United States: Federal Trade Commission

The US Federal Trade Commission (FTC) is an independent law enforcement agency, dedicated to enforcing the US antitrust laws to protect consumers from anticompetitive mergers and business practices. ¹ In today’s global economy, the FTC also works in partnership with antitrust authorities from almost every corner of the globe to promote sound and effective competition enforcement and policy. This chapter describes some of the FTC’s recent competition enforcement and international cooperation efforts, as well as its competition advocacy work from the past year.

Merger enforcement

One of the FTC’s principal responsibilities is to prevent mergers that may substantially lessen competition. In fiscal year 2018, the FTC challenged 22 mergers after the evidence showed they would likely result in competitive harm in the form of higher prices, reduced quality or lower rates of innovation. ² Although most of these enforcement actions were resolved through a consent decree, the FTC initiated litigation in five matters in fiscal year 2018.

In December 2017, the Commission issued an administrative complaint challenging Tronox Limited’s proposed acquisition of Cristal. ³ The firms were two of the largest suppliers in the United States and Canada of chloride process titanium dioxide, a pigment used to add whiteness, brightness and opacity to paints, industrial and automotive coatings, plastics and other speciality products. According to the complaint, the transaction would have increased the likelihood of coordination among the remaining competitors in the industry, as well as the likelihood that Tronox would exercise market power to reduce future output and prices. After an administrative hearing on the merits concluded in June 2018, the FTC filed a motion for a preliminary injunction in federal court to enjoin the transaction pending the outcome of the administrative proceeding. ⁴ In September 2018, the district court granted the FTC’s request for a preliminary injunction. ⁵ In December 2018, the administrative law judge issued an initial decision upholding the FTC’s complaint. ⁶ In April 2019, Tronox and Cristal agreed to settle the charges in the FTC’s complaint by divesting Cristal’s North American titanium dioxide assets. ⁷ The settlement ended 16 months of litigation over the proposed transaction.

Throughout the Tronox investigation, the FTC communicated regularly with its counterpart agencies in the European Union and Australia to coordinate the agencies’ analysis, as well as the timing and messaging of the agencies’ respective concerns to the parties.

Also in December 2017, the Commission issued an administrative complaint challenging Otto Bock HealthCare North America’s (Ottobock) consummated acquisition of Freedom Innovations. ⁸ According to the complaint, the merger eliminated head-to-head competition between two of the top sellers in the United States of prosthetic knees equipped with microprocessors, entrenching Ottobock’s position as the dominant supplier in the market. Microprocessor knees are prescribed to patients with above-the-knee amputations who are relatively ambulatory. These complex medical devices assist patient mobility while reducing the risk of falling and promoting the health and function of the sound limb. An administrative hearing on the merits of this matter concluded in October 2018. In April 2019, the administrative law judge issued an initial decision upholding the Commission’s complaint. ⁹ This matter is now pending on appeal in administrative litigation. ¹⁰

In February 2018, the Commission issued an administrative complaint and authorised staff to seek a preliminary injunction in federal court to prevent Wilhelmsen Maritime Services’ proposed acquisition of Drew Marine Group pending an administrative trial on the merits. ¹¹ The two firms are the largest suppliers of water treatment chemicals and related services in the world. According to the complaint, the transaction would have substantially reduced competition for marine water treatment chemicals and services needed by global fleets to maintain critical on-board equipment on tankers, container ships and military support vessels, among others. The 10-day federal court proceeding concluded in June 2018. In July 2018, the district court granted the FTC’s motion for a preliminary injunction. ¹² The parties abandoned their proposed transaction shortly after the court’s decision. ¹³

Throughout the Wilhelmsen investigation, FTC staff cooperated with the staff of the antitrust agencies in Singapore and the United Kingdom.

In March 2018, the Commission authorised staff to seek a preliminary injunction in federal court to prevent The JM Smucker Company’s proposed acquisition of Conagra Brands’ Wesson cooking oil brand pending an administrative trial on the merits. ¹⁴ The FTC’s complaint alleged that the transaction would have given Smucker, owner of the Crisco brand, control of at least 70 per cent of the US market for branded canola and vegetable oils sold to grocery stores and other retailers. The transaction would also have eliminated the vigorous head-to-head competition between the two firms and increased Smucker’s negotiating leverage with retailers, leading to higher prices for US consumers. In the face of the FTC’s challenge, the parties abandoned their proposed transaction. ¹⁵

Also in March 2018, the Commission authorised staff to seek a preliminary injunction in federal court to prevent CDK Global’s proposed acquisition of Auto/Mate pending an administrative trial on the merits. ¹⁶ According to the complaint, the transaction would have reduced competition in the already concentrated US market for specialised software known as dealer management systems. These systems are used by franchise (new car) dealerships to manage every aspect of their business, including accounting, payroll, parts and vehicle inventory, service repair scheduling and vehicle financing. Auto/Mate competed with CDK and other larger franchise dealer management system providers and won business by offering lower prices, flexible contract terms, free software upgrades and training, and high-quality customer service. In addition, Auto/Mate was poised to become an even more effective competitor in the future. Shortly after the FTC issued its complaint, the parties abandoned their proposed transaction. ¹⁷

In addition to its litigation efforts, the FTC preserved competition in affected markets through negotiated merger settlements that required divestitures to address areas of competitive concern. For example, the FTC issued a consent order to settle charges that Amneal Pharmaceuticals’ acquisition of an equity share in Impax Laboratories would have lessened current and future competition in the markets for 10 generic drugs, including those used in the prevention or treatment of strokes, bacterial infections, high cholesterol and the symptoms of epilepsy. ¹⁸ In another healthcare matter, Becton, Dickinson and Company and CR Bard agreed to divest two medical device product lines to settle FTC charges that their proposed merger would harm competition in the US markets for tunnelled home drainage catheter systems and soft tissue core needle biopsy devices. ¹⁹ FTC staff and the staff of antitrust agencies in China, the European Union, Mexico and South Africa worked cooperatively to analyse the proposed transaction and remedies. The FTC also announced settlements in a merger involving the only two providers of air ambulance services in Hawaii, ²⁰ and in a merger that would have negatively impacted competition in three markets for the collection of human blood plasma: Lincoln, Nebraska; Augusta, Georgia; and Youngstown, Ohio. ²¹

In addition to preserving competition in healthcare markets, the FTC preserved competitive markets for industrial and manufactured goods, taking action to preserve competition for Portland cement, crushed limestone, sand and gravel, as well as other products. ²² The FTC also intervened to prevent harm to competition from Northrop Grumman’s proposed merger with Orbital ATK. ²³ Northrop supplies the US government with missile systems, including tactical missiles, strategic missiles and missile defence interceptors, and Orbital ATK is the premier supplier of solid rocket motors, an essential input for missile systems. The FTC required a firewall and non-discrimination provisions to prevent the vertical merger from reducing competition for missile systems purchased by the US government. Absent the remedy, the merger could have led to less innovation and higher prices for US taxpayers.

The FTC also announced settlements in three mergers involving retail fuel stations and convenience stores. In a merger that would have combined the 7-Eleven network with approximately 1,100 Sunoco convenience stores and retail fuel outlets, the FTC required divestitures to preserve gasoline competition in 76 local markets. ²⁴ The FTC also required the divestiture of retail fuel assets in several US cities to resolve charges that Marathon Petroleum Corporation’s acquisition of Express Mart would reduce competition for retail gasoline and retail diesel fuel. ²⁵ In addition, the FTC challenged Alimentation Couche-Tard’s (ACT) proposed acquisition from Holiday Companies of 380 retail fuel outlets with attached convenience stores, charging that the proposed acquisition would have increased the risk of both unilateral and coordinated anticompetitive effects in 10 local markets. To resolve the FTC’s concerns, ACT agreed to divest 10 retail fuel stations in Minnesota and Wisconsin. ²⁶

Non-merger enforcement

The FTC pursued a variety of conduct matters in fiscal year 2018. For example, it initiated an administrative proceeding against three dental product distributors, charging that they conspired to refuse to serve or provide discounts to buying groups representing dental practitioners. ²⁷ In another matter, a company that provides therapist staffing services to home health agencies, its owner and the former owner of a competing staffing company agreed to settle FTC charges that they violated section 5 of the FTC Act by agreeing to reduce pay rates for therapists and inviting other competitors to collude on the rates. ²⁸

The FTC also continued its administrative litigation of charges that 1-800 Contacts, the largest online retailer of contact lenses in the United States, entered into unlawful agreements with rival sellers to suppress competition in certain online search advertising auctions, and restrict truthful and non-misleading internet advertising to consumers. Following a three-week administrative trial, the administrative law judge found that the agreements violated the antitrust laws. ²⁹ The parties filed an appeal to the Commission and, in November 2018, the Commission upheld the initial decision. ³⁰ This matter is currently on appeal in the US Court of Appeals for the Second Circuit.

In February 2019, the FTC reached a global settlement that resolved pending claims in three separate reverse-payment lawsuits involving subsidiaries of pharmaceutical manufacturer Teva Pharmaceuticals Industries. ³¹ The global settlement prohibits Teva from entering into reverse-payment patent settlement agreements that impede consumer access to lower cost drugs for 10 years. Similarly, on the eve of trial, the FTC reached a settlement in FTC v Actavis, the 2009 case alleging that brand-name drug firm Solvay Pharmaceuticals (now known as AbbVie Products LLC) and three generic drug firms unlawfully conspired to delay generic competition to Solvay’s branded testosterone replacement drug AndroGel for nine years. ³² Under the settlement, Solvay’s current owner AbbVie is prohibited from entering into certain patent infringement settlement agreements that restrict generic entry for certain drugs and contain common forms of reverse-payments, such as a side deal, in which the generic company receives compensation in the form of a business transaction entered at the same time as the patent litigation settlement; or a ‘no-authorised generic’ commitment, in which a brand company agrees not to compete with an authorised generic version of a drug for a period.

The FTC also continued to prosecute its administrative complaint that Impax Laboratories violated the antitrust laws when it entered into an agreement with Endo Pharmaceuticals to block consumers’ access to a lower cost generic version of Endo’s branded extended-release opioid pain reliever Opana ER. In May 2018, an administrative law judge dismissed the FTC’s charges against Impax; however, in May 2019, the Commission reversed the administrative law judge’s initial decision, ruling that the reverse-payment patent settlement agreement between Impax and Endo violated section 5 of the FTC Act. ³³

Turning to unilateral conduct, in June 2018, a federal district court awarded US$493.7 million in monetary relief for consumers after finding that drug maker AbbVie used sham litigation to illegally maintain its monopoly over the testosterone replacement drug AndroGel. ³⁴ This marked the FTC’s first ever litigated victory on the merits in a sham litigation matter. The parties have appealed and the case is pending before the US Court of Appeals for the Third Circuit. ³⁵

FTC staff also presented evidence in federal court on charges that Qualcomm, Inc unlawfully maintained its monopoly position as a modem chip supplier through a number of exclusionary practices, including refusing to license standard essential patents on fair, reasonable and non-discriminatory terms. In May 2019, the district court ruled that Qualcomm’s licensing practices relating to its modem chips violate the antitrust laws, and allowed the company to maintain its monopoly power, extract higher royalty rates and foreclose a substantial share of the market from rivals. ³⁶ The court ordered extensive injunctive relief, including requiring Qualcomm to renegotiate all of its existing patent-licensing deals, and submit to ongoing compliance and monitoring procedures for seven years. Qualcomm has appealed and the case is now pending before the US Court of Appeals for the Ninth Circuit.

In April 2019, the FTC filed a complaint in federal court against the health information company Surescripts, alleging that it employed illegal vertical and horizontal restraints to maintain its monopolies over two electronic prescription markets: routing and eligibility. ³⁷ According to the complaint, Surescripts’ conduct in these markets increased prices, reduced quality, stifled innovation, suppressed output and foreclosed entry. ³⁸

Competition research and advocacy

The FTC broadly shares its expertise on competition issues with interested policymakers through competition advocacy. These written advocacies provide guidance and recommendations on how to incorporate competition principles into laws, regulations or policies.

In fiscal year 2018, the FTC filed 16 advocacy comments and amicus curiae briefs before various state and federal bodies, including on issues relating to occupational licensing, certificates of need for healthcare entities, efforts to enable telehealth models to expand patient access to healthcare services and practices that may harm competition in the pharmaceutical industry.

The FTC also published reports and working papers addressing an array of competition issues. For example, in September 2018, FTC staff issued a policy paper addressing the competitive issues involved in state-based occupational licensing. ³⁹ More recently, FTC staff issued a report analysing branded drug firms’ patent settlements with generic competitors. ⁴⁰ The report summarised data on patent settlements filed with the FTC and the DOJ during fiscal year 2016, as required under the Medicare Modernization Act of 2003. This was the FTC’s third annual snapshot of such deals since the Supreme Court’s decision in FTC v Actavis. ⁴¹ The May 2019 report found that, of the 232 final settlements received in fiscal year 2016, only one contained a side deal or no-authorised generic commitment – the types of reverse-payments at issue in Actavis and, subsequently, in cases before appellate courts. This is the lowest number of such agreements since 2004. ⁴²

Hosting workshops on emerging business practices and technologies is another way that the FTC explores competition policy issues and stays current with industry developments. In fiscal year 2018, the FTC held eight public workshops and conferences on emerging competition issues, including its annual Microeconomics Conference. ⁴³ The agency’s Economic Liberty Task Force held two events. The first, ‘The Effects of Occupational Licensure on Competition, Consumers, and the Workforce: Empirical Research and Results’, examined the current state of economic learning about the costs and benefits of occupational licensing. ⁴⁴ At the second event, ‘Voices for Liberty Fireside Chat’, then acting chair Maureen K Ohlhausen hosted four individuals to discuss how unnecessary state-based licensing requirements affected their lives and made it more difficult for them to practice their professions when moving among states. ⁴⁵

The FTC also held a workshop, ‘The Contact Lens Rule and the Evolving Contact Lens Marketplace’, which explored issues regarding competition in the contact lens marketplace, consumer access to contact lenses, and prescription release and portability. ⁴⁶ At ‘What’s New in Residential Real Estate Brokerage Competition’, the FTC and the DOJ held a joint workshop exploring competition issues in the real estate brokerage industry. ⁴⁷ Finally, the FTC explored prescription drug markets in its workshop, ‘Understanding Competition in Prescription Drug Markets: Entry and Supply Chain Dynamics’. ⁴⁸

In June 2018, the FTC announced that it would hold a series of hearings on competition and consumer protection in the twenty-first century to consider whether broad-based changes in the economy, evolving business practices, new technologies or international developments might require adjustments to competition and consumer protection law, enforcement priorities and policy. ⁴⁹ The multi-day, multi-part hearings (14 in total) began last autumn and concluded on 12 June 2019. ⁵⁰ In conjunction with the public comment process, the hearings have provided the FTC with a broad range of viewpoints to stimulate evaluation of the FTC’s near and long-term law enforcement and policy agenda.

International policy engagement

The FTC considers the international ramifications of all of its enforcement actions, and in fiscal year 2018 cooperated with competition agencies around the world in 43 merger and conduct cases. In many cases, consistent and quick cooperative review was aided by the parties’ waivers of confidentiality. Although the use of waivers has been common in cases involving the European Commission and Canada for many years, they are increasingly being used in merger reviews involving agencies in Latin America, including in Mexico, Brazil, Chile and Colombia.

The FTC, together with the DOJ, also works to promote convergence toward sound, effects-based economic analysis and fair procedures in competition investigations. The FTC pursues this through multilateral competition organisations, policy dialogues with counterpart agencies, technical assistance and international fellows programmes, and competition chapters of trade agreements.

The FTC plays a lead role in multilateral organisations, including the International Competition Network (ICN), the Organisation for Economic Co-operation and Development (OECD), the United Nations Conference on Trade and Development (UNCTAD) and the Asia-Pacific Economic Cooperation (APEC).

In the ICN, the FTC:

• is a long-serving member of the Steering Group;
• co-chairs the promotion and implementation team, leading the ICN’s work implementing its recommendations;
• leads the ‘ICN Training on Demand’ project, which produces video training materials on competition law and practice;
• leads the Agency Effectiveness Working Group’s work on due process in competition investigations that this year produced the ICN Recommended Practices for Investigative Process;
• is a founding member of the ICN Framework on Competition Agency Procedures, promoting procedural fairness; and
• previously co-chaired the Merger, Agency Effectiveness and Unilateral Conduct Working Groups.

The FTC and the DOJ will host the ICN’s 2020 Annual Conference in Los Angeles, which will be the first time the event is held in the United States. ⁵¹

In the OECD, the agency plays a key role in developing the Competition Committee’s long-term themes, including the current projects on procedural fairness, the application of competition laws to intellectual property, competition in the digital economy and competitive neutrality. It also conducted and oversaw an APEC-sponsored series of workshops on procedural fairness. In UNCTAD, the FTC took a key role in the development of proposed guidance on international cooperation for developing countries.

The FTC, often in collaboration with other parts of the US government, maintains dialogue with counterpart agencies and governments on a variety of challenging issues, including the intersection of competition law and intellectual property rights, the role of industrial policy and other non-competition policies, the territorial scope of competition law and remedies, and due process in antitrust investigations. In addition, the FTC participates in US delegations that negotiate competition chapters of trade agreements, such as the recently renegotiated United States–Canada–Mexico Free Trade Agreement. The proposed agreement includes provisions on procedural fairness and attorney–client privilege that are new to the trade landscape in the Americas.

In fiscal year 2018, the FTC provided a steady stream of policy advice to foreign competition agencies through consultations, written submissions, and comments on proposed laws and guidelines. The FTC also expanded its programme of technical assistance to help other agencies apply their laws in ways that support competitive markets, and compatible analysis and outcomes in cross-border matters. During the past fiscal year, the FTC conducted 24 competition missions in 17 countries. This included placing resident advisers in the competition agencies of Ukraine, Brazil and India, and conducting hands-on workshops on investigational skills. The resident advisers’ work focused on the application of economic analysis in investigations and on merger notification procedures.

The FTC, working with the DOJ, also concluded a five-year programme to strengthen competition law enforcement in Central America, especially in El Salvador and Honduras. The FTC also conducted competition workshops in numerous countries, from Argentina to Vietnam, along with regional programmes for Africa, South East Asia and south-east Europe.

Also in fiscal year 2018, the FTC hosted international fellows from eight competition agencies. The FTC International Fellows and Interns programme enables staff from counterpart agencies to participate in investigations, enforcement actions and other projects with FTC attorneys and economists. The fellows gain firsthand experience with how the FTC carries out its enforcement and policy work, and return to their home agencies able to share what they have learned with their colleagues and apply their experience to their own work. The FTC benefits in turn from the insights and experience of the visiting fellows.

The FTC remains committed to working with its counterpart agencies in the Americas and around the world, and will continue to use the full range of its enforcement, research and advocacy tools to protect consumers and promote competition in 2019 and beyond.

* The views expressed here are the author’s own and do not necessarily reflect the views of the Federal Trade Commission or any commissioner.

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