Welcome to the August E-briefs, News and Notes. We hope you find this edition useful. I want to thank LeeAnna Bowman-Carpio, (J.D. Candidate, 2022-U.C. Hastings College of Law), and Leilyn Miles (summer intern at Nike) for contributing the E-briefs found below. Ms. Bowman-Carpio is the Antitrust and Unfair Competition Law Section’s inaugural recipient of its Inclusion and Diversity Fellowship.
Lee Brand and Olivia Fong (summer associate), Pillsbury Winthrop Shaw Pittman LLPhave contributed an outstanding “Deeper Dive: The First Six Months of the Biden Antitrust Agenda.” The Agency Update section is also well worth reading with much happening, especially at the FTC, under the new administration. As always, there is information about upcoming Section events and other news we hope is relevant.
E-briefs is in need of additional volunteer authors. If you would like to be on the email list of attorneys to whom I send out requests for help, please let me know. There is no obligation to take on any particular case, but if you get the email messages about e-briefs, you can jump in when time/interest allows. Also, please get in touch if you have any comments or suggestions for new features. Thanks. email@example.com.
Blix Inc. v. Apple, Inc. (Case No. 19-1869 (D. Del. July 9, 2021) | LeeAnna Bowman-Carpio, J.D. Candidate, 2022-U.C. Hastings College of Law
The United States District Court for the District of Delaware granted Apple’s motion to dismiss plaintiff Blix’s antitrust case for failing to sufficiently state a claim for maintaining a monopoly or for creating an illegal tying arrangement involving Consumer Single Sign-On (Consumer SSO) technology and solutions for mobile phone operating systems (mobile OS). Blix, Inc. v. Apple, Inc., No. 19-1869, 2021 WL 2895654 at 5 (D. Del. July 9, 2021). The court dismissed the case with prejudice, noting that Blix had ample opportunity to plead a viable case after twice amending its complaint. Id. at 10.
SSO is a service that centralizes identity authentication by allowing a user to sign into multiple applications with a single set of login credentials (e.g., a username and password). Second Amended Complaint at 22, Blix, Inc. v. Apple, Inc., No. 19-1869 (D. Del. Feb. 12, 2021). Blix provides an SSO solution, BlueMail, which is a “universal email application” that provides users with a single space to manage “an unlimited number of mail accounts from various providers.” Id. at 6. Additionally, Blix offers Messaging Bridge, which is a “cross-platform proxy” that automatically and anonymously relays private email communications between various email services and applications irrespective of the operating systems on which they run.” Id. at 25.
Apple also provides an SSO solution in the form of its “Sign in with Apple” system. “Sign in with Apple” includes a “Hide My Email” feature, which is the company’s private relay system and is similar to Blix’s Messaging Bridge. Id. at 65. Apple requires developers that offer an SSO on its iPhone operating system (iOS) to also offer “Sign In With Apple.” Id. at 92.
Procedural History: Evolving Allegations and the Second Amended Complaint
Blix originally brought this action in 2019. Complaint at 1, Blix, Inc. v. Apple, Inc., No. 19-1869 (D. Del. Oct. 4, 2019). In its original complaint, the app developer alleged that Apple had infringed its patent through “Sign In With Apple.” Id. at 11. Blix also alleged a broad violation of the Sherman Act. Id. at 5. Prior to the second amended complaint, the operative complaint here, Blix had originally constructed its case around Apple’s personal computer operating system (MacOS). Id. at 20. In its first amended complaint, Blix broadened the scope of the claims to include both MacOS and iOS. First Amended Complaint at 70, 76, Blix, Inc. v. Apple, Inc., No. 19-1869 (D. Del. Dec. 12, 2019). In its second amended complaint, Blix refined its argument to solely focus on Apple’s systemic stranglehold on the mobile OS market, mobilizing specific claims of monopoly maintenance and tying in addition to its patent infringement claim. Second Amended Complaint at 9, 81, 88, 91, Blix, Inc. v. Apple, Inc., No. 19-1869 (D. Del. Feb. 12, 2021).
Within Blix’s monopoly maintenance claim, the overarching theory of harm presented was that Apple used its monopoly power and structural advantages to surveil developers’ innovations, take the underlying ideas and apply them to its own applications, and then essentially push the original app out of the market. Id. at 4–5. The argument began by highlighting that Apple created a mobile OS application ecosystem that facilitated iOS user lock-in. Id. at 14, 23. In turn, the ability to lock in users enabled Apple’s acquisition of 61.47% of the Mobile OS market. Id. at 15. Further, Blix claimed that it and its SSO solution, Messaging Bridge, posed a threat to Apple’s monopoly by providing an alternative to the iOS lock-in – basically a way to access other mobile OS apps. Id. at 26. Blix argued that Messaging Bridge is a “tool of disintermediation,” meaning that it removes the middleman (in this case Apple) from user-developer, or user-third-party, communications. Id. at 6. Additionally, the developer explained that its “platform-agnostic, user-centric model reduces consumer and developer dependence on iOS and could facilitate an increase in switching or multi-homing by making it easy to sign into non-Apple devices and services privately and securely.” Id.
Based on this assertion, Blix next alleged that, because it posed a threat to Apple’s monopoly in the Mobile OS market, Apple viewed and adopted aspects of Blix technology through a process called “Sherlocking.” Id. at 30–31. According to Blix, Apple requires that every iOS application be shown to it so that it can pluck and incorporate into its own applications aspects of the applications that it likes. Blix v. Apple, No. 19-1869 at 5. After developing and launching its own alternative SSO, Apple then moved to limit competition by requiring developers to include “Sign In With Apple” whenever a developer was providing a third-party SSO on a device running iOS. Second Amended Complaint at 4–5, Blix, Inc. v. Apple, Inc., No. 19-1869 (D. Del. Feb. 12, 2021). This way, Apple would be able to use user lock-in and its requirement to preload “Sign In With Apple” to make it duplicative and less convenient for users to choose a non-Apple SSO that would free users from iOS lock-in, thereby routing users away from SSO solutions such as those provided by Blix. Id. at 6, 66.
For its tying claim, Blix alleged that Apple’s requirement that application developers include “Sign In With Apple” whenever they offer a non-Apple SSO created an illegal tying arrangement between iOS (the tying product within the mobile OS market) and “Sign In With Apple” (the tied product within the consumer SSO market). Blix v. Apple, No. 19-1869 at 9.
Motion to Dismiss
The District Court dismissed the case for failure to show that Apple willfully maintained its monopoly power or created an illegal tying arrangement. The court began by rejecting Blix’s maintenance of monopoly claim. Id. at 8. As elucidated in United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966), Section 2 of the Sherman Act requires that the defendant both possess monopoly power in the relevant market and willfully acquire or maintain the monopoly power “as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.” Id. at 3. The court noted that Apple’s alleged monopoly power of 61.47% of the Mobile OS market had been sufficiently pleaded and was not at issue. Id. at 4–5. However, the court found that Blix had not satisfied the second requirement of showing willful maintenance of the monopoly power. Id. at 5.
The court first held that, because the patent infringement claim was a “fundamental premise” of the monopoly maintenance argument, the claim was weakened when the court previously dismissed the patent infringement claim. Id. The court then rejected the “Sherlocking” premise, explaining that Blix did not show how it was different from patent infringement or why it should be viewed as a willful maintenance of monopoly power instead of business acumen. Id. The court also challenged Blix’s reliance on United States v. Microsoft, 253 F.3d 34 (D.C. Cir. 2001) and failure to explain how Apple’s requirement that developers offer “Sign In With Apple” restricted competition in the mobile OS market. Id. at 6–7. Unlike Microsoft, where the company actively worked to eliminate competitive threats posed by middleware companies in the internet browser market, the case at bar did not include sufficient allegations of competition elimination. Id. at 6. Instead, the court saw the requirement to offer “Sign In With Apple” as actually expanding consumer choice in the SSO market by adding Apple’s SSO as an option. Id. at 7. Finally, the court also rejected Blix’s analogy to Roxul USA, Inc. v. Armstrong World Industries, Inc., 2019 WL 1109868 (D. Del. Mar. 8, 2019). Id. In Roxul, a maverick had been blocked from gaining a foothold in its market through the anticompetitive effects of an exclusive dealing arrangement. Id. Blix argued that Apple had similarly prevented Blix from gaining a foothold in the SSO market. Because Blix had not alleged an exclusive dealing arrangement, the court found the analogy to be unpersuasive. Id.
Turning to the illegal tying allegation implicating Sections 1 and 2 of the Sherman Act, the court went on to reject Blix’s claim that, by forcing developers to include “Sign In With Apple” if they wanted to provide a non-Apple SSO option on the iOS platform, Apple had created an illegal tie. Id. at 9. For a tying arrangement to exist, there must be two product markets (the tied product and the tying product), and customers must be forced to purchase the tied product when purchasing the tying product, thereby restraining competition in the tied product market. Id. at 4. In analyzing the tying claim, the court initially dispatched Blix’s reliance on the Section 2 claim noting that “any tying claim predicated on the deficient Section 2 claim must also fail.” Id at 8. While the court found that Apple did require developers to include “Sign In With Apple” as an alternative SSO, the court determined that Blix had failed to show how anyone (here the assumption was end users) was forced into buying “Sign In With Apple” when buying mobile iOS. Id. at 9. Instead, the court found using Apple’s SSO to be a free choice on the part of consumers, and that there was “no requirement that purchasers of Apple devices running iOS implement Sign In With Apple.” Id. The court did not directly address Blix’s contention that the coercion happened at the developer level. Id.
Accordingly, the court dismissed the case with prejudice.
Social Technologies LLC v. Apple Inc., Case No. 20-15251, (9th Cir. July 13, 2021) | Leilyn Miles, Legal Intern at Nike
By: Leilyn Miles, Legal Intern at Nike
This Ninth Circuit opinion is a great warning for any party seeking trademark protection. Parties need to ensure their use is real and done in good faith. Specifically, for software and technologies premature release of a defective product could very well undermine claims to bona fide use in commerce. It is also important to note that downloads to not equate to actual trademark usage.
This case involved a trademark dispute between Defendant-Appellee Apple Inc. (Apple), and Plaintiff Appellant Social Technologies LLC (Social Tech), over their use of the MEMOJI mark under the Lanham Act.
This dispute began in 2016 when Social Tech filed an intent-to-use trademark application for the trademark MEMOJI. In 2017, Lucky Bunny LLC (LB) filed a trademark application based on actual use in commerce for the MEMOJI trademark. The following year Social Tech rejected Apple’s offer to inquire the rights and goodwill associated with the MEMOJI mark. Apple then negotiated the assignment of LB’s rights to mark. Once the acquisition was finalized and announced, Apple released a public beta version of a new operating software that included the Memoji software. Three weeks after Apple’s announcement, Social Tech launched its own Memoji mobile phone app and, two days after that, filed a Statement of Use with the USPTO that matured into a Trademark Registration. But the day before, Apple launched its new iOS 12 operating system, which incorporated Apple’s Memoji software into Apple devices. As a result, social Tech filed suit against Apple, alleging trademark infringement under the Lanham Act.
The district court granted summary judgment in favor of Apple on the grounds that no reasonable jury could find that Social Tech engaged in bona fide use of the MEMOJI mark in commerce and that Apple was entitled to cancellation of Social Tech’s registration. Social Tech now appeals the district court’s determination that it lacked bona fide use of the MEMOJI mark in commerce. But the court affirmed the district court’s grant of summary judgment in favor of Apple.
Social Tech claimed that its use of the MEMOJI mark during pre-sales activities exhibited bona fide intent to use the mark in commerce. The court disagreed and held that mere adoption of a mark without bona fide use in commerce, in an attempt to reserve rights for the future, is insufficient to establish rights under the Lanham Act. There was no evidence to show that any outside person would have identified the MEMOJI mark with Social Tech before Apple’s announcement. The court explained that a mark is not meritorious of trademark protection until it is used in public in a way that creates an association among consumers between the mark and its owner, and Social Tech failed to do that.
Social Tech claimed that it rushed to develop code and release for its Memoji application for the sole purpose of reserving its right to the MEMOJI mark. The court disagreed again and quoted email correspondence between Social Tech and its software developer, which compelled the conclusion that Social Tech intended to provide a basis for its lawsuit against Apple.
Social Tech also claimed that the 5,000 downloads of its Memoji app were enough to raise a question of fact as to whether its use in commerce was bona fide. The court explained that it was not the number of downloads lacking, but a lack of any evidence suggesting that Social Tech developed the app for genuine commercial reasons warranting trademark protection.
Wisk Aero LLC v. Archer Aviation Inc., Case No. 3:21-cv-02450 (N.D. Cal., filed 07/22/2021)
Court denies a motion for preliminary injunction relating to alleged misappropriation of trade secrets. From the opinion:
“Plaintiff Wisk Aero LLC’s (“Wisk”) motion for a preliminary injunction (Dkt. No. 16) is DENIED. A full written opinion will follow in due course. In essence, Wisk has not shown a likelihood of success on the merits that defendant Archer Aviation Inc. has misappropriated its particular asserted trade secrets. See Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). There are some arguable indications of misappropriation but, even if the totality of that evidence raises “serious questions going to the merits,” it is too uncertain and equivocal to support a finding of irreparable injury based on misappropriation or that the balance of hardships sharply favors Wisk. See Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1132 (9th Cir. 2011.”
SmileDirectClub, LLC. V. Tanja D. Battle, in her official capacity as Executive Director of the Georgia Board of Dentistry, Case:19-12227, (11th Cir., filed July 20, 2021)
The 11thh Circuit reversed an earlier circuit precedent and ended a circuit split over whether private parties, such as the Georgia Board of Dentistry, could seek interlocutory appeal of district court rulings denying a motion to dismiss under Parker v. Brown, 317 U.S. 341 (1943). The 11th Circuit, prior to this opinion, had been the only circuit granting such a right.
Excerpts from the Court opinion:
“Sitting as a full court, we hold that interlocutory appeals may not be taken under the collateral order doctrine from the denials of so-called “state-action immunity” under Parker v. Brown, 317 U.S. 341, 350-52 (1943), and its progeny. We therefore dismiss this appeal by the members of the Georgia Board of Dentistry for lack of appellate jurisdiction.”
In 2018, the Georgia Board of Dentistry—a state-organized entity mostly comprised of practicing dentists—voted to amend its Rule 150-9-.02, which relates to the expanded duties of dental assistants. As explained in the panel opinion, the “practical effect of the proposed amendment w[as] . . . to require that digital scans, like the ones [performed] by SmileDirect at [its locations,] only take place when a licensed dentist is physically in the building where the scans are taking place, and to prohibit them otherwise.” Id. at 1137.
The Board members moved to dismiss the antitrust claims against them in their individual capacities. They argued that they were entitled to dismissal based on so-called “state action immunity” under Parker because they acted on behalf of Georgia in amending Rule 150-9-.02.
We conclude that Commuter Transportation Systems incorrectly characterized Parker as creating an immunity from trial.
In reading Parker this way, we join the Fourth, Sixth, and Ninth Circuits. See SolarCity Corp. v. Salt River Project Agric. Improvement & Power Dist., 859 F.3d 720, 726 (9th Cir. 2017) (“[T]he state[ ]action doctrine is a defense to liability, not immunity from suit.”); S.C. State Bd. of Dentistry v. FTC, 455 F.3d 436, 444 (4th Cir. 2006) (“The Supreme Court did not say in Parker that states and their agencies are immune from federal restrictions placed upon a state’s regulation of commerce within its borders or that Congress could not otherwise make states liable for antitrust violations.”); Huron Valley Hosp., Inc. v. City of Pontiac, 792 F.2d 563, 567 (6th Cir. 1986) (“[T]he [Parker] exemption is not an ‘entitlement’ of the same magnitude as qualified immunity or absolute immunity, but rather is more akin to a defense to the original claim.”). We also align ourselves with the Third, Fifth, and Tenth Circuits, which have similarly read Parker in opinions not addressing the collateral order doctrine. See Kay Elec. Coop v. City of Newkirk, 647 F.3d 1039, 1042 (10th Cir. 2011) (Gorsuch, J.) (noting that “the term ‘immunity’ may be a bit strong since the Court [in Parker] held only that Congress hadn’t covered state action, not that it couldn’t”); Surgical Care Ctr., 171 F.3d at 234 (“‘Parker immunity’ is more accurately a strict standard for locating the reach of the Sherman Act than the judicial creation of a defense to liability for its violation.”); Duke & Co. v. Foerster, 521 F.2d 1277, 1279 n.5 (3d Cir. 1975) (“[T]he thrust of Parker is that the Sherman Act is simply inapplicable to activity mandated by state authority.”), overruled in part on other grounds by Omni Outdoor Advert., 499 U.S. at 382-83.
Klein, et al. v. Facebook, Case No. 5: 20-cv-08570 (N.D. Cal. Filed July 13, 2021)
Law firm disqualified based on recent associate lateral hire who had previously represented Facebook.
While a full opinion is yet to follow, Judge Lucy H. Koh: “GRANTS Facebook’s motion to disqualify Keller Lenkner LLC…..The Court notes, nonetheless, that the record does not reflect that there has been any disclosure of Facebook confidential information. However, such a disclosure is not required for disqualification. “The purpose of a disqualification order is prophylactic, not punitive.” Kirk v. First American Title Ins. Co., 183 Cal. App. 4th 776, 815 (2010).”
Students Can Join the Section for Free
Law students can join up to three sections of the California Lawyers’ Association (CLA) for free? We’d love to have you. Find more information here.
Midsummer Mixer for Professionals and Law Students
August 26, 2021 @ 5:00 – 7:00 p.m.
The Antitrust and Unfair Competition Law Section invites you to the Midsummer Mixer for Professionals and Law Students:
Pier 23 Cafe Restaurant & Bar
23 The Embarcadero
San Francisco, CA 94111
RSVP to firstname.lastname@example.org
This a free event for all section members to mix and mingle, including summer associates and law clerks who are interested in competition law. This is a great opportunity for professionals to reconnect and mentors and mentees to meet after almost a year and a half of no in-person events. Please join us at this outdoor space for food and beverages hosted by the Section. More information is available here.
Celebrating Women in Competition Law in California | September 9, 2021
Location: Morgan Lewis & Bockius One Market, Spear Street Tower, 28th Floor San Francisco, CA 94105
You’re invited to the Fifth Annual Celebrating Women in Competition Law in California, our first in-person event of the year! You don’t want to miss the panel of female trailblazers of the competition bar as they share their paths to leadership, discuss the role of gender in their leadership styles, and provide advice for navigating gender-based obstacles.
In a conversation moderated by the Honorable Beth Labson Freeman, the panel of female trailblazers of the competition bar will share their paths to leadership, discuss the role of gender in their leadership styles, and provide advice for navigating gender-based obstacles. The evening will conclude with a hosted networking reception featuring delectable bites and beverages.
For complete information and to register, use this link.
31st Annual Golden State Institute | November 17-18, 2021
Please save the date for the 31st Annual Golden State Institute on November 17-18, 2021!
This annual marquee event sponsored by the Antitrust and Unfair Competition Law Section promises expert panels on front page issues and cutting-edge legal developments, along with the unrivaled socializing and networking opportunities the Antitrust and Unfair Competition Law Section is renowned for. 2021 also marks the return of the Section’s star-studded California Antitrust Lawyer of the Year events. Don’t miss out!
For major sponsorship options, please email Antitrust@CAlawyers.org.
Meet CLA’s New Digital Publication
Welcome to the First Issue of CLA’s Digital Publication (Summer 2021)
This is a new quarterly publication featuring articles from across the organization, the CLA’s Sections, and more. The first edition features an article that first appeared in our section E-Briefs. Find the article here.
A Deeper Dive: The First Six Months of the Biden Antitrust Agenda
By Lee Brand and Olivia Fong (summer associate)
Pillsbury Winthrop Shaw Pittman LLP
In its first six months, the Biden administration has taken significant executive action to signal increased antitrust enforcement activity in general and in the tech industry in particular. These actions include:
- the appointment of outspoken advocates for aggressive antitrust enforcement at the White House, Federal Trade Commission (“FTC”), and Department of Justice (“DOJ”);
- revisions to FTC policy and procedure aimed at facilitating aggressive rulemaking and enforcement; and
- a wide-ranging executive order, comprised of 72 initiatives and involving over a dozen federal agencies, to increase competition across the economy.
This executive action, however, is likely to meet with at least some impediments in the courts. Congressional expansion of antitrust law could overcome such judicial impediments, but thus far the Biden administration has not prioritized such legislation and independent legislative activity remains preliminary.
A. Key Appointments
In March 2021, the Biden administration announced its appointment of Tim Wu to the National Economic Council as Special Assistant to the President for Technology and Competition Policy. Before joining the Biden administration, Wu taught antitrust law at Columbia Law School and worked in antitrust enforcement at the New York Attorney General’s Office and the FTC. Wu previously worked on the National Economic Council during the Obama administration. Wu is known for his criticism of the tech industry and is an advocate for stronger and broader antitrust enforcement policy that looks beyond a traditional consumer welfare standard focused on consumer pricing. For example, in his 2018 book, The Curse of Bigness: Antitrust in the New Gilded Age, Wu argued that “[e]xtreme economic concentration yields gross inequality and material suffering, feeding an appetite for nationalistic and extremist leadership.”
Weeks later, the White House announced President Biden’s nomination of Lina Khan for commissioner of the FTC. After Khan’s Senate confirmation, President Biden elevated Khan to chair of the FTC. Before her appointment, Khan also taught antitrust law at Columbia Law School and served as counsel to the U.S. House Judiciary Committee’s Antitrust Subcommittee. Khan was the lead writer of the 2019 House report on competition in digital markets, which raised various abuses of monopoly power in the tech industry. As a law student, Khan also published an influential journal note, Amazon’s Antitrust Paradox, that has been cited over 800 times since its publication in 2017. In that note, Khan also argued that the consumer welfare standard is an inadequate framework for measuring antitrust impact in the modern economy.
On July 20, President Biden announced the nomination of Jonathan Kanter as the chief of the DOJ Antitrust Division. Kanter began his career as a staff attorney at the FTC during the Clinton administration, but most of his experience has been in private practice. Kanter currently helms the Kanter Law Group, which specializes in federal and state antitrust enforcement and before founding his own firm co-chaired the antitrust practice at Paul Weiss Rifkind Wharton & Garrison LLP. Kanter is well known for representing tech clients alleging anticompetitive conduct by other players in the tech industry and has testified before the Senate’s Antirust Subcommittee that U.S. antitrust enforcers “should vigorously explore new questions in antitrust to ensure that U.S. antitrust law remains relevant to the realities of today’s economy and society.” There appears to be bipartisan support in the Senate for Mr. Kanter’s appointment.
B. Initial Revisions to FTC Policy and Procedure
In addition to these appointments and nominations, the executive branch has taken several other actions to signal a more aggressive antitrust stance. After being sworn in as Chair, Khan opened the FTC’s meetings to the public and, at her first meeting on July 1, voted with fellow Democratic Commissioners Rohit Chopra and Rebecca Kelly Slaughter to rescind a 2015 FTC policy statement. That policy had declared that the FTC would be guided by the consumer welfare standard in deciding whether to bring antitrust cases under Section 5 of the FTC Act (“Section 5”) and that it would not bring such cases “if enforcement of the Sherman or Clayton Act is sufficient to address the competitive harm.” Section 5 prohibits “unfair methods of competition,” and the FTC’s antitrust authority thereunder is viewed as separate from and broader than government enforcement authority under the Sherman and Clayton Acts. This recission of the 2015 statement signals the FTC’s willingness to use all tools at its disposal to challenge various forms of perceived anticompetitive harm.
At the same July 1 meeting, Khan and her Democratic colleagues also voted to streamline FTC rulemaking procedures. Under Section 18 of the FTC Act, Congress gave the FTC rulemaking powers to regulate unfair or deceptive acts and practices. Previously, an in-house administrative law judge presided over the rulemaking process, but now the FTC Chair or another designated commissioner may act as the presiding officer. The FTC also revised the Section 18 rulemaking process to allow additional stakeholders to participate in informal hearings more easily and by eliminating rules not required by the FTC Act. The Commission represented that these rulemaking changes would set the stage for stronger deterrence of corporate misconduct.
With Chair Khan and Commissioners Chopra and Slaughter now constituting a Democratic majority of the FTC’s five commissioners, the Commission appears likely to continue pursuing an aggressive antitrust agenda with or without bipartisan support.
C. Executive Order on Promoting Competition in the American Economy
On July 9, President Biden signed an executive order (the “Order”) to increase competition across the American economy. At the signing ceremony, President Biden’s remarks echoed the reframing of antitrust law championed by his appointees: “Forty years ago, we chose the wrong path, in my view, following the misguided philosophy of people like Robert Bork, and pulled back on enforcing laws to promote competition. We’re now 40 years into the experiment of letting giant corporations accumulate more and more power. . . . I believe the experiment failed.”
Reflecting Tim Wu’s reported role as one of its key architects, the Order itself and its accompanying Fact Sheet represent a whole-of-government approach to preventing anticompetitive conduct, encouraging 72 specific initiatives across over a dozen federal agencies. With regard to the FTC and DOJ, the Order recognizes their ability to challenge past mergers that went unchallenged by prior administrations and calls for vigorous enforcement activity focused in particular on labor markets, agricultural markets, healthcare markets, and the tech sector. It also establishes a White House Competition Council to coordinate the Biden administration’s antitrust efforts across other federal agencies.
With regard to the technology industry in particular, the Fact Sheet identifies three key areas for antitrust enforcement activity: (1) “killer” or nascent acquisitions wherein potential competitors are bought up before they become actual competitors; (2) business models that rely on the accumulation of sensitive personal information; and (3) unfair competition with small businesses, such as powerful marketplace platforms that use the data they accumulate running the marketplace to also sell competing products within the marketplace. In turn, the Order announces that the Biden administration will increase merger scrutiny, especially for dominant internet platforms, nascent acquisitions, serial mergers, data accumulation, competition by “free” products, and the effect on user privacy. The Order also encourages the FTC to establish surveillance and data accumulation rules and rules barring unfair methods of competition on internet marketplaces.
On the same day the Order was signed, Chair Khan and Acting Assistant Attorney General Richard A. Powers, the current head of the DOJ’s Antitrust Division, released a statement announcing a joint review of the federal merger guidelines to ensure that they “reflect current economic realities and empirical learning and that they guide enforcers to review mergers with the skepticism the law demands.” Later that month at a July 21 meeting, the FTC voted along party lines to rescind a 1995 policy statement. Now, as prior to 1995, where the FTC has determined that a proposed merger is problematic, the FTC’s prior approval is required for any future transaction in the same product and geographic market for which a violation was alleged. On August 3, the FTC also announced a policy change in light of a surge in merger filings and its resulting inability to fully investigate many proposed transactions within the timeline set by the Hart Scott Rodino Act. Specifically, where the Commission’s investigation remains open, it has begun to send standard form letters alerting companies that if they proceed with a deal that has not been fully investigated, the FTC may subsequently determine that the deal is unlawful and seek to undo the transaction.
D. Judicial Roadblocks and Potential Legislation
While the foregoing executive branch activity no doubt portends increased antitrust enforcement, the courts remain a looming hurdle for the Biden administration’s agenda. For example, in June 2021, a federal district court dismissed the FTC’s lawsuit accusing Facebook of monopolization and seeking to unwind its prior acquisitions of Instagram and WhatsApp in 2012 and 2014, respectively. While originally filed during the Trump administration, this case represents precisely the type of re-review of past mergers and emphasis on nascent acquisitions that the Biden administration has made a priority. The case was dismissed with leave to amend based on a failure to sufficiently plead Facebook’s monopoly power in the market for personal social networking, and the FTC now has until August 19 to file an amended complaint—an early test for Biden and Khan’s antitrust agenda.
Cooperation with the legislative branch represents a potential avenue to overcome such judicial challenges and to otherwise strengthen the executive branch’s antitrust toolkit. Thus far, however, new antitrust legislation has not appeared to be a priority for the Biden administration. But even without a strong push from the White House, there has been some notable preliminary legislative activity in the area. In late June, the House Judiciary Committee passed six antitrust-related bills that would: (1) update merger filing fees, (2) ensure that state attorneys general can bring antitrust cases in federal court without delays or higher costs, (3) increase interoperability and data portability between the largest online platforms, (4) prohibit the largest online platforms from acquiring competitors or potential competitors, (5) prevent dominant online platforms from using their market power to favor their own products, and (6) prevent dominant online platforms from owning another line of business that creates a conflict of interest. While the bills had bipartisan support in the House Judiciary Committee, three Democratic representatives from California voted against five of the six bills. The House Judiciary Committee has ordered these bills to be reported to the House, but no date has been set for a full House vote.
Three significant antitrust bills have also been proposed in the Senate. Senate Bill 225, introduced on February 4 by Senator Amy Klobuchar (D-MN), would modify the Clayton Act’s standard for unlawful acquisition, shifting the burden to defendants to demonstrate that there is no material anticompetitive harm. It would also enhance the DOJ and FTC’s enforcement authority. Senate Bill 1074, introduced on April 12 by Senator Josh Hawley (R-MO), would amend the Clayton Act to prohibit extremely large companies from acquiring companies that may “lessen competition in any way.” This bill would also require the Sherman Act’s competitive harm analysis to consider the “protection of economic competition within the United States” and shift the burden of proof to the defendant. Senate Bill 2039, introduced by Senators Mike Lee (R-UT) and Chuck Grassley (R-IA) on June 14, would transfer the FTC’s competition resources to the DOJ and significantly increase the DOJ’s antitrust budget. The bill would also prohibit mergers resulting in a 66% market share unless the transaction is necessary to prevent serious harm to the national economy. All three Senate bills have been read twice and referred to the Senate Judiciary Committee, but no further action has been reported.
In sum, the appointments of Tim Wu and Lina Khan, the nomination of Jonathan Kanter, President Biden’s executive order, and FTC policy changes all signal a coming wave of aggressive antitrust enforcement. Further, a focus on big tech and a shift away from traditional notions of consumer welfare appear likely to be two of the major hallmarks of this enforcement activity. Nevertheless, this enforcement agenda may well run into considerable judicial headwinds, and it remains difficult to predict whether early signs of bipartisan support for significant new antirust legislation will prove enduring.
This feature includes selected press release from the Antitrust Division, USDOJ, the Federal Trade Commission and the California Attorney General’s Office. It does not include all press releases issued by those offices. This appears to be a truly transitional time in antitrust enforcement and reading the press releases can be very helpful to stay on top of changes.
July 9, 2021 | President Biden’s Executive Order on Promoting Competition in the American Economy
Excerpt: “This order affirms that it is the policy of my Administration to enforce the antitrust laws to combat the excessive concentration of industry, the abuses of market power, and the harmful effects of monopoly and monopsony — especially as these issues arise in labor markets, agricultural markets, Internet platform industries, healthcare markets (including insurance, hospital, and prescription drug markets), repair markets, and United States markets directly affected by foreign cartel activity.
It is also the policy of my Administration to enforce the antitrust laws to meet the challenges posed by new industries and technologies, including the rise of the dominant Internet platforms, especially as they stem from serial mergers, the acquisition of nascent competitors, the aggregation of data, unfair competition in attention markets, the surveillance of users, and the presence of network effects.”
Antitrust Division, USDOJ
July 20, 2021 | President Biden Nominates Jonathan Kanter for Assistant Attorney General for Antitrust
“Jonathan Kanter is a distinguished antitrust lawyer with over 20 years of experience. Throughout his career, Kanter has also been a leading advocate and expert in the effort to promote strong and meaningful antitrust enforcement and competition policy. He is currently a partner at The Kanter Law Group LLP, which is a boutique antitrust law firm that advocates in favor of federal and state antitrust law enforcement. “
July 26, 2021 | Attorney General Merrick B. Garland’s Statement on Aon and Willis Towers Watson Decision to Terminate Merger Agreement
“The Department of Justice filed a civil antitrust lawsuit on June 16, 2021, to stop the merger, alleging that the combination of Aon and Willis Towers Watson, the second- and third-largest insurance brokers in the world, would reduce competition for the business of American companies, effectively consolidating the industry’s “Big Three” into a Big Two.”
July 21, 2021 | Acting Assistant Attorney General Richard A. Powers Delivers Remarks at the Symposium on Corporate Enforcement and Individual Accountability Hosted by the University of Southern California Gould School of Law
“ At the Antitrust Division, our criminal enforcement mission is to deter, detect, and prosecute crimes that corrupt markets and prevent fair, open competition. Our goal is to always carry out that mission in a principled, transparent, and predictable way. We set clear rules. And we make sure those rules can be understood. Not just by the most sophisticated businesses and antitrust lawyers, but by everyone.”
July 15, 2021 | DaVita Inc. and Former CEO Indicted in Ongoing Investigation of Labor Market Collusion in Health Care Industry
“The indictment alleges that DaVita and [CEO defendant] Thiry both participated in two separate conspiracies to suppress competition for the services of certain employees. Count One charges DaVita and Thiry for conspiring with SCA to allocate senior-level employees by agreeing not to solicit each other’s senior-level employees from as early as February 2012 until as late as July 2017. Count Two charges DaVita and Thiry for conspiring with another health care company from as early as April 2017 until as late as June 2019 to allocate employees by agreeing that the other health care company would not solicit DaVita’s employees.”
July 9, 2021 | Statement of Acting Assistant Attorney General Richard A. Powers of the Antitrust Division and FTC Chair Lina Khan on Competition Executive Order’s Call to Consider Revisions to Merger Guidelines
“We must ensure that the merger guidelines reflect current economic realities and empirical learning and that they guide enforcers to review mergers with the skepticism the law demands. The current guidelines deserve a hard look to determine whether they are overly permissive. We plan soon to jointly launch a review of our merger guidelines with the goal of updating them to reflect a rigorous analytical approach consistent with applicable law.”
July 1, 2021 | Justice Department Withdraws from Settlement with the National Association of Realtors
“Today the Justice Department’s Antitrust Division filed a notice of withdrawal of consent to a proposed settlement with the National Association of Realtors (NAR). The department has also filed to voluntarily dismiss its complaint without prejudice. The department determined that the settlement will not adequately protect the department’s rights to investigate other conduct by NAR that could impact competition in the real estate market and may harm home sellers and home buyers. The department is taking this action to permit a broader investigation of NAR’s rules and conduct to proceed without restriction.”
Federal Trade Commission
July 21, 2021 | FTC to Ramp Up Law Enforcement Against Illegal Repair Restrictions
“The Federal Trade Commission today unanimously voted to ramp up law enforcement against repair restrictions that prevent small businesses, workers, consumers, and even government entities from fixing their own products. The policy statement adopted today is aimed at manufacturers’ practices that make it extremely difficult for purchasers to repair their products or shop around for other service providers to do it for them.”
July 21, 2021 | FTC Rescinds 1995 Policy Statement that Limited the Agency’s Ability to Deter Problematic Mergers
“The Federal Trade Commission voted in an open Commission meeting to rescind a 1995 policy statement that made it more difficult and burdensome to deter problematic mergers and acquisitions. The 1995 Policy Statement on Prior Approval and Prior Notice Provisions ended the Commission’s longstanding practice of requiring parties that proposed unlawful mergers to receive prior approval and give prior notice for future transactions. By rescinding this policy statement, the FTC regains a valuable law enforcement tool.”
July 9, 2021 | Statement of FTC Chair Lina Khan and Antitrust Division Acting Assistant Attorney General Richard A. Powers on Competition Executive Order’s Call to Consider Revisions to Merger Guidelines
“We must ensure that the merger guidelines reflect current economic realities and empirical learning and that they guide enforcers to review mergers with the skepticism the law demands. The current guidelines deserve a hard look to determine whether they are overly permissive. We plan soon to jointly launch a review of our merger guidelines with the goal of updating them to reflect a rigorous analytical approach consistent with applicable law.”
July 2, 2021 | FTC Charges Broadcom with Illegal Monopolization and Orders the Semiconductor Supplier to Cease its Anticompetitive Conduct
“The Federal Trade Commission has issued a complaint charging Broadcom with illegally monopolizing markets for semiconductor components used to deliver television and broadband internet services through exclusive dealing and related conduct. The Commission has also issued a proposed consent order that would settle the Commission’s charges. Under the consent order, Broadcom must stop requiring its customers to source components from Broadcom on an exclusive or near exclusive basis.”
July 1, 2021 | FTC Authorizes Investigations into Key Enforcement Priorities
“The Federal Trade Commission voted to approve a series of resolutions authorizing investigations into key law enforcement priorities for the next decade. Specifically, the resolutions direct agency staff to use “compulsory process,” such as subpoenas, to investigate seven specific enforcement priorities. Priority targets include repeat offenders; technology companies and digital platforms; and healthcare businesses such as pharmaceutical companies, pharmacy benefits managers, and hospitals. The agency is also prioritizing investigations into harms against workers and small businesses, along with harms related to the COVID-19 pandemic. Finally, at a time when merger filings are surging, the agency is ramping up enforcement against illegal mergers, both proposed and consummated.”
State of California Department of Justice
July 19, 2021 California Superior Court Approves Hospital Merger Settlement
Settlement includes price controls and the appointment of a monitor to oversee settlement compliance.
July 7, 2021 | Attorney General Bonta Files Lawsuit Against Google for Anticompetitive Practices Related to Google Play Store
“California Attorney General Rob Bonta today announced a multistate lawsuit against Google for monopolizing the smartphone application market in violation of state and federal antitrust laws. Google, one of the world’s largest companies, operates a web of exclusionary agreements with phone manufacturers and carriers to exert control over app distribution on Android phones through its Google Play Store. By leveraging those anticompetitive agreements, Google can demand a 30 percent cut from third-party app developers for using its Google Play Store and for in-app purchases, a captive market practice that raises prices for consumers and limits options for anyone using an Android mobile operating system. The 30 percent commission is ten times higher than competitive prices through third-party payment systems.”
Other News and Notes
- Diversity: Hybrid Work Models Are Key To Gender Parity In Law Firms, Roberta Liebenberg and Stephanie Scharf, Law 360, July 16, 2021 (subscription required).
- The Noncompete Clause Gets a Closer Look, Lauren Weber, July 21, 2021 Wall Street Journal (here–subscription required)( Biden’s executive order asks FTC to limit the use of agreements that keep workers from changing jobs; ‘I didn’t know any trade secrets,’ former security guard says.”)
- With Trump appointees, Supreme Court delivers 9th Circuit another year of reversals, David G. Savage, Mauro Dolan, LA Times, July 13 (2021)(“The Supreme Court’s favorite target again this year was the California-based U.S. 9th Circuit Court of Appeals, which saw 15 of 16 rulings overturned on review.