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Authors: Steve Cernak, Kristen Harris, Pat Pascarella, Ruth Glaeser, Luis Blanquez

The American Bar Association Antitrust Law Section’s annual Spring Meeting in Washington DC is April 10-12 this year. Each year, the Spring Meeting has dozens of panels and events and generates numerous receptions — formal and informal — as about 4000 antitrust practitioners and enforcers flock to Washington. It is the place to be for antitrust and consumer protection lawyers and economists — so, of course, Bona Law professionals will play a leading role.

Steve Cernak will be moderating a panel of the Deputy Assistant Attorneys General of the US Department of Justice Antitrust Division on Wednesday morning. As Chair-Elect of the Section, Cernak has helped organize this Spring Meeting and is already hard at work on all the Section’s programming for the Section year starting in August.

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Author: Aaron Gott

There are a lot of lessons you can learn from Wonka. It’s a story about how ingenuity, determination, selflessness, and teamwork can overcome the oppressive adversity of a system that serves entrenched interests.

But it’s also a story about a chocolate cartel. And that offers its own lessons, too. Just ask my four kids, who now understand what I do all day (though I may have overplayed the chocolate-related aspect).

In fact, the whole plot of Wonka revolves around the machinations of this market-dominating chocolate cartel. It’s almost as if the folks over at Warner Bros. Pictures took inspiration from our Antitrust for Kids series and (surely inadvertently) left us out of the credits.

For those who haven’t seen it: Wonka is essentially the origin story of the Willy Wonka from 1971’s Willy Wonka & the Chocolate Factory. Wonka, played by Timothée Chalamet, comes to town with the intent to realize his dream of owning a chocolate shop in a ritzy plaza called the Galeries Gourmet. With little money to his name—twelve silver sovereigns that are all spent by the end of the first tune—he sets out to sell his chocolate on the street the following day. A crowd gathers, and the owners of three preeminent chocolate shops, led by Paterson Joseph’s Slugworth, at the Galeries Gourmet notice.

Spoiler Alert!: in this post, I’m talking about Wonka and there may be some spoilers. So if you haven’t seen it, go watch it, and then come back and read this post.

We learn that these three chocolatiers are, despite identifying themselves as three “fierce rivals,” in fact, the members of a chocolate cartel that has the entire market locked down. And just as soon as upstart Wonka begins trying to sell his chocolate, the cartel goes to work to prevent this competitive threat from upending its lucrative arrangement. Or as the cartel puts it, “If we don’t / get on top of this / we’ll go bust / chocopocalypse! / we’ll cease to exist.

What follows in Wonka is not only a lot of catchy numbers, but also a step-by-step guide into the workings of a successful price-fixing cartel.

  1. Control Price by Controlling Supply

Soon after the members of the chocolate cartel are introduced, we learn the strategy to which they owe their cushy, profitable position: while ostensibly fierce rivals to the outside world, each with their own shops, the chocolatiers actually pool their chocolate in a secret underground vault and strictly control the output so as to artificially depress supply, which ultimately raises prices in a market with pent-up demand.

This is a classic mechanism for a cartel to increase prices without explicitly fixing prices. Rather than attempt to set and discipline cartel members’ prices directly, which can be difficult to administer and is more easily detected by authorities, controlling supply (or production) lets the market do the work of raising prices through the hydraulic action of supply and demand. Output restrictions and price fixing are two sides of the same coin.

A classic example of output controls is the open-and-notorious oil conspiracy known as OPEC.

  1. Conceal Your Meetings and Communications

The chocolatiers’ secret underground vault isn’t just where they store their chocolate reserves; it’s also where they meet to discuss their nefarious business. The lair is underneath a Catholic church run by a frocked, chocoholic Mr. Bean on the take, and to get there, they simply go to a confessional booth, which has a secret elevator to the vault below.

Conspirators often take measures to conceal their communications and meetings, and while real-life cases do not usually involve such ostentatious means, they can still be elaborate. Some use code names and secret email addresses, while others might enlist a supplier to collect and distribute draft pricing announcements while she makes her sales rounds. Conspirators might even have a seemingly coincidental meeting at a charity golf tournament.

And while this cartel was meeting directly in its secret lair, it could have accomplished a similar scheme by integrating Father Bean as the hub of a hub-and-spoke conspiracy. Some notable recent cases have featured accusations of conspiracies facilitated through third-party data aggregators and technology service providers. That kind of conspiracy, though, isn’t quite as conducive to show-tune choreography.

  1. Keep Your Numbers Small

Another reason the chocolate cartel was so successful: it comprises only three competitors who dominate a market. It’s easier to form a cartel in a concentrated, oligopic market. And it’s easier to sustain one, too, for a few different reasons.

The more people who are in on a secret, the more likely that secret is going to get out. It’s important your cartel stays a secret, given that it’s a felony punishable by prison and often means civil liability far beyond what was made from the scheme. This is especially true because the U.S. Department of Justice Leniency Program provides incentives for cartel members to tell on their co-conspirators and cooperate with its investigations. So even if you trust your co-conspirators now, wait until one of them is acquired by a larger company with a strong antitrust compliance program or one of their employees decides to become a whistleblower if for no other reason than to protect their job.

Keeping your numbers small also means that it is less work to detect and punish “cheating” by cartel members, which is inevitable—if they’re willing to cheat the market, you can be sure they’ll cheat each other at every opportunity.

  1. Use the Law to Stop Upstart Competitors

In Wonka, local law forbids the sale of chocolate without a chocolate shop. As one of Wonka’s friends puts it, “You can’t get a shop without selling chocolate, and you can’t sell chocolate without a shop.”

This catch-22 is surely by design. The cartel instinctively calls the police on Wonka the very moment it recognizes him as a competitive threat. The cartel members even make friends with the chief of police—played by Keegan Michael Key—and bribe him with chocolate (and the promise of more) so that he dedicates himself to enforcing the law against Wonka.

Cartels often try to create and use legal barriers to prevent new competitors from gaining a foothold. In the United States, it’s a tale as old as interest group politics: lobby to create barriers to entry through either complex regulatory regimes or licensing schemes that make it harder for others to enter the market and compete against you. And then put your friends in government to enforce those laws with enthusiasm.

Something like this is what happened in North Carolina State Board of Dental Examiners v. FTC: as teeth whitening technology took off, dentists found it extraordinarily profitable. And when non-dentists started offering teeth whitening, the dentists used the state board (conveniently controlled by dentists) to reinterpret the dental scope of practice under state law and start going after non-dentists for the unlicensed practice of dentistry, even though teeth whitening is not actually dentistry.

  1. Scare Consumers Away From Non-Conspirator Rivals

The chocolate cartel also attempts to turn the market against Wonka. First, in front of a crowd comprising Wonka’s intrigued prospective customers, Slugworth declares his expert opinion: “Mr. Wonka, I have been in this business a very long time, and I can safely say, that of all the chocolate I have ever tasted, this is without doubt, the absolute 100% worst.”

Consumers still went wild for Wonka’s “hover chocolates” when Slugworth and his confederates started to float. But that victory was short-lived because of the already-in-motion cartel strategy of using the law against Wonka, which goes to show a successful cartel doesn’t usually rely on just one type of anticompetitive act to achieve its goals.

Later, after a montage of Wonka and his troupe turning to a pop-up retail strategy that allows him to both compete and successfully evade the police, Wonka finally has the financial resources to open a shop. And when he does, the chocolate cartel sabotages him by surreptitiously poisoning his confections with Yeti Sweat, which leads to rapid and uncontrollable vividly colored hair growth. With this, the cartel successfully turned the market against Wonka, and Wonka’s shop was literally destroyed.

Food tampering aside, this is classic group boycott behavior: a concerted effort by firms to persuade customers, suppliers, and other parties in the market not to do business with a rival firm whose competition imposes downward price pressure in the market.

  1. Reach an Illegal Noncompete Agreement

The chocolate cartel at one point convinces Wonka to agree not to compete in exchange for buying his and his friends’ freedom from their indentured servitude to Mrs. Scrubbit.

Paying competitors not to compete is illegal, but the important thing to note here is that it is illegal even if it is just one competitor paying off another. In fact, there is a whole class of “pay-for-delay” antitrust cases, which typically allege brand-name pharmaceutical companies suing generic makers for patent infringement, with the purpose of inducing a settlement whereby the generic makers agree not to introduce their competing products to the market for some period of time.

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Author:  Molly Donovan

For adults, it’s the worst idea imaginable for a holiday, but for second graders, Valentine’s Day is great—decorating mailboxes, making paper cards and distributing treats to all your friends.

This year the second graders had an idea for making Valentine’s Day even better: a contest to see who can make the best Valentine’s cards! The kids would vote for one winner after sorting through all the cards to judge whose was most creative and best executed. The winner would have the prestige of winning.

As with all competitions, big or small, things should be fair. One thing that is not fair: copying another friend’s idea.

But that is what happened (as these Antitrust for Kids stories tend to go).

Mikey had made valentines out of actual waffles that read in frosting “I like you a waffle lot.” OMG. Could anything be cuter?

The day before Valentine’s, his mom posted the waffle photos on Instagram.

When Nora saw the post, she knew her cards (plain old paper, largely uninspired) would never win. But Nora HAD TO win.

She whipped up a batch of pancakes as quickly as she could and wrote on each in whipped cream: “I like you a waffle lot!” (Obviously, she didn’t nail it with the pun, but since the joke was lost on most of the kids anyway, it didn’t really matter.)

Nora’s mom (naturally) posted the pancakes on Instagram later that night with a tagline suggesting that Nora invented the very idea of homemade food valentines all by herself.

The next day at school, a final tiebreaker vote would come down to Mikey v. Nora. (In third place was JoJo whose pickle-shaped cards on green paper read “You’re a Big Dill.”)

But Mikey stopped the contest before the final vote occurred: “This competition is unfair. Nora took my idea and closely duplicated it only because she can’t stand losing.” Mikey had the IG posts to prove that his idea came first, and that Nora’s pancakes and posts were deceitful.

But by the time he finished explaining all that, most of the friends had lost interest—moving on to eating the candy and applying the fake tattoos that feel impossible to wash off.

Nora went home happy that even though she didn’t win, nobody else won either.

My Muse: There has been litigation in China and the UK about competitors posting or reposting each other’s ideas and online content. Not only does this present potential IP issues, but the plaintiffs in these recent litigations are also claiming that the alleged conduct is a violation of unfair competition laws.

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Mate, DrinkAuthor: Paul Moore2

Introduction

Over the past several decades State Attorneys General have become increasingly involved in merger reviews in tandem with the Federal Trade Commission and/or the U.S. Department of Justice’s Antitrust Division (the Regulatory Agencies). This increase in state merger reviews has been in parallel with states raising their merger and non-merger profile and general antitrust enforcement efforts statewide and nationally. This trend has occurred, in part, as Attorneys General expanded their staffs and have become increasingly experienced in antitrust enforcement efforts and merger analysis. While many states, including California, do not have statutes mandating proposed merger registration, Attorneys General have statutory authority to investigate conduct to ensure no laws have been violated3. This means that an Attorney General can decide to review a proposed merger whenever they think it may violate a state’s antitrust laws. Therefore, it makes sense to notify an Attorney General when a proposed merger may have a competitive impact in a specific state and is likely to trigger an in-depth analysis at the federal level. Some examples might be a merger between two competitors who have substantial overlapping retailing assets, service routes, or service areas in one state. Such a notification to a state allows parties to avoid duplicative and possibly successive investigations. Best practices have emerged around how to conduct a merger investigation with a Regulatory Agency and tandem with the California Attorney General’s office.

Best Practices When Cooperating with Staff

Contacting the federal agency likely to review a transaction before submitting an HSR filing is increasingly becoming part of merger review practice. Since there is no statutory requirement to seek regulatory authority to merge at the state level in California a best practice is to invite the Attorney General to participate in the review process to avoid subsequent investigations that could have been run in parallel with other agencies and possibly avoid efforts by the staff ex-post to unwind a transaction4. Contacting the California Attorney General (Cal-AG) before an HSR is filed is generally well-received by staff and is typically considered a smart strategy because it allows the staff assigned to the transaction the ability to begin reviewing the transaction before the 30-day statutory clock has started. This extra time allows staff more time to conduct a review before any enforcement decisions need to be made and in some cases provides the time necessary to avoid one altogether. In addition, a pre-filing notification to both staffs permits the two agencies to interact freely since there is no HSR confidence to maintain.

We are in an era where many meetings are conducted over video. Generally, saving time and client resources is a good thing; however, visiting a State Attorney General’s staff in their office at the beginning of a merger can pay significant dividends. An in-person visit can establish the foundation for a positive working relationship, allow for clear communications5 and most importantly, communicate to the staff and Attorney General that you are aware of the importance of their involvement and welcome their participation. The in-person visit makes a significant first-step in ensuring that things start off on the right foot.

Once the HSR is submitted, the Cal-AG is able to file her Form 712 and to continue the interagency dialogue with the benefit of the documents and filings the parties have made. The Cal-AG’s staff can also begin to reach out to third parties and seek waivers that permit the FTC/DOJ to share what is produced with the states. This is more efficient for the producing parties as well, as they can make what amounts to a single production to satisfy both reviewing agencies6. Securing these waivers early in the process also allows the staffs to communicate freely, to share economic analyses based on produced information, and for the CAL-AG staff to join party meetings with the FTC/DOJ7. This level of cooperation benefits all involved as it prevents parties from making the same presentation twice and it allows both regulatory agencies to hear the same information simultaneously.

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Authors: Steven Cernak & Molly Donovan

The Federal Trade Commission and the Department of Justice are reminding companies that, in responding to grand jury subpoenas and second requests, there is an obligation to preserve data and communications created using “new methods of collaboration and information sharing tools, even including tools that allow for messages to disappear via ephemeral messaging capabilities.” The government has specifically called out Slack, Microsoft Teams and Signal as being some of the applications of concern “designed to hide evidence.”

The government says that while there has always been an obligation to produce information from ephemeral messaging applications in investigations and litigations, the purpose of the reminder is to ensure that counsel and clients do not “feign ignorance” when choosing to use ephemeral messaging to do business. Thus, the FTC and DOJ will include new, explicit language in subpoenas and other requests specifically stating that data from ephemeral messaging applications must be preserved. A failure to meet that obligation could result in obstruction of justice charges.

More generally, once a company has been served with a subpoena, a document hold should be prepared and circulated right away. A document hold is a written notification to relevant employees not to delete, destroy or alter any electronic or paper materials potentially relevant to the subpoena. The notice must unpack what that language means in plain English and should be conservative in describing what “potentially relevant” means—(remember that just because something is being preserved does not necessarily mean it will have to be produced.)

The document hold should apply to all types of messaging (text, IM, DMs, ephemeral) to ensure that all existing and going-forward materials will not be deleted. The relevant persons with IT expertise should certify internally that preservation is occurring effectively, that all auto-delete functions have been turned off, and that back-up tapes are not being purged automatically.

It’s also a good idea to instruct employees not to talk to each other about the subpoena or the underlying subject matter. When employees talk to each other, it can create the appearance of collusion—i.e., employees are coordinating with each other about what to say or not say to the lawyers or to the government. This can raise obstruction suspicions that may only grow if the discussions occur over ephemeral messaging applications that employees think will not leave a paper trail behind.

If employees believe that they or others have violated, or behaved inconsistently with, company policies or relevant laws, employees should discuss that only with in-house or outside counsel—not with each other.

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Authors: Steven Cernak and Luis Blanquez

On January 22, 2024, the Federal Trade Commission (FTC) issued its usual annual announcement to increase the Hart-Scott-Rodino (HSR) Act thresholds. The 2024 thresholds will take effect 30 days after publication in the Federal Register, which is expected soon, so the thresholds likely will be effective in late February.

HSR requires the parties to submit certain information and documents and then wait for approval before closing a transaction. The FTC and DOJ then have 30 days to determine if they will allow the merger to proceed or seek much more detail through a “second request” for information. The parties may also ask for “Early Termination” to shorten the 30-day waiting period, although for nearly two-years this option has been––and continues to be––suspended.

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Authors: Steve Cernak & Molly Donovan

There is no guaranteed safety zone for exchanging competitively sensitive information amongst competitors. Practices once deemed relatively safe—like subscribing to a third-party data services provider to manage the exchange—now carry increased risks. This is mostly because machine learning and AI have made it possible to predict a specific competitor’s future strategies even if a third party has aggregated and anonymized the underlying data and even if the underlying data is old.

While antitrust compliance is best assessed on a case-by-case basis, there are general guideposts that third parties and their subscribers should understand before gathering, providing, and/or exchanging price, production, procurement, employment or other competitively sensitive data that competitors would not (or should not) share directly with each other.

Antitrust concerns are at their peak if the exchanged information allows competitors to increase price or restrict output in explicit or even tacit collusion with each other in a joint effort to raise profits industry wide. To steer clear of even the appearance of such conduct, these pointers matter:

  1. Avoid exchanging data that is comprehensive, detailed and current. Any one of these is a concern, but the combination is very concerning.

Comprehensive means the information covers every aspect of business planning and strategy: how to procure, how to price, how to set production levels, and how to compensate workers and executives. Have you been asked to provide entire internal business plans? That should raise flags.

Detailed means the data reveals information broken down by specific production facilities or specific products, as examples. The higher level, the better. More detailed, lower-level information entails more risk.

Current means the information exposes what your business is doing in real time. The government once said that data should be at least 3 months old before it is exchanged, but machine learning and complex algorithms have since increased the value of historical data—making it possible that subscribers might be able to use even months-old data to discern future-facing strategies.

 

  1. Don’t fill in the donut hole. Even when the information exchanged is not comprehensive, make sure that it is not the missing piece that, when combined with information that “everyone knows,” allows subscribers to act collusively. Even after the information exchange, those subscribers should still not be certain about how their competitors will act and react.

 

  1. Asymmetry can be a bad fact. Suspicions are raised if the third-party reports are available only to companies who compete at the same level of the supply chain—and not to their suppliers, employees, and/or customers. The “give to get” idea (i.e., you must be able to provide the relevant data to receive the relevant data) can appear collusive.

 

  1. The antitrust risks from all exchanges are not equal. Exchanging price, production, and cost information is risky. Exchanging tips on organization of a parts warehouse is less risky (though not riskless). Your antitrust reaction should be calibrated to the different levels of risk.

 

  1. Voluntary surveys and periodic polling are preferred over direct downloads of internal ledgers and reports. You obviously would not share the latter directly with a competitor, so you should exercise equal caution before sharing it with a third party.

 

  1. Don’t couple sensitivity with deanonymization. Flags should go up if subscribers are able to deanonymize sensitive information, i.e., identify which competitor supplied what information.

 

  1. Even aggregated data poses risks. Ask whether subscribers can use algorithms or other methods to disaggregate data to predict competitors’ pricing or output strategies.

 

  1. Complete or near-complete industry participation could appear collusive. If the data being shared represents all or most of the relevant industry, talk to counsel about risk mitigation. The risks increase if the third party discloses the identities of the participants (or they are otherwise known, obvious or can be inferred) and/or the industry is concentrated.

 

  1. Third-party consultants should not advise subscribers how to use the information to raise total industry profits. Nor should consultants in their reports to subscribers identify opportunities to raise prices or restrict output or tell one subscriber how other subscribers are using the information.

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Authors: Molly Donovan & Steven Cernak

Update: The FTC has won a preliminary injunction to stop IQVIA from acquiring Propel Media. The judge (Judge Ramos in the Southern District of New York) ruled the injunction is in the public’s interest and the FTC has shown a reasonable probability of a substantial impairment in competition should the deal proceed. A written opinion is not available as of this post (January 3, 2024).

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The Federal Trade Commission has sued to block IQVIA’s proposed acquisition of Propel Media—a deal the FTC says would combine two of the top three providers of programmatic advertising that target U.S. healthcare providers on a one-to-one basis. The FTC says IQVIA and Propel both operate demand-side platforms or “DSPs” (called Lasso and DeepIntent, respectively) in an already-concentrated “healthcare provider programmatic advertising market” (a “subset of the total healthcare digital advertising industry”). And the FTC argues the deal would result in further concentration in that market and would significantly decrease advertising competition, which would contribute to higher prescription drug costs for U.S. consumers.

The FTC has filed an administrative complaint and has asked the Southern District of New York to block the acquisition until the administrative trial is completed—projected for December 2023. The FTC requested that the injunction issue in the next few days on or before July 21.

According to the FTC, programmatic advertising matches buyers and sellers of advertising space in virtual auctions that occur in seconds or less. Programmatic advertising automates the more traditional negotiations between advertiser and publisher of print or digital ads. DSPs like Lasso and DeepIntent provide programmatic advertising to healthcare advertisers specifically (i.e., pharmaceutical companies and their advertising agencies).

According to the FTC, IQVIA and Propel are the leading DSPs providing programmatic advertising that targets healthcare providers on a one-to-one basis. This means IQVIA and Propel have the scope and quality of healthcare data to identify individual doctors—and their digital devices—who are relevant to a particular ad campaign. DSPs target healthcare providers because they make the “prescribing decisions” and shape consumers’ perceptions of drugs and drug brands.

Although the FTC admits that there are many “generalist” programmatic advertisers, the FTC urges that healthcare DSPs operate in a distinct relevant market specific to healthcare advertising with clients who have unique advertising demands.

The FTC calls the proposed acquisition presumptively unlawful under the Horizontal Merger Guidelines and caselaw. The FTC’s major concerns are twofold: the combination would eliminate “head-to-head” competition between 2 of only 3 competitors in the relevant market and would enhance IQVIA’s ability to reduce or eliminate potential competition by refusing to sell its healthcare data to would-be competitors or by selling it at anticompetitive prices. The FTC charges that IQVIA is the world leader in terms of the scale and quality of its healthcare data. And while IQVIA currently sells that data to DSPs and others, the FTC says IQVIA would be positioned to increase price and/or reduce access to data critical to one-to-one healthcare DSPs should the deal go through.

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Author: Molly Donovan

Update: In December 2023, New York Governor Kathy Hochul vetoed the legislature’s proposed prohibition against employee non-competes. The Governor indicated that her “top priority was to protect middle-class and low-wage earners, while allowing New York’s businesses to retain highly compensated talent.” Carve-outs to the bill for highly-compensated employees and executives were discussed, but no agreement as to an income cut-off could be reached. Senator Sean Ryan has said that he expects the legislation to be reintroduced in 2024.

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Author: Steven Cernak

On December 15, 2023, the Fifth Circuit remanded to the FTC its order requiring Illumina to divest its re-acquired subsidiary, Grail. Despite the remand, the opinion is a big win for the FTC. Below, we offer five takeaways for future merging parties and their counsel.

[Disclosure: Bona Law filed an amicus brief for 34 Members of Congress arguing that the FTC’s action violated the “major questions” doctrine and misinterpreted Clayton Act Section 7 in several ways.]

Here is a quick summary of the twists and turns of this case from our earlier writings. Illumina is a dominant provider of a certain type of DNA sequencing. Grail is one of several companies developing a multi-cancer early detection (MCED) test. An MCED promises to be able to detect biomarkers associated with up to fifty types of cancer by extracting the DNA from a simple blood sample. To work, the MCED needs DNA sequencing supply. According to the complaint, the type of DNA sequencing that works best — and with which Grail and all other MCED developers have been working — is the type supplied by Illumina.

The parties announced Illumina’s proposed acquisition of Grail in September 2020 and said that it would speed global adoption of Grail’s MCED and enhance patient access to the tool. In late March 2021, the FTC challenged this transaction by filing an administrative complaint before its own administrative law judge (ALJ). Shortly thereafter, the European Commission announced that it too would investigate the transaction, even though the transaction did not meet its usual thresholds.

During these investigations, the parties closed the transaction. The European Commission decided to block the transaction and the parties appealed. Just before the European decision, the FTC ALJ dismissed the complaint in an unexpected decision ruling for the first time against the FTC in a merger case. In a nutshell, the ALJ concluded that the FTC failed to prove that Illumina’s post-acquisition ability and incentive to advantage Grail to the disadvantage of Grail’s alleged rivals would likely result in a substantial lessening of competition in the relevant market for the research, development, and commercialization of MCED tests. FTC Complaint Counsel appealed the ALJ decision. The four Commissioners unanimously agreed to overturn it. Now, the Fifth Circuit has largely upheld that decision of the Commission, though with a remand for reconsideration of one aspect of the decision, as described below.

Takeaway 1: This Development is Largely an FTC Win

Some of the initial tweets and headlines, perhaps after reading only the opinion’s opening paragraph vacating the FTC’s order and remanding for further consideration, seemed to characterize the Fifth Circuit opinion as another loss for the FTC. But make no mistake, this development is a big win for the FTC for several reasons. First, the FTC challenged this transaction to block, then later, unwind, the acquisition of Grail. About a day after the opinion was filed, Illumina announced it would divest Grail. Mission accomplished.

Second, the court found “substantial evidence” for the Commission’s conclusions, despite arguments by the parties (and amici) to the contrary. As detailed below, the court did not question the Commission’s use of older cases and theories to review mergers.

Third, even the court’s rationale for the remand was not that strong a rebuke of the FTC. During the investigation, Illumina made an Open Offer to other customers of its sequencing, promising to treat them as well as Grail. The ALJ found this a useful additional fact in concluding that Illumina did not have the incentive to harm Grail competitors. The FTC majority opinion disagreed with the ALJ and only considered the Open Offer in the remedy phase of the merger review. Commissioner Wilson also disagreed with the ALJ but considered the Open Offer in Illumina’s rebuttal portion of the liability phase of the review. The parties argued that the Open Offer should be addressed by the FTC Complaint Counsel in its prima facie case for liability. The Fifth Circuit agreed with Commissioner Wilson. It seems certain that the other three Commissioners would have reached the same ultimate conclusion on remand when considering the Open Offer earlier in the process.

Takeaway 2: The Court Quickly Punted Constitutional Concerns

As with several other recent challenges to the FTC and other administrative agencies, the parties raised serious, difficult constitutional questions about the structure and processes of the FTC and its review of mergers. The court wrestled with none of them. Instead, the court took only two pages to explain that the four questions were answered by precedent, either from the Fifth Circuit or the Supreme Court, and saw no reason to explore whether any court should change. While this opinion is not the final word on these and similar issues, the FTC at least avoided a number of thorny issues for now.

Takeaway 3: Vertical Might be the New Horizontal

We hear sometimes that a proposed transaction should sail through the Hart-Scott-Rodino merger review process because “the parties don’t compete.” While that focus on current horizontal competition might have been a sufficient screen for antitrust issues a few years ago, it no longer is. Whether the Trump Administration’s challenge of the AT&T/TimeWarner transaction or the Biden Administration’s challenge of this transaction, Microsoft/Activision, or others, vertical (and potential competition) mergers have been ripe for challenge for a few years. Illumina’s abandonment of this vertical deal after this ruling will only encourage further challenges by federal and state antitrust enforcement agencies.

Takeaway 4: Courts Sometimes Agree with New/Renewed Antitrust Theories

As the Biden Administration DOJ and FTC have issued new merger guidelines or unilaterally taken other actions, one popular response from parts of the antitrust commentariat has been “but just wait until the courts consider them.” It is true that a long-lasting change in antitrust interpretation (like, say, the Chicago School) can only start with law review articles and enforcer speeches but eventually will require supportive court opinions; however, the “wait for the courts” sentiment seems built on two faulty premises.

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