The Article 82 EC Abuse Concept: What Scope is There for Modernization?

On 30 September 2004, Wilmer Cutler Pickering Hale and Dorr LLP, the University of Nyenrode, and Global Competition Review co-sponsored a seminar on the reform of Article 82 EC by the European Commission. The seminar raised a great deal of interest amongst members of the legal community and attracted a large attendance. The speakers included some of the most well-known top-level policy makers, academics, and practitioners in the field of competition law. Over the last two years, there have been numerous calls for modernization of the way in which Article 82 of the EC Treaty is applied by the European Commission and, with decentralization in mind, by 25 national competition authorities and many more national courts. Modernization in other areas has involved a greater focus on the economic effects of the relevant practice. In Article 82 EC cases, enforcement has, however, been more based on the perceived object of a criticized practice with the effect being inferred from market power. Classic positions on fidelity market power. Classic positions on fidelity rebates and the special responsibilities of dominant companies have also been reaffirmed recently by the European Court in judgments such as Michelin II, Masterfoods II, and BA/Virgin. The aim of the seminar was to look at the concepts underlying the current law in relation to rebates and tying and bundling to compare how EU and US enforcers deal with such issues and to make suggestions for possible European Commission guidelines on Article 82 EC enforcement practice

Antitrust and Competition Law Update: Tetra Laval--A landmark judgement on EC Merger Control

On 15 February 2005, the European Court of Justice (ECJ) dismissed the European Commission’s appeal in the Tetra Laval/Sidel merger case.2 The ECJ’s judgment establishes two significant principles that apply beyond the facts of this particular case:The judgment confirms that the Court of First Instance (CFI) for all practical purposes will continue to be the ultimate arbiter of disputes about the Commission’s use of evidence and economic assessment in merger control proceedings. The ECJ has signaled that it will generally not entertain appeals asserting that the CFI engaged in excessive scrutiny of the Commission’s assessment and therefore overstepped the permissible boundaries of judicial review. Had the ECJ upheld the arguments raised by the Commission, this may well have had a chilling effect on the CFI’s willingness to subject the Commission’s merger decisions to strict scrutiny. This in turn would have severely limited the effectiveness of judicial review, in particular in the age of the Commission’s “more economicsbased approach” and the increasing importance of complex factual and economic evidence in merger cases. • While the judgment does not preclude prohibition of conglomerate mergers under the Merger Regulation, it imposes stringent legal and practical constraints on the Commission’s ability to challenge such mergers on the basis of “leveraging”- type theories of competitive harm: Finding that “the chains of cause and effect [underlying leveraging theories] are dimly discernible, uncertain, and difficult to establish”, the ECJ required a particularly high quality of evidence to support a conclusion that the leveraging developments will occur following the merger. By requiring that the Commission examine on a case-by-case basis whether behavioral commitments (such as not to bundle different products) might be effective, the ECJ’s judgment makes it less likely that the Commission will pursue leveraging theories in merger review. The judgment effectively compels the Commission to reassess its method of evaluating commitments, which currently calls for the rejection of even the most carefully crafted long-term behavioral commitments that adequately address conglomerate concerns

Schering-Plough Corp. v. Federal Trade Commission: Eleventh Circuit Rejects the FTC’s Position on “Reverse Payments” in Patent Suit Settlements

In recent years, the Federal Trade Commission (“FTC” or the “Commission”) has investigated several settlement agreements between pioneer and generic drug manufacturers involving “reverse payments.” In the view of the FTC, reverse payments are cash that a pioneer drug manufacturer pays to a generic manufacturer who has challenged the patent(s) protecting the pioneer drug, in exchange for the generic manufacturer’s agreement to delay market entry. Such payments sometimes occur in the settlement of patent infringement actions. The Commission has been extremely skeptical of reverse payments, viewing them as objective indicia of intent to illegally share monopoly profits that the delayed generic entry perpetuates. It has successfully challenged settlement agreements that included reverse payments involving the market entry of generic Cardizem (hypertension treatment) and generic Hytrin (hypertension and angina treatment)

Antitrust and Competition Law Update: HSR Filing Thresholds Increased for Inflation Acquisitions Unreportable Up to $53.1 Million Effective March 2, 2005

For the first time since the passage of the HSR Act in 1976, the Federal Trade Commission has published new HSR thresholds adjusted for inflation, slightly reducing the overall number of transactions that will require premerger notification filings. The new, higher thresholds will become effective on March 2, 2005. See 70 F.R. 5020 (January 31, 2005). These threshold raises match changes in the gross national product, and will be readjusted annually going forward, as required by the 2000 amendments to the Hart-Scott-Rodino Antitrust Act of 1976. As of the effective date, acquisitions will be reportable under the HSR Act only if the acquiring person will hold as a result voting securities or assets worth more than $53.1 million

Antitrust and Competition Law Update

The US Federal Trade Commission(FTC) has announced sweeping changes to the Hart-Scott-Rodino (HSR) Act premerger reporting rules, including those governing transactions involving partnerships and LLCs, that will come into effect on April 6, 2005. See 70 Fed. Reg. 11526 (March 8, 2005). In addition to reconciling the HSR analysis of LLCs, partnerships and other unincorporated entities with that of corporations, the new rules will make a number of technical adjustments and codify some informal FTC interpretations. The changes will make some transactions reportable that have historically be exempt; this effect will be offset to some extent by new exemptions from filing, most notably a significant expansion of the exemption for acquisitions of voting securities of entities whose assets would be exempt if acquired directly. We discuss all of these changes in more detail below

Antitrust and Competition Law Update: Brazil Adjusts Merger Notification Thresholds

Brazilian merger notification requirements, traditionally a major hurdle for multinational mergers, have just become less burdensome. In an unexpected development last Wednesday, the Brazilian antitrust authority (“CADE”) announced a new interpretation of the Brazilian merger notification thresholds that may reduce foreign merger filings in Brazil by more than 90%. CADE reversed 10 years of precedent by declaring that, in line with the approach of many other jurisdictions worldwide, the Brazil notification threshold of 400 million Reales should henceforth be assessed in terms of Brazilian turnover rather than worldwide turnover. (ADC Telecommunications Inc. / Krone International Holding Inc., announced January 19, 2005.