On February 27, 2009, President Barack Obama named Federal Trade Commission (FTC) Commissioner Jon Leibowitz as FTC Chairman. Mr. Leibowitz replaces Bill Kovacic, who will likely remain at the FTC as a Commissioner. With Mr. Leibowitz already serving as an FTC Commissioner, this appointment does not require confirmation. Mr. Leibowitz has served in various positions on Capitol Hill since graduating from New York University School of Law in 1984. While we anticipate aggressive antitrust and consumer protection enforcement to continue at the FTC under Chairman Leibowitz, the appointment of Ms. Christine Varney at the U.S. Department of Justice also should result in aggressive antitrust enforcement by that agency.
Background on Mr. Leibowitz
Mr. Leibowitz has close ties to Senator Herb Kohl (D-Wis.), having served as his chief counsel from 1989 – 2000, and as Democratic Chief Counsel to the Antitrust Subcommittee of the Senate Judiciary Committee from 1997 – 2000. From 2000 – 2004, Mr. Leibowitz worked as vice president for congressional affairs for the Motion Picture Association of America.
Mr. Leibowitz's speeches and articles tend to focus on nonmerger competition and consumer protection issues. However, in a concurring statement approving Genzyme Corporation’s acquisition of ILEX Oncology, Inc. in 2005, Mr. Leibowitz made the following (general) comments:
Merger enforcement is a vital component of the Commission’s mission. We are charged under the Clayton Act with ensuring that competition and consumers do not suffer from transactions whose effects may be to “substantially lessen competition.” Of course, the Clayton Act provides no inalienable right to merge. It is important, then, for the Commission to rigorously scrutinize each transaction we review in fulfilling our mission. Where a transaction may substantially lessen competition, a high burden should be placed on the parties to show that harm is demonstrably outweighed by efficiencies or that potential relief restores competition. My fellow Commissioners and our attorneys, economists and staff take our responsibility very seriously.
The recently announced or discussed mergers between a) Pfizer and Wyeth, and b) Merck and Schering-Plough will provide opportunities to see how Mr. Leibowitz and the other FTC Commissioners intend to address major pharmaceutical mergers. It is possible that, under Chairman Leibowitz, the FTC will be more aggressive on pharmaceutical merger reviews, namely by pushing for more scrutiny and divestiture of drug pipeline and research and development (R&D) overlaps. If so, there will be even greater opportunities for other pharmaceutical businesses to buy valuable assets — including drugs, drug pipelines, and R&D projects — required for divestiture by the FTC.
Impact on the Pharmaceutical Industry
In light of Mr. Leibowitz's apparent predispositions with respect to the pharmaceutical industry, the industry also could face heightened scrutiny with him as FTC Chair in nonmerger areas of antirust enforcement. For example, Mr. Leibowitz has been a strong advocate of per se illegality treatment of "reverse payments," which are sometimes made in the course of settlement of patent litigation between branded and generic drug manufacturers. The Leibowitz/FTC position on this issue has been repeatedly rejected by U.S Circuit Courts, including the Eleventh Circuit in Schering-Plough Corp. v. FTC, 402 F.3d 1056 (11th Cir. 2005); the Second Circuit in In re Tamoxifen Citrate Antitrust Litig., 466 F.3d 187 (2d Cir. 2006); and most recently by the Federal Circuit in In re Ciprofloxacin Hydrochloride Antitrust Litig., 544 F.3d 1323 (Fed. Cir. 2008). In addition:
Finally, the FTC routinely reviews patent licensing issues in an attempt to identify anticompetitive practices. As a result, it is important to ensure that patent licenses do not contain competitive restrictions that the antitrust agencies would not find reasonably "ancillary" to the license. Also recall that the sale of a patent, or the license of an exclusive patent license, may trigger the merger notification requirements of the Hart-Scott-Rodino Act (HSR), which requires agency clearance before the transaction can be completed.
We do not yet have knowledge as to whom Mr. Leibowitz intends to appoint as directors and deputy directors of the FTC's various bureaus. These appointments could be important to your business, since the people in these positions can provide an important check to FTC staffers conducting merger and nonmerger investigations.
Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and our colleagues. If you have any questions about this update or would like to discuss this topic further, please contact your Foley attorney or the following:
Gregory E. Neppl
Stephen B. Maebius
David L. Rosen
Judith A. Waltz
Alan D. Rutenberg