A Comparison of 10 Key Issues in Civil Price-Fixing Cases Under the EU’s New Antitrust Damages Law and U.S. Antitrust Law

In April 2014, the European Parliament approved legislation governing antitrust damages actions brought in the national courts of European Union Member States. The Parliament’s approval followed several years of debate, and was the last significant hurdle for developing a private damages law for the EU. The Directive requires the approval of the European Council, which will be a formality, at which point it will be formally adopted. EU Member States then have two years to implement it into their national laws. The Directive aims to make it easier for companies and consumers to bring damages actions against companies involved in EU antitrust infringements. The text of the Directive is available here.

There has been a great deal of commentary concerning the extent to which EU private damages law will become like that of the United States—with all of its benefits for those harmed by anticompetitive conduct and all of its burdens for those accused of engaging in the conduct. Now that the Parliament has approved the Directive and the scope and contours of the forthcoming EU law have become clearer, this article compares some of the key features of the new law with U.S. law in price-fixing cases. For simplicity, the article focuses on U.S. federal law, with references to state law only where important. Our discussion of the new EU law similarly omits reference to national laws. Although brevity is the soul of wit, it also can be a source of potentially incomplete short-cuts that can lead to debatable, or even misleading, conclusions. Accordingly, while this article provides a general overview and comparison of some important issues under U.S. and EU law, it is not meant to substitute for independent legal research and analysis. Read More

Opt-Out Antitrust Class Actions—A U.S. Perspective on the Consumer Rights Bill Pending in UK’s Parliament

Note: This article was adapted from a speech given by Mr. Popofsky[1] at the Oxford Centre for Competition Law & Policy in the UK on May 2, 2014.

Will opt-out class actions proposed by the UK Parliament’s Consumer Rights Bill bring the dreaded U.S.-style litigation culture to the United Kingdom? My personal assessment—that of a seasoned American antitrust practitioner—is that it’s doubtful.

But first, some background. Opt-out class actions are a form of what are known as collective actions or collective proceedings. Such actions are currently permitted in UK and European courts only on an opt-in basis—essentially a form of voluntary joinder—but then only in private claims for redress in the high court that follow on a prior public agency decision of wrongdoing under the competition laws of the UK or EU. Private antitrust actions in the UK are quite rare; only 27 such cases resulted in judgment in the 2005-2008 period. Only one collective action for damages has been brought on behalf of consumers. Read More

Chinese Court Publishes Decisions Finding That InterDigital Violated AML Through Discriminatory Pricing, Sets FRAND Rate for Licensing InterDigital’s SEPs Under Chinese Standards

In April 2014, the Guangdong High Court of China published its October 2013 judgments in two Huawei Technologies v. InterDigital cases. One held that U.S.-based InterDigital (IDC) abused its dominant market position by refusing to license standard essential patents (SEPs) for 3G wireless communication devices on fair, reasonable and non-discriminatory (FRAND) terms. The other set a FRAND rate capped at 0.019 percent of the actual product selling price for IDC to license its Chinese SEPs to Huawei.

IDC designs and develops advanced technologies for wireless communications, and has participated in the formulation of international wireless communications standards for which it owns relevant patents. In July 2011, IDC filed patent infringement litigation against Huawei in the U.S. International Trade Commission and in a U.S. District Court. Huawei then sued IDC in December 2011 in the Shenzhen Intermediate People’s Court by filing two complaints, one over an antitrust dispute and one over a FRAND rate dispute. Read More

MOFCOM Files Brief in U.S. Vitamin C Case Urging Application of Foreign Sovereign Compulsion Defense

On April 14, 2014, the Ministry of Commerce (MOFCOM) of the People’s Republic of China filed an amicus brief in In re Vitamin C Antitrust Litigation, No. 13-4791-cv (2d Cir.), arguing that the district court erred in refusing to apply the foreign sovereign compulsion defense to protect Chinese companies sued in the litigation.

In the Vitamin C class action, plaintiffs alleged that several Chinese companies fixed the price of Vitamin C that was exported to the United States. The case was tried in early 2013, and all but two of the defendants settled before the jury rendered its verdict. The jury entered a verdict for plaintiffs in the amount of $54.1 million, which was trebled to $162.3 million before credits for settlements with other defendants. The trial defendants appealed on various grounds. Read More

NDRC Fines Eyewear Makers for Resale Price Maintenance

On May 29, 2014, China’s National Development and Reform Commission (NDRC) announced that its investigation into the eyeglass industry found that some major manufacturers had restricted resale prices, and it therefore instructed local pricing departments in Beijing, Shanghai and Guangdong to impose total fines totaling more than RMB 19 million ($3 million) under the Anti-Monopoly Law. The conduct at issue involved sales contracts requesting distributors to sell products strictly at “suggested retail prices,” or forcing “buy three get one free” (for contact lenses) promotional activity throughout the year. Companies that voluntarily reported to the NDRC and provided important evidence were exempted from any fines. Companies that offered satisfactory cooperation with the investigation and undertook voluntary correction were fined 1 percent of sales revenue of the previous year’s sales. The harshest penalty—a fine of 2 percent of sales revenue for the previous year’s sales—was imposed on companies that undertook voluntary correction, but also could exercise power in controlling prices or did not provide satisfactory cooperation.

The NDRC’s announcement is available here.

European Commission Issues Statement of Objections Against Marine Harvest for “Gun Jumping”

The European Commission has issued a Statement of Objections against Marine Harvest ASA for the early implementation of its acquisition of Morpol ASA. Marine Harvest is a Norwegian seafood company and Morpol is the largest salmon processor in the European Economic Area.

In December 2012, Marine Harvest acquired a 48.5 percent stake in Morpol from Friendmall Ltd. and Bazmonta Holding Ltd., and subsequently submitted a mandatory public offer for the remaining 51.5 percent of shares in January 2013. Following the settlement and completion of the mandatory offer on March 12, 2013, Marine Harvest acquired 87.1 percent of the shares in Morpol. On August 9, 2013, Marine Harvest notified the Commission of its acquisition of Morpol, and the transaction was conditionally approved on Sept. 30, 2013. Marine Harvest completed its acquisition of the remainder of Morpol’s shares in November 2013. Read More

General Court Orders the Commission to Pay All Costs Following Delay in Responding to Request for Access to Documents

On May 6, 2014, the European Union’s General Court dismissed an appeal filed by Unión de Almacenistas de Hierros de España (UAHE)—a Spanish association of iron warehouses—against a decision of the European Commission to refuse access to documents exchanged with the Spanish competition authority, the Comisión Nacional de la Competencia (CNC), during an investigation, but required the Commission to pay all costs in the appeal because of the length of time the Commission took to issue its refusal.

The CNC fined UAHE in May 2010, alleging that it implemented a system of concerted billing and surcharging practices by sending recommendations to its members on how to charge its services to customers. During the course of its investigation, the CNC sent documents and other information to the Commission pursuant to the framework of cooperation set out in Article 11(4) of Regulation 1/2003. UAHE was fined again by the CNC in a separate but related investigation in 2012. In February 2013, UAHE made a request to the Commission to hand over the documents and correspondence exchanged with the CNC during its 2010 investigation. Following various exchanges and requests for extension, the Commission responded to UAHE’s request in June 2013 stating that it could not provide a response, extending indefinitely the period for its responding to the requests. UAHE subsequently filed an appeal before the General Court alleging that the Commission denied access to the documents by failing to provide an answer within the timescale prescribed by EU transparency rules, and requested that the Court annul the Commission’s decision to extend and require the Commission to disclose the documents. Read More

First Person Extradited From Europe to the United States for Criminal Antitrust Charges

In June 2013, Romano Pisciotti, an Italian national, was arrested at Frankfurt Airport in Germany while in transit from Nigeria to Italy. His arrest was executed upon request of the U.S. Department of Justice’s Antitrust Division (DOJ) for price-fixing charges, pursuant to a bilateral extradition treaty between Germany and the United States. On April 3, 2014, Pisciotti was extradited to the United States to appear before a U.S. District Court in Florida. Two weeks later, he pleaded guilty and was sentenced to serve 24 months in prison and to pay a $50,000 fine, but was credited the nine-month period already served in Germany pending the extradition. He also must cooperate with the DOJ in its ongoing probe of the marine hose industry.

For more than 20 years, until he left the company in 2006, Pisciotti was a manager at Parker ITR. In 2007, it was uncovered that Parker ITR had participated in a worldwide cartel with respect to marine hoses. The cartel agreed to allocate shares of the marine hose market, to use a price list for marine hose, and not to compete for customers with other sellers either by not submitting prices or bids or by submitting intentionally high prices or bids. Pisciotti and his co-conspirators would also provide information gleaned from customers about upcoming marine hose jobs to another conspirator, who would serve as a coordinator. The coordinator would act as a clearinghouse for bidding information, and was paid by the manufacturers for coordinating the conspiracy. Read More

French Competition Authority Launches Market Test on Nespresso-Compatible Single-Serve Coffee Capsules

Following complaints by two single-serve coffee capsule makers, the French Competition Authority (FCA) recently launched a market test relating to undertakings proposed by Nespresso with respect to single-serve coffee capsules. As a market leader for both coffee machines (73 percent market share) and for Nespresso-compatible coffee capsules (85 percent market share), the FCA was concerned at the risk of foreclosure of Nespresso’s competitors. First, Nespresso could have rendered its competitors’ capsules incompatible by not publishing details of technical updates of its machines. Second, Nespresso could abuse its dominant position by pushing consumers to use only Nespresso-branded capsules through various means, including the media, its “Nespresso Club,” labeling/branding on its machines or in Nespresso’s guarantee terms and user guides.

In response to the FCA’s concerns, on April 17, 2014, Nespresso offered commitments, to be enforced for seven years, as part of which the company will communicate technical updates to any third-party capsule maker that requests them, three months before implementation. Nespresso also will refrain from dissuading customers from using competing capsules in the press or through “Club Nespresso,” and will amend its guarantee terms.

The market test ended on May 19, and the FCA’s conclusions are expected soon.

French Competition Authority Publishes Study on Its Leniency Program

The French Competition Authority (FCA) is currently considering a further revision of the 2001 French leniency program, which has already been the subject of two procedural notices in 2006 and 2009. The FCA sought the opinions of competition law practitioners and companies to determine whether areas of the program could be improved. The responses to the study contained some strong criticism, but also some surprises.

The bulk of negative opinions centered on the amount of “red tape,” the overall legal uncertainty of the outcome of the leniency application, and the excessive length of the procedure. Nevertheless, a substantial 67 percent of respondent practitioners considered that the French leniency program was satisfactory compared to the programs of other national competition authorities (NCA). As far as respondent companies were concerned, it was the uncertainty in obtaining a satisfactory reduction of fines and, again, the cumbersome procedure before the FCA that constituted the main obstacles to the program’s efficiency. A surprising outcome came in the ranking of reasons that lead a company to petition for leniency: a reduction of fine, perhaps unsurprisingly, ranked first, followed by the existence of a prior leniency claim before another NCA. However, the threat of on-site inspections or “dawn raids” (“operations de visite et saisies”) by both investigators from the FCA and/or police ranked third.

Competition law practitioners, on the other hand, emphasized the size of the company as well as companies’ multinational reach as being strong incentives when considering petitioning for leniency, but also stressed the importance of in-house legal departments being fully aware of the intricacies of the FCA and its leniency program.

Finally, the responses to the inquiry showed a great concern from both companies and practitioners regarding two aspects: (1) the increased risk of subsequent civil actions, especially following the introduction of competition-based class actions introduced by a recent law; and (2) the lack of transparency in FCA inspections.

2nd Circuit’s Decision in Lotes Clarifies FTAIA’s Effect on the Extraterritorial Reach of the Sherman Act, But Leaves Unresolved Status of Claims Based on Importation of Products Containing Price-Fixed Components

On June 4, 2014, the U.S. Court of Appeals for the 2nd Circuit issued an important decision regarding the limits that the Foreign Trade Antitrust Improvements Act, 15 U.S.C. § 6a (FTAIA) places on the extraterritorial application of the Sherman Act. Lotes Co., Ltd. v. Hon Hai Precision Industry, Co., Ltd., et al., No. 13-2280 (2d Cir).

Lotes and the defendants are members of a trade group that produced a technical standard, USB 3.0, for a new generation of USB devices. All participants in the trade group agreed to make available to all other members royalty-free, reasonable and nondiscriminatory (RAND-Zero) license terms for any patents required to satisfy the new standard. Lotes alleged that the defendants breached their obligations to provide RAND-Zero licenses and tried to secure for the defendants a dominant position that would result in higher USB prices worldwide, including in the United States. Lotes did not claim that it paid higher prices for licenses or products in the United States. Lotes appealed to the 2nd Circuit after the district court dismissed its complaint based on the FTAIA. Read More

7th Circuit Seeks Solicitor General’s Input on the Scope of the FTAIA

As reported in the April 2014 of Orrick’s Antitrust and Competition Newsletter, on March 27, 2014, the 7th U.S. Circuit Court of Appeals affirmed a district court decision that Motorola’s price-fixing claims based on purchases that its non-U.S. affiliates made from non-U.S. defendants were barred under the Foreign Trade Antitrust Improvement Act (FTAIA). Motorola Mobility LLC v. AU Optronics Corp. et al., 746 F.3d 842 (7th Cir. 2014). The 7th Circuit issued its decision based solely on the petition for review and without full briefing on the merits or a hearing.

That denial, which surprised many, has since turned into an unusual series of orders from the 7th Circuit, which might be attributed to the complexity and difficulty of analyzing and applying the FTAIA in light of international comity concerns. On April 24, 2014, Motorola submitted a petition for rehearing en banc, which was supported by a joint brief filed by the U.S. Department of Justice and the U.S. Federal Trade Commission, a brief filed by several economists, and a brief filed by the American Antitrust Institute. On May 1, 2014, the 7th Circuit issued a short order inviting the U.S. Departments of Commerce and State to file briefs as amici curiae. On May 20, the U.S. Solicitor General informed the court that the United States had explained its position in the DOJ/FTC’s brief, and suggested that the conduct Motorola alleged was “substantially the same unlawful conduct as gave rise to” criminal prosecutions by the United States. Read More

DOJ and Bazaarvoice Settle Challenge to Bazaarvoice’s Acquisition of PowerReviews

On April 24, 2014, the U.S. Department of Justice and Bazaarvoice submitted a Stipulation and Proposed Order with respect to a final judgment to resolve the DOJ’s challenge to Bazaarvoice’s acquisition of PowerReviews, its primary competitor in the market for Ratings and Reviews (R&R) platforms.

As reported in Orrick’s February 2014 Antitrust and Competition Newsletter, the DOJ had prevailed on its Clayton Act § 7 claim against Bazaarvoice in a three-week trial before Judge William Orrick of the U.S. District Court for the Northern District of California. United States v. Bazaarvoice, Inc., No. 13-cv-00133-WHO, 2014 U.S. Dist. LEXIS 3284 (N.D. Cal. Jan. 8, 2014). The parties staked out different positions in briefing regarding remedies, and then submitted their proposed stipulation on April 24 before the hearing on remedies scheduled for April 25. Read More

6th Circuit Agrees With FTC and Strikes Down Ohio Hospital Merger

On April 22, 2014, a three-judge panel for the 6th U.S. Circuit Court of Appeals unanimously ordered ProMedica Health System to unwind its merger with a local Ohio hospital, upholding a Federal Trade Commission order that the acquisition was anticompetitive. ProMedica Health Sys., Inc. v. FTC, No. 12-3583, 2014 U.S. App. LEXIS 7500 (6th Cir. Apr. 22, 2014).

ProMedica is a nonprofit health care system based in Ohio that signed an agreement in 2010 to merge with St. Luke’s community hospital. While the transaction did not trigger the Hart-Scott-Rodino premerger notification thresholds, the FTC nevertheless opened an investigation in 2010, and then moved to block the merger out of a concern that ProMedica would increase prices for inpatient services. Although ProMedica felt its acquisition helped the Toledo, Ohio, community by saving St. Luke’s from insolvency, the FTC disagreed. The FTC’s victory closes a four-year dispute, where it obtained a preliminary injunction precluding additional integration, won at trial, survived an appeal to the full Commission, and survived another to the 6th Circuit, which found the Commission’s decision was “supported by substantial evidence in the record.”

The 6th Circuit’s decision hands another win to the FTC in healthcare provider cases and signals an uphill regulatory path for merging hospitals that seek more bargaining power when they negotiate with insurers. Despite the absence of significant legal obstacles to hospital consolidation in the 1990s and the justifications the Affordable Care Act may provide to merging providers, it is clear that FTC continues to aggressively enforce the antitrust laws in this sector of the economy.

The opinion is available here.

9th Circuit Affirms Dismissal of Antitrust Claims in MMS Case Against Wireless Carriers

On April 17, 2014, the 9th U.S. Circuit Court of Appeals affirmed the dismissal of antitrust claims against various wireless carriers that had been brought by a purported class of commercial producers of multimedia content. Davis v. AT&T Wireless Servs., No. 12-55985, 2014 U.S. App. LEXIS 7243 (9th Cir. Apr. 17, 2014).

Two years earlier, the U.S. District Court for the Central District of California had dismissed the claims. Plaintiffs had alleged that when the wireless carriers created the Multimedia Messaging Service (MMS) standard for sending multimedia data files, they agreed not to implement digital rights management measures that would have protected materials copyrighted by third parties. Allegedly, the carriers’ motive was to increase revenues and profits from the use of MMS. The district court ruled that the plaintiffs had not alleged antitrust injury, and therefore lacked antitrust standing.

The 9th Circuit agreed with the lower court that plaintiffs lacked standing, because they failed to allege that they and the defendants were participants in the MMS market in which plaintiffs’ injury allegedly occurred.

A copy of the decision can be found here.

District Court Dismisses Exclusive Dealing and Attempted Monopolization Claims Against SanDisk

On April 25, 2014, in PNY Technologies, Inc. v. SanDisk Corp., the U.S. District Court for the Northern District of California dismissed PNY’s exclusive dealing and attempted monopolization claims relating to flash memory drives. PNY Techs., Inc. v. SanDisk Corp., No. C 11-04689, 2014 U.S. Dist. LEXIS 58108 (N.D. Cal. Apr. 25, 2014).

The court found that allegations of foreclosure from a substantial percentage of retail outlets due to SanDisk’s exclusive contracts with retailers were insufficient as a matter of law. The court took judicial notice of SanDisk’s contracts with retailers under the “incorporation by reference” doctrine, and concluded that, because they were terminable on short notice, they did not plausibly foreclose competition. Due to protective order issues, the court redacted information on the term(s) of SanDisk’s exclusives, so one cannot accurately infer how long would be too long in the court’s view. The court also determined that PNY had failed to adequately plead a lack of alternative channels of distribution for flash memory. Although PNY alleged that non-retail channels were insufficient, the court held that PNY’s allegations were wholly conclusory and therefore deficient. The court gave PNY leave to amend.

A copy of the decision can be found here.

District Court Rules in American Needle Case Following SCOTUS Remand

On April 4, 2014, the U.S. District Court for the Northern District of Illinois made three important rulings in American Needle, Inc. v. New Orleans Saints, et al., No. 04-cv-7806, 2014 U.S. Dist. LEXIS 47527 (N.D. Ill. Apr. 4, 2014).

As background, in a 2010 decision concerning the National Football League (NFL), the U.S. Supreme Court had considered claims by plaintiff American Needle and others challenging the NFL’s decision to award an exclusive apparel license to Reebok, and rejected the NFL’s defense that it was a single entity incapable of conspiring under Sherman Act Section 1. American Needle, Inc. v. National Football League, 130 S. Ct. 2201 (2010). The Supreme Court remanded the case.

The district court (1) rejected American Needle’s request to apply a “quick look” analysis to the NFL’s licensing practices, holding that a full rule of reason analysis was required because the net anticompetitive effects were not obvious; (2) declined to grant summary judgment to the NFL on the issue of causation; and (3) denied the NFL’s summary judgment motion that had argued that American Needle failed to establish a relevant market. As to the latter decision, the district court held that proof of actual detrimental effects—such as lower output and higher prices—can obviate the need for an inquiry into market power and definition, which is a surrogate for such effects. The court also held in the alternative that American Needle had provided sufficient evidence of a submarket for the “wholesale market for NFL trademarked hats.”

A copy of the decision can be found here.

FTC Announces Revised Proposed Information Request for Study on Patent Assertion Entities

As reported in the October 2013 issue of Orrick’s Antitrust and Competition Newsletter, on Oct. 3, 2013, the U.S. Federal Trade Commission published a Federal Register notice that it intends to conduct a study concerning Patent Assertion Entities. The FTC received 70 public comments in response to its Oct. 3, 2013, notice seeking public input on the usefulness and burden of the proposed information collection requests. On May 19, 2014, FTC published a second Federal Register notice with revised proposed information requests. According to an FTC press release dated May 13, 2014, in light of comments the FTC received, the Commission scaled back the scope of information requested and also revised the relevant period to begin Jan. 1, 2009, rather than Jan. 1, 2008. The FTC is accepting comments until June 18, 2014.

The Federal Register Notice and proposed information request are available here.
Comments can be submitted here.

DOJ and FTC to Hold Joint Workshop on Conditional Pricing Practices

On June 23, 2013, the U.S. Department of Justice and the U.S. Federal Trade Commission will hold a joint, one-day workshop in Washington, D.C., on competition issues related to conditional pricing practices. “Conditional pricing” includes loyalty and bundled pricing, in addition to other arrangements where prices are contingent on commitments to purchase or sell a specified share or volume of a particular product or mix of products. The focus of the workshop will be to garner a better economic understanding of the potential harms and benefits of these practices, as well as examine how such practices are treated under the antitrust laws.

The all-day workshop is free and open to the public. It will be held at the FTC’s new satellite conference center, Constitution Center, 400 Seventh St., S.W., Washington, D.C. 20024. Registration is not required, but encouraged. Individuals may register by sending an email to CPPworkshop@ftc.gov with “RSVP” in the subject line. The DOJ and FTC are requesting comments and will accept written submissions through Aug. 22, 2014.

Additional information about the workshop can be found here. The agenda for the workshop is available here. Comments can be submitted here.

A Year Later: Comcast’s Impact On Antitrust Class Actions

This article originally appeared in Law360 on March 26, 2014.

On March 27, 2013, the U.S. Supreme Court issued its decision in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), overturning an order certifying an antitrust class action under Federal Rule of Civil Procedure 23(b)(3), which requires that questions of law or fact common to class members predominate over questions affecting only individual members.

The Supreme Court held that the plaintiffs’ expert’s damages model was unable to measure classwide damages attributable to the only theory of antitrust impact found viable by the district court. Because of this flaw in the damages model, individual damages calculations would overwhelm questions common to the class, and the class therefore could not be certified under Rule 23(b)(3).1

On remand, plaintiffs filed a new motion for class certification, slicing several years off the class period and limiting the geographic market to only five of the 18 counties in the Philadelphia area for which they originally sought certification.2 The defendants opposed the motion and filed a new motion to exclude the opinions of plaintiffs’ expert. The court then granted plaintiffs’ unopposed request to stay the case while the parties conduct settlement discussions. Plaintiffs and Comcast recently agreed to de-certify the Chicago-area class based on the Supreme Court’s decision, and plaintiffs filed an amended complaint limited to the five Philadelphia-area markets.3

It was not unexpected that class counsel in Comcast would narrow the class for which they sought certification, or that settlement discussions might take place after the Supreme Court’s decision. But what effect is Comcast having on class certification in other antitrust cases? Read More