The report highlighted how critics and rivals, such as Yelp Inc., are trying to bring Europe’s antitrust approach to Google to the United States.  Margrethe Vestager, the European Union competition commissioner, told CBS that she is intent on stopping Google’s “illegal behavior” in web search, suggesting that the EC isn’t appeased by the company’s proposed solution for the hefty charges the EU filed last year.  “You have to look at the power they have and it’s something the Justice Department I hope takes a serious look at,” Mnuchin said, though he added that “issues of monopolies are out of my lane” and that it’s up to the DOJ to review antitrust violations.

CBS featured guests who argued Google abuses its dominance in search and search advertising.  It didn’t show any evidence that U.S. lawmakers or enforcement agencies will target the company or mention the potential cases Vestager is pursuing against Google for its Android mobile software and advertising business.

Observations:  The Trump administration is signaling that it wants to scrutinize big tech companies’ two sided digital platforms and their associated network effects.  The EU law has a provision that imposes a special responsibility on dominant firms not to hinder competition.  The U.S. antitrust agencies and Makan Delrahim are in favor of using an evidence-based approach meaning there has to be harm to competition and consumers. But even Delrahim has noted that “in certain platform markets involving network effects, there may be barriers to entry or a tendency toward a single firm emerging as the sole winner” and in those situations, “antitrust enforcers may need to take a close look to see whether competition is suffering and consumers are losing out on new innovations as a result of misdeeds by a monopoly incumbent.”  So, the DOJ and FTC antitrust officials should be “open and receptive” to evidence that some incumbent monopolist tech firms may be engaging in exclusionary conduct, such as below-cost pricing aimed at driving out competitors, to gain control of a market.

The Trump Administration has its eye on Google, Facebook and Amazon and the DOJ has noted that if there is “clear evidence of harm to competition in digital platforms, enforcers must take vigorous action and seek remedies that protect American consumers, so that free markets or consumers don’t instead bear the risk of failure.”

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

Critics raised concerns about the merged company’s shutting out competitors, which would leave consumers with fewer options and less freedom of choice.  For example, if the merged firm bundles together frames and lenses for sale in its Lenscrafters stores, other lens manufacturers will lose sales.  Independent stores might also be left out or excluded from the markets.  The concern was not just in these critics’ imagination as Luxottica has a history of shutting out its rivals.  Year ago, Luxottica and Oakley had a disagreement about pricing, and Luxottica stopped Oakley’s products in their stores. Oakley’s stock price collapsed, and it was later bought by Luxottica. Critics also claimed the merger eliminated competition between the two companies and ends the possibility of future competition. Essilor had started promoting its own sunglasses and online sales, and Luxottica was beginning its own lens manufacturing.  The two firms were expanding into each other’s markets and competing against each others, which would have driven down prices, improved quality, and helped consumers.  Given the decisions by the FTC and EC, that competition will never occur.

According to the FTC in its statement to close its investigation of the merger, the evidence did not support a conclusion that Essilor’s proposed acquisition of Luxottica violates federal antitrust laws: “FTC staff extensively investigated every plausible theory and used aggressive assumptions to assess the likelihood of competitive harm.  The investigation exhaustively examined information provided by a wide and deep swath of market participants, as well as the parties’ own documents and data.  Assessing the likely competitive effects of a proposed transaction is a fact-specific exercise that takes into account the current market dynamics, which may be different in the future.  Here, however, the evidence did not support a conclusion that Essilor’s proposed acquisition of Luxottica may be substantially to lessen competition in violation of Section 7 of the Clayton Act.”  The FTC vote to close the investigation and issue the closing statement was 2-0.

Meanwhile, European Union Competition Commissioner Margrethe Vestager said: “Our job is to ensure that a merger won’t lead to higher prices or reduced choices.  In this case for opticians and consumers in the EU.  We’ve received feedback from nearly 4,000 opticians in a market test in Europe that Essilor and Luxottica would not gain market power to harm competition.  As the result of the market test did not support our initial concerns we can let this merger go ahead unconditionally.”  To date, the deal has been unconditionally approved in 13 other countries: Australia, Canada, Chile, Colombia, India, Japan, Mexico, Morocco, New Zealand, Russia, South Africa, South Korea and Taiwan.  Essilor and Luxottica expect to finalize their proposed combination in the first part of 2018 after obtaining all necessary authorizations.

Clearly, close coordination between the FTC and EC on the closing of these investigations into this merger.

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

Syngenta is the leading pesticide supplier worldwide. ChemChina is currently active in pesticide markets in Europe through Adama, its wholly-owned Israel-based subsidiary.  Unlike Syngenta, which produces pesticides based on active ingredients it has developed itself, Adama only produces generic pesticides based on active ingredients developed by third parties for which the patent has expired.  Adama is the world’s largest producer of such generic pesticides.

The EC had concerns that the transaction as notified would have reduced competition in a number of existing markets for pesticides.  Furthermore, it had concerns that the transaction would reduce competition for plant growth regulators.  The EC’s investigation focused on competition for existing pesticides, since ChemChina does not compete with Syngenta for the development of new and innovative pesticides.

The settlement addresses the EC’s competition concerns in full. The companies will divest: (i) a significant part of Adama’s existing pesticide business, including fungicides for cereals, fruits and oilseed rape, herbicides for cereals, corn, sunflower and vegetables, insecticides for cereals, corn, fruits, oilseed rape, and vegetables and its seed treatment products for cereals and sugar beet; (ii) some of Syngenta’s pesticides, notably fungicides for vegetables and herbicides for cereals, vegetables and sunflower; (iii) 29 of Adama’s generic pesticides under development and access to third parties to studies and field trial results for these products; (iv) a significant part of Adama’s plant growth regulator business for cereals; and (v) all relevant intangible assets underpinning the divested pesticide and plant growth regulator products.  The companies also agreed to make available relevant personnel to help with the transfer of assets.

The EC concluded that the divestiture package will ensure that effective competition is preserved in pesticide and plant growth regulator markets after the merger as the companies are divesting in all product markets that raised competitive concerns.  Unlike the U.S. FTC, the EC required the sale of Adama’s products under development to ensure the viability and competitiveness of the divested business.  The EC believes that the buyer of the divested assets will be able to compete with the parties to the benefit of European farmers and consumers.

Lesson Learned:

On the face of it, the EC’s enforcement action appeared to be more aggressive in obtaining a stronger enforcement order than the FTC.  In terms of similarities, both the FTC and EC focused on competitive overlaps between branded and generic products. One explanation of the difference in the FTC’s divestiture remedy package compared to the EC’s remedy package is that the facts may have been different in Europe as compared to the United States.  However, the EC, unlike the FTC, had an additional focus on pipeline products.  The EC’s remedy fully addresses the competitive concerns raised by the deal and is designed in a way that should provide effective competition in European pesticide markets.  As is typical for the EC, the EC did not require an upfront buyer whereas the FTC required one.

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