U.S. Supreme Court Establishes Uniform Test for Standing to Bring False Advertising Claims Under Section 43(a) of the Lanham Act

On March 25, 2014, a unanimous U.S. Supreme Court established a uniform test to determine whether a plaintiff has standing to bring a false advertising claim under section 43(a) of the Lanham Act, 15 U.S.C. §1125(a). Lexmark International, Inc. v. Static Control Components, Inc., No. 12-873 (U.S. March 25, 2014). Now, to bring a claim under section 43(a), the plaintiff must demonstrate (1) that its injury falls within the “zone of interests” protected by the Lanham Act, and (2) that its injury was proximately caused by the defendant’s misrepresentations.

Before the Supreme Court’s decision, there was a three-way split among the U.S. Circuit Courts of Appeals as to the appropriate test for standing under section 43(a). The 7th, 9th and 10th Circuits had limited section 43(a) standing to actual competitors of the defendant; the 3rd, 5th, 8th and 11th Circuits had relied on antitrust standing principles or the factors outlined in Associated General Contractors v. Carpenters, 459 U.S. 519 (1983); and the 2nd Circuit had applied a “’reasonable interest’ approach.” The Court rejected all three of these tests. Read More

U.S. Supreme Court to Decide When Professional Licensing Bodies Enjoy Antitrust Immunity

The state action immunity doctrine shields private actors from antitrust liability if their activities are “actively supervised” by a state. However, arms of the state itself generally do not have to satisfy the “actively supervised” requirement to enjoy the immunity. On March 3, 2014, the U.S. Supreme Court accepted for review North Carolina State Board of Dental Examiners v. Federal Trade Commission, Case No. 13-534, where it will decide whether a state agency that consists of professionals who regulate their own profession qualifies as an arm of the state, or whether it is more akin to a private actor that must meet the “actively supervised” requirement to enjoy antitrust immunity.

The North Carolina Board of Dental Examiners had engaged in efforts to block non-dentists from offering tooth-whitening services. The 4th U.S. Circuit Court of Appeals agreed with the FTC that a North Carolina agency made up almost entirely of practicing dentists must satisfy the actively supervised requirement for the immunity to attach. See 717 F.3d 359 (4th Cir. 2013). “[W]hen a state agency is operated by market participants who are elected by other market participants, it is a ‘private’ actor.” Id. at 370. The Supreme Court will now review that determination. Although the issue of the regulation of dentists may be a narrow one, the case has broader implications for the regulation by states and state boards of many other professions and industries.

Last year, the Supreme Court decided FTC v. Phoebe Putney Health System, Inc., 133 S. Ct. 1003 (2013), another immunity case, where the Court further defined another requirement of the state action immunity doctrine—that the state policy authorizing anticompetitive activity must be “clearly articulated.”

7th Circuit Holds That the FTAIA Bars a U.S. Manufacturer’s Price-Fixing Claims Based on Its Foreign Affiliates’ Purchases of Price-Fixed Goods From a Foreign Manufacturer

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. Motorola Mobility LLC v. AU Optronics Corp. et al., No. 09 C 6610 (7th Cir. March 27, 2014).

As explained in the February 2014 issue of Orrick’s Antitrust and Competition Newsletter, in multi-district litigation in the Northern District of California, Illinois-based Motorola asserted price-fixing claims against manufacturers of liquid crystal display (LCD) panels used in mobile phones. Its claims fell into three groups: (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 incorporated into mobile phones sold outside the United States (Category III). Read More

9th Circuit Dismisses LSI’s Appeal of Injunction That Kept LSI From Enforcing Import Ban Against Realtek

On March 20, 2014, the 9th U.S. Circuit Court of Appeals in an unpublished memorandum opinion dismissed LSI Corp.’s appeal of a preliminary injunction that blocked it from enforcing a potential import ban against Realtek Semiconductor Corp. Realtek Semiconductor Corp. v. LSI Corp., No. 13-16070 (9th Cir. Mar. 20, 2014). Earlier in the month, the International Trade Commission found that Realtek did not infringe LSI patents for wireless networking products. In the wake of that decision, and despite requests from both parties to hear the appeal in case LSI prevailed on appeal of the infringement ruling, the 9th Circuit held that LSI’s appeal was moot. Judge Ronald M. Whyte of the Northern District of California had issued the injunction after finding that LSI had improperly filed its ITC complaint to pressure Realtek in royalty negotiations, without first making a FRAND offer to license the patents. Realtek Semiconductor Corp. v. LSI Corp., Case No. C-12-3451 (N.D. Cal.).

The 9th Circuit and ITC rulings followed a jury decision in February setting the FRAND rate for LSI’s patents at 0.12 percent and 0.07 percent. That was the first time a jury had been tasked with determining the FRAND rate for standard-essential patents. LSI’s initial offer had been for a royalty based on the value of the end products in which Realtek’s allegedly infringing chips were used. However, the jury’s significantly lower rate was based on the value of the chips. This followed the standard in In re Innovatio IP Ventures LLC Patent Litig., MDL 2303, Case No. 11 C 9308 (N.D. Ill. Sept. 27, 2013), where the court applied royalty rates to wireless chips rather than to laptops, scanners and other devices that used them. In that context, the jury’s decision is the latest signal that Judge James Robart’s modified Georgia-Pacific analysis in Microsoft Corp. v. Motorola, Inc., No. C10-1823 (W.D. Wash. Apr. 25, 2013), continues to influence how fact-finders evaluate FRAND royalties for standard-essential patents.

The 9th Circuit’s unpublished memorandum is available here.

Ohio District Court Certifies Price Discrimination Class Under Robinson-Patman Act

In Williams v. Duke Energy Corp., Case No. 1:08-cv-46 (S.D. Ohio March 13, 2014), the U.S. District Court for the Southern District of Ohio certified a class of direct purchasers of electricity. The class alleged that a power company settled objections of certain large customers to a rate-stabilization plan in return for unlawful and substantial rebates to those customers. Plaintiffs brought fraud and related claims on behalf of all electricity purchasers who did not receive the rebates, and brought Robinson-Patman Act price discrimination claims on behalf of competitors of the favored businesses. In certifying the Robinson-Patman competitor subclass, the Court noted that although Robinson-Patman Act claims are generally not susceptible to class treatment because of the individualized proof required to establish damages, the plaintiffs in the case were seeking only injunctive and declaratory relief under the Act, so competitive injury need not be demonstrated. Accordingly, the competitor subclass satisfied Federal Rule of Civil Procedure 23(a)(2)’s commonality requirement.

A copy of the decision is available here.

McWane Dismissal Breaks FTC’s “Winning Streak,” But Enforcement Implications Are Unclear

On Feb. 6, 2014, the Federal Trade Commission dismissed six of the seven unfair competition claims it brought under Section 5 of the Federal Trade Commission Act against McWane, Inc., the leading domestic producer of iron pipe fittings in the United States. In its January 2012 complaint, the FTC alleged that McWane conspired with its two primary competitors to fix prices for certain small- and medium-diameter iron pipe fittings (three counts), and that it unlawfully maintained its monopoly power by trying to keep a competitor out of a narrower market for domestically produced fittings (four counts). FTC Administrative Law Judge D. Michael Chappell initially dismissed the FTC’s collusion claims after finding no evidence of price fixing, but ruled in the FTC’s favor with respect to its monopolization claims. Both parties appealed the ALJ’s decision to the full Commission. Despite harsh criticism from certain commissioners that the ALJ’s findings as to price fixing were “incredible” and ignored certain evidence, the Commission ultimately issued an opinion dismissing only six of the seven claims against McWane. With respect to the remaining claim, the Commission held that McWane maintained its monopoly power in the domestic fittings market through an exclusionary distribution policy that violated Section 5 of the FTC Act. Read More

Federal Court Dismisses Antitrust Action Against U.S. Hotel Companies and Online Travel Companies

On Feb. 18, 2014, the U.S. District Court for the Northern District of Texas dismissed an antitrust lawsuit that accused U.S. hotel companies and online travel agencies (OTAs) of conspiring to fix the online prices of hotel rooms. In re Online Travel Company Hotel Booking Antitrust Litig., No. 3:12-cv-3515-B (N.D. Texas Feb. 18, 2014). The plaintiffs alleged that the OTAs and hotels conspired to eliminate price competition by imposing “rate parity” across OTA websites, such that a room at a given hotel would be offered at the same price regardless of whether a consumer purchased it from an OTA site or from the hotel website itself. The court dismissed the claims because the complaint described only the suppression of intrabrand competition—the competition among each hotel’s online distribution channels—and did not allege the elimination of competition between the different hotel brands. The court acknowledged that antitrust laws permit hotels to control the prices at which their rooms are sold online, as well as permit OTAs to enter into most-favored-nation agreements ensuring their competitors can’t offer a lower price than the published rate. The court also dismissed plaintiffs’ state law consumer protection claims, finding that plaintiffs did not adequately allege how they were injured by defendants’ “best price” guarantees. Plaintiffs have the opportunity to amend their complaint.

A copy of the decision is available here.

DOJ Announces Streamlined Procedures to Modify or Terminate Old Settlements and Litigation

On March 28, 2014, the U.S. Department of Justice’s Antitrust Division announced that it has updated procedures for parties seeking to modify or terminate perpetual decrees—settlements and litigated judgments—entered prior to 1980. Perpetual decrees entered into before 1980 cannot be terminated or modified except by court order. Going forward, the department will advise courts that pre-1980 “legacy” decrees, except in limited circumstances, are presumptively no longer in the public interest. According to the DOJ’s press release:

“The updated procedure differs from the present procedure in two important ways. First, the party seeking termination or modification will no longer be subject to the extensive discovery that was required by the 1999 protocol. This should result in a substantial reduction in the cost of seeking decree termination. Second, when responding to a request to terminate or modify qualifying legacy decrees, the department will no longer conduct an in-depth investigation into the relevant markets due to the significant changes that have taken place.”

The updated procedure can be found in the Division Manual on the Antitrust Division’s website.

DOJ Launches New Criminal Antitrust Section

The U.S. Department of Justice has opened a new section focused on criminal antitrust enforcement to address the division’s workload. The current criminal antitrust office in Washington, D.C. has been renamed Washington Criminal I, and the new division will be called Washington Criminal II. The new section will first focus on domestic criminal enforcement and will later broaden to include international cases. It is already operational and eventually will have 10 to 15 prosecutors on staff.

The DOJ press release can be found here.

EC Adopts Revised Regime for Technology Transfer Agreements

On March 21, 2014, the European Commission adopted a new package of rules for the assessment of technology transfer agreements (TTAs) under EU competition law. The package consists of: (1) an updated Block Exemption Regulation for TTAs (TTBER) substituting the previous TTBER adopted in 2004; and (2) new guidelines to reflect the changes in the TTBER, the most recent case law and developments on the assessment of TTAs that fall outside the TTBER. The main changes focus on the scope of the TTBER, patent pools, termination clauses, exclusive grant-back obligations and settlements.

TTAs are licensing agreements where the licensor authorizes one or more licensee(s) to exploit its patents, know-how, utility models, design rights and software copyrights for the production of goods and services. Read More

EU Advocate General Confirms Availability of “Umbrella Claims” Against Cartel Members

In her recent opinion to the Court of Justice of the European Union (CoJ), Advocate General Juliane Kokott stated that loss resulting from “umbrella pricing” is recoverable from cartel members. Umbrella pricing is when a company that is not a member of a cartel raises its prices by more than the amount that would be expected under normal competitive conditions, as a result of the cartel. The opinion, from Jan. 30, 2014, follows a reference to the CoJ by an Austrian court hearing a damages action brought against providers of services for escalators and lifts (see COMP/38.823).

AG Kokott considered that loss resulting from umbrella pricing is not unforeseeable by the cartel members, and that the reparation of that loss is consistent with the objectives of Article 101 of Treaty on the Functioning of the European Union (TFEU). It would, she suggested, run counter to the practical effectiveness of EU competition rules for national civil law to exclude compensation for such loss. Read More

Court of Justice Clarifies Status of Monopolistic Royalty-Collecting Societies Under EU Law

The Court of Justice of the European Union (CoJ) has held that collecting societies with exclusive rights to gather royalties for protected works do not contravene Article 56 (which establishes the freedom to provide services across the EU) of the Treaty on the Functioning of the European Union (TFEU). The CoJ found, however, that if the collecting society imposes fees that are appreciably higher than those charged in other Member States, or that are excessive in relation to the economic value of the service provided, this could be indicative of an abuse of a dominant position contrary to Article 102 of the TFEU.

The CoJ held that the territorial monopoly on gathering royalties might constitute an illegal restriction, but that this is justified because it meets a public interest pursued by EU law (i.e., the effective management of intellectual property rights) and does not go beyond what is necessary to achieve the public interest. It was not shown that another equally efficient but less restrictive method would allow the same level of copyright monitoring and protection as the current, territory-based system of copyright supervision.

The CoJ’s judgment, of Feb. 27, 2014, is available here.

Court of Justice Overturns General Court on Access to Commission’s Files by Potential Damages Claimants

The Court of Justice of the European Union (CoJ) ruled on Feb. 27, 2014 that the European Commission was entitled to refuse Energie Baden-Wurttemberg AG (EnBW) full access to the Commission’s file relating to the gas insulated switchgear cartel.

In January 2007, the Commission fined 11 companies for participating in a collusive tendering cartel in the gas insulated switchgear market. EnBW, an energy distribution company, requested global access to the Commission’s cartel file under EU Regulation 1049/2001 (the Regulation), which grants rights of public access to documents held by EU institutions. The Commission rejected EnBW’s request for access. In doing so, it relied on certain exceptions in the Regulation, namely that granting access to the documents would jeopardize the protection of inspections and investigations and of sensitive commercial interests of the parties to the proceedings. Moreover, the Commission found that there was no overriding public interest in granting access to the requested documents. EnBW appealed to the General Court, which annulled the decision on the ground that the Commission had erred in refusing EnBW’s request without carrying out specific analysis of each document in its file. Read More

EC Opens Investigation of Specialty Paper Companies for Providing Misleading Data in Merger Review

On Feb. 25, 2014, the European Commission announced it is investigating the alleged provision of misleading market data by the parties to the Ahlstrom-Munksjö merger.

In October 2012, Ahlstrom and Munksjö notified the EC that the label and processing businesses of Ahlstrom Corporation and Munksjö AB were to be transferred to a new company, later named Munksjö Oyj. The Commission’s review of the proposed transaction found that the parties were the only manufacturers of heavyweight abrasive paper backings in the European Economic Area (EEA), and that their combined share of the global market was over 80 percent. In its decision of May 2013 (which will not be affected by the current proceedings), the Commission approved the transaction subject to the divestment of Ahlstrom’s abrasive paper business. Read More

France Adopts New Consumers’ Rights Law

On Feb. 13, 2014, the French National Assembly adopted the so-called “loi Hamon,” an Act of Parliament related to consumers’ rights and, supplier-distributor relations. Following the French Constitutional Council Decision confirming the act on March 13, 2014, it was published in the Official Journal of the French Republic on March 18, 2014.

France was one of the last major countries in Europe not to have a collective redress system, although it was discussed for several years by different French governments. The new law allows consumers who suffered similarly or identically from a professional’s breach of its legal or contractual obligations, to introduce an action against the professional. The class action may only take place in the case of a sale of goods, a provision of services, or a breach of any competition law provisions (abuse of dominant position or a cartel established by a competition authority), as only compensation for pecuniary losses may be claimed (no punitive damages). Only a few consumer associations are authorized to bring an action on behalf of consumers. Read More

Competition Commission Formally Clears Two Mergers in Concentrated Markets

In March 2014, following its provisional findings in the previous month, the UK Competition Commission (UKCC) formally cleared two mergers that resulted in the reduction of competitors in the relevant markets from four to three and three to two respectively.

The completed joint venture between Tradebe Environmental Services Limited (Tradebe) and SITA UK Limited (Sita), and the anticipated acquisition by Telefonaktiebolaget LM Ericsson (Ericsson) of Creative Broadcast Services Holdings (2) Limited (Creative), were referred to the UKCC by the UK Office of Fair Trading (OFT) in late 2013. The OFT considered that the transactions raised realistic prospects of a substantial lessening of competition: (1) in the case of the Ericsson acquisition, in the market for the provision of complex, highly reactive outsourced linear playout services; and (2), in the case of the Tradebe/Sita joint venture, in relation to the collection, processing and disposal of healthcare risk waste for “large quantity generator” customers in the Birmingham and Gloucester areas. Read More

Office of Fair Trading Accepts Binding Commitments From Booking.com, Expedia and IHG

The UK Office of Fair Trading (OFT) has accepted binding commitments from Booking.com B.V., Expedia, Inc. and InterContinental Hotels Group plc, which address concerns that restrictions on discounting a hotel’s room-only accommodation rate may limit competition between online travel agents (OTAs) and between OTAs and hotels, and may create barriers to entry into the market for new OTAs.

The OFT launched a formal investigation in September 2010 following the receipt of information suggesting that vertical arrangements between OTAs and hotels could be in breach of UK and EU competition law.

To address the OFT’s concerns, Booking.com, Expedia and IHG agreed to ensure that their existing and future commercial arrangements allow OTAs and hotels to offer reductions on headline room-only rates, so long as customers sign up to the membership scheme of an OTA or hotel and make one undiscounted booking with the OTA or hotel in question prior to becoming eligible for such a reduction.

The OFT believes the commitments will allow greater competition on price between OTAs and between OTAs and hotels and will allow new OTAs to enter the market.

The OFT’s press release of Jan. 31, 2014 is available here.

Japan Fair Trade Commission Fines Marine Transport Companies 22.7 Billion JPY

On March 18, 2014, the Japan Fair Trade Commission (JFTC) announced it had fined four marine transport companies a total of 22,718,480,000 JPY ($227 million) for engaging in price-fixing activities and violating the Japanese Antimonopoly Act. The JFTC’s action followed the cease and desist and surcharge payment orders that had been issued on Jan. 9, 2014. The fined companies are Nippon Yusen Kabushiki Kaisha, Kawasaki Kisen Kaisha, Ltd., Wallenius Wilhelmsen Logistics, AS and Nissan Motor Car Carrier Co., Ltd. Another subject of the investigation was Mitsui O.S.K. Lines, Ltd., but the company applied for leniency and was exempted from the administrative order and fine. According to the JFTC announcement, the violations included fixing freight rates, colluding to maintain the freight rate, and refraining from bidding against one another from January 2008 to September 2012 with regard to automobile shipments from Japan to North America, Europe and elsewhere.

The JFTC’s announcement can be found here.

Shanghai High People’s Court Rules That Resale Price Maintenance Agreement Constitutes Monopolistic Agreement

The Shanghai High People’s Court recently made available its Aug. 1, 2013 final judgment overruling the Shanghai First Intermediate Court’s judgment in a case brought by a domestic medical distributor, Beijing Rainbow Medical Equipment Technology & Trading Company (Rainbow) against Johnson & Johnson’s (J&J) China operations. The court ruled that J&J’s resale price maintenance (RPM) constitutes a monopolistic agreement, and ordered J&J to indemnify Rainbow’s economic losses of RMB 530,000 ($87,500).

On Jan. 2, 2008, J&J and Rainbow signed a distribution agreement, providing that Rainbow had the authorized right to sell J&J’s Ethicon surgical sutures in Beijing. According to the agreement, Rainbow could not sell Ethicon surgical sutures at a price lower than that stipulated by J&J. In March 2008, Rainbow won a bid to supply surgical sutures to Peking University People’s Hospital by offering a price lower than the one provided in the agreement. On July 1, 2008, J&J issued a letter to Rainbow on deduction of a deposit of RMB 20,000 ($3,245) and cancellation of Rainbow’s sales right in two hospitals in Beijing. The key issue in this case was whether the RPM agreement constitutes a monopolistic agreement under the Antimonopoly Law of the People’s Republic of China (the AML). Read More

MOFCOM Issues Interim Provisions for Standards of Simple Cases Related to Concentration of Business Operators

In order to specify the applicable standards for simple cases of concentration-of–business-operators, the Ministry of Commence of the People’s Republic of China (MOFCOM) put into effect a simplified merger review system as of Feb. 12, 2014, by publishing the Interim Provisions for Standards of Simple Cases Related to Concentration of Business Operators (the Interim Provisions).

The Interim Provisions set out the thresholds of merger fillings in the simple-case category, which apply under the following circumstances: Read More