On August 9, 2016, the Second Circuit affirmed a district court’s dismissal of claims asserted by two groups of self-proclaimed “indirect purchasers” of aluminum products who alleged that three aluminum futures traders, which had acquired operators of warehouses for aluminum, manipulated a price component for aluminum (warehouse storage costs). The Second Circuit concluded that these “indirect purchasers” did not suffer antitrust injury because they were not participants in the aluminum warehousing market. In re Aluminum Warehousing Antitrust Litig., Nos. 14-3574, 14-3581(2d Cir. Aug. 9, 2016). In the district court, Judge Katherine Forrest recently applied the Second Circuit’s analysis to dismiss similar claims brought by the purported “direct purchasers” of the aluminum because they, too, were not participants in the aluminum warehousing market. In re Aluminum Warehousing Antitrust Litig., No. 13-2481 (S.D.N.Y. Oct. 5, 2016). These two decisions (assuming the district court’s decision is affirmed) should help defendants attack plaintiffs’ efforts to establish antitrust standing in other cases by trying to thread the “inextricably intertwined” needle for market participants that the Supreme Court established in Blue Shield of Virginia v. McCready, 457 U.S. 465 (1982).
Partners Jay Jurata and Alex Okuliar recently published a chapter on IP and Antitrust in The Antitrust Review of the Americas 2017 published by Global Competition Review. They note that antitrust and competition law is being wielded as an increasingly effective weapon to diminish patent rights in the US. Follow the link to the chapter.
For years, a debate has swirled in Washington and around the country about the role and economic value of “patent assertion entities” – often referred to derisively in the press as “patent trolls.” Some of these PAEs have been known to blanket small businesses with threatening letters claiming infringement of sometimes questionable patents hoping to receive a quick payout. The Federal Trade Commission just recently published a long-awaited Patent Assertion Entity Activity Study that analyzes the structure, organization, and behavior of PAEs, hoping to inform the debate about these entities. Using responses from a sample of 22 PAEs and more than 2,500 PAE affiliates and related entities, the study analyzes PAE acquisitions, litigation, and licensing practices over a six-year period. The findings in the study are extensive and are likely to provoke further discussion and debate. The Commission’s key findings and recommendations are discussed below. READ MORE
Partners Alex Okuliar and Jim Tierney recently published a piece in the National Law Journal entitled Are Patent Rights Poised for a Resurgence? They argue that after several years of retrenchment, economic trends in the US and China, as well as developments at the federal agencies and US courts, could signal a return to stronger protections for patent owners. Follow the link to the article.
On September 20, 2016, the U.S. Court of Appeals for the Second Circuit issued an opinion in In re Vitamin C Antitrust Litigation, reversing the district court’s eight year-old decision not to grant a motion to dismiss the case, based on international comity. The Second Circuit vacated the $147 million judgment against the two defendants that took the case to trial in 2013, and remanded with instructions to dismiss the complaint with prejudice. The court did not opine on the defendants’ other grounds for dismissal – the foreign sovereign compulsion, act of state, and political question doctrines. In re Vitamin C Antitrust Litig., No. 13-4791 (2d Cir. Sept. 20, 2016).
In 2005, the plaintiffs brought several class action complaints against the major Chinese vitamin C manufacturers, alleging that the manufacturers illegally fixed the price and output levels of vitamin C that they exported to the United States. The cases, which were consolidated in the Eastern District of New York, marked the first time that Chinese companies had been sued in a U.S. court for violation of the Sherman Act.
On September 15, 2016, the Third Circuit jump-started a federal antitrust class action involving truck transmissions, holding that a direct purchaser’s assignment of its federal antitrust claims to an indirect purchaser is valid as long as the assignment was written and express—even if there was no consideration for the assignment. The Third Circuit also held that a proposed class representative’s motion to intervene is presumptively timely if made before class certification. Wallach, et al. v. Eaton Corp., et al., No. 15-3320 (Sept. 15, 2016).
Last week, the Ninth Circuit affirmed a summary judgment disposing of numerous antitrust claims brought by an independent servicer against a manufacturer of systems and parts that also provides service. The court emphasized that “[t]his case serves as a reminder that anecdotal speculation and supposition are not a substitute for evidence, and that evidence decoupled from harm to competition—the bellweather of antitrust—is insufficient to defeat summary judgment.” Aerotec Int’l, Inc. v. Honeywell Int’l, Inc., No. 14-15562 (9th Cir. Sept. 9, 2016).
Auxiliary Power Units (“APUs”) power an airplane’s air conditioning, cabin lights and instrumentation. Aerotec International, Inc. (“Aerotec’), a small servicer of APUs, including those manufactured by Honeywell International, Inc. (“Honeywell”), complained that Honeywell had stalled Aerotec’s sales efforts and prevented it from reaching cruising altitude through a variety of alleged anticompetitive conduct.
On September 7, 2016, the Third Circuit ruled that a district court erred in granting a Fed. R. Civ. P. 12(b)(1) motion to dismiss federal antitrust claims for lack of subject matter jurisdiction, because the court conflated the analyses for Article III standing and antitrust standing. Hartig Drug Co. Inc. v. Senju Pharmaceutical Co. Ltd., No. 15-3289 (3d Cir. Sept. 7, 2016).
Hartig Drug Company Inc. (“Hartig”), an Iowa-based drug store chain, sued pharmaceutical manufacturers alleging that they suppressed competition for medicated eyedrops through a variety of means, which resulted in higher prices for the eyedrops. Hartig purchased the eyedrops from a distributor, AmerisourceBergen Drug Corporation (“Amerisource”), which purchased the eyedrops from the manufacturers. Hartig’s claim as an indirect purchaser from the defendant manufacturers was barred by Illinois Brick v. Illinois, 431 U.S. 720 (1977), so it alleged that Amerisource had assigned its claim to Hartwig, which enable Hartwig to sue as a direct purchaser.
The manufacturers filed a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, and also a Rule 12(b)(6) motion to dismiss for failure to state a claim. For the Rule 12(b)(1) motion, defendants submitted Amerisource’s Distribution Services Agreement (“DSA”) with one of the manufacturers—which was not mentioned in Hartwig’s complaint—to argue that an anti-assignment clause in the DSA prohibited Amerisource from assigning its claim without the defendant’s consent. The District Court accepted that argument and granted the Rule 12(b)(1) motion on the ground that Hartig was actually suing as an indirect purchaser and not as a direct purchaser because the assignment was invalid.
On appeal, several retailers filed an amicus brief arguing that defendant’s anti-assignment argument reached only the issue of antitrust standing, which is different from Article III standing, and the district court erred in ruling that it did not have subject matter jurisdiction. The Third Circuit agreed.
A court in the Central District of California recently applied the Act of State doctrine to dismiss a complaint against two private companies that are minority owners of a third company, also a defendant, which is majority-owned by the Mexican government. U.S. District Judge Dolly M. Gee held that the relief the plaintiffs sought would require the court to deem the official acts of a foreign sovereign invalid, and that the private entities had standing to invoke the doctrine. Sea Breeze Salt, Inc. et al. v. Mitsubishi Corp. et al., CV 16-2345-DMG, ECF No. 45 (Aug. 18, 2016).
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 Second Circuit recently held that under Federal Rule of Civil Procedure 23, a district court judge can decertify a class after a jury verdict in favor of the class but before entering judgment, upholding a Southern District Court of New York decision granting defendants’ post-verdict motion to decertify the class. Joseph Mazzei v. The Money Store, TMS Mortgage Inc., HomEq Servicing Corp., No. 15-2054 (2d Cir. July 15, 2016). The Second Circuit’s decision confirms that after a court certifies a class, defendants should continue to develop evidence to seek to decertify the class even after a jury verdict in favor of the class.
On July 6, 2016, Judge Leonard P. Stark, of the federal district court in Delaware, ordered a $3 million punitive monetary sanction, and an adverse inference jury instruction, against antitrust defendant Plantronics after finding that a top executive at the company had deleted thousands of potentially relevant emails. This case is noteworthy both because of the severity of the sanction and the court’s decision to impute the conduct of an employee to the company even though numerous preservation practices were in place and the employee was instructed not to destroy information.
Where is the line drawn between acquisitions of securities made “solely for the purpose of investment” on one hand, and influencing control, thereby requiring regulatory approval, on the other hand? That is the central cautionary question that was reinforced by the July 12, 2016, Department of Justice (“DOJ”) settlement with ValueAct Capital. The well-known activist investment firm agreed to pay $11 million to settle a suit alleging that it violated the premerger reporting and waiting period requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”). ValueAct purchased more than $2.5 billion of shares in two oil companies, Baker Hughes Inc. and Halliburton Co., after they announced they would merge. The DOJ alleged that ValueAct used its ownership position to influence the proposed merger and other aspects of Baker Hughes and Halliburton, and thus could not rely on the exemption.
On June 30, 2016, the Federal Trade Commission (“FTC”) announced increases to the maximum civil penalties issuable for violations of several key competition statutes. The agency made these changes to comply with the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, which required the agency adjust penalty amounts for laws it enforces based on a methodology provided for by Congress.
For the past several years, plaintiffs and defendants in international price-fixing cases have battled over the extraterritorial application of the Sherman Act in light of the Foreign Trade Antitrust Improvements Act of 1982 (“FTAIA”), 15 U.S.C. § 6a, and the U.S. Supreme Court’s seminal decision in F. Hoffman-LaRoche Ltd. v. Empagran, S.A., 542 U.S. 155 (2004). Although the Supreme Court passed on an opportunity to clarify the scope of the FTAIA when it denied petitions for certiorari following decisions in Hsuing v. United States, 778 F.3d 738 (9th Cir. 2014), as amended (Jan. 30, 2015), and Motorola Mobility LLC v. AU Optronics Corp., 775 F.3d 816 (7th Cir. 2014), as amended (Jan. 12, 2015), the Court’s decision in RJR Nabisco v. European Community—which addresses the extraterritorial application of the federal RICO statute—may provide some insight into how it views antitrust claims based on foreign injuries under the FTAIA.
On June 14, 2016, U.S. District Judge Jorge Alonso, of the Northern District of Illinois, denied a motion for preliminary injunction by the Federal Trade Commission (“FTC”) and the Attorney General for the State of Illinois, seeking to block the proposed merger between Advocate Health Care and the NorthShore University Health System (“NorthShore”) in the Chicago metropolitan area. According to Judge Alonso’s opinion released on June 20, the Plaintiffs failed to prove a relevant geographic market, the lack of which the Court deemed fatal to the Plaintiffs’ case.
This loss could be a blow for the FTC’s health care competition enforcement program. It is the agency’s second loss in district court this year in a hospital merger challenge. Additionally, as we noted in our May 13, 2016 blog post concerning the FTC’s earlier loss on the Hershey merger—now on appeal to the Third Circuit—both cases reflect push-back by courts against what to this point have been highly successful FTC market definition and consumer harm arguments in hospital merger cases.
Courts in the Northern District of California, which have been handling price-fixing class actions in the electronics industry for more than a decade, are continuing to develop ground rules about whether defendants in a price-fixing case are entitled to know the amount for which an opt-out Direct Action Plaintiff (DAP) settles its cases against other defendants. On May 27, 2016, Judge Jon S. Tigar overruled objections to a Special Master’s Report and Recommendation compelling two DAPs to disclose settlement amounts in the Cathode Ray Tube (CRT) Antitrust Litigation, No. 3:07-cv-5944 (N.D. Cal.). Judge Tigar compelled both companies to provide that information to a Special Master so he can determine whether the information should be provided to other defendants to facilitate settlements—even though both companies had already settled all of their claims against all defendants. ECF 4661.
On Monday, June 7, the Supreme Court requested the views of the Solicitor General in connection with a petition for certiorari filed by the U.S. subsidiary of GlaxoSmithKline plc (“GSK”) in SmithKline Beecham Corp. v. King Drug Co. of Florence, No. 15-1055. The Supreme Court’s request seems less directed to rethinking its seminal ruling in FTC v. Actavis on the lawfulness of “reverse-payment” settlements of Hatch-Waxman cases than to a concern that, in some specific ways, its decision may have created some unintended consequences.