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Vol 1-no 2 0801.qxd

Antitrust Review Published by the Antitrust and White Collar Defense Practice Group METRONET V. QWEST: AN ILLUSTRATION OF HOW TRINKO
In This Issue
LIMITS ANTITRUST INTERVENTION IN THE
TELECOMMUNICATIONS INDUSTRY
• MetroNet v. Qwest: An Illustration Of How Trinko In Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, 124 Limits Antitrust Intervention In S.Ct. 872 (2004), the Court imposed strict limits on the application of the antitrust laws in the telecommunications industry, insofar as those laws impose a duty to aid competitors. The Court noted that the"essential facilities" doctrine, under which a firm may have a duty to • "Bitter Pill" For Pharma provide access to its facilities under some circumstances, had never Defendants: Second Circuit been recognized by the Supreme Court. Verizon at 881. Further, the Reverses Summary Court held the doctrine has little application where a state or federal Judgment In Warfarin Sodium agency has the power to compel sharing of facilities and that the Antitrust Case Telecommunications Act of 1996 ("TCA") provides extensively forsuch power. In addition, the Court held that the holding in Aspen Skiing • NCAA Wins Summary Judgment Motion Against Co. v. Apsen Highlands Skiing Corp., 472 U.S. 585, that a firm may be subject to Section 2 liability for refusing to deal with a competitor undersome circumstances, is a very narrow exception to the general rule that • DOJ White Collar Crime a firm has no duty to aid its competitors and that liability for refusing to deal does not attach where the antitrust defendant is not repudiatingan established (presumably profitable) prior course of dealing or isotherwise forgoing profitable sales in the short term for ananticompetitive purpose. Id. at 880. Finally, the Court held that courts should be hesitant to add new exceptions to the general rule that thereis no duty to aid competitors, especially in an industry where there DOJ Antitrust Highlights exists an extensive regulatory structure designed to combat FTC Antitrust Highlights anticompetitive harm. Id. at 881. The Court reasoned that allegationsof antitrust violations in the telecommunications industry are difficult FTC Consumer Protection for courts to evaluate and lend themselves to "false positives" that have the effect of chilling the competitive conduct the antitrust laws are International Antitrust meant to protect. Id. at 882-83. Where there is already an extensive regulatory structure governing the conduct at issue, therefore, there islittle to be gained from broadening the scope of antitrust intervention.
FCC Antitrust Highlights In MetroNet Services Corp. v. Qwest Corp., 2004 U.S. App. LEXIS20107 (9th Cir. 2004), the Ninth Circuit applied the principles ofVerizon to save Qwest, an incumbent local exchange carrier regulatedby the TCA, from antitrust liability for altering its pricing structure inorder to eliminate resale of its business phone services. Qwest sold a Sheppard Mullin Richter & Hampton LLP Antitrust Review package of phone services that allowed businesses facilities claim because they do not ensure access to make internal and external calls and access to Qwest's local exchange network in a way that calling features such as call forwarding and call makes its resale business viable. The Ninth waiting called "Centrex." Initially, Qwest priced Circuit, however, held that the essential facilities Centrex on a "per system basis" that based the doctrine only requires some sort of reasonable price on the number of total phone lines purchased access to the essential facility in question, not in the Centrex package, regardless of whether access in a manner that ensures the profitability of those lines were for a single location or multiple, the plaintiff's particular business model.
separate locations. Customers that purchased MetroNet also attempted to salvage its essential Centrex for 20 or more total lines, regardless of facilities theory by arguing that the WUTC, due to where those lines were to run, received volume limited resources, limited statutory authority, and discounts. Thus, resellers such as plaintiff other reasons, must concede considerable latitude MetroNet would purchase Centrex at the volume to Qwest in setting prices for access to its local discount and resell the service to multiple small exchange network. The Ninth Circuit was also businesses, each of which had twenty or fewer unconvinced by this argument, explaining that lines, for more than what the resellers paid and Verizon only required that a state or federal agency less than what their small business customers has the power to compel sharing, not particular would have to pay for the Centrex package prices. Moreover, Qwest had entered into an without the volume discount. In 1997, Qwest interconnection agreement with MetroNet and changed its pricing of Centrex to a "per location" other telecommunications carriers had system that required customers to have more than successfully petitioned the WUTC to broker twenty lines at each location in order to receive a interconnection agreements with Qwest. As such, volume discount for service to that location. This it was clear to the court that access to Qwest's pricing system eliminated the resellers' ability to local exchange network was in fact available obtain the volume discounts since each of their through the TCA and WUTC and the essential customers had twenty or fewer lines and prompted facilities doctrine was therefore inapplicable. MetroNet to bring suit against Qwest underSection 2 of the Sherman Act. MetroNet also claimed that Qwest's actions placedit in the exception to the general rule that there is MetroNet claimed that, under the essential no duty to deal with a competitor announced in facilities doctrine, Qwest had a duty to provide Aspen. The court, however, found that Verizon's access to its local exchange network. Citing interpretation of Aspen rendered it inapplicable to Verizon's observation that "where access exists, Qwest's conduct. The defendant in Aspen halted the [essential facilities] doctrine serves no its presumably profitable prior course of dealing purpose," the Ninth Circuit held that the doctrine with the plaintiff competitor and refused to sell to had no application because the TCA's extensive the plaintiff competitor at the same presumably compelled access provisions endowed the profitable retail price it charged others. According Washington Utilities and Transportation to Verizon, these actions indicated a willingness to Commission ("WUTC") with the effective power forego profits in the short-term in order to reap to force Qwest to provide access to its local gains in the long-term from the resulting exclusion exchange network to competitors. MetroNet of competition. 124 S. Ct. at 879-80. Where there argued that the TCA's compelled access is no such forsaking of profits by the defendant in provisions should have no effect on its essential the short-term, Verizon holds that Aspen does not Antitrust Review apply. Id. The Ninth Circuit noted that Qwest's scrutinized by the mechanisms of the TCA and change to a per location pricing structure was an other relevant authorities such that antitrust effort to increase profits in the short term and that intervention would likely have little to add while Qwest had not refused to deal with MetroNet on risking the deterrence of conduct beneficial to the same terms that it deals with other customers.
consumers. As a result of these decisions, Hence, the Ninth Circuit held, MetroNet "does not concerns about the unilateral competitive behavior have an actionable antitrust claim under the of these types of telecommunications firms will Supreme Court's existing refusal to deal likely have to focus on compliance with the TCA precedents as explained and limited by Verizon." and the relevant state regulatory schemes, not theantitrust laws.
Finally, the Ninth Circuit considered thepossibility of departing from existing antitrust For more information, please contact Carlton Varner at precedent and extending antitrust liability to (213) 617-4146 or [email protected], or Anik Qwest's unilateral attempt to eliminate discount Banerjee (213) 617-4124 or [email protected] resellers. In light of Verizon's admonition thatcourts should be hesitant to create new theories of "BITTER PILL" FOR PHARMA
antitrust liability because of the risk of false DEFENDANTS: SECOND CIRCUIT
positives, especially where there is already a REVERSES SUMMARY JUDGMENT IN
regulatory structure designed to combat WARFARIN SODIUM ANTITRUST CASE
anticompetitive harm in place, the court declinedto do so. It noted that the WUTC closely regulated The Second Circuit Court of Appeals on October the competitive environment of the Washington 18 resuscitated the antitrust conspiracy and telecommunications industry. It also observed that monopolization claims pursued by the the WUTC had in fact been proactive in manufacturer and distributor of a generic form of monitoring Qwest's attempts to eliminate the warfarin sodium, an anti-coagulant (blood thinner) reselling of its phone services. Indeed, the WUTC medication that helps prevent blood clots that can had held a number of hearings on the issue and cause strokes and heart attacks. In Geneva ultimately concluded that it would allow Qwest to Pharmaceuticals Technology Corp. v. Barr use per location pricing. Thus, the court Laboratories, Inc., 2004 WL 2334907, the Second concluded, "the additional benefits of antitrust Circuit reversed the trial court decision handed intervention would tend to be small given the down two years prior which entered summary existence of a regulatory structure designed to judgment in favor of the defendants – a competing deter and remedy anticompetitive harm and the manufacturer and supplier of blood thinner record of the WUTC's attentiveness to the alleged medication – on the plaintiffs' claims under anticompetitive conduct." Sherman Act §§ 1 and 2. MetroNet is a clear illustration of how the A critical aspect of the decision was the Second principles of Verizon operate to, in effect, shield Circuit's determination that the market for generic regulated telecommunications firms like Verizon warfarin sodium constituted a "relevant market" and Qwest from the scrutiny of the antitrust laws.
separate and distinct from the overall market for The fundamental rationale underlying Verizon, and warfarin sodium. Defendants Barr Laboratories applied in MetroNet, is that the competitive (the manufacturer of a competing generic warfarin behavior of these firms is already closely sodium) and Brantford (the supplier of a critical Antitrust Review component – clathrate), now face the possibility of The trial court ruled that the entire warfarin treble damages and other costs because of their sodium market, including the non-generic version alleged conduct in depriving plaintiffs of the of the blood thinner drug sold by DuPont – ability to market their generic product.
Coumadin – was the appropriate market. Itstressed that Coumadin and the generics shared a As this case demonstrates, the definition of the chemical equivalence, and that customers and "relevant market" in an antitrust case can have vendors viewed the products as competing, and critical consequences. The market definition concluded that generics took market share from provides the context against which to measure the Coumadin. In reversing, the Second Circuit competitive effects of the challenged conduct acknowledged it might "seem paradoxical . . that (here, the exclusive-dealing agreement between a Coumadin and generic warfarin – which have manufacturer and supplier). The goal in defining been certified by the FDA as therapeutically the relevant market is to identify the market equivalent – are nevertheless separate markets for participants and competitive pressures that antitrust analysis." But the court determined that restrain an individual firm's ability to raise prices the differences between the generic and or restrict output. The relevant market is defined established forms of the drug outweighed the as all products reasonably interchangeable by similarities. The primary difference was price.
consumers for the same purposes, because the Defendant Barr's generic was introduced at about ability of consumers to switch to a substitute 70 percent of Coumadin's price, and thereafter restrains a firm's ability to raise prices above the declined to 50 percent, while Coumadin's price competitive level. Reasonable interchangeability stayed steady, creating a marked gap in price sketches the boundaries of a market. The Second between the products. Coumadin's substantially Circuit observed that "there also may also be higher price was "evidence of a distinct customer group with brand allegiance and/or high risk constitute the appropriate market for antitrust sensitivity that was unwilling to switch from the analysis." The court explained that "Defining a known brand name even in the face of a submarket requires a fact-intensive inquiry that discounted alternative." The court emphasized: includes consideration of ‘such practical indicia asindustry or public recognition of the submarket as Coumadin's substantially higher prices is a separate economic entity, the product's peculiar evidence of a distinct customer group characteristics and uses, unique production with brand allegiance and/or high risk facilities, distinct customers, distinct prices, sensitivity that was unwilling to switch sensitivity to price changes, and specialized from the known brand name even in the vendors.'" (Quoting Brown Shoe Co. v. United face of a discounted alternative. That this States, 370 U.S. 294, 325 (1962)). The court group has remained loyal despite added that the term "submarket" is somewhat of a Coumadin's conspicuously higher prices misnomer, since the "submarket" analysis "simply strongly suggests inelastic demand.
clarifies whether two products are in fact More significantly, this division of ‘reasonable' substitutes and are therefore part of customers indicates there is little the same market. The emphasis always is on the likelihood that price-sensitive generic actual dynamics of the market rather than rote customers would switch to the higher- application of any formula." priced Coumadin when faced with anincrease in generic prices.
Antitrust Review The Second Circuit's conclusion was further • A "Product Development Strategy" prepared buttressed by the fact that when other generic for a Barr board of directors meeting stated that competitors entered the market, Barr's prices Barr focused on lower sales volume drugs with dropped substantially, but Coumadin's remained high barriers to entry that limit competition.
virtually unchanged and even rose slightly. The memo described Barr's efforts to secure asource of raw materials for generic warfarin An additional factor influencing the relevant sodium and noted that its "investment of time market decision was the existence of different and capital resulted in an exclusive source of distribution chains for Coumadin and the generics.
active ingredient that to date is the only source Wholesalers and chain pharmacies frequently available to the generic industry." stocked Coumadin plus a single generic version.
"Thus, for a substantial customer base, generic • An internal Barr memo which contained a warfarin manufacturers compete among section entitled "Preserving Market Share: themselves for one slot rather than with Warfarin Case Study" included the headline Coumadin." Similarly, there was evidence that "Block Generic Competition by Controlling Coumadin had been marketed primarily to doctors, while generics targeted wholesalers andcertain pharmacies.
The court also pointed to plaintiffs' claim thatBrantford, acting in tandem with Barr, had The court's conclusion that the relevant market improperly helped to prevent plaintiffs from excluded Coumadin had a major impact on the pursuing a new source of clathrate by failing to court's decision that the plaintiffs could proceed to reveal the existence of the exclusive dealing trial on their Sherman Act claims. In reaching arrangement between Barr and Brantford and both determinations, the court relied on otherwise engaging in conduct that engendered documentary evidence that the defendantsintended to exclude plaintiffs and other generic false hope within plaintiffs. manufacturers from the generic market, includingthe following: In reversing summary judgment on themonopolization claim, the court concluded that the • A memo from Barr's purchasing manager to its "evidence as a whole could lead a reasonable jury vice president and general counsel noted that to conclude that Barr and . . Brantford intended to there were only two potential purchasers of take advantage of . . Brantford's clathrate clathrate, and urged a strategy "to deny a viable monopoly, intended to create a monopoly for Barr source" to a competing generic manufacturer.
in the generic warfarin sodium industry, and Barr's director of pharmacology and senior intended to keep their agreement so that president of operations added a handwritten [plaintiffs] would not take steps to develop an note to the memorandum, asking if the expense alternate source." The court added that while of "purchasing the Coventry facility's supply "there may be some pro-competitive benefits of (even though we can't use it), be less than our exclusive supply agreements, it is difficult to losses if [generic competitor] enters the conceive of the pro-competitive benefits that market?" The court stated: "Defendants would be derived from this level of deception, and, attempt to portray these notes as isolated also, it is difficult to believe that defendants' thoughts of non-decision making employees, advantage came about through better business but we think a jury should decide what weight practices or historical accident." should be given these statements." Antitrust Review In resurrecting the conspiracy claim, the court NCAA WINS SUMMARY JUDGMENT
concluded that the "testimony as a whole as well MOTION AGAINST MIBA
as the various memos and internal documentssupport an inference of conscious, concerted On September 30, the National Collegiate Athletic action intended to take advantage of . .
Association ("NCAA") defeated a motion for Brantford's monopoly on clathrate. Plaintiffs summary judgment seeking to hold it liable under presented circumstantial evidence that Barr and Section 1 and Section 2 of the Sherman Act for .Brantford conspired to control the only source of implementing a rule that precludes 65 of the best clathrate available and to deceive plaintiffs so that college basketball teams in the country from plaintiffs would not take steps to develop an participating in postseason tournaments other than alternate supply. There was evidence that Barr the one sponsored by the NCAA. (See demanded the confidentiality agreement [with Metropolitan Intercollegiate Basketball Ass'n v. Brantford] in order to delay [plaintiffs'] entry and Nat'l Collegiate Athletic Ass'n, S.D.N.Y., No. 01 thwart the development of alternative supplies.
Civ. 0071, 9/30/04). In her ruling, Judge Miriam Testimony further showed that both Barr and . .
G. Cedarbaum found that the plaintiff, an NCAA- Brantford understood the confidentiality affiliated organization that sponsors the only rival agreement to require silence by . . Brantford in its postseason college basketball tournament, would dealings with [plaintiffs], suggesting that . .
have to prove that the NCAA's Commitment to Brantford's deceptions were in furtherance of the Participate Rule had anticompetitive effects to prevail on a claim under Section 1 and would haveto demonstrate that the NCAA had specific intent The result in Geneva Pharmaceuticals to monopolize to win under Section 2. demonstrates the fact-intensive nature of theseantitrust disputes. Defendants often are successful The suit was filed by the Metropolitan in using expert economic testimony and antitrust Intercollegiate Basketball Association ("MIBA"), doctrines to avoid being subjected to trial on an unincorporated association of five New York Section 1 and Section 2 claims. But if the facts do area colleges and universities. MIBA is an not support the defendants' attempt to define the affiliated member of the NCAA, the governing relevant market as broadly as possible, and there is body for 23 college sports. MIBA has conducted documentary evidence supporting a conclusion of a Postseason National Invitational Tournament anticompetitive motivation, companies that (Postseason NIT) since the 1930s. Approximately thought they were behaving in an aggressive but 40 teams currently compete by invitation in the lawful manner may find themselves faced with a Postseason NIT. The NCAA hosts the only other serious threat of treble damages and other court- postseason tournament for its Division I member teams, the NCAA Division I Men's BasketballChampionship Tournament ("NCAA For more information, please contact Roy Goldberg at (202) 218-0007 or [email protected] MIBA argued that the NCAA has been attemptingto restrict competition from the Postseason NITsince the mid-1940s. Until 1953, however, NCAAmember institutions were allowed to participate in Antitrust Review both tournaments, if invited. In 1953, the NCAA The court declined to relieve MIBA of its burden changed its rules to prohibit member institutions of showing anticompetitive effects under the rule from participating in more than one postseason of reason. This is only allowed under the rule of tournament. Thereafter, the NCAA rules on reason analysis if the anticompetitive effects of the postseason tournaments became more restrictive, challenged conduct are obvious. Here, the Judge as the size of its own tournament expanded from held that it was not obvious that the challenged 22 teams in 1953 to 65. The rule at issue, the rule had anticompetitive effects. In particular, the Commitment to Participate Rule, is a 1981 court explained that MIBA could extend revision to a rule specifying that member invitations to its tournament to any of the 260 institutions were expected to participate in NCAA teams not invited to the NCAA tournament and championship tournaments. The revised rule MIBA had not presented any evidence that it had ended uncertainty about a team's obligation to been unable to fill its Postseason NIT bracket each participate in the NCAA championship, if invited.
year. In denying summary judgment to MIBA on Although there were further revisions to the its Section 2 conspiracy to monopolize claim, the Commitment to Participate Rule in 1991, 1999, court explained that the parties disputed the and 2000, Judge Cedarbaum observed that the "specific intent" element of the offense.
essence of the rule was unchanged. Member Specifically, the parties disagreed as to whether institutions risked fines and sanctions for breaking the Commitment to Participate Rule was adopted NCAA rules, and there was evidence in this case "with the specific intent of suppressing that the NCAA would view a failure to comply competition from the NCAA Tournament's with the Commitment to Participate Rule as a major violation of its rules. For more information, please contact Camelia Mazard at In its suit, MIBA sought treble damages and (202) 218-0028 or [email protected] injunctive and declaratory relief from severalNCAA rules, which allegedly were adversely DOJ WHITE COLLAR CRIME UPDATE
impacting the Postseason NIT. MIBA's motion forsummary judgment related only to the White Collar Crime Continues as a
Commitment to Participate Rule, but its broader Priority for the Antitrust Division
claim was that the combined effect of several rulesprevented it from postponing the Postseason NIT The Antitrust Division continues to send a strong until after the NCAA Tournament or competing message to corporations and corporate executives for the teams who participate in that tournament.
engaged in potential bid rigging and price-fixing MIBA viewed the Commitment to Participate schemes. Recent investigations of the E-Rate Rule as effectuating a boycott of the Postseason program, fish distribution and the synthetic rubber NIT and argued that the rule should be stricken as industry have resulted in guilty pleas and a violation of Section 1 and Section 2 without detailed market analysis. NCAA countered thatboycott analysis was improper and that MIBA was E-Rate Investigation
not entitled to summary judgment because the rulehad no obvious anticompetitive effects.
On October 22, Qasim Bokhari and HaiderBokhari pleaded guilty to charges of conspiracy, Antitrust Review fraud, and money laundering involving a federal totaling more than $16 million. Qasim Bokhari program, E-Rate, that subsidizes tele- and his company eventually received more than communications services, Internet access and $1.2 million for goods and services that were not internal computer and communications networks provided to three of these schools. The to disadvantaged schools and libraries. superseding indictment also charges all threeindividuals with money laundering and conspiracy A federal grand jury in Milwaukee returned a to commit money laundering, in violation of 18 superseding indictment against Qasim Bokhari, U.S.C. §§ 1956(a) and 1956(h). the owner and president of a Virginia computerconsulting company, and his two brothers, Haider The investigation was conducted jointly by the Bokhari, and Raza Bokhari, who acted as agents Department's Antitrust Division, the Federal of the company, on September 23. Each of these Bureau of Investigation, the Criminal individuals was originally charged in a March 16, Investigation Division of the Internal Revenue 2004 indictment filed under seal and unsealed Service, and the Inspector General's Office of the after the arrest of Qasim Bokhari and Haider Federal Communications Commission, with Bokhari on April 1, 2004. At the time of their assistance from the U.S. Attorney's Office for the arrest, citing the risk of flight, the court ordered Eastern District of Wisconsin. Qasim Bokhari and Haider Bokhari, both citizensof Pakistan, to be held in prison pending trial. The The guilty pleas announced today resulted from an third brother, Raza Bokhari, a naturalized U.S.
ongoing investigation by the Antitrust Division citizen, is still a fugitive from justice. and the FCC of unlawful conduct concerning theE-Rate Program. The Chicago Field Office of the The superseding indictment included the original Antitrust Division is continuing to investigate charges of one count of conspiracy to commit mail potential bid rigging, fraud, kickbacks, bribery, or fraud, three counts of mail fraud, one count of other crimes related to the E-Rate Program.
conspiracy to commit money laundering, and onecount of money laundering against Qasim Bokhari Fish Distributor Charged With Obstruction of
and Haider Bokhari. As to Raza Bokhari, the superseding indictment included the originalcharge of one count of conspiring to commit On October 19, Pool Fish Distributors Inc. ("Pool money laundering and added one count of Fish Distributors"), an Arkansas fish distributor, conspiring to commit mail fraud, three counts of was charged with obstructing the grand jury mail fraud, and one count of money laundering investigation of a suspected conspiracy to fix the against him. The superseding indictment also price of feeder goldfish sold in the United States.
added certain additional allegations concerning Feeder goldfish are used as food for other the schools for which E-Rate funding was sought ornamental and desirable fish. but not obtained. Pool Fish Distributors was charged in U.S. District According to court papers, in 2001, Qasim Court in Cleveland with obstruction of justice for Bokhari and his company submitted applications intentionally delaying the production of for E-Rate Program funding on behalf of 21 documents that the grand jury subpoenaed that schools in the Milwaukee and Chicago areas were material to its investigation. According to Antitrust Review the charge, between June 19, 2002 and May 2004, According to the one-count felony charge filed in Pool Fish Distributors intentionally delayed the the U.S. District Court in San Francisco, Bayer AG production of documents in response to grand jury conspired from May, 2002 through December, subpoenas, which caused the grand jury not to 2002 with unnamed co-conspirators to suppress consider the relevance of the documents before the and eliminate competition for NBR in the United statute of limitations had expired on the alleged States and elsewhere. Under the plea agreement, which must be approved by the court, Bayer AGhas agreed to assist the government in its ongoing The Division's ongoing investigation into suspected price fixing in the feeder goldfishindustry is being conducted by the Cleveland Field The Department charged that Bayer AG and Office with assistance from the FBI. This case unnamed co-conspirators carried out the sends a strong message that the Antitrust Division will prosecute those who obstruct grand jury • participating in conversations and meetings to investigations and attempt to prevent the Division discuss prices of NBR to be sold in the United from detecting and prosecuting price fixing States and elsewhere; • agreeing, during those conversations and meetings, to raise and maintain prices of NBR Synthetic Rubber Investigation
to be sold in the United States and elsewhere;and On October 13, Bayer AG, a German corporation, • issuing price announcements and price agreed to plead guilty and to pay a $4.7 million quotations in accordance with the agreements criminal fine for participating in a conspiracy to fix the prices of synthetic rubber which is used tomanufacture a variety of products including The charge is the result of an ongoing automotive parts. The rubber, acrylonitrile- investigation being conducted by the Antitrust butadiene, which is also known as NBR, is also Division's San Francisco Field Office and the FBI used to manufacture hoses, belting, cable, o-rings, in San Francisco. seals, adhesives, and sealants. The charge is thefirst in an ongoing investigation of price fixing in For more information, please contact Andre Barlow at the NBR industry. (202) 218-0026 or [email protected] DOJ ANTITRUST HIGHLIGHTS
• On October 25, the DOJ announced that AT&T Wireless, Inc. ("AT&T") and Cingular Wireless Corporation ("Cingular") entered into a consent decree to allow the merger of the two wireless carriers and broadbandservice providers. According to the press release the DOJ contended that markets for wirelesscommunications were local and that in ten such markets the merger would reduce competition. The DOJ alsocontended that broadband markets were local and that in three such markets the merger would reducecompetition.
The press release also explained that two of a limited number of mobile wireless services providers have launched or are likely to launch mobile wireless broadband services, which offer data speeds Antitrust Review DOJ Antitrust Highlights (Continued)
four to six times faster than existing service. To resolve concerns, the parties agreed to divest AT&T's mobilewireless services business, including spectrum and customer contracts, in parts of Connecticut (Litchfield),Kentucky (Fulton), Oklahoma (Oklahoma City and Ponca City), and Texas (Lufkin/Nacogdoches). Themerged firm must also divest minority equity interests in mobile wireless services providers in FCC licensingareas in Georgia (Athens), Kansas (Topeka), Louisiana (Shreveport, Monroe), Massachusetts (Pittsfield), andMissouri (St. Joseph), although it may retain its minority interests in Kansas, Louisiana, and Missouri if thoseinterests are made irrevocably and entirely passive to the satisfaction of the Division. To resolve theDepartment's competitive concerns related to mobile wireless broadband services, the merged firm must divest10 MHz of contiguous PCS wireless spectrum in parts of Michigan (Detroit), Tennessee (Knoxville), and Texas(Dallas-Fort Worth). In Knoxville, the merged firm can alternatively restructure AT&T's existing relationshipwith another spectrum licensee in the market to the satisfaction of the Division so that the merged firm has noequity, managerial, or other interest in the licensee and the Division's competitive concerns are resolved. Seealso FCC Antitrust Highlights at p. 18.
• On October 21, the Antitrust Division released an "Antitrust Division Policy Guide to Merger Remedies" that sets forth the Division's policies on merger remedies and describes the legal and economic underpinnings ofthose policies. The guide provides the business community, antitrust bar, and economists with anunderstanding of the Division's analytical framework for crafting and implementing relief in merger cases. Theguide concentrates on remedies that allow mergers to proceed with modifications rather than blocking them.
After setting forth a number of guiding principles for the development of remedies in all Antitrust Divisionmerger cases, the guide emphasizes the following important points: (1) structural remedies involving thedivestiture of physical or intangible assets are preferred to conduct remedies; conduct remedies are appropriateonly in limited circumstances; (2) the divestiture must include all assets necessary for the purchaser to be aneffective, long-term competitor, including critical intangible assets; (3) the divestiture of an existing businessentity that possesses all of the assets necessary for the efficient production and distribution of the relevantproduct is preferred to a partial divestiture; (4) if the Division believes the merger will result in a violation, theDivision will be willing to forego filing a case and accept instead a structural "fix" that the parties implementbefore the merger is consummated as long as it fully eliminates the competitive harm arising from the merger;and (5) the Division will ensure that remedies are completely implemented and will fully enforce its judgments. • On October 6, Deputy Assistant Attorney General Makan Delrahim spoke before the George Mason Law Review Symposium regarding convergence as it applies to antitrust and intellectual property laws. Mr.
Delrahim's discussion about convergence in the application of antitrust to intellectual property referred to "thegoal of reaching consensus on antitrust enforcement strategies that are grounded in sound economic theory, notmere coincidence in the application of antitrust law to specific cases." Because antitrust authorities'enforcement policies help shape international business practices, consensus-based antitrust enforcement is vitalto global business and consumer welfare. He covered intellectual property licensing and discussed severalspecific examples that illustrate areas of convergence and divergence between the U.S. and EU. Mr. Delrahimalso suggested how, in some areas, a period of constructive divergence may ultimately help the U.S. and EU Antitrust Review DOJ Antitrust Highlights (Continued)
reach consensus in the future. He concluded that, although extraordinary strides have been made towardsconvergence between the U.S. and EU in the application of antitrust law to intellectual property rights, thereare still particular areas around the edges where differences remain. While Mr. Delrahim speculated on thereasons for the difference, he emphasized that the focus should be on a process of constructive divergence tobridge the gap. • On October 1, the Antitrust Division announced that it would not appeal the decision of the U.S. District Court for the Northern District of California in the Oracle/Peoplesoft merger case. The decision was surprising for acouple of reasons. First, the Division believed the evidence, including the testimony of numerous customers,strongly supported its case against Oracle Corp.'s proposed acquisition of Peoplesoft, Inc. Second, the Divisionclearly disagreed with some of the legal observations in the district court's opinion. That being said, theDivision realized that an appeal would be difficult because the ultimate outcome of the merger case rested onJudge Walker's detailed factual findings that would receive great deference in the appellate process. For more information on any of these activities, please contact Andre Barlow at (202) 218-0026 or [email protected]. FTC ANTITRUST HIGHLIGHTS
• On October 29, following a public comment period, the Commission approved a final consent order in the matter concerning General Electric Company ("GE") and InVision Technologies, Inc. ("InVision"). The vote
to approve the order as final was 3-0-2, with Commissioner Pamela Jones Harbour recused and Commissioner
Jon Leibowitz not participating. Shortly thereafter, on November 2, the Commission received a petition for
approval of proposed divestiture from GE related to the FTC decision and order. Under the terms of the order,
within six months of the date the consent agreement was executed GE was required to divest it's "X-Ray
Nondestructive Technology ("NDT") Business," as that term is defined in the order, to a Commission-approved
buyer. In its petition, GE has requested Commission approval to divest the X-Ray NDT Business assets to
Prinzipal 26. V V GmbH, a subsidiary of Andlinger & Company, Inc. The FTC is accepting public comments
on the proposed divestiture for 30 days, until December 1, 2004, after which it will decide whether to approve
it.
• On October 29, the Commission approved a proposed divestiture by Sanofi-Synthelabo and Aventis. The company's application concerned the final consent order issued to address competition problems raised bySanofi's acquisition of Aventis. Under the terms of the decision and order in this matter, Sanofi was required todivest certain assets and royalty rights to ensure that competition was maintained following the consummationof the transaction. In its petition, the companies requested Commission approval to divest the "EstorraRoyalties," as that term is defined in the order, to Paul Royalty Fund II, L.P., a limited partnership under thecontrol of Paul Capital Partners and PRF Sleep Holdings, LLC, an affiliate of Paul Royalty Fund.
Antitrust Review FTC Antitrust Highlights (Continued)
• On October 26, the Commission approved a proposed divestiture by American Air Liquide, Inc. ("Air Liquide"). The company's petition for approval of the proposed divestiture related to the FTC's recent decisionand order concerning Air Liquide's acquisition of Messer Griesheim GmbH. The order requires Air Liquide todivest certain assets acquired from Messer Griesheim. In its petition, Air Liquide requested prior Commissionapproval to divest the "Atmospheric Gases Divestiture Assets and Businesses," as that term is defined in theorder, to Matheson Tri-Gas, Inc., a wholly owned subsidiary of Nippon Sanso Corporation of Japan, or to oneor more Matheson Tri-Gas subsidiaries. The FTC has now approved that request. The Commission vote toapprove the proposed divestiture was 4-0-1, with newly appointed Commissioner Jon Leibowitz notparticipating. • On October 20, the attorneys general of several states announced their submission, for approval by the U.S.
District Court for the District of New Jersey, of a settlement agreement with Akzo Nobel, N.V., and itssubsidiary, Organon USA Inc. (collectively, "Organon"), resolving the States' allegations that Organon violatedthe antitrust laws by engaging in various anticompetitive acts relating to its anti-depressant drug, Remeron. TheStates' complaint alleges, among other things, that Organon made a "fraudulent misrepresentation" to the FDAabout the claims of a patent listed in the FDA's Orange Book, so as to delay by approximately eight months theintroduction of generic competition to Remeron. Under the settlement, Organon would pay tens of millions ofdollars in damages and become subject to strong injunctive terms barring future anticompetitive conduct.
FTC staff conducted a parallel, nonpublic investigation regarding Organon's conduct. The FTC staff'sinvestigatory record contains significant evidence indicating that Organon may have violated Section 5 of theFederal Trade Commission Act by knowingly making misleading statements to the FDA in order to delayintroduction of generic competition to Remeron. FTC staff closely coordinated their investigation with theStates. Working with the States, FTC staff took the lead in developing and negotiating the injunctive terms thatare encompassed in the States' proposed settlement. In consideration of the comprehensive, effective, andappropriate injunctive terms contained in the States' proposed settlement, the FTC's investigation intoOrganon's activities relating to Remeron has been closed. • On October 20, the Commission received an application from AspenTechnology, Inc. ("AspenTech"), requesting FTC approval to divest its Engineering Software Assets, as that term is defined in the Commission'sproposed order announced on July 15, 2004, to Honeywell International, Inc. ("Honeywell"). Under the termsof the proposed order, AspenTech is required to divest the Engineering Software Assets within 90 days of thedate the order becomes final. AspenTech and Honeywell executed the purchase agreement on October 6. 2004.
A public copy of AspenTech's application can be found on the FTC's Web site as a link to this press release.
The FTC is accepting public comments on the proposed divestiture for 30 days, until November 18, 2004.
• On October 12, the staffs of the Federal Trade Commission and the Antitrust Division of the Justice Department jointly issued a letter urging the Massachusetts House of Representatives to adopt a bill that would enable non-lawyers to compete with lawyers to perform certain real estate closing services. According to the agencies,competition is likely to lower prices and enable consumers to receive better services. The bill, HB 180, wouldamend the General Laws of Massachusetts to authorize non-lawyers to perform real estate closing services, Antitrust Review FTC Antitrust Highlights (Continued)
such as drafting deeds, mortgages, leases and agreements; examining titles; issuing title certification or policiesof title insurance; and representing lenders as their closing agents. "As the staff analysis shows, HB 180 islikely to benefit consumers in Massachusetts by encouraging competition that leads to lower prices, moreconvenient services, and the option to use Internet-based loan services," noted FTC Chairman Deborah PlattMajoras. "The bill likely will lower prices for real estate closings for Massachusetts consumers in two ways,"said R. Hewitt Pate, Assistant Attorney General in charge of the Justice Department's Antitrust Division. "First,consumers will be able to choose to use a non-lawyer instead of an attorney for their closings. Historically,lawyers charge more than lay providers. Second, with competition from non-lawyers, lawyers' fees are likelyto decrease." For more information on any of these activities, please contact Robert W. Doyle, Jr. at (202) 218-0030 or [email protected] FTC CONSUMER PROTECTION HIGHLIGHTS
• On November 4, the FTC announced that it had charged New Jersey-based NorVergence, Inc. ("NorVergence") with making misleading claims relating to dramatic savings on their monthly telephone, cellular, and Internetbills, and the purported availability of unlimited long-distance and cellular minutes at no extra cost. Accordingto the FTC, NorVergence claimed the savings were partially the result of a "black box" that it would install oncustomers' premises. The complaint, which was filed in federal district court in New Jersey, stated that theblack boxes (rented to customers for inflated prices of between $400 and $5,700 per month) were nothing morethan standard telephone routers. The FTC maintained that in reality, NorVergence had no long-term contractswith telecommunications providers and no way to assure the long-term discounts it promised. • The FTC has been fairly active this past month in fulfilling its responsibilities under the Fair and Accurate Credit Transaction Act, or "FACTA." On November 3, the agency announced that it was seeking comments indetermining a "fair and reasonable fee" for credit scores under the new laws. On October 29, the FTC issuedfinal rules under FACTA that provide certain clarifications necessary to effect the Act's purpose. The final rulesdefine "identity theft," and "identifying information," and require a 12 month duration for active duty alerts.
The rules also require the credit reporting agencies to develop minimum reasonable requirements forappropriate proof of identity needed to block information resulting from identity theft on their consumer reportsand place or remove fraud or active duty alerts, or truncate their Social Security number in their file disclosures.
The final rule and accompanying comments are available at: http://www.ftc.gov/os/2004/10/041029idtheftdefsfrn.pdf. FACTA amended the Fair Credit Reporting Act in 2003 by providing consumers with theability to place fraud alerts on their credit reports and "block" credit report information resulting from identitytheft. • On October 28, FTC's Consumer Protection Acting Director Lydia Parnes stated in a speech before the International Association of Privacy Professionals that identity theft and privacy issues would remain a toppriority for the agency. According to her speech, the FTC has filed 63 spam-related cases against 164 individual Antitrust Review FTC Consumer Protection Highlights (Continued)
and corporate defendants. Parnes' speech highlighted a number of regulatory initiatives that raise identity theftand privacy concerns, such as the use of radio frequency identification (or "RFID") technology, thedevelopment of the National Fraud Alert System, and the filing of the agency's first spyware case. Accordingto Parnes, "Privacy protection efforts will continue to occupy a central role in [the FTC's] consumer protectionmission." • The FTC announced that it settled claims filed in federal district court that the marketers of the "Balance Bracelet" failed to possess adequate substantiation for advertising claims that the bracelet alleviated painsymptoms resulting from arthritis, joint, back, and injury-related pain. The agency filed its lawsuit againstMaverick Media, Inc. and its officers Mark Jones and Charles Cody in May of this year while a class actionlawsuit was pending in state court in California. The settlement, which prohibits the defendants from makingmisrepresenting claims about pain alleviation products and requires them to pay $400,000 to a settlement fund,is part of a global settlement that includes class action plaintiffs who already filed claims in state court whenthe FTC first initiated its suit.
• On October 22, former Mark Nutritionals, Inc. founder, Harry Siskind, agreed to a $155 million judgment against him due to his falsification of financial information in an attempt to hide assets from the FTC in orderto obtain a more favorable settlement. The agency had originally settled claims against Mr. Siskind and otherdefendants relating to the marketing of Mark Nutritionals' Body Solutions Evening Weight Loss formula andother products requiring Mr. Siskind to pay $500,000 as part of the settlement. The settlement also contained$155 million suspended judgment that would be reinstated if it was found that his financial disclosurescontained false information. In May 2004, the FTC filed a motion that detailed Mr. Siskind's falsification offinancial information, which then triggered the reinstatement of the $155 million. Mr. Siskind agreed to thereinstatement of the full settlement amount just prior to a hearing on the FTC's motion.
• On October 12, the FTC announced that it has joined forces with a number of law enforcement agencies in other countries to combat unwanted spam e-mails on a global level by adopting an international Action Planon Spam Enforcement. The plan was announced on October 11 at an international forum on spam enforcementtechniques, hosted by the FTC and the Office of Fair Trading of the United Kingdom. For more information on any of these activities, please contact June Casalmir at (202) 218-0027 or [email protected] INTERNATIONAL ANTITRUST HIGHLIGHTS
• On October 28, the European Commission announced that it had agreed on a Memorandum of Understanding with the Republic of Korea regarding bilateral cooperation in the antitrust field. The signing of theMemorandum of Understanding between Korea and the EU provides a formal basis for enhanced bilateralcooperation between the two parties. It establishes a permanent and transparent forum for consultation and Antitrust Review International Antitrust Highlights (Continued)
cooperation in this area. In particular, it is hoped that the bilateral cooperation can foment: improvements in therespective legal frameworks governing anticompetitive business behavior, merger control, and anticompetitivegovernment regulation; exchange of experience in the field of case investigation; and, exchange of experienceand views on substantive antitrust policy issues. In addition, the two parties are keen to promote and strengthencooperation in the field of antitrust law enforcement. The Commission has previously concluded dedicatedcooperation agreements in antitrust matters with the United States and Canada.
• On October 28, following the European Parliament's threatened veto of the entire incoming European Commission, and the subsequent withdrawal of the candidatures of all incoming Commissioners, it appears thatMario Monti will temporarily stay on as European Competition Commissioner until the EU's political processis finalized. There are also numerous suggestions that Ms. Kroes may be moved from her nominatedcompetition post given the potential conflicts with her numerous previous business interests and her poorEuropean parliamentary confirmation hearing. Pervenche Beres, head of the European Parliament's antitrustcommittee, said that Ms. Kroes had failed to show the qualities necessary "for exercising the responsibilitiesof the competition job." • On October 27, Russia's director of the Federal Anti-Monopoly Service, Igor Artemyev, stated that he intended to stiffen Russia's antitrust legislation and increase sanctions against offenders. He said that his departmentwould present to the Russian Duma draft amendments to antitrust legislation by the end of December. Hewould like to see the activities of natural monopolies brought under real control, and said that at present, finesfor contravention of the law "cannot be taken seriously." The amendments would see that companies foundguilty of an abuse of a dominant position would be fined 2% of their previous year's turnover, and those foundguilty of cartel activity would be fined 4% of their previous year's turnover. • On October 27, Shang-Ming, the head of China's Ministry of Commerce's antitrust office (established in September), said that China plans to accelerate the drafting of an antitrust law. Such a law is on the agenda ofthe Tenth National People's Congress, and the absence of a law to date has been a source of concern. Draftlegislation, which deals with monopoly agreements, abuse of dominance, mergers and administrativemonopolies, has been distributed to state departments for comments, but is subject to further revision. • On October 26, the European Commission announced that it had decided to close its investigations into aspects of the contracts between a number of Hollywood film studios and European pay-tv companies. The EuropeanCommission decided to close its investigation into the so-called Most Favored Nation ("MFN") clauses foundin the contracts of the Hollywood film studios with a number of pay television companies in the EuropeanUnion after the studios decided to withdraw the clauses. The case remains open with regard to NBC Universaland Paramount Pictures Corp. Inc. that still hold on to them. The Commission's competition services believethat these clauses have the effect of aligning the prices of the broadcasting rights bought by the televisioncompanies.
Antitrust Review International Antitrust Highlights (Continued)
• On October 26, the European Commission announced that it had decided to grant unconditional approval under Article 8(2) of the old EC Merger Regulation (Regulation 4064/89) to Oracle Corp's proposed acquisition ofPeopleSoft Inc. The Commission was principally concerned that the transaction would combine two of thelargest suppliers and reduce the number of key players in certain applications software markets from three totwo (Oracle/PeopleSoft and SAP). The Commission concluded that there are separate global markets for "highfunction" Human Resource and Financial Management Software purchased by large and complex enterprises.
Due to the high level of functionality required by such "tier one" or "enterprise" software, it is distinct from themarkets for such software supplied to smaller companies ("mid market" software). The Commission, however,concluded that the removal of PeopleSoft as an independent player in these markets would not causecompetition concerns as the relevant markets would all remain competitive. The merger was approved in theU.S. in September following Oracle's success in challenging the DOJ's initial adverse findings. TheCommission notes that it cooperated closely with the DOJ and that it took into account evidence that waspresented to the U.S. courts. At a year in length, this was the longest ever Commission investigation under theEC Merger Regulation.
• On October 26, Mexico's Commission Federal de Competencia ("CFC") cleared the merger between Aeromexico and Mexicana, subject to conditions. Both airlines are subsidiaries of Cintra, the publicly ownedcompany created in 1995 to bail Aeromexico and Mexicana out of bankruptcy. The remedies imposed on theoperation, which precedes the privatization of Cintra, consist of the divestment of tow subsidiaries ofAeromexico and Mexicana – Aerolitoral and Aerocaribe. These subsidiaries will be merged into a single entity.
In the process of privatization, the companies resulting from the mergers, Aeromexico-Mexicana andAerolitoral-Aerocaribe will be sold to different investors. This approach will result in the existence of twocompeting airlines.
• On October 22, the Irish High Court found a credit union association guilty of abusing its dominant position, handing the Irish Competition Authority its first positive judgment in a civil public enforcement case. JudgeNicholas Kearns found in favor of the Competition Authority's first ever decision in an abuse of a dominantposition case. The Irish League of Credit Unions was said to have broken Irish antitrust law by requiring creditunions to be members before they could avail themselves of a particular protection scheme. By requiringmembers to take out loan protection and life savings cover with a life assurance company it controls, the Leaguewas alleged to be abusing its position in the market for credit union representation. The League represents 516affiliated credit union members throughout Ireland. The case is one of the first cases brought against avoluntary organization and may set a key precedent. Former FTC Commissioner Terry Calvani is a member ofthe Irish Competition Authority and Director of its Cartels Division.
• On October 19, the European Commission announced that it had received proposed commitments from the Coca-Cola Company, which it considers may be sufficient to settle its investigation into alleged infringementsby Coca-Cola of Article 82 of the EC Treaty. The Commission has been conducting an investigation into Coca-Cola's business practices in the EU for five years. The Commission has not at this stage explained the particularcompetition concerns that it has identified. However, it is clear from the terms of the commitments that the Antitrust Review International Antitrust Highlights (Continued)
Commission is concerned that Coca-Cola has been using its market strength to impose terms on retailers thatforeclose the market to other soft drinks manufacturers. The Commission states that the commitments offeredby Coca-Cola will have the effect of introducing more competition to the EU markets for carbonated soft drinksand will increase consumer choice in shops and at cafes. • On October 18, it was reported that South Africa's largest gold company, Harmony, had made a hostile bid for its domestic rival, Gold Fields, valuing it at $8.1 billion. A merger would create the world's number one goldmining company in terms of gold reserves and number two by market capitalization. Despite the backing of itslargest shareholder, the Russian company Norilsk Nickel, Gold Fields has rejected Harmony's offer. GoldFields says that it will proceed with its current $2.1 billion acquisition of Canadian gold miner Iamgold. GoldFields is South Africa's second largest gold producer, producing more than four million ounces annually atmines in South Africa, Ghana and Australia. Harmony became the sixth largest gold miner in the world whenit acquired ARMgold in 2003. It produces more than three million ounces of gold annually and runs operationsin South Africa, Australia and Papua New Guinea.
• On October 13, Canada's competition bureau approved the merger of brewers Molson and Coors, which will create the world's fifth largest brewer by volume. The merger, which will see the creation of Molson Coorsbrewing, still faces some opposition from a member of the Molson family and some Canadian pension funds.
The U.S. FTC had previously approved the merger. • On October 13, Japan's Fair Trade Commission proposed cuts in the penalties for those companies who notify the Commission of illegal practices in which they were involved. The changes to the Anti-Monopoly law areincluded in the draft revisions to the law, which have been presented to the ruling Liberal Democratic Party.
Under the proposed changes, the first company to turn itself in before a raid would be free from penalties, andthe second and third firms would be given 50% and 30% reductions respectively. Those confessing voluntarilyafter an inspection would also be given some reduction. It is planned to seek parliamentary approval during thecurrent extraordinary Diet session. • On October 12, it was announced that the French antitrust authorities were investigating possible price-fixing in the toy sector in 2002 and early 2003. The investigation concerns the supermarket group Carrefour Sam, andthe Danish toy maker, Lego Systems AS. Sources close to the case said that Carrefour had been raided, and itwas also reported that Lego had replaced its head of operations following an internal investigation, whichrevealed that the company guidelines had been violated. For more information on any of these activities, please contact Neil Ray at (415) 774-3269 or [email protected] Antitrust Review FCC ANTITRUST HIGHLIGHTS
• On October 22, the Baby Bells gained additional deregulation for fiber deployments in an FCC decision that represents another step in establishing broadband parity between the phone giants and cable operators. In theruling, the FCC decided to take recent decisions to deregulate Bells' fiber deployments to the home and curband extend them to unbundling requirements found in telecommunications-law provisions that govern Bellentry into the long-distance market. The Bells had asked the Commission to broaden the initial rulings toensure that the agency's previous actions could not be diminished by regulatory provisions in the long-distanceentry rules. "The FCC found that the relief included in this decision will benefit consumers by making the[Bells] more vigorous competitors to cable-modem service, which plays a significant role in the currentbroadband market," the FCC said in a press release. However, FCC commissioner Michael Copps dissented,saying that the ruling would mean that broadband providers that did not own their own fiber lines would lose"competitive access to last-mile bottleneck facilities." In addressing the Bell-monopoly argument, FCCCommissioner, Kathleen Abernathy, noted that "Cable operators enjoy a significant lead over wirelineincumbents" in signing up high-speed-data customers. "It is difficult to justify saddling the less-dominantplatform – but not the market leader – with unbundling obligations." • On October 26, the FCC consented to the applications filed in connection with the proposed merger of Cingular Wireless Corporation and AT&T Wireless Services, Inc., subject to a number of conditions. TheCommission denied all of the petitions filed in opposition to the merger, finding that the merger as conditionedwould serve the public interest. The Commission consented also to two related sets of applications; (1) theapplications filed by Cingular and T-Mobile USA, Inc. in connection with the unwinding of their GSMnetwork infrastructure joint venture in portions of California, Nevada, and New York, and (2) the applicationsfiled by Triton PCS, Inc. and AT&T Wireless to exchange spectrum in portions of North Carolina and Georgia. The Commission analyzed the market for mobile telephone services and concluded that the companies haddemonstrated that the proposed merger will serve the public interest, convenience, and necessity. Further, theCommission concluded that the likely public interest benefits of the merger outweigh the potential publicinterest harms. Moreover, it found that the acquisition generally is not likely to cause competitive harm inmost mobile telephone markets. In reaching these conclusions, the Commission analyzed many factorsregarding the likely horizontal effects of the merger, including substitutability of products and services,possible competitive responses by rival carriers, spectrum aggregation, deployment of advanced wirelessservices, network effects on the merged company, and penetration rates in local markets. The Commissionconcluded that anticompetitive effects are unlikely in all but 22 of the Commission's 734 Cellular MarketAreas, where the merger would cause significant competitive harm that exceeds its likely public interestbenefits. The Commission conditioned its consent on the companies taking certain actions to ameliorate theanticompetitive effect of the merger in those markets. This generally included the Commission prohibiting thecompanies' plan to merge their mobile telephone businesses in particular markets or its requiring thedivestiture of problematic spectrum. See DOJ Antitrust Highlights at p. 9.
Antitrust Review FCC Antitrust Highlights (Continued)
• On October 14, as part of its goal to promote access to broadband services for all Americans and to encourage new facilities-based broadband platforms, the FCC adopted changes to Part 15 of its rules to encourage thedevelopment of Access Broadband over Power Line ("Access BPL") systems while safeguarding existinglicensed services against harmful interference. Access BPL is a new technology that provides access to highspeed broadband services using the largely untapped communications capabilities of the nation's power grid.
By facilitating access to BPL, the Commission took an important step toward increasing the availability ofbroadband to wider areas of the country because power lines reach virtually every home and community. Inareas where consumers already have broadband access, BPL can enhance competition by providing anotherbroadband alternative. Access BPL will also facilitate the ability of electric utilities to dynamically manage thepower grid itself, increasing network reliability by remote diagnosis of electrical system failures. • On October 14, the FCC announced it adopted a Notice of Inquiry ("Notice") that fulfills a commitment that the Commission made in March 2004 in the ISP Reform Order to develop a record on foreign mobiletermination rates. The Notice seeks to further develop the Commission's understanding of the possible effectsof foreign mobile termination rates on U.S. customers and competition in the U.S. internationaltelecommunications services market. In particular, the Notice solicits comments on foreign mobile terminationpayment arrangements and on payment flows between carriers that terminate mobile calls in certain foreigncountries. It also requests data and information on foreign mobile termination rates, actions taken by foreignregulators with respect to these rates, and on competitive concerns raised in the FCC's ISP Reform proceeding.
Finally, the Notice seeks comments and information on the appropriate framework for evaluating whetherforeign mobile termination rates are unreasonably high.
For more information on any of these activities, please contact Olev Jaakson at (202) 218-0021 or [email protected] Antitrust Review Antitrust and White Collar Defense Practice Group
Pamela J. Naughton James J. Mittermiller Elizabeth Balfour Timothy B. Taylor Edward C. Duckers James L. McGinnis Don T. Hibner, Jr.
Kathyleen A. O'Brien Michael W. Scarborough Carlton A. Varner Robert W. Doyle, Jr.
John R. Fornaciari Roscoe C. Howard, Jr.
Robert L. Magielnicki, Sr.
Camelia C. Mazard Daniel S. Seikaly The Sheppard Mullin Antitrust Review is intended to apprisereaders of noteworthy developments involving antitrustmatters. The contents are based upon recent decisions, butshould not be viewed as legal advice or legal opinions of anykind whatsoever. Legal advice should be sought before takingaction based on the information discussed. For further information, please contact: Sheppard, Mullin, Richter & Hampton LLP Antitrust and White Collar Defense Practice Group Robert W. Doyle, Jr. at 202.218.0030 or [email protected]

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