The BLT: The Blog of Legal Times

Whole Foods Prevails Against D.C. Antitrust Lawsuit

The plaintiff in a civil antitrust lawsuit against Whole Foods Market Inc. has agreed to judgment in favor of the company, following a decision in April by the U.S. Court of Appeals for the D.C. Circuit not to hear an appeal of an order denying class certification.

Ekaterini Kottaras, a California woman, sued Whole Foods in 2008 in U.S. District Court for the District of Columbia, claiming the company's merger with former competitor Wild Oats had led to higher prices. The lawsuit was an offshoot of the Federal Trade Commission's 2007 challenge to the merger, which eventually settled.

U.S. District Judge James Boasberg denied Kottaras’ motion to certify a class in the case in late January. Kottaras filed a petition to appeal, which a three-judge appellate panel denied on April 20. On Friday, Kottaras agreed to an entry of judgment in Whole Foods' favor, meaning she could be on the hook for some of the company's costs. The case docket officially closed yesterday.

FTC Approves $29.1 Billion Medco-Express Scripts Merger

On Monday, The Federal Trade Commission approved a $29.1 billion merger between two of the nation's largest pharmacy benefits management firms, citing fierce competition from smaller companies as evidence that the deal would not risk creating a monopoly.

Following an eight-month investigation, the FTC voted 3-1 to close its probe and approve the deal, in which Express Scripts, Inc. will take control of Medco Health Solutions, Inc. Before the acquisition, Medco led the pharmacy benefits management market while Express Scripts ranked third behind CVS Caremark. Pharmacy benefits managers are third party administrators of prescription drug programs that process and pay claims.

In a nine-page, unsigned majority statement, the Commission acknowledged the perceived dangers in allowing a merger among the top three companies, especially one that would control roughly 40 percent of the market.

"The investigation revealed that the high market shares of the parties do not accurately reflect the current competitive environment" and is not likely to cause "unilateral anticompetitive effects, enhance the likelihood of successful coordination, or facilitate the exercise of monopsony power," according to the statement.

FTC Commissioner Julie Brill cast the lone dissenting vote. In a statement, Brill argued that the Commission should have filed suit in federal district court, citing a U.S. Court of Appeals for the District of Columbia Circuit decision that found a merger is suspect if it creates an "appreciable danger" of higher prices even if no hard evidence exists.

"While I sincerely hope that I am wrong about the effects of this merger, I believe – with deep sadness and concern – that will not prove to be the case," Brill wrote.

In particular, the decision referenced the rise of health plan-owned pharmacy benefits management firms and others outside of the big three as evidence that the merger would not unduly affect the market. With the passage of federal health care reform legislation and the creation of Medicare Part D, several insurers have shifted away from the top three firms and opened their own in-house services.

In July 2011, United HealthCare said it would be leaving Medco at the end of 2012 in favor of an in-house operation. The loss is a huge blow to Medco's client base, as United's $11.7 billion in expenditures accounted for 17 percent of Medco's net revenue in 2011.

One concern for smaller companies, according to the FTC majority statement, was that the merged company would be able to outbid the competition due to a sheer numbers advantage.

According to the Commission's statement, "after examination of the actual cost data submitted by various PBMs, those cost advantages were not as significant as hypothesized and, for many inputs, may not exist at all."

A statement released by Sen. Herb Kohl, chairman of the Antitrust, Competition Policy and Consumer Rights Subcommittee, supported the decision but called on the FTC to keep an eye on the market to help protect smaller pharmacies and keep drug costs down.

"We are also aware of the vital role of local, community pharmacists in serving consumers, and will continue to monitor this industry to ensure that consumers continue to have access to their local pharmacists to serve their prescription drug needs," Kohl wrote.

In an interview, former FTC Competition Director Richard Parker supported the decision, characterizing the Commissioners as "vigorous enforcers" who are "not afraid to bring a case when they feel there is reason to do so."

Some are not so ready to accept the Commission's findings. For example, five states – New York, Ohio, Pennsylvania, Texas and California – have said they would consider challenging the FTC if it did not impose what they consider to be adequate safeguards against inflated drug prices and decreased pharmacy service.

Arnold & Porter Gross Revenue Grew by 15.2% in 2011

Updated at 12:29 p.m.

Arnold & Porter saw a big jump in business in 2011, posting a 15.2% growth in gross revenue and a 25.4% rise in profits per partner, according to our reporting.

The Washington-based firm took in $639.5 million in gross revenue, up from $555 million the previous year. Profits per partner jumped in 2011 from $1.12 million to more than $1.4 million. The firm's net income went up by 27.4%, from $239 million to $304.5 million.

Chairman Thomas Milch said government investigations work made up a "significant part of our growth" in 2011, especially in health care, banking and the oil industry. Managing Partner Richard Alexander said that the firm's "robust" growth in the fourth quarter of 2010 carried over "across a wide range of matters that have a regulatory component."

"We’ve tried very hard to raise the bar for what we expect from our partners," Milch said.

Milch said the firm also saw growth in its patent litigation practice, notably with its representation of Boston Scientific Corp. Antitrust work was also big in 2011. Milch said that being a part of the legal team defending AT&T against the Justice Department’s efforts to stop a merger with T-Mobile USA “was definitely a component of our strength this year.”

Other strong practice areas included bank regulatory work, especially surrounding the Lehman Brothers Holdings Inc. bankruptcy, and work relating to the Foreign Corrupt Practices Act, Alexander said. The firm's FCPA work has included representing Avon Products Inc. in an internal investigation.

Bingham McCutchen Lobbying for Universal Music Group

Bingham McCutchen last week notified Congress it is lobbying for Universal Music Group Inc. on competition matters, becoming the second law firm this year to disclose its advocacy on that issue for a major music label.

Brownstein Hyatt Farber Schreck also filed paperwork with Congress this month to lobby on antitrust matters for the Warner Music Group Corp. subsidiary called WMG Acquisition Corp. The filings come as U.S. antitrust authorities are reviewing Universal's planned acquisition of EMI Group Ltd.

Vivendi SA, Universal’s parent company, announced in November that it signed a $1.9 billion agreement to acquire EMI’s recorded music division. Len Blavatnik, owner of WMG parent company Access Industries Inc., made a $1.5 billion bid for the unit, but withdrew his offer, The Financial Times reported in October.

Universal, home to artists that include Lady Gaga, Kanye West and U2, secured 29.9% of U.S. music sales in 2011, garnering the largest market share of any record company, according to Nielsen Co. and Billboard magazine. EMI, which has the Beatles, Pink Floyd and Coldplay in its artist lineup, controlled 9.6%.

WMG, which counts Cee Lo Green, Death Cab for Cutie and Jason Mraz among its artists, had 19.1%, putting it in third place behind Sony Music Entertainment Inc.

Universal spent $3.7 million on its federal lobbying in 2011, according to congressional records. Bingham received $80,000 from Universal for advocacy work the firm did since it started lobbying for the company on Dec. 8.

Bingham partner Gary Slaiman, who heads the firm’s government affairs practice group, is handling the account

Neither Slaiman nor a Universal spokesman immediately responded to requests for comment.

Brownstein Hired to Lobby for Music Label on Antitrust Issues

With U.S. antitrust authorities reviewing Universal Music Group's planned acquisition of EMI Group, one of the world's biggest music labels has hired a team of Brownstein Hyatt Farber Schreck lobbyists who count competition policy and corporate mergers among their practices.

Brownstein last week filed a lobbying registration report with Congress to disclose that shareholders Alexander Dahl, Makan Delrahim, Allen Grunes and William Moschella are advocating for Warner Music Group Corp. subsidiary WMG Acquisition Corp.

The team is lobbying on antitrust matters, according to the paperwork. A WMG representative didn’t have an immediate comment.

Last year, the Brownstein lobbyists advocated against AT&T Inc.’s planned acquisition of T-Mobile USA Inc. on behalf of the Coalition for Mobile Wireless Competition, a group affiliated with Dish Network Corp. AT&T dropped the $39 billion deal with T-Mobile in December.

Universal Music Group parent company Vivendi SA announced in November that it inked a $1.9 billion deal with EMI to acquire the label’s recorded music division. Len Blavatnik, who owns WMG parent company Access Industries Inc., offered about $1.5 billion for the unit, but withdrew his bid, The Financial Times reported in October.

UMG, which counts Lady Gaga, Kanye West and U2 among its artists, commanded 29.9% of U.S. music sales in 2011, securing the largest market share of any record company, according to Nielsen Co. and Billboard magazine. EMI, home to artists that include the Beatles, Pink Floyd and Coldplay, had 9.6%.

WMG, which has Cee Lo Green, Death Cab for Cutie and Jason Mraz in its artist lineup, controlled 19.1%, putting it in third place behind Sony Music Entertainment Inc. SME garnered 29.3%.

Delrahim served as a deputy assistant attorney general in the U.S. Justice Department Antitrust Division during the George W. Bush Administration. Grunes was an attorney in the Division from 1995 to 2007.

Amid Antitrust Fight, AT&T Drops T-Mobile Deal

AT&T announced this afternoon the company is abandoning its planned $39 billion acquisition of rival T-Mobile USA, a decision that comes just days after asking a federal judge in Washington to postpone antitrust proceedings.

The U.S. Justice Department sued in August in U.S. District Court for the District of Columbia to block the proposed merger, and the Federal Communications Commission recently issued a staff report that criticized the deal.

Lawyers for AT&T, represented by Kellogg, Huber, Hansen, Todd, Evans & Figel, joined DOJ antitrust prosecutors in asking Judge Ellen Segal Huvelle on Dec. 12 to stay the antitrust proceedings. The judge approved putting the government’s suit on hold. She then set a Jan. 18 hearing.

AT&T issued a statement that said in part: “The actions by the Federal Communications Commission and the Department of Justice to block this transaction do not change the realities of the U.S. wireless industry. It is one of the most fiercely competitive industries in the world, with a mounting need for more spectrum that has not diminished and must be addressed immediately.”

The company said it will take a pretax accounting charge of $4 billion this quarter. AT&T said it will enter a “mutually beneficial” roaming agreement with Deutsche Telekom, T-Mobile’s parent company.

The Justice Department did not immediately comment on AT&T’s announcement. A lawyer for AT&T, Mark Hansen, a Kellogg Huber name partner in Washington, was not immediately reached for comment this afternoon.

Comcast CEO Agrees To $500K Settlement With Antitrust Regulators

Comcast Corp. chairman Brian Roberts has agreed to a pay a $500,000 civil penalty in an antitrust suit in Washington that alleged he violated reporting and waiting requirements before acquiring company stock, the U.S. Justice Department said.

The Justice Department, acting at the request of the Federal Trade Commission, filed suit today against Roberts in U.S. District Court for the District of Columbia. The government simultaneously filed settlement documents that a judge will review. The case is assigned to U.S. District Judge Colleen Kollar-Kotelly.

Prosecutors said in the complaint (PDF) that Roberts, chairman and chief executive officer of Comcast, violated the notification requirements of the Hart-Scott-Rodino Act of 1976. The law contains notification and waiting period provisions that address acquisitions that result in holding stock or assets above a certain value.

The complaint said Roberts failed to comply with the notification requirement before acquiring Comcast stock as part of his compensation beginning on Oct. 22, 2007. Roberts did not notify DOJ and the FTC before acquiring the Comcast shares, the complaint said.

DOJ lawyers said in court papers the “notification and wait period are intended to give the federal antitrust agencies prior notice of, and information about, proposed transactions. The waiting period is also intended to provide the federal antitrust agencies with an opportunity to investigate a proposed transaction and to determine whether to seek an injunction to prevent the consummation of a transaction that may violate antitrust laws.”

A lawyer for Roberts, Michael Sohn, counsel in the Washington office of Davis Polk & Wardwell, declined to comment this afternoon. The FTC said in a statement that Roberts in August 2009 made a corrective filing. Roberts, according to the FTC, admitted to inadvertent violations of the law’s filing requirements in 1999 and in 2000. He was not charged for the earlier violations.

Addressing the $500,00 settlement, the FTC said in a statement this afternoon: “The amount of the fine was limited by a number of factors, including that the violation was inadvertent and technical; that it was apparently due to faulty advice from outside counsel; that Roberts did not gain financially from the violation; and that he reported the violation promptly once it was discovered.”

Van Ness Feldman, GordonDerr Announce Merger

Updated 6:45 p.m.

Washington-based law firm Van Ness Feldman and Seattle-based GordonDerr announced Wednesday that the two firms would be merging their practices to form one firm.

The new firm, which will take the name Van Ness Feldman, merges GordonDerr’s 14 partners and two associates with Van Ness’ 47 members and 35 associates and of counsel, for a total of 98 lawyers.

The combination of the two firms is expected to be complete by the first quarter of 2012. In the interim, the Seattle office will operate as Van Ness Feldman GordonDerr.

Rick Agnew, managing member of Van Ness’ Seattle office, said in an interview that his firm saw an opportunity to combine with a firm that has developed expertise in land use, real estate development and emergency management.

“We don’t try to extend beyond the areas that we cover,” said Agnew. “In those areas, we have sufficient depth that is proven.”

Agnew will move to Washington, D.C. to assume the role of national chairman of the new firm beginning Jan. 1. Jay Derr, current managing partner at GordonDerr, will be the Seattle managing partner. The attorneys said despite their sudden growth into what many would classify as the midsize range, they still could be considered a boutique.

“We’re still a boutique firm,” Derr said. “We are in a position to better serve our clients and provide better opportunity.”

Van Ness maintains practices in energy, environment, transportation and natural resources law and public policy. GordonDerr has specialized in real estate, land use, water law and civil litigation.

AT&T Intent On Challenging DOJ Antitrust Suit

AT&T wants to move forward with its challenge of the U.S. Justice Department's antitrust suit over the company's proposed $39 billion merger with rival T-Mobile, but the government said today it is mulling whether to pull the complaint or seek to postpone the proceedings.

Federal antitrust lawyers and attorneys for AT&T today quarreled in Washington federal district court over the next steps in the blockbuster antitrust court case.

AT&T in late November withdrew its acquisition application at the Federal Communications Commission, saying the telecommunication company wants a ruling on the merits in the antitrust suit before seeking regulatory approval. The FCC issued a report criticizing the proposed deal between AT&T and T-Mobile.

DOJ’s Joseph Wayland, a veteran antitrust lawyer, said today at a hearing in Washington that the government will decide next week whether to seek dismissal of the antitrust suit without prejudice or seek to put the proceedings on hold.

U.S. District Judge Ellen Segal Huvelle today expressed skepticism about AT&T’s legal maneuvering, saying there’s a “slight aura” the company is imposing an unfair burden on the court and taxpayers.

Mark Hansen, a partner at Kellogg, Huber, Hansen, Todd, Evans & Figel, said AT&T decided against parallel proceedings as a practical matter. The FCC, Hansen said, will benefit from Huvelle’s ruling on whether the deal is anti-competitive. Hansen insisted AT&T is not “playing some strategic game” with Huvelle.

Covington Assists Big East in Addition of Five Schools

Two Washington-based Covington & Burling attorneys assisted the Big East in adding five schools to the conference, the firm announced late Wednesday.

Covington partner Peter Zern and associate Scott Roades represented the Big East with its agreements to bring the University of Central Florida, University of Houston, Boise State and San Diego State into the conference. Boise State and San Diego State will be eligible to compete in the 2013 football season. The other three schools will be eligible beginning with the 2013-14 academic year.

Syracuse, West Virginia and Pittsburgh will depart from the conference in the coming years, eventually bringing the total number of Big East teams to 12. The hope is that the additions will allow the conference to stage an annual conference football championship game.

Zern, who focuses his practice on sports and media transactions, finance and mergers and acquisitions, is a partner in the firm’s corporate finance practice.

“Our legal relationship with Covington & Burling has been extremely beneficial and integral to our expansion discussions as well as our television planning,” Big East commissioner John Marinatto said in a written statement.