July 25, 2006 1

American Bar AssociationSection of Antitrust Law

Corporate Counseling Committee

July 25, 2006

American Bar AssociationSection of Antitrust Law

Corporate Counseling Committee

July 25, 2006

Antitrust Updatefor In-House Counsel

July 25, 2006 2

Bill Baer: DOJ/FTC Civil and Criminal Enforcement and AMC Developments

Debbie Feinstein: Merger Developments

Jonathan Gleklen: Civil Litigation Developments

Marleen Van Kerckhove: Developments in Europe

AGENDA

July 25, 2006 3

DOJ and FTC Civil and Criminal Developments and Developments at the Antitrust

Modernization Commission

Bill Baer

July 25, 2006 4

FTC v. Austin Board of Realtors

FTC challenges ABOR policy of not listing “exclusive agency listings” on public websites– Exclusive agency listings give the home seller the right to sell on its own

without paying the selling broker a commission – they’re often used by discount brokers

FTC says:– ABOR rule is joint action by competitors with market power – a refusal to

deal except on specified terms– Consumers are harmed by discouraging use of lower-cost listings– No procompetitive justifications; not needed to prevent “free riding”

because rules already prevent FSBO listings where no broker is paid– We told real estate brokers not to do this in a half-dozen cases in the

1980s and 1990s involving refusal to include exclusive agency listings in the MLS

Settled by consent decree: stop it and don’t do it again

July 25, 2006 5

FTC Continues Review of Pharmaceutical Patent Settlements Denial of cert. in Schering seems not to have slowed the

FTC Cephalon reveals in an SEC filing that the FTC is looking at

its settlements with Mylan, Barr, Ranbaxy and Teva in patent cases relating to its narcolepsy drug Provigil– No official word from the FTC

Bristol-Myers and Sanofi settlement with Apotex on Plavix– In late June the parties amended a March settlement agreement to

permit Apotex to enter earlier– Parties say the FTC is investigating whether the settlement

nevertheless violates an earlier FTC consent decree

July 25, 2006 6

FTC/DOJ Hearings on Exclusionary Conduct

Hearings on July 18 addressed unilateral refusals to deal: when must a monopolist deal with its competitors?– Alternatives

• Bill Kolasky – Rule of reason style balancing, with no special rule for IP

• Hew Pate, Mark Whitener – Never, because it decreases incentives to invest and is unworkable (e.g. requires price-setting)

• Bob Pitofsky – Rare, but never say never• Steve Salop – Whenever consumer welfare is harmed (with

complicated calculations of consumer welfare)

July 25, 2006 7

AMC Hearing on July 13

Standards for Exclusionary Conduct– Commissioners believe current case law generally takes the

correct approach, that clear standards are desirable, and that further development should come from the courts, not Congress

– Concern about unclear standards for refusals to deal and bundling

Market Power– All but 2 commissioners support Independent Ink’s elimination of

a presumption of power from a patent

State Action Doctrine– Significant dispute on the AMC about whether the state action

doctrine is too lenient (with a substantial minority favoring limiting the doctrine to cases involving government compulsion)

July 25, 2006 8

AMC Hearing on July 13 (cont.)

Exemptions and Immunities

– General agreement that exemptions should be disfavored, with a strong consensus favoring automatic sunset provisions

Regulated Industries

– Substantial minorities of the AMC favor giving the DOJ and FTC the exclusive right to review the antitrust consequences of mergers or requiring other agencies (e.g. the FCC) to give DOJ or FTC determinations presumptive weight.

– Small majority of the AMC expresses concern about reading Trinko to displace antitrust law in regulated industries

July 25, 2006 9

DOJ Criminal Enforcement Developments

Air Cargo investigation intensifies: UPS and FedEx announce receipt of grand jury subpoenas.

New orthopedic implant investigation: Biomet, DePuy (a unit of J&J), Smith & Nephew, Stryker and Zimmer announce receipt of grand jury subpoenas and/or execution of search warrants.

Flint Energy Services and a regional manager for Flint agreed to plead guilty to participating in a bid-rigging conspiracy in connection with bids submitted to BP. Flint is a natural gas pipeline construction company.

President of a marine products company in California agreed to plead guilty to bid-rigging with respect to the sale of foam-filled marine fenders and buoys.

July 25, 2006 10

Merger Developments

Debbie Feinstein

July 25, 2006 11

Hologic/Fischer Imaging

Non-reportable transaction consummated in 2005 Breast cancer screening and diagnosis – stereotactic

breast biopsy systems (SBBSs) FTC alleged “virtual monopoly”

– Giotto, only other competitor, has minimal sales– Entry unlikely because of patent position of combined company

Order required Hologic to divest to Siemens the Fischer SBBS assets– Up-front buyer set forth in consent– Siemens already a competitor in breast cancer screening– Consent contained various covenants not to sue– Consent required Fischer not to interfere with Siemens ability to

deal with vendors

July 25, 2006 12

Linde/BOC

Linde and BOC supply industrial and medical gases and related supplies

Product markets are individual gases distributed by specific means

Geographic markets for liquid products are regional due to high transportation costs

Both coordinated and unilateral affects alleged for liquid oxygen/liquid nitrogen

In helium, Linde was smallest of 5 rivals; only coordinated interaction alleged

Divestiture required– No up-front buyer in liquid oxygen/liquid nitrogen– Up-front buyer required in helium

July 25, 2006 13

ATT/SBC – The Tunney Act Dispute

DOJ and parties reached settlement last year and transaction closed– Requires ATT and Verizon to provide competitor access to fiber

lines Tunney Act requires court to approve DOJ settlements Congress bolstered Tunney Act in 2004 to require judicial

review of terms of settlement Court expressed concern about decree and held a

hearing earlier this month AAI has requested permission to intervene on the basis

that the hearing record is incomplete – though it did not put in comments during 60 day review period

July 25, 2006 14

Civil Litigation Developments

Jonathan Gleklen

July 25, 2006 15

Section 1: Minimum Advertised Prices

Worldhomecenter.com, Inc. v. Thermasol, 2006 WL 1896344 (E.D.N.Y. July 10, 2006) – Plaintiff distributes Thermasol products on the Internet and

claims injury from a new MAP policy that bans advertising prices less that 20% below MSRP.

– Issue: Where’s the conspiracy?• Court cites Twombly (cert. granted) and finds a barebones

allegation that the MAP policy is the product of an agreement between Thermasol and competing distributors sufficient.

– Elephant in the room: legality of a MAP policy not linked to promotional support.

July 25, 2006 16

Section 1: Boycotts and Exclusive Dealing

Insignia, Inc. v. News America Mktg. In-Store, Inc., 2006 WL 1851137 (D. Minn. June 30, 2006) – Insignia alleges a conspiracy between NAMI (a competitor) and

NAMI’s grocer store customers.– Motion to dismiss denied:

• Evidence of conspiracy based upon identical letters sent by grocery stores to their managers, and alleged communications between the stores

• Group boycott claim stated because grocery stores have 87% combined share

• Exclusive dealing claim stated because plaintiff alleges foreclosure from 87% of the potential market

July 25, 2006 17

Monopolization In re Abbott Norvir Antitrust Litig., 2006 WL 1867677

(N.D. Cal. July 6, 2006) – Abbott raises the price of Norvir, a “booster” for AIDS drugs, by

400%. Plaintiffs challenge this as an attempt to monopolize, by steering customers to Abbott’s Kaletra, a single pill including both Norvir and another protease inhibitor (“PI”).

– Abbott’s motion for summary judgment is denied:• Disputed issue of fact on monopoly power.

• Leveraging monopoly in the booster market via exercise of patent rights can be monopolization of the PI market.

• High prices can be antitrust injury because they raised barriers to entering a second market.

• Citing ITS v. Kodak (9th Cir.), rejects Abbott’s “patent immunity” defense because a disputed issue of fact over whether patents cover the “boosted” market, or just the “booster” market and whether it has granted an implied license to use the patents in the “boosted” market.

July 25, 2006 18

Market Definition

Mumford v. GNC Franchising LLC, 2006 WL 1835947 (W.D. Pa. June 29, 2006) – Plaintiff need not allege a relevant market to withstand a motion

to dismiss, but if it does allege a relevant market dismissal may be appropriate if the facts alleged fail to support the alleged market.

• Court rejects market limited to supplies needed for a GNC franchise.

• Court rejects Kodak-style aftermarket because GNC supplies are interchangeable with non-GNC supplies (ignoring whether there is elasticity between supply prices and franchise prices)

July 25, 2006 19

Robinson-Patman

Mumford v. GNC Franchising LLC, 2006 WL 1835947 (W.D. Pa. June 29, 2006)– Court holds that sales from a manufacturer to a wholly-owned

subsidiary do not count as sales for purposes of the R-P Act.

July 25, 2006 20

Other Issues: Standing Tal v. Hogan, --- F.3d ----, 2006 WL 1775371 (10th Cir. June 29, 2006)

– Affirms district court decision denying standing to the president of companies allegedly injured by antitrust violations because the claims belong to the companies and “injury to his reputation, dignity and emotional damages are not the type of injuries redressable by the antitrust laws.”

James Cape & Sons Co. v. PCC Construction Co., --- F.3d ----, 2006 WL 1751886 (7th Cir. June 28, 2006)– Affirms dismissal of antitrust claim by construction company claiming it

was underbid by colluding competitors because the injury is not antitrust injury.

Alaska Gasline Port Authority v. ExxonMobil, 2006 WL 1718195 (D. Alaska June 19, 2006) – Plaintiff lacks standing to complain about producers’ refusal to supply gas

because it lacks “intent and preparedness” to build a pipeline

July 25, 2006 21

Other Issues: Exemptions & Immunities

State Action– Ticket Center, Inc. v. Banco Popular, --- F.Supp.2d ----, 2006 WL

1991737 (D.P.R. July 18, 2006)• Exclusive contract between ticketing agent and state-owned stadium

not immunized under Parker v. Brown because there was no “active supervision”

Local Government Immunity– Shepard v. City of Batesville, 2006 WL 1896206 (N.D. Miss. July

11, 2006) • Dismisses claims against city claiming it participated in a conspiracy

with competing construction companies. Rejects the argument that the Local Government Antitrust Act requires the “active supervision” of Parker v. Brown.

July 25, 2006 22

Other Issues: Exemptions & Immunities (cont.)

Noerr-Pennington– Hynix v. Rambus, 2006 WL 1883353 (N.D. Cal. July 7, 2006)

• Grants summary judgment to Rambus, holding that filing of patent infringement action is immune under Noerr-Pennington.

• But Rambus does not seek summary judgment on any claim that the lawsuits were part of an unlawful course of conduct under Kobe v. Dempsey Pump.

July 25, 2006 23

Developments in Europe

Marleen Van Kerckhove

July 25, 2006 24

Sony BMG Merger Clearance Overruled The investigation

– January 2004, Sony and Bertelsmann notify merger of their global recorded music activities to EU

– In May 2004, EU Commission expresses concern over reinforcement of collective dominant position amongst 5 majors, but in July 2004 clears deal without conditions

The appeal– In December 2004, Impala, association of independent music production

companies, challenges clearance decision before EU Court of First Instance (“CFI”)

The judgment (July 13th, 2006)– CFI annuls clearance for failure to state reasons to requisite legal

standard and for manifest error of assessment re findings of collective dominance

July 25, 2006 25

EU Tightens Guidelines on Setting Fines

Revision of 1998 Guidelines to tighten policy of fines Maximum level remains at 10% of total world-wide

revenue Three important changes:

– New entry fee for major infringements (e.g. cartels) of 15% to 25% of annual revenue in relevant product

– Fines linked to individual companies’ revenue in relevant product: up to 30% multiplied by number of years of infringement

– Stricter on repeat offenders• Up to 100% increase (instead of 50%)• For each prior infringement• Also taking into account findings of infringement by national

competition authorities

July 25, 2006 26

Penalty Payment of EUR 280.5 million Imposed on Microsoft by EU Background

– In March 2004, EU Commission finds that Microsoft has abused a dominant position (Art 82 EC) by, inter alia, failing to provide interoperability information to competing developers of work group server OS

– It orders Microsoft to make such information available on reasonable terms

– Microsoft appeals the Decision and also applies to the Court to have the remedies suspended pending the appeal – the Court refuses to grant suspension – the main appeal is still pending

– EU Commission announces that it will impose daily penalty of EUR 2 million as from December 15, 2004 if Microsoft fails to comply with the obligations imposed

July 25, 2006 27

EU Imposes Penalty Payment of EUR 280.5 million on Microsoft

Working out specifics of remedies– Monitoring Trustee gives technical assistance to EU Commission

as regards Microsoft’s compliance– EU Commission also appoints external technical advisors,

TAEUS, to advise it as regards Microsoft’s compliance– Intense negotiations between EU Commission and Microsoft as to

what constitutes ‘complete and accurate’ information – extensive input from competitors

EU penalty decision (July 12th, 2006)– EU Commission imposes retroactive penalties of EUR280.5m

plus daily penalties of EUR1.5m, and announces its intention to increase daily penalties to EUR3m if Microsoft fails to comply by July 31st

July 25, 2006 28

EU Intensifies Payment Card Investigations

June 30th: EU sends further Statement of Objections to MasterCard for alleged infringement of Art 81 EC– Supplements earlier SO from September 2003– Focuses on cross-border interchange fees paid by merchant

banks to card issuing banks July 20th: EU sends Statement of Objections to

Groupement des Cartes Bancaires– Replaces previous SO to French bank members of Groupement– Alleges that tariffs are set by Groupement at such level as to

hinder issuing of cards by new entrants at lower price than incumbent banks

Preliminary steps – separate from sector enquiry

July 25, 2006 29

EU Challenges Certain Aspects of SkyTeam Global Airline Alliance

Involves Aeromexico, Air France, Alitalia, Continental Airlines, CSA, Delta Airlines, KLM, Korean Air Lines and Northwest

Statement of Objections issued on June 19th– No objections to alliance as a whole– Concerns about a limited number of EU-third country routes– Issue is whether better connectivity, cost savings and synergies

lead to a better overall deal for passengers

Preliminary step Complements earlier analysis of Air France/KLM merger

and Air France/Alitalia alliance

July 25, 2006 30

Arnold & Porter’s Antitrust Practiceand Speaker Bios

July 25, 2006 31

Recognition of Our Antitrust Expertise Chambers USA

– Ranked #1 antitrust law firm in DC by Chambers USA 2006-2007 for the fifth consecutive year

– 8 Arnold & Porter antitrust lawyers ranked as “Leading Individuals” by Chambers

FTC Watch

– Twice surveyed FTC staff to rate firms on effective representation

– Ranked Arnold & Porter first both times

PLC Global Counsel's Competition Super League 2005– Ranked Arnold & Porter LLP among the top

ten firms in the world

– Recommended the firm for its U.S. and EU competition advice

July 25, 2006 32

Fortune’s “One Hundred Best Companies to Work For” in 2003, 2004, 2005, and 2006

Working Mother Magazine’s "100 Best Companies for Working Mothers" in 2002, 2004, and 2005

Thomas L. Sager Award from the Minority Corporate Counsel Association in honor of the firm's recruitment, retention, and promotion of minority lawyers

Recognition of Our Values

July 25, 2006 33

Representative Matters Micron Technology Inc., in price-fixing investigations and follow-on litigation

General Electric Company, including mergers & acquisitions, class action litigation, and securing acquittal on price fixing charges

Pfizer, in its $60 billion acquisition of Pharmacia Corporation

Cisco Systems, in mergers & acquisitions

SAP, in mergers & acquisitions and other matters

Visa, in class action litigation

Government Experience Director, Bureau of Competition, Federal Trade Commission

Assistant General Counsel & Director of Congressional Relations, FTC

Attorney Advisor to the Chairman, FTC

Awards & Honors Named the leading competition lawyer in the world by International Who's Who of Business Lawyers (2006)

Named to The Best Lawyers in America® 2007 for Antitrust Law

Named to Euromoney's Expert Guides to the World's Leading Lawyers "Best of the Best 2006" for Antitrust

LawDragon500, one of the “Top Leading Litigators in America” (2006)

Legal Times Leading Lawyers in Antitrust 2005

Chambers USA: America’s Leading Lawyers for Business. Leading Antitrust/Competition Attorney (2003, 2004, 2005, and 2006).

Practical Law Company, Which Lawyer? Leading Competition Attorney in Washington, D.C. (2005-06)

Bill Baer heads Arnold & Porter’s antitrust group. He represents a broad range of companies in US and international cartel investigations, mergers and acquisition reviews by antitrust enforcers (FTC, DOJ and European Commission), and antitrust litigation. He divides his time between the firm’s Washington, DC and Brussels offices.

July 25, 2006 34

Deborah Feinstein is a leading antitrust lawyer, principally focusing on merger and acquisition matters before the Federal Trade Commission (FTC) and Department of Justice (DOJ). She is named to The Best Lawyers in America® 2007 for Antitrust Law and Global Competition Review named her on its international list of the “Top 100 Women in Antitrust.” Ms. Feinstein has advised clients on hundreds of transactions, involving virtually all sectors of the economy.

Representative Matters Loews Cineplex Entertainment Corporation in its merger with AMC Entertainment Inc. Together the firms

will own or operate 334 theatres nationwide. The matter was resolved with the DOJ and various state attorneys general with the divestiture of only 10 theatres.

The Kroger Co. in its $13.5 billion merger with Fred Meyer, Inc., successfully negotiated with the FTC to require the divestiture of only 8 stores. The combined company became, at the time, the largest grocery retailer in the United States.

General Electric Corporation’s $2.1 billion acquisition of Instrumentarium OYJ, a manufacturer of high-technology medical equipment .

Phillip Morris and Kraft in their $18.9 billion acquisition of Nabisco Holdings Corporation, creating the world’s largest food company. Negotiations with the FTC resulted in the divestiture of only minimal assets.

PepsiCo in its $14 billion acquisition of The Quaker Oats Company. The merger strengthened PepsiCo's food businesses and added Gatorade, the leading sports drink brand, to its portfolio.

Genzyme's acquisition of Novazyme. The acquisition combined the only two companies performing research and development on a rare disease.

Government Experience Federal Trade Commission, Bureau of Competition, Assistant to the Director and Attorney Adviser to Commissioner Yao

Awards & Honors Chambers USA: America’s Leading Business Lawyers. Leading Antitrust/Competition Attorney (2003, 2004, 2005, and 2006).

Global Competition Review's international list of "Top 100 Women in Antitrust" (2004).

July 25, 2006 35

Representative Transactions Adobe in its $3.4 billion acquisition of Macromedia, a leading developer of software used by creative

professionals and web developers. Transaction permitted to close without divestitures after second request.

SAP AG as a third-party witness in the DOJ’s challenge to the Oracle/PeopleSoft merger.

GE Security in its $900 million acquisition of InVision Technologies, a maker of explosive detection equipment. The transaction combined InVision’s CT-based technologies with GE’s complementary ion-detection technologies. InVision’s nondestructive testing business was divested pursuant to a consent decree.

GE Inspection Technologies in its $437 million acquisition of Agfa’s nondestructive testing business.

Representative Litigation Medical Supply Chain v. General Electric. As lead counsel to GE, obtained dismissal of Sherman Act § 1 and § 2 claims

alleging foreclosure of an online healthcare marketplace. Defended dismissal on appeal and obtained reversal of district judge’s refusal to award sanctions.

CCS v. Xerox. Lead counsel to Xerox in a § 2 case challenging Xerox’s refusal to sell unpatented parts to a service competitor.

Independent Service Organizations Antitrust Litigation. As counsel to Xerox, obtained summary judgment on monopolization claims and defended judgment on appeal in precedent-setting case on refusals to sell or license intellectual property. Obtained judgment of more than $1 million plus attorney’s fees on Xerox’s copyright infringement counterclaims.

Awards & Honors One of four U.S. antitrust lawyers identified as among the “world’s 40 brightest young antitrust lawyers and economists under

40” by Global Competition Review (February 2004).

Chambers USA: America’s Leading Business Lawyers. Named a leading Antitrust/Competition Attorney (2006-2007).

Jonathan Gleklen’s antitrust practice encompasses civil litigation, government investigations, counseling, and transactional matters with a particular focus on antitrust and intellectual property issues affecting clients in high technology industries. He was one of four Americans identified by Global Competition Review as among the “world’s 40 brightest young antitrust lawyers and economists” in its 40 Under 40 issue.

July 25, 2006 36

Representative Matters Pfizer in its acquisition of Warner-Lambert. Obtained clearance in the EU and multiple other jurisdictions world-wide. Pfizer in its acquisition of Pharmacia. Obtained clearance in the EU and multiple other jurisdictions world-wide. General Electric in its proposed acquisition of Honeywell, assisting both with the notification to the European Commission and the

subsequent appeal to the Court of First Instance. SBC in its acquisition of AT&T. Obtained clearance in multiple jurisdictions world-wide. Cisco in its acquisition of Scientific-Atlanta. Obtained clearance in the EU. Boston Scientific in its acquisition of Guidant. Obtained clearance in the EU and multiple other jurisdictions world-wide. Group of consumer electronics companies before the European Commission with respect to an Article 82 EC Treaty complaint regarding

abusive licensing conduct. European Federation of Pharmaceutical Industries Associations (EFPIA) before the Court of First Instance in its intervention supporting

AstraZeneca in its appeal against the European Commission’s decision finding an Article 82 infringement with respect to certain of its alleged regulatory and IP conduct.

Awards & Honors Global Competition Review’s International Who's Who of Competition Lawyers Chambers Global, Leading Antitrust/Competition Attorney PLC Global Counsel's Competition Law, highly recommended for competition/antitrust in the EU and Belgium PLC Global Counsel's Life Sciences, highly recommended for competition/antitrust in the EU and Belgium Global Competition Review's international list of "Top 100 Women in Antitrust" (2004)

Marleen Van Kerckhove leads Arnold & Porter’s European Competition Practice and its Brussels office. Her practice encompasses advice and representation before EU and national antitrust agencies on merger control, abusive conduct, price fixing and other restrictive practices, as well as litigation before European courts. She has advised extensively on the application of EU competition law to the pharmaceutical sector, and on the interplay between antitrust and intellectual property law.