According to the FTC, this workshop is intended to examine the marketplace experiences of people in these communities, identify areas of concern in different communities, and seek to find actionable remedies through cooperation, law enforcement, industry fraud-prevention initiatives, community outreach and education. The event will bring together consumer advocates, state and federal regulators, fraud prevention experts, academics and researchers to discuss the issues. Its findings will enhance the FTC’s ongoing efforts to fight fraud in the marketplace in every community.

The FTC’s law enforcement experience, input from consumer advocates, and survey research reveal that some broadly-targeted frauds – such as telemarketing fraud, debt-relief services, phony opportunities to earn income, and unauthorized billing schemes – are more likely to affect certain communities. Meanwhile, some scams target specific populations – such as service-members shopping for cars, or people seeking help with the immigration process.

The workshop will address the following issues:

• What are the top consumer protection concerns in each community?
• What types of fraud are most prevalent in each community?
• What are the different experiences consumers have on the Internet?
• What interventions by consumer groups, industry, or academics have been and could be successful to prevent fraud?

Individuals who are interested in speaking at the workshop should email everycommunity@ftc.gov with information about any relevant experience in this area by Sept. 24, 2014. The workshop, which is free and open to the public, will be held at the FTC’s Constitution Center location at 400 7th Street, SW, Washington, DC 20024. The Commission will publish a more detailed agenda at a later date.

The FTC decided to retract its initial proposed settlement, which included no structural remedies, after its public comment period revealed that Georgia’s Certificate of Need (“CON”) laws do not preclude the FTC from seeking meaningful structural relief.

The FTC’s complaint in 2011 alleged that the merger between Phoebe and Palmyra Park would significantly reduce competition of acute-care hospital services sold to commercial health plans in the six-county area surrounding Albany, Georgia, resulting in higher prices and lower quality of service for patients and their employers. The combined hospitals controlled an 85 percent market share.

However, the FTC’s initial complaint was rejected by Judge W. Louis Sands of the U.S. District Court in June 2011, and in his decision to uphold the defendant’s motion to dismiss held that the state action doctrine immunized the transaction from federal antitrust scrutiny. The FTC then appealed to the U.S. Court of Appeals for the Eleventh Circuit, which affirmed the decision by the district court, even though it noted that “the joint operation of Phoebe and Palmyra would substantially lessen competition or tend to create, if not create, a monopoly” in the Albany, Georgia market.

The FTC then filed a petition for certiorari, which the U.S. Supreme Court granted on June 25, 2012. In February 2013, a unanimous Supreme Court ruled in favor of the Commission and reversed the dismissal of the complaint, holding that the state action doctrine did not bar the Commission from taking action. The FTC then proceeded with its original administrative actions.

In August 2013, the Commission accepted for public comment a proposed consent to resolve this matter, which did not require a divestiture of Palmyra, even though that would constitute the most appropriate and effective remedy to restore competition in Albany and the surrounding six-county area. At the time, the FTC believed that because Phoebe Putney had combined its hospital permit with Palmyra’s following the acquisition, the legal and practical challenges presented by Georgia’s CON laws and regulations would very likely prevent a divestiture of hospital assets from being effectuated to restore competition, even assuming a finding of liability following a full merits trial and appeals. Therefore, the FTC proceeded to accept the proposed remedy for public comment.

However, as a result of the public comments and further research efforts, the FTC realized that the CON laws are no barrier to requesting a divestiture that would structurally solve the anticompetitive effects of the merger. In addition, in March 2014, North Albany Medical Center, LLC, a newly-formed healthcare entity, expressed an interest in acquiring Palmyra and operating it as a competing general acute care hospital. Seeking clarification on whether Georgia’s CON laws would impede such an acquisition, North Albany filed a “request for a determination” with the Georgia Department of Community Health (“DCH”) on the issue. On June 3, 2014, DCH staff issued an initial determination that, among other things, “returning Phoebe North to its status as a separately licensed . . . hospital for divestiture would not require prior CON review and approval.” That initial determination is currently on appeal, but we believe that Georgia CON laws may not be an impediment to structural relief.

Lessons Learned

From this FTC decision, it is clear that the FTC takes the public comment period very seriously. In this instance, public comments completely changed the FTC’s decision on this matter.  In August 2013, the FTC and the parties reached a “non-structural” settlement, which did not require the parties to divest any assets.  The FTC usually disfavors these types of settlements, but accepted the settlement for public comment based on the understanding that Georgia’s CON laws would prevent structural relief.  Given that the FTC now believes that Georgia’s CON laws do not preclude structural relief, the FTC voted to withdraw its acceptance of the proposed consent agreement and return the matter to administrative litigation.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

Mark Ye
202-589-1834
mye@dbmlawgroup.com

In March of 2013, the court found the Albans to have violated the FTC act by illegally providing immigration services to Salvadorian and Honduran immigrants, even though neither they nor their employees were licensed to provide any such services. Under federal regulations, only authorized providers, aside from attorneys, may accept money in exchange for preparing immigration forms on someone else’s behalf.

Despite this, the court found that the Albans took in an estimated $479,000 to $753,000 from unsuspecting immigrants.  “Misleading people to steal their money and destroy their dreams crosses the line,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “The FTC is here to protect people from just these kinds of scams.”

The court order requires Manuel Alban and his wife Lola Alban to pay the refund judgment in installments totaling up to $616,000, depending on the number of victims the FTC is able to locate to receive a refund.

In addition, the order prohibits the defendants, their employees, and others representing them from providing immigration services, misrepresenting anything about goods or services they are promoting.  It also requires all customer information held by the defendants to be destroyed, and all customer information held by a court-ordered monitor to be turned over to the FTC.

The FTC has information in Spanish that explains how to find legitimate free or low-cost immigration advice from authorized providers, and where to report immigration services fraud. Because scammers target immigrants from around the world, the FTC’s immigration-related materials (found here) are also in Chinese, Korean, Kreyòl and Vietnamese.

Mark Ye
202-589-1834
mye@dbmlawgroup.com

According to FTC’s press release, while its debt collection efforts in the past have focused on research and consumer education, the Commission has focused on law enforcement efforts in recent years, especially after the financial crisis.

In 2013, the FTC brought or resolved a total of nine debt collection cases. The FTC brought forth its first enforcement action against text-message debt collection, fined the largest third-party debt collection agency in the world the highest debt collection civil penalty, and obtained temporary restraining orders halting the unlawful conduct and freezing the assets of some defendants while the court case proceeded. For the most egregious violators, the FTC obtained orders which banned the responsible parties permanently from debt collection.

The most common violations cited by the FTC include:

• Failing to notify consumers of their right to dispute and obtain verification of their debts.
• Misleading customers into believing that their debt will cause them to be arrested, have their wages garnished, have the custody over their children stripped, or imprisoned for lengthy periods.
• Continuing debt collection activities without verifying the debt.
• Masquerading as entities other than debt-collection agencies, such as lawyers or law enforcement officers.
• Disclosing the status of customers’ debt to third parties, including family members, neighbors, or employers.
• Making phone calls early in the morning or late in the night, with the intent to harass customers.

The FTC also filed three amicus briefs in the last year. In its brief for the Seventh Circuit, the FTC argued that a payday lender’s mandatory pre-dispute arbitration clauses may be unconscionable, in part because they require alleged debtors to arbitrate in a remote tribal court, effectively pressuring those consumers to abandon their legal claims or defenses. The FTC joined the Consumer Financial Protection Bureau in filing two other amicus briefs. The first, submitted to the Seventh Circuit, argued that a debt collector violates the law whenever its communications tend to deceive or mislead consumers into believing that a time-barred debt could be the subject of a collection suit. The second, submitted to the Second Circuit, argued that debt collectors whose process servers failed to notify consumers that they were being sued violate the Fair Debt Collection Practices Act, which broadly prohibits deceptive and unfair collection practices in any form.

These scams seek to trick customers to sign-up for “work-at-home” and “mystery shopper” schemes with an upfront fee, and then charging the members a monthly fee under negative-option (i.e. consumers must ‘opt-out’ before the fees are stopped). Consumers who attempt to get their money back usually receive no response, or a call-back that tries another pitch to the caller. The scammers are also engaged in sending unauthorized text messages and other kinds of spam to recruit potential “customers.”

The settlement order against Moysich, Concept Rocket, Revenue Works, Shopper Select and Shopper Systems, bans them from selling business or work-at-home opportunities, sending unauthorized text messages, and selling products or services with negative-option features.  The settlement order against Brosseau and EMZ Ventures bans them from selling business or work-at-home opportunities and sending unauthorized text messages.  The settlement orders impose a judgment of more than $40.5 million against these defendants, which will be suspended when the Moysich defendants have surrendered $55,000 in frozen assets, and the Brosseau defendants have surrendered $88,000 in frozen assets and nearly $270,000 from the sale of property in Georgia, Vermont.

The settlement order against Keith R. Powell and The Veracity Group bans them from selling business or work-at-home opportunities.  It also imposes a judgment of more than $14.8 million, which will be suspended when Powell has surrendered his assets, including more than $115,000, to the FTC, and the Veracity Group has surrendered telecommunication equipment to a court-appointed receiver for liquidation.  As stipulated in all three orders, the full monetary judgments will become due immediately if the defendants are found to have misrepresented their respective financial conditions.

Background 

In March 2013, the FTC filed a complaint for an injunction against St. Luke’s, alleging that the Saltzer acquisition, which was not reportable to the federal antitrust agencies under the Hart-Scott-Rodino Antitrust Improvements Act (“HSR Act”), would create a single, dominant provider of primary care physician services in Nampa, Idaho.  The FTC alleged that the acquisition would provide St. Luke’s with greater bargaining leverage with commercial insurance health plans, because any attractive insurance plan would need to offer primary care services from St. Luke’s-Saltzer – resulting in higher prices for those services that ultimately would be passed on by the insurance plans to local employers and their employees.

Judge Lynn Winmill’s opinion agreed with the FTC’s view of the market.  The Judge concluded that the combined entity would control 80% of the primary care physicians in Nampa, would enable St. Luke’s to negotiate higher reimbursement rates with commercial health care plans that would be passed on to consumers; and raise rates for ancillary services, such as x-rays, to the higher hospital-billing rates.  The Judge noted that while St. Luke’s has a proven track record of putting the well-being of patients at the forefront of its operations, and that the merger is primarily intended to improve patient outcomes, the merger may nevertheless have significant anti-competitive effects that will ultimately raise the cost of healthcare for consumers in the Nampa area.  Accordingly, the court issued a permanent injunction against the acquisition and ordered St. Luke’s to divest itself of the physicians and assets acquired from the Saltzer group.

Judge Winmill acknowledged that the acquisition was intended to improve patient outcomes and likely would have done so if the acquisition had been left intact. And it also applauded St. Luke’s for its integrated approach to the delivery of health care throughout the Treasure Valley of Idaho. Judge Winmill also indicated that she will be issuing her full analysis, including findings of facts and conclusions of law, after the parties have an opportunity raise any confidentiality objections.

Lesson Learned

The FTC’s win is noteworthy because it demonstrates that the antitrust laws still apply to healthcare mergers even though the parties to a transaction may believe that the benefits of creating more efficient and higher quality health care outweigh the competitive harm.  Indeed, the benefits of an acquisition do not immunize the acquisition from antitrust scrutiny and that the benefits can usually be achieved through less restrictive means than by acquisition.  The victory emboldens the FTC staff to continue its efforts in the healthcare industry.  Moreover, healthcare providers that are thinking about deals are on notice that the FTC may scrutinize any health systems’ integration efforts with physicians under the antitrust laws.  The enforcement action also demonstrates the FTC’s willingness to investigate and challenge acquisitions that are not reported under the HSR Act.

Andre Barlow
202-589-1838
abarlow@dbmlawgroup.com

Mark Ye
202-589-1834
mye@dbmlawgroup.com

The FTC first raised the need to reform Part 2 citing a substantial risk of delay and mistakes in the FTC’s discovery process based on the complexities of modern electronic document discovery involving high volumes of electronically stored information (ESI). The proposed changes are meant to expedite FTC investigations by (i) requiring a party’s continued progress in achieving compliance before granting time extensions to comply with Commission processes; (ii) requiring parties to engage in meaningful “meet and confer” sessions with FTC staff before they file any petition to quash Commission process; and (iii) eliminating the two-step process for resolving petitions to quash, and establishing tighter deadlines for the FTC to rule on petitions. The proposed revisions to Part 2 streamline the rules, update investigatory practices in consideration of ESI, and clarify parties’ rights and duties with regard to the FTC’s compulsory process.

Additionally, the FTC proposed to amend attorney disciplinary rules in Part 4 to provide more guidance on the type of conduct that may warrant disciplinary action and introduced processes for investigating and adjudicating allegations of attorney misconduct, issuing attorney reprimands, and suspending attorneys that have been disbarred.

Notably, Commissioner Rosch opposed the proposed changes, issuing a partial concurrence-partial dissent. Specifically, Commissioner Rosch approved the modernization of the Rules but criticized that the proposed changes lack two important reforms: mandatory compulsory process in all full-phase investigations and regular reports on the status of pending investigations to all Commissioners (not just the Chairman).

The Federal Register Notice is available at: http://ftc.gov/os/2012/01/120113part2and4frn.pdf

Melody Cheung
(202) 589-1834
mcheung@dbmlawgroup.com

The settlement agreement is designed to remedy this competitive harm by requiring that, if Air Products succeeds in its hostile takeover, Air Products sell 15 air separation units (“ASU”s) and related assets that are currently owned and operated by Airgas. The ASUs are used to separate atmospheric air into nitrogen, oxygen, and its other primary components. The units to be sold are in Bozrah, Connecticut; Carrollton, Kentucky; Canton, Ohio; Dayton, Ohio; New Carlisle, Indiana; Madison, Wisconsin; Waukesha, Wisconsin; Carrollton, Georgia; Jefferson, Georgia; Gaston, South Carolina (two ASUs); Rock Hill, South Carolina; Chester, Virginia; Mulberry, Arkansas; and Lawton, Oklahoma. As a result of this agreement, Air Products would face the same competition in those areas as it does now.

Under the proposed settlement order, Air Products would have to sell these assets to a buyer within four months after it acquires Airgas. If Air Products is unable to complete the acquisition by February 15, 2011, the FTC may require Air Products to seek prior approval of a buyer before it could close any transaction. This would provide the FTC with an opportunity to evaluate the continued availability of acceptable buyers. The Commission vote approving the proposed consent order was 5-0.

This investigation demonstrates the FTC’s willingness to cooperate with buyers involved in a hostile takeover. While Air Products announced its intention to acquire all of the outstanding shares of Airgas under an all-cash tender offer for approximately $7 billion on February 11, 2010, Air Products only recently filed its Hart Scott Rodino Notification form. Thus, the FTC conducted its investigation of the competitive effects of this potential takeover and negotiated a consent agreement without a formal second request.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

The FTC alleged that the acquisition resulted in Nufarm obtaining monopoly of two phenoxy herbicide markets (MCPA and MCPP-p) and reduced a third market (2,4DB) to a duopoly. Furthermore, FTC alleged that the merger would result in higher prices and other anticompetitive effects, because there are no comparable substitutes on the market for these three herbicides.

To resolve the anticompetitive concerns, the FTC entered into a consent order with Nufarm, in which Nufarm agreed to sell certain rights and assets associated with two of the herbicides to competitors and modify some of its business agreements with two other companies to allow them to fully compete in the market. The FTC vote approving the complaint and proposed settlement order was 4-0, with Commissioner Edith Ramirez recused.

The challenge is noteworthy for several reasons. First, the challenge reiterates that the FTC is serious about enforcing the antitrust laws against consummated mergers. Second, it demonstrates that completed deals that slip beneath the FTC’s radar screen initially are fair game even if the FTC learns about them later. Third, the FTC has a particular interest in post-acquisition competitive effects of consummated mergers.

Therefore, parties to a consummated deal that raise significant antitrust issues and avoided HSR scrutiny, for whatever reason, should proceed with reasonable caution and closely monitor post-acquisition conduct. Moreover, corporate and private counsel should be aware of the likely consequences and the risks of consummating transactions that raise significant competitive issues.

Parva Fattahi
(202) 589-1834
pfattahi@dbmlawgroup.com

According to the FTC’s complaint, Agrium’s acquisition of CF would have eliminated competition between the two companies in the distribution and sale of anhydrous ammonia in three markets: the Pacific Northwest; East Dubuque, Illinois; and Marseilles, Illinois.

The FTC’s complaint alleges that each of these markets is highly concentrated and the proposed transaction would further increase concentration levels by reducing the number of significant competitors in the Pacific Northwest from two to one, and in the two areas in Illinois from three to two. The complaint further alleges that the proposed transaction likely would increase the prices for anhydrous ammonium fertilizer.

To prevent these price increases, the FTC’s consent order replaces the competition that otherwise would have been lost because of the deal and requires Agrium to:

• Divest CF’s Ritzville anhydrous ammonia terminal in the Pacific Northwest;
• Divest its Marseilles anhydrous ammonia terminal in Northern Illinois; and
• Rescind its rights to market anhydrous ammonia produced by Rentech at Rentech’s East Dubuque manufacturing plant.

According to the consent order, Agrium must divest the Ritzville and Marseilles terminals to Terra Industries, Inc. or another Commission-approved purchaser if Terra is later found to be an unacceptable buyer.

The consent order requires Agrium to maintain the assets to be divested and operate the Ritzville terminal independently until each of the divestitures is completed. The consent order also requires Agrium to provide necessary transition services to Terra or another Commission- approved acquirer. It also allows the FTC to appoint a trustee to divest any assets that Agrium does not sell in a timely manner and to seek civil penalties from Agrium if it fails to comply with the consent agreement. Finally, for 10 years, it requires Agrium to provide advance written notification to the Commission of any intent to acquire any interests or assets related to the distribution and sale of anhydrous ammonia.

The Commission vote approving the proposed consent order was 4-0.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

Under the order’s terms, Watson will sell its generic cabergoline product to Impax Laboratories Inc. and Arrow will spin off its subsidiary, Resolution Chemicals, which is currently developing generic dronabinol, to a new entity, Reso Holdings, within 10 days of the acquisition. Arrow also must sell the U.S. marketing rights for generic dronabinol to Impax.

According to the Commission’s complaint, Watson’s acquisition of Arrow, as originally proposed, would violate federal antitrust law because it would lessen competition in the U.S. markets for generic cabergoline tablets and generic dronabinol capsules. The complaint alleges that the acquisition would reduce the number of generic suppliers in the market, which could raise the prices that patients pay for these drugs.

Cabergoline, the generic name of Pfizer’s Dostinex, is a dopamine receptor agonist used to treat Parkinson’s disease and medical problems related to the overproduction of the hormone prolactin. The FTC alleged that the $44.8 million U.S. market for the generic version of the drug is highly concentrated, and Arrow is one of only three suppliers in the United States. Watson has U.S. Food and Drug Administration approval to sell generic cabergoline, and is poised to enter the market within the next two years. Its proposed acquisition of Arrow, therefore, would eliminate its incentive to enter the market as a fourth generic alternative.

Dronabinol, the generic name for Solvay Pharmaceutical’s Marinol, is used to treat nausea and vomiting caused by chemotherapy, as well as loss of appetite and weight loss in HIV patients. The $74.4 million U.S. market for generic dronabinol is also highly concentrated, with only Watson and Par Pharmaceuticals currently supplying the drug. Arrow’s subsidiary, Resolution, is one of a limited number of companies developing a generic dronabinol product, and is planning to enter the market within two years. Thus, Watson’s proposed acquisition of Arrow would eliminate one of a limited number of potential competitors.

The FTC’s proposed consent order remedies the anticompetitive effects of the acquisition in both markets. It requires Watson to divest its generic cabergoline product to Impax. The order also requires Arrow to spin-off its wholly-owned subsidiary, Resolution Chemicals, to a new entity, Reso Holdings, which will be owned in part by Resolution’s current management. Resolution’s managers are the original developers of Arrow’s generic dronabinol product and have been involved with all aspects of generic dronabinol development. As Reso Holdings will not have sales and marketing capabilities, however, the order also requires Arrow to sell the U.S. marketing rights for generic dronabinol to Impax. The FTC stated that the combined divestitures preserve competition in the generic dronabinol market by allowing Resolution to continue dronabinol development as Reso Holdings and providing a capable marketing partner once generic dronabinol receives all necessary regulatory approvals.

The order is noteworthy because it demonstrates that the FTC continues to scrutinize generic merger deals. The Commission’s order requires the firms to sell assets related to the two drugs to FTC-approved buyers and to ensure the acquirers have the means to compete effectively in the future. Generic drug competition is very important at the FTC. Indeed, the Commission vote approving the proposed consent order was 3-0, with Commissioner Harbour recused.

Robert Doyle
(202) 589-1834
rdoyle@dbmlawgroup.com

The FTC alleged that Las Vegas has a highly concentrated market for cemetery services, which includes burial plots, opening and closing of graves, memorials, burial vaults, mausoleum spaces, and cemetery maintenance. According to the FTC’s complaint, SCI’s proposed acquisition of Palm would have reduced the number of significant competitors from three to two, and SCI would have controlled 76 percent of the market for funeral services.

The complaint alleges that the transaction would have increased the likelihood that the combined firm could raise prices either unilaterally or through coordinated interaction with its only remaining competitor. Entry of a new competitor in the area is not likely to counteract the alleged anticompetitive effects of the acquisition, due in part to the limited amount of land in Las Vegas that is suitable for cemeteries.

The FTC’s consent order is designed to remedy the anticompetitive effects of the proposed acquisition by requiring SCI to divest Davis Memorial Park, currently its only cemetery in the Las Vegas area, as well as the funeral home on the same property. SCI also will be required to divest the rights to the Davis trade name and the pre-need service contracts associated with the Davis facility as well as another funeral home it owns in the Las Vegas area.

The divestiture must be made to an FTC-approved buyer, and completed within 90 days after SCI acquires Palm. If the FTC finds that the purchaser or manner of the proposed divestiture is unacceptable, SCI must immediately rescind the offer and divest the assets to another FTC-approved buyer within six months from when the order becomes final. The proposed order requires SCI to give prior notice to the Commission before acquiring any interest or assets related to the provision of cemetery services in the Las Vegas area for the next 10 years.

The Commission vote approving the proposed consent order was 4-0.

Robert Doyle
(202) 589-1834
rdoyle@dbmlawgroup.com

According to the FTC, the proposed transaction would have reduced competition in several U.S. markets for the manufacture and sale of animal vaccines and animal pharmaceutical products. Veterinarians and other animal health product customers could have seen the prices of these goods increase. Furthermore, the FTC believes that the entry of new competitors in these markets would not be timely, likely, nor sufficient to offset the loss of competition.

The consent order requires Pfizer to sell approximately half of Wyeth’s Fort Dodge U.S. animal health business, including vaccines for cattle, dogs, and cats, and other pharmaceutical products used in treating cattle, dogs, cats, and horses, to Boehringer Ingelheim Vetmedica, Inc. (“Boehringer”), within 10 days of the acquisition. Pfizer is required to provide Boehringer with key services to help it compete after the consummation of the deal. In addition, the order requires Pfizer to return its exclusive distribution rights for a product to treat tapeworms in horses to Virbac S.A., the manufacturer of the product.

Throughout the course of the FTC’s investigation, staff communicated and cooperated with their counterparts in the European Commission’s Competition Directorate (“EC”), and the competition authorities in Canada, Australia, Mexico, New Zealand, and South Africa that also are reviewing, or already have reviewed, this proposed merger.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

On July 24, 2009, the FTC issued an administrative complaint challenging Carilion’s August 2008 acquisition of two outpatient clinics in the Roanoke, Virginia area. Prior to the acquisition, the Center for Advanced Imaging (“CAI”) and the Center for Surgical Excellence (“CSE”) had strong reputations for offering high-quality care and convenient services at prices much lower than Carilion’s.

According to the complaint, Carilion’s $20 million acquisition of CAI and CSE reduced the number of outpatient imaging and surgical services providers in the Roanoke area from three to two. Carilion now faces competition for outpatient imaging and surgical services from only one other provider, HCA, the other major hospital system in the Roanoke area.

The consent order requires Carilion to sell the Center for Advanced Imaging and the Center for Surgical Excellence to an FTC-approved buyer within three months. The order also allows for FTC-approved buyer to replace the competition eliminated by the acquisition through the following provisions: prohibiting Carilion, for the first six months, from soliciting for employment any physician or physician practice that has referred patients to the CAI since January 1, 2008 enabling the new owner to develop and reestablish its referral base; prohibiting Carilion, for one year, from making any change that would restrict its own doctors who have referred patients to the CAI from continuing to do so; requiring Carilion to preserve the viability, marketability, and competitiveness of the two clinics’ assets prior to divestiture; requiring Carilion to offer financial incentives to the staff of both clinics to remain during and after their sale to the FTC-approved buyer; and prohibiting Carilion from using or disclosing competitively sensitive information and permitting the FTC to appoint a monitor to ensure Carilion’s compliance with the terms of the order.

The successful challenge is noteworthy for several reasons. First, the challenge reiterates that the FTC is serious about enforcing the antitrust laws against small mergers that do not meet the HSR thresholds. Second, it demonstrates that completed deals that slip beneath the FTC’s radar screen initially are fair game even if the FTC learns about them later. Third, the fact that a deal is not HSR reportable does not mean that no antitrust issues exist with the combination. Fourth, the Commission can and will challenge a consummated deal if it determines that the deal is anticompetitive. Fifth, the FTC has a particular interest in post-acquisition competitive effects of consummated mergers.

Therefore, parties to a consummated deal that raise significant antitrust issues and avoided HSR scrutiny, for whatever reason, should proceed with reasonable caution and closely monitor post-acquisition conduct. Moreover, corporate and private counsel should be aware of the likely consequences and the risks of consummating transactions that raise significant competitive issues. The risks may include: defending against costly and lengthy government investigations; reorganizing to the government’s demands of possible divestitures even after integration has taken place; and disgorging profits gained form the alleged anticompetitive merger.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

Although the Competition Commission of India (“CCI”) became functional on April 1, 2008, several other provisions of the Competition (Amendment) Act, 2007 (“Competition Act”) have not been notified. According to the Indian legislative process, the Act, even though passed by the Parliament, has to be notified by the President of India to become functional. Section 66 of the Competition Act requires the dissolution of the Monopolies and Restrictive Trade Practices Commission (“MRTPC”), which to this point was the erstwhile competition authority in the country. This section has not been notified. As a result, there has been a multiplicity of regulators. The CCI has already begun seeing cases with is first formal complaint of “cartelization” coming from the Multiplex Association of India against the United Producers and Distributors Forum, Association of Motion Pictures and TV Program Producers; and Film and TV Producers Guild of India. However, the MRTPC is also continuing to take cases (at least 30 a month).

In addition, even though the merger control regulations, under the Competition Act, 2002 were issued in January 2008, they are yet to be enacted. As such there seems to be some overlap regarding the role of the CCI in merger regulations as well.

Camelia C. Mazard
202-589-1837
cmazard@dbmlawgroup.com

In 2004, a federal court voided 1,600 NorVergence contracts with small businesses and religious and other nonprofit organizations that were misled by promised savings on phone and Internet services. The contracts purported to be long-term rental agreements for a relatively inexpensive device that NorVergence falsely claimed would create the savings. NorVergence was forced into bankruptcy, and the promised services stopped. The judgment the FTC obtained against NorVergence left unaffected thousands of rental agreements NorVergence had already sold to finance companies.

According to a complaint filed on June 6 by the FTC, IFC Credit Corporation purchased NorVergence rental agreements valued at $21 million, with individual contracts ranging from $4,439 to $160,672. Altough payments were received, as the complaint alleges, no customers received services from NorVergrnce for an extended period, while others received none.
The complaint states that IFC continued with the fraudulent scheme because they aquired new rental contracts, despite NorVergence’s failure to provide the promised services and the resulting high rate of default among IFC customers. Even after NorVergence entered bankruptcy in 2004, the complaint states, IFC continued to tell consumers they were obligated under the rental agreements because the payments were for the device, not for services.

The FTC charges IFC with misrepresenting that consumers have no defenses to payment on the NorVergence rental agreements; harming consumers by unfairly accepting and collecting on the rental agreements; and unfairly filing debt collection lawsuits in courts far from consumers’ locations.

The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Northern District of Illinois. The FTC is asked the court to order all rental agreements terminated and is requested refunds for payments consumers made for services they never received. The FTC also is seeking a preliminary injunction to stop IFC from continuing any debt collection while the suit proceeds.

Camelia Mazard
(202) 589-1834
cmazard@dbmlawgroup.com