Court’s “FTC v. Amazon” Decision Endorses Agency’s Disregard for Economic Analysis

amazonOn May 24, 2016 a subcommittee of the House of Representatives Energy and Commerce Committee held a hearing on a number of bills (17, to be exact) regarding the Federal Trade Commission’s consumer-protection mission. A number of proposals seek to fortify the vigor and transparency of the economic analysis FTC must perform when taking action against alleged “unfair” acts or practices under § 5 of the FTC Act. Some observers, (including former FTC Commissioner Josh Wright, who testified at the hearing) feel the Commission often gives short shrift to the “not-outweighed-by-countervailing-benefits-to-consumers-or-competition” language in the statute’s Unfairness Statement.

Wright’s testimony offers as an example the Commission’s 2014-2015 actions against several mobile app sellers’ “in-app purchase” sales practices. While on the Commission, Wright dissented from FTC’s complaint that Apple acted unfairly in how it designed the mechanism for app buyers to make purchases within the app. FTC alleged that Apple did not do enough to prevent children from making in-app purchases their parents did not authorize. In his dissent, Wright criticized FTC for failing to consider the countervailing benefits of Apple’s approach, such as relieving consumers of the need to constantly enter passwords, as well as the costs associated with government micromanagement of app design. Continue reading

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

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

FTC’s Actions on In-App Purchases Reflect Chilling Move Toward “Mother-May-I” Paternalism

amazonFederal regulatory agencies routinely act as table-setters for the plaintiffs’ bar. Class-action lawsuits can require targets of federal enforcement actions, even after those actions end in settlement, to defend against the same allegations in court. A federal judge’s April 3, 2015 dismissal of a class action on the ground that the company had already entered into a settlement with the Federal Trade Commission (FTC), therefore, was a commendable outcome. The underlying FTC action that inspired the suit, however—an industry-wide investigation into companies’ in-app purchase procedures—is far less welcome. The Commission’s investigation is yet another example of government’s steady drift away from respecting permissionless innovation and toward “mother-may-I” paternalism.

FTC’s In-App Purchase Inquest. FTC initiated an investigation in 2011 of various companies’ mobile-app sales practices. The Commission had received complaints from parents that their children were making “unauthorized” purchases on mobile app stores. On January 15, 2014, Apple agreed to settle with FTC over charges that its in-app purchase process constituted an unfair business practice under § 5 of the FTC Act. On September 4, 2014, Google entered into a similar settlement. Both app sellers agreed to provide customers with refunds and alter their app sales practices.

In addition to Google and Apple, FTC also accused Amazon of unfair business practices for failing to prevent “unauthorized” in-app purchases.  Amazon, however, refused to settle the charges. The Commission filed suit on July 10, 2014 in the U.S. District Court for the Western District of Washington. On December 1, 2014, Judge John C. Coughenour denied Amazon’s motion to dismiss. Continue reading