Markets Wired

In testimony presented to a U.S. House of Representatives Judiciary subcommittee the Federal Trade Commission described its ongoing efforts to protect competition and consumers in many important sectors of the economy, including health care, pharmaceuticals, and technology.

Testifying on behalf of the FTC before the Subcommittee on Regulatory Reform, Commercial and Antitrust Laws, Chairwoman Edith Ramirez said that, “In an effort to be most effective with limited resources, we pay particular attention to sectors where our action will provide the greatest benefit to the largest number of consumers.  Chief among those are health care and the technology sector.” 

The testimony outlines the FTC’s critical work promoting competition in health care markets, noting that health care consolidation can threaten to undermine efforts to control rising health care costs.  Examples of FTC actions to prevent anticompetitive health care mergers include litigation involving proposed hospital mergers that threaten higher prices and lower quality of care, as well as divestitures in pharmaceutical mergers to preserve competition and maintain competitive pricing for needed medications. 

The testimony also discusses the Commission’s ongoing work to prevent branded drug companies from using anticompetitive “pay-for-delay” agreements to stifle generic entry, a bipartisan effort in which the Commission has been involved for more than a decade.  The testimony highlights the U.S. Supreme Court’s ruling in FTC v. Actavis Inc., overturning the so-called “scope-of-patent” test, which some courts had held effectively immunized pay-for-delay settlements from antitrust scrutiny. 

The testimony also details the FTC’s efforts to promote competition in technology markets by using a balanced and fact-based approach to enforcement.  For instance, the Commission recently challenged the proposed merger between Honeywell and Intermec, makers of two-dimensional scan engines used in products such as retail scanners.  The testimony further discusses the Commission’s interest in the problem of “patent hold-up” that can arise during an industry standard-setting process.  Patent hold-up occurs when the holder of a standard essential patent (SEP), which has previously committed to license that SEP on reasonable and non-discriminatory (RAND) terms, violates its RAND commitment and uses the leverage of the standard setting process to negotiate higher royalties than it could have before the patent was incorporated into the standard.  The FTC recently pursued several enforcement actions related to patent holders who seek injunctive relief or exclusion orders for alleged infringement of their RAND-encumbered SEPs.

The testimony also notes that the FTC is addressing concerns about the rise of patent assertion entities (PAEs) — firms with a business model focused primarily on acquiring patents and then attempting to generate revenue by asserting intellectual property against persons who are already practicing the patented technology.  Last month, the Commission proposed to study the issue using its authority under Section 6(b) of the FTC Act, in order to develop a fuller and more accurate picture of the impact of PAE activity.

The testimony concludes with a summary of the FTC’s work to preserve competition in U.S. energy markets, citing recent merger reviews in the energy sector and describing the agency’s ongoing monitoring of daily retail and wholesale gasoline and diesel prices in 20 regions and 360 retail markets nationwide. 

The Commission vote approving the testimony and its inclusion in the formal record was 4-0.

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action.  To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., N.W., Room 7117, Washington, DC 20001.  To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.