CORPORATE CRIME REPORTER
Foer
Wants FTC to Move Against CVS Caremark Domination
24 Corporate Crime Reporter 44, November 9, 2010
The American Antitrust Institute today called on the Federal Trade Commission
(FTC) to investigate whether CVS Caremark has been using its market dominance
as a pharmacy benefits manager to suppress competition in retail pharmacy markets.
In a letter to Richard Feinstein, director of the FTC’s Bureau of Competition, and David Vladeck, director of the FTC’s Bureau of Consumer Protection, AAI Presdient Albert Foer asked – “Why, in the course of the 2007 review of the then-proposed CVS-Caremark merger, the FTC did not foresee a likelihood that the merger would create both the ability and the incentive of the combined firm to act in this manner?”
“That surely would have warranted a challenge and, at a minimum, conditioning clearance upon consent-order safeguards against such conduct as the FTC did in the case of similar PBM-related combinations in the 1990s (Merck/Medco, Lilly/PCS),” Foer wrote. “But, without any need to find fault with the decision-making three years ago, evidence that this conduct is now occurring would clearly establish that the merger did in fact enable and incent the combined firm to engage in this conduct. That, in turn, would warrant reopening the merger investigation, challenging the merger today on the ground it has proven to be anti-competitive, and consideration of a divestiture remedy.”
Foer argued that evidence that these practices are occurring would be “a sound basis” for the FTC to challenge to them as both antitrust violations under the “unfair methods of competition” prong and consumer protection violations under the “unfair practices” prong of Section 5 of the FTC Act.
“Indeed, this would be an important opportunity to develop and confirm Section 5 law as broader than other antitrust statutes in its ability to reach single-firm exclusionary conduct in its incipiency – even, for example, before it reaches the stage of monopoly or near monopoly power in the affected market or markets,” Foer wrote. “And, particularly given the alleged disregard of consumer privacy expectations and the role of that abuse in the alleged overall scheme, this could also be an important opportunity to demonstrate synergies in coordinated uses of the Commission’s antitrust and consumer protection authorities in support of both agency missions.”
“If the evidence supports the allegations, serious diminution of consumer choice would be a common feature of both the alleged unfair methods of competition and the alleged unfair practices,” Foer wrote.
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