Court Dismisses FTC’s Claims Against Pharmaceutical Reverse Payments
A federal court in Georgia has dismissed the Federal Trade Commission’s
antitrust claims against defendant pharmaceutical makers based on “reverse
payments” made to prevent the sale of generic drugs. Solvay Pharmaceuticals,
Inc. jointly owns a patent on the manufacture of a testosterone replacement
cream, marketed under the name AndroGel.
Solvay was previously involved in patent litigation with Watson
Pharmaceuticals, Inc., Paddock Laboratories, Inc., and Par Pharmaceutical
Companies, Inc. Solvay had sued for patent infringement when other manufacturers
filed applications with the U.S. Food and Drug Administration to sell generic
versions of the AndroGel product. If valid, Solvay’s patent would have given it
exclusive rights to sell Androgel until 2020. In a settlement agreement, Solvay
agreed to pay the would-be generic manufacturers via “business promotion
agreements” in return for their not selling a generic version until 2015.
The FTC and several private plaintiffs filed antitrust suits against the
parties to the settlement agreements. These cases were consolidated for
pre-trial proceedings in the United States District Court for the Northern
District of Georgia.
Citing the Eleventh Circuit’s opinion in Schering-Plough Corp. v. FTC,
402 F.3d 1056 (11th Cir. 2005), the court dismissed the antitrust claims that
were based on the payments to the generic manufacturers. Under most
circumstances, paying a competitor not to enter a market would be a per se
violation of the Sherman Act. In the context of a patent settlement, however,
the court reaffirmed that such payments are usually lawful, particularly since
it did not lengthen the exclusionary period that Solvay was entitled to under
The court declined to dismiss claims that the parties had engaged in sham
patent litigation in order to enter into the reverse payment agreement. The case
is 1:09-MD-2084 in the U.S. District Court for the Northern District of Georgia.
The opinion by Judge Thomas W. Thrash, Jr. is dated February 22, 2010.
Electric Utility Agrees to Disgorge Profits
KeySpan Corp., a New York electricity generator, has agreed to disgorge $12
million in profits to settle claims by the U.S. Department of Justice, Antitrust
Division, that it engaged in anticompetitive conduct when it entered into an
agreement with an unnamed financial institution that gave it an interest in the
electric capacity sales of its largest competitor, Astoria Generating Co.
According to the DOJ, KeySpan had a reduced incentive to sell its electricity at
lower prices, because it was positioned to profit whether KeySpan or Astoria
made a sale.
The DOJ filed a complaint in the United States District Court for the
Southern District of New York, along with the proposed settlement. If approved,
the settlement will resolve the lawsuit. KeySpan was acquired by National Grid
PLC in March of 2008, and the generating facilities in question were divested as
part of the acquisition. The case is number 1:10-cv-01415-WHP, filed February
22, 2010 in the U.S. District Court for the Southern District of New York.
DOJ Closes Investigation into Microsoft / Yahoo! Agreement
On February 18, 2010, the U.S. Department of Justice, Antitrust Division,
issued a statement closing its investigation into the Internet search
advertising agreement between Yahoo! and Microsoft which was announced last
July. The DOJ concluded that the agreement between the two companies would not
substantially lessen competition.
This finding was based on the conclusion that Internet search and advertising
giant Google currently dominates both the Internet search and paid search
advertising markets. The DOJ concluded that the competitive efforts of both
Microsoft and Yahoo! were focused on Google, rather than on each other.
The statement further explained that in the DOJ’s opinion, the combination of
Microsoft and Yahoo! would be better able to bring competitive pressure to bear
on Google and on the marketplace generally.
Under the terms of the agreement, which was announced in July, Microsoft will
acquire an exclusive 10-year license to Yahoo!’s core search technologies,
Microsoft’s Bing will be the exclusive algorithmic search and paid search
platform for Yahoo! Sites, and Yahoo! will become the exclusive worldwide
relationship sales force for both companies’ premium search advertisers.
The deal has also received approval from EU antitrust regulators.
EU "block exemptions" automatically exempt certain types of agreements from
the basic prohibition on anti-competitive agreements under the applicable EU
treaties. There will be several developments in the area of block exemptions
during 2010, which are important for day-to-day business operations in the EU.
The most high-profile change will be the introduction of the new Vertical
Agreements Block Exemption (VABE), replacing the existing version which expires
on 31 May 2010. The European Commission is still considering the text, but it is
likely that the key change being the introduction of a buyer market share
Our EU and UK competition practice, based in
will be monitoring and reporting on these and other EU and UK developments
during 2010. Out latest update on these developments is available here.