Antitrust Law Blog

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.

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.

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). 

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.

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.

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.

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.

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.

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.

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.

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.

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.

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).

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.

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 (4^th Cir. 2007).

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.

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.

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.

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:

Carlton A. Varner

(213) 617-4146

cvarner@sheppardmullin.com

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 (7^th 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 (1^st Cir. 1990).

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.

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.

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.

The California Court of Appeal has held that Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4^th 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.4^th 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.

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]

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.

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."

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.

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.

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).

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."

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."

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.

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.

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.

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.

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.

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”).

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).

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).

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. 

On April 2, 2007, the Antitrust Modernization Commission[1] issued its Report and Recommendation to the President and to Congress ("Report").  In its three years of existence, AMC held 17 public hearings and 16 meetings.  First, in its summary to the President and the Congress, AMC states "the report is fundamentally an endorsement of free-market principles.  These principles have driven the success of the U.S. economy and will continue to fuel the investment and innovation that are essential to ensuring our continued welfare."  Second, AMC reports that the state of the US antitrust laws is "sound".  Third, AMC reported that it did not believe that new or different rules are needed to address the so-called "new economy" issues.  Rather, consistent application of the principles in focus of free market principles, in conjunction with current antitrust law and policy, will ensure that the antitrust laws remain relevant in today's environment as well as the environment of the future.  The AMC also noted that differentiated rules for different industries would be unnecessary and unwise.  This is particularly the case  as to antitrust immunities, exemptions, or special industry-specific standards.

As previously reported in the Blog, Judge Sullivan in the United States District Court for the District of Columbia, surprised many antitrust lawyers by granting applications from a number of competitors and consumer groups and commencing extensive proceedings under the amended Tunney Act to review the consent decree reflecting Department of Justice approval of the merger between SBC and AT&T.  On March 29, 2007 Judge Sullivan finally granted the Antitrust Division's motion to approve the consent decrees between the United States and SBC and AT&T, and between the United States and MCI and Verizon.  SBC and Verizon can now sell off the assets of AT&T and MCI, respectively, listed in the consent decrees, ending the limbo in which the assets had been since December, 2005.

Unlike other areas of antitrust law and policy, Canada is less lenient than United States law when it comes to refusals to deal and resale price maintenance.  Since January 2004, Canada's Competition Act has included a private right of action for refusals to deal.[1]  Attempting to use this relatively new right, one of Canada's largest retailers, Sears Canada, filed suit against Givenchy and Christian Dior's perfume affiliates earlier this year when Givenchy and Dior advised Sears that they would stop supplying Sears after fourteen years of doing business with it.  Unlike under U.S. law, where firms generally may lawfully refuse to deal to anyone they choose provided the refusal is unilateral, Canada's Competition Act restricts refusals to deal when the refusal is causes a person's business to be "substantially affected" and has or is likely to have "an adverse effect on competition in a market"

On July 31, 2006, a unanimous Federal Trade Commission (“Commission” or “FTC”) ruled that Rambus Inc.’s “acts of deception constituted exclusionary conduct under Section 2 of the Sherman Act, and that Rambus unlawfully monopolized the markets for four technologies” that were incorporated into the Dynamic Random Access Memory (“DRAM”) standards adopted by the Joint Electron Device Engineering Counsel (“JEDEC”) for the Synchronous DRAM (“SDRAM”) and the Double Data Rate SDRAM (“DDR-SDRAM”) in violation of Section 5 of the Federal Trade Commission Act (“FTC Act”).  Liability Op. at 3.[1]  In its Liability Opinion, the Commission found, “Through a course of deceptive conduct, Rambus exploited its participation in JEDEC [an industry-wide standard-setting organization] to obtain patents that would cover technologies incorporated into now-ubiquitous JEDEC memory standards, without revealing its patent position to other JEDEC members.  As a result, Rambus was able to distort the standard-setting process and engage in anticompetitive ‘hold up’ of the computer memory industry.”  Id. at 3.

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.

On March 1, the European Commission ("EC") sent a Statement of Objections ("SO") to Microsoft for failing to comply with certain of its obligations under the March 2004 Commission Decision.  Part of that Decision found Microsoft to have infringed the EC Treaty rules on abuse of a dominant position (Article 82) by leveraging its near monopoly in the market for PC operating systems onto the market for work group server operating systems.  Microsoft was required to disclose complete and accurate interface documentation on "reasonable and non-discriminatory terms" to allow non-Microsoft work group servers to interoperate with Windows PCs and servers.  The SO indicates the EC's preliminary view that there is no significant innovation in the interoperability information, rejecting as unfounded 1500 pages of submissions by Microsoft from December 2005 onwards, and hence that the prices proposed by Microsoft are unreasonable.

A maker of concrete vaults that house telephone cables cannot add an exclusive dealing claim to the host of antitrust allegations it has leveled against SBC Services Inc., a California District Court judge has ruled.