On February 24, 2014, the Ninth Circuit Court of Appeals affirmed the lower court’s grant of summary judgment dismissing DAW Industries’ claims of conspiracy to restrain trade and attempted monopolization, once again affirming the tenet that antitrust laws do not address malicious actions to destroy a competitor, unless injury to competition as a whole can also be established. DAW Indus., Inc. v. Hanger Orthopedic Group, Inc., 3:06-cv-01222 (9th Cir. Feb. 24, 2014) (unpublished opinion).
On January 23, in a landmark decision that is one of the most important yet to be handed down in the sprawling LCD antitrust litigation pending in various federal courts since 2006, Judge Joan Gottschall of the Northern District of Illinois dismissed plaintiff Motorola Mobility’s price-fixing claims based on overseas purchases by its foreign affiliates, ruling that the claims were barred by the Foreign Trade Antitrust Improvements Act (“FTAIA”), which limits the application of American antitrust laws to foreign conduct. The decision effectively eliminates from the case more than 99% of Motorola’s $5.4 billion in claimed damages.
1. Higher Thresholds For HSR Filings
Higher thresholds for premerger filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 will become effective on February 24, 2014. The filing thresholds are revised annually, based on the change in gross national product.
On January 7, 2014, the Federal Trade Commission announced “Operation Failed Resolution”, targeting false and deceptive claims made by marketers of weight loss products. As part of this initiative, the FTC issued updated guidance for use by the media to help them spot phony weight-loss claims when screening ads for publication. Along with the release of this media guidance, the FTC also announced the settlement of four enforcement actions against companies marketing foods, cosmetics or dietary supplements. In connection with these weight-loss and similar cases, there appears to be disagreement among the Commissioners as to a substantiation rule that would require two “randomized controlled trials” to substantiate health and disease-related claims.
On December 2, 2013, United States District Judge Yvonne Gonzalez Rogers of the Northern District of California dismissed a case against Apple brought by a putative class of consumers who purchased applications from the App Store claiming that Apple’s 30 percent commission violated Section 2 of the Sherman Act. Judge Gonzalez Rogers held that the consumers were indirect purchasers barred from bringing suit under Illinois Brick and dismissed the case with prejudice. In re Apple iPhone Antitrust Litigation, No. 11-cv-06714-YGR (N.D. Cal December 2, 2013).
In Competition Law360, September 4, 2013, we reported on the dismissal of a complaint which alleged, inter alia, exclusive-dealing claims in a market described as the management and distribution of “photographs in rich media content for hotels”. Plaintiff Pro Search (“Pro Search”) alleged that defendant VFML Leonardo, Inc. (VFML”) violated Sections 1 and 2 of the Sherman Act by entering into exclusive-dealing agreements which allegedly excluded Pro Search from participation in the defined relevant market. Pro Search alleged that VFML had approximately 80% of the relevant market. Nevertheless, the U.S. District Court for the Central District of California, sitting in Santa Ana, dismissed the First Amended Complaint (“FAC”) on the ground that the contracts were “a short duration and easily terminable”. This was so notwithstanding that the duration of the contracts in issue were two to three years in a number of situations, and five years in another. Pro Search Plus LLC v. VFM Leonardo, Inc., U.S.D.C., Central Dist. of California, Case No. SACV 12-2102-JST (ANx), July 30, 2013.
On December 6, 2013, a federal judge sentenced the former president of SeaStar Line LLC to five years in prison for his role in a price-fixing conspiracy – the longest-ever prison sentence imposed for an antitrust violation. (U.S. v. Frank Peake, Case No. 3:11-cr-00512, U.S. Dist. Ct., DPR.). The executive was convicted of engaging in a conspiracy to fix rates and surcharges to government and commercial customers for ocean freight between the Continental U.S. and Puerto Rico.
The City of San Jose, California, entered into an option contract to lease land to the Oakland A’s, a Major League Baseball (“MLB”) club, for the construction of a new stadium. The land was within the exclusive territory of another MLB club, the San Francisco Giants, who refused to waive their right under MLB’s Constitution to territorial exclusivity. The City sued MLB under the antitrust laws for not putting repeal of that constitutional provision up for a vote by all of the teams belonging to MLB, despite repeated demands by the City that it do so. City of San Jose v. Office of the Commissioner of Baseball, __ F.Supp.2d __, 2013 WL 5609346, Case No. C-13-02787 RMW (N.D. Cal., Oct. 11, 2013).
GULF STATES REORGANIZATION GROUP, INC. V. NUCOR CORP. (11th Cir. July 15, 2013) No. 11-14983.
In 1999, Gulf States Steel, Inc., a participant in a market described as “black hot rolled coil steel” filed a petition for bankruptcy. When reorganization efforts failed, and it filed a Chapter 7 petition, a group called Gulf States Reorganization Group (“GSRG”) negotiated with the Bankruptcy court to purchase and operate the “black hot rolled coil steel” assets. The Bankruptcy court issued an order requiring the sale of the assets to GSRG, unless another entity made a higher bid. In that eventuality, an auction would be held.
The current press is buzzing with news about the recent increase in antitrust investigations involving foreign companies with operations in China, and reports of foreign companies being told to expect higher fines if they “put up a fight” during investigations. At the same time, the Chinese enforcement agencies have started to make their decisions public. Putting these developments in perspective, the take-away is that antitrust in China should be taken seriously, the enforcement agencies are still in the development stage, and some progress is being made in transparency of decision-making.