Monopolization/Dominant Firm Conduct

The Chips Are Down: Intel’s Victory in the European Court of Justice Has Implications on How Anticompetitive Conduct Is Analysed in EU Antitrust Cases

 

On 6 September 2017, the Court of Justice of the European Union (“CJEU”) handed down its long-awaited ruling in Intel v Commission (the “Ruling”).[1] The Ruling, which sets aside the appealed judgment of the EU General Court and orders the case to be re-examined for failing to consider the effects of anticompetitive conduct on competition, has potentially broad implications for how the European Commission (“Commission”) conducts its analysis and reasons its decisions in ongoing and future EU antitrust investigations.

Key Takeaways

  • The Ruling signals a return of “effects-based” analysis in EU antitrust cases and a move away from a “form-based” approach where certain conduct is deemed per se illegal.
  • The Ruling not only clarifies how the General Court should assess appeals of Commission decisions, but is likely to have implications for how the Commission approaches its analysis and reasons its decisions in EU antitrust cases going forward. In particular, the burden of proving that specific conduct or practices have anticompetitive effects is placed firmly with the Commission.
  • Intel’s victory may embolden other entities facing similar allegations to defend their corners more aggressively.
  • This is not the end of the road. It cannot be ruled out that the General Court, when it re-examines the case and applies the appropriate analysis, comes to the same ultimate conclusions and upholds the Commission’s original fine.

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Antitrust Issues on Collection and Use of Big Data in Japan

On June 6, 2017, a committee within Japan’s Fair Trade Commission published a report on competition policy and big data. The report is based on a concern that dominance of big data by certain major technology companies could impede competition and innovation, and addresses how Japan’s Antitrust Act (Act) could be applied in this context.

A main focus of the report is how certain cases of “collection of data” and “use of data” could trigger antitrust issues. READ MORE

U.S. DOJ and FTC Issue Updated Antitrust/IP Guidelines and International Enforcement and Cooperation Guidelines

On January 13, 2017, the U.S. Department of Justice and the Federal Trade Commission issued their updated Antitrust Guidelines for the Licensing of Intellectual Property, first issued in 1995, which explains how the two agencies evaluate licensing and related activities involving patents, copyrights, trade secrets and know-how. Although the agencies have issued a variety of reports since 1995 regarding antitrust and IP issues, this is the first comprehensive update of the Guidelines.  The final updated Guidelines do not differ significantly from the proposed Guidelines released in August 2016, which we analyzed in this blog post.

Also on January 13, 2017, the DOJ and FTC issued their revised Antitrust Guidelines for International Enforcement and Cooperation, first issued in 1995 as the Antitrust Enforcement Guidelines for International Operations. These Guidelines explain the agencies’ current approaches to international enforcement policy and their related investigative tools and cooperation with foreign enforcement agencies.  The revised Guidelines differ from the 1995 Guidelines by adding a chapter on international cooperation, updating the discussion of the application of U.S. antitrust law to conduct involving foreign commerce (e.g., the Foreign Trade Antitrust Improvement Act, foreign sovereign immunity, foreign sovereign compulsion, etc.), and providing examples of issues that commonly arise.

Tenth Circuit Rules That Invocation of IP Rights Is Presumptively Valid Defense to Antitrust Refusal to Deal Claims

Tenth Circuit Rules That Invocation of IP Rights Is Presumptively Valid Defense to Antitrust Refusal to Deal Claims Detail of a pair of aviator sunglasses on a flight planner

In SOLIDFX, LLC v. Jeppesen Sanderson, Inc., Case Nos. 15-1079 and 15-1097 (opinion available here), the Tenth Circuit aligned itself with the First and Federal Circuits to hold that the invocation of intellectual property rights is a presumptively valid business justification sufficient to rebut a Sherman Act Section 2 refusal to deal claim, but left open some questions about when and how the presumption can (if ever) be rebutted.

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China’s and Japan’s Antitrust Enforcement Agencies Warm Up To Each Other

Chinese and Japanese crossed flags increased communication, cooperation and coordination among Chinese and Japanese antitrust enforcement agencies

Although China and Japan have very different histories regarding their antitrust laws, antitrust enforcement officials from the two countries have recently taken steps to open a formal dialogue. This is a welcome development for Chinese and Japanese companies, as well as for foreign companies that do business in China and Japan, and it continues the trend of increased communication, cooperation and coordination among national enforcement agencies. There remains an open question, however, as to how convergence among Asian antitrust enforcement agencies will affect possible convergence with agencies in the United States, the European Union and the rest of the world.

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Third Circuit Jump-starts Class Action, Holding that an Indirect Purchaser Can Bring Federal Antitrust Claims as a Direct Purchaser Based on Assignment of the Claims Even Without Consideration

Antitrust Class Action Truck Transmissions

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).

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Ninth Circuit Grounds Aftermarket Claims, Refusing to Stretch Antitrust Theories and Reminding Plaintiffs That Allegations Must Be Supported by Evidence of Anti-Competitive Harm

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.

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China’s Fair Competition Review System: China Takes Another Significant Step Eight Years After Enacting the Anti-Monopoly Law

Rshutterstock_99699011-2ecognizing concern that the Chinese government intervenes excessively into markets and private economic activities, the China State Council recently released opinions directing the implementation of a fair competition review system (“FCRS”), which is intended to moderate administrative authorities’ issuance of regulations and minimize the government’s interference in China’s economy. Although the CRS has been hailed as “a key step to establish the fundamental status of competition policies,”[1] its success will depend on how it is implemented.

On June 1, 2016, the Opinions of the State Council on Establishing a Fair Competition Review System During the Development of Market-Oriented Systems (“Opinions”) were promulgated and became effective.  The Opinions note that enforcement of current laws sometimes entails “local protectionism, regional blockade, industry barriers, business monopoly, granting preferential policies in violation of the law or illegally prejudicing the interests of market players, and other phenomena contrary to the efforts of building a unified national market and promoting fair competition.”  These so-called “administrative monopolies,” which often are at issue in cases investigated under the Anti-Monopoly Law (“AML”), are at cross purposes to the AML.  In an effort to reduce or eliminate obstacles to economic development, the Opinions call for limiting the government authorities’ administrative powers, establishing the FCRS, preventing new policies and measures that exclude competition, and gradually revising and ultimately abolishing existing provisions that impede fair competition.

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U.S. District Court Denies FTC’s Motion for a Preliminary Injunction Blocking Chicago-area Advocate Health / NorthShore Hospital Merger

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.[1]  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.[2]

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.

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Supreme Court’s Request for Views of the United States on Cert. Petition in Lamictal “Reverse-Payment” Case Flags Potential Issues for Practitioners

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.

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Health Check for Hospitals in Germany

Are patients receiving the best care in hospitals? The German competition authority – Bundeskartellamt – has now decided to apply a health check to the German hospitals market.

On May 31, 2016, the German competition authority announced that it was launching a so-called “sector inquiry” into the hospital services market to examine the degree of competition in that sector of the economy.

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No Easy Answers: Ohlhausen Challenges Notion of “Monopoly Problem” In the US

On June 1, 2016, FTC Commissioner Maureen Ohlhausen delivered remarks in Hong Kong, pushing back on recent news reports implying that the United States currently suffers from a “monopoly problem” causing a reduction of competition in the marketplace.  Recent articles and opinion pieces in The Economist and The New York Times suggest that the consolidation of market power, and lack of antitrust enforcement preventing such consolidation, are having a noticeable effect and harming consumers and innovation.  Indeed, the precursor to these reports—an April 14, 2016 report from the Council of Economic Advisers (“CEA”), entitled “Benefits of Competition and Indicators of Market Power,” argues there has been a decline of competition in certain parts of the U.S. economy due the concentration of monopoly power in the hands of a select few players in certain industries (e.g., airlines, cable, networking).  The CEA report suggests U.S. agencies should explore how certain factors—the use of Big Data, increased price transparency, and common stock ownership—affect competition.  As a result of the CEA report, President Obama issued an Executive Order on April 15, 2016, directing antitrust enforcement agencies to use their authority to “promote competition.”

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Third Circuit Rejects Drug Manufacturer’s Single-Product Bundling Claim – But Prescription for the Future Is Unclear

You know what they say: one man’s price is another man’s bundle.  No?  Well maybe they should, after this recent decision out of the Third Circuit in Eisai, Inc. v. Sanofi Aventis U.S., LLC involving allegedly exclusionary discounting.  The court ultimately found Sanofi’s conduct was not unlawful.  But the decision raises questions about how such conduct – a hybrid of price discounts and single-product bundling – will be treated going forward, at least in the Third Circuit.

At issue was Sanofi’s marketing of its anticoagulant drug Lovenox to hospitals through its Lovenox Acute Contract Value Program.  Under the Program, hospitals received price discounts based on the total volume of Lovenox they purchased and the proportion of Lovenox in their overall purchase of anticoagulant drugs.  A hospital that chose Lovenox for less than 75% of its total purchase of anticoagulants received a flat 1% discount regardless of the volume purchased.  But when a hospital’s purchase of Lovenox exceeded that percentage, it would receive an increasingly higher discount based on total volume and percentage share, up to a total of 30% off the wholesale price.  A hospital that did not participate in the Program at all was free to purchase Lovenox “off contract” at the wholesale price.

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FTC Settles Charges of Illegal Exclusive Contracts with Medical Device Input Supplier Invibio

On April 27, 2016, Invibio—a supplier of polyetheretherketone (“PEEK”) used in medical implants—agreed to settle charges asserted by the Federal Trade Commission (“FTC”) that its exclusive supply contracts with medical device manufacturers, including some of the world’s largest, violated Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45.[1]  This consent decree may signal a renewed interest at the agency to scrutinize exclusive contract arrangements. The decree also serves as a reminder that, while exclusive contracts are not per se unlawful, companies that have market power and use exclusive contracts face risks under the antitrust and consumer protection laws.

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U.S. District Court Denies FTC’s Motion for a Preliminary Injunction Blocking Penn State Hershey / PinnacleHealth Hospital Merger

On May 9, 2016, U.S. District Judge John Jones III, of the Middle District of Pennsylvania, rejected a motion for preliminary injunction by the Federal Trade Commission (“FTC”) and the Pennsylvania Attorney General to halt the proposed merger between Penn State Hershey Medical Center (“Hershey”) and PinnacleHealth System (“Pinnacle”).  The Court’s decision represents a potential setback for the FTC’s enforcement against hospital consolidation around the country.  The opinion raises further questions about recent analyses endorsed by the agency and other federal courts when reviewing hospital mergers.  The Court has extended the temporary restraining order in effect until May 27, 2016, to allow the FTC and the Attorney General to seek relief from the 3d Circuit.

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Observations on “Brexit” and the EU/UK Competition Law Regime

Rightly considered to be a “once in a generation decision,” the UK electorate will on 23 June 2016 have a chance to vote on whether the UK should remain a member of the European Union (“EU”).

This upcoming referendum has resulted in emotional rhetoric and heated discussions in the media (and no doubt around dining tables throughout the UK and elsewhere) on which way to vote, and why. However, what is striking to us is the relative lack of focus on the legal implications of so-called “Brexit,” including on EU and UK competition law.

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