On Jan. 14, 2014, the U.S. Supreme Court, in an opinion by Justice Sonia Sotomayor for a unanimous Court, held that a parens patriae antitrust suit filed in state court by Mississippi’s Attorney General seeking damages on behalf of the citizens of Mississippi was not removable to federal court under the Class Action Fairness Act of 2005 (CAFA). Mississippi ex rel. Hood, Attorney General v. AU Optronics Corp., et al., No. 12-1036, (U.S. Jan. 14, 2014) .
The Attorney General of Mississippi sued AU Optronics and other manufacturers of liquid crystal display (LCD) panels in state court, alleging claims under the Mississippi Antitrust Act, Miss. Code Ann. § 75-21-1 et seq. and the Mississippi Consumer Protection Act, § 75-24-1 et seq. The AG alleged that the defendants operated an international cartel to restrict competition and raise prices for LCD products, and sought, among other things, restitution for purchases of LCD products by Mississippi and its citizens. AUO and the other defendants removed the case to federal court under CAFA’s provision that a “mass action” includes “any civil action … in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact.” 28 U.S.C. § 1332(d)(11)(B)(i). The Court held that a suit filed by a state as the sole plaintiff does not qualify as a “mass action” under CAFA where it includes a claim for restitution based on injuries suffered by the state’s citizens. Read More
On Dec. 9, 2013, a 2-1 panel of the 2nd U.S. Circuit Court of Appeals overturned the convictions of three former General Electric Co. officials, and placed a limit on the government’s use of the continuing conspiracy theory to avoid the applicable statute of limitations. United States v. Peter Grimm, et al., Nos. 12-4310-cr, 12-4365-cr, 12-4371-cr (2d Cir. Dec. 9, 2013). The three former GE executives all worked for a unit of the company that acted as a provider for guaranteed investment contracts or “GICs,” which enable municipalities to invest proceeds from municipal bonds pending their use of the funds. The government alleged in a 2010 indictment that the executives paid kickbacks to brokers between 1999 and 2004 as part of a scheme to rig the competitive bidding process for GICs by lowering interest rates on the GICs. The executives were convicted of violating the federal conspiracy statute (18 U.S.C. § 371), and they appealed to the 2nd Circuit, arguing that the indictment was barred by the five-year statute of limitations for general conspiracies. To satisfy the statute of limitations, the government had to establish that the conspirators knowingly committed an overt act in furtherance of the conspiracy during the limitations period. The 2nd Circuit disagreed with the government’s position that each periodic interest payment made to a municipality pursuant to a GIC was an overt act that continually restarted the conspiracy period. Specifically, the court found that the periodic interest payments were not in furtherance of a conspiracy, but the result of a completed conspiracy. Read More
On Jan. 3, 2014, the 6th U.S. Circuit Court of Appeals revived a price-fixing suit brought by milk retailers, reversing the district court’s grant of summary judgment in favor of defendants. In Re Southeastern Milk Antitrust Litig., No. 12-5457 (6th Cir. Jan. 3, 2014). The retailers claimed that an agreement among Dean Foods Co., Dairy Farmers of America, and National Dairy Holdings had given Dean Foods a monopoly in the processed milk market and caused prices to rise. Specifically, the retailers alleged that to secure U.S. Department of Justice approval of its merger with Suiza Foods, Dean Foods sold certain factories to National Dairy Holdings, an entity that was supposed to compete with Dean Foods but allegedly was a sham company established by Dairy Farmers of America. The retailers further alleged that Dean Foods and National Dairy Holdings agreed not to compete by reducing capacity and allocating markets for the purpose of raising the price of bottled milk. The district court applied the rule of reason and dismissed the lawsuit because the plaintiffs had failed to establish the relevant geographic market. The 6th Circuit reversed, holding that the appropriate inquiry was the quick look test because the alleged illegal conduct has “obviously adverse [and] anticompetitive effects.” The 6th Circuit further found that the plaintiffs’ allegations survived the quick look test even without establishing the relevant geographic market. The 6th Circuit remanded the case to the district court.
A copy of the decision is available here.
On Jan. 8, 2014, Judge William Orrick of the U.S. District Court for the Northern District of California, issued an order after a three-week trial ruling that Bazaarvoice, a provider of Ratings and Reviews platforms (R&R) to companies involved in online commerce in the United States, violated Section 7 of the Clayton Act, 15 U.S.C. § 18, when it acquired its primary competitor, PowerReviews. United States v. Bazaarvoice, Inc., No. 13-cv-00133-WHO (N.D. Cal. Jan. 8, 2014). Bazaarvoice acquired PowerReviews on June 12, 2012, for cash and non-cash consideration valued between $150.8 million and $168.2 million. The transaction was not reported to the U.S. Department of Justice or Federal Trade Commission because the amount of the consideration did not exceed the thresholds for reportable transactions under the Hart-Scott-Rodino Act.
Bazaarvoice and PowerReviews both provide R&R platforms to companies involved in e-commerce. These platforms combine software and services to enable manufacturers and retailers, as well as other companies, to collect, organize, and display online consumers’ product reviews and ratings. The goal of R&R platforms is to increase the conversion rate of consumers who see the posted reviews and ratings. The court found that R&R is critical for companies selling products over the Internet, and is a separate product market for antitrust purposes. It also found that the geographic market is the United States because of, among other things, the realities of marketing and servicing R&R platforms locally, cultural differences in moderating user-generated content, and the difficulties of incorporating different SKUs (Stock Keeping Units). Read More
On Jan. 23, 2014, Judge Joan B. Gottschall of the U.S. District Court for the Northern District of Illinois, ruled 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. Motorola Mobility, Inc. v. AU Optronics Corp. et al., No. 09-c-6610 (N.D. Ill. Jan. 23, 2014).
Motorola, based in Illinois, manufactures electronic devices, including mobile phones that contain liquid crystal display (LCD) panels. Motorola’s non-U.S. affiliates purchased LCD panels that it alleged were the subject of an international price-fixing conspiracy. The purchases of LCD panels fell into three categories: (1) purchases of LCD panels by Motorola that were delivered directly to Motorola facilities in the United States (Category I); (2) purchases of LCD panels by Motorola’s foreign affiliates that were delivered to the foreign affiliates’ manufacturing facilities abroad, where they were incorporated into mobile phones that later were sold in the United States (Category II); and (3) purchases of LCD panels by Motorola’s foreign affiliates that were delivered to the foreign affiliates’ manufacturing facilities abroad and later were incorporated into mobile phones sold outside the United States (Category III). Motorola had negotiated prices for the LCD panels in part in the United States, and its foreign affiliates assigned their claims to Motorola. Read More
In one of the latest battles at the nexus between antitrust and patent law, on Dec. 3, 2013, Judge Yvonne Gonzalez Rogers in the U.S. District Court for the Northern District of California allowed antitrust claims by Cascades Computer Innovation LLC to proceed against RPX Corp. and a number of Android device manufacturers. Cascades Computer Innovation LLC v. RPX Corp., No. 12-cv-01143 (N.D. Cal. Dec. 3, 2013). The case has highlighted significant potential implications for the patent aggregation business model, which has been widely adopted in the technology industry as a reaction to increased litigation from patent assertion entities.
Cascades is a “patent assertion entity” or “PAE”—pejoratively but commonly referred to as a “patent troll”—that does not practice patent claims but instead seeks to monetize them through litigation or licensing. Cascades holds a number of patents it claims are infringed by the Android mobile operating system. RPX is a patent aggregator, or “non-practicing entity” (NPE), formed by member manufacturers to aggregate patents and hold them to defend against patent litigation, including claims by PAEs. Cascades brought Section 1 and 2 and California state law claims alleging a hub-and-spoke conspiracy among RPX and its members to restrain trade in, and to monopsonize the market for, Cascades’ patents. According to Cascades, RPX stands at the center of the conspiracy (the hub), with agreements between RPX and the manufacturers (including Samsung, HTC and Motorola—which settled after the decision) forming the spokes and an agreement among the manufacturers as the rim of the conspiracy. According to Cascades, the defendants agreed not to deal with Cascades in its licensing efforts, other than through RPX. Cascades claims the goal and effect of the alleged conspiracy was to drive down the price for the Cascades patents. Read More
On Dec. 16, 2013, the U.S. Federal Trade Commission announced that it had reached proposed settlements with two professional associations to eliminate provisions in their codes of ethics that purportedly limited competition among their members.
The FTC’s complaint against the Music Teachers National Association, Inc. (MTNA), which represents over 20,000 music teachers nationwide, alleged that the association and its members restrained competition in violation of Section 5 of the FTC Act through a code of ethics provision that restricted members from soliciting clients from rival music teachers: “The teacher shall respect the integrity of other teachers’ studios and shall not actively recruit students from another studio.” The FTC’s proposed order requires, among other things, that the MTNA stop declaring it unethical for its members to solicit teaching work from other music teachers. Read More
On Jan. 23, 2014, the U.S. Federal Trade Commission announced new Hart-Scott-Rodino filing thresholds for mergers and acquisitions. The new thresholds will go into effect on Feb. 24, 2014. Transactions that close on or after the effective date will be subject to the revised thresholds. Any acquisition of voting securities and/or assets requires premerger notification to the FTC and the U.S. Department of Justice under the HSR Act and the regulations promulgated thereunder (16 C.F.R. Sections 801–803) if the following tests are satisfied and if no exemption applies (15 U.S.C. Section 18a(a)(2)). Where an HSR notification is required, both parties must file, the acquiring person must pay a filing fee ((i) $45,000 for transactions below $151.7 million, (ii) $125,000 for transactions of $151.7 million or more but below $758.6 million, and (iii) $280,000 for transactions of $758.6 million or more), and the parties must observe a 30 day waiting period prior to closing.
The new thresholds are as follows: Read More
On Dec. 10, 2013, the European Commission announced fines of €10.8 million ($14.7 million) imposed on Johnson & Johnson (J&J) and €5.5 million ($7.5 million) on Novartis for colluding to postpone the entry of a generic version of fentanyl (a drug used to provide pain relief) into the Dutch market. Postponed entry was achieved through a so-called “co-promotion agreement” between the Janssen-Cilag (J-C), the Dutch subsidiary of J&J, and Sandoz, the Dutch subsidiary of Novartis.
Under this arrangement, Sandoz delayed a generic launch in exchange for financial incentives from J-C. These inducements exceeded the profits Sandoz predicted it could make from selling the generic version of the drug. The agreement began in July 2005 and lasted for around 17 months until December 2006, at which point it was terminated due to the imminent launch of a generic version by a third party. The Commission opened the investigation on its own initiative in October 2011, and found that the agreement kept the price of fentanyl in the Netherlands needlessly high, resulting in unnecessary costs to the Dutch healthcare system, patients and taxpayers.
This decision forms part of a wider series of actions by the Commission with respect to “reverse payments” by which branded manufacturers and generic manufacturers of pharmaceuticals settle patent disputes.
On Dec. 18, 2013, the European Commission announced that it accepted binding commitments from Deutsche Bahn (DB) to resolve concerns that its pricing system for traction current (the electricity used to power trains) in Germany favored DB-owned entities over competitors.
The Commission formally opened its investigation in June 2012, following unannounced inspections at the premises of DB and its German subsidiaries in 2011. The Commission raised concerns that the criteria for discounts offered by DB Energie (which is Germany’s sole provider of traction current) could only be fulfilled by DB’s subsidiaries. The Commission found that the criteria may have adversely affected the profitability and competitiveness of other operators in the markets for rail freight and long distance passenger transport. Read More
On Dec. 11, 2013, in a speech delivered at the CRA Competition Conference in Brussels, Alexander Italianer, the European Commission’s Director-General for Competition, clarified the Commission’s approach in the negotiation of commitments. The speech also highlighted the benefits of the commitments procedure and explained the circumstances in which the Commission will pursue a prohibition decision.
Italianer explained that the Commission is not bound to accept commitments and commitments that are “quick, sufficient and sensible” are more likely to be acceptable. Commitments should be offered at the first opportunity, preferably before any statement of objections, should offer sound solutions that achieve “real change” in the markets, and should be easy to implement and monitor, he said. Companies should avoid offering conditional commitments. Read More
On Dec. 5, 2013, the Chancellor of the Exchequer delivered the UK’s annual Autumn Statement for 2013. Included in the announcement were plans to increase the funding for the new Competition and Markets Authority (CMA) for 2014-2015 and measures to address concerns over the supply of tied banking products to small and medium-sized enterprises (SMEs).
The CMA is to benefit from an additional £12 million ($19.8 million) in funding in 2014-2015, increasing its total budget to around £59.9 million ($99.2 million). These additional resources have been provided to help the CMA deal more effectively with cartels and deliver a “step change” in competition enforcement. It is hoped that this will, in turn, help to encourage increased investment, the entry of new participants to the markets, and the adoption of innovative technologies. Read More
On Jan. 22, 2014, the UK Competition and Markets Authority (CMA) published its draft Prioritisation Principles and Annual Plan for 2014/15. The documents set out the CMA’s vision and strategy for effective enforcement of competition law and other consumer protections. As expected, the CMA identifies cartel and merger control enforcement as key priorities. Perhaps less so, the Plan identifies the change in market structure resulting from an increase in online business, innovation in online and mobile technology, and emerging sectors and business models more generally, as changes in the economy that may have implications for the CMA’s priorities. Third parties have until March 5, 2014 to submit comments.
The Annual Plan is available here. The Prioritisation Principles are available here.
On Dec. 16, 2013, the Guangdong provincial Administration for Industry and Commerce (AIC) issued a Written Decision of Administrative Penalty to penalize Huizhou Daya Bay Yiyuan Purified Water (Huizhou) for abuse of dominance through bundled sales.
After concluding that Huizhou has a dominant market position, Guangdong AIC determined that the company conducted bundled sales through the following activities: (1) It required some real estate companies (the Complainants) to sign water supply engineering agreements that contain not only terms for temporary water supply service to construction sites, but also terms requiring the Complainants to engage Huizhou to work on the residential water meter projects; (2) In situations where some real estate companies were firmly opposed, Huizhou agreed to sign water supply engineering agreements without terms for residential water meter projects, but required them to sign a letter promising in the future to sign agreements with Huizhou for residential water meter projects and acknowledging Huizhou’s right to cut water supply in case of a breach of the promise letter; and (3) Huizhou also required Complainants to sign bundled agreements with a third party in areas where Huizhou is not qualified to sign such agreements. Read More
The Shaanxi High People’s Court has formally issued its Sept. 12, 2013 verdict overturning the first instance judgment of a Xi’an Intermediate People’s Court ruling that Shaanxi Broadcast and TV Network Media’s (Shaanxi) sales of its cable TV services to a consumer did not constitute bundled sales in violation of the Antimonopoly Law of the People’s Republic of China (AML).
In May 2012, Shaanxi charged a consumer RMB 30 yuan per month ($5) for cable TV service, a five-yuan increase from the previous monthly rate. According to Shaanxi, the increased fee includes a RMB 15 yuan ($3) fee for the value-added cable services sold together with the basic cable TV services. The consumer plaintiff filed a claim in the first instance court, Xi’an Intermediate People’s Court, asserting that Shaanxi abused its dominant market position by selling bundled cable TV services without reasonable justification. He requested that the court: (1) confirm that the appellant’s act of charging the RMB 15 yuan value-added cable service fee was invalid, (2) order the return of RMB 15 yuan, and (3) order that Shaanxi pay the plaintiff’s litigation fees. Read More
On Dec. 19, 2013, the Standardization Administration of China (SAC) and State Intellectual Property Office (SIPO) published the Administrative Regulation on National Standards Involving Patents-Interim (Interim Regulations), which concerns the formulation and implementation of national standards involving patents. The Interim Regulations were effective Jan. 1, 2014.
According to the Interim Regulations, national standards involving patents should concern patents that are essential for implementation of the relevant standards. The Interim Regulations impose obligations regarding the disclosure of essential patents that a party owns or knows about. A party that fails to make the required disclosures may be held legally responsible for the failure to do so. In addition, even parties not participating in the formation or revision of national standards are encouraged to disclose essential patents they own or of which they are aware. Read More
On Jan. 9, 2014, three marine transport companies individually announced that the Japan Fair Trade Commission (JFTC) has sent them an advance notice of a surcharge payment order and a cease and desist order, in connection with the agency’s investigation into alleged price fixing on automobile shipments from Japan to North America and Europe. The companies are Nippon Yusen Kabushiki Kaisha, Kawasaki Kisen Kaisha, Ltd. and Wallenius Wilhelmsen Logistics. The JFTC has also reportedly sent such advance notice to Nissan Motor Car Carrier Co., Ltd., although the company has not made any official announcement yet. Mitsui O.S.K. Lines, Ltd., the parent company of Nissan Motor Car Carrier Co., Ltd., also was investigated by the JFTC, but it applied for leniency and avoided receiving the advance notices. Each company will have an opportunity to respond to the notices before the JFTC officially announces its decision. The total amount of fines likely will be about 22 billion JPY ($220 million), which is the second-highest penalty imposed by the JFTC in a single case. Although the three companies disclosed that they received these orders, the JFTC itself has not yet issued any official announcement regarding the orders.
On Dec. 23, 2013, the Korea Fair Trade Commission (KFTC) announced that it imposed fines on foreign auto parts manufacturers and their Korean subsidiaries, in aggregate amounts of 114.6 billion Korean won ($109.1 million), for fixing prices on windshield wipers and instrument panel clusters. The companies fined were Denso Korea Electronics, Denso Korea Automotive, Continental Automotive Electronics and Bosch Electrical Devices. The KFTC noted that Denso Corp., the parent company of the two Denso entities in Korea, also was involved, but it was not fined because it does not have any revenue in Korea.
According to the KFTC, Denso Corp., Denso Korea Electronics and Continental Automotive Electronics colluded to restrict competition and secure certain profit levels when they made bids to supply instrument panel clusters to Hyundai Motor Company and Kia Motors, during the period from January 2008 to March 2012. The KFTC said that Denso Corp., Denso Korea Automotive and Bosch Electrical Devices colluded in making bids to supply such products to Hyundai and Kia during the period from August 2008 to February 2009. Read More
In April 2013, Judge James Robart of the U.S. District Court for the Western District of Washington issued a 200-plus-page opinion determining “reasonable and non-discriminatory” (RAND) royalty rates for standard-essential patents (SEPs) asserted by Motorola against Microsoft—the first such opinion by a district court. (See Microsoft Corp. v. Motorola, Inc., No. C10-1823, 2013 WL 2111217 (W.D. Wash. Apr. 25, 2013).) On Sept. 27, 2013, Judge James Holderman of the Northern District of Illinois issued a lengthy ruling that suggests that Judge Robart’s methodology likely will influence other courts in determining RAND rates. (See In re Innovatio IP Ventures, LLC, MDL No. 2303, Case No. 11 C 9308, Docket No. 975 (N.D. Ill. Oct. 3, 2013) (date of filing public version).) Judge Holderman employed a modified version of Judge Robart’s methodology to determine a RAND rate of 9.56 cents for each WiFi chip sold by several manufacturers. This rate was significantly lower than the royalty Innovatio sought of $4 to $40 dollars based on end products using the chips.
The wide-ranging case involves SEPs asserted by Innovatio, a non-practicing entity, against end-user customers employing WiFi networks—such as coffee shops, hotels, restaurants and transportation companies. Several WiFi equipment manufacturers, including Cisco, Motorola, Netgear, SonicWALL and Hewlett-Packard, sought a declaratory judgment that their products did not infringe Innovatio’s patents, and Innovatio in turn sued them for patent infringement. In July, Judge Holderman ruled that the patents were indeed essential to the WiFi standard and subject to RAND terms based on a commitment to license them on RAND terms made by their previous owner, Broadcom. The parties agreed to a bench trial on the issue of the appropriate RAND rates, and agreed that Judge Robart’s methodology should serve as the model. Read More
On Oct. 15, 2013, following a three-week trial in the Northern District of California, a jury found AU Optronics executive Richard Bai not guilty of charges that he engaged in price fixing of Thin Film Transistor-Liquid Crystal Display (LCD) panels. The Department of Justice had contended that Bai, who headed AUO’s notebook sales division and negotiated prices with major U.S. buyers, used the prices set between AUO and other LCD manufacturers to instruct his subordinates what to charge for laptop displays each month. The DOJ also introduced evidence that Bai had attended one of these collusive meetings in person.
Bai’s acquittal is the latest result in the DOJ’s prosecution of individuals following a series of criminal indictments against AUO and a number of its executives for participation in the conspiracy. Earlier, in March 2012, the DOJ secured convictions against AUO and high-level executives Hsuan Bin Chen (AUO’s former vice chairman) and Hui Hsiung (AUO’s former vice president). On Dec. 5, 2013, the 9th Circuit granted Chen and Hsiung’s motion for bail pending appeal, noting that although it was expressing no opinion as to the ultimate merits or outcome of the appeal, “the defendants have raised at least one ‘fairly debatable, or fairly doubtful’ question of law or fact.” U.S.A. v. Hsuing, Case No. 12-10492, Docket No. 84 (9th Cir. Dec. 5, 2013). Steven Leung, who headed AUO’s desktop monitor sales and attended more than a dozen price-fixing meetings, was also convicted in December 2012. At the March 2012 trial, however, the jury acquitted Lai-Juh Chen, AUO’s former President, and Hubert Lee, AUO’s former senior desktop group manager. These acquittals, coupled with Bai’s acquittal, may embolden some targets to resist accepting plea deals and instead have their cases tried to a jury.