In the first post in this series, we introduced the concept of joint ventures (“JVs”), outlined why antitrust law applies to their formation and operation, identified the major antitrust issues raised by JVs, and discussed why you should care about these issues. In this installment, we will unpack some of the major antitrust issues surrounding the threshold question of whether or not a JV is a legitimate collaboration. In particular, we will first try to separate the analyses of, on the one hand, JV formation, and on the other, JV operation and structure. Then we will consider whether a JV (i) constitutes a “naked” agreement between or among competitors which is per se unlawful, (ii) presents no significant antitrust issue because there is only a single, integrated entity performing the JV functions, or (iii) involves restraints within the scope of a legitimate collaboration that are virtually per se lawful.
On March 24, 2017, the PRC National Development and Reform Commission (“NDRC”) issued draft Guidelines for Price-Related Behavior of Industry Associations (“Guidelines”). The Guidelines encourage industry associations in the People’s Republic of China to engage in price-related behavior that benefits industry development, market competition and consumers’ legal interests; outline the legal risks that may be involved in various price-related behavior by industry associations; and provide guidance for industry associations to assess whether price-related behavior poses legal risk. The NDRC is accepting public comments until April 24, 2017.
Joint ventures (“JVs”) can require navigation of a potential minefield of antitrust issues, which we’ll explore in a series of six blog posts beginning with this introductory post. Not all of the law in this area is entirely settled, and there remain ongoing debates about some aspects of the antitrust treatment of JVs. Indeed, arriving at a coherent and unified view of JV law is like putting together a jigsaw puzzle with missing and damaged pieces.
The development of a digital single market is a key objective for the European Union. As Jean-Claude Juncker, President of the European Commission (“EC”) said in September, “We need to be connected. Our economy needs it.” Although this economic policy objective was initiated when the EC published its communication on the Digital Single Market Strategy for Europe in 2015, the various proposals it contains need to be formally adopted and implemented in the EU. This process is now underway.
The EU’s commitments contained in the Telecoms Single Market Regulation of 2015 to end roaming charges for periodic travel in the EU required the EC to adopt rules by 15 December 2016. A transition period—starting from 30 April 2016 to 15 June 2017—has been established to make the abolition of roaming charges sustainable throughout the EU without an increase in domestic prices. On December 8, the EC sent an implementing draft on the end of the roaming charges to the representatives of Member States (via the Communications Committee (“COCOM”)). They voted on the text on December 12, and the EC will adopt these new rules regarding the retail market in the coming days. READ MORE
Although China and Japan have very different histories regarding their antitrust laws, antitrust enforcement officials from the two countries have recently taken steps to open a formal dialogue. This is a welcome development for Chinese and Japanese companies, as well as for foreign companies that do business in China and Japan, and it continues the trend of increased communication, cooperation and coordination among national enforcement agencies. There remains an open question, however, as to how convergence among Asian antitrust enforcement agencies will affect possible convergence with agencies in the United States, the European Union and the rest of the world.
Proving once again that antitrust law protects competition, not competitors, on August 18, 2016 the Sixth Circuit affirmed a decision from the Eastern District of Michigan dismissing a plaintiff’s Sherman Act § 1 predatory pricing complaint for failure to state a claim. The case, Energy Conversion Devices Liquidated Trust et al. v. Trina Solar Ltd. et al., involved allegations by a US-based solar panel manufacturer that its Chinese competitors had conspired to lower their prices in the US to below cost in order to drive the plaintiff out of business.
Energy Conversion conceded that a predatory pricing claim under § 2 of the Sherman Act requires the plaintiff to plead and prove both that the defendant charged below-cost prices, and that the defendant had a reasonable prospect of recouping its investment. But it maintained that for a claim brought under § 1, the second element—recoupment—was not required.
In a recent decision, the Northern District of California denied Chrysler’s motion for summary judgment to defeat a Robinson-Patman Act price discrimination claim. Mathew Enterprise, Inc. v. Chrysler Group LLC, 2016 U.S. Dist. LEXIS 108693 (N.D. Cal. Aug. 2, 2016) (opinion filed August 15, 2016 and available here). The decision serves as a reminder of the relatively low bar for establishing competitive and antitrust injury for Robinson-Patman Act purposes, and counsels in favor of carefully structuring discount programs to avoid any potential litigation down the road.
On August 12, 2016, the Seventh Circuit ruled that a manufacturer’s decision to sell large package products to some retailers but not others does not constitute price discrimination under Section 13(e) of the Robinson-Patman Act. Woodman’s Food Market, Inc. v. Clorox Co. and Clorox Sales Co. (7th Cir. Aug. 12, 2016) (opinion available here). The decision harmonizes Seventh Circuit law with that of other circuits and clarifies that manufacturers do not violate the promotional services or facilities requirements of the Act when they offer bulk products to some but not all purchasers.
The long list of practices violating EU competition law just got longer: in Container Shipping, the European Commission confirmed that the unilateral publishing of pricing information, in public media, can violate Article 101 TFEU.
In this case, the Commission expressed concern that the practice of fourteen container liner shipping companies (“Carriers”) to publish intentions to increase prices may harm competition. The Carriers regularly announced intended increases of freight prices on their websites, via the press, or in other ways. The announcements were made several times a year and included the level of increase and the date of implementation. The Carriers were not bound by the announced increases and some of them postponed or modified the price increases after announcement.
You know what they say: one man’s price is another man’s bundle. No? Well maybe they should, after this recent decision out of the Third Circuit in Eisai, Inc. v. Sanofi Aventis U.S., LLC involving allegedly exclusionary discounting. The court ultimately found Sanofi’s conduct was not unlawful. But the decision raises questions about how such conduct – a hybrid of price discounts and single-product bundling – will be treated going forward, at least in the Third Circuit.
At issue was Sanofi’s marketing of its anticoagulant drug Lovenox to hospitals through its Lovenox Acute Contract Value Program. Under the Program, hospitals received price discounts based on the total volume of Lovenox they purchased and the proportion of Lovenox in their overall purchase of anticoagulant drugs. A hospital that chose Lovenox for less than 75% of its total purchase of anticoagulants received a flat 1% discount regardless of the volume purchased. But when a hospital’s purchase of Lovenox exceeded that percentage, it would receive an increasingly higher discount based on total volume and percentage share, up to a total of 30% off the wholesale price. A hospital that did not participate in the Program at all was free to purchase Lovenox “off contract” at the wholesale price.
On April 27, 2016, Invibio—a supplier of polyetheretherketone (“PEEK”) used in medical implants—agreed to settle charges asserted by the Federal Trade Commission (“FTC”) that its exclusive supply contracts with medical device manufacturers, including some of the world’s largest, violated Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45. This consent decree may signal a renewed interest at the agency to scrutinize exclusive contract arrangements. The decree also serves as a reminder that, while exclusive contracts are not per se unlawful, companies that have market power and use exclusive contracts face risks under the antitrust and consumer protection laws.