The Election, The Economy And The New Antitrust Challenges

Sunday, October 4, 2009 - 01:00

Editor: Barry, what brought you back to Fried Frank?

Nigro: The work and the people attracted me back to the firm. My appreciation for Fried Frank's work is based not only on my prior tenure at the firm, but also on the fact that the firm consistently has been at the forefront of the types of transactions and government investigations on which my practice is focused. I'm especially excited about working closely with the firm's M&A and private equity practices and its strong roster of public company and private equity clients, both of which provide a great platform for expanding Fried Frank's existing antitrust practice.

On the people side, I'm really looking forward to teaming up again with Fried Frank's corporate department and its antitrust team, in particular Peter Guryan and Richard Park. Both Peter and Richard are lawyers with whom I've worked for many years. I recruited them when I previously was at the firm and have tremendous respect for both of them.

I left the firm in 2003 to serve as Deputy Director for the Federal Trade Commission's Bureau of Competition where I supervised the merger and non-merger enforcement divisions, and participated in the development of agency policies related to compliance, merger and non-merger matters, and pre-merger notification. During my tenure at the FTC, I oversaw numerous merger investigations and litigations across a broad range of industries, including pharmaceuticals, defense, energy, music, tobacco, consumer products, and aerospace. Immediately prior to rejoining Fried Frank, I served as an antitrust partner in the Washington office of another excellent firm. However, when the opportunity arose to collaborate again with Peter, Richard, and the antitrust group, the combination of the work and the people was too compelling to ignore.

Editor: As a partner in the firm's antitrust practice, what role will you play?

Nigro: The Fried Frank antitrust practice is well established. It experienced significant growth before I joined the FTC, and it has continued since then to do great work. I expect to provide leadership and experience to further expand the practice along with Peter and Richard.

Editor: What changes do you foresee in FTC and DOJ policy as a result of the elections?

Nigro: As to the FTC, Chairman Leibowitz's priorities are likely to lead to increased enforcement in the areas of healthcare, pharmaceuticals, energy and consumer protection. In addition, the President has two Commission seats to fill, which could lead to further policy changes.

Christine Varney, the new Assistant Attorney General for the DOJ's Antitrust Division, has clearly signaled that she will have an active enforcement agenda. The Antitrust Division is also hiring a significant number of trial lawyers. I expect there is going to be an increased focus and investment in litigating cases, which I think we will start to see some time in 2010.

However, what has not changed at either agency is the staff. One thing that is great about the agencies is the professionalism and expertise that the staff brings to a matter. There are people on the staff both at the management level and the attorney level who have been there for many years. They have worked for Democratic and Republican administrations and do a fantastic job of investigating and litigating cases.

Editor: How has the practice of antitrust law been impacted by the economic crisis?

Nigro: Although there are fewer deals, the FTC and the DOJ are as active as ever. If anything, their level of activity has increased. The focus now seems to be on strategic acquisitions in smaller markets and smaller deals, some of which are too small to trigger a filing under the Hart-Scott-Rodino Act. This has resulted in the agencies investing a lot more resources investigating and prosecuting consummated mergers.

Editor: What types of matters will you be working on?

Nigro: Primarily government antitrust investigations of transactions, both consummated and unconsummated, and investigations of criminal and civil anticompetitive conduct.

Editor: How is the new administration approaching issues relating to unilateral conduct?

Nigro: The prior administration was cautious about bringing monopolization cases challenging unilateral conduct under Section 2 of the Sherman Act. There was a presumption that tie-ins, bundling and various sorts of pricing and marketing practices promoted efficiency and were okay, absent compelling evidence that they were anticompetitive. Under the new administration, there seems to be an increased willingness to scrutinize and potentially challenge them. One of the first things AAG Varney did after she was confirmed was to withdraw the Section 2 Report issued last fall.

Editor: To what extent will the agencies' new initiatives be limited by the courts?

Nigro: The FTC and the DOJ have been very vocal about the desire to increase antitrust enforcement with respect to transactions and conduct. However, both agencies need to persuade a court that based on existing law a violation has occurred. Remember, the courts in several cases brought by the prior administration denied the requested relief. So, it'll be interesting to see to what extent a more aggressive enforcement posture will produce significantly different results from the prior administration.

Editor: What sectors of the economy are most likely to be in the cross-hairs of the agencies?

Nigro: Healthcare, energy and high tech.

There will be an increased focus on healthcare if the reforms advocated by President Obama are passed. The reforms will change how healthcare companies do business, which is certain to raise antitrust issues.

Within the healthcare sector, the pharmaceutical industry is of particular interest to the FTC. The FTC has repeatedly challenged "reverse payments" provided for in some of the settlement agreements between branded pharmaceutical companies and manufacturers of generics. These types of settlements grow out of patent litigation and involve a payment from the branded company to the generic company along with some sort of understanding about when the generic company will enter the market.

Because energy prices are of such great concern to the administration and Congress, I believe it is likely that we will see increased enforcement resources focused on oil, gas and other energy markets.

Finally, it is clear that the Antitrust Division is going to focus significant resources on high-tech companies that have large market shares, including several with widely recognized names.

Editor: What do you see happening in the banking sector?

Nigro: The concern with banks is that some may be too big to fail. However, whether a bank is too big to fail is a different question from whether it has monopoly power. Even the largest banks don't necessarily have a large market share in today's global financial markets. With respect to retail banking, the analysis of mergers is relatively straightforward. So, while there may be greater antitrust scrutiny of financial institutions, it is unclear whether enforcement in the banking sector by the new administration will be markedly different from prior administrations.

Editor: Are authorities other than the FTC and the Antitrust Division increasingly involved in matters you handle?

Nigro: Yes. It's common for authorities, both state and federal, to work together. In addition, increasingly their investigations are being done in concert with competition authorities in foreign jurisdictions. There is coordination among antitrust authorities not just across the country but across the globe. Trying to get a deal cleared and closed has become more interesting and more complex.

Over 100 countries have some sort of antitrust rules in place, and many include merger notification requirements. Almost any deal that is of significant size requires filings in the United States, Europe and usually a number of other countries. Editor: Does your firm handle the international aspects or do you rely on local firms?

Nigro: Both. We handle deals all the time that require filings around the world. We have through our foreign offices, particularly London, a significant amount of experience relating to merger clearance in countries outside the U.S. There also are instances in which we team up with a member of our network of firms when it's appropriate.

Editor: When should corporate counsel retain outside antitrust counsel?

Nigro: When a transaction involves a competitor, or a critical supplier or customer of a competitor, outside antitrust counsel should get involved from the beginning. In addition to addressing the antitrust risks up front, there are risks associated with the deal process. For example, there are limits on the conversations that companies can have and the information that can be shared in connection with due diligence. Companies that are not properly counseled could incur significant penalties if they aren't careful. Even worse, an investigation into conduct that occurred prior to signing the merger agreement has the potential to unnecessarily delay antitrust clearance and closing the deal.

Editor: Can outside antitrust counsel be of help in sensitizing inside counsel to marketing issues?

Nigro: Yes. The Internet and new modes of marketing raise some novel antitrust issues. Also, in some respects the law has changed and in other respects it hasn't. On the one hand, companies have a lot more leeway under federal law when it comes to resale price maintenance, distribution systems, pricing programs, advertising cooperatives and the like. Companies now have greater flexibility to come up with creative programs to promote more efficient distribution and service for their customers. On the other hand, some states continue to impose rules that are more restrictive than exist under federal law - for example, Maryland recently adopted legislation that makes price maintenance illegal and criminal. We are familiar with the different requirements from state to state and federally. We regularly help companies structure marketing programs and policies.

Editor: Are you seeing any emerging trends?

Nigro: Yes. There is closer alignment between the agencies on a number of issues where they previously disagreed, and there seems to be an increased focus on consummated mergers. But we need to give both the FTC and the DOJ more time before we can identify new trends with any degree of confidence. Although President Obama was elected in November and inaugurated in January, the new leadership at both agencies was not fully in place until just a few months ago. We should have a better idea by early next year just how significant a change has occurred.

Please email the interviewee at barry.nigro@friedfrank.com with questions about this interview.