Plaintiff flunks Twombly-Sprewell "two-step," as the court's judicial notice of admissions adduced during preliminary injunction discovery discloses facts the court found to be inconsistent with plaintiff's theory of the case. RealNetworks, Inc. v. DVD Copy Control Ass'n, 2010-1 Trade Cas. (CCH) Para 76,877 (N.D. Cal. 1/6/10).
On January 13, 2010, the U.S. Court of Appeals for the Second Circuit reversed a district court’s dismissal of a class action lawsuit accusing the major record companies of conspiring in violation of the antitrust laws to fix the prices for music purchased on the Internet. See Starr v. Sony BMG Music Entertainment, et al., No. 08-5637-cv (2nd Cir., Jan. 13, 2010) (“Starr”). Specifically, applying the heightened pleading standard required by the United States Supreme Court’s decision in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the Court found that “[t]he present complaint succeeds where Twombly's failed because the complaint alleges specific facts sufficient to plausibly suggest that the parallel conduct alleged was the result of an agreement among the defendants.” While the precise impact of the pleading standard required by Twombly for antitrust cases remains uncertain, for now, the Starr decision will be one that is carefully studied by attorneys bringing, and defending against, antitrust lawsuits.
On January 13, 2010, the Supreme Court heard oral arguments in American Needle v. National Football League, Case No. 08-661, which concerns whether the teams belonging to the National Football League should be treated as a single entity or as 32 independent entities for antitrust purposes. If the former view were to be adopted in this case, the teams in the NFL possibly could enjoy immunity from lawsuits brought under Section 1 of the Sherman Act, which only applies to combinations of two or more entities.
A market share discount engaged in by an alleged monopolist, coupled with a new product innovation that was not compatible with competitor's products, passes Sherman Act scrutiny. Allied Orthopedic v. Tyco Health Care, 08-56314 (9th Cir. January 6, 2010).
In Safeway Inc. v. Abbott Laboratories, 2010 WL 147988 (N.D. Cal. Jan. 12, 2010), Judge Wilkins of the U.S. District Court for the Northern District of California denied defendant Abbott Laboratories' motion to dismiss predatory pricing and refusal to deal claims set forth in the second amended complaints filed by Direct Purchasers and Abbott's competitor, SmithKline Beecham Corp. ("GSK").
The U.S. Department of Justice has approved the merger of the world's biggest concert promoter and the world's biggest ticket-seller.
On January 13, 2010, the Federal Trade Commission released a study critical of “pay-for-delay” patent litigation settlements by which brand-name drug companies pay generic competitors to keep generic drugs off the market. The same day, the Chairman of the FTC, Jon Leibowitz, and Representatives Chris Van Hollen (D-Md.), Bobby Rush (D-Ill.) and Mary Jo Kilroy (D-Ohio) held a news conference during which they urged Congress to include a provisional banning such settlements in the final health care reform bill.
1. Lower Thresholds For HSR Filings
On January 19, 2010, the Federal Trade Commission announced revised, lower thresholds for premerger filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The filing thresholds are revised annually, based on the change in gross national product. For the first time, the thresholds have been reduced. They will be effective thirty days after publication in the Federal Register. Publication is expected to occur this week. Thus the new thresholds will most likely become effective late February 2010. Acquisitions that have not closed by the effective date will be subject to the new thresholds. Filing persons must wait a designated period of time, usually 30 days, before completing their transactions. The HSR Act imposes premerger notification and waiting period obligations on transactions over a certain size, where the parties are over a certain size, before those transactions may be completed. Each "person" who is a party to an HSR-reportable deal must file an HSR notification with the Department of Justice Antitrust Division and the Federal Trade Commission.
The Ninth Circuit recently affirmed the dismissal of claims based on the aggregation of petroleum exchange agreements to show alleged "cumulative anticompetitive effects." Gilley Enterprises v. Atlantic Richfield Company, No. 06-056059 (9th Cir. Dec. 2, 2009)."
In Electronic Trading Group, LLC v. Banc of America Securities LLC (In re Short Sale Antitrust Litigation), 2009 WL 4350035 (2d Cir. Dec. 3, 2009), the United States Court of Appeals for the Second Circuit affirmed the dismissal of a putative antitrust class action against certain financial institutions that serve as “prime brokers” in connection with short sale transactions, on the ground that the federal securities laws precluded application of antitrust law to the matters at hand. This was the first time the Second Circuit applied the considerations for the implied preclusion of antitrust laws by the securities laws outlined by the United States Supreme Court in Credit Suisse Securities (USA) LLC v. Billing, 551 U.S. 264 (2007).
On November 9, 2009, the European Commission ("EC") issued a Statement of Objections ("SO") regarding Oracle Corporation's ("Oracle") proposed acquisition of Sun Microsystems, Inc., ("Sun"). The EC opened an in-depth investigation of the deal in September, shortly after the U.S. Department of Justice's Antitrust Division ("DOJ") cleared the proposed transaction. The EC is concerned that the merger will reduce competition in the market for databases. See EC Declines to Follow DOJ's Lead, Opens In-Depth Investigation of Oracle-Sun Deal.
The Federal Trade Commission announced in October 2009 that it will allow Schering-Plough Corporation's proposed $41.1 billion acquisition of Merck & Co., Inc. to proceed, subject to a consent order requiring the parties to each divest certain interests and assets in businesses where the FTC was concerned the transaction would have substantially reduced competition.
On October 16, 2009, Judge Louis H. Pollak of the United States District Court for the Eastern District of Pennsylvania ruled that the Foreign Trade Antitrust Improvements Act of 1982, 15 U.S.C. § 6a ("FTAIA") mandated dismissal of a putative class action brought against foreign airlines Lufthansa, Air France, KLM, and Alitalia under the Sherman Act for allegedly conspiring to fix the price of Europe-to-Japan and Japan-to-Europe passenger air transportation. McLafferty v. Deutsche Lufthansa A.G., CV 08-1706 (E.D. Pa., October 16, 2009).
Rather than being "plus factors," allegations of interdependent industry structure simply demonstrate that the challenged conduct of defendant title insurers was as consistent with competition as with collusion. In re California Title Insurance Antitrust Litigation, 2009 U.S. Dist. LEXIS 103407 (N.D. Cal., November 6, 2009). Plaintiffs brought an action against major title insurers and their subsidiaries for engaging in conduct that allegedly violated Section 1 of the Sherman Act, Section 16720 of the California Business and Professions Code, and Section 17200 of the California Unfair Competition Provision in the Business and Professions Code.
On June 28, 2007, in Leegin Creative Leather Products, Inc. v. PSKS, Inc.,[1] the United States Supreme Court decided in a 5-4 vote to overrule the long-lived rule in Dr. Miles Medical Co. v. John D. Park & Sons Co.[2]The decision in Dr. Miles, issued in 1911, had a long but checkered life. In Dr. Miles, the Court affirmed the sustaining of a demurrer to a bill in equity, and held that it was illegal under Section 1 of the Sherman Act for a manufacturer and its distributors to agree on a minimum price that the distributor must charge for the manufacturer's goods, upon resale.
The Tenth Circuit's recent dismissal of Section 2 monopolization and attempted monopolization claims in Four Corners Nephrology Associates, P.C. v. Mercy Medical Center of Durango, -- F.3d ---, 2009 WL 3085882 (10th Cir. Sep. 29, 2009), relied extensively on the Supreme Court's Linkline and Trinko decisions to hold that: (1) a hospital's refusal to allow a physician access to its nephrology facilities does not constitute anticompetitive conduct under Section 2 of the Sherman Act; and (2) the refusal does not constitute an injury of the type the antitrust laws were intended to prevent.
Earlier this year, in her first speech as Assistant Attorney General in charge of the Department of Justice's (DOJ) Antitrust Division, Christine Varney referred to Americans' growing reliance on high-tech solutions in the home and workplace, and stated that her Department “planned to devote attention to understanding the unique competition-related issues posed by these markets”. See Christine Varney, Vigorous Antitrust Enforcement in This Challenging Era, Speech Before the Center for American Progress (May 11, 2009), available here. Less than six months later, DOJ has reportedly initiated an antitrust investigation into one of the nation's largest technology companies, IBM, and filed a brief detailing its concerns at a proposed book settlement that would allow the creation of a vast digital library by Google. During the same time period, the Federal Trade Commission (FTC) has been investigating the boardroom overlap between Google and Apple with respect to a breach of the prohibition on “interlocking directorates" and the Federal Communication Commission ( FCC) has been investigating the state of competition in the wireless market. Together, these actions may evidence the beginning of a wider trend of antitrust scrutiny of the technology sector.
On October 2, 2009, the United States Court of Appeals for the Sixth Circuit ruled in favor of defendant airline carriers[1] accused of conspiring to reduce, cap and ultimately eliminate the base commissions paid to travel agents selling defendants’ airline services in In re Travel Agent Commission Antitrust Litigation. The Sixth Circuit’s decision is the latest to embrace the pleading standards of Bell Atlantic Corporation v. Twombly, 550 U.S. 544 (2007) by requiring plaintiffs to plead non-conclusory factual allegations that raise a “plausible suggestion of conspiracy.”
When the Supreme Court modified the prohibition against resale price maintenance agreements ("RPM") more than two years ago in Leegin Creative Leather Products v. PSKS, Inc., it was not immediately clear how state enforcers and state courts would apply state laws to RPM. 127 S. Ct. 2705 (2007). Thirty-seven State Attorneys General (AGs) had asked the Court in a joint amicus brief to uphold the per se rule which makes all RPM illegal. Since Leegin, some AGs have taken the position that RPM remains per se illegal under some state laws and other states have passed or may pass "Leegin repealer" bills.
Overview
On September 3, 2009, the European Commission ("EC") announced that it was opening an in-depth investigation under the EU Merger Regulation of Oracle Corporation's proposed acquisition of Sun Microsystems. This announcement came despite the Department of Justice's ("DOJ") extended review and approval of the same deal without conditions in late August, in addition to DOJ's recent signaling of tougher merger review standards and closer cooperation with European competition authorities.
On August 18, 2009, the District Court for the Western District of Washington dismissed with leave to amend an MDL action against shippers for violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, based on allegations that the shippers colluded to simultaneously increase fuel surcharges, illegally shared vessel capacity, and conspired not to enter into extra-tariff rate agreements with customers. In re Hawaiian and Guamanian Cabotage Antitrust Litig., No. 08-md-1972 TSZ (“Pacific Shipping MDL”), Order No. 5 (W.D. Wa., Aug. 18, 2009) (“Slip Op.”).
On August 21, 2009, Judge John Gleeson of the United States District Court for the Eastern District of New York overruled a magistrate judge’s recommendation to dismiss antitrust and other claims asserted in a multi-district putative class action against domestic and foreign airlines that provide airfreight-shipping services. See In Re Air Cargo Shipping Services Antitrust Litigation, 06-MD-1775 (JG) (VVP) (MDL No. 1775) (the “Opinion”). The Air Cargo case arises from investigations into the air cargo industry by competition authorities around the globe. Plaintiffs are direct and indirect domestic and foreign purchasers of airfreight shipping services who purportedly paid uncompetitive fees as a result of price-fixing carried out by, inter alia, the defendants’ concerted imposition of surcharges.
I. Summary
On July 28, 2009, the European Commission (EC) launched a formal consultation on the EU rules applicable to distribution agreements. The current key legislation expires on May 31, 2010, and the intention appears to be to adopt the new rules before the end of this year. These proposals are important to both suppliers and retailers and affect both physical and online distribution. While the EC believes the current economic effects-based rules introduced in 1999 work well and do not need substantial change, it has published a revised draft Regulation and Guidelines that contain some important changes and clarifications from the existing law, in particular, with respect to internet sales, resale price maintenance, and purchasing power of large retailers.
Despite two 2007 Supreme Court decisions that make it more difficult to sue under federal antitrust laws for vertical price restraints, on July 15, 2009, a federal judge in Philadelphia granted class certification to a complaint alleging that Babies "R" Us ("BRU") coerced manufacturers of high-end baby products into preventing Internet dealers from discounting their products. McDonough et al. v. Toys "R" Us Inc. et al., No. 06-0242, 2009 WL 2055168 (E.D. Pa. July 15, 2009).
"Zero Foreclosure" Is Less Than "De Minimus."
Buyers of newly constructed homes in the Boise, Idaho, area filed a federal antitrust class action, alleging that realtors representing owners of undeveloped property tied the sale of the undeveloped lots to realtors’ services and commissions that included the new homes constructed on the lots by contractors, as well at the value of the lot. Plaintiffs claimed that the practice was a per se unlawful tying arrangement under Section 1 of The Sherman Act.
On August 10, 2009, a federal district court in Mississippi granted defendants' motion to dismiss plaintiffs' claims alleging that defendants conspired to fix the prices of plywood in violation of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1. Bailey Lumber & Supply Co. v. Georgia-Pacific Corp., No. 1:08-CV-1394 (S.D. Miss. Aug. 10, 2009).
On July 10, 2009, the U.S. Department of Transportation ("DOT") granted antitrust immunity to Continental Airlines for its planned participation in the Star Alliance, allowing Continental to coordinate international air services with other Star Alliance members without being subject to antitrust liability. The Star Alliance is a joint venture that includes over 20 member airlines. The Star ATI Alliance is a nine-member antitrust-immune subset of the Star Alliance. Continental is expected to join the Star Alliance and become the newest Star ATI member on October 24, 2009, when its current agreement with rival SkyTeam Alliance expires. The DOT also approved a new international joint venture between Star ATI members Continental, Air Canada, Deutsche Lufthansa Airlines and United Air Lines to be called Atlantic Plus-Plus, or A++. A++ members will be able to jointly arrange capacity, sales and marketing and share revenue on a portion of their international air services, also without being subject to antitrust liability.
The new Department of Justice, with Christine Varney at the helm of its antitrust division, has changed course to finally (and formally) align itself with the Federal Trade Commission in opposition to reverse payment settlements in the pharmaceutical industry. On July 6, 2009, the DOJ filed a brief with the Second Circuit (at the court's invitation) in In re Ciproflaxin Hydrochloride Antitrust Litigation which marks the DOJ's first formal opposition to reverse payment settlements, i.e., settlements of patent disputes in which the brand drug-maker makes a "reverse" or "exclusion" payment to the would-be generic competitor to delay its entry into the relevant drug market. This represents a significant departure from the DOJ of the Bush era, which took a stance contrary to the FTC's before the U.S. Supreme Court, even criticizing its sister agency's "high degree of suspicion of any reverse payment settlement."
On June 4, 2009, the European Court of Justice (ECJ) gave judgment on a reference from the Dutch courts on the interpretation of Article 81 of the EC Treaty and ruled that a single meeting between five Dutch mobile phone operators in which the companies had discussed the reduction of commission payments made to dealers for the sale of mobile phone contracts to consumers was sufficient to establish a breach of the EU's competition rules. See Case C-8/08, T-Mobile Netherlands BV and Others v Raad van bestuur van der Nederlands Mededingingsautoriteit (June 4, 2009).
In June 2009, media executive John Malone agreed to pay $1.4 million for violating the pre-merger reporting and waiting requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 as amended (HSR Act). The payment settles a complaint for civil penalties that alleges Malone violated the HSR Act in August 2005, when he acquired voting securities of Discovery Holding Co. (Discovery) without complying with the HSR Act's pre-merger notification and waiting period requirements. The complaint also charges that he continued to violate the HSR Act through July 2008 by acquiring additional voting securities of Discovery without complying with the same requirements.
On November 16, 2008, just after President Barack Obama’s election, the president-elect stated in an interview with CBS’s 60 Minutes that the Bowl Championship Series’ (BCS’s) current system should be dismantled and replaced with a playoff system:
The Federal Trade Commission's Chairman, Jon Leibowitz, continued the FTC's aggressive campaign against reverse payment settlements (also called "pay-for-delay" or "exclusion" settlements) by delivering a speech at the Center for American Progress entitled "'Pay-for Delay' Settlements in the Pharmaceutical Industry: How Congress Can Stop Anticompetitive Conduct, Protect Consumers' Wallets, and Help Pay for Health Care Reform (The $35 Billion Solution)" (June 23, 2009). In his speech, Chairman Leibowitz reiterated that banning such settlements -- settlements of patent disputes in which the brand name pharmaceutical company makes a "reverse" or "exclusion" payment to the would-be generic competitor to delay its entry into the relevant drug market -- is one of the FTC's highest priorities. He also reiterated the FTC's position that because the profits that a would-be generic competitor anticipates making by entering the market are significantly less than the profits the brand-name firm stands to lose, both parties have greater incentives to settle their patent disputes and share in the monopoly profits than to compete with one another. While reverse payment settlements are "win-win" propositions for both settling parties, American consumers, on the other hand, bear the ultimate costs of such settlements. (Read our previous blog article about the FTC's latest suit against reverse payment settlements.)
On June 29, 2009, Governor Schwarzenegger signed into law California's Electronic Discovery Act, which is effective immediately. These amendments to California's discovery rules are very similar to the recent revisions to the Federal Rules of Civil Procedure, and generally bring California in line with federal e-discovery standards.
Standard Iron Works v. Arcelormittal, N.D. ILL., No. 08 C 5214, June 12, 2009
Plaintiff Standard Iron Works ("Standard") commenced a class action against domestic steel producers, as a direct purchaser of steel products. Standard alleged a multi-year antitrust conspiracy to enhance price levels by the coordinated reduction of industry output of steel products in the United States. According to the complaint, each defendant implemented, and pre-announced, coordinated production cuts through express communications at numerous trade association meetings. The complaint alleged that the statements were made for the express purpose of coordinating production cuts for the purpose of raising the price of steel products. To circumvent the application of Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955 (2007), plaintiffs alleged that the trade association statements of the need for "discipline" constituted "plus factors" or the "something more" required as "facilitating practices" to transform “interdependent” behavior within a concentrated, fungible product industry into an actionable Sherman 1 violation. See, e.g., Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 768 (1984) and Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574 (1986).
On June 19, President Barack Obama signed legislation extending provisions of the Antitrust Criminal Penalty Enhancement and Reform Act of 2004 ("ACPERA") that allow successful amnesty applicants under the Department of Justice Antitrust Division's corporate leniency program who provide "satisfactory cooperation" to private plaintiffs to avoid the treble damages and joint and several liability typically available in private antitrust suits. These provisions were originally scheduled to sunset on June 22, 2009, but will now be available to all applicants who enter into amnesty agreements with the Antitrust Division on or before June 22, 2010.
At the eighth annual International Competition Network (ICN) conference in Zurich, Switzerland, the ICN adopted new Recommended Practices for substantive merger analysis. The ICN conference, hosted by the Swiss Competition Commission, was held on June 3-5, 2009. More than 450 delegates participated, representing over 80 antitrust agencies from around the world, and competition experts from international organizations and the legal, business, consumer and academic communities.
In a recent decision in Ashcroft v. Iqbal, 556 U.S. ____, Slip Op., issued on May 18, 2009, the Supreme Court extended the reach of its decision in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), to a non-antitrust case and expressly affirmed that because Twombly construed Rule 8 of the Federal Rules of Civil Procedure, rather than any antitrust rules, its reasoning was applicable to all civil actions in the federal courts.
In her first speech as Assistant Attorney General in charge of the Antitrust Division, Christine Varney called for a return to vigorous antitrust enforcement and repudiated the Bush Administration's eight month old report on how the Antitrust Division would evaluate single firm conduct under Section 2 of the Sherman Act, Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act, United States Department of Justice (2008) ("Report").
Continue Reading...The Court of Appeals for the Eighth Circuit has affirmed a grant of summary judgment for defendants in an antitrust action which, according to the court, mischaracterized a vertical course of conduct as a “horizontal conspiracy.” Nitro Distributing, Inc. v. Alticor, Inc., No. 08-1451, 2009 WL 1175504 (8th Cir. May 4, 2009). Applying the principles of Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752 (1984), and Matsushita Electric Industrial Co. v. Zenith Radio, 475 U.S. 574 (1986), the court held that it is incumbent upon an antitrust plaintiff, in attempting to allege a “genuine issue,” to exclude the possibility of independent action. This is so whether the alleged conduct is characterized as “direct evidence,” or “circumstantial evidence.” The court held that only by assuming its conclusion, and by mischaracterizing a vertical course of conduct as “horizontal,” could plaintiffs’ complaint state a claim.
Continue Reading...In 2004, California voters imposed limits on the state's famously broad Unfair Competition Law. More than four years later, the California Supreme Court has announced exactly where those limits lie.
Continue Reading...On May 13, the European Commission (EC) imposed a fine of €1.06 billion (approximately $1.45 billion) on Intel Corporation for allegedly violating EC Treaty antitrust rules on the abuse of a dominant market position (Article 82) by engaging in anticompetitive practices to exclude competitors from the market for computer chips called x86 central processing units (CPUs), which are considered to be "the main hardware of a computer." The EC also ordered Intel to cease the alleged illegal practices immediately to the extent that they were still ongoing.
Continue Reading...Carl Shapiro, Deputy Assistant Attorney General for Economics, Antitrust Division, U.S. Department of Justice, provided a Statement, entitled "A New Age for Newspapers: Diversity of Voices, Competition and the Internet" (April 21, 2009), to the Subcommittee of Courts and Competition Policy, Committee of the Judiciary, United States House of Representatives. Mr. Shapiro, who served in that position once before, has been a Professor of Business and Economics at the Haas School of Business at the University of California at Berkeley since 1990.
Continue Reading...On April 24, 2009, a group of professors of law, economics and business, together with the American Antitrust Institute, the Public Patent Foundation, and AARP (collectively "amici") filed an amicus brief urging the Supreme Court to grant certiorari and reverse the decision of the Federal Circuit Court of Appeals in In re Cirpoflaxacin Hydrochloride Antitrust Litigation, 544 F.3d 1323 (Fed. Cir. 2008) ("Cipro"). This is the latest advance in the heated debate over the legality of reverse payment settlements in the pharmaceutical industry, i.e., settlements of patent disputes in which the brand-name pharmaceutical company makes a "reverse" or "exclusion" payment to the would-be generic competitor to delay its entry into the relevant drug market. Such settlements have garnered significant attention and debate over the years because they implicate important policy considerations underlying antitrust and patent laws, as well the vital public interest in curbing soaring healthcare costs.
Continue Reading...Partner v. ExxonMobil Oil Corp., 08-1590 (6th Cir. May 4, 2009)
In 2000, plaintiff Partner & Partner, Inc. entered into a lease/franchise agreement with ExxonMobil to operate a Mobil-branded gasoline station. The lease was pursuant to an ExxonMobil Petroleum Marketing Practices Act (PMPA) franchise agreement, 15 USC Sections 2801-2806. The agreement expressly provided that it did not grant plaintiff an exclusive market or geographic area to sell branded gasoline, or to conduct related businesses. ExxonMobil expressly reserved the right to open or continue stations, franchises, or related businesses at locations of its choice.
Despite the California Supreme Court's conclusion that gasoline purchasers failed even to imply a price-fixing conspiracy among major oil companies, the Ninth Circuit U.S. Court of Appeals has allowed wholesale gasoline purchasers to proceed with similar claims against the same defendants, repackaged under the rule of reason. William O. Gilley Enters., Inc. v. Atlantic Richfield Co., 2009 U.S. App. LEXIS 7161 (9th Cir. April 3, 2009).
Two years ago, PSKS, Inc., dba Kay's Kloset ("PSKS"), lost its antitrust contest with Leegin Creative Leather Products, Inc. at the Supreme Court. Leegin Creative Leather Products, Inc. v. PSKS, Inc. 127 S. Ct. 2705 (2007). PSKS argued to the Court that the 99 year old rule that makes minimum resale price maintenance agreements ("RPM") illegal per se should be upheld. The Court instead held that the appropriate standard of review for resale price maintenance agreements ("RPM") is the rule of reason, not the per se standard. The Court remanded PSKS's case to the lower court to determine whether Leegin's RPM conduct was unlawful under the rule of reason standard.
On April 2, 2009, the Sixth Circuit affirmed the lower court's 12(b)(6) dismissal of an antitrust complaint against national credit reporting agency, Equifax, for lack of antitrust injury. CBC Companies, Inc. v. Equifax, Inc., --- F.3d ----, 2009 WL 860225 (6th Cir. Apr. 2, 2009).
On April 8, 2009, the Chancellor of the High Court (who is the head of the Chancery Division of the High Court of Justice of England and Wales) granted an application by British Airways ("BA") to strike out the representative element of a claim for damages arising from its alleged participation in an air cargo cartel. The claimants, Emerald Suppliers Ltd, imported cut flowers from Colombia and Kenya using the air freight services of BA and other international airlines. They alleged that BA had been party to agreements to fix the prices at which air freight services were supplied, or to control or share the market for the supply of those services in breach of the EC and UK competition rules (the "Claim"). The claimants asserted that they were "direct or indirect purchasers of air freight services the prices for which were inflated by one or more of the agreements or concerted practices. As such, they are representative of all other direct or indirect purchasers of air freight services, the prices for which were so inflated."
On March 18, 2009, the Chinese Anti-monopoly Bureau of the Ministry of Commerce (“AMB”) issued its first rejection in the history of pre-merger filing under the Anti-monopoly Law (“AML”). Two days before the reviewing period deadline of 120 days, Coca-Cola (“Coke”) received the official decision issued by AMB rejecting its acquisition proposal of one of the biggest fruit juice manufacturers in China, HuiYuan Juice Group Co., Ltd., which is a listed Chinese company in the Hong Kong Stock market ("HuiYuan”).
California has a strict code section that declares that covenants not to compete are unlawful except in limited circumstances.California Business and Professions Code Section 16600:
“Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”
Section 16600 has some statutory exceptions (e.g., qualifying sale of a business (Section 16601)), but often operates as a per se rule against noncompete clauses in contracts.
Continue Reading...
After nearly two years of vigorously disputing the competitive impact of Whole Foods Market Inc.'s acquisition of Wild Oats Market, Inc., on March 6, 2009, the Federal Trade Commission announced a settlement with Whole Foods that will substantially restore competition allegedly eliminated by Whole Foods' 2007 acquisition of Wild Oats and resolves the antitrust regulator's charges that the acquisition violated federal antitrust laws.
Judge Oliver W. Wanger of the Eastern District of California granted plaintiff grape growers leave to amend their antitrust and declaratory relief claims against the California Table Grape Commission (CTGC) based on an allegedly anticompetitive and fraudulent "patent and licensing" scheme by the CTGC and US Department of Agriculture (USDA) in connection with three new varieties of table grapes. Delano Farms Co. v. Cal. Table Grape Commission, No. 1:07-cv-1610 OWW SMS (E.D. Cal. filed Feb. 18, 2009).
Continue Reading...Meyer v. Qualcomm, Inc., Case No. 08cv655 WQH (LSP) (S.D. Cal., March 9, 2009)
On March 3, 2009, the District Court for the Southern District of California granted for lack of standing Qualcomm’s motion to dismiss federal and state antitrust and unfair competition law claims brought against Qualcomm by an end consumer alleging that Qualcomm’s anticompetitive licensing practices resulted in higher prices of a particular type of GSM-based cellular device technology that plaintiff purchased. GSM stands for “global system for mobility” and is one of “two technology paths or families of standards [that] are in widespread use today” in wireless communication. Id. at 2. The other is CDMA or “code division multiple access.” Id.
On March 2, 2009, the Korean National Assembly passed new legislation, the Foreign Legal Consultant Act (FLCA), permitting foreign lawyers to register as "foreign legal consultants (FLCs)" and foreign law firms to open offices in Korea, which are called "foreign legal consulting offices (FLCOs)" under the Act, provided that the countries of jurisdiction where they are licensed have signed and ratified free trade agreements (FTAs) with Korea, including liberalization of the legal services market. The Act is to take effect September 26, 2009, six months after its promulgation, so foreign law firms from countries that are parties to effective FTAs with Korea will now be able to operate foreign legal consultancy businesses in Korea.
Canada has given its competition and foreign investment laws its first major makeover in more than twenty years. On March 12, 2009, Canada's Parliament gave Royal Assent to Bill C-10, the Budget Implementation Act, 2009, and thereby adopted fundamental, significant amendments to the Competition Act and Investment Canada Act. Hard core cartels, for example, will be subject to a per se standard of illegality. Those who violate the per se laws will be liable for penalties of up to $25 million and prison sentences of up to 14 years. Further, Canada's premerger notification and review process has been refashioned to resemble the United States' premerger review system. Additionally, resale price maintenance has been decriminalized and can only be scrutinized on a showing of anticompetitive effects. These and other transformations of Canadian competition law are described in greater detail below.
Continue Reading...In Pacific Bell Telephone Co. v. Linkline Communications Inc., 2009 U.S. Lexis 1635, 555 U.S. ______ (February 25, 2009) ("Linkline"), the U.S. Supreme Court, mostly following its decision in Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004) ("Trinko"), held that a plaintiff cannot bring a valid “price-squeeze” claim under Section 2 of the Sherman Act where (1) the monopolist owes no "antitrust duty" to deal with the plaintiff being “squeezed”, and (2) the monopolist's sales into the downstream market at retail are not below an "appropriate measure of its rival's cost," as defined by the Supreme Court in its decision in Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 222-224 (1993) ("Brooke Group").
Continue Reading...Judge William S. Duffey, Jr. of the Northern District of Georgia recently dismissed a complaint brought by direct purchasers of less-than-truckload ("LTL") freight services alleging that defendants, LTL carriers, conspired to fix fuel surcharges from 2003 to 2007. In re LTL Shipping Servs. Antitrust Litig., No. 1:08-MD-01895-WSD (N.D. Ga. filed Jan. 28, 2009). Judge Duffey held that plaintiffs' complaint did not contain sufficient factual allegations to support a plausible inference of conspiracy under Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955 (2007). In an insightful 49-page opinion, Judge Duffey synthesized and applied post-Twombly federal court decisions that have shaped the new pleading standard in antitrust cases.
Continue Reading...California Supreme Court's Kagan analysis is clarified by Proposition 64 spill-over. Meyer v. Sprint Spectrum LP, ___ Cal. __, 2009 WL197560 (January 29, 2009).
In Meyer, the plaintiffs filed a class action alleging violations of the California Unfair Competition Law (“UCL”), the California Consumers Legal Remedies Act (“CLRA”), and for declaratory relief. Plaintiffs claimed that Sprint Spectrum (“Sprint”) improperly included certain illegal and unconscionable terms in its customer service agreement, including: (1) a requirement that the parties submit disputes under the customer service agreement to binding arbitration, (2) a waiver of the right to jury trial, (3) a waiver of class action rights in arbitration, (4) a failure to provide for discovery before arbitration, (5) unconscionable arbitration costs-splitting provisions, (6) a disclaimer of warranties and a limitation and liability, (7) the right of Sprint to unilaterally change the terms of the customer service agreement, and (8) a 60-day limitation period for initiating billing disputes. Plaintiffs did not allege, however, that Sprint had asserted or threatened to assert these terms against them. In the wake of the passage of Proposition 64 in November 2004, which changed the standing requirements for a UCL claim under California Business and Professions Code section 17204, Sprint demurred to plaintiffs’ fourth amended complaint, alleging lack of standing. The trial court sustained the demurrer without leave to amend. The Court of Appeal for the Fourth Appellate District affirmed. See Meyer v. Sprint Spectrum L.P., 150 Cal. App. 4th 1136 (2007).
The website of the Anti-monopoly Bureau of the Ministry of Commerce (“Anti-monopoly Bureau”) has become “the must-see site” for antitrust lawyers practicing in China. See http://fldj.mofcom.gov.cn/. Since the beginning of 2009, the Anti-monopoly Bureau has used the site to announce six drafts of various provisions and guidelines, and two transitional guidelines regarding implementation of a new pre-merger filing system under the Anti-monopoly Law.
Following the announcement of thresholds for pre-merger filing in China, Anti-monopoly Bureau is actively constructing the new pre-merger filing system in compliance with the Anti-monopoly Law and working to clarify vague areas of the new law.
Continue Reading...
On January 29, 2009, the Federal Trade Commission ("FTC"), in conjunction with California's Attorney General, launched its latest challenge to reverse payment settlements in the pharmaceutical industry, Fed. Trade Comm'n et al. v. Watson Pharm., Inc. et al., 09-cv-00598 (AHM) ("Watson"). In a press release announcing the action, the FTC stated that "'[t]oday's action reaffirms the Commission's commitment to protect American consumers from artificially high prescription drug prices that result when branded and generic pharmaceutical companies decide to collude rather than compete."[i]
Continue Reading...On January 6, 2009, the Federal Trade Commission announced revised thresholds for premerger filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. They will be effective Thursday, February 12, 2009. Acquisitions that have not closed by the effective date will be subject to the new thresholds. Filing persons must wait a designated period of time, usually 30 days, before completing their transactions. The HSR Act imposes premerger notification and waiting period obligations on transactions over a certain size, where the parties are over a certain size, before those transactions may be completed. Each "person" who is a party to an HSR-reportable deal must file an HSR notification with the Department of Justice Antitrust Division and the Federal Trade Commission.
The Ninth Circuit recently affirmed in part and reversed in part the entry of summary judgment for defendant Abbott Laboratories, Inc. ("Abbott") on claims brought under Section 2 of the Sherman Act. The Ninth Circuit found that genuine issues of material fact existed as to whether Abbot committed Walker Process fraud, one possible "sham" exception to Noerr-Pennington immunity. The Court, however, affirmed the absence of evidence of "sham" litigation with respect to the multiple patent infringement suits that Abbott filed against its would-be competitors. The Court also affirmed judgment for Abbott and its co-defendant on the Section 1 restraint-of-trade claim. Kaiser Foundation Health Plan, Inc. v. Abbott Laboratories, Inc., __ F.3d __, 2009 WL 69269 (9th Cir. Jan. 13, 2009) ("Kaiser").
The U.S. District Court for the District of Massachusetts denied a Rule 12(b)(6) motion brought by defendant private equity firms (“PE Firms”) challenging a putative class action complaint brought by a trust, a public retirement trust fund and five individuals. The plaintiffs asserted that the PE Firms entered into a bid rigging and bid allocation agreement when purchasing the “Target Companies.” Nine specific transactions, involving billions of dollars, were alleged. The PE Firms assertedly carried out their conspiracy by submitting false bids; agreeing not to submit bids; “granting management certain incentives;” and including “losing” bidders in the final transactions. Plaintiffs, as shareholders in the Target Companies, claimed that defendants had deprived plaintiffs of the fair value of their shares.
On December 30, 2008 the Third Circuit Court of Appeals clarified the standard that district courts in that circuit must apply before permitting a class action to proceed. See In re Hydrogen Peroxide Antitrust Litigation, No. 07-1680, 2008 U.S. App. LEXIS 26871 (3d Cir. Dec. 30, 2008) ("Hydrogen Peroxide"). And, in what is obviously a welcome development for the class action defense bar, the Court of Appeals clarified that the "rigorous analysis" which district courts must apply requires an assessment of all relevant facts and arguments. In doing so, the Court of Appeals rejected the notion that only a "threshold showing" is required or that a relaxed class certification analysis applies in antitrust cases. Hydrogen Peroxide, 2008 U.S. App. LEXIS 26871 at *48-49.
On August 20, 2008 the US District Court in the Eastern District of Tennessee issued an opinion further defining the legal requirements necessary to plead a vertical resale price maintenance cause of action in Spahr v. Leegin Creative Leather Products, Inc., 2008 WL 3914461 (E.D. Tenn. 2008) ("Spahr"). Spahr comes in the aftermath of the watershed antitrust cases Bell Atlantic Corp v. Twombly, 127 S.Ct. 1955 (2007) and Leegin Creative Leather Products, Inc. v. PSKS, Inc., 127 S.Ct. 2705 (2007) ("Leegin").
With two cases proceeding and one just getting started concerning Whole Foods' merger with Wild Oats, Whole Foods and the Federal Trade Commission are in for a whole lot of litigation. First, there is the FTC's Section 7 action on the merits of the merger, which will be heard in an administrative hearing in February 2009. Second, there is the federal court case in which the district court, on remand, will weigh the equities and determine whether injunctive relief would be in the public interest. Third, there is Whole Foods' due process lawsuit seeking to stop the FTC from conducting the Section 7 hearing and have it heard in federal court. There is also the recent, amended decision of the United States Court of Appeals for the District of Columbia which has implications for key antitrust issues like market definition and antitrust merger cases more generally.
Continue Reading...Little Rock Cardiology Clinic v. Baptist Health, 573 F. Supp. 2d 1125 (E.D. Ark., August 29, 2008).
Little Rock Cardiology Clinic (“LRCC”) is a professional association of cardiologists practicing medicine in Little Rock, Arkansas. LRCC brought an action under Sections 1 and 2 of the Sherman Act against Baptist Health, a non-profit corporation that operates five hospitals in Arkansas, including Little Rock. The complaint alleged that Baptist Health conspired with Arkansas Blue Cross and Blue Shield to restrain trade in, and to monopolize, the market for “cardiology services for privately insured patients in a 16 county area of central Arkansas.” The complaint alleged that Baptist Health refused to deal with LRCC, and denied it and its members access to patients within the Baptist Health Network of Hospitals.
On October 14, 2008, a federal district court in New York denied defendant pharmaceutical companies' motion for summary judgment after finding genuine issues of fact existed as to whether 1) the sham exception to antitrust immunity under the Noerr-Penington doctrine applied to defendants' filing of a Citizen-Petition to the FDA to block the approval of generic drug manufacturers' applications; and 2) defendants' Petition in fact delayed the generic manufacturers' applications. Louisiana Wholesale Drug Co., Inc. v. Sanofi-Aventis, 2008 WL 4580016 (S.D.N.Y. Oct 14, 2008).
Continue Reading...In New England Carpenters Health Benefits Fund v. McKesson Corp., 573 F.Supp.2d 431 (Aug. 26, 2008), the District Court for the District of Massachusetts dismissed a national class action antitrust complaint, borrowing from the recent United States Supreme Court decisions in Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955 (2007), and Leegin Creative Leather Products, Inc. v. PSKS, Inc., 127 S.Ct. 2705 (2007).
Continue Reading...Please click here to read an article that was published in the Fall 2008 special edition of "Competition," published by the State Bar Antitrust and Unfair Competition Law Section. The article commemorates the 100th anniversary of the enactment of the Cartwright Act, California's analogue to Section 1 of the federal Sherman Act, and maintains that the symmetry between the two acts is essential to promote consumer welfare and allocative efficiency.
Authored by:
Don T. Hibner, Jr.
(213) 617-4115
dhibner@sheppardmullin.com
and
Heather M. Cooper
(213) 617-5457
hcooper@sheppardmullin.com
In a July 31, 2008 decision, the District Court of Delaware rejected antitrust and unjust enrichment claims by a generic drug manufacturer for failing to satisfy the “sham litigation” exception to the Noerr-Pennington Doctrine. Braintree Labs v. Schwarz Pharma, Inc., __ F.Supp.2d __, No. 03-477-SLR, 2008 WL 2944655 (D. Del. July 31, 2008).
Continue Reading...On August 14, 2008, the United States Court of Appeals for the Ninth Circuit affirmed a district court's dismissal for lack of subject-matter jurisdiction of a foreign DRAM purchaser's claim of price fixing against defendant DRAM manufacturers. In re Dynamnic Random Access Memory (DRAM) Antitrust Litig., No. 06-15636 (9th Cir. 8-14-2008).
Continue Reading...The Ninth Circuit recently affirmed the dismissal of a franchisee's tying and price fixing conspiracy claims against its franchisor, Equilon Enterprises LLC, which does business as Shell Oil Products. Rick-Mik Enterprises, Inc. v. Equilon Enterprises LLC, __ F.3d __, 2008 WL 2697793 (9th Cir. July 11, 2008). The putative class action complaint alleged that Equilon required its franchisees, Shell and Texaco gas stations, to use Equilon to process credit card transactions. Plaintiff also alleged that Equilon received transaction fees for such processing and received "kickbacks" from unidentified banks that processed the transactions.
Continue Reading...Since the 2003 issuance of the Provisions on the Takeover of Domestic Enterprises by Foreign Investor ("Old Rule"), the Ministry of Commerce ("MOFCOM") has handled more than 500 pre-merger filings. Among those filings, 85% to 95% of mergers were passed after initial review, while the rest triggered expanded review, and in some cases, hearings. We are not aware of any announced or disclosed merger being rejected by MOFCOM.
Continue Reading...On July 25, 2008, in a case that presented an issue of first impression in California antitrust law, California’s Court of Appeal of the First Appellate District ruled that the pass-on defense is available to defendants accused of price-fixing. See Clayworth v. Pfizer, No. A116798, __ Cal.App.4th __, 2008 Cal.App. LEXIS 1151 (7/25/08) (hereafter “Pfizer”). The case is significant in that, for now, despite the long-standing rule to the contrary in the seminal United States Supreme Court case of Hanover Shoe v. United Shoe Mach. Corp., 392 U.S. 481 (1968) (“Hanover Shoe”), antitrust defendants in California may assert as a defense that an antitrust plaintiff “passed on” any of its alleged damages to its customers.
Continue Reading...The Ninth Circuit recently affirmed the dismissal of the claims of an antitrust plaintiff on the ground that he lacked the injury-in-fact required for Article III standing. Gerlinger v. Amazon.com Inc. and Borders Group, Inc., 526 F.3d 1253 (9th Cir. 2008). Plaintiff failed to create an issue of fact in response to defendants’ showing on summary judgment that plaintiff had not paid more for books as he claimed in his complaint.
Continue Reading...Delving into "one of the darkest corners of antitrust law," the federal District Court for the Northern District of California recently determined what standard – the per se rule or the rule of reason – should apply to judge the setting of prices by members of a joint venture. In re ATM Fee Antitrust Litigation, N.D. Cal., No. 04-02676 CRB, 3/24/08. The court concluded that in this instance, the rule of reason was the appropriate standard for two reasons: (1) the price setting was a "core activity" of the joint venture; and (2) the price setting was "reasonably ancillary to the legitimate cooperative aspects of a joint venture that requires competitor restraints if the venture's product is to be available at all."
Continue Reading...On April 30, 2008, the Ninth Circuit Court of Appeals ruled that Bamberg County Memorial Hospital and Nursing Center ("Bamberg") lacked standing to pursue its antitrust claims against Johnson & Johnson, Inc. ("J & J"). See Delaware Valley Surgical Supply, Inc. v. Johnson & Johnson, 2008 U.S. App. LEXIS 9308 (9th Cir. Apr. 8, 2-008). Specifically, because Bamberg purchased products through a J&J approved distributor, Bamberg was not a “direct purchaser” with standing to bring an antitrust claim against J&J, even though a contract existed between Bamberg and J&J setting the product prices.
Continue Reading...On April 25, 2008, the Tenth Circuit of the United States Court of Appeals reversed a jury's judgment in favor of competitors who challenged a grocery store's practice of offering below-cost discounts on gasoline conditioned on the purchase of a qualifying amount of groceries sold in the store. Parish Oil Co. v. Dillon Companies, No. 07-1032 (10th Cir. 3-31-2008).
Continue Reading...The willingness of federal enforcement agencies to lift resale price maintenance ("RPM") prohibitions in light of the Supreme Court's decision holding RPM was no longer per se illegal was demonstrated recently by the FTC. In re Nine West Group, Inc., FTC Dkt. No. C-3937 (May 6, 2008). Nine West is a shoe manufacturer. In 2000, it entered into a Consent Order with the FTC which prohibited it from entering into agreements to fix, control, or maintain resale prices. After the Supreme Court decision in Leegin Creative Products, Inc. v. PSKS, Inc., 127 S. Ct. 2705 (2007), Nine West petitioned the FTC to modify the order to set aside the portion of the Order containing the RPM prohibition. In a 4-0 decision issued May 6, the Commission granted the petition in substantial part but required Nine West to provide periodic reports on its use of RPM agreements so that the FTC can analyze the effect of such agreements on competition.
Continue Reading...The antitrust litigation against Rambus for failing to disclose patents to JEDEC, a standard setting body (SSO), took another twist last week. In Rambus v. FTC, No. 07-1086 (D.C. Cir. 2008), the court unanimously set aside the FTC decision holding that Rambus' conduct constituted monopolization under Section 2 of the Sherman Act. The D.C. Circuit held that the FTC failed to carry its burden to show the conduct was exclusionary. In dicta, the court also suggested that the FTC had taken "an aggressive interpretation of rather weak evidence" to conclude that the failure to disclose was a violation of JEDEC disclosure rules.
Continue Reading...Competitors of a copier equipment provider, IKON Office Solution ("IKON") alleged that defendant IKON used "fraudulent practices" to secure and lengthen its customer contracts, and thus reducing the ability of competing copier equipment providers to contest for "aftermarket" business. The district court granted a motion to dismiss pursuant to FRCP 12(b)(6), on the ground that IKON did not have market power over a "unique" product or service, and that any control that it had acquired over its customers was a function of contract, and not market power. The district court distinguished Eastman Kodak Co. v. Image Technical Services, Inc.,[1] and relied on the decision of the Third Circuit in Queen City Pizza, Inc. v. Domino's Pizza, Inc.[2] The court held that the parties copier equipment was interchangeable, and thus within the same relevant market. It was only the defendant's customer contracts that prevented plaintiffs from attempting to gain aftermarket business from defendant's customers.
Continue Reading...On March 31, 2008, a federal district court in Ohio granted summary judgment after finding insufficient evidence to support a claim that Respironics, Inc., a manufacturer of positive airway pressure devices ("PAPs") and masks used to treat obstructive sleep apnea ("OSA"), entered into exclusive deals with sleep labs and durable medical equipment suppliers ("DMEs") to prescribe Respironics' products to the exclusion of others. Invacare Corp. v. Respironics, Inc., No. 1:04 CV 1580 (N.D. Ohio 3-31-2008).
Continue Reading...Over the last several months, Canada's head federal antitrust enforcer, the Commissioner of Competition, has lost three rounds of disputes with Labatt Brewing Company Limited. Labatt is the second largest brewery in Canada. The first two losses relate to the Commissioner's attempt to temporarily block Labatt from completing its merger with Lakeport Brewing Limited Partnership in order to give the Commissioner more time to review the deal. The third involved a Federal Court quashing "enormous" document subpoenas the Commissioner obtained against Labatt, Lakeport and fifteen other breweries. This marked the first time a "section 11" order has been struck down in a merger case.
Continue Reading...On April 3, the European Commission ("EC") published its long-awaited "White Paper" or policy proposals to increase the number of private antitrust damages actions in the EU. The White Paper sets out suggestions for concrete measures "to help victims of EU competition law infringements to get compensation for the harm they have suffered". The EC's proposals are the result of extensive consultation and are in response to criticisms that there is a lack of effective redress for European businesses and consumers who have suffered from alleged antitrust injury. The EC is keen to encourage a culture of private litigation in the EU but wants to avoid the excesses of US-style class actions.
Continue Reading...Satellite radio is a fairly recent phenomena. Unlike the usual AM/FM radio, satellite radio offers hundreds of commercial free channels. It includes niche music formats (e.g. 60s music), out of market sporting events, and exclusive programming such as Howard Stern or Oprah & Friends. Thus, in February 2007, when the only two satellite radio providers, Sirius Satellite Radio ("Sirius") and XM Satellite Radio Holdings ("XM"), announced their plan to merge, the anticompetitive signs went up. Leading politicians and consumer groups urged the antitrust enforces to take action to halt the merger.
Continue Reading...The Anti-monopoly Law of China (“AML”) will come into effect soon and accompany the approaching Beijing Olympics. As preparation for this highly significant law , the Implementation Rules of AML (“Implementing Rule”) have been extensively discussed within the anti-monopoly authorities. These Implementation Rules will be an essential part for implementing and enforcing the AML. In particular, Implementing Rules are expected to clearly define some vague clauses of AML. Among these vague clauses, the right to file the private anti-monopoly litigation has received substantial attention from many leading multi-national companies in various industries.
Continue Reading...On March 4, 2008, a federal district court in San Jose, CA, refused to dismiss an antitrust class action complaint against eBay, the online auction company, brought by online auction participants seeking to represent a class of all eBay auction sellers and a subclass of all auction sellers on eBay who accept PayPal as the method of online payment. See In re Ebay Seller Antitrust Litigation, No. 07-1882 N.D. Cal., No. C 07-01882 JF (RS) (2008). As a result, the class action plaintiffs can pursue claims of abuse of monopoly power and monopoly maintenance claims. However, the class action plaintiffs’ claim that eBay engaged in an illegal tying arrangement has been dismissed.
Continue Reading...Competitors of a copier equipment provider, IKON Office Solution ("IKON") alleged that defendant IKON used "fraudulent practices" to secure and lengthen its customer contracts, and thus reducing the ability of competing copier equipment providers to contest for "aftermarket" business. The district court granted a motion to dismiss pursuant to FRCP 12(b)(6), on the ground that IKON did not have market power over a "unique" product or service, and that any control that it had acquired over its customers was a function of contract, and not market power. The district court distinguished Eastman Kodak Co. v. Image Technical Services, Inc.,[1] and relied on the decision of the Third Circuit in Queen City Pizza, Inc. v. Domino's Pizza, Inc.[2] The court held that the parties copier equipment was interchangeable, and thus within the same relevant market. It was only the defendant's customer contracts that prevented plaintiffs from attempting to gain aftermarket business from defendant's customers.
Continue Reading...FDA regulations provide that anyone can file a "Citizen Petition" to request that the FDA take, or refrain from taking, administrative action based on genuine safety, scientific, or legal concerns. In recent years, owners of branded drugs approved by the FDA have sometimes filed Citizen Petitions on the eve of FDA approval of generic equivalents. Such filings are often challenged in Court under the antitrust laws, with the plaintiffs asserting that such filings are simply a sham to delay generic entry and the resultant price competition.
Continue Reading...On January 28, 2008, the Fourth Circuit Court of Appeals reversed a federal district court decision that had struck down most of the regulations on the sales of alcoholic beverages imposed by the State of Washington in Costco Wholesale Corp. v. Maleng et al., 06-35538,06-35542, 06-35543 (January 29, 2008). As a result, regulations that Costco Wholesale Corporation alleged were in violation of federal antitrust laws, by limiting competition and causing retailers to charge higher prices, remain intact.
Continue Reading...Businesses that participate in Standard Setting Organizations ("SSOs") and seek adoption of their technologies in standards now arguably face additional exposures. Extending a line of previous SSO patent "hold-up" cases, including Dell, Unocal, and Rambus, the Federal Trade Commission has used its most recent SSO case to define a broader potential scope for liability under Section 5 of the FTC Act, 15 U.S.C. § 45. The zone of liability now includes businesses that do not conceal their patents before SSO adoption, but later engage in "hold-up" behaviors after adoption – "ex ante," by trying to reneg on previously negotiated agreements with an SSO about the future economic terms on which the patent would be licensed if they were included in the standard. According to at least a majority of the current FTC, the Act now appears to encompass such actions by corporations with questionable market power, and also provides the basis for additional liability under the consumer protection provisions of the Act as well as unfair competition.
Continue Reading...In one of the first cases to apply the U.S. Supreme Court's opinion in Credit Suisse Securities (USA) v. Billing, 127 S.Ct. 2383 (2007), a New York District Court found "clear incompatibility" between federal securities and antitrust laws and dismissed allegations that brokerage firms fixed prices charged to short sellers. In re Short Sale Antitrust Litig., 2007 U.S. Dist. LEXIS 94116 (S.D.N.Y. Dec. 20, 2007).
Continue Reading...Dudley v. Aspen Realty, Inc., D. Idaho, Case No. CV-04-121-S-BLW, 11/30/07
Defendants were realtors in Boise, Idaho. The realtors based their commission charges on the price of both an undeveloped lot, and the price of the home to be built on the lot at a subsequent time. The plaintiffs, purchasers of undeveloped lots, brought an action under the federal antitrust laws alleging an illegal tie between the commission charged for the sale of the undeveloped lot, and the commission charged on the home which would be built on the lot. The trial court granted motions for summary judgment, based upon the court's finding that there was no claim, as the degree of foreclosure was "zero". Under no set of facts, would any of the plaintiffs have purchased the alleged tied product, namely commissions to be paid on a home to be located on the undeveloped lot, from any other seller. This being the case, there was zero foreclosure, and zero claim. Dudley v. Aspen Realty, Inc., D. Idaho, Case No. CV-04-121-S-BLW, 11/30/07.
Continue Reading...In a Fourth Circuit opinion, the court upheld the standing to sue of a plaintiff (former owner of WordPerfect) assertedly injured by defendant as a means to inflict harm to competition in the defendant's market (operating systems) even though plaintiff did not participate in defendant's market. The court also rejected defendant's proposed bright-line rule that only consumers or competitors in the relevant market have standing to sue. Novell, Incorporated v. Microsoft Corporation, 505 F.3d 302 (4th Cir. 2007).
Continue Reading...The Hart-Scott-Rodino Antitrust Improvements Act of 1976 imposes premerger notification and waiting period obligations on transactions over a certain size, where the parties are over a certain size, before those transactions may be completed. Each "person" who is a party to an HSR-reportable deal must file an HSR notification with the DOJ and the Federal Trade Commission. On January 28, 2008, the Federal Trade Commission published revised thresholds for premerger filings under the HSR Act. The new thresholds go into effect February 28, 2008. Acquisitions that have not closed by that date will be subject to the new thresholds. The Act requires all persons contemplating certain mergers or acquisitions meeting the jurisdictional thresholds in the Act to file notification with the FTC and the Department of Justice's Antitrust Division. Filing persons must wait a designated period of time, usually 30 days, before completing their transactions.
Continue Reading...District Court Enforces DOJ Corporate Leniency Agreement, Dismisses Indictment Against Stolt-Nielsen And Company Executives
On November 29, 2007, a federal district court in Philadelphia dismissed an indictment charging Stolt-Nielsen, S.A., two of its subsidiaries and two of its executives with violations of Section 1 of the Sherman Act in the parcel tanker shipping industry. See United States v. Stolt-Nielsen S.A., 2007 U.S. Dist. LEXIS 88011 (E.D. Pa. Nov. 29, 2007) (memorandum and order); id., 2007 U.S. Dist. LEXIS 88628 (findings of fact and conclusions of law). Judge Bruce Kauffman's 79-page ruling puts to rest a long, closely watched legal struggle over the first and only instance of the Antitrust Division's revocation of an amnesty agreement under its highly successful Corporate Leniency Program.
Continue Reading...Antitrust, Fraud And RICO Claims Are Dismissed Westerfield v. The Quizno's Franchise Company, LLC (E. D. Wis., November 5, 2007).
Quizno's operates a chain of fast food restaurants known for their toasted submarine sandwiches. Plaintiffs, twelve Wisconsin franchisees brought an action under the Sherman Act, RICO, the Wisconsin Anti-Trust Act, and other Wisconsin consumer protection laws in the United States District Court for the Eastern District of Wisconsin, alleging, inter alia, that Quizno's "fraudulently induced plaintiffs and the Class to purchase franchises and thereafter exploited their control and economic power in order to extract exorbitant and unjustifiable payments." The plaintiff franchisees sought class certification, preliminary and permanent injunctive relief, and statutory, compensatory and punitive damages.
Continue Reading...On November 29, 2007 a federal court in Philadelphia issued a decision granting the motion of Stolt-Nielsen (Stolt), a Luxembourg tanker shipping company, to dismiss a grand jury indictment against it for violations of Section 1 of the Sherman Act alleging it conspired with its competitors to allocate customers among them. Stolt had self reported the customer allocation scheme to the Department of Justice in 2002, and thereafter entered into a leniency agreement with the DOJ whereby it was immunized from prosecution based on representations that it had ceased the unlawful conduct and would cooperate in the investigation. The DOJ later notified Stolt that it had obtained evidence that Stolt did not terminate its participation in the conspiracy as represented, and thus the leniency conditions were not met. The indictment followed. In this decision, Judge Kaufman reviews the evidence and concludes that Stolt did take action to terminate its participation in the conspiracy as represented, and otherwise fulfilled its obligations under the leniency agreement. Our January blog will contain a complete review and analysis of this important decision.
Authored by:
(213) 617-4146
A price squeeze occurs when a vertically integrated company with a monopoly in the upstream market sets its wholesale prices to its customers so high that they cannot compete effectively with it at the downstream level. In some circumstances, price squeezes may constitute exclusionary conduct under Section 2 of the Sherman Act. For example, in City of Mishikawa v. American Electric Power, 616 F. 2d 976 (7th Cir. 1980) the defendant utility company sold power both at wholesale and directly to consumers. By setting its wholesale price higher than its retail price, it effectively prevented its wholesale customers from competing with it at the consumer level. Other courts, however, have criticized price squeeze claims pointing out that they can be pro-consumer when the upstream monopolist can carry out the downstream activities more efficiently than its independent competitors, and such claims also impose administrative burdens on the courts with respect to price setting for which they are ill-suited. Town of Concord v. Boston Edison Co., 915 F. 2d 17 (1st Cir. 1990).
Continue Reading...In October, the Department of Justice obtained a half a million dollar penalty against Iconix Brand Group for omitting "4(c)" documents in its Hart-Scott-Rodino Act premerger notification. For lawyers and companies involved in mergers, acquisitions and joint ventures, the DOJ's actions make clear that HSR filings, including their more technical aspects, are no minor matter and call for diligence.
Continue Reading...The new Anti-monopoly Law of China (“AML”) was issued on August 30, 2007, although it will not come into effect until August 2008. During the one year time window, there is no doubt that the existing enforcement system of anti-monopoly will be greatly impacted and amended by this AML. However, it is also very important for general counsels of multinational companies in China to understand how the current anti-monopoly enforcement system might impact the future upgraded system under the AML.
Continue Reading...Bundled discounts, the practice of selling multiple products for a single price, are ubiquitous in America, ranging from Happy Meals at your local McDonald's to a single price for telephone, Internet and television service from your local cable or satellite provider.
Courts have struggled to develop an analytical model to determine when bundled discounts violate antitrust laws. They do not fit the tying paradigm because there is no conditioning; that is, a buyer can purchase the products in the bundle separately, albeit at higher individual prices. Likewise, unless the discount causes the seller's prices to be below the seller's incremental cost, bundled discounts do not constitute predatory pricing.
Continue Reading...The California Court of Appeal has held that Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134 (2003), did not preclude an award of restitution under California's Unfair Competition Law ("UCL") to plaintiff by defendant Microsoft even though plaintiff paid a retailer, not Microsoft, for the product. Plaintiff asserted that he had been misled by statements on Microsoft's packaging into purchasing a Microsoft product. Shersher v. Superior Court, 154 Cal.App.4th 1491, 1494, 65 Cal.Rptr.3d 634 (2007) (plaintiff "alleged that he paid money to a retailer to purchase Microsoft's product based on false or misleading statements on the product package"). The Court of Appeal, which reviewed the writ at the direction of the California Supreme Court, reversed the Superior Court order granting defendants' motion to strike plaintiff's claim for restitution.
Continue Reading...Since the venerable case of Ace Beer Distributors v. Kohn, Inc.,[1] numerous courts have held that the substitution of one distributor for another is competitively neutral. The courts have generally upheld refusals to deal and distributorship substitutions, even where a manufacturer decides to abandon a geographic area for product distribution, a line of business, or makes significant changes in the means by which it offers its product for distribution.[2]
[1] 318 F.2d 283 (6th Cir. 1963)
[2] See, generally, Antitrust Law Developments p. 170 et seq. (6th Ed. 2007).
On September 17, the European Court of First Instance (CFI) handed down its judgment upholding a decision of the European Commission (EC) that documents seized during an EC antitrust investigation were not covered by legal professional privilege. Despite indications by the President of the Court during the early part of the proceedings that the CFI might extend the scope of legal professional privilege in EU law, the CFI held that communications between in-house counsel, and internal clients, are not privileged in relation to EC competition investigations, and it set out the procedure that EC officials should follow if a dispute as to privilege arises during an on-site investigation.
Continue Reading...In May of this year, the United States Supreme Court issued a highly important decision significantly tightening the requirements for pleading antitrust conspiracies. In Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955 (2007), the Court held that allegations of parallel conduct and conclusory assertions of agreement will not suffice to survive a 12(b)(6) motion to dismiss. Rather, the complaint must state "enough factual matter (taken as true) to suggest that an agreement was made" and such allegations must be enough to raise a right to relief "above the speculative level." In reaching this conclusion, the Court expressly rejected the longstanding formulation for deciding motions to dismiss set forth in Conley v. Gibson, 355 U.S. 41 (1957), which held that a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of its claim which would entitle it to relief. Now, under Twombly, an antitrust plaintiff may not rely on the possibility that it may later establish "some set of undisclosed facts to support recovery," but instead must plead "enough facts to state a claim to relief that is plausible on its face," and not merely "conceivable."
Continue Reading...A patent holder that promises a standard-setting organization that it will license its technology on fair and reasonable terms, but reneges once its technology is adopted as the industry standard, may be held liable under the Sherman Act Section 2, the U.S. Court of Appeals for the Third Circuit announced in Broadcom Corp. v. Qualcomm Inc., No. 06-4292 (3d Cir. Sept. 4, 2007), available at 2007 U.S. App. LEXIS 21092.
Continue Reading...On August 30, 2007, the National People’s Congress passed the Anti-monopoly Law of the People’s Republic of China (“AML”). Such marks a historical moment in China’s legal history as, after over 10 years of drafting and preparing this AML, China has finally become one of the countries with advanced antitrust law system. The AML will come into effect on August 1, 2008, and many view this law as a tool that will finally regulate the market competition in China.
Continue Reading...British Airways PLC and Korean Air Lines Co, Ltd. will each pay $300 million fines and plead guilty to charges that they participated in conspiracies to fix prices of passenger and cargo flights, according to the U.S. Department of Justice Antitrust Division. United States v. British Airways PLC, 07-183-JDB (D.D.C. filed Aug. 1, 2007); United States v. Korean Air Lines Co., Ltd., 07-184-JDB (D.D.C. filed Aug. 1, 2007).
Continue Reading...On February 21, 2007, Whole Foods and Wild Oats and entered into an agreement under which Whole Foods would acquire Wild Oats for a price of approximately $670 million. On June 6, 2007, the FTC filed a Complaint in the United States District Court for the District of Columbia seeking to block this transaction. According to the FTC, the proposed Whole Foods/Wild Oats transaction would constitute an anticompetitive merger of the top two competitors in the highly concentrated market for "premium natural and organic supermarkets."
Continue Reading...A class action antitrust Complaint passed the new, stricter "plausibility" pleading standard the Supreme Court established earlier this summer in Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955; (No. 05-1126) 2007 U.S. LEXIS 5901 (2007). In re Hypodermic Products Antitrust Litigation, No. 05-CV-1602 (JLL/CCC) (D. N.J. June 29, 2007). In three separate, unpublished opinions, a New Jersey district court overruled defendant medical device manufacturer Becton Dickinson & Company (Becton)'s motion to dismiss Section 1, Sherman Act and Section 3, Clayton Act claims because the three Complaints provided plausible grounds to infer that Becton and group purchasing organizations (GPOs) entered into unreasonably anticompetitive agreements.
Continue Reading...Summary
The Supreme Court has delivered its much anticipated[1] decision in Leegin v. PSKS, Inc.[2] and overruled the 96 year-old rule established in Dr. Miles Medical Co. v. John D. Park & Sons Co.[3] that made agreements between manufacturers and their distributors on the minimum resale price of the manufacturer's products, "per se" or automatically unlawful. The Court held that the appropriate standard for testing the lawfulness of minimum resale price agreements, also known as resale price maintenance or RPM, is the rule of reason, not the per se standard. Under the rule of reason, the courts evaluate the effects of a trade restraint on competition in the relevant antitrust market. If a restraint's effects benefit competition between rival firms more than they injure competition, the restraint will be upheld. Thus, the Leegin decision means that courts will now review RPM practices on a case-by-case basis. Federal and state law enforcers and private plaintiffs will have the burden of proving that a RPM practice is anticompetitive, while manufacturers and distributors will need to show that their RPM practice is procompetitive.
[1] For more on Leegin's road to the Supreme Court, see Heather M. Cooper, After Nearly 100 Years Will the Sun Soon Set on Dr. Miles?, Antitrust Law Blog, at (Dec. 8, 2006).
[2] 551 U.S. ___ (2007).
[3] 220 U.S. 373 (1911).
Introduction
On June 18, 2007, the United States Supreme Court ruled in a 7-1 decision that investment banks are immune from antitrust scrutiny in connection with syndication and marketing techniques employed in underwriting initial public offerings, Credit Suisse Securities (USA) LLC v. Billing (No. 05-1157) 127 S.Ct. 2383, 2007 U.S. LEXIS 7724. Finding that "permitting plaintiffs to dress what is essentially a securities complaint in antitrust clothing" would pose a "serious conflict between, on the one hand, application of the antitrust laws and, on the other, proper enforcement of the securities law," the Court held that federal securities laws and regulation impliedly preclude the application of antitrust laws to the underwriting activities at issue. Id. at *35. Writing for the majority, Justice Breyer emphasized that there is a fine, complex line separating activities permitted and forbidden under the securities laws, and that the Securities and Exchange Commission is far better qualified to determine the legality of such conduct than judge and juries in antitrust cases. Id. at *27-34.
Continue Reading...Introduction
On May 21, 2007, the United States Supreme Court issued a significant 7-2 decision tightening the requirements for pleading antitrust conspiracies under Sherman Act § 1, Bell Atlantic Corp. v. Twombly (No. 05-1126) 2007 U.S. LEXIS 5901. The Court held that to satisfy the pleading requirements of FRCP 8 and survive a motion to dismiss pursuant to FRCP 12(b)(6), allegations of parallel conduct and bare assertions of conspiracy will not suffice. Id. at *23 ("Without more, parallel conduct does not suggest conspiracy, and a conclusory allegation of agreement at some unidentified point does not supply facts adequate to show illegality.") Thus, the Court found, when allegations of parallel conduct are set out as the basis of a Section 1 claim, "they must be placed in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action." Id. at *24.
In reaching this conclusion, the Supreme Court explicitly rejected the longstanding formulation for deciding motions to dismiss set forth in Conley v. Gibson, 355 U.S. 41 at 45-46 (1957) – "that a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." See Twombly, 2007 U.S. LEXIS 5901 at *31-35. Now, under Twombly, a Section 1 plaintiff may not rely on the possibility that she might later establish some "some set of undisclosed facts to support recovery," but instead must plead "enough facts to state a claim to relief that is plausible on its face," and not merely "conceivable." Id. at *33, *47.
Continue Reading...On March 13, 2007, United States District Court Chief Judge Vaughn Walker decided summary judgment motions in a complex group boycott case arising out of alleged efforts by Federated Department Stores (“Federated”), May Department Stores (“May”), Lenox Incorporated (“Lenox”) and Waterford Wedgwood (“Waterford”) to boycott Bed Bath & Beyond, a competitor of May and Federated. In Re: Tableware Antitrust Litigation (No. 04-3514 VRW, N.D. Cal.). Judge Walker's typically painstaking opinion provides a textbook quality overview of an area of antitrust law not currently known for its clarity: the interplay between horizontal group boycott allegations, the per se rule and application of the Matsushita standard for analyzing summary judgment where no direct evidence of the horizontal group boycott exists.
Continue Reading...Subject to the restrictions on technology monopoly as set forth under Article 329 of the Contract Law of the PRC, a covenant not to sue clause (“CNS”) in a Software Development Agreement is feasible under the current laws and regulations of the People’s Republic of China (“the PRC”).
Continue Reading...The air in a taxicab company's Sherman Act Section 1 challenge to an exclusive operating agreement between an airport authority and a competing taxicab company went flat when the U.S. District court for the Middle District of Pennsylvania held the company failed to state a claim. Capital City Cab Service, Inc. v. Susquehanna Area Regional Airport Authority, No. 1:06-CV-671 (M.D. Pa. filed Apr. 18, 2007).
Continue Reading...A jury examining a series of giant trades in the mid-1990s copper derivatives market might reasonably conclude that one of the country's biggest banks, which financed the trades, conspired with its customer to manipulate the market, a U.S. district judge has ruled in rejecting a summary judgment motion by defendants J.P. Morgan Chase & Co. and Morgan Guaranty Trust Company of New York in Southwire Co. v. J.P. Morgan Chase & Co., MDL Docket No. 1303 (W.D. Wis. April 24, 2007).
Continue Reading...If you are interested in the latest court decisions and developments regarding California's antitrust and unfair competition laws, please visit Sheppard Mullin Publications.
China has been working on an Anti-Monopoly Law (“AML”) for almost a decade, and the latest draft is expected to be finalized and to come into effect during the later part of 2007.
Continue Reading...[1] The Antitrust Modernization Commission ("AMC") was created by the Antitrust Modernization Commission Act of 2002, Public Law No. 107-273 Section 11054(h), 116 Stat. 1856, 1857 (2002).
[1] Competition Act § 75, R.S.C. 2002, c. 16, s.11.1, § 103.1, R.S.C. 2002, c. 16, s.12. Prior to this, the Commissioner of Competition had exclusive jurisdiction to enforce the civil refusal to deal provision of the Act. Private parties suing under section 75 may not recover damages as section 75 only authorizes the Competition Tribunal to issue orders directing a supplier to deal to a customer on usual trade terms.
[1] “Liability Opinion” and “Liability Op.” refer to the Commission’s July 31, 2006 opinion. For a copy of the Commission’s Liability Opinion, please refer to In the Matter of Rambus, Inc., FTC Docket No. 9302, available at http://www.ftc.gov/os/adjpro/d9302/index.htm (filed on August 2, 2006).
In two companion cases concerning the Robinson-Patman Act's prohibition of price discrimination, the Sixth Circuit holds that a loyalty program that is functionally available to competing purchasers does not violate the RPA. Smith Wholesale Co., Inc. v. R.J. Reynolds Tobacco Co., 6th Cir. No. 05-6053, 2/27/07; M-K Grocery Co. v. Philip Morris USA, Inc., 6th Cir., No. 05-6481, 2/27/07 (unpublished). Unlike other RPA decisions that have applied the functional availability doctrine to volume-based loyalty programs, these cases stand-out as one of the first occasions where a court has discussed in detail the circumstances in which a market share based loyalty program may or may not be functionally available and discriminatory. The decisions reveal that a loyalty (or other discount) program that requires a purchaser to alter its business strategy or marketing decisions to obtain the best price does not render the discount functionally unavailable.
Continue Reading...With its decision affirming dismissal for lack of subject matter jurisdiction in In re: Monosodium Glutamate Antitrust Litig., 2007 U.S. App. LEXIS 2772 (8th Cir. Feb. 8, 2007) ("MSG"), the Eighth Circuit delivered another setback to foreign plaintiffs intent on using U.S. antitrust laws to redress injuries from wholly foreign purchases allegedly subject to unified global price-fixing conspiracies. MSG is part of a growing body of law applying the Supreme Court's landmark decision in F. Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155 (2004) ("Empagran I"), which addressed the applicability of the Sherman Act to foreign purchaser claims under the Foreign Trade Antitrust Improvements Act of 1982 ("FTAIA").
Continue Reading...In Hydril Co. v. Grant Prideco LP, Fed. Cir., No. 2006-1188, 1/25/07, the Federal Circuit held that a plaintiff may state a Sherman Act section 2 claim when it alleges that the holder of a fraudulently procured patent has directed threats of enforcement to the plaintiff's customers, as opposed to the plaintiff. Hydril sued Grant Prideco on three causes of action: (1) a "Walker-Process" section 2 claim alleging that Grant Prideco monopolized two product markets by enforcing a patent it obtained by fraud on the Patent and Trademark Office; (2) a patent infringement claim regarding a patent Hydril owned; and (3) breach of contract. The court reversed the district court's dismissal of the first two actions and vacated dismissal of the third.
Continue Reading...Apple Computer Inc. (“Apple”)’s use of technology that makes the company’s popular iPod and iTunes music store incompatible with other digital music players and online music stores might constitute illegal tying, a U.S. District Court judge has ruled in denying Apple’s motion to dismiss a host of antitrust claims against it.
Continue Reading...On December 7, 2006, the European Commission adopted a revised Notice on Immunity from Fines and Reduction of Fines in Cartel Cases (the “Leniency Notice") which clarifies the information an applicant needs to provide to the Commission to benefit from immunity, and a reduction of fines. The Leniency Notice also introduces a marker system for immunity applicants, and a procedure to protect corporate statements made by companies from being made available to claimants in civil damage proceedings. The revisions take account of two public consultations, conducted in February, and October 2006. On announcing the new changes, the European Competition Commissioner, Ms. Neelie Kroes, stated,
Continue Reading...Plaintiff Bearing Distributors, Inc. (BDI), a dealer, brought an action against Rockwell Automation, Inc. (Rockwell), and a competing dealer, Motion, alleging that Rockwell and Motion conspired to terminate it for refusing to abide by Rockwell's resale price maintenance (RPM) policy. Rockwell contended that it terminated BDI, because it refused to impose a 25% minimum markup on BDI sales from "unauthorized" locations. As the complaint failed to allege an RPM agreement between Rockwell and Motion, Motion moved to dismiss. It claimed that it was lawful for Rockwell to terminate a dealer, even at the suggestion of a competing dealer, where there was no agreement on price, or price levels.
Continue Reading...On October 27, 2006, the Second Circuit issued its opinion in Paycom Billing Services, Inc. v. MasterCard Int'l, Inc., 2006-2 Trade Cas. (CCH) ¶ 75,470, 2006 U.S. App. LEXIS 26820 (2d Cir. October 27, 2006), affirming the dismissal of Paycom's complaint against MasterCard by Judge Trager in the Eastern District of New York. See 2005-1 Trade Cas. (CCH) ¶ 74,751, 2005 U.S. Dist. LEXIS 4920 (E.D.N.Y. 2005). Paycom, a processing service for primarily adult internet credit card services, had purported to allege violations of Sections 1 and 2 of the Sherman Act with respect to MasterCard's (1) chargeback system; (2) former Competitive Programs Policy ("CPP"); and (3) Cross-Border Acquiring Rules ("CBA Rules"). Paycom abandoned its Section 2 claims on appeal.
Continue Reading...An October 30, 2006 Business Review letter ("BRL") from the Antitrust Division of the Department of Justice (the "Department") is a potentially important step forward in providing guidance to Standard Development Organizations (SDO's) and their lawyers about the form of acceptable SDO patent disclosure requirements. The BRL was in response to a request by VITA, an international trade association, and its standards development subcommittee, VSO. VITA is an SDO that is accredited by the American National Standards Institute, and includes developers, vendors and users of real-time modular imbedded computing systems originally based on the VMEbus Computer Architecture. VITA sought guidance on the propriety of its proposed new rules for requiring disclosure of relevant patents and pending patent applications as a precondition to participating in standard setting activity.
Continue Reading...One of the most significant developments in U.S. antitrust law in years has come upon the horizon: the much criticized, nearly 100 year old rule holding that minimum resale price maintenance ("RPM") is per se illegal is in jeopardy. This per se rule was adopted in Dr. Miles Med. Co., Inc. v. John D. Park & Sons.1 and could be overturned by the Supreme Court which on December 7, 2006, granted a petition for writ of certiorari. The Court has also granted leave to manufacturers associations and economists to file amicus curiae briefs.
Continue Reading...On November 30, Judge Sullivan held yet another hearing in his review of the mergers between SBC and AT&T and Verizon and MCI. The purpose of the hearing was to determine if the Court should hold an evidentiary hearing to examine the government’s witnesses or, if not, what the court’s next steps should. Although the first exchanges between the government’s lawyer, Mr. Claude Scott, and the court were fairly cordial and professional, Judge Sullivan took umbrage at Verizon’s suggestion that there was nothing the court could do to undo the completed parts of the merger, and Mr. Reback, representing ACTel, accused the government’s lawyers and economists of misrepresentation.
Continue Reading...Federal District Court in Pennsylvania refused to dismiss conspiracy and monopolization claims against Comcast arising out of transactions in which Comcast had both purchased and sold geographically separate local cable television systems to competitors in exchange for other systems. Glaberson, et al. v. Comcast, et al., Civil Action No. 03-6604 (E.D. Pa. August 31, 2006). The rapidly consolidating cable television industry frequently uses transactions in which large cable companies "swap" cable systems in different geographic areas with the goal of assembling larger contiguous areas in which each cable company provides services. The economic motivation is that assembling larger contiguous areas makes administering such contiguous cable systems cheaper and more efficient. Such swaps are also done on the basis of swapping subscribers, rather than entire cable systems, again in an effort to increase the effective economic size of contiguous service areas.
Continue Reading...In a recent opinion, the District Court for the District of Delaware dismissed AMD's antitrust claims against Intel that arose out of Intel's alleged foreign-related conduct that affected AMD's foreign sales. Advanced Micro Devices, Inc. v. Intel Corp. (AMD), Civ. Action No. 05-441-JJF, --- F.Supp.2d ----, 2006 WL 2742297 (D. Del. Sept. 26, 2006). In that case, AMD had alleged that Intel willfully maintained a monopoly in the x86 microprocessor market, which AMD alleged to constitute a world-wide market, by engaging in such exclusionary conduct as, among other things, "forcing major customers into exclusive or non-exclusive deals, conditioning rebates and other monetary incentives on customers' agreement to limit or forego purchases from AMD, forcing PC makers and technology partners to boycott AMD product launches and promotions and threatening retaliation against customers introducing AMD computer platforms." Id. at *1.
Continue Reading...In Champagne Metals v. Ken Mac Metals, Inc., Nos. 04-6222 and 05-6139 (10th Cir. 2006), plaintiff aluminum distributor, a recent entrant in the aluminum distribution market, alleged that competing aluminum distributors engaged in a conspiracy to withhold business from any aluminum mill that supplied the plaintiff in order to force the plaintiff out of business and deter others from entering the aluminum distribution market in violation of Section 1 of the Sherman Act. The Western District of Oklahoma granted the defendants' motion for summary judgment, holding that plaintiff's proffered evidence of conspiracy was insufficient. According to the district court, the plaintiff did not offer direct evidence of a conspiracy and, applying the principle that the range of permissible inferences from circumstantial evidence of a conspiracy is limited where the economic rationality of the alleged conspiracy is doubtful, the district court found plaintiff's circumstantial evidence of conspiracy insufficient to save it from summary judgment because the economic theory of the plaintiff's claim made little economic sense. On appeal, the Tenth Circuit reversed. It held that the plaintiff had produced direct evidence of conspiracy, though that evidence was not by itself sufficient to overcome a summary judgment motion, and that the district court erred in finding that the plaintiff's economic theory was dubious and consequently undervalued the plaintiff's circumstantial evidence of conspiracy.
Continue Reading...It appears that the 3M Company has another exclusive dealing problem based on allegedly anti-competitive unilateral conduct, which in the current antitrust environment is significant news. The appropriate boundaries of unilateral anticompetitive activity have been a subject of intense interest in the antitrust bar since the Supreme Court's decision in Verizon Communs., Inc. v. Law Offices of Curtis V. Trinko, 40 U.S. 398 (2004). Trinko is typically characterized as reflecting increasing judicial skepticism with most antitrust theories attacking unilateral actions by an alleged monopolist. This skepticism has arguably complicated Section 2 monopolization and attempted monopolization cases, and resulted in such cases increasingly being resolved against plaintiffs at the early stages of litigation, particularly when brought by other competitors. However, and seen as bucking the overall trend, in 2003 the Third Circuit upheld a monopolization verdict against 3M arising in large part out of exclusive dealing arrangements which 3M had made with major sellers of clear tape in a case brought by a competitor. See LePage's Inc. v. 3M, 324 F.3d 141 (3rd Cir. 2003). It now appears that 3M, at least at the pleading stage, has been unsuccessful in another Section 2 monopolization claim brought by a competitor because of exclusive distribution arrangements with distributors, this time for retail automotive coated abrasives like sandpaper and polishing and grinding disks. NicSand Inc. v. 3M Company, 05-3431 (6th Cir. 2006) (filed August 8, 2006) ("NicSand").
Continue Reading...In an opinion that sheds light on the defenses available to a company accused of price discrimination, the Seventh Circuit Court of Appeals has upheld a jury's defense verdict in favor of tobacco giant R.J. Reynolds Tobacco Co. ("Reynolds"). R.J. Reynolds Tobacco Co. v. Cigarettes Cheaper!, 2006 U.S. App. LEXIS 21590 (7th Cir. Aug. 24, 2006), reh'g denied, 2006 U.S. App. LEXIS 23811 (7th Cir. Sept. 15, 2006). Specifically, the unanimous panel: (1) allowed Reynolds protection under the "general availability" defense even though its generally available discount was conditioned on the retailer's agreement to provide a certain level of advertising; (2) remarked that evidence of intent in a Robinson-Patman Act trial could only serve to confuse the jury; and (3) held that a generally available discount can qualify for a "meeting competition" defense, if it counters a similar discount from a competitor.
Continue Reading...Answer: NO. (But read the following fine print).
The passage of the Antitrust Criminal Investigation Improvement Act of 2005 (March 9, 2006) authorizing antitrust wiretapping for the first time has generated plenty of comment. And, in some circles, alarm. None of the comments, however, have been authored by practitioners experienced with wiretaps. That is not surprising. Almost all wiretaps are used in drug cases — not an area generally frequented by antitrust lawyers.
Continue Reading...On July 31, 2006, the Federal Trade Commission issued its long awaited decision concerning abuse of a technical standard setting process, In the Matter of Rambus, Inc., Docket No. 9302. The Rambus FTC proceeding has been closely watched by practitioners responsible for policing the involvement of companies in standard setting organizations ("SSO's"), and the companies themselves. Standard setting is increasingly important in this era of rapid technological change, as competitors seeks to cooperatively create open standards that operate pro-competitively by providing for interoperability to increase the value and commercial acceptance of a wide variety of products.
Continue Reading..."Monopoly leveraging," or the use of monopoly power in one market to achieve an advantage in a related market, is not in itself a violation of Sherman Act section 2, according to a recent opinion from the U.S. Court of Appeals for the Seventh Circuit. Schor v. Abbott Laboratories, No. 05-3344 (7th Cir. 2006). The complaint alleged that defendant Abbott Laboratories ("ABBOTT") attempted to leverage a monopoly on its patented AIDS drug Norvir to obtain a second monopoly on other drugs that can be combined with Norvir. The District Court dismissed the complaint for failure to state a claim and the Seventh Circuit affirmed. The court reasoned that such a practice cannot increase a monopolist's profits. "A monopolist can take its monopoly profit just once," Judge Frank H. Easterbrook wrote for the unanimous panel. "An effort to do more makes it worse off and is self-deterring." Therefore, the court concluded, monopoly leveraging does not violate the antitrust laws unless it takes a particular form, such as predatory pricing, tie-in sales or a refusal to deal.
Continue Reading...The Robinson-Patman Act provides price discrimination in the sales of commodities of like grade or quality. In Water Craft Management LLC v. Mercury Marine, No. 04-31139 (5th Cir. 2006), plaintiff Water Craft, a retailer of outboard motors, sued its supplier, Mercury Marine, alleging that Mercury engaged in price discrimination prohibited by the Robinson-Patman Act by offering Water Craft's largest competitor, Travis Boating Center, discounts that far exceeded those offered to Water Craft. Mercury invoked the "meeting competition" defense to price discrimination claims, i.e. that the lower price offered to Travis was a good faith attempt to meet the low price offered to Travis by Mercury's competitor. After a bench trial, the district court agreed with Mercury that the meeting competition defense applied and entered judgment in favor of Mercury. Water Craft appealed to the Fifth Circuit, arguing that the district court erred in applying the meeting competition defense because (1) the district court's factual finding that Mercury's price discrimination was a good faith response to its competitor's low prices was erroneous and (2) where a defendant offers a price to the favored purchaser that is not as low as the price offered by the defendant's competitor, as was the case here, the defendant cannot, as a matter of law, avail itself of the meeting competition defense. The Fifth Circuit rejected these arguments and upheld the district court ruling.
Continue Reading...In the first time a Canadian court has considered the tests for exclusive dealing and abuse of dominant position under the Competition Act, Canada's Federal Court of Appeal (the FCA or the court) held last June that the Competition Tribunal failed to correctly apply these tests.1 The FCA thus overturned the Tribunal's dismissal of the Competition Commissioner's application seeking orders against manufacturer Canada Pipe Company Ltd. for abusing its dominant position and having a practice of exclusive dealing and remanded the case to the Tribunal for re-determination. The Commissioner appealed the Tribunal's dismissal of its claims, and Canada Pipe cross-appealed the Tribunal's finding that it had market power in the relevant markets.2 The case also reveals significant differences in the legal tests employed in the United States and Canada for unlawful exclusive dealing.
Continue Reading...The Roberts Supreme Court appears to be well on its way to reining in the outer reaches of private antitrust enforcement. In the term just concluded, all three antitrust cases heard by the Court resulted in reversals or vacating of judgments in favor of private plaintiffs in actions involving the Robinson Patman Act, joint ventures, and tying.1 Two of these decisions – the Dagher joint venture case and the Independent Ink tying case – were 8-0 (Alito did not participate) decisions, while the Volvo price discrimination opinion commanded the votes of seven justices. Near the end of its term, the Court also granted certorari on two decisions – one by the Ninth Circuit and the other by the Second Circuit – which likewise stretched private enforcement beyond its usual boundaries.
Continue Reading...United States District Judge Emmett Sullivan, sitting in Washington, D.C., has thrown the already-consummated of AT&T/SBC and Verizon/MCI mergers into a state of confusion. Judge Sullivan is requiring the parties and the Antitrust Division of the Department of Justice ("DOJ") to produce evidence to support the alleged public interest purposes served by the consent decrees filed by the DOJ in 2005, to settle its allegations that the acquisitions were anti-competitive and violated Section 7 of the Clayton Act. In the past, federal courts have approved such negotiated consent decrees with little or no comment, attaching extreme deference to the consent decrees and signing them as a matter of course. Judge Sullivan has now stated, however, that the 2004 amendments to the Tunney Act (15 U.S.C.A. § 16 (2006)), passed in response to District of Columbia Circuit's highly deferential review and approval of the consent decree in United States v. Microsoft, require that he give both mergers -- which have already closed -- a more in-depth review. The 2004 Amendments to the Tunney Act directed that "before entering any consent judgment proposed by the United States under this section, the court shall determine that the entry of such judgment is in the public interest," and then instructed the court to consider the impact of the entry of judgment "upon competition and upon the public generally." 15 U.S.C.A. 16(e). Judge Sullivan apparently has interpreted this provision as requiring him to review evidence himself, rather than relying upon the administrative agencies' review of the evidence.
Continue Reading...Plaintiff, a real estate agent representing buyers, brought an action under Section 1 of the Sherman Act for illegal tying, Reifert v. South Central Wisconsin MLS Corp., 7th cir., No. 05-3601, 6/12/06. Plaintiff claimed that defendant Realtors' Association violated Section 1 by requiring an agent subscribing to a multiple listing service ("MLS") to also pay dues to an affiliated national association, the National Association of Realtors ("NAR").
Continue Reading...The California Supreme Court finally decided whether Proposition 64 ("Prop. 64") applies to actions pending at the time it was passed in November, 2004. Prop. 64 limited private actions under the Unfair Competition Law ("UCL"), Bus. & Prof. Code § 17200, et seq. to those who have "suffered injury in fact and lost money or property as a result of" unfair competition or false advertising. Since the plaintiffs in many UCL actions pending at the time of its passage did not meet this requirement, this raised the issue of whether Prop. 64 applies to such pending actions. The California lower courts had split on the issue, although a majority had concluded that Prop. 64 did apply to pending actions.
Continue Reading...Some of the most complex and contentious aspects of contemporary antitrust litigation involve threshold determinations about what kind of market participants are entitled to bring antitrust cases. These controversies are typically played out in the context of two related, but distinct concepts. The first is standing to sue, and the second is whether the type of injury allegedly suffered by the plaintiff is of the sort which the antitrust laws were intended to remedy, typically referred to as "antitrust injury." In a recent unreported decision the Northern District of California wrote at length about both of these topics in the complex context of a challenge to basic aspects of the VISA interbank credit card system brought by First Data Incorporated, a small processor of credit card transactions seeking to both process VISA credit card transactions and offer credit card interchange services. VISA USA v. First Data Corporation, et al., No. C02-01786 (May 12, 2006, N.D.Cal.). Readers should note that the decision discussed below is only one of the latest in a series of private and government cases reflecting a variety of different challenges under state and federal antitrust law to the VISA bank credit card network.
Continue Reading...Antitrust litigation in Canada differs significantly from that in the United States. Whereas private antitrust litigation has been widespread and robust for many years in the U.S., private antitrust litigation in Canada has been slow to grow. However, increasing calls for expanding private parties' access to antitrust lawsuits in Canada signal that Canada may be in store for a growth spurt. Companies doing business in Canada should thus take note that private enforcement of Canada's antitrust law is likely to escalate.
Continue Reading...In an unpublished opinion, designated as "not precedential," the Third Circuit recently affirmed the District Court's dismissal pursuant to the Federal Rule of Civil Procedure 12(b)(6) of antitrust claims that were predicated on a doctor's asserted economic retaliation against a nurse after she rebuffed his sexual advances. Stark v. Ear Nose & Throat Specialists of Northwestern Penn., No. 05-2345, 2006 WL 1371571 (3rd Cir. May 19, 2006). The plaintiffs were Beata and Norman Stark ("Stark"), and Beata Clinical Research Services ("BCRS"), who provided administrative and contractual support services to drug manufacturers and drug research firms. Id. at *1, *4. Defendants, Dr. Anon, his company, Ear Nose & Throat Specialists of Northwestern Penn. ("ENT"), and Robert Budacki, who was one of ENT's employees, engaged in drug and medical research in the field of ear, nose and throat. Id. The relationship between the defendants and Plaintiffs was essentially one of contractor and subcontractor. Id. at *2.
Continue Reading...Continuing a well established trend and reflecting consistency among the federal courts, at least two federal courts in five months have granted summary judgment for lack of antitrust injury where plaintiffs could not show competition had been injured. The two cases briefed here demonstrate that federal courts require that without any accompanying injury to competition, injury to a competitor will not be enough to show antitrust injury and establish standing to assert a claim under the Sherman Act.
Continue Reading...On February 8, 2006, President Bush signed into law the Digital Television Transition and Public Safety Act of 2005 (the "DTV Act"). The DTV Act contains provisions relating to the nation's transition from analog to digital television broadcasting. Most significantly, the DTV Act establishes February 18, 2009 as the "hard" deadline by which full-power television stations must cease broadcasting analog signals and commence broadcasting exclusively in digital format. Congress previously had set a target date of December 31, 2006 for the end of the transition from analog to digital broadcasting. That date, however, was flexible in that television stations could seek an extension of the deadline, and continue broadcasting in analog format, if less than 85 percent of the households in their respective market had access to the digital broadcast signals (e.g., owned a digital television set or a converter box that would make digital signals viewable on older analog television sets). The DTV Act eliminates the 85 percent extension criteria and establishes February 18, 2009 as the "hard" deadline for turning off analog television signals.
Continue Reading...Tying is the sale of one product which the buyer wants (the "tying" product") on the condition that the buyer purchase a second product (the "tied" product) which the buyer either does not want or would prefer to purchase elsewhere. When certain prerequisites are satisfied, tying is per se illegal under the antitrust laws. One of those prerequisites is that the seller have market power over the tying product. Several Supreme Court decisions, including Loew's v. United States, 371 U.S. 38 (1962), held this market power was presumed when the tying product was patented or copyrighted. In Illinois Tool Works, Inc. v. Independent Ink, Inc., 506 U.S. ___ (March 1, 2006), however, the Supreme Court in an 8-0 decision held that this market power presumption was invalid, and that plaintiffs in tying cases involving patented or copyrighted products must prove market power as is necessary in cases involving the tying of nonpatented products.
Continue Reading...In 2006, the Federal Trade Commission ("FTC") approved the merger of Seagate and Maxtor while, a few months prior in 2005, Antitrust Division of the Department of Justice ("DOJ") approved the merger of WebCT and Blackboard, neither issuing a second request for information. In both cases, the two merging firms had sufficiently high market shares that most analysts expected at least a second request, if not some call for divestitures. Yet, the DOJ and the FTC did not issue a second request, much less initiate a suit to block the merger, proving that high market shares do not always guarantee second requests.
Continue Reading...According to the European Commission's latest Report on European Electronic Communications Regulation and Markets, which was released on February 20, telecom operators in Europe are investing in new technologies to cut costs and seize new opportunities opened up by the convergence of communication networks, media content and devices. The Commission confirmed that growing competition, especially in telecom retail markets, is bringing increased consumer benefits and the positive outlook for innovation and investment within Member States and across Europe.
Continue Reading...Now that Judge Alito is Justice Alito, many have asked what impact, if any, may be prophesized for the resolution of antitrust and other competition based matters before the United States Supreme Court. While Judge Alito served on the United States Court of Appeals for the Third Circuit from 1990 to January 31, 2006, he has been involved in but a sparse number of antitrust and competition related matters.
Continue Reading...Beginning in February 2003, several independent class action suits were filed in California state court against various car manufacturers, dealers, and trade associations on behalf of consumers who purchased new vehicles in California that were manufactured or distributed by one of the defendants. These suits alleged that the defendants violated California's antitrust and unfair business practices laws by conspiring to prevent Canadian distributors from exporting cars to California in order to maintain a higher price for those cars in California. In July 2003, California's Judicial Case Coordination Panel consolidated these suits. Honda Motors Co., Ltd. of Japan ("Honda"), Volkswagen AG of Germany ("Volkswagen"), Nissan Motor Ltd. of Japan ("Nissan"), and the Canadian Automobile Dealers' Association ("CADA"), all non-U.S. entities, were among the defendants in this action. Each of these parties, all of whom were served in their respective home countries, made a special appearance in California court in order to move to quash service of summons for lack of personal jurisdiction. In December 2004, the trial court concluded that it did indeed lack personal jurisdiction over these foreign defendants. In In re Automobile Antitrust Cases I and II, 135 Cal. App. 4th (2005), handed down on December 22nd, California's First Appellate District upheld this ruling on appeal.
Continue Reading...On December 19, the European Commission ("Commission") published a Staff Discussion Paper on the application of Article 82 of EC Treaty. Article 82 of the EC Treaty prohibits the abuse of a dominant position, and is the EU's equivalent of Section 2 of the Sherman Act. The Paper is designed to promote a debate as to how European consumers are best protected from dominant companies' exclusionary conduct which risks weakening competition on the EU markets. The proposals are not meant to represent a potential radical change in policy. The Commission "simply wants to develop, and explain its theories of competitive harm on the basis of sound economic assessment for the most frequent types of abusive behavior to make it easier to understand its policy."
Continue Reading...In American Bar Association v. Federal Trade Commission, No. 04-5257 (D.C Cir. 2005), the Court of Appeals for the District of Columbia federal Circuit refused to allow the Federal Trade Commission ("Commission") to regulate the handling of client confidential information by attorneys engaged in certain legal practices. Although certain regulations included in the statute by reference had listed "real estate settlement services" and "tax planning and tax preparation services" as activities in which a financial institution may engage, the court held that the statute itself had no provision that could.
Continue Reading...The federal price discrimination law, the Robinson-Patman Act, is often criticized as being antithetical to the antitrust laws in that it sometimes promotes price uniformity rather than price competition. In Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc., ____ U.S. ____ (2006), the Supreme Court took a major step towards harmonizing Robinson-Patman with other antitrust laws. Not only did the court raise the bar on the competitive injury requirements in secondary line cases, but it stated that the Robinson-Patman Act should not be construed to discourage price reductions that are the hallmark of interbrand competition and should be limited to cases where the favored purchaser has market power.
Continue Reading...On December 14, 2005, the European Court of First Instance ("CFI") denied the application of General Electric Company ("GE") and Honeywell International ("Honeywell") for annulment of the merger prohibition issued by the European Commission ("Commission") of July 3, 2001.1 There, the Commission declared that the acquisition of the assets of Honeywell by GE would be a "concentration incompatible with the common market". A concentration which creates or strengthens a dominant position as a result of which effective competition would be significantly impeded in the common market, or a substantial part thereof, is declared incompatible with the common market. 2
Continue Reading...In Walker Process Equip Co., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172 (1965), the Supreme Court held that the enforcement of a fraudulently procured patent may violate Section 2 of the Sherman Act assuming the other elements of a Section 2 violation are also proved. In recent years, such Walker Process claims have become commonplace, and often asserted as counterclaims in patent infringement cases. The parties asserting such claims, however, are normally those who manufacture competing and potentially infringing products and the damage remedy is normally lost profits.
Continue Reading...The two antitrust agencies are enacting some minor changes to the Hart-Scott-Rodino ("HSR") Notification Rules that impacts all companies that are required to file HSR Notification Forms in connection with their deals.
Continue Reading...Effective antitrust enforcement in an increasingly global economy depends on close governmental cooperation and coordination as well as respect of the decisions other nations. But how should United States antitrust enforcement agencies react when increased dialogue and communication with foreign antitrust agencies which is meant to reduce misunderstanding, and over time, reveal areas of agreement, actually leads to a divergence in the application of antitrust policies?
Continue Reading...The United Kingdom's Office of Fair Trading ("OFT"), the primary UK government agency for enforcing laws protecting competition and consumer welfare, will no longer provide confidential guidance and informal advice on potential mergers not yet made public, it announced last November.1 Previously, competition counsel representing merging parties could obtain, free of charge, a view from the OFT, before the merger was made public, on whether a transaction presented competition issues and whether it would be referred to the UK's Competition Commission for a second stage, in-depth investigation. The announcement cited scarcity of resources due to heightened expectations at a time of increased caseload as the primary reason for the change.
Continue Reading...Suppliers that attempt by agreement, threat, promise or like means, to influence upward or discourage the reduction of the price of products or services, are subject to criminal liability in Canada under Section 61(1)(a) of Canada's Competition Act (the "Act").1 Last week, Labatt Brewing Company faced such liability after an inquiry by the Canadian Competition Bureau (the "Bureau") into the Quebec beer industry resulted in allegations that between March 2004 and April 2005, Labatt engaged in price maintenance in violation of Section 61(1)(a) of the Act. Following an agreement with the Attorney General of Canada, Labatt pleaded guilty to one charge of the offense.
Continue Reading...The Second Circuit recently weighed in with its view of the legality of reverse payment settlements in Hatch Waxman patent litigation. In re Tamoxifen Citrate Antitrust Litigation, 2005 U.S. App. LEXIS 23653 (2d. Cir 2005). The Sixth Circuit previously found such payments to be per se illegal as analogous to market allocation agreements among competitors. In re Cardizem, 332 F.3d 896 (6th Cir. 2003). By contrast, the Eleventh Circuit rejected per se treatment if such settlements did not restrict competition beyond the exclusionary scope of the patent themselves. Valley Drug Co. et al. v. Geneva Pharmaceuticals, 344 F.3d. 1294 (2003). See also Schering Plough Corp. v. FTC, 402 F.3d. 1056 (11th Cir. 2005), cert. petition pending 2005 U.S. LEXIS 7855. In Tamoxifen, the Second Circuit largely aligned itself with the Eleventh Circuit and affirmed dismissal of the Complaint at the pleading stage for failure to state a claim for relief under Federal Rule 12(b). There was no discovery and no trial. The Court accepted the allegations of the Complaint as true and accurate but nonetheless found them insufficient. It affirmed a judgment dismissing the Complaint.
Continue Reading...After a number of losses by the federal government in cases seeking to enjoin hospital mergers, the Federal Trade Commission ("FTC") has won at least a preliminary victory in its challenge of a hospital merger that was consummated almost six years ago. The FTC successfully challenged Evanston Northwestern Healthcare Corporation's ("ENH") acquisition of Highland Park Hospital ("Highland Park") through an administrative trial. Although the FTC Administrative Law Judge ("ALJ") Stephen J. McGuire ruled in favor of the FTC, lengthy appeals are expected. The decision has been appealed to the full Commission and then if the Commission sides in favor of the FTC, that decision would likely be appealed to the Seventh Circuit. Given that the FTC has prevailed at least at this initial stage of the litigation process, the FTC staff's confidence in challenging hospital mergers may increase slightly.
Continue Reading...Blackboard Inc. ("Blackboard"), a Washington-based developer of online learning resources and Web-based academic forums, announced Wednesday, October 12, it would acquire smaller rival WebCT Inc. ('WebCT") of Lynnfield, Massachusetts, for $180 million. The deal will bring the top two competitors in the online learning space together under one platform, with a total of 3,700 institutional users. The transaction has been approved by the companies' boards and the companies expect the deal to close later this year or in early 2006.
Continue Reading...On November 9, 2005, the UK's antitrust regulator, the Office of Fair Trading ("OFT") announced that it had issued a statement of objections to 50 of the UK's leading private schools which set out the OFT's provisional findings that the schools had infringed the Chapter I prohibition of the Competition Act 1998 (which is the UK's equivalent of Section 1 of the Sherman Act in the US) by entering into an agreement to exchange detailed information about their academic fees.
Continue Reading...On September 30, the FTC (with only 2 Commissioners sitting) announced that it reached a settlement that would allow Procter & Gamble Co.'s ("P&G") proposed $57 billion acquisition of a rival consumer products manufacturer, Gillette Co., to proceed. By a 2-0-2 vote, the Commission approved the merger so long as the companies divest assets ranging from toothbrushes to antiperspirants/deodorants. The divestitures are required to satisfy the FTC that competition will not be harmed following the transaction.
Continue Reading...Pursuant to a proposed consent judgment, filed by the Department of Justice on behalf of the Federal Trade Commission, in the U.S. District Court for the District of Columbia, a Connecticut-based hedge fund manager will be required to pay $350,000 in civil penalties to settle charges that he failed to make four premerger notification filings required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act").
Continue Reading...People's Choice Wireless, Inc. v. Verizon Wireless, B175179.
In a case building upon the definition of "unfair" as defined in the California Unfair Practices Act1, plaintiffs, independent dealers of cellular phones ("Independent Dealers") alleged that defendant Verizon Wireless ("Verizon") engaged in unfair competition within the meaning of Business and Professions Code Section 17200 by (1) refusing to sell popular, new cellular telephone models to the Independent Dealers during an extended "holdback" period, and (2) selling cellular telephones to customers below cost in certain circumstances, where because of a change in Verizon's sales policies, the Independent Dealers could not afford to compete. The Independent Dealers brought an action for injunctive relief pursuant to California Business and Professions Code Section 17203.
Continue Reading...On September 23, 2005, the European Competition Commissioner, Ms. Neelie Kroes, delivered a speech to the Fordham Corporate Law Institute, New York, on the policy review of Article 82 of the EC Treaty. Article 82 deals with unilateral conduct by a corporation with market power which restricts competition on the market, and is the EU's equivalent of Section 2 of the Sherman Act in the US.
Continue Reading...A lawsuit brought by MFS Securities Corp. and its owner, Marco Savarese, against the New York Stock Exchange was properly dismissed, the Second Circuit recently held, where plaintiffs failed to state an antitrust claim when they failed to allege any anticompetitive effects of the NYSE's termination of MFS's membership in the Exchange.
Continue Reading...In the magazine distribution business, wholesalers purchase magazines from distributors and resell them to retailers. In the early 1990's, magazine wholesalers operated in defined geographic territories, facing little competition from other wholesalers. Large chain retailers with businesses in many territories, however, desired wholesalers who were capable of serving multiple or all of their retail outlets across geographic territories. The chains began shifting business to such wholesalers and inviting bids from them for contracts wherein the chains would agree to a multi-year commitment in exchange for discounted prices. One wholesaler, Charles Levy Circulating Co. ("Levy"), allegedly gained a large share of the market by entering into such contracts with the chains. Many other wholesalers, however, either went out of business or experienced declining profits as this new trend took hold.
Continue Reading...Federal Circuit Holds That Patent Pools Without Anticompetitive Effects Are Lawful In U.S. Philips Corp. v. International Trade Commission.
On September 21, 2005, the Court of Appeals for the Federal Circuit reversed a ruling of the International Trade Commission ("ITC") which had found that U.S. Philips Corp. ("Philips") had committed "per se" patent misuse by "tying" the license of "essential" compact disk patents to the license of "nonessential" patents in a package licensing pool. The ITC found misuse both under a "per se" standard, and under the rule of reason.
Continue Reading...In a case concerning competition between would-be entrants to a generic drug market and competition between generic pharmaceutical firms and a patentee, the Eleventh Circuit held that a patentee's infringement action is immune from antitrust challenge, but the same patentee's settlement of infringement proceedings with a third party may give rise to liability under Sections 1 and 2 of the Sherman Act. Andrx Pharmaceuticals, Inc. v. Elan Corp., PLC, 11th Cir., No. 03-13605, 8/29/05.
Continue Reading...On September 22, 2005, Ms. Neelie Kroes, the European Union's Competition Commissioner, gave a speech at the Harvard Club, New York, on enhancing actions for damages for breach of competition rules in Europe.
Continue Reading...On September 16, 2005, the Third Circuit affirmed a district court's dismissal of a plaintiff's antitrust case on summary judgment in Harrison Aire, Inc. v. Aerostar International, Inc., Nos. 04-2904 & 04-3052 (3d Cir. Sept. 16, 2005). The three judge panel unanimously concurred with the district court that Harrison Aire had failed to show that Aerostar International had illegally established a monopoly over the market for replacement fabric for Aerostar hot air balloons or had illegally tied its repair fabric to the purchase of the balloon. The Third Circuit did, however, decide that Harrison Aire had standing to raise antitrust claims.
Continue Reading...On September 29, 2005, Woodson & Associates, Inc., a Florida electrical contractor, was charged with conspiring to rig bids with respect to construction contracts in support of the Evolved Expendable Launch Vehicle ("EELV") program supported by the U.S. Air Force. According to the one-count felony charge filed in the U.S. District Court in Orlando, Florida, Woodson allegedly participated in a conspiracy to suppress and eliminate competition from at least March 1998 until June 2002 by rigging a series of bids on electrical construction contracts with regard to the EELV program at Space Launch Complex 37 at Cape Canaveral Air Force Station ("CCAFS"). Woodson agreed to plea guilty and pay a criminal penalty of $175,000.
Continue Reading...On July 22, 2005, the Court of Appeals for the District of Columbia Circuit denied a petition for review filed by PolyGram Holding, Inc. In so doing, the DC Circuit, in an opinion by Chief Judge Ginsburg, endorsed the Commission's characterization of the restraint in issue as "inherently suspect". The court held that the Commission was correct in following the analytical path that it established in In Re Massachusetts Board of Optometry.1 PolyGram Holding, Inc. v. Federal Trade Commission, No. 03-1293 (DC Cer. 2005).
Continue Reading...Aloha Petroleum ("Aloha"), a Hawaiian corporation involved in both the bulk supply and retail sale of gasoline on the Hawaiian islands, is seeking to acquire eighteen retail gasoline stations on the island of Oahu currently owned by Trustreet Properties ("Trustreet") as well as Trustreet's fifty percent interest in a petroleum importing terminal on Oahu known as Barbers Point. Aloha presently owns its own retail gasoline stations on Oahu and the other fifty percent interest in the Barbers Point Terminal. The FTC has filed a complaint in the U.S. District Court for the District of Hawaii seeking a preliminary injunction against this acquisition (FTC v. Aloha Petroleum, Ltd.). The FTC contends that this transaction, which is not reportable under the Hart-Scott-Rodino premerger filing guidelines, would have anticompetitive effects in both the market for the bulk supply of gasoline and the market for the retail sale of gasoline.
Continue Reading...On August 23, 2005, the UK's Department of Trade and Industry (DTI) published a consultation document on the possible reform of Part 9 of the UK's Enterprise Act 2002, which governs the release of consumer and competition information, and outlined options for disclosing currently confidential commercial information held by public authorities to consumers and businesses for pursuing their own private civil court proceedings.
Continue Reading...On August 9, the Federal Trade Commission (the "FTC") approved by a 4-0 vote the publication of a Federal Register notice concerning proposed amendments to the HSR Rules, 16 C.F.R. Part 803. The proposed amendments would allow parties filing pre-merger documents under the HSR Act to provide Internet links to certain documents in lieu of paper copies for items 4(a) and 4(b) on the notification and report form. The proposed rulemaking also addresses "stale filing" situations, in which parties make premerger filings but then fail to comply with a Request for Additional Information and Documentary Material - commonly known as a second request. The proposed rule is that an acquired person's notification of the transaction shall expire after 18 months if a second request is still outstanding. The proposed rulemaking was drafted jointly by staff from the Department of Justice's Antitrust Division ("DOJ") and the FTC.
Continue Reading...Section 2 of the Sherman Act prohibits monopolization and attempted monopolization. Both offenses require a high degree of market power coupled with exclusionary conduct. Defining what constitutes exclusionary conduct, however, is one of the great conundrums of antitrust law since much legitimate competition is exclusionary in some sense. See generally Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, 124 S. Ct. 872, 882-83 (2004). Therefore, courts have limited exclusionary conduct for Section 2 purposes to conduct which may otherwise violate the antitrust laws - - such as tying or exclusive dealing - - or other conduct when the alleged monopolist forgoes short-run benefits to reduce competition in the long run. Trinko, 124 S. Ct. at 879-80; Aspen Skiing v. Aspen Highlands Skiing Corp., 472 U.S. 585, 608 (1985).
Continue Reading...In Parker v. Brown, 317 U.S. 341, the Supreme Court held that states were immune from the federal antitrust laws. This doctrine, known as state action immunity, is based on the theory that states acting in their capacities as sovereigns should not be subject to the federal antitrust laws out of respect for federalism. As originally formulated in Parker, state action immunity only applied if the specific anticompetitive activity at issue was directed or compelled by the state. Subsequent cases have relaxed the requirements for the immunity to apply, however. In California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97 (1980), the Court held that the challenged restraint should be a clearly articulated and affirmatively expressed state policy, actively supervised by the state, and that mere authorization by the state, as opposed to compulsion, constituted sufficient clear articulation. In Town of Hallie v. City of Eau Claive, 471 U.S. 34 (1985), the Court further expanded the scope of state action immunity holding that the anticompetitive activity need only be a "foreseeable result" of the state statute to satisfy the clear articulation requirement and that active supervision is not required if municipalities or other public entities are involved. In City of Columbia v. Omni Outdoor Advertising, 499 U.S. 365 (1991), the Court applied the foreseeable result standard to immunize restrictions on the construction of billboards imposed by a city, allegedly for the purpose of preserving the monopoly position of an incumbent, based on the state's grant of zoning authority to the city. The Court reasoned that zoning laws inherently involve the displacement of competition and, as such, harm to competition was a foreseeable result of the state's grant of zoning authority to the city. Thus, although lower courts have varied somewhat in how they have interpreted these precedents, there appears to have been a distinct trend since Parker to expand the scope of state action immunity by finding clear articulation in broad or general grants of authority to act by states.
Continue Reading...In a number of recent speeches, Ms. Neelie Kroes, the European Competition Commissioner, has highlighted the European Commission's ("Commission") intention to undertake a comprehensive review of the European Community's ("EC") state aid policy to stimulate European economic growth and increase European competitiveness on the global market.
Continue Reading...Competition Bureau Announces Withdrawal of Regulated Conduct Defence Bulletin and Forthcoming Issuance of New Bulletin
On June 20, 2005, Canada's Competition Bureau changed directions and announced that it would immediately withdraw its Information Bulletin on the Regulated Conduct Defence released in December 2002 (the "Bulletin") and release a new Bulletin on the Regulated Conduct Defence ("RCD") in Fall 2005.1 The announcement came after the Bureau reviewed submissions received in response to its invitation for public comment on the Bulletin. The stated purpose of the Bulletin is to "outline and clarify the Bureau's position with regard to the jurisprudence on [the] regulated conduct defence." Since its release, however, the Bulletin has been sharply criticized for "ignoring the very jurisprudence which forms the RCD and reflecting a view that is at odds with that jurisprudence."2 This is troubling and creates uncertainty in the law since the Bureau's administrative guidance, whether characterized as "guidelines" or an "information bulletin", often serves in practice as a statement of law. 3
Continue Reading...On June 15, the European Commission ("Commission") announced that it had fined Anglo-Swedish pharmaceutical company, AstraZeneca, €60 million (approx. US$73 million) for misusing the patent system, and the procedures for marketing pharmaceuticals, to block or delay market entry for generic competitors to its ulcer drug Losec. The Commission decided that AstraZeneca's actions constituted serious abuses of its dominant market position in violation of the European Union's competition rules. The level of the fine took into account that some features of the abuses were considered novel by EU standards.
Continue Reading...In an unusual "predatory buying" case, the Ninth Circuit held that to succeed on a Sherman Act Section 2 claim, a plaintiff complaining of predatory buying need not meet the high standard of liability applicable to predatory pricing claims. Confederated Tribes of Siletz Indians of Oregon v. Weyerhaeuser Co., Nos. 03-35669, 03-35984, 2005 WL 1269668 (9th Cir. May 31, 2005). According to the Ninth Circuit, a plaintiff does not have to prove that the defendant operated at a loss and that a dangerous probability of the defendant's recoupment of those losses existed to establish antitrust liability for predatory buying.
Continue Reading...On June 13, the European Commission ("Commission") announced the launch of detailed antitrust investigations of the European Union's ("EU") financial services and energy markets. In particular, the Commission will focus on the retail banking and business insurance sectors, and the gas and electricity markets. The Commission is concerned with growing evidence suggesting that EU consumers are not benefiting from fully competitive and integrated financial markets, and the lack of genuinely competitive offers and significant price increases in the energy sector.
Continue Reading...Plaintiffs, promoters of "A" Hunter-Jumper Competitions on the Florida Winter Horse Show circuit, filed an action against USA Equestrian, Inc., ("USAE"), United States Equestrian Federation Inc. ("USEF"), an affiliate, and incumbent horse show promoters, granted exclusive rights to produce "A" horse shows within a 250 mile radius ("mileage rule"), of the incumbant venue. USEF is the successor of the American Horse Show Association.
Continue Reading...On May 25, 2005, United States District Judge, Central District of California, denied the defendant supermarkets' motion for summary judgment, and held that a revenue sharing agreement between three large supermarket chains, alleged to be ancillary to the promotion of employer solidarity within the structure of a multiemployer bargaining unit, was not subject to the nonstatutory labor exemption, and is not immune from scrutiny as a potential antitrust violation. State of California v. Safeway, Inc., United States District Court, Central District of California, CV04-0687-GHK (SSx), 52505.
Continue Reading...Conspiracy is a basic theory of antitrust liability. It is a theory favored by antitrust plaintiffs and the government, pled often by each, and can form the legal basis of private and public enforcement. Plaintiffs win or lose on its proof. Conspiracy rarely, if ever, enhances efficiency; and competition and consumer welfare often suffer in its presence. In June, the Ninth Circuit limited its use by broadening the circumstances under which two groups can be considered one entity, and therefore, incapable of forming a horizontal agreement. The court held that a national trade association was incapable of conspiring with its affiliated local groups to exclude competition because all parties shared a common unified interest. Only disparate, competing, independent entities with unique economic incentives, motives, and actions are able to unlawfully conspire. Jack Russell Network of Northern California v. American Kennel Club, Inc., 9th Cir., No. 02-17264.
Continue Reading...The Federal Trade Commission has proposed consent orders that will approve Chevron's acquisition of the voting securities of Unocal, which will then merge into a Chevron subsidiary, and continue as a single entity. In Re Chevron Corp., FTC, File No. 051 0125, 6/10/05. The consent orders require Chevron to release all of its patent rights to CARB reformulated gasoline, required in the California market.
Continue Reading...In a unanimous decision, the Supreme Court opened the door for generic drug manufacturers to conduct pre-clinical drug testing on patented drugs. Integra brought the case, Merck KGaA v. Integra Lifesciences I, Ltd., against Merck for using patented tripeptide sequences that show promise in combating certain types of cancer. Integra alleged that Merck's research of the patented compounds constituted patent infringement and sued Merck for damages. Integra prevailed both at trial and on appeal to the Federal Circuit by convincing the court that Merck had infringed Integra's patent when they conducted pre-clinical research. But the Supreme Court's opinion, which was widely supported by both the Bush Administration and the AARP, stated that Merck's use of patented material was protected by a statutory safe harbor that allows generic drug manufacturers to conduct research using patented information.
Continue Reading...The Antitrust Division continues to send a strong message to businesses, executives, and individuals engaged in potential bid rigging and price fixing schemes. Recent investigations of the ready mixed concrete industry, glyphosate industry, and roofing products industry have resulted in guilty pleas and indictments. The recent activity indicates that the Antitrust Division continues to make criminal enforcement a priority.
Continue Reading...Under the Hatch-Waxman Act, a drug manufacturer must file a New Drug Application ("NDA") in order to obtain FDA approval of a new drug. Along with the NDA, the drug company must inform the FDA of any patents that cover the drug so the FDA can list the patents in a publication known as the "Orange Book." If such patents are listed in the Orange Book, a generic manufacturer, must make a certification with respect to the listed patents in its Abbreviated New Drug Application ("ANDA"). One certification is that the listed patents are either unenforceable or not infringed by the generic drug ("Paragraph IV certification"). The generic must give notice of the Paragraph IV filing to the NDA company, which has 45 days to file an infringement suit. If no suit is filed, the ANDA may be approved immediately. If suit is filed, that delays approval for 30 months. Either way, any subsequent generic making a similar Paragraph IV certification may not receive approval until 180 days after the earlier of either (1) the first ANDA applicant that submitted a Paragraph IV certification begins commercial marketing, or (2) a court decision holding that the relevant patent is invalid or not infringed.
Continue Reading...On May 16, 2005, the United States Supreme Court struck down state laws in Michigan and New York, barring out of state wineries from selling directly to instate consumers, while allowing such sales by instate wineries. The laws were an unconstitutional discrimination against interstate commerce, in violation of the Commerce Clause of the Constitution. Granholm v. Heald, No. 03-1116 (May 16, 2005).1
Continue Reading...The DOJ has been conducting an aggressive enforcement campaign against international cartels since 1996. In the past, the DOJ could indict suspects located in the UK, but the requirement under previous extradition arrangements for the offence to be a crime in both requesting and receiving states (i.e. dual criminality) prevented their extradition since price-fixing was not a criminal offence on the UK. Most notably, in the auction house commissions scandal, the former Chairman of Christie's, Sir Anthony Tennant, could not be extradited under the dual criminality principle, and refused to go to New York to stand trial.
Continue Reading...Due to the popularity of this blog -- over 100,000 hits so far -- we are pleased to announce that we will be updating the content on a bi-weekly (versus monthly) basis to keep you informed about issues, cases and news that have implications for your business.
The first three articles below are NEW!
In light of the continued globalization of business activities, and the increasing number of mergers that are subject to review under merger laws in more than one jurisdiction, the Organization for Economic Co-operation and Development ("OECD") published on March 23, 2005, a Council Recommendation, on merger review best practices.
Continue Reading...Ms. Nellie Kroes, the European Competition Commissioner, delivered a speech on April 7, 2005, on the effective enforcement of European Community competition law. Speaking at the International Forum on Competition Law in Brussels, the Commissioner focused on cartel enforcement, in particular, which she has highlighted in previous speeches as one of her highest priorities during her time in office.
Continue Reading...Canada's Commissioner of Competition has sought leave to intervene in an appeal by Apotex Inc. in Eli Lilly and Co. v. Apotex Inc., [2004] FC 1445, a decision of the Federal Court delivered last fall. Apotex holds that a mere assignment of patents does not constitute a cause of action under Section 45 of Canada's Competition Act, R.S.C. 1985, c. C-34, even when it results in a monopoly.
Continue Reading...In the aftermath of the entry of the Multistate Tobacco Settlement Agreement ("MSA"), and enactment by the California Legislature of legislation to implement the terms of the MSA, a class of California consumers, who purchased cigarettes manufactured by one or more of the settling defendant tobacco manufacturers, claimed that the MSA and the state legislation constituted an "anticompetitive hybrid agreement", in violation of Section 1 of the Sherman Act and the California Cartwright Act and Unfair Competition Act.1
Continue Reading...Amendments to United States Sentencing Guidelines Which Increase Antitrust Penalties Submitted to Congress
On April 15, 2005, the United States Sentencing Commission ("USSC"), an independent agency in the judicial branch of the federal government, voted unanimously to adopt amendments to the United States Sentencing Guidelines (the "Guidelines").1 The amendments, which follow a series of major developments in the sentencing system, increase the advised penalties for antitrust offenses in response to the Antitrust Criminal Penalty Enhancement and Reform Act of 2004 (the "Antitrust Penalty Enhancement Act")2 which increased the maximum sentences for individuals convicted of Sherman Act offenses from three years to ten years.
Continue Reading...California State Senator Figueroa (D-Fremont), Chair of the California Senate's Business and Professions Committee, has introduced SB 582, a bill that would require retailers to disclose "slotting allowances" paid by suppliers. Slotting allowances are payments a supplier makes to a retailer for placement of the supplier's product on the retailer's shelves.
Continue Reading...The Antitrust Division continues to send a strong message to businesses, executives, and individuals engaged in potential bid rigging and price fixing schemes. Recent investigation of ready mixed concrete industry, roofing products industry, and the E-rate program have resulted in guilty pleas and indictments. The recent activity indicates that the Antitrust Division continues to make criminal enforcement a priority.
Continue Reading...In Schering-Plough Corp. v. Federal Trade Commission, 2005 U.S. App. LEXIS 3811, (11th. Cir. 2005), the Eleventh Circuit addressed the antitrust implications of settlements of patent suits in the context of the Hatch-Waxman regulatory regime that involve payments from the patent holder to the alleged infringer. Under the Hatch-Waxman Act, a generic drug manufacturer may be approved to market its generic drug without expensive and time-consuming safety studies if its drug is the bioequivalent of a pioneer drug that is already approved for marketing. In order to receive this approval, the generic manufacturer must certify that the relevant patents on the brand name drug are either invalid or will not be infringed by the generic drug. The pioneer manufacturer is then notified of the generic's desire to enter the market; if the pioneer manufacturer sues for patent infringement within forty-five days of receiving notice, Hatch-Waxman imposes a thirty month stay on FDA approval of the generic.
Continue Reading...In a reversal of the dismissal of the Department of Justice Antitrust Division (DOJ) complaint, alleging violations of Section 1 and 2 of the Sherman Act and Section 3 of the Clayton Act, the Court of Appeals for the Third Circuit found Dentsply International Inc. ("Dentsply") guilty of illegal monopoly power maintenance. DOJ opted not to appeal adverse district court rulings on the Sherman Act Section 1 and the Clayton Act Section 3 claims. The court remanded for the entry of the injunctive relief prayed for.
Continue Reading...It has been almost one year since the world of European antitrust enforcement was radically reformed. The new EU antitrust regime is characterized by more proactive enforcement, increased co-operation, and better priority setting. The changes resulted from the efforts of former European Competition Commissioner, Mario Monti, whose commitment to antitrust reform ensured that all the necessary regulatory instruments were in place by May 1, 2004. While no firm conclusions can be drawn because the reference period is relatively short (and, some powers have yet to be exercised, or have not had any reported outcome), what follows is a short overview of the enforcement of the new EU competition rules during the past eleven months.
Continue Reading...The United States Supreme Court has granted certiorari in a Robinson-Patman Act ("RPA") case. In Reeder-Simco GMC, Inc. v. Volvo GM Heavy Truck Corp., 374 F.3d 701 (8th Cir. 2004), cert. granted, 73 U.S.LW. 3402, 3524 (2005), a divided panel of the Eighth Circuit had affirmed a jury verdict for the plaintiff on an RPA claim. Plaintiff truck dealer, a reseller of Volvo trucks, asserted that it had lost bids to non-Volvo competitors for the sale of trucks because Volvo had refused to provide plaintiff with price concessions that would have enabled plaintiff to bid successfully.
Continue Reading...The Federal Trade Commission is on a campaign to reduce health care costs. One way to rein them in is to challenge consummated hospital mergers that, in the FTC's view, have resulted in dramatic price increases for patients, insurers, employers, and other payers.
Continue Reading...In an effort to market its generic version of Pfizer's blockbuster drug Zoloft, Teva Pharmaceuticals USA, Inc. ("Teva") sued Pfizer Inc. ("Pfizer") challenging a patent on that drug. Specifically, Teva sued Pfizer for a declaratory judgment that its generic version of sertraline hydrochloride would not infringe Pfizer's patents on the drug Zoloft. Pfizer moved to dismiss for lack of subject matter jurisdiction, arguing that there was no actual controversy between the parties as required for such jurisdiction. The district court granted the motion to dismiss.
Continue Reading...On February 15, 2005, the European Court of Justice ("ECJ") rejected an appeal by the European Commission against the judgment of the Court of First Instance ("CFI"), annulling the Commission's decision prohibiting the merger between Tetra Laval and Sidel.
Continue Reading...In Newcal Indus., Inc. v. IKON Office Solutions, Inc., 2004 U.S. Dist. LEXIS 26229 (N.D. Cal. December 23, 2004), plaintiff suppliers and service providers of copiers alleged that defendant IKON, also a supplier and service provider of copiers, fraudulently obtains amendments to its existing contracts with customers that extend the period of time that these customers are under contract with IKON. According to the plaintiffs, these fraudulently obtained contract extensions reduced the ability of plaintiffs to make deals with IKON customers to replace IKON copier equipment. Such a foreclosure of competition for the business of IKON customers, the plaintiffs contended, violated Sections 1 and 2 of the Sherman Act. IKON moved for dismissal for failure to state a claim, arguing that the plaintiffs failed to allege a legally sufficient market.
Continue Reading...A federal trial has cleared the way for an Italian drug manufacturer - Chemi SpA - to sue drug maker GlaxoSmithKline ("GSK") for unlawful monopolization of the market for nabumetone, an anti-inflammatory drug. Chemi SpA v. GlaxoSmithKline, 2005 WL 300067 (E.D. Pa. February 8, 2005). The court rejected the defendant's arguments that Chemi lacked standing and that its claims were barred by the statute of limitations.
Continue Reading...In January, the Court of Appeals for the Federal Circuit issued an opinion in Independent Ink Inc. v. Illinois Tool Works, Inc. 1 Addressing the issue whether, in a Section 1 tying case, a rebuttable presumption arises from the possession of a patent over the tying product, the court answers in the affirmative. It concludes that it was bound to follow Supreme Court precedent in International Salt and Loew's, which have not been expressly overruled by Jefferson Parish, or more recent case law. Because International Salt and Loew's are not dispositive on the rebuttable nature of the presumption, however, the court looks to Supreme Court dicta, and concludes that on remand, the defendants may offer expert testimony or other credible economic evidence of cross-elasticity of demand, which, would negate the presumption.
Continue Reading...In In re Terazosin Hydrochloride Antitrust Litig., 2005 U.S. Dist. LEXIS 108 (S.D. Fla. January 5, 2005), the Southern District of Florida held, on remand from the Eleventh Circuit, that "reverse" payments to settle patent infringement litigation under Hatch-Waxman were per se illegal.
Continue Reading...On November 2, 2004, California voters approved Proposition 64 which significantly limits lawsuits brought under California's Business and Professions Code § 17200, known as the Unfair Competition Law (the "UCL") and for false advertising under Business and Professions Code § 17500 ("False Advertising Law").
Continue Reading...On January 6, the Commission ruled that Chicago Bridge & Iron Company ("CB&I") illegally acquired Pitt-Des Moines, Inc.'s ("PDM") Engineered Construction and Water Divisions. The FTC did not initially investigate the deal when the parties filed their Hart Scott Rodino notification forms. Eight months after the HSR waiting period expired, the FTC challenged the merger administratively before an FTC Administrative Law Judge ("ALJ"). The CB&I case serves as a powerful reminder that the expiration of the HSR waiting period does not mean that the transaction has been approved by the FTC or cleared from a potential challenge.
Continue Reading...An interesting development has occurred internationally regarding the issue of retail shelf space control and management. On January 5, Israeli Antitrust Authority ("IAA") General Director Dror Strum announced the finalization of rules that prohibit, among other things, slotting allowances and category captaincy arrangements between large retailers and suppliers. Mr. Strum originally announced these rules in May 2003, but had provided time for industry to appeal.
Continue Reading...The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act") requires all drug companies, including brand-name companies and generic makers, to file certain agreements with the FTC and DOJ. Under the Act, whose filing requirements began on January 7, 2004, drug companies must file all brand-generic settlement agreements with the antitrust regulators within 10 days of their execution. Typically, these settlement agreements involve resolutions of patent disputes between brand-name companies and their generic competitors, and, in some instances, disputes between two generic competitors over issues that typically relate to exclusivity for first-to-file generic products.
Continue Reading...On January 14, 2005, the Eastern District of Pennsylvania enjoined the Antitrust Division from indicting and prosecuting Stolt-Nielsen S.A., Stolt-Nielsen Transportation Group, Ltd and Richard Wingfield. The decision is noteworthy because the Antitrust Division had taken the unusual step of attempting to indict and prosecute two corporations and an individual who participated in the Antitrust Division's corporate amnesty program. This was reportedly the first time that the DOJ had tried to revoke an immunity agreement. The district court basically held that the DOJ got what it bargained for when it gave the company and its employees immunity from prosecution for potential antitrust violations in exchange for information that led to convictions of other firms involved in a cartel.
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