Legal Library: Cases and Proceedings

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 largest U.S. supplier of diagnostic testing products used by small animal veterinarians, IDEXX Laboratories, Inc., agreed to drop its exclusive-dealing arrangements with a top distributor, resolving FTC charges that it was using the exclusive arrangements to stifle competition. IDEXX has agreed to a settlement order that prohibits concurrent exclusive distribution arrangements with the three national distributors of point-of-care (POC) diagnostic testing products. According to the FTC’s complaint, IDEXX has used its dominant market power to reduce competition by threatening to drop the distributors if they carried other companies’ products that compete with IDEXX products.

The FTC required Johnson & Johnson (J&J) to sell its system for surgically treating serious wrist fractures, resolving charges that J&J's proposed $21.3 billion acquisition of Synthes, Inc. would illegally reduce competition for these systems. J&J intends to sell its system, known as DVR, along with the rest of its product line for treating traumatic injuries, to Biomet, Inc. According to the FTC's complaint, J&J's proposed acquisition of Synthes would harm competition in the U.S. market for volar distal radius plating systems, internal devices that are surgically implanted on the underside of the wrist to achieve proper alignment of the radius bone following a fracture.

The FTC filed an administrative complaint challenging OSF Healthcare System’s proposed acquisition of Rockford Health System, charging that the acquisition would substantially reduce competition among hospitals and primary care physicians in Rockford, Illinois, and significantly harm local businesses and patients. The FTC filed a separate complaint in federal district court seeking an order to halt the transaction temporarily to preserve competition for Rockford area residents pending the FTC’s administrative proceeding and any subsequent appeals. On 4/5/2012, the U.S. District Court ruled granting the FTC's request for a preliminary injunction. On 4/13/2012, the FTC dismissed the complaint in light of OSF Healthcare's decision to abandon the proposed transaction.

The FTC required specialty metals manufacturer Carpenter Technology Corporation to sell assets involved in producing two metal alloys used in the aerospace industry, under a settlement resolving charges that Carpenter's proposed $410 million acquisition of Latrobe Specialty Metals, Inc. would harm competition in the U.S. markets for these alloys.The FTC's complaint alleges that the deal – a merger to monopoly – likely would lead to higher prices for consumers of the two alloys.  The order requires Carpenter to divest assets necessary for manufacturing the two alloys – MP159 and Aerospace MP35N – to another metals manufacturer, Eramet S.A.

The FTC filed separate complaints against the three largest U.S. suppliers of ductile iron pipe fittings, which are used in municipal water systems around the United States. The FTC charged that the three companies, McWane, Inc., Star Pipe Products, Ltd., and Sigma Corporation, illegally conspired to set and maintain prices for pipe fittings, and that McWane illegally maintained its monopoly power in the market for U.S.-made pipe fittings by implementing an exclusive dealing policy. Sigma settled the FTC's charges prior to litigation (final order dated Feb. 27, 2012); Star settled soon after (final order dated May 8, 2012).  The complaint against McWane was heard before an administrative law judge and later appealed to the Commission; see Docket No. 9351.

The Commission issued a complaint to block Omnicare, Inc.'s hostile acquisition of rival long-term care pharmacy provider PharMerica Corporation, alleging that the combination of the two largest U.S. long-term care pharmacies would harm competition and enable Omnicare to raise the price of drugs for Medicare Part D consumers and others. In its complaint, the FTC charges that a deal combining Omnicare and PharMerica would significantly increase Omnicare's already substantial bargaining leverage by dramatically increasing the number of skilled nursing facilities, known as SNFs, that receive long-term care pharmacy services from the company. Due to its substantial market share, the FTC alleges that the combined firm likely would be a "must have" for Medicare Part D prescription drug plans, which are responsible for providing subsidized prescription drug benefit coverage for most SNF residents and other Medicare beneficiaries. On 2/23/2012, the FTC dismissed the complaint in light of Omnicare's decision to abandon the proposed transaction.

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.