Group as a condition for completing Coca-Cola’s proposed $12.3 billion acquisition of its largest North American bottler, which also distributes Dr Pepper Snapple carbonated soft drinks. In a complaint filed with the settlement, the FTC charged that access to cmmercially sensitive information likely would have harmed competition in the U.S. markets for carbonated soft drinks.Under the settlement with the FTC, Coca-Cola will set up a “firewall” to ensure that its ownership of the bottling company does not give certain Coca-Cola employees access to commercially sensitive confidential Dr Pepper Snapple marketing information and brand plans.

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.

Tobacco companies Reynolds American Inc. and Lorillard Inc. agreed to divest four cigarette brands to Imperial Tobacco Group to settle FTC charges that their proposed $27.4 billion merger would likely be anticompetitive. The order requires Reynolds to divest to Imperial four established cigarette brands: Winston, Kool, Salem, and Maverick. Imperial is an international tobacco manufacturer with a competitive presence in about 70 countries, but a comparatively small presence in the United States. With the acquisition of the divested assets, Imperial would become a more substantial competitor in the United States. The Commission’s order requires not only that the brands be divested, but also that Reynolds divest to Imperial the Lorillard manufacturing facilities in Greensboro, North Carolina, and provide Imperial with the opportunity to hire most of the existing Lorillard management, staff, and salesforce. It also requires the newly merged Reynolds and Lorillard to provide Imperial with retail shelf space for a short period, and to provide other operational support during the transition.