The completed CVS-Caremark merger may be the first fruit to be plucked by federal antitrust enforcers who have indicated a willingness to take second bites at the apple of merger review.

Antitrust enforcers in the new administration have expressed an interest in re-examining previously approved mergers to ensure that competition was not compromised.  Christine A. Varney, Assistant Attorney General in charge of Antitrust at the Department of Justice, has stated that she is “absolutely” open to reviewing the effects of mergers approved under the previous administration.  No statute of limitations exists on mergers.  The DOJ under the most recent Bush administration filed suit against a company, Microsemi, seeking to undo its acquisition of competitor Semicoa Inc, and it seems likely that there will be more to come under the current administration.

The March 2007 merger of CVS drugstores with pharmacy benefits manager Caremark RX has been criticized by both lawmakers and various public interest groups.  In July 2009, various US Senators wrote to FTC Chairman John Leibowitz requesting the FTC to reexamine the merger of CVS and Caremark to determine whether the combined entity has engaged in anticompetitive practices.  (Letters are available here and here).  The National Community Pharmacists Association issued a statement that prices are higher under the combined company.  The FTC is conducting a “non-public investigation” into CVS, which has revealed in a recent SEC filing that it is producing documents and other information in compliance with that investigation. click here for more »

Since her confirmation as the new Assistant Attorney General of the Antitrust Division in April 2009, Christine Varney has delivered a series of speeches that has made clear that the Department of Justice intends to step up antitrust enforcement.

One of the areas under increased scrutiny is industry-specific exemptions from the antitrust laws, including the health care insurance industry.  With the heated debate over health care reform legislation now underway, any enforcement efforts related to health care would draw considerable attention.

Before enforcement could occur, however, the insurance industry’s long-standing exemption from the antitrust laws under the McCarran-Ferguson Act would have to be repealed.  Health insurers’ antitrust exemption would be repealed under the health care reform bill that passed the U.S. House of Representatives on November 7, 2009.

Ms. Varney supports repeal of the exemption, and testified before a Senate Judiciary Committee hearing in October in favor of ending the insurance industry’s exemption from price fixing, bid rigging and market allocation claims. click here for more »

Merck’s acquisition of Schering-Plough is plowing ahead as the companies addresses competitive concerns raised by antitrust enforcers.

 In an October 29, 2009, Consent Order, the FTC is permitting the acquisition – which would result in the one of the world’s largest prescription drug companies – to go forward provided the two companies divest of certain assets.  The European Union granted a smooth approval to the companies’ merger just a week earlier.

 The divestitures required by the FTC are already well underway.  As discussed in an earlier post, the anticipation and remedying of potential objections by regulators has allowed the Merck and Schering-Plough deal to progress.  In addition to the EU, Canadian and Swiss antitrust authorities have also given the green-light for this acquisition to continue.  The transaction still needs to obtain approval from other regulators, including Mexico and China before its anticipated close in the fourth quarter of 2009. 

 The main hurdle for FTC clearance was the concern regarding the parties’ animal health operations, but, as discussed earlier, Merck has already taken steps to divest itself of its shares in Merial, its animal health joint venture with Sanofi-Aventis.  This approval signifies that Merck and Schering-Plough have satisfied the issues raised in the FTC’s June 22, 2009, second request.

 The successful merger of the two companies would result in the world’s second largest prescription drug companies – behind only Pfizer, Inc.

Several advertising powerhouses are showing some respect for the Microsoft-Yahoo! search engine deal, which would advance Microsoft’s Bing in its challenge to Google.

As discussed in an earlier post, Yahoo! and Microsoft’s proposed partnership, which provides for Yahoo! to exit the search business and rely exclusively on Microsoft’s search engine Bing, is unlikely to be aided by traditional merger defenses in the wake of the Department of Justice’s antitrust review.  However, on October 19, 2009, the American Association of Advertising Agencies wrote a letter to the DOJ endorsing the partnership.

 The letter – also signed by leading advertising agencies Publicis Groupe, WPP, Interpublic Group, and Omnicom – states that a “healthy, competitive market for search and search advertising is crucial to the Internet’s future,” and that “Yahoo! and Microsoft’s proposal to combine their technologies and search platforms is good for advertisers, marketing services agencies, website publishers and consumers.”  The letter opines that the partnership “enhances competition,” and urges the DOJ to conclude its review quickly so that the partnership can take effect as soon as possible.

While it might be unlikely that President Obama and Republican Senator Orrin Hatch of Utah will be getting together for some Bud Lights and Doritos at a Super Bowl party, they may still become football friends over the antitrust issues raised by the Bowl Championship Series.

Senator Hatch sent President Obama a 10-page letter on Wednesday asking him to investigate the BCS for possible antitrust violations in the way college football picks its national champion.

The issue is personal for Senator Hatch’s constituents.  Although Utah was the only undefeated team in the Football Bowl Subdivision last year, they did not get a chance to play for the national title.

President Obama has already picked his team in the College Football Playoff Debate.  On 60 Minutes last year, in his first interview as President-Elect, Obama expressed support for a college football playoff system instead of the present bowl system based on rankings.

Senator Hatch contends that the BCS results and placement in college bowl games at the end of the season is rigged in favor of “privileged” conferences, to the exclusion of smaller ones that include universities in his home state of Utah.  “After a careful examination of both the written and oral testimonies presented” to his committee, Senator Hatch wrote to President Obama, “I believe a strong case can be made that the BCS is in violation of the Sherman Antitrust Act.  Therefore, I respectfully request that the Department of Justice’s Antitrust Division look into this matter.”  click here for more »