Déjà Vu All Over Again: Federal Court Blocks Staples/Office Depot Merger

amurinoFeatured Expert Column – Antitrust/Federal Trade Commission

Andrea Agathoklis Murino, Goodwin Procter LLP

Staples, Inc. (SPLS) and Office Depot, Inc. (ODP) would be forgiven for thinking of the late Yogi Berra and wondering if this was what he meant by déjà vu all over again.  In 1997, following an investigation by the Federal Trade Commission (FTC), the US District Court for the District of Columbia blocked their proposed tie-up.  And now, in 2016, after more than a year-long battle with the FTC, the same court’s Judge Emmet G. Sullivan blocked SPLS’s proposed acquisition of ODP.  Judge Sullivan announced the outcome on May 10, but issued his opinion only to the parties; the public needed to wait until May 17 to see his quite detailed 75-page explanation.  In sum, Judge Sullivan found that the FTC had met its burden under § 7 of the Clayton Act and showed a reasonable probability that the proposed merger would substantially lessen competition in the sale and distribution of consumable office supplies to large Business-to-Business customers. With that finding in hand, the court concluded that the FTC had carried its burden of showing that a preliminary injunction preventing the proposed merger was in the public interest and that the equities weighed in favor of injunctive relief. Shortly after Judge Sullivan announced his decision, SPLS and ODP abandoned the transaction. Continue reading

Antitrust Merger Enforcement In the Obama Administration: Has the Pendulum Swung Too Far?

Botti2Featured Expert Contributor – Antitrust & Competition, U.S. Department of Justice

Mark J. Botti, Squire Patton Boggs (US) LLP with Anthony W. Swisher, Squire Patton Boggs (US) LLP

With a Senate Judiciary Committee oversight hearings scheduled for March 9, it seems an appropriate time to examine whether the Obama Administration’s more aggressive merger enforcement has gained so much momentum that it is causing the pendulum to swing too far.   Have the U.S. Department of Justice and the Federal Trade Commission lost sight of mergers’ value to the economy by abandoning the middle ground and too often treating “problem” mergers as all-or-nothing propositions? Continue reading

FTC Takes Scissors to Staples/Office Depot Merger

amurinoFeatured Expert Column – Antitrust/Federal Trade Commission

Andrea Agathoklis Murino, Goodwin Proctor LLP

On December 7, 2015, the Federal Trade Commission voted 4-0 to file suit against Staples Inc.’s acquisition of Office Depot, Inc. (“OD”), finding that it would combine the number one and number two market participants and therefore lead to an anticompetitive reduction in nationwide competition in the market for consumable office supplies sold to large business customers. This vote surprised many observers as it came just two years after the FTC cleared Office Depot’s acquisition of Office Max (“OM”), which combined the then number two and number three participants.

To this observer, the decision to block was, however, not a surprise. In looking at recent FTC enforcement actions, especially the Sysco/US Foods challenge, and in closely examining the bases on which the OD/OM transaction was cleared, several key differences emerged that are almost certainly what led to such wildly divergent enforcement outcomes. Continue reading

With Recent Use of Disgorgement, FTC Continues to Sharpen its Enforcement Tools

amurinoFeatured Expert Column – Antitrust/Federal Trade Commission

Andrea Agathoklis Murino, Goodwin Proctor LLP

One need only check the headlines to see that enforcement of the antitrust laws is alive and well at the Federal Trade Commission (“FTC”) today. On both the merger and conduct front, the FTC’s Bureau of Competition has proven incredibly active—and successful. In a continuing example of its willingness to use all tools in its competition enforcement arsenal, the FTC resurrected use of its disgorgement authority in dramatic fashion, collecting nearly $27 million from Cardinal Health, Inc. (“Cardinal”) for conduct dating back to the early and mid- 2000s. The FTC’s willingness to challenge Cardinal’s conduct and the significance of the fine serve as reminders that the agency’s powers are broad and that under Chairwoman Edith Ramirez, the FTC will not hesitate to seek bold relief. Continue reading

The Supreme Court’s NOT Top 10: Cases the Justices Wrongly Rejected Last Term

supreme courtThe usual spate of articles by Supreme Court scribes pronouncing the Roberts Court staunchly pro-business were noticeably sparser as the latest term ended. When journalists are reduced to using the Obamacare and same-sex marriage cases as their main exhibits to prove the Supreme Court’s supposed pro-business tilt, you know it wasn’t a banner year for business.

Of course there were a few notable losses (King v. Burwell itself, Oneok, and Texas Dept. of Housing come to mind). But the fact that free enterprise did not fare well this term had comparatively little to do with the decisions the Supreme Court issued. Rather, business civil liberties suffered more overall from the various state supreme court and federal courts of appeals cases that the high court left on the cutting-room floor.

The tally that follows comprises more than just the cases of a disappointed cert seeker. WLF did not participate in more than half of the examples discussed below. However, the cert petitions mentioned here are all cases where free enterprise, individual and business civil liberties, or rule of law interests were at stake. From the free-market vantage point, it once again appears that the Court did not make enough room on its docket for cases implicating significant liberty interests. By choosing a lighter load, the Court allows legal uncertainty to linger, lower-court disobedience to fester, adventuresome new legal theories to propagate, and injustices implicating millions, if not billions, of dollars to prevail.       Continue reading

Regrettable Outcome of Sysco/U.S. Foods Merger Challenge Reflects FTC Has Nothing to Fear from “SMARTER” Act

Botti2Featured Expert Contributor – Antitrust & Competition, U.S. Department of Justice

Mark J. Botti, Squire Patton Boggs (US) LLP with Anthony W. Swisher, Squire Patton Boggs (US) LLP

Late last month, a federal district court judge in Washington, D.C. granted the request of the Federal Trade Commission (FTC) for a preliminary injunction against the proposed combination of Sysco and U.S. Foods because, according to the FTC, the merger “raised questions going to the merits so serious, substantial, difficult and doubtful as to make them fair ground for thorough investigation, study, deliberation and determination by the FTC in the first instance . . . .” In essence, despite having already conducted an intensive, 15-month investigation, the FTC sought an injunction that would allow it to further study the merger. The court’s injunction and the likely further delay predictably put an end to the merger.

The death of the Sysco/U.S. Foods merger underscores the sensibility of the proposed Standard Merger and Acquisition Reviews Through Equal Rules (SMARTER) Act, now working its way through Congress. While opposed by the FTC, SMARTER can simply and fairly require the FTC to show that a merger is likely to harm competition before it blocks the deal through the procedural device of a federal court preliminary injunction. That’s the same standard the Antitrust Division of the Justice Department (DOJ) must meet, and is the standard approach for federal courts considering a preliminary injunction request. Under current law, unlike DOJ the FTC faces the lower “further inquiry” standard quoted above. Passage of SMARTER could lead to equal treatment for all mergers under the law when tested in federal court regardless of which agency happened to review them. Continue reading

California’s New Scrutiny of Patent Litigation Settlements Will Not Stand Under Federal Law

cali sealThe California Supreme Court earlier this month issued an opinion that subjects litigants who settle their patent disputes to scrutiny under state antitrust law. The court reasoned that such settlements may create unreasonable restraints on trade. While the decision in In re Cipro Cases I & II to reinstate antitrust claims was not overly surprising—after all, the U.S. Supreme Court had previously held in FTC v. Actavis, Inc. that some patent litigation settlements might violate federal antitrust law—the breadth of the California Supreme Court’s decision could have a particularly negative impact on the free-enterprise system. Indeed, the decision suggests that parties to a patent litigation settlement will have great difficulty ever avoiding California antitrust liability if the settlement entails transferring anything of value from the patent holder to the alleged infringer. Because Cipro’s new state-law antitrust standard is so much more exacting than the standard announced by the U.S. Supreme Court in Actavis, federal antitrust law may well trump California’s standard. Indeed, were Cipro to reach the U.S. Supreme Court, the Court likely would reverse on federal preemption grounds.

“Reverse-Payment” Patent Settlements

When parties to litigation enter into a settlement, one would normally expect that any cash payments would flow from the defendant to the plaintiff. The normal expectations have been reversed in the context of litigation involving prescription-drug patents, however, as a result of financial incentives created by the Hatch-Waxman Act, a federal statute designed to ensure that generic versions of prescription drugs enter the market more quickly. The Act includes a provision that permits generic companies, by declaring to the Food and Drug Administration a belief that the patent held by a brand-name drug company is invalid, to essentially force the patentee to immediately file a patent infringement suit. It also grants huge financial awards to generic companies that successfully challenge drug patents. Continue reading