The U.S. Federal Trade Commission (“FTC”) and Department of Justice (“DOJ”) plan to sign a memorandum of understanding with China’s three antitrust enforcement agencies, signaling the first formal pact of cooperation between U.S. and Chinese regulators. 

This deal comes on the heels of China’s sweeping antitrust reform, a policy it developed with advice from foreign agencies like the FTC.  The growing number of countries with antitrust laws and agencies, combined with the increasingly global profile of corporations, has made international cooperation extremely important.  Moreover, multi-jurisdiction, transnational antitrust investigations are now common, meaning that different agencies often have overlapping authority. 

A formal memorandum of understanding facilitates agencies’ ability to share information, especially confidential documents.  The FTC hopes this deal will bring international antitrust policy one step closer to a convergent set of global standards with consistent enforcement. 

The U.S. shares similar agreements with a handful of other countries (Russia, Japan, Israel, and the E.U.) and intends to actively pursue new deals, especially with developing countries like India.

The Antitrust Division of the U.S. Department of Justice has updated its Policy Guide to Merger Remedies.

In a press release, the Antitrust Division stated that the updated Policy Guide takes into account new merger dynamics that have surfaced since the issuance of the original guide in 2004, particularly the rise of transnational mergers and complex vertical transactions.

The Antitrust Division uses the policy guide in analyzing proposed remedies for potentially anticompetitive mergers reviewed by its staff.

The update highlights the role of the Antitrust Division’s new Office of the General Counsel, which is responsible for enforcing consent decrees.  One of the main goals of the update is to more accurately reflect the division’s actual merger remedy practices.

The revised policy guide also maintains the original goal of providing effective merger remedies when necessary to preserve competition in the relevant market and promote innovation and consumer welfare.

The Affordable Care Act provides for the creation of Accountable Care Organizations (“ACOs”), organizations of healthcare providers that agree to be held accountable for the cost and quality of care provided to Medicare beneficiaries.  Beginning in January 2012, Medicare will reward ACOs for meeting certain benchmarks set by the Secretary of Health and Human Services.  As a result, many healthcare providers that historically have been competitors are now seeking to join forces as ACOs.

Although the Affordable Care Act promotes the establishment of ACOs, Congress did not carve out an antitrust exemption for them.  Thus, there is a concern in Washington that ACOs, if not properly regulated, could become monopolies that run afoul of the antitrust laws.  J. Thomas Rosch, a member of the Federal Trade Commission, recently expressed such sentiments in letters written to the White House and the federal Medicare agency, according to The New York Times.  Commissioner Rosch notes the concern that ACOs, through their substantial bargaining power, could drive up the price of privately insured healthcare to offset the loss in Medicare revenue.

Commissioner Rosch’s letters also reveal a struggle between the FTC and the Department of Justice over who should regulate ACOs.  The DOJ is generally viewed by healthcare providers as the entity that is more understanding of their efforts to join forces and collectively negotiate with health insurance plans.  Not surprisingly, healthcare providers believe that the DOJ should regulated ACOs and have accused Mr. Rosch and the FTC of attempting to encroach on the DOJ’s territory.

The antitrust concerns inherent in the conduct of ACOs, and the uncertainty over who will regulate the ACOs’ compliance with the antitrust laws, could lead to a delay in the formation of ACOs.  Hopefully these issues will be resolved sooner rather than later, and ACOs will be allowed to operate within a regulatory framework, consistent with the antitrust laws, to allow them to deliver the cost savings and quality improvements as intended.

A judge in the Southern District of New York has approved a settlement agreement between the Department of Justice and KeySpan Corporation (“KeySpan”) in which KeySpan agreed to disgorge $12 million of profits for alleged violations of Sherman Act Section 1.  KeySpan was once the largest seller of electricity generating capacity in New York City and is owned by National Grid, which purchased it in 2007. 

The Department of Justice alleged that KeySpan manipulated New York City electricity prices to the detriment of consumers by entering into a swap agreement that provided it with an interest in the electricity generating business Astoria Generating Company (“Astoria”), its largest competitor.  According to the Department of Justice, KeySpan’s swap agreement with Astoria raised electricity prices for the consumers of New York City.  The swap was especially effective, according the Department of Justice’s complaint, because the New York City electricity market is highly concentrated, with KeySpan, NRG Energy, Inc., and Astoria, “controlling a substantial portion of generating capacity.”  Moreover, the Department of Justice alleged that KeySpan held market power in the New York City capacity market from 2003 to 2008.  The Federal Energy Regulatory Commission (“FERC”) had described KeySpan and its two principal competitors in New York City as “pivotal suppliers” in recognition of their central role in the local electricity market. 

U.S. District Court Judge William H. Pauley III stated in his decision approving the Settlement that whether the Department of Justice could seek disgorgement of profits was a novel legal question.  He stated that the Department of Justice could pursue this remedy, and added that it was the first time a federal U.S. court had approved disgorgement as an antitrust sanction.  The $12 million disgorgement by KeySpan represented 25 percent of its net revenues from the swap transaction at issue in the Department of Justice complaint.

Judge Pauley stated that such a remedy could prove to be a powerful deterrent and a way of punishing past antitrust violations.  He noted that “[d]isgorgement is particularly appropriate where, as where, the anticompetitive conduct has ceased.”  Such a remedy would, in his view, make a potentially valuable addition to the “government arsenal.”

The FTC has voted unanimously to approve a Federal Register notice announcing revised thresholds for the Hart-Scott-Rodino Antitrust Improvements Act.

The Hart-Scott-Rodino Act requires persons contemplating certain large mergers or acquisitions to notify the FTC and the Assistant Attorney General, and to wait a designated period of time before consummating such transactions.  The threshold for reporting proposed mergers and acquisitions decreased from $65.2 million to $63.4 million.  Several additional thresholds were also revised and can be found in the notice.

The revised thresholds will apply to all transactions that close on or after the effective date of the notice.  According to an FTC press release, the notice will be published in the Federal Register shortly and will become effective 30 days after publication.

The FTC also unanimously approved a Federal Register notice announcing revised thresholds that trigger the prohibition on interlocking directorates under Section 8 of the Clayton Act.  The new thresholds are $25,841,000 for Section 8(a)(1) and $2,584,100 for Section 8(a)(2)(A).  According to the FTC press release, the notice will be published in the Federal Register shortly and will become effective upon publication.

The Clayton Act requires that these thresholds be revised annually by the FTC based on the change in gross national product.