Antitrust and Unfair Competition Law

ANTITRUST AND UNFAIR COMPETITION LAW: E-BRIEFS, NEWS AND NOTES—June 2022

Welcome to the June E-Briefs, News and Notes. We have included a new section, Other Notable Cases, where we flag additional judicial opinions but instead of a full E-Brief, we have a short summary describing the main antitrust/unfair competition issue in the case so that you may read the opinion if it is relevant to your practice. This issue also has three panel summaries from the May 2022 Antitrust and Unfair Competition Section of the California Lawyers Association Golden State Institute. The Agency Update section includes links to numerous DOJ/FTC press releases. The In Case You Missed It section re-posts numerous articles and other items related to matters of interest to antitrust and unfair competition lawyers. To the extent possible, the news items reprinted are not behind a paywall. 

We hope this E-Brief is informative. Thanks to all the contributors. If you have any suggestions for improvement, please let us know. bob@reconnollylaw.com.

E-BRIEFS

Class Cert Granted in Broiler Chicken Class Action Litigation

By Bob Connolly         
Law Office of Robert Connolly

Class certification was granted for all three proposed classes (direct purchasers, indirect purchasers and end-user consumers) in In re: Broiler Chicken Antitrust Litigation, No. 16-C-8367 (N.D. Ill. May 27, 2022). The Defendants did not challenge whether the Plaintiffs had met their burden to establish the four elements of Rule 23(a): Numerosity, Adequacy, Commonality & Typicality. The Court noted those elements were easily met. Id. at 5-12. As is typical at the class certification stage, the battle lines were drawn at Rule 23(b)(3) Predominance.

Rule 23(b)(3) Predominance

Rule 23(b)(3) Predominance requires that “questions of law or fact common to class members predominate over any questions affecting only individual members.” The two primary common questions were: (1) whether Defendants engaged in a conspiracy to reduce supply to increase price; and (2) whether this conspiracy caused Plaintiffs to suffer injury.

A.          Evidence of Conspiracy

The Defendants did not challenge that liability could be resolved for all class members in a single trial.

B.         Evidence of Causation

Defendants primarily focused their opposition to class certification on the question of whether causation and injury could be demonstrated in a single adjudication. Id. at 16. Plaintiffs relied on expert testimony to show: (1) that the existence of individual injury resulting from the alleged antitrust violation (referred to as antitrust impact) was capable of proof at trial through evidence that was common to the class rather than individual to its members; and (2) that the damages resulting from that injury were measurable on a class-wide basis through use of a common methodology. Id. Defendants did not attack the Plaintiffs’ experts’ qualifications but challenged the reliability of their findings.

Experts for each class concluded that a conspiracy to restrict Broiler chicken supply caused Broiler chicken prices to increase and that this could be shown by evidence common to that class. For the indirect and end user classes to have suffered injury, the direct purchasers class must have been injured first.

1.         Identifying the Class Period

The first task the experts took on was identifying the class period. Each expert used a different test.

Direct Purchaser Class: Structural Break Test

The direct purchaser class expert, Dr. Colin A. Carter, used a “structural break test” to identify the class period. Id. at 18. Dr. Carter plotted changes in chicken supply over time and noted a significant contraction at what Plaintiffs called the beginning of the class period. The Defendants agreed that total product decreased at this time but argued that not all Defendants contributed to the structural break. While some Defendants cut production, some grew, and some stayed the same. The Court dismissed this as a fact/summary judgment question: “From the Court’s perspective—which has not changed upon reviewing the briefing on these motions and hearing the testimony—this case is about determining whether collusive conduct by Defendants caused this historic decrease in Broiler production.” Id. at 19.

Indirect Purchaser Class:          Regression Analysis

The indirect purchaser class expert offered a regression analysis to support their designation of the class period. The Defendants attacked the experts use of certain variables but the court found that “[t]his might be relevant to the evidentiary weight of [Dr.] Mangum’s testimony, but it is not a reason to question the reliability of his method.” Id. at 29.

End User Class:            Additional evidence

The end users class expert, Dr. David L. Sunding, identified the class period by evaluating quantitative evidence relevant to Broiler supply. For example, he noted that the two largest Broiler producers, Pilgrim’s and Tyson, made significant production cuts starting in 2009. Id. at 29. In addition, the expert noted that “that the egg industry, which is subject to many of the same market factors as Broilers, did not experience the same dramatic production decrease in the 2008-09 period as Broilers.” Id.

The Court concluded that “all three expert opinions are sufficient evidence that Broiler production decreased to an extent contrary to market indicators. And that evidence is common to each class.” Id. at 30.

2.         Evidence of Conspiratorial Price Increase

Plaintiffs’ experts also opined on whether there was evidence that a conspiracy among Defendants caused prices to increase.

a.         Pooled Regression—”But For” Price

All three Plaintiffs’ experts conducted regression analyses of Broiler price and relevant market factors and calculated overcharges. All three experts believed that the price of whole Broilers is most representative of the market because all Broiler products originate from a whole Broiler. From there, all three experts calculated significant overcharges. Id. at 32.

b.         Common Impact

The Plaintiffs’ experts then showed that this impact on the market price likely affected all direct purchasers of Broilers. Id. at 32. One expert conducted a regression analysis; the other two evaluated Broiler market characteristics to conclude that an artificially high price would have been experienced by all direct purchasers. In each case, the evaluation was based on the price of Broiler chickens because chicken is a commodity product and an increase in the price of a Broiler chicken would impact the price of all its parts such as breasts and wings.

 c.         Defendants’ Objections – Analysis of Prices

Defendants relied primarily on the analysis of their expert, Dr. John Johnson, to criticize Plaintiffs’ experts’ findings that prices were higher than they should have been during the class period. Id. at 34. Defendants argued that Broiler products are not a commodity because different Broiler products (e.g., breasts, wings, frozen or not, etc.) sold by different producers to different customers cannot be compared because of the different prices of the products, the differing market share of producers, and the different bargaining power of various customers. The Court rejected this view because all Broiler products come from Broiler chickens and industry executives themselves look to the price of Broiler chickens to determine what the price for a specific deal for various chicken parts should be. The Court concluded that a focus on the Broiler market price is a reasonable way to demonstrate common impact of an alleged conspiracy to reduce supply. Id. at 38. While contracts may be individually negotiated, the evidence shows that those negotiations take place in the context of a market price. “The market price of Broilers has a significant effect on negotiations.” Id. at 39.

While the Court recognized that Defendants’ experts’ view might ultimately be correct, the Court concluded that “In litigation, such a dispute is factual and is resolved at summary judgment or trial. It is not a reason to exclude either perspective or deny class certification.” Id. at 43.

d.         Defendants’ Objections – The Perfect Storm

The Defendants’ expert also argued that the decrease in Broiler output was not the result of a conspiracy but the “perfect storm” of increased corn prices and recession. The Court stated:

“At bottom, to the extent Johnson has created alternative economic models showing that the price increase was not caused by a conspiracy, the choice to accept Plaintiffs’ experts’ or Johnson’s models of alternatives is a question better suited to summary judgment or trial. It may not be unreasonable to conclude that Johnson’s model is more reliable than Plaintiffs’ experts’ (Plaintiffs have not moved to exclude Johnson’s opinions), but it does not show that Plaintiffs’ experts’ models are so unreliable that any of them should be excluded from the case.” Id. at 46.

3.         Damages

The Defendants also argued that damages needed to be figured individually. But the Court, citing Kleen Products LLC v. International Paper Co., 831 F.3d 919, 929 (7th Cir. 2016), wrote that “as long as ‘the aggregate classwide damages is something that can be handled most efficiently as a class action,’ then ‘the allocation of that total sum among the class members can be managed individually’ without undermining predominance or superiority.” In re: Broiler Chicken Antitrust Litigation, at 50. The Court elaborated:

If Defendants are found liable, and the parties continue to dispute the appropriate methods for calculating damages, those disputes can be resolved by the Court, a mediator, or a special master. The resulting methods can be applied across all plaintiffs, and damages will be a function of the number of purchases, which are already known. This is not so arduous a process as to prohibit class certification.” Id. at 51-52.

C.        Conclusion

The Court held that class treatment of each class of Plaintiffs’ claims was superior to joinder of individual claims and certified each class.

Court Upholds Defendants’ Judgment Sharing Agreement Against Plaintiffs’ Attempts to Void as Group Boycott

By:  Cheryl Johnson

Case Background

In another ruling in In re Broiler Chicken Antitrust Litigation, Case No. 1:16-cv-08637-TMD, U.S. District Court, District of Illinois, Eastern Division, Order dated May 4, 2022 (Docket No. 5578) (the “Order”), the Court upheld a “judgment sharing agreement” (JSA) among some of the defendants in the case. In this class action, the participants in the broiler chicken industry are alleged to have conspired to fix and raise the price of broiler chickens by reducing the size of the breeder flocks, sharing competitively sensitive price and production information, and by other manipulations. A defendant found liable on antitrust conspiracy claims faces joint and several liability for all damages caused by the conspiracy with no right of contribution from the other defendants. As a result, some 14 of the defendants in the Broiler Chicken litigation entered into a JSA to create a contractual right of contribution between the signatories, and to allocate expenses and liability amongst themselves.

While such JSAs have been “common for many years” in antitrust litigation, their enforceability has been questioned. However, challenges to the JSAs as illegal boycotts, anticompetitive, or as improper insurance against intentional acts have been largely rejected in several district court decisions between 1992 to 2007. These decisions declared the JSAs to be generally lawful as long as they did not prohibit a defendant’s right to settle with a plaintiff or contain provisions evincing a motive to prevent settlements. Order, pp. 2-3.

Challenges to the Broiler Chicken Joint Sharing Agreement

Plaintiffs in the Broiler Chicken litigation challenged two provisions in the Defendants’ JSA as effectively disabling antitrust’s enforcement scheme and preventing certain settlements. Order, p. 2. On a broad level, Judge Thomas Durkin, observed that JSAs are “generally appropriate” and “serve the legitimate purposes of controlling parties’ exposure,” citing to the Manual of Complex Litigation. Order, p. 3. The judge also noted earlier district court approvals of JSAs, the “paucity” of higher court authority criticizing JSAs despite their “widespread use,” and Congress’ failure to outlaw these agreements. Order, p. 2.

The first JSA provision challenged required that a settling plaintiff agree to reduce any judgment against non-settling defendants by a percentage of the settling defendant’s sharing percentage under the JSA. While plaintiffs contended this was an unlawful group boycott against nonconforming settlements, the court disagreed, noting that the parties were free to settle without the judgment-sharing language and could enter any “unqualified” settlements they wanted. Order, pp. 3-4. Coordination among defendants on how to address litigation is generally lawful and could not be considered a “group boycott.” Nor did the JSA deprive plaintiffs of the core antitrust remedy of joint and several liability, as a plaintiff could refuse to settle and its rights to the remedy could not be altered without its consent. Order, pp. 4-5. Finally, the court observed that there was no evidence that the JSA discouraged settlements, as both JSA and non-JSA defendants continued to settle. Order, p.6.

Plaintiffs challenged a second JSA provision that required a JSA defendant to provide others with any settlement agreement entered into by that JSA defendant within 7 days of its execution.  Plaintiffs claimed that this provision was unjustified and discouraged JSA defendants from settling. The court disagreed, explaining that a plaintiff could simply insist that the settling defendant agree to keep the agreement confidential. Order, p. 6.

Insurers’ claims in Auto Parts Antitrust Settlement Rejected for Untimeliness: In re Automotive Parts, No. 20-2260 (6th Cir. May 12, 2022)

By Anthony Leon, in-house counsel

On May 13, 2022, the United States Court of Appeals for the Sixth Circuit affirmed a District Court ruling rejecting a company’s assertion of rights to settlement claims on behalf of its insurers clients in the automotive parts antitrust multidistrict litigation. In Re: Automotive Parts Antitrust Litigation, May 13, 2022, No. 20-2260 (6th Cir. 2022).

In 2011, the U.S. Department of Justice (DOJ) and foreign authorities started investigating allegations of bid-rigging and price-fixing in the automotive parts industry. The investigation led to charges against several companies and individuals. Many putative class actions alleging violations of antitrust laws stemmed from DOJ’s probe and were consolidated in Michigan federal court. Many parties to the MDL eventually settled, including the End-Payor Plaintiffs (Appellees) and defendants. Appellees were a class of consumers and businesses that bought or leased certain qualifying vehicles or paid to replace certain qualifying vehicle parts during the designated time period.

In 2018, Financial Recovery Services, LLC (Appellant), a third-party class action claim management company, filed claims on behalf of its eight insurer clients. The insurers alleged they had a right to recovery for paying an inflated market value to their customers in reimbursements for covered vehicles that were deemed a “total loss” due to theft or damage. Appellant, as a result, argued its clients were equitably subrogated to their insureds’ claims, meaning that they assume the right of the insureds to sue the party that caused the injury.

To that extent, Appellant submitted claims to the claims administrator between May 2018 and March 2020. To support the claims, Appellant sent Appellees’ counsel a memorandum giving weight to their subrogation theory, which Appellees’ counsel disagreed with. It took then nine months for Appellant to reach out again to Appellees’ counsel, in October 2019, two months before the deadline to submit the claims. In November 2019, Appellee’s counsel disagreed again on insurers being class members, and therefore Appellant would have no rights to recovery under the settlement. The parties then agreed to discuss the issue before the district court. Though instead of intervening, Appellant only sent a FedEx letter to the district judge chamber in December 2019. Although the chambers immediately told Appellant to intervene in the case to ask for relief, Appellant filed its motion more than six months later, in June 2020.

On November 17, 2020, the District Court denied the motion to intervene as untimely. Indeed, the district court found that Appellant waited too long to file their motion to intervene. Appellant timely filed an appeal.

The Court of Appeals confirmed the District Court’s ruling, reminding that timeliness is a critical requirement for a party to seek intervention under Federal Rule of Civil Procedure (FRCP) 24(a)(2). In Re: Automotive Parts Antitrust Litigation, May 13, 2022, No. 20-2260, at 7 (6th Cir. 2022). Using five factors, courts evaluate whether the motion was timely filed: 1) the point to which the suit has progressed; 2) the purpose for which intervention is sought; 3) the length of time preceding the application during which the proposed intervenors knew or should have known of their interest in the case; 4) the prejudice to the original parties due to the proposed intervenors’ failure to promptly intervene after they knew or reasonably should have known of their interest in the case; and 5) the existence of unusual circumstances militating against or in favor of intervention. Id. at 7.

In this case, the Court of Appeals found that the District Court did not abuse its discretion in considering the first factor to weigh against Appellant as they moved to intervene while “the suit has progressed to a very advanced stage.” Id. at 9. Further, the Court found that Appellant’s purpose for intervention is too broad, and they should have filed the motion earlier to avoid resulting prejudices for class members. Id. at 10. The Court of Appeals also reasoned that Appellant should have known far earlier than June 2020 that Appellees were not representing their interest, and therefore the third factor weighs against them too. Id. at 13. The Court of Appeals then found that Appellant’s intervention in June 2020 would involve submitting untimely claims and delay the distribution of settlement proceeds, causing prejudice to class members. Id. at 14. Finally, the Court of Appeals could not identify unusual circumstances that would have prevented Appellant from moving earlier than June 2020. Id. at 15.

For these reasons, the Court of Appeals concluded that the District Court did not abuse its discretion in rejecting Appellant’s assertion of rights to settlement claims months after the settlement terms were decided. Id. at 16.

This case should remind practitioners to pay greater attention to the timeliness of their motions. Most of all, it invites practitioners not to wait too long after having knowledge of a need to file a motion to go on with filing it.

California Laws on Gender Diversity and Underrepresented Communities Struck Down

By Katherine Van Horn
McGeorge School of Law ’24
Katherine.vanhorn@gmail.com

In two separate cases brought by Judicial Watch, judges in Los Angeles County Superior Court found unconstitutional two California laws relating to membership on corporate boards. In the first case below, the Court struck down a requirement that publicly listed corporations must have board members from “underrepresented communities.” In the second case, the law struck down required publicly listed corporations to have women on their boards.

a.         Crest v. Padilla, No. 20-STCV-37513 (LA Super. Ct. April 1, 2002)

California enacted AB 979 (Chaptered Section 301.4, Holden, 2020), a law that required that no later than the close of the 2022 calendar year, a publicly held domestic or foreign corporation whose principal executive offices, according to the corporation’s SEC 10-K form, are located in California shall comply with the following:

(1) If its number of directors is nine or more, the corporation shall have a minimum of three directors from underrepresented communities.

(2) If its number of directors is more than four but fewer than nine, the corporation shall have a minimum of two directors from underrepresented communities.

(3) If its number of directors is four or fewer, the corporation shall have a minimum of one director from an underrepresented community.

Plaintiffs challenged AB 979 as: 1) a violation on the prohibition on discrimination based on sex in public employment, education or contracting (Article 1, Section 31); and 2) a violation of the Equal Protection Clause as enumerated in the California Constitution.

The Court rejected the Plaintiff’s argument that AB 979 violates Article 1, Section 31 because some of the corporations subject to the measure hold public contracts. The statute does not condition the award of public contracts on compliance with this provision and does not even mention public contracting. The Court also ruled that AB 979 does not violate the prohibition on discrimination based on sex in public employment, education or contracting.

However, the Court also determined that AB 979 does violate the Equal Protection Clause (Article 1, Section 7). Plaintiff succeeded in showing that the measure poses a total and fatal conflict with the Equal Protection Clause. AB 979 applies suspect categories in imposing its duty on corporation to use such categories in their selection process. While the Secretary of the State contended that a corporation could use an anonymized selection process and that corporations are already permitted to diversify their boards, the Court was not convinced by these arguments and held that AB 979 is facially unconstitutional as a violation to the Equal Protections Clause.

The Defendant also asserted that AB 979 is justified because the listed and unlisted groups are not similarly situated. An Equal Protection challenge can only succeed if “similarly situated” people are treated differently. The Secretary claimed that the listed groups are not similarly situated because they are underrepresented. The Court found, however, that the Equal Protection rights are individual rights, not group rights. The relevant set of individuals qualified to sit on boards are thus similarly situated.

The use of a suspect classification renders the statute presumptively unconstitutional and subject to the strict scrutiny of a compelling state interest that is narrowly tailored to further that interest. The State failed to show that there was a compelling interest because AB 979 broadly addresses general discrimination rather than identifying a specific arena in which discrimination has occurred. The companies subject to the measure are not confined to any one industry or geographic region (likely including tech companies of Silicon Valley, entertainment companies from Hollywood, and pharmaceutical companies from San Diego).

California failed to provide specific, convincing evidence that AB 979 was necessary. The use of statistics alone is not dispositive, nor is the use of testimony alone. However, together, the use of statistics and testimony can bring numbers to life and show that anecdotes are more than just an anomaly. While the testimony showing specific discrimination was compelling, the statistics were not, in the Court’s view. This is because the data relied on did not sufficiently describe the qualified talent pool for director positions and thus failed to show the required statistical disparity. When the Secretary responded by providing evidence that board selection processes are secretive, exclusive, and dependent on personal networks of those already holding board position, the Court found that such overt discrimination required an assumption that it had been occurring against each group listed in the bill and there was no evidence or finding to support such an assumption.

Neither was the measure narrowly tailored, according to the Court’s opinion. The Legislature made no attempt to conduct any type of demographic survey of qualified talent pool of potential board members, or any other investigation into alternative means to meet the offered compelling state interest.

In conclusion, Judge Green held that AB 979 (as section 301.4) did not violate the prohibition on discrimination based on sex in public employment, education or contracting but did violate the Equal Protection Clause.

b.         Crest v. Padilla, No. 19-STCV-27561 (L.A. Super. Ct. May 13, 2022)

In a similar case, Plaintiffs challenged California SB 826. That law provided that no later than the close of the 2021 calendar year, a publicly held domestic or foreign corporation whose principal executive offices, according to the corporation’s SEC 10-K form, are located in California must comply with the following:

(1) If its number of directors is six or more, the corporation shall have a minimum of three female directors.

(2) If its number of directors is five, the corporation shall have a minimum of two female directors.

(3) If its number of directors is four or fewer, the corporation shall have a minimum of one female director.

Plaintiffs challenged SB 826 as 1) a violation of the Equal Protection Clause; and 2) a violation on the prohibition on discrimination based on sex in public employment, education, or contracting as enumerated in the California Constitution.

The challenge was brought under Code of Civil Procedure Section 526a, which allows a taxpayer to enjoin an actual or threatened expenditure of taxpayer funds by a state official where the expenditure is illegal. The Court found that Plaintiffs are taxpayers and thus have adequate standing for their suit, and rejected Defendant’s argument that the challenge failed because the Government has not promulgated regulations implementing penalties and or that there is no evidence to indicate future threatened prosecution.

Judge Duffy-Lewis held that the use of taxpayer funds to implement or carry out an allegedly unconstitutional law is illegal and satisfies the requirement of an expenditure of public funds. In finding that Secretary of the State Alex Padilla is a public official, the Court found that fines to compel compliance was anticipated and expected by SB 826.

The Plaintiffs successfully carried their burden as to their first claim asserting a violation under the Equal Protection Clause in showing that both men and women are similarly situated for purposes of SB 826 gender-based quota (exhibiting evidence, among others, that board selection process generally does not differentiate between men and women; and being appointed to a board is a difficult process for men and women).

After the burden shifted to the government, California failed to satisfy the strict scrutiny test and did not demonstrate that SB 826 furthered a compelling state interest, was necessary, nor narrowly tailored.

California claimed that the compelling state interest of SB 826 was to eliminate and remedy discrimination in selection process for publicly held corporate boards in California, increase gender diversity to benefit the public and the state economy, and increase gender diversity on publicly held corporations headquartered in California to benefit and protect California taxpayers, public employees, and retirees. However, the Court explained that there is no compelling governmental interest in remedying society discrimination, and there is no compelling governmental interest in remedying generalized, non-specific allegations of discrimination.

California also failed to prove that SB 826’s use of a gender-based classification was necessary. The measurer’s author, Senator Hannah-Beth Jackson, was quoted as acknowledging that are a number of different approaches to protect taxpayers, shareholders, and retirees other than requiring certain numbers of women on publicly held corporate boards in California. Further, the court found that statistical analyses were unpersuasive because they were inconclusive in establishing a causal connection between an increase in women on boards and a boost in the economy. Neither, the Court found, were the studies used in analyzing SB 826 by the Legislature sophisticated econometric methodologies that sufficiently address discrimination. Thus, failing to show that SB 826 was necessary to address gender parity in board make-up.

Finally, California failed to show that SB 826 was narrowly tailored, because California did not consider gender-neutral alternatives. The Legislature could have amended existing anti-discrimination laws or enacted a new anti-discrimination law focusing on board selection process before enacting SB 826. Further, the Defendant failed to show that SB 826 was actually remedial to any intentional, unlawful discrimination.

Other Notable Cases

In re Generic Pharmaceuticals Pricing Antitrust Litig., Case No. 2:16-md-02774 (E.D. Pa. June 7, 2022)

“Defendants have moved to dismiss Plaintiff States’ federal claim for disgorgement of Defendants’ purportedly ill-gotten gains and moved to dismiss all federal law claims in the Consolidated Amended Complaint (“CAC”) for lack of standing. For the reasons explained below, the motion will be granted as to the disgorgement issue and denied as to the standing issue.”

In re: Rail Freight Fuel Surcharge Antitrust Litig., 34 F.4th 1 (D.C. Cir. May 17, 2022)

In longstanding antitrust litigation challenging an alleged conspiracy among railroads to impose supra-competitive fuel surcharge price increases on their shipping customers, the United States Court of Appeals for the District of Columbia recently interpreted an arcane statute: 49 U.S.C. § 10706(a)(3)(B)(ii)(II) (“Section 10706”). The D.C. Circuit affirmed in part and reversed in part the district court’s determination that the statute did not render inadmissible certain communications between the railroads en masse.

Congress enacted Section 10706 as part of the Staggers Rail Act of 1980. Its “primary goal” “was to revitalize the railroad industry by reducing or eliminating regulatory burdens.” One such “burden” was antitrust liability; a provision of Section 10706 thus “provides that proof of a conspiracy may not be inferred from evidence that two or more rail carriers acted together with respect to an interline rate” and also “precludes the admission of evidence of certain discussions and agreements between rail carriers” where “the discussion or agreement would not, considered by itself, violate the antitrust laws.” In adjudicating the defendants’ motions to exclude certain evidence in advance of summary judgment, the district court made several principal determinations. including: (1) a discussion or agreement is subject to exclusion only if it is about “an identifiable movement or movements with identifiable circumstances, such as a specific shipper, specific shipments, and specific destinations”; (2) as to documents that are “internal to one rail carrier,” the documents “may be evidence of a protected discussion or agreement” between “two or more carriers only if they “summarize or otherwise convey the substance of a discussion or agreement between” the multiple carriers; and (3) documents qualifying for exclusion under Section 10706 “need not be either admitted or excluded in their entirety” but can instead be admitted in part, using redactions and/or limiting instructions. The district court certified its order for interlocutory appeal.

The D.C. Circuit concluded that in order to be subject to Section 10706’s protections, a “discussion or agreement need not identify a specific shipper, shipments, or destinations” and that “more general discussions or agreements may suffice.” The D.C. Circuit also determined that “a rail carrier’s internal documents need not convey the substance . . . to qualify for exclusion under the statute.” As to redactions, the D.C. Circuit agreed with the plaintiffs that “Subject 10706 can be implemented through redactions of truly segregable portions of documents.” As to limiting instructions, the D.C. Circuit held that they “may not be used to enforce the protections of the statute except in those very rare instances in which protected evidence is unavoidably and inextricably intertwined with evidence that does not qualify for exclusion.” In those “limited situations,” a district court “must take care to craft instructions that do not open the door to a jury’s drawing the very type of inferences that Congress intended Section 10706 to protect against.”

In re Generic Pharmaceuticals Pricing Antitrust Litig., Case No. 2:16-md-02774 (E.D. Pa. May 25, 2022)

In the sprawling MDL generic drug price fixing litigation before Judge Rufe in the Eastern District of Pennsylvania, the Court granted a Motion to Dismiss indirect generic-drug resellers’ price-fixing claims against distributors/middlemen like McKesson Corp.  The Court found that, given the role of distributors, the fact that a distributor is in constant communication with its supplier about prices does not imply a conspiracy. 

CVB Inc. v. Corsicana Mattress, Case No. 1:20-cv-00144 (D. Utah, May 23, 2022)

Plaintiff mattress importer brought various claims against mattress manufacturers alleging they made false statements to get high duties imposed against imported mattresses. The Court found: “Quite to the contrary, the reports, and the amended complaint, make it plain that Commerce conducted its own investigation and came to its own conclusions, which often resulted in dumping margin findings different than those alleged by defendants” and held that “CVB has provided no basis at all for concluding that the legitimacy of the proceedings was undermined by false statements that changed the outcome of Commerce’s determinations.”

SUMMARIES FROM MAY GOLDEN STATE INSTITUTE PANELS

On May 5, 2022 a “special” spring Golden State Institute of the California Antitrust and Unfair Competition Law Section was held.  Below are write-ups of the three panel discussion that took place.  These are not verbatim reproductions, except where quotes appear, but are intended to present the substance of the panel discussion.

Judges Panel: Managing Complex Litigation in California State Court

By: Betsy C. Manifold, Partner and Alex J. Tramontano, Associate, Wolf Haldenstein Adler Freeman & Herz LLP

Moderator: Christina Tusan, Trial Counsel, Los Angeles City Attorney’s Office

Panelists:

  • Hon. Anne-Christine Massullo, Judge, San Francisco County Superior Court
  • Hon. Brad Seligman, Judge, Alameda County Superior Court
  • Hon. Sunil Kulkarni, Judge, Santa Clara County Superior Court

Summary:

Moderator Christina Tusan led the panel in an engaging discussion about complex case management and class certification best practices with experienced judges from the Complex Divisions of various California Superior Courts. The panelists, judges in the Bay Area Complex Divisions, each shared their unique views on issues ranging from changes in UCL filings to non-monetary aspects of settlement.  The panel also shared a range of opinions regarding discovery disputes and the increasing number of matters involving electronically stored information.

First up, changes in UCL and complex filings and the view from the bench regarding case trends.  Judge Massullo has seen an uptick in UCL cases.  Judge Massullo shared that in San Francisco the complex department has one research attorney and one staff attorney, and stressed that complex designation should be reserved for those matters that are truly complex (e.g., numerous parties and complex actively-litigated issues).  If not, a judge may de-designate the case from complex per the rules. (See C.R.C. Rules 3.400(d), and Rule 3.403(b).)  Judge Seiglman emphasized that in weighing the complex determination, he looks at how likely the matter is to actually be litigated.  If the case is likely to be filed-and-settled, it may not be designated as complex.  As an example of the practical application of this, PAGA claims are no longer designated complex by default.

Second, the panel discussed issues frequently arising after the formal initiation of litigation.  The discussion focused on issues regarding settlement of claims early on after filing versus after extensive litigation. Judge Kulkarni stated, when reviewing cases where there is service of a complaint then notice of settlement a month later: “How am I to know that any investigation was done, by either side?  … How much time have you put in?  How many hours has your firm spent? … I’m going to be in some ways more probing than in cases where there has been a hard-fought four-year battle, because then I feel comfortable that is a good settlement coming in.”  The recommendation for an early settlement is to provide the court with a full record and for defendants to provide plaintiffs with adequate documents and information.  Judge Kulkarni recognized the tension with information sharing,  “I think there is an incentive for defense counsel to give more information to the Plaintiff.  I know that’s verboten, that’s not what you want to do, you don’t want to give more documents.  But, if you want to have a full record that allows a settlement to sail through quickly as opposed to being stalled for months because we are asking for more information, that’s better for your client.”  Stressing the importance of making a clear record of counsel’s efforts in order to support the settlement in a class case, Judge Seiglman agreed and asked rhetorically, “I only see the tip of the iceberg … no evidence of any discovery, no depositions that have been taken, no motion work, and of course how do I evaluate that?  He stressed the importance of showing the Judge evaluating the settlement the real risks and issues germane to this specific case.  He stated the question is: “What is unique about your case, that led you to an early settlement, and led you to believe that this is a good deal for the client(s)?”   Judge Massullo commented that counsel should be careful when filing a case as a class action, as it will need to pass muster for settlement approval.  In response to complaints that counsel should not be “punished for settling a case early,” Judge Massullo expressed it’s not about that, “I need to make a separate judgment call, so you need to give me the information, so that I can make a record that will withstand any sort of challenge, if there is one later on.”

On the next topic, non-monetary settlement terms and injunctive relief, the panel noted a few rules of thumb for settlements:

  1. Judges do not run companies; do not ask a court to run the defendant company.
  2. If the complaint seeks injunctive relief, then there should be something in the settlement addressing the injunctive relief.
  3. If you are only getting non-monetary relief of the class, there must be something of value to the class.
  4. If you are asking for injunctive relief in a settlement, a professional monitor may be required.

The next panel topic was class representatives.  The panel unanimously cautioned counsel to watch out for potential background issues (misdeeds) of class representative.  Do a background check!  The Judges differed slightly regarding service awards, and recognized jurisdictional differences regarding such awards.  Questions to ask are: 1) whether the class representative focused on non-class claims; 2) whether there were threats made to the representative re: sanctions; 3) proportionality to benefit to the class; and 4) personal risk or involvement of the representative.

The next topic involved every litigator’s not-so-favorite pastime: discovery disputes!  Judge Massullo asked counsel to consider: “Do you need to boil the ocean, or do you just need to boil a lake?”  Craft the discovery carefully and meet with the Court for an Informal Discovery Conference (“IDC”) over any disputes.  Judge Seiglman encouraged counsel to look at “what is it that could give the moving party relief, without causing the other side pain.”  Have a meaningful meet and confer conference to determine what the real issues are, target only that information, and then have a direct conversation.  IDC rules are generally effective, and are either encouraged or mandatory depending on the jurisdiction.  ESI issues should be dealt with early, and possibly planned for even before the initiation of litigation, if possible.  Judge Kulkani advised defense counsel to engage ESI experts early, in order to gain an understanding of what the issues are early on.  Counsel may also seek appointment of a special master in rare or complex circumstances.

Next, the panel discussed motions to seal.  According to Judge Massullo, an over-inclusive motion to seal will be denied.  “If only certain portions or information from a contract is needed, redact the portions you don’t need” and only bring a motion to seal the critical redacted portion.  Judge Seiglman expressed the same frustration: “These can be very time consuming and can boomerang against you sometimes.  If you have an excessively broad request, one result is you run the risk of having nothing sealed.”  

Next, in the related topic of protective orders, Judge Seiglman highlighted the sample protective orders available for counsel and cautioned counsel on two critical items.  First, pay close attention to the burdens that are on the party seeking the order.  Second, the protective order does not cover the introduction of or admissibility of evidence at trial.

As to evidentiary hearings prior to a trial, even though counsel often request them, the panel agreed that such hearings are rare.  Judge Massullo allows an evidentiary hearing if requested and expressed the importance of allowing the parties to have their day in court.  According to Judge Seiglman, the motion papers alone are usually sufficient.  Judge Kulkarni expressed willingness to stage discovery and limit early discovery to threshold issues (i.e. standing) or to allow a defendant to bring an early MSJ on a narrow topic.

Finally, the Judges turned to the issue of settlements in UCL cases, cy pres, and other settlement issues.  The Judges had differing views of settlements, illuminating the nuances of settling antitrust actions in the state of California.  For example, Judge Seiglman expressed his reservations regarding any settlement where there are provisions indicating that money with escheat to the state of California, and cautioned against attempting to give proceeds to the Dept. of Labor, the LWDA which is responsible for PAGA, “They won’t even take the money, which, is bizarre since they have a fund for workers.”  Judge Massullo places a cap on the amount that may be issued via cy pres doctrine, and askes counsel to push as much benefit as economically feasible to the class.  Judge Massullo advised counsel to craft language similar to “the cy pres recipient will receive no more than $X, unless it would be economically unfeasible for the excess to be returned to the class.”   According to Judge Kulkarni, to avoid embarrassment ensure that the cy pres recipient is not linked to counsel (or a movement counsel is actively involved in promoting), as it creates bad optics and media.

Big Stakes Antitrust Trial: In Re Capacitors Antitrust Litigation, No. 3:14-cv-3264-JD, 17-md-2801-JD (N.D. Cal.)

By: Steven N. Williams            
Saveri Law Firm

Panelists: Roberto Finzi, Paul Weiss Rifkind & Garrison; Bonnie Lau, Morrison & Foerster; Anupama Reddy, Google, Inc.; Joseph R. Saveri, Joseph Saveri Law Firm, LLP; Elizabeth Castillo (moderator).

A case so nice they tried it twice – In re Capacitors was the trial of the direct purchaser class action plaintiffs arising from an alleged cartel involving a conspiracy to fix the price of capacitors, the fundamental component of all electronic products. In this case, the plaintiffs named as defendants 22 corporate families, most with offices and abroad and offices in the United States. By the time of the first trial in March of 2020, there were 9 corporate defendants remaining. Seven of those defendants settled during the first trial. On its ninth day, the trial was suspended due to the pandemic. Just before the suspension, one of Plaintiff’s economic experts had been subject to an order striking an exhibit he had used and a portion of his testimony. A large open question was what would be the scope of exclusion of the remaining testimony, and what effect would that have on the remaining claims. Defendants were bullish, while Plaintiffs believed that there would be little impact. The Court subsequently granted a mistrial, and the issue was mooted.

On November 29, 2021, the remaining parties – the Class Plaintiffs, Matsuo, Nippon Chemi Con and United Chemi Con began the second trial as the omicron variant bore down on the world. Matsuo settled mid-trial, and as the trial neared its end one of Defendants’ economic witnesses was subject to an order striking a portion of her testimony.  The trial settled before that expert’s cross-examination and on the day it was to be submitted to the jury.

Elizabeth Castillo did an outstanding job eliciting interesting information from the panelists. Two particularly interesting topics were (1) the role of younger and diverse attorneys at the trial and (2) the role that expert witnesses – and their missteps – had in the resolution of the case.

The trial was notable for the role played by two young and diverse attorneys who were trying their first case in a billion dollar class action. One of those lawyers, Panelist Anupama Reddy, was asked how she was able to have such a significant role so early in her career. Her response pointed to several things. Among those was the confidence that her team had in her, which led her to believe more strongly in her own abilities.  Her diligence and persistence in preparing and seeking guidance when necessary ensured that she was ready to play a key role, in particular with expert witnesses.  She was assigned the role of cross-examining perhaps the most important witness in the case, the Defense expert who was relied upon to undercut the Plaintiff’s damage analysis. An objection she made during the expert’s direct examination led to an order striking a portion of the expert’s testimony. It might be coincidence, but the Defendants then settled before letting Ms. Reddy conduct her cross-examination.  Joseph Saveri, of the Joseph Saveri Law Firm, noted that Ms. Reddy’s was more than ready for the opportunity, and that training the next generation of trial lawyers – and antitrust lawyers – was an important goal of his firm.

Bonnie Lau discussed the consequences of the striking of portions of the Plaintiff’s economic expert during the first trial, and how the Defendants believed they were poised to capitalize on that by undercutting Plaintiff’s liability case. Ms. Lau also noted that these experiences in the first trial gave Defendants added confidence going into the second trial, particularly in relation to the key areas of expert testimony. Roberto Finzi picked up on this theme, noting that a key theme of the defense case was to show that, although Defendants had engaged in some misconduct, Plaintiffs were vastly overreaching in their claims. A key way to accomplish this was by undercutting the Plaintiffs’ economic experts and providing an alternate damages approach for the jury. Joseph Saveri countered by noting that a key deficiency in the defense case was that it solely relied on experts, rather than any fact witnesses who participated in the conspiracy.

The panel ended with an interesting presentation, in five minutes per side, of the closings that they never got to give. The defense emphasized overreaching; the plaintiffs emphasized justice and accountability. 

All around an excellent panel.

GSI Panel Discusses Solutions to Antitrust’s Diversity Problem

James Dallal is a Senior Associate within the Antitrust and Global Competition group at Cotchett, Pitre & McCarthy, LLP and can be reached jdallal@cpmlegal.com.

At the May 5, 2022 special spring session of the California Lawyers Association Antitrust and Unfair Competition Law section Golden State Institute, a panel of speakers from diverse personal and professional backgrounds gathered to discuss “Diversity in the Antitrust Bar: Is It Truly a Pipeline Problem?”

The panel featured Laura Wilkinson, Global Antitrust Counsel at PayPal and former deputy assistant director at the Federal Trade Commission; Qianwei Fu, a partner specializing in antitrust and unfair competition at the Oakland office of Zelle LLP; Ye Eun (Charlotte) Chun, an associate in the Palo Alto office of Cleary Gottlieb Steen & Hamilton LLP; and Jeff Negrette of the civil conduct task force within the U.S. Department of Justice Antitrust Division. Steve Vieux, of counsel at Shook Hardy & Bacon, LLP and former senior attorney at the FTC, moderated.

The panel opened with a discussion of how the speakers arrived in their present positions and their experience, from their varying perspectives, in seeking out mentors early in their careers. Ms. Wilkinson noted she had seen a lot of progress on diversity during her career, including significant periods spent in private practice at AmLaw 100 firms, and offered the advice that “mentors don’t have to look like you.” Her mentors were generally not other African-American women; they were white men and women with whom she had a lot in common in other ways. Ms. Wilkinson added that it will not work for diverse attorneys to be “the only role models, the only mentors, the only sponsors;” rather, it is a shared responsibility for everyone in the profession.

Ms. Chun described what good mentorship feels like from her standpoint as an associate at a major firm, and noted “it’s about feeling valued.” Mentors and firm leaders can help by recognizing what associates are good at and assigning them projects and opportunities that are a good fit. But she added that many diverse associates do not enter the profession with networks that are as strong as those enjoyed by their non-diverse peers. Ms. Fu described her experience starting out practicing law in China for three years, then moving on to several roles before settling in at her present firm, where she said she is a “lifer.” She noted that she experienced struggles in finding suitable mentors, and had to figure out a lot for herself. Part of the difficulty for young, diverse lawyers who must build their own networks is that “you don’t know what you don’t know.”

Mr. Negrette described his early experience with the Antitrust Division in San Francisco before transferring to Washington, DC. When asked what initiatives the Antitrust Division itself has undertaken on diversity, he observed that a lot was happening behind the scenes, in addition to the public-facing Diversity Committee. He pointed to the importance of the enforcement agencies serving as a guidepost for what the rest of the bar should be doing. In addition, the enforcement agencies serve as an important pipeline for advancing young attorneys’ skillsets.

With that observation the conversation shifted to its main focus, a discussion of whether the challenges for improving diversity in the antitrust bar arise from a “pipeline problem” due to not enough diverse candidates starting out in antitrust at all, or from a broader set of conditions and circumstances. Ms. Fu observed that the statistics are truly daunting: Despite significant improvements to overall diversity, the California attorney population does not reflect the diversity of the state’s population, and Latinx representation is lagging behind in particular. Women of color are also underrepresented in leadership roles, particularly Asian women. In addition, women, people of color, and people with disabilities consistently report low levels of satisfaction with working conditions. And while the pipeline of diverse attorneys is strong and getting stronger, it remains a “leaky pipeline.” Mr. Vieux agreed with this observation and reported seeing the same phenomenon in government: Levels of diversity at the outset for recruiting classes may seem favorable, but may not persist among the group remaining five or six years later.

As for what can be done, Mr. Vieux opened by observing that his government experience at the FTC certainly helped in building an enduring network. Ms. Fu added that the Antitrust and UCL section itself has made important contributions, doubling down on efforts to inject diversity into section programs and activities and developing a Diversity & Inclusion fellowship under the leadership of past Chair of the section Elizabeth Pritzker. Efforts to encourage male allyship are also underway, and increasingly, the message is getting through that diversity and inclusion are not just the right thing to do but enhance team performance and profitability

Ms. Wilkinson then offered the perspective that the problem stems from both pipeline and will. Focusing on law school, the start of the pipeline, is not enough, but the crucial conversation about retention is finally starting to happen. Ms. Chun further noted that she had at times had to initiate conversations about diversity after-hours. Many firms proudly announce diverse recruiting classes, but that same diversity is not reflected in senior leadership. Many firms apply a cookie-cutter approach to diversity initiatives such as a monthly chat session for attorneys in particular groups. This dynamic leaves a lot of work remaining for young attorneys to do in driving progress forward.

Mr. Vieux asked the panel how a young attorney can engage in that work while meanwhile protecting his or her career and avoiding being labeled a troublemaker? Ms. Chun agreed that was a hard question because the burden should not be entirely on attorneys from underrepresented groups. A first step is simply to be in the room where the discussion is happening, and then an institutional approach is important, examining every aspect of the firm, from staffing to client base to everything else, through the lens of diversity.

Ms. Wilkinson noted further that companies in their role as clients can insist on diversity on the teams and firms representing them. Diversity should be made everyone’s responsibility, and reinforced with hard incentives, so the entire burden does not rest on the diverse attorneys. It can be made a factor in how firm attorneys are evaluated and compensated. Affinity groups and ally groups are valuable as well, but they should not be expected to solve the problem all on their own.

Mr. Vieux then asked what role enforcement agencies can play. Mr. Negrette again invoked the important role of the agencies in building the pipeline. Recruitment efforts must include outreach where people are encouraged to apply, and efforts must be made to avoid falling into the “convenience trap” and shortcut of engaging in unconscious bias, particularly when one is confronted with 300 resumes. The same degree of care must then be exercised with retention and advancement. Ms. Chun further reflected that established firms for strategic reasons will sometimes seek to mirror the demographic profile of the enforcers with whom they meet, so the agencies presenting more diverse attorneys may indirectly generate opportunities for diverse attorneys at firms as well; it becomes “a bit of a feedback loop.”

In closing, Mr. Vieux asked what might be done to improve diversity among the plaintiffs’ bar. Ms. Fu recognized that it is worse for this sector as compared with the corporate and public sectors. Earlier in her career leadership opportunities were monopolized by a few attorneys repeatedly selected to run class cases. And while the situation has improved in recent years, the bar has lost talent when certain attorneys were unable to secure a leadership role during the most crucial years of their careers. She noted that the judiciary has begun to put more pressure on the plaintiffs’ bar to improve, and quoted from a recent order by Judge Louis Liman of the Southern District of New York appointing class counsel and emphasizing that factoring in diversity considerations is an important component of the Court’s exercise of its duty under Rule 23(g) “to select counsel who will best represent the interests of the class.”

The opinion is: City of Providence, Rhode Island v. AbbVie, Inc., No. 20-cv-5538 (LJL), 2020 WL 6049139 (S.D.N.Y. Oct. 13, 2020).

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A DEEPER DIVE: Lischewski Per Se Cert Petition Denied by Supreme Court

Bob Connolly  Law Office of Robert Connolly

It has become common for defendants indicted on criminal antitrust charges to argue that the use of the per se rule in their trial is unconstitutional. The United States, however, relying on ample precedent from the relevant court of appeals relying and on long standing Supreme Court precedent (i.e. Trenton Potteries and Socony Vacuum) holding that hold that price fixing is a per se Sherman Act violation, has beaten back each attack.

In one per se challenge before the Ninth Circuit a panel member was sympathetic to defendants’ position and noted: “I think if it’s going to get straightened out [whether the per se rule is constitutional] it’s going to have to require an en banc panel of this court or more likely the Supreme Court itself.”[1] The Ninth Circuit turned back the per se challenge in that appeal and Supreme Court denied certiorari. Sanchez et al. v. United States,140 S. Ct. 2655 (2020)(cert petition denied, January 13, 2020). The Supreme Court recently had another chance to review the constitutionality of the per se rule in a criminal antitrust case. Christopher Lischewski was convicted at trial of conspiring to fix the price of canned tuna. Lischewski preserved his objection to the per se rule at his trial; his appeal was denied by the Ninth Circuit and he filed a petition for cert with the Supreme Court. The Supreme Court denied Lischewski’s petition. Lischewski v. United States, No. 21-852 (May 2, 2022). The per se rule lives.

More challenges lie ahead, however, for the per se rule. On May 2, 2022 the Second Circuit released an opinion rejecting yet another challenge to the per se rule. U.S. v Aiyer, Case No. 20-3594 (2d Cir. May 2, 2022). Aiyer was convicted after trial for his participation in a conspiracy to fix prices and rig bids in connection with his trading activity in the foreign currency exchange market. The Second Circuit rejected various challenges Aiyer made to the use of the per se rule in his criminal trial. Aiyer argued, among other things, that when the judge instructs the jury that the agreement, if found, is a per se violation of the Sherman Act, the court takes away from the jury an element of the offense, namely whether the alleged agreement restrained trade. Aiyer also argued that the trial court, citing the per se rule, impermissibly prohibited him from offering evidence of the procompetitive effects of the alleged agreement.

It seems likely defendant Aiyer will file a cert petition with the Supreme Court. What are the odds the Court will review the per se rule in Aiyer’s case? Not good I would imagine with the Court having recently rejected two similar cert petitions. The best chance Aiyer may have for a grant of cert is that, without going into details, the FOREX market is more complicated than the real estate auction bid rigging conviction that was the subject of the cert petition in Sanchez or the garden variety price fixing agreement that was the subject of the conviction in the Lischewski case.

A defendant never wants to be in a position of seeking a cert petition with the Supreme Court because first you have to get convicted in the trial court and then lose your appeal. Many people think that labor market collusion cases may be the most likely vehicle for Supreme Court to revisit the per se rule, but so far the Antitrust Division is 0 for 2 in labor market collusion trials. But there are more labor market collusion cases on the way so the United States may achieve a conviction and if so, an appeal will likely make its way to the Supreme Court.

While losing at trial, the Antitrust Division has won judicial rulings upholding the per se rule in their first wage-fixing and labor allocation cases. In those cases the challenges to the per se rule were focused more on an argument that the conduct in question was not the type with which the courts had sufficient experience and thus, the per se rule should not apply. The courts rejected those arguments, in essence holding that while they may not have had experience with labor market collusion cases, the types of agreements alleged in the indictments were agreements the court had sufficient experience with to treat them as per se violation.

The DaVita labor allocation trial story, however, is not quite as simple as saying the court upheld the per se rule. The judge did rule that “evidence of lack of harm or pro-competitive benefits might be relevant to determining whether defendants” intended or had the purpose to allocate the market. In a true per se case the defense is not permitted to offer procompetitive justifications or evidence of the purpose behind the agreement. Somewhat like Monty Python’s “Black Night,” the Division has brushed off this per se “modification” as a mere “flesh wound” but it was likely fatal to the government’s case in DaVita and will be troublesome going forward if followed by other courts.

Back to the constitutionality of the per se rule: When the courts make findings that the agreement alleged is of the type that are per se illegal, the courts are making fact-finding decisions in determining whether they have enough experience with a given type of agreement to label it as per se violation i.e. “always or almost always an unreasonable restraint of trade.” In some opinions, we see the court deferring a ruling on whether the per se rule applies until there is further factual development in the case. Courts are clearly making factual determinations about whether the alleged agreement violates the Sherman Act as a matter of law. But shouldn’t the jury always be making the decision on every element of the offense including whether the agreement in question constitutes a restraint of trade? It shouldn’t matter how much experience a court has with a particular type of restraint and/or how comfortable the court is that the charged agreement is a per se violation (after all, the Court has changed its mind many times on what a per se violation is), in a criminal case the jury, and only the jury, should decide whether the agreement in question (if proven) is a restraint of trade.

In opposing challenges to the per se rule, the government, quite appropriately, cites decades of per se rule precedent. The DOJ opposition can be summarized: “Nothing to see here; nothing has changed.” But things have changed. The per se rule was developed at a time when the Sherman Act was a misdemeanor and before the Supreme Court began to focus on requiring prosecutors to prove every element of the offense. In the 1940 Supreme Court case of United States v. Socony Vacuum Oil Co. the individual defendants were fined $1,000.[2] As was customary for this then misdemeanor, no jail sentences were imposed. By contrast, in 2014, Romano Pisciotti, an Italian citizen, was indicted under seal for violating Section One of the Sherman Act [now a felony], seized by Interpol while changing planes in Germany and eventually extradited to the United States.[3] Even before conviction:

Romano Pisciotti spent 669 days in custody. This included two hours in a police station in Lugano, Switzerland; 10 months in a jail in Frankfurt, Germany fighting extradition [on a Sherman Act indictment]; and eight months in a US federal prison in Folkston, Georgia, in a room with around 40 mainly Mexican inmates and a single corner toilet.” [4]

Times have changed; maximum statutory sentences have skyrocketed. The Antitrust Division has asked for the maximum 10 year prison sentence in one case. Fines have taken off as well. The largest corporate fine in Socony Vacuum was $5,000. The largest corporate fine today stands at $925 million![5] The per se rule remains undefeated in taking on all challengers and perhaps will remain so. But the challenges will keep coming.

Note: This article is an updated version of a May 24, 2022 post on my blog, Cartel Capers.


[1] Joshua Sisco, Mlex, January 16, 2019: “In foreclosure auction appeal, court questions applicability of per se standard, (behind pay firewall)].

[2]  See Daniel A. Crane, The Story of United States v. Socony-Vacuum: Hot Oil and Antitrust in the Two New Deals, in ANTITRUST STORIES 107 (Eleanor M. Fox & Daniel A. Crane eds., 2007). 

[3]  Lewis Crofts and Leah Nylen, December 9, 2015, Mlex Interview with Romano Pisciotti, available at https://mlexmarketinsight.com/insights-center/reports/interview-with-Romano-Pisciotti.

[4] Id.  See also See Plea Agreement with Roman Pisciotti, https://www.justice.gov/atr/case-document/file/507541/download.

[5]   See SHERMAN ACT VIOLATIONS RESULTING IN CRIMINAL FINES & PENALTIES OF $10 MILLION OR MORE, available at https://www.justice.gov/atr/sherman-act-violations-yielding-corporate-fine-10-million-or-more.

Agency Updates

This feature includes excerpts from selected press releases issued by 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.

Antitrust Division, U.S. Department of Justice

Justice Department, U.S. Patent and Trademark Office and National Institute of Standards and Technology Withdraw 2019 Standards-Essential Patents (SEP) Policy Statement

June 8, 2022 “The Department of Justice, U.S. Patent and Trademark Office (USPTO) and the National Institute of Standards and Technology (NIST) (the Agencies) announced today the withdrawal of the 2019 Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments (2019 Statement). After considering public input on the 2019 Statement and possible revisions, the Agencies have concluded that withdrawal of the 2019 Statement is the best course of action for promoting both competition and innovation in the standards ecosystem.”

Deputy Assistant Attorney General Andrew Forman Delivers Keynote at the ABA’s Antitrust in Healthcare Conference

Friday, June 3, 2022

“The Importance of Vigorous Antitrust Enforcement in Health Care”

Deputy Assistant Attorney General Richard A. Powers Delivers Keynote at the University of Southern California Global Competition Thought Leadership Conference

Friday, June 3, 2022

“Now, six months into AAG Kanter’s tenure, I’m pleased to be able to discuss the division’s current enforcement priorities and our plans for the future. And — after nearly a year as Acting AAG — I am also going to offer a few thoughts on the division’s civil antitrust work and the ways in which it can complement criminal enforcement to ensure we are using all available tools to protect and promote competition.”

Verzatec Abandons Proposed Acquisition of Crane Composites Following Justice Department Suit to Block

May 26, 2022

“On March 17, the department filed suit to block the transaction in the U.S. District Court for the Northern District of Illinois. The complaint alleged that the proposed $360 million transaction would harm competition in production and sale of pebbled fiberglass reinforced plastic (FRP) wall panels, whose product and performance characteristics make it the wall covering of choice for many restaurants, grocery stores, hospitals and convenience stores across the United States. The trial was scheduled for Oct. 4. As a result of Verzatec and Crane’s decision to terminate their transaction agreement, the United States has filed a joint stipulation of dismissal.”

Assistant Attorney General Jonathan Kanter Delivers Remarks at New York City Bar Association’s Milton Handler Lecture

May 18, 2022

“We meet tonight in a moment of great challenge and great opportunity in antitrust. Corporate power has grown to levels that leave our fellow citizens concerned and confused. On a daily basis, I am asked how the laws meant to protect competition went astray, and what we can do to reinvigorate antitrust enforcement and meet our nation’s challenges.”

Federal Trade Commission

Statement of Bureau of Competition Director Holly Vedova Regarding the Decision of Utah Healthcare Competitors HCA Healthcare and Steward Health Care System to Abandon Their Proposed Merger

June 16, 2022

“Proposed Merger Is the Second Abandoned in One Week Following FTC Complaint”

FTC to Ramp Up Enforcement Against Any Illegal Rebate Schemes, Bribes to Prescription Drug Middleman That Block Cheaper Drugs

June 16, 2022

“Agency puts drug industry on notice that paying rebates and fees to exclude competitors offering lower-cost drug alternatives can violate competition and consumer protection laws”

FTC Launches Inquiry Into Prescription Drug Middlemen Industry

June 7, 2022

“Agency to Scrutinize the Impact of Vertically Integrated Pharmacy Benefit Managers on the Access and Affordability of Medicine”

FTC Sues to Block Merger Between Utah Healthcare Rivals HCA Healthcare and Steward Health Care System

June 2, 2022

“Agency Alleges that Anticompetitive Deal Would Lead to Higher Prices and Reduced Quality of Care for Patients”

FTC Acts to Protect South Carolina and Alabama Markets from Anticompetitive Gasoline Terminal Deal

June 2, 2022

“Agency Requires Buckeye Partners, L.P. and Magellan Midstream Partners, L.P. to Divest Fuel Terminals and Assets in 3 Local Markets to U.S. Venture, Inc.”

FTC Sues to Block Merger Between New Jersey Healthcare Rivals RWJBarnabas Health and Saint Peter’s Healthcare System

June 2, 2022

“Agency Alleges that Deal Would Increase Prices and Reduce Quality of Care for Patients by Eliminating Head-to-Head Competition”

FTC Chair Lina M. Khan Testifies Before House Appropriations Subcommittee

May 18, 2022

“Khan Points to Need for Increased Staffing to Address Surge in Mergers, Scams, and Other Potential Harms that Require Law Enforcement Investigations and Action”

California Department of Justice

To link to All California Department of Justice press releases, click here.

Attorney General Bonta Issues Consumer Alert on Price Gouging During Nationwide Baby Formula Shortage

June 7, 2022

“California Attorney General Rob Bonta today issued a consumer alert following the Governor’s executive order establishing protections against price gouging for families struggling to access safe and affordable baby formula.”

IN CASE YOU MISSED IT

Below are headlines from various news reports with a short excerpt from the article. The article is hyperlinked so you can read it in its entirety. Some articles may require a subscription. 

By Jonathan Gardner, HealthCare Dive, June 17, 2022

“Experts at key meeting argued drug divestitures may not be enough to prevent market concentration.”

By Kevin Dunleavy, Fierce Pharma, June 9, 2022

“On Tuesday, a federal district court judge in Pennsylvania ruled that states were not entitled to a cut of the profits generics manufacturers allegedly made from their scheme.”

By Lauren Feiner, CNBC, June 6, 2022

“A major piece of legislation that could reshape the tech industry is just a few steps away from becoming federal law. But advocates fear that if congressional leadership doesn’t usher it through before the midterms, or at least the end of the year, it could die.”

By Dan Papscun, Bloomberg Law, June 6, 2022

“The Department of Justice is launching its third attempt at convincing a jury that some chicken manufacturing executives violated federal antitrust law by colluding to fix prices.”

By Theo Francis, Wall Street Journal, May 16, 2022

“Decision follows a similar ruling last month on a separate law requiring racial or ethnic diversity on boards”

By Andrew Das, May 18, 2022 New York Times

“Landmark labor agreements with members of the men’s and women’s national teams will include higher paychecks and shared World Cup prize money.”

By Meghan Tribe, Bloomberg Law, May 2, 2022

“Top law firms find accidental diversity in tough hiring climate.”


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