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.
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.
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
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
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.
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
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
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.
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
Note: This article was adapted from a speech given by Mr. Popofsky 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
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
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.
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
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
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
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.
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.
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.
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.
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.