U.S. Ramps Up Criticism of China’s Enforcement of Its Antitrust Laws Against Foreign Companies

I.  Introduction

For some time, many in the antitrust community have expressed concerns about how China is enforcing its antitrust laws against foreign companies. The past several months have seen a steady stream of criticism from the United States that in certain areas—notably, dominant firm conduct, intellectual property rights and mergers—China is selectively enforcing its antitrust laws outside of international norms in order to protect domestic industries. The criticism includes pointed complaints, comments and recommendations from the U.S. enforcement agencies, U.S. business groups and antitrust practitioners. This article provides a brief overview of some of the comments and recommendations being offered to the Chinese government. Read More

9th Circuit: State Action Immunity Protects Convention Center from Exclusive Dealing Claim

In United National Maintenance, Inc. v. San Diego Convention Center, Inc., No. 12-56809, 2014 WL 2094545 (9th Cir. May 14, 2014), the 9th U.S. Circuit Court of Appeals held that the San Diego Convention center enjoyed state action immunity from antitrust claims brought by a supplier of cleaning services whose business was negatively impacted by the convention center’s decision to be the exclusive supplier of cleaning services.

The California Legislature specifically authorized San Diego (and other cities) not only to build a convention center, but also to create a commission that would “manage the use” of the convention center. This type of managerial authorization, the court held, was sufficient to make any anticompetitive effects the result of a clearly articulated and affirmatively expressed state policy—the first prong of the test for state action immunity. The 9th Circuit also held that the center did not need to meet the second state action immunity requirement (that its actions were “actively supervised” by the state), because 1) the City of San Diego appoints all of the center’s board members; 2) upon dissolution, the center’s assets revert back to San Diego; and 3) the center must publicly account for its operations. Overall, the court held, the center acts as an agent that operates the convention center for the benefit of its principal, the city of San Diego. It is an extension of the municipality of San Diego and thus does not require active supervision by the state in order to retain its immunity from antitrust liability. Furthermore, the court noted, the specific facts indicate there is no need for the evidentiary function of active supervision. Read More

Federal Circuit Breathes New Life into Sham Claims Against Tyco

On Aug. 6, 2014, a split three-judge panel from U.S. Court of Appeals for the Federal Circuit restored two of Mutual Pharmaceutical Company Inc.’s antitrust counterclaims against Tyco Healthcare Group LP that stemmed from Tyco’s 2006 patent infringement suit against the company. See Tyco Healthcare Grp. LP v. Mut. Pharm. Co., Inc., 762 F.3d 1338 (2014).

Tyco sued Mutual for infringement and also filed a citizen petition with the U.S. Food and Drug Administration to prevent Mutual from marketing a generic version of Tyco’s insomnia drug, Restoril. In response, Mutual filed four antitrust counterclaims, alleging that the infringement suit and citizen petition—filed a day after Tyco lost a summary judgment motion as to the validity of the Restoril patent—each was a sham and that no reasonable litigant would expect the patents to withstand an invalidity challenge. Mutual also asserted a Walker Process claim alleging that Tyco procured its patents by fraud on the patent office. The district court rejected each of Mutual’s counterclaims. On appeal, the Federal Circuit affirmed the dismissal of the validity and Walker Process counterclaims, but remanded the infringement and citizen petition counterclaims to the district court. Read More

U.S. District Court Rejects Proposed Settlement of High-Tech Employees Non-Solicitation Cases

On Aug. 8, 2014, Judge Lucy Koh of the U.S. District Court for the Northern District of California rejected the proposed settlement of a class action brought by employees of Silicon Valley technology companies alleging that the companies had entered into agreements not to solicit each other’s employees. In re: High Tech Emp. Antitrust Litig., 2014 U.S. Dist. LEXIS 110064 (N.D. Cal. Aug. 8, 2014).

Plaintiffs filed complaints against certain high-tech companies and film studios alleging they had entered into agreements not to solicit each other’s employees. In April 2013, the court denied a motion for class certification on the ground that the plaintiffs’ expert had failed to demonstrate class-wide impact. Plaintiffs again filed a class certification motion and while it was pending, and they settled their claims against certain defendants for a total of $20 million. In October 2013, the court approved that settlement. The litigation continued against the high-tech companies, and in October 2013 the court granted class certification as to a narrowed class of employees. In March 2014, the court denied the defendants’ summary judgment motion. Shortly before the trial was set to begin, the parties informed the court that they had reached a settlement. Plaintiffs filed a motion for preliminary approval of a settlement totaling $324.5 million, and one class member objected to the settlement. Read More

U.S. District Court Rules that NCAA’s Rules Regarding Compensation for Student Athletes Violate the Sherman Act

On Aug. 8, 2014, Judge Claudia Wilken of the U.S. District Court for the Northern District of California issued a post-trial order that the National Collegiate Athletic Association (NCAA) violated Section 1 of the Sherman Antitrust by adopting rules that bar student-athletes from receiving a share of revenue that the NCAA and its member schools earn from the sale of licenses to use the student-athletes’ names, images and likeness. Edward O’Bannon et al. v. NCAA, et al., No. C 09-3329, 2014 U.S. District LEXIS 110036 (N.D. Cal. Aug. 8, 2014).

The NCAA is an association of 1,100 colleges and universities that regulates intercollegiate athletic competition in about two dozen sports. It issues rules that establish academic eligibility requirements for student-athletes, sets forth guidelines and restrictions for recruiting high school athletes, and imposes limits on the number and size of athletic scholarships that each school may provide. The NCAA has three divisions based on the number and quality of opportunities schools can provide, including the financial aid provided to student-athletes. The NCAA imposes rules that bar schools from sharing with student-athletes revenue earned from selling licensing rights to use the student-athletes names, likenesses and images. Read More

Is Cash King? Two District Courts Throw Out “Reverse Payment” Claims, But Highlight Confusion Over Applying FTC v. Actavis

In September 2014, two separate district courts dismissed claims against branded drug manufacturers stemming from pay-for-delay patent infringement settlements. While the end result was the same, the opinions from these cases show a continuing inconsistency in the approach courts are taking as to whether reverse payment claims should be interpreted flexibly under the Supreme Court’s 2013 decision in FTC v. Actavis to include non-cash payments, or more strictly to require an actual cash payment.

On Sept. 12, Judge Peter G. Sheridan in New Jersey dismissed a multidistrict case challenging an allegedly anticompetitive settlement between Pfizer Inc. and Ranbaxy Laboratories Ltd. concerning patents for the cholesterol drug Lipitor. See In re Lipitor Antitrust Litig., No. 3:12-cv-02389 (PGS), 2014 U.S. District LEXIS 127877 (D.N.J. Sept. 12, 2014). Judge Sheridan did not take issue with the fact that the allegedly anticompetitive settlement was nonmonetary, but nevertheless dismissed the case because the plaintiffs failed to quantify and reasonably estimate the value and amount of that nonmonetary payment. By contrast, on Sept. 4, Judge William E. Smith in Rhode Island similarly dismissed a claim that Warner Chilcott PLC and others entered into an illicit agreement regarding Loestrin, but did so on the basis that Actavis requires an actual cash payment to violate the antitrust laws. See In re Loestrin 24 Fe Antitrust Litig., No. 1:13-md-2472-S-PAS, 2014 WL 4368924 (D.R.I. Sept. 4, 2014). In particular, because the settlement agreement at issue included a worldwide license to one generic firm and other co-promotion and licensing arrangements—but did not call for any cash exchange—it did not trigger Actavis. Read More

FTC Updates Fred Meyer Guidelines Regarding Promotional Allowances

On Sept. 29, 2014, the U.S. Federal Trade Commission published revisions to its Guide for Advertising Allowances and Other Merchandising Payments and Services, commonly referred to as the “Fred Meyer Guidelines,” effective Nov. 10, 2014. Fed. Reg. Vol. 79, No. 188 (Sept. 29, 2014).

The Fred Meyer Guidelines were first published in 1969 to help businesses comply with sections 2(d) and 2(e) of the Robinson-Patman Act, 15 U.S.C. § 13(d), which generally prohibit a seller from paying allowances or furnishing services to promote the resale of its products unless the allowances or services are offered to all competing customers on proportionally equal terms. Sections 2(d) and 2(e) relate to the resale of a firm’s products, as opposed to section 2(a) of the Act, which relates to the original or first sale. The FTC made minor amendments to the Guidelines by, among other things, providing some additional guidance through revised examples of conduct regarding slotting allowances, making promotional services and allowances available to competing customers on proportionally equal terms, and taking reasonable steps to ensure that promotional services and facilities are functionally available to competing customers, particularly in the context of on-line commerce.

The notice published in the Federal Register, as well as the revised Fred Meyer Guidelines, are available here.

Trade Associations Agree to Eliminate “No Poaching” Code of Ethics Provisions Pursuant to FTC Consent Orders

On Aug. 22, 2014, the U.S. Federal Trade Commission announced it had reached two separate proposed consent orders with the National Association of Residential Property Managers, Inc. (NARPM) and the National Association of Teachers of Singing, Inc. (NATS). NARPM and NATS agreed to eliminate provisions in their respective codes of ethics that restrain competition.

NARPM represents more than 4,000 real estate brokers, managers and agents. Its code of ethics read, “The Property Manager shall not knowingly solicit competitor’s clients,” and “NARPM Professional Members shall refrain from criticizing other property managers or their business practices.” The FTC’s complaint alleged that these limitations on comparative advertising and solicitation restrained competition in violation of the FTC Act. The proposed settlement order requires NARPM to stop restraining its members from soliciting property management work, and from making statements that are not false or deceptive about a competitor’s products, services, or business or commercial practices. Among other things, NARPM also must implement an antitrust compliance program. Read More

Assistant Attorney General Bill Baer Warns Amnesty Applicants to Fulfill Their Obligations Under ACPERA

On Sept. 10, 2014, Assistant Attorney General Bill Baer spoke to the Global Antitrust Enforcement Symposium at Georgetown University on the topic of “Prosecuting Antitrust Crimes,” emphasizing the need for amnesty applicants to fulfill their obligations under the Antitrust Criminal Penalty Enhancement and Reform Act (ACPERA).

Baer explained that amnesty cooperation needs to be complete and robust, and that companies cannot pick and choose what they report about their overall wrongdoing. He said the fact that there may be a cooperating corporation has dramatically “changed the calculus” for other corporate co-conspirators, and as a result, the Division is seeing more companies seeking to mitigate the consequences of their cartel activity at early stages of investigations. Baer added that the Division takes compliance commitments seriously, and questions whether companies that continue to employ culpable senior executives who do not accept responsibility and are carved out of a corporate plea agreement are effective in their remediation efforts. In such cases, the Division may argue that a term of corporate probation is required, he said.

Assistant Attorney General Baer’s full speech is available here.

U.S. Supreme Court To Determine Whether Natural Gas Act Preempts Price-Fixing Claims

On July 1, 2014, the U.S. Supreme Court granted review to determine whether the Natural Gas Act preempts price-fixing claims in multidistrict litigation against energy companies. In In Re: Western States Wholesale Natural Gas Antitrust Litigation, 715 F.3d 716 (9th Cir. 2013) (court of appeals decision available here), the 9th U.S. Circuit Court of Appeals held that the Natural Gas Act did not preempt state law antitrust challenges to natural gas rates and practices related to natural gas sales. The 9th Circuit relied upon the Supreme Court’s 1989 decision in Northwest Central Pipeline Corp., 489 U.S. 493 (1989). There, the Supreme Court held that the Natural Gas Act provides a “regulatory role for the states” in natural gas production, and, according to the 9th Circuit, rejected the argument that federal regulations preempted all state regulations that may affect rates within federal control. The natural gas companies sought review, arguing that the 9th Circuit’s decision conflicted with those of two state supreme courts. After the U.S. Supreme Court asked the federal government to address the dispute, the U.S. Solicitor General argued that the Federal Energy Regulatory Commission (FERC) had exclusive jurisdiction over the issues, but recommended that the Supreme Court deny review because there was no conflict with state supreme court decisions and the issue was not likely to recur given FERC’s subsequently expanded authority. The U.S. Supreme Court nevertheless accepted the case, which will be heard during the next term, which starts in October. The case is styled in the Supreme Court as Oneok, Inc., et al. v. Learjet, Inc., Case No. 13-271.

U.S. Supreme Court to Hear Libor Antitrust Appeal to Resolve Circuit Split Regarding Appealability of Orders Before Entry of a Final Judgment in an MDL Proceeding

On June 30, 2014, the U.S. Supreme Court agreed to consider whether bondholder plaintiffs accusing several banks of violating antitrust law by rigging Libor had the right to immediately appeal the dismissal of their case even though the broader multidistrict litigation is still ongoing. See Ellen Gelboim, et al. v. Bank of America Corp., et al., Case No. 13-1174. The district court had dismissed the majority of plaintiffs’ claims, including the antitrust claims, for failing to meet statutory requirements pertaining to private plaintiffs. The 2nd U.S. Circuit Court of Appeals denied plaintiffs’ appeal because a final judgment not yet been entered in the district court’s MDL case. See In re LIBOR-Based Fin. Instruments Antitrust Litig., 935 F. Supp. 2d 666 (S.D.N.Y. 2013).In their petition to the Supreme Court, the plaintiffs argued that there is a split of authority among the circuit courts over whether parties in their situation could appeal—the Federal, 9th and 10th circuits also would have refused to allow their appeal, but the D.C., 3rd, 5th, 7th, 8th, and 11th circuits would have permitted it. The defendant banks urged the Supreme Court to refuse to hear the case, arguing that doing so would interfere with trial courts’ abilities to manage their own calendars in complex cases.

The Supreme Court is expected to hold oral arguments on the case during its next term, which begins in October.

9th Circuit Upholds Criminal Judgment and $500 Million AUO Antitrust Fine for LCD Price-Fixing Conspiracy

On July 10, 2014, the 9th U.S. Circuit Court of Appeals denied an appeal by AU Optronics Corp. and two of its former executives to reverse a $500 million criminal judgment for participating in a conspiracy to fix the prices of liquid crystal display (LCD) panels. See United States of America v. AU Optronics Corp., et al, Case No. 12-10492 __ F.3d __, 2014 U.S. App. LEXIS 13051 (9th Cir. July 10, 2014). The appellants argued that the Foreign Trade Antitrust Improvements Act (FTAIA), which limits the extraterritorial reach of U.S. antitrust laws, barred prosecution for their conduct because the bulk of panels were sold to third parties outside the United States. The 9th Circuit rejected this argument, holding that the government had sufficiently proved at trial that the defendants had engaged in import trade into the U.S., and therefore the FTAIA did not apply. The court found that although AUO’s agreement to fix prices occurred in Taiwan, a substantial volume of goods containing the price-fixed panels were ultimately sold to customers in the U.S., thereby constituting import commerce. The court did not reach the merits of the defendants’ argument that the district court had given an improper jury instruction on the FTAIA’s domestic effects exception. Read More

7th Circuit Grants Motorola’s Petition for Interlocutory Appeal of FTAIA Decision Eliminating 99 Percent of Its Claim in LCD Price-Fixing Case

On July 15, 2014, the 7th U.S. Circuit Court of Appeals granted Motorola’s petition for interlocutory appeal of a district court decision that held 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). See Motorola Mobility LLC v. AU Optronics Corp. et al., 746 F.3d 842 (7th Cir. 2014).

As reported in the April 2014 edition of Orrick’s Antitrust and Competition Newsletter, on March 27, 2014, Motorola’s petition originally resulted in a 7th Circuit decision, by Judge Richard Posner, that affirmed the district court’s decision based solely on Motorola’s petition for review and without full briefing on the merits or a hearing. Following that decision, as reported in our June 2014 Antitrust and Competition Newsletter, Motorola filed a petition for rehearing en banc, and the 7th Circuit issued a series of unusual decisions demanding briefing from the Solicitor General on the application of the FTAIA in light of positions the U.S. government had taken in other cases. In addition, the governments of Japan, Korea and Taiwan submitted amicus briefs. Read More

2nd Circuit Affirms Dismissal of Monopolization Claim Alleging That Pharmaceutical Manufacturer Failed to Supply Competitors With Unbranded Version of Drug

On June 9, 2014, the 2nd U.S. Circuit Court of Appeals affirmed a district court ruling that wholesale dealers of the prescription drug Adderall XR failed to state a claim against the manufacturer of the drug based on allegations that it did not fulfill supply contracts with competitors that were reached in settling Hatch-Waxman litigation. See In re Adderall XR Antitrust Litig., 754 F.3d 128 (2d Cir. 2014). As part of the settlement of the Hatch-Waxman litigation, the manufacturer of Aderall XR—Shire LLC and Shire U.S., Inc.—agreed to provide generic manufacturers Teva Pharmaceuticals and Impax Laboratories with the rights and supplies necessary to participate in the market for Adderall XR. Teva and Impax claimed that Shire was only partially fulfilling its orders, which allegedly resulted in increased prices for Aderall XR for the wholesaler plaintiffs. The wholesalers filed a class action alleging monopolization claims under the Sherman Act. The 2nd Circuit affirmed the district court’s dismissal of the claim, concluding that manufacturers generally have no duty to deal, that the rare exception in Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985), lies “at or near the outer boundary of [section] 2 liability,” and that, in any event, Shire did not terminate any prior course of dealing. To the contrary, Shire had accepted a below-retail price for its product, and any alleged breach of its supply agreements with Teva and Impax may have prevented the price of Adderall XR from falling further, but did not give rise to a monopolization claim under Aspen Skiing. In other words, the breach of that contractual duty did not give rise to an antitrust claim.

A copy of the decision is available here.

District Court Dismisses With Prejudice PNY’s Exclusive Dealing and Attempted Monopolization Claims Against SanDisk

On July 2, 2014, the U.S. District Court for the Northern District of California dismissed with prejudice PNY’s exclusive dealing and attempted monopolization claims against SanDisk relating to flash memory drives. PNY Techs., Inc. v. SanDisk Corp., No. C 11-04689, 2014 U.S. Dist. LEXIS 90649 (N.D. Cal. July 2, 2014). The court dismissed PNY’s third amended complaint after it was filed following the court’s April 25, 2014 order dismissing the second amended complaint. See Orrick’s Antitrust and Competition Newsletter (June 6, 2014).

In its July 2, 2014 order, the court explained that PNY alleges that SanDisk enters into contracts with retailers, making SanDisk their exclusive supplier for SD cards for sales to consumers. According to PNY, this means that PNY and other competitors cannot reach consumers, and PNY alleges that SanDisk has attempted to monopolize the market. The contracts allegedly have terms ranging from one to three years, with only one contract lasting three years. SanDisk offers retailers a variety of incentives to enter into the exclusive contracts and make it unattractive to terminate the contract. Read More

FTC Settles Charges Under Section 5 for Barcode Resellers’ Invitations to Collude

On July 21, 2014, two Internet resellers of UPC barcodes settled charges by the U.S. Federal Trade Commission that they violated Section 5 of the FTC Act by inviting competitors to collude. An “invitation to collude” involves an improper communication from one firm to actual or potential competitors that the firm wants to coordinate on price, output, or other important terms of competition. In an invitation that the FTC deemed “particularly egregious” in its complaint, the FTC alleged that a principal from InstantUPCCodes.com sent an email to representatives of two other UPC competing resellers—Nationwide Barcode and “Company A”—inviting them to “match the price” of rival competitor, “Company B.” InstantUPCCodes.com and Nationwide expressed a readiness to raise prices over several months if Company A would agree, but Company A never responded. While acceptance of the invitation would have constituted a per se violation of the antitrust statutes and criminal penalties, the invitation itself was sufficient to violate Section 5 of the FTC Act, which precludes “unfair methods” of competition. The proposed settlement, subject to public comment for 30 days, prohibits InstantUPCCodes.com and Nationwide from (1) communicating with competitors about prices; (2) entering an agreement with a competitor to divide markets, allocate consumers, or fix prices; and (3) urging any competitors to manipulate prices or limit levels of service. Read More

FTC Approves Final Orders Settling Charges That Ski Equipment Manufacturers Agreed Not to Compete for Ski Endorsers or Employees

On July 9, 2014, the U.S. Federal Trade Commission announced that, pursuant to Section 5 of the FTC Act, it had approved two final orders settling charges that two ski equipment manufacturers—Market Volko (International) and Tecnica Group S.p.A—agreed for many years not to compete for one another’s ski endorsers or employees. The FTC’s complaint alleges that starting in 2004, the companies agreed not to solicit, recruit or contact any skier who previously endorsed the other company’s skis, and that the companies reached similar agreements with respect to each other’s employees.

The FTC’s case file is available here.

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

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