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.
The Federal Register Notice and proposed information request are available here.
Comments can be submitted here.
On June 23, 2013, the U.S. Department of Justice and the U.S. Federal Trade Commission will hold a joint, one-day workshop in Washington, D.C., on competition issues related to conditional pricing practices. “Conditional pricing” includes loyalty and bundled pricing, in addition to other arrangements where prices are contingent on commitments to purchase or sell a specified share or volume of a particular product or mix of products. The focus of the workshop will be to garner a better economic understanding of the potential harms and benefits of these practices, as well as examine how such practices are treated under the antitrust laws.
The all-day workshop is free and open to the public. It will be held at the FTC’s new satellite conference center, Constitution Center, 400 Seventh St., S.W., Washington, D.C. 20024. Registration is not required, but encouraged. Individuals may register by sending an email to CPPworkshop@ftc.gov with “RSVP” in the subject line. The DOJ and FTC are requesting comments and will accept written submissions through Aug. 22, 2014.
Additional information about the workshop can be found here. The agenda for the workshop is available here. Comments can be submitted here.
This article originally appeared in Law360 on March 26, 2014.
On March 27, 2013, the U.S. Supreme Court issued its decision in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), overturning an order certifying an antitrust class action under Federal Rule of Civil Procedure 23(b)(3), which requires that questions of law or fact common to class members predominate over questions affecting only individual members.
The Supreme Court held that the plaintiffs’ expert’s damages model was unable to measure classwide damages attributable to the only theory of antitrust impact found viable by the district court. Because of this flaw in the damages model, individual damages calculations would overwhelm questions common to the class, and the class therefore could not be certified under Rule 23(b)(3).1
On remand, plaintiffs filed a new motion for class certification, slicing several years off the class period and limiting the geographic market to only five of the 18 counties in the Philadelphia area for which they originally sought certification.2 The defendants opposed the motion and filed a new motion to exclude the opinions of plaintiffs’ expert. The court then granted plaintiffs’ unopposed request to stay the case while the parties conduct settlement discussions. Plaintiffs and Comcast recently agreed to de-certify the Chicago-area class based on the Supreme Court’s decision, and plaintiffs filed an amended complaint limited to the five Philadelphia-area markets.3
It was not unexpected that class counsel in Comcast would narrow the class for which they sought certification, or that settlement discussions might take place after the Supreme Court’s decision. But what effect is Comcast having on class certification in other antitrust cases? Read More
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
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.”
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
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.
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.
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