Modern Day Trust Busters: Fighting for You
July 06, 2016
by Taylor Nefussy, C’17
Within the Bureau of Competition, there are several departments that divide up the various incoming cases. There are two categories: mergers and conduct. Mergers deal with cases where two large companies in the same sector are considering merging and the Federal Trade Commission may file an injunction to stop it. The Commission might attempt to prevent a merger if they believe the merger would create a monopoly in the market. Monopolies are considered a market failure because if one company is the sole provider of a good, they are able to mark up the price without limits. The consumer ultimately pays the price, literally. For example, if two hospitals were to merge it could make it difficult for people to receive care in close proximity to where they live. If a hospital closed near a consumer’s home and merged with a hospital an hour away, they are forced to travel a farther distance to receive the care they need. These two reasons for blocking mergers are not an exhaustive list; nonetheless, they are examples of the work the FTC’s Bureau of Competition deals with on a daily basis.
Conduct cases are the second major category of cases the Bureau deals with. This is a broader class but basically means that an investigation can be opened or case brought against a company that the FTC believes is partaking in anticompetitive practices. When there are more businesses in the same market, prices are kept lower, innovation is encouraged, and the quality of goods is higher. So, the work the FTC does is important because it stops anticompetitive practices that could negatively affect the consumer. This work spans across all types of markets, ranging from healthcare to energy.
To better represent the two major types of work the Bureau of Competition does, one can look to two recent cases the FTC has tried and won. First, in the mergers camp, the Bureau filed an injunction to prevent the merger of US Foods and Sysco. This case was tried in Federal Court in DC in 2015. In court, the FTC argued that the merger “would violate the antitrust laws by significantly reducing competition nationwide and in 32 local markets for broadline foodservice distribution services. The FTC alleged that if the merger goes forward as proposed, foodservice customers, including restaurants, hospitals, hotels, and schools, would likely face higher prices and lower levels of service than would be the case but for the merger” . On the FTC’s side, an expert economist claimed this merger would make up for 75% of the national broadline distribution market. In court, the judge ruled in favor of the FTC, granting a preliminary injunction of the Sysco/US Foods merger. As a result, the two companies decided to abandon their proposed merger. This can be seen as a win for competition in the marketplace and for the FTC in assuming its role of preventing monopolies.
Another example representing the anticompetitive cases the Bureau of Competition deals with is FTC vs. Actavis. Actavis, a pharmaceutical company, patented a drug they created allowing them to be the sole creator of the medicine for a certain amount of time. This essentially encourages companies to have a monopoly on the market for a while and incentivizes people and companies to make and patent important inventions. After this time expires, generic companies can enter the marketplace and sell the drug, often at a much lower price. Actavis wanted to keep control of the market and be the sole manufacturer; thus keeping its monopoly. To do so, the firm had to come up with a way to keep the generic brands out of the market – which they accomplished through “reverse payment settlements”. This means Actavis paid the ready to market generic brands a percentage of their earnings, and in return, the generic brands agreed to stay out of the market. The FTC deemed this practice, of paying companies to stay out of the market, unfair and the case was brought to trial. By keeping the generic brand out of the market, Actavis could keep prices high, hurting consumers reliant on this medication. This case progressed to the Supreme Court where the court refused to rule that these reverse payment settlements are presumptively illegal, meaning each situation needs to be reviewed on a case-by-case basis. Ultimately, in a 5-3 ruling the court did decide that the FTC was allowed to bring antitrust action against the defendants. This landmark decision will influence numerous other cases in the coming years.
From all the influential work mentioned above, it is clear that I have a lot to learn from the leading anti trust lawyers in the country over the course of this summer. But more importantly, it is amazing to know that at the end of the day, the work these people do benefits the American public. That is certainly a cause I can get behind.
 “FTC v. Sysco, USF Holding Corp., and US Foods, Inc.” Federal Trade Commission. Federal Trade Commission, 29 June 2015. Web. 11 June 2016. https://www.ftc.gov/enforcement/cases-proceedings/ftc-v-sysco-usf-holding-corp-us-foods-inc
 Progressive President. Digital image. Thing Link. Thing Link, 2015. Web. 11 June 2016. <https://www.thinglink.com/scene/706164593080139777>.
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