Competition Law: INFORMATION, UPDATES AND ANALYSIS, May 2016
United States of America – Federal Trade Commission (‘FTC’)
FTC approves final order preserving competition for sale of drugs that treatbacterial infections and ulcerative colitis dated April 20, 2016
Upon investigation of the proposed $850 million acquisition of Gavis Pharmaceuticals LLC by Lupin Limited, the FTC found that the merger will combine two of only four companies that currently market generic doxycycline monohydrate capsules in two dosage strengths likely resulting in higher prices. The merger will also eliminate one of only a few companies likely to enter the market for generic mesalamine extended release capsules in the near future therefore delaying beneficial competition and the prospect of price decreases. FTC has passed final order settling charges that the proposed acquisition would likely be anticompetitive. In terms of the order the companies are required to divest two dosage strengths of generic doxycycline monohydrate capsules, which are used to treat bacterial infections, and generic mesalamine extended release capsules, which are used to treat ulcerative colitis to the New Jersey based pharmaceutical company G&W Laboratories Inc.
FTC approves final order requiring kidney dialysis chain U.S. Renal Care to divest assets as a condition for acquiring DSI Renal dated March 17, 2016
FTC has approved a final order settling charges that national kidney-dialysis chain U.S. Renal Care, Inc.’s (‘Renal Care’) $640 million acquisition of competitor DSI Renal from DSI Renal’s ultimate parent company, Dialysis Parent, LLC, would be anticompetitive. In terms of the order the parent companies of Rental Care and DSI Renal are required to divest the three DSI Renal outpatient dialysis clinics in Laredo, Texas to Satellite Healthcare, Inc. Renal Care is the third-largest provider of outpatient dialysis services in the United States and DSI Renal is the sixth-largest. The complaint alleged that the merger would reduce the number of providers from three to two thereby causing significant increase in market concentration and anticompetitive effects in Laredo, Texas. The likely result would be elimination of direct competition between Renal Care and DSI Renal, reduced incentives to improve service or quality for dialysis patients, and increased ability for the merged company to unilaterally increase prices. The complaint also alleged that if the merger took place without divesture, the Laredo area would not have sufficient kidney specialists to support new competition in this market.
European Union (‘EU’) – European Competition Commission (‘EC’)
EC fines GrupoRiberebro Integral S.L (‘Riberebro’)5.2 million Euros for participation in canned mushrooms carteldated April 6, 2016
The EC has found that Spanish canned and fresh vegetable company Riberebro participated in a cartel to coordinate prices and allocate customers of canned mushrooms in Europe for more than a year and has imposed a fine of €5 194 000 on the company. The cartel concerned canned mushrooms sold in tins and jars (i.e. not fresh or frozen mushrooms) for private label sales in the European Economic Area (‘EEA’). These sales are carried out via tender procedures to retailers and food wholesalers such as cash and carry companies, as well as to professional customers such as catering companies.The overall aim of the cartelists was to stabilise their market shares and stop a decline in prices. To achieve this, the cartel members exchanged confidential information on tenders, set minimum prices, agreed on volume targets and allocated customers among themselves. The cartel was a non-aggression pact with a compensation scheme in case of customer transfer and application of minimum prices which had been agreed beforehand. The EC found that Riberebro participated in the cartel from 10 September 2010 until 28 February 2012
Republic of India (comprising pronouncements on anti-competitive agreements, abuse of dominant position)
CCI dismisses information against GAIL, Case No. 94/2015 dated April 01, 2016.
The Informant, Gujarat State Fertilizer and Chemicals Limited which is a public limited company engaged in the business of fertilizers and chemicals, alleged that the Opposite Party, GAIL (‘OP’) had imposed certain unfair and discriminatory conditions in the Gas Supply Agreement (‘GSA’) entered into between the Informant and the Opposite Party. It was alleged that the OP had leveraged its dominant position in the market of ‘supply and distribution of natural gas (RLNG) to industrial customers’ to incorporate unfair and discriminatory conditions in the GSA. The CCI observed that the information on record does not disclose that the OP had indulged in any conduct which is in violation of Section 4 of the Competition Act, 2002 (‘Act’). Further, the conduct of the OP was found to be rational in view of the fact that the Take or Pay liability was substantially reduced by the OP pursuant to discussions with the Informant. It was also observed that mere technical non-compliance of certain terms and conditions of the GSA cannot be the subject matter under Section 4 of the Act, if the conduct arising out of the same has been held to be non-abusive. The information was therefore dismissed.
CCI dismisses information against National Securities Depository Ltd, SEBI, Case no. 104/2015 dated March 29, 2016.
The Informant, Registrars Association of India is an association whose members are intermediaries between the issuer and the depository and inter alia providing services such as dematerialization, initial public offers (IPOs) and corporate actions in securities markets in India. The Opposite Party 1 (‘OP-1’) is the largest depository in India. It was alleged by the Informant that OP-1 through its wholly owned subsidiary i.e. Opposite Party 2 (‘OP-2’) is trying to enter into the participant market. It was further alleged that being a regulator in the participant market, OP-1 would favour OP-2 as the preferred service provider causing a monopoly situation in the market in violation of Section 3 and 4 of the Act. The CCI observed that the Informant has filed the information on the basis of the apprehension that OP-2’s efforts to enter the intermediary market would distort competition as the parent company of OP-2 i.e. OP-1 is the largest depository in India. The CCI held that allegations made by the Informant are premature and that an action for an alleged anti-competitive conduct can be initiated only if the alleged anticompetitive conduct had already taken place. Further, the Informant had already raised the same issue before SEBI. In light of the same, the matter was closed under Section 26(2) of the Competition Act, 2002 (‘Act’).
United States of America
FTC files complaint against pharmaceutical companies for entering into pay-for-delay settlements to block consumers’ access to lower-cost generic versions of Opana ER and Lidoderm dated March 30, 2016
FTC has filed a complaint in federal district court alleging that Endo Pharmaceuticals Inc. (‘Endo’) and several other drug companies violated antitrust laws by using pay-for-delay settlements to block consumers’ access to lower-cost generic versions of Opana ER and Lidoderm.The FTC’s complaint alleges that Endo paid the first generic companies that filed for FDA approval beingImpax Laboratories, Inc. (‘Impax’) and Watson Laboratories, Inc. (‘Watson’), to eliminate the risk of competition for Opana ER and Lidoderm, in violation of the Federal Trade Commission Act.
The complaint charges that:
- In 2010, Endo and Impax illegally agreed that until January 2013, Endo would not compete by marketing an authorized generic version of Endo’s Opana ER. In exchange, Endo paid Impax more than $112 million, including $10 million under a development and co-promotion agreement signed during the same time period. Endo used this period of delay to transition patients to a new formulation of Opana ER, thereby maintaining its monopoly power even after Impax’s generic entry. In 2010, Opana ER sales in the United States exceeded $250 million.
- In May 2012, Endo and its partners, Teikoku Seiyaku Co. Ltd. and Teikoku Pharma USA, Inc., illegally agreed with Watson Laboratories, Inc. that until September 2013, Watson would not compete with Endo and Teikoku by marketing a generic version of Endo’s Lidoderm patch. In exchange, Endo paid Watson hundreds of millions of dollars, including $96 million of free branded Lidoderm product that Endo and Teikoku gave to Watson. As a result, Endo illegally maintained its monopoly over Lidoderm. In 2012, Lidoderm sales in the United States approached $1 billion.
- Endo and Watson illegally agreed that, for 7½ months after September 2013 (including the 180-day first-filer exclusivity period for which Watson was eligible), Endo would not compete by marketing an authorized generic version of Lidoderm. This agreement left Watson as the only generic version of Lidoderm on the market, substantially reducing competition and increasing prices for generic lidocaine patches. As a result, Watson made hundreds of millions of dollars more in generic Lidoderm sales.
The FTC is seeking a court judgment declaring that the defendants’ conduct violates the antitrust laws, ordering the companies to disgorge their ill-gotten gains, and permanently barring them from engaging in similar anticompetitive behaviour in the future.
Republic of India
CCI approves notice for acquisition given by Dalmia Bharat Limited, C-2016/01/367 dated March 01, 2016.
Notice was given pursuant to the execution of a Share Purchase and Subscription Agreement dated 15.01.2016 executed between KKR Mauritius Cement Investments Limited (‘KKR Cement’), Dalmia Bharat Limited (‘DBL’) and Dalmia Cement (Bharat) Limited (‘DCBL’). Proposed combination relates to acquisition by DBL of 15 percent shares in DCBL held at present by KKR Cement leading to DBL holding 100 percent of the equity share capital and sole control of DCBL. Further, DBL had agreed to issue its shares to KKR Cement. The CCI noted that proposed combination envisages exit of KKR Cement from DCBL and that the consequent change in control over DCBL is not likely to result in a change in competition dynamics in any market in India. Further, there are no horizontal or vertical overlaps between DBL and KKR Cement’s portfolio companies. The combination was therefore approved under Section 31(1) of the Competition Act, 2002 (‘Act’).
United Kingdom (UK)
CMA clears acquisition of assets of Swissport Limited’s ground handling business by Aviator LGW Limited dated February 5, 2016
The CMA assessed the acquisition of the assets of Swissport Limited’s ground handling business at London Gatwick (‘Swissport LGW’) by Aviator LGW Limited (‘Aviator’) (the Merger). It was found that the parties overlap in the supply of ground handling services comprising ramp, baggage, passenger and airside cargo services at London Gatwick. The evidence available to CMA showed a relative lack of closeness of competition between the Parties pre-Merger; and the presence of three other ground handlers active and capable of serving and winning contracts with the airlines operating at London Gatwick. The CMA also found evidence that potential entry by other ground handlers not currently operating at London Gatwick may also impose some constraint post-Merger. All these constraints taken together were found to be sufficient to ensure that the Merger does not give rise to a realistic prospect of a substantial lessening of competition.
CMA clears acquisition of Osborne Books Limited by Kaplan International Holdings Limited dated February 9, 2016
The CMA assessed the acquisition of Osborne Books Limited (‘Osborne’) by Kaplan International Holdings Limited (‘Kaplan’) (collectively, ‘Parties’). The Parties were found to overlap in the supply of online and printed content for studying the Association of Accountancy Technicians professional accountancy qualifications (‘AAT content’). The CMA did not determine conclusively whether there is a realistic prospect that the merger will result in substantial lessening of competition in the supply of AAT content in the UK as the CMA believed that the market concerned would be of insufficient importance to justify making reference under Section 33 Enterprise Act, 2002.
European Union (‘EU’)
European Commission (EC) approves acquisition of Allergan Generics (‘Allergan’) by TevaPharmaceutical Industries Limited (‘Teva’)dated March 10, 2016
The EC has approved the proposed acquisition of the generics business of Allergan, Ireland, by Teva, Israel. Both companies are among the top four generic pharmaceutical manufacturers worldwide. The decision is conditional upon the divestment of a number of assets, including the majority of Allergans’ business in the UK and Ireland. The EC had concerns that the merged entity would have faced insufficient competition from the remaining players for a number of generic pharmaceuticals, as well as regarding the overall generics business in the UK, Ireland and Iceland pursuant to which the parties offered commitments. Following a thorough market investigation, the EC found that competition concerns arose for a number of marketed generic molecules and generic molecules in 24 EEA countries, due to horizontal overlaps or vertical relationships (related to out-licensing) between the parties. On the other hand, the EC did not identify any competition concerns as regards vertical relationships resulting from the parties’ offerings of active pharmaceutical ingredients. In order to address the EC’s competition concerns, the two companies offered a comprehensive remedies package including the divestment. Following an extensive market test, the EC found that the commitments address the competition concerns identified and concluded that the proposed transaction, as modified by the commitments, would raise no competition concerns.
EC approves Statoil Fuel and Retail’s takeover of Shell’s Dansk Fuels dated March 23, 2016
The EC has approved the proposed acquisition of Shell’s Danish retail and wholesale fuels business, Dansk Fuels, by Alimentation Couche-Tard of Canada, which operates in Denmark under the Statoil brand via its subsidiary Statoil Fuel and Retail (‘SFR’). The EC’s investigation focused on the Danish petrol station market (retail) and the wholesale markets of various refined oil products, where both Dansk Fuels and SFR are active. It was observed that the transaction combines the fuel businesses of number 1 and 2 on the Danish wholesale markets and number 1 and 3 on the petrol station market in Denmark. The EC had concerns that the merged entity would have had the ability and the incentive to shut out competing resellers or retailers from access to these products, because of its high market share on the upstream markets and the higher margins to be made on the downstream markets following which certain commitments including divestiture of assets were offered by the parties. The EC found that the commitments address the competition concerns identified, and concluded that the proposed transaction, as modified by the commitments, would raise no competition concerns. It was further observed that the divestiture will create a national player which is capable of replacing the lost competitive constraint resulting from the transaction both at the national level and at the local level.
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Doc ID: CL/14/16