Davis Polk & Wardwell Newsflash

Federal Antitrust Agencies Seek to Unwind Two Transactions Not Subject to HSR Act Reporting

December 23, 2008

Last week, the Department of Justice and the Federal Trade Commission separately filed complaints in federal district court seeking to unwind two different closed mergers which were not subject to the reporting and waiting period requirements under the Hart-Scott-Rodino Act.

The HSR Act requires that, subject to any applicable exemption, mergers or acquisitions that exceed a minimum jurisdictional threshold value (currently $63.1 million) be reported to the Federal Trade Commission (“FTC”) and the Department of Justice (“DOJ”), and that a waiting period be observed, prior to closing.  The value of each of these two transactions fell below that initial threshold.

Challenges to transactions valued below the minimum HSR Act threshold are exceedingly rare.  Prior to these actions, the last instance in which a transaction that fell below the thresholds was challenged occurred in July of 2006.  There, the FTC brought an action challenging Hologic Inc.’s 2005 purchase of the breast cancer screening and diagnosis business of Fischer Imaging Corporation, which challenge resulted in divestitures.  These two recent complaints provide a reminder that transactions not subject to the HSR Act process may still be challenged, even after they are consummated.

Last Friday, December 19th, the DOJ filed a civil antitrust lawsuit against Microsemi Corporation in connection with its acquisition of assets from Semicoa Inc., which closed in July of 2008.  The complaint alleged that the transaction eliminated or reduced competition in the development, manufacture and sale of certain semiconductor devices used in military and space programs essential to national security.  The DOJ has sought a preliminary injunction to hold separate the assets acquired from Semicoa, pending a trial, and requested as relief the divestiture of those assets.  The transaction was valued at approximately $25 million.

See a copy of the DOJ’s press release.

See a copy of the complaint.

Last Tuesday, December 16th, the FTC filed a complaint challenging Ovation Pharmaceuticals, Inc.ís January 2006 acquisition of the drug NeoProfen, which transaction was not reportable under the HSR Act. The complaint alleges that the transaction eliminated Ovationís only competitor for the treatment of a potentially deadly congenital heart defect affecting babies born prematurely, and seeks divestiture necessary to bring a competitor into the marketplace. The complaint further alleges that the acquisition allowed Ovation to raise the price of its drug, Indocin, nearly 1,300 percent, and states that Ovation then set a similarly inflated price for NeoProfen when that drug was brought to market.

See a copy of the FTC’s press release, which links to the complaint and to concurring statements from Commissioners Leibowitz and Rosch.  

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If you have any questions about the matters covered in this newsflash, please contact any of the lawyers listed below or your regular Davis Polk contact:

Paul W. Bartel, II, Partner
212-450-4760 | paul.bartel@dpw.com

Arthur J. Burke, Partner
212-450-4352 | arthur.burke@dpw.com

Joel M. Cohen, Partner
212-450-4592 | joel.cohen@dpw.com

Ronan P. Harty, Partner
212-450-4870 | ronan.harty@dpw.com

Stephen M. Pepper, Associate
212-450-4108 | stephen.pepper@dpw.com

Davis Polk & Wardwell