A proposed joint venture between cable giant Comcast and media titan NBC Universal has cleared a major hurdle as European antitrust regulators have blessed the deal.

Because of significant differences between the assets involved in the American and European aspects of the deal, however, it seems likely that U.S. regulators will continue to scrutinize the venture more rigorously.

Comcast is America’s largest cable company and second largest internet service provider.  NBC owns major stakes in television, film, and cable programming as well as a major share in online streaming television service Hulu.  Under the deal, announced December 3, 2009, Comcast would buy a majority stake in NBC from its parent, General Electric.  As a result, Comcast and NBC would form a joint venture owned 51% by Comcast and 49% by NBC; Comcast would also manage the venture.  The deal is valued at $37 billion.

The European Commission has announced that the deal “would not significantly impede effective competition in the European Economic Area or any substantial part of it.”  But they pointedly noted that in Europe, unlike in the U.S., Comcast owns no cable assets.  Thus in Europe the deal creates no vertical relationship between a Comcast cable distribution platform and NBC’s programming assets.  Such a relationship would, however, result from the U.S. portion of the deal.

This vertical relationship was one of several concerns raised by opponents of the deal in a public comment period offered by the U.S. Federal Communications Commission, which has jurisdiction to review the deal.  The venture’s opponents believe it will lead to higher cable bills, fewer independent programmers and less public-service programming.  Comcast and NBC will formally respond to the public comments later this month.  But they have already argued that the deal would be a boon to consumers by improving broadcast operations, pressuring cable networks to lower prices and improve quality, and speeding the development of “anytime, anywhere” video service.  And they say the post-venture NBC would still only account for 12% of national cable network advertising and affiliate revenues, hardly enough to dominate cable advertising.

The FCC and the U.S. Justice Department, which shares jurisdiction over the deal, are expected to decide by year-end whether to approve or deny the deal or approve it with conditions, such as asset divestitures.

SmithKline Beecham Corp. may be breathing a little easier for now as a result of a temporary denial of class certification in the antitrust litigation that seeks to hold the pharmaceutical company liable for delaying generic versions of the nasal spray Flonase.

Judge Anita B. Brody of the U.S. District Court for the Eastern District of Pennsylvania ordered the plaintiffs to rebrief their motion by September 30 in light of the U.S. Court of Appeals for the Third Circuit’s ruling a day earlier in a price-fixing class action against diamond company De Beers SA.

A day before Judge Brody’s ruling, the Third Circuit vacated a $295 million settlement in the De Beers case, Sullivan v. DB Investments Inc.  The Third Circuit held that the district court failed to properly ascertain whether class certification was appropriate.  In vacating the De Beers settlement, the appeals court found that the lower court had not addressed differences among the state laws at issue in the case.

The De Beers ruling could have significant implications for the plaintiffs in the Flonase antitrust litigation because they are seeking the certification of multiple classes based on various state and federal laws.  Each of the potential classes seeks to represent individuals and entities that purchased Flonase or its generic equivalent from May 19, 2004, until the full effects of generic competition had been felt.

The court had previously allowed the plaintiffs to proceed with allegations that Glaxo SmithKline (formed by the merger of Glaxo Wellcome and SmithKline Beecham in 2000) caused them to overpay for Flonase by repeatedly filing sham citizen petitions that stalled the entry of generic nasal sprays into the market.  Citizen petitions can be filed with the FDA while approval of a generic drug is pending to express concerns about a product or request that the FDA take administrative action.  Congress passed a law in 2007 permitting the FDA to summarily dismiss citizen petitions to stop drug companies from abusing the process to extend monopolies.

Judge Brody’s ruling temporarily denying class certification may turn out to be only a hiccup in plaintiffs’ quest for class certification.  That said, in seeking class certification, the plaintiffs will need to fully address the differences among the various state and federal laws at issue or risk certification being denied yet again.  Until they achieve the requested class certification, it is the plaintiffs who cannot breath easy.

Judge James Ware of the Northern District of California has granted a motion for certification of a class of iPhone consumers in an antitrust suit against Apple and AT&T.  An estimated 15 to 20 million U.S. iPhone purchasers are potential members of the class.

Filed in 2007, the suit alleges that Apple and AT&T secretly agreed to restrict iPhone service for five years.  Although plaintiffs purchased a two-year service agreement which could be terminated at any time by paying a $175 fee, the suit alleges that Apple and AT&T ensured that iPhone users are still locked in to AT&T, as the iPhone won’t work on any other compatible network – such as T-Mobile.

In 2008, the court held that the plaintiffs adequately alleged the existence of two “iPhone aftermarkets” – one for iPhone voice and data service and one for iPhone applications.  In ruling on class certification, the court rejected the argument that determining market power in the aftermarkets would require “individualized inquiry” into whether each class member “knowingly and voluntarily” gave the defendants this market power because they knew about AT&T exclusivity and Apple’s control over iPhone apps.  The court held that “whether consumers of iPhones ‘knowingly’ entered into de facto commitments to be monopolized can be analyzed on a class-wide basis.” 

Likewise, defendants argued that plaintiffs’ damages expert failed to raise a common question because he analyzed the broader value of a customer’s ability to switch carriers rather than the impact of defendants’ specific challenged practices – the non-disclosure of the five-year exclusivity agreement.  The court concluded that the broader analysis was plausible.

Europe’s highest court, the EU Court of Justice (ECJ), has upheld a fine of 85.8 million euros (approximately $100 million) against the German company Knauf Gips KG for participating in a plasterboard price-fixing cartel.

The cartel consisted of Knauf Gips KG, France’s Lafarge SA, Britain’s BPB Plc, and Belgium’s Gyproc Benelux.  The decision upholds part of the European Commission’s November 27, 2002, total fine of 478.32 million euros (approximately $605 million) imposed on the four companies. 

The fines stem from the cartel’s price-fixing of plasterboard for builders in Germany, Britain, France, Belgium, the Netherlands and Luxembourg between 1992 and 1998.  The Commission found that the companies implemented their cartel through a clandestine system that exchanged information and monitored the market to avoid competition.

A few weeks ago, on June 17, 2010, the ECJ upheld a fine of 249.6 million euros (approximately $300 million) against Lafarge for its role in the cartel.  As part of that decision, the ECJ found that the Commission had correctly doubled the fine against Lafarge based on Lafarge’s prior infringement of competition laws.

The General Court of the European Union has upheld a 2005 ruling by the European Commission that AstraZeneca engaged in anticompetitive behavior to shield its anti-ulcer and heartburn drug, Losec, from competition by blocking generic copies from entering the market.

The Commission fined AstraZeneca 60 million euros ($74 million), which the Court reduced to the still significant amount of 52.5 million euros. 

The Court found that between 1993 and 2000, pharmaceutical giant AstraZeneca engaged in anticompetitive behavior in order to preserve its market dominance and prevent generics from entering the market.  AstraZeneca’s scheme was wildly successful.  By 2000, Losec was the world’s highest-selling drug with global sales exceeding $6 billion. 

AstraZeneca was found to have shielded its drug from competition by misleading European patent authorities into granting it additional periods of patent protection.  To gain these additional periods, AstraZeneca told the patent authorities in various European countries that it did not receive approval to market Losec until1998.  The trouble is, AstraZeneca actually received approval in 1997, yet concealed this information from the patent authorities. 

The Court also found that AstraZeneca attempted to block generics from entering the market by changing the form in which Losec was sold from capsule to tablet.  Competing pharmaceutical companies are able to introduce generic versions of brand-name drugs into the market only if the original product is still for sale.  To keep generics off the trail, AstraZeneca asked various European countries to actually withdraw their approval of the capsule form in favor of the new tablet form that AstraZeneca had developed.  The Court found that this was yet another of AstraZeneca’s anticompetitive tactics aimed at creating a roadblock to a rival company introducing a generic version of their blockbuster drug.

In 2008, the European Commission began a probe into the name-brand versus generic rivalry, finding that drug companies routinely engage in anticompetitive practices to shield their name-brand drugs from competition by generics.  The Court’s upholding of the Commission’s ruling against AstraZeneca will provide the Commission with strong precedent to help stop pharmaceutical companies from engaging in such anticompetitive behavior.

Canada is attempting to get a handle on the bewildering explosion in new payment technologies with a task force.

Canada’s Minister of Finance, Jim Flaherty, has announced the launch of a new Task Force for the Payments System Review.  As Flaherty commented, consumers today can make payments in “a bewildering number of ways, even by tapping a cell phone against a scanner.”

One of the Task Force’s main goals will be to figure out how to introduce these new payment technologies without compromising Canadian safety and efficiency or consumer protection.  The Task Force is gearing up to provide recommendations to the Minister by the end of 2011. 

The Task Force’s mandate includes: (1)”[i]dentify[ing] public policy objectives to be pursued in the operation and regulation of the payments system;” (2) “[i]dentify[ing] and assess[ing] the regulatory and institutional structures best suited to achieving those public policy objectives;” (3) “[a]ssess[ing] and report[ing] on the safety and soundness of the Canadian payments system;” (4) “[a]ssess[ing] the competitive landscape for current participants by identifying any potential barriers for new entrants and mechanisms to improve the competitive landscape of the domestic payments system;” (5) “[a]ssess[ing] the degree of innovation in the domestic payments system and report[ing] on the challenges and opportunities to bring new and innovative products to market in Canada;” and (6) “[a]ssess[ing] and report[ing] on whether consumers and merchants are well served by the domestic payments system.”

The Task Force is chaired by Patricia Meredith, a Professional Associate and Senior Adviser to financial services and technology companies with the consulting firm Monitor Group, an Adjunct Professor at York University’s Schulich School of Business, and former Executive Vice President of corporate strategy and member of the Senior Executive at Canadian Imperial Bank of Commerce.

While no one may be predicting China will be the antitrust powerhouse of the 21st Century, its days as an antitrust neophyte appear to be ending.

China’s National Development and Reform Commission (“NDRC”) of China has levied fines and administrative penalties against more than 20 producers of rice noodles.  This enforcement action represents the first application of Article 13 of China’s Anti-Monopoly Law against a price-fixing cartel.  According to media reports, the local Guangxi counterpart of the NRDC led the enforcement efforts.

The cartel involved competing rice noodle producers in the cities of Nanning and Liuzhou.  The first cartel began in November of 2009 in the city of Nanning and continued until January 2010.  During that time, competitors held a series of meetings that led 18 noodle producers to agree to increase prices of rice noodles. Soon thereafter, a second cartel formed in the nearby city of Liuzhou that lead 15 noodle producers to reach agreement to raise prices.  After consumer protests, the NRDC began its investigation, which eventually resulted in publication of China’s first public infringement decision under the Chinese Anti-Monopoly Law on March 30, 2010. 

The fines ranged from 100,000 RMB (approximately $14,700 U.S. dollars) to 800,000 RMB (approximately $117,800 U.S. dollars).  Reports have also indicated that some producers took advantage of China’s leniency program and only received warnings.  China’s Price Law also played a role as local enforcement agencies restored rice noodle prices to pre-cartel levels.

The House-Senate Conference Committee considering financial services reform legislation is on the verge of adopting provisions that could shake up the world of debit cards. 

After much controversy and intense lobbying by merchants and banks, key conferees have announced an agreement that preserves most of the Durbin Amendment and, remarkably, adds a critical and potentially groundbreaking new prohibition aimed at the networks and debit issuing banks.

While the situation remains fluid and things could change, if this agreement holds the merchants have won a huge victory.

In discussing where things currently stand, let’s start with the key provisions regarding debit interchange.

While the Federal Reserve still will be given the power to pass rules regarding debit interchange, those rules will not apply to federal, state and local government program prepaid debit cards.  Reloadable prepaid cards, such as the cards increasingly used by the unbanked, are also exempted.

In another change the definition of “interchange transaction fee” has been changed to prevent the Fed from regulating the fees that banks pay to Visa and other debit networks for membership except to the extent that such fees are used to undermine the interchange regulations.

Lastly, in a potentially significant change,  the Fed can now take fraud prevention costs into account in configuring rules  aimed at capping the amount that merchants will pay  for debit interchange but such costs can only be considered if a bank demonstrates that they are complying with standards established by the Fed to reduce fraud. 

That brings us to the most significant change that came out of the conference.  The initial legislation included a provision that prohibited the card networks from passing rules against merchants from offering discounts to favor one card network over another.  That provision has been removed.

Instead, the agreement includes a provision that directs the Fed to adopt rules that preclude debit network exclusivity that comes about by “contract, requirement, condition, penalty, or otherwise.”  This provision could effectively nullify the partnership agreements between numerous banks – particularly some of the largest banks in the country – and Visa, as those agreements have resulted in an increasing number of debit cards bearing on the Visa and Interlink. click here for more »

Recognizing that “credit card companies” and “Wall Street banks” may not have the most sympathetic political image these days, the payment card industry has enlisted small financial institutions as proxies to undercut support for Senator Dick Durbin’s (D.-IL) amendment giving the Federal Reserve the power to scrutinize fees imposed on merchants accepting debit cards.

Durbin’s amendment was incorporated into the Senate version of the pending financial reform package by a surprisingly large, bipartisan 64-33 vote last month – thus the vociferous opposition campaign as House and Senate conferees got to work to reconcile the Senate’s version with a House bill that has no provision addressing interchange fees.  The conferees are expected to continue debating the potential curb on fees this week.

Durbin’s amendment requires the Federal Reserve to establish rules requiring that debit card “interchange fees” are “reasonable and proportional” to the costs incurred by an issuer or payment network “with respect to” a transaction.  The Federal Reserve’s rules are to set such levels taking into consideration the fact that the debit cards are an electronic replacement for checks, which clear at par, and the incremental costs of a card transaction.  In contrast, debit card interchange fees currently can amount to 1 percent or more of a card transaction.  Merchants would like these fees reduced to reflect no more than actual processing costs, to ensure, for example, that merchants are not forced to pay for the costs associated with airline frequent flyer points awarded when a customer swipes a “rewards” debit card. 

In response to concerns raised by community banks and credit unions during the drafting of the amendment, Durbin’s amendment expressly carved out from the sections coverage fees paid to card issuers that have assets of $10 billion or less.  According to Senator Durbin, the result is that only 85 financial institutions are covered by the debit interchange fee provision, including just the three largest of America’s over seven thousand credit unions.

 Nevertheless, credit unions and community banks have been at the forefront of the card industry’s efforts to ensure that the Durbin amendment is not included in the final financial reform legislation that emerges from the House-Senate conference process.  As the Washington Post put it, “credit unions and community banks say that [the exemption] isn’t enough in this case, arguing that they will be indirectly affected by any government efforts to curtail the lucrative fees. And they have not been shy in letting lawmakers know,” with a credit union trade association staffer announcing, “[w]e’re really trying to ramp up the noise this week.” click here for more »

Cooperation among competitors is usually the kind of activity that raises antitrust concerns.  However, with thousands of barrels of dirty crude oil spilling into the Gulf of Mexico on a daily basis, the head of Federal Trade Commission is seeking to ease concerns that cooperation among competing energy companies to help the federal government solve the crisis in the Gulf would face scrutiny under federal antitrust laws.

In response to a letter from Senate Judiciary Committee Chairman Patrick Leahy seeking the FTC’s position on such collaboration, FTC Chairman Jon Leibowitz wrote that “[a]lthough we must always be watchful when competitors collaborate, industry efforts to work with Federal officials and provide expertise to combat this ecological disaster are unlikely to raise concerns under the antitrust laws, and we would be unlikely to challenge such an effort.”  Chairman Leibowitz added that the “impact of the oil spill appears likely to be an enormous tragedy for the people and economy of the Gulf and we would like to help any way that we can.”

The issue of collaboration among energy companies was raised because BP officials have acknowledged that they were not technologically prepared to deal with a disaster such as the one now unfolding in the Gulf of Mexico.  A number of BP’s competitors, including ExxonMobile, Royal Dutch Shell and Chevron, have provided support to BP and government officials to help get the oil leak under control.