Welcome to the March 2022 E-briefs, News and Notes. This edition includes E-Briefs authored by Thomas H. Burt and Betsy C. Manifold, Kerry C. Klein, Anthony Léon and Sean Kolkey. Agency Updates contains links to important DOJ/FTC press releases, especially on the merger enforcement front. A Deeper Dive covers the joint FTC/DOJ statement seeking comments on potential new merger guidelines. Lastly, the News and Notes section contains some updates with links to other events of interest to unfair competition and antitrust lawyers.
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Naked No-Poach Found To Be Per Se Violation, By Thomas H. Burt and Betsy C. Manifold
United States v. DaVita Inc. et al., Criminal Case No. 1:21-cr-00229-RBJ (D. Colo. January 28, 2022) is remarkable in that it squarely holds that the alleged naked no-poach agreement between competing employers is a per se violation of Section 1 of the Sherman Act. It does so not by generally applying per se treatment to agreements not to solicit or hire employees of competitors, but by clarifying that when such agreements fall within the traditional boundaries of per se agreements, they will receive the same treatment.
DaVita is the first of now four criminal prosecutions for no-hire or no-solicit or no-poach agreements to be litigated to a ruling on per se treatment. The import is twofold: criminal enforcement against participants in no-poach agreements that fit within traditional per se categories is possible; and per se treatment in public and private civil enforcement, where and only where plaintiffs can plead that the no-solicit or no-hire agreement, constitutes a market allocation.
Facts: The Government alleged three violations. The first was a conspiracy between competing outpatient medical facilities not to hire each other’s high-level personnel, and the second a similar agreement not to hire any of each other’s personnel. Finally, the government alleged a third count substantially matching the second, but with an additional competing firm. Defendants allegedly enforced these agreements, among other methods, by instructing their employees not to hire from the co-conspirator firms, and by imposing a duty on their own employees to inform them of an intent to seek employment with any of the co-conspirators.
Analysis: DaVita’s holding ends the drought of cases that squarely apply per se treatment to employers’ labor market cartels. The Court’s explanation is that it is doing nothing at all new: “anticompetitive practices in the labor market are equally pernicious – and are treated the same – as anticompetitive practices in markets for goods and services.” Slip Op. at p. 5. To the DaVita Court, the no-poach agreement is no different than a product or geographic market division between sellers of goods. Id.
The Court first addressed arguments away from the core question. Defendants contended that, by using the terminology of an agreement “not to solicit each other’s” employees, the indictment had failed to make out a horizontal market allocation. But the counts described the agreements by saying that the firms party to the agreement “would allocate employees ….” The Court held that this language was clearly a horizontal market allocation. Slip Op. at pp. 6-7. The Court likewise turned aside the contention that the factual allegations did not support the claims. The agreement as alleged and the techniques for enforcement, taken as true, the Court held, both supported the claim that the agreement was to allocate the market for this labor, and that employees were hampered in moving. Slip Op. at p. 8.
The remainder of the opinion addresses the central issue, whether as a matter of law an agreement of this kind could be subject to per se treatment. The Court did so under a three-part framework: (1) is the conduct within a traditional per se category; (2) if not, is the creation of a new per se category warranted; and (3) is the restraint naked, warranting per se treatment in this instance, or is it ancillary to a broader agreement that must be analyzed under the rule of reason.
Absent a perfectly analogous case, the Court selected a close precedent in United States v. Cooperative Theatres of Ohio, Inc., 845 F.2d 1367 (6th Cir. 1988) (agreement not to solicit customers rather than workers). Cartel members were booking agents for movie theaters and had agreed that none would attempt to become the booking agent for a theater that was already the customer of another conspirator. On appeal the defendant booking agents argued that their agreement was based on non-solicitation which was different from market allocation. The Sixth Circuit held that the agreement was a horizontal allocation, and a naked restraint on trade. Id. at 1372.
Defendants raised proposed pro-competitive benefits. But pro-competitive benefits apply in the second and third parts of the analysis framework: creation of a new per se category and determining whether the restraint is naked or ancillary. They do not affect the first, which is determining whether the conduct is within a traditional per se category. For this proposition, the Court cited United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 220-21 (1940). The Court declined to create a new per se category, citing the lack of long judicial experience with non-solicitation. Where the non-solicitation was of a kind that fell within the bounds of market allocation, a traditional per se category, the Court held that the first prong of the framework was satisfied and a new category was unnecessary; where the non-solicitation did not amount to an allocation of the market, it was not warranted. Slip Op. at pg. 15. The Court held that this distinction explained the lack of uniformity in precedents concerning no-hire agreements: they are not a category of per se unlawful agreement unto themselves, but instead are per se unreasonable when and only when they constitute a horizontal market allocation, collecting cases. Slip Op. at p. 16.
The Court concluded by addressing the defendants’ argument that they were surprised and deprived of due process by having their agreements deemed per se unreasonable. The Court noted that market allocation has long been unlawful, and non-solicitation will only receive per se treatment when it is market allocation. Slip Op. at p. 17. Looking ahead to the trial, the government will have to prove the defendants acted for the purpose of allocating the markets, variously for senior employees and for all workers. Though per se treatment streamlines the Government’s path, it must still prove the elements beyond a reasonable doubt.
Ninth Circuit Revives Antitrust Claims Against Power and Water Utility, By Kerry C. Klein
Kerry C. Klein, Farmer Brownstein Jaeger Goldstein Klein & Siegel LLP
The Ninth Circuit Court of Appeals reversed the district court’s dismissal of plaintiff’s Sherman Act Section 2 claims in Ellis v. Salt River Project Agric. Improvement and Power Dist., Nos. 20-15301, 20-15476, 2022 WL 276031 (9th Cir. Jan. 31 2022), in a case at the intersection of antitrust and regulatory law.
Factual and Procedural Background
Salt River Project Agricultural Improvement and Power District (SRP) is a power and water utility that services most of the Phoenix metropolitan area. SRP is a political subdivision of the state of Arizona. It controls the electrical grid and has authority to set prices for the sale and distribution of electricity to its approximately one million customers. It supplies more than 95% of the electricity used by those customers.
Some of SRP’s customers have chosen to install solar energy systems, such as rooftop solar panels, thereby reducing the amount of electricity they need to purchase from SRP. Solar energy is not always available, however, so customers with solar installations must still rely on SRP to supply power when their solar installations are insufficient to fulfill their electricity needs. SRP has encouraged the use of solar energy systems.
In 2015, SRP increased prices on the E-27 price plan for customers who generate their own electricity through solar installations, pursuant to which these customers could be charged up to 65% more than previous rates. At the same time, SRP adopted a rate increase for its non-solar customers of only about 3.9%.
Ellis, a customer subject to the E-27 price plan, sued SRP in federal court on behalf of a putative class of similarly situated customers, asserting claims for monopolization and attempted monopolization under Section 2 of the Sherman Act; various Arizona consumer protection, antitrust and price discrimination laws; and the equal protection clauses of the United States and Arizona constitutions.
The district court dismissed the case in its entirety. With respect to the Section 2 claims, although it held the filed-rate and state action immunity doctrines inapplicable, the district court dismissed the federal antitrust claims for failure to allege antitrust injury. Ellis appealed to the Ninth Circuit.
Ninth’s Circuit’s Opinion on Section 2 Claims
The district court dismissed the Section 2 claims for failure to allege antitrust injury. Along the way, the district court also concluded that the filed-rate doctrine and state action immunity do not bar Ellis’s claims. The Ninth Circuit reversed the district court’s holding on antitrust injury and affirmed its other rulings.
The court restated the general rule that a private antitrust plaintiff must plead and prove antitrust injury, which is an injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendant’s conduct unlawful. The court then itemized the four requirements for antitrust injury: (1) unlawful conduct; (2) causing an injury to the plaintiff; (3) that flows from that which makes the conduct unlawful; and (4) that is of the type the antitrust laws were intended to prevent.
The district court found that Ellis did not adequately allege antitrust injury because, in its view, the E-27 price plan actually encourages competition in alternative energy investment by allowing for new market entrants with its higher prices. The Ninth Circuit disagreed, finding that Ellis adequately alleged exclusionary conduct designed to (1) deter the competitive threat of solar energy systems; (2) penalize solar energy investments to fortify SRP’s monopoly; and (3) force consumers to exclusively purchase from electricity from SRP by making solar installations uneconomical.
On appeal, SRP argued that Ellis did not adequately allege antitrust injury because he paid the higher rate before SRP could fully succeed in displacing competition. SRP further argued that Ellis cannot claim to have been injured by exclusionary conduct because he attempted to use the market alternative that he claims SRP tried to make uneconomical. The Ninth Circuit found both of these theories flawed because “[c]oercive activity that prevents its victims from making free choices between market alternatives” gives rise to antitrust injury. To adequately plead antitrust injury, a plaintiff need not allege that the exclusionary conduct has succeeded in displacing all competition. The Ninth Circuit concluded that the increased prices that SRP imposed on solar customers are the means of SRP’s allegedly unlawful scheme to reduce solar energy competition.
Filed Rate Doctrine and State Action Immunity Defenses
SRP asserted the filed rate doctrine and state action immunity as defenses to Ellis’s claims. The filed rate doctrine is a judicially created rule that prohibits individuals from asserting antitrust challenges to an entity’s agency-approved rates. The Ninth Circuit found that the problem for SRP is that it does not file its rates with anyone other than itself. Rather, SRP’s board sets rates unilaterally. Unlike other Arizona utilities, SRP is not regulated by the Arizona Corporation Commission. The Ninth Circuit requires that some agency be engaged in sufficient regulation in order for the filed rate doctrine to apply. The Ninth Circuit rejected SRP’s attempt to compare its authority to that of the Federal Energy Regulatory Commission (FERC) because FERC regulates the rates charged by market participants, while SRP is the market participant. The court concluded that, “[w]e have never extended the filed-rate doctrine to unilateral, unsupervised rate-setting by a market participant.”
The Ninth Circuit also rejected SRP’s claim that it was entitled to state action immunity. State action immunity recognizes that the Sherman Act does not restrict the sovereign power of states to regulate their economies by imposing market restraints as an act of government. The doctrine is disfavored and applies only when it is clear that the challenged anticompetitive conduct is undertaken pursuant to a regulatory scheme that is the state’s own. The Ninth Circuit held that state action immunity was inapplicable in this case because the state of Arizona has not articulated a policy to displace competition. Rather, Arizona’s statutes signal a shift by the legislature to promote competition in the retail electricity market, not curtail it.
The Ninth Circuit remanded the Sherman Act claims to the district court.
Seafood MDL: Class Plaintiffs Swim Through Statute Of Limitations Nets: California Federal Judge Denies Two Partial Summary Judgment Motions, By Anthony Léon
By Anthony Léon, in-house counsel in San Francisco, CA
In two separate orders, dated February 7th and February 11th, Judge Dana M. Sabraw, Chief United States District Judge of the United States District Court for the Southern District of California denied two motions for partial summary judgment on statute of limitation grounds brought by StarKist, Bumble Bee, and other defendants in the seafood’s multidistrict antitrust litigation. In Re: Packaged Seafood Products Antitrust Litigation, 15-MD-2670 DMS (MDD).
In 2015, the United States Department of Justice uncovered the canned tuna business’s fishy side. Chicken of the Sea and Bumble Bee, two of the three biggest canned tuna brands, proposed a merger, leaving StarKist as a remaining big competitor. The US DOJ, reviewing the merger, unveiled a greater scheme: the three companies behind these brands were, in fact, conspiring to fix and maintain canned fish prices.
The US DOJ brought charges against the conspirators. In August 2017, Bumble Bee Foods LLC pled guilty to participating in the conspiracy and was fined $25 million. In November 2018, the StarKist Company also pled guilty to the same charges and was fined $100 million. Chicken of the Sea International (COSI), which cooperated with the government from the beginning of the investigation, benefited from the DOJ leniency program and avoided charges and penalties.
Simultaneously, various tuna purchasers, including consumers, retailers, wholesalers, and commercial food preparers, filed lawsuits against the coconspirators and their parent companies, claiming violations of federal and state antitrust and consumer protection laws. Most cases have been consolidated in the multidistrict litigation (MDL) presented here.
Defendants Bumble Bee, StarKist, and their parent companies requested summary judgment on Plaintiffs’ claims. They argue that Plaintiffs’ claims are time-barred because they were filed outside the relevant statute of limitations—four years for federal antitrust claims and one to six years for state antitrust and consumer protection claims. Plaintiffs oppose, arguing that there are triable questions of fact regarding whether the doctrine of fraudulent concealment applies to Defendants and tolls the limitation periods.
In a first order related to the direct action plaintiffs’ claims, the Court denied summary judgment, arguing that Plaintiffs are raising genuine issues of material fact regarding whether Defendants engaged in fraudulent concealment of their anticompetitive activity, thus tolling the statutes of limitation. Four days later, the Court used a similar reasoning in denying summary judgment in an order related to the claims of direct purchaser plaintiffs, indirect purchaser plaintiffs, and commercial food preparer plaintiffs.
Doctrine of fraudulent concealment tolls statute for federal and state claims brought by direct action plaintiffs (DAP)
To rule on the request for partial summary judgment against direct action plaintiffs (DAP) on statute of limitation grounds, the Court first addressed DAPs federal claims before turning to state law claims. Specifically, the Court had to find sufficient triable issues of fact in each element of the doctrine of fraudulent concealment, a defense used by the DAPs to toll the statute of limitations. In Re: Packaged Seafood Products Antitrust Litigation, February 7th, 2022, 15-MD-2670 DMS (MDD) (ECF No. 2007).
The Court reminded that a plaintiff arguing the doctrine of fraudulent concealment must establish that “(1) the defendant took affirmative acts to mislead the plaintiff; (2) the plaintiff did not have ‘actual or constructive knowledge of the facts giving rise to its claim’; and (3) the plaintiff acted diligently in trying to uncover the facts giving rise to its claim.” In re Animation Workers Antitrust Litig., 123 F. Supp. 3d 1175, 1194 (N.D. Cal. 2015) (quoting Hexcel Corp. v. Ineos Polymers, Inc., 681 F.3d 1055, 1060 (9th Cir. 2012)).
Concerning the Federal claims, the Court first found sufficient triable issues of fact that Class Defendants have taken affirmative acts to mislead the plaintiffs. Class Defendants exchanged proprietary business information, which included presentation materials to retailers. Id. at 8. They also used a ‘smoke and mirrors’ method by publishing justifications for the can downsizing and tuna price increase in a similar fashion. Id. at 8. They also actively altered and destroyed documents not to draw attention to their practices. Id. at 9. Further, in addition to organizing clandestine meetings using coded language, they also used private and family members’ emails to actively exchange information so that their conversations would not be detected. Id. at 10.
The second element of the doctrine was the most discussed by Class Defendants, which considered that DAPs must have had active or constructive knowledge of the facts giving rise to their claim. Though the Court noted that, in a summary judgment motion, Class Defendants should have brought irrefutable evidence of DAPs’ knowledge to show the absence of triable issues of fact—which they did not. Id. at 11. Class Defendants attempted to rely on an allegation in DAPs complaint where they asserted that cans downsizing would have made economic sense to the Class Defendants only if they had conspired with one another. However, this allegation, presented by Class Defendants as a judicial admission of knowledge, was only added after the grand jury proceedings to allege that the cans downsizing resulted from the collusion and was not to infer they had knowledge of the collusion. Id. at 15. In addition, the mere fact that DAPs had access to supply and demand information through the length of the conspiracy could not be sufficient on its own to show DAPs had constructive knowledge of the collusion. Id. at 16. Thus, the Court found sufficient triable issues of fact as to whether DAPs had actual or constructive knowledge.
On the third element, the Court restated that to show a plaintiff diligently tried to uncover facts giving rise to its claim, they should show facts that would excite the inquiry of a reasonable person. Id. at 16 (citing Conmar Corp. v. Mitsui & Co. (U.S.A.), 858 F.2d 499, at 504 (9th Cir. 1988)). The Court noted that, although it did not need to address this factor based on what has already been discussed, two points here were worth a discussion. First, Class Defendants argued DAPs have managers expert in their field that should have been more diligent in verifying the reasons behind the tuna industry’s parallel price increase, but the Court found that a defendant’s public offering of a legitimate explanation for parallel pricing can be enough to show a dispute of material fact as to fraudulent concealment. Id. at 17. Also, the Court found that because Class Defendants used so much sophistication and commercial power to communicate with their competitors clandestinely, category managers should not have been expected to detect the parallel pricing. Id. at 17.
All in all, the Court found sufficient triable issues of fact to deny Class Defendants’ motion for partial summary judgment on the federal claims. Id. at 18.
Concerning the state law—specifically here on the Kansas Restraint of Trade Act, and the South Carolina Antitrust Act—the Court had to look at how sister courts apply the doctrine of fraudulent concealment to these types of claims, if ever. Because the United States District Court for the District of Columbia held that the doctrine could be extended to toll the three-year statute of limitations governing a Kansas antitrust claim, the Court aligned and denied partial summary judgment on the Kansas antitrust law claims. Id. at 18. On the South Carolina antitrust law claims, the Court could not find a similar application. However, the Court noted that South Carolina courts have consistently relied on federal precedents in deciding cases about the South Carolina Antitrust Act. In the Court’s words, “as the federal statutory frameworks provide, and South Carolina statutory frameworks do not contradict, that statutes of limitation are universally tolled until the plaintiff knew, or reasonably should have known, the facts giving rise to a cause of action,” the doctrine of fraudulent concealment should then be extended to toll the statute of limitations of the South Carolina Antitrust Act. Id. at 19. Thus, the Court denies partial summary judgment on the South Carolina claims as well.
A similar outcome for the claims brought by direct and indirect purchasers as well as commercial food preparers
In the February 11th order, the Court followed the same reasoning as above to rule on the request for partial summary judgment brought under similar ground against the direct purchaser plaintiffs (DPP), indirect purchaser end payer plaintiffs (EPP), and consumer food preparer (CFP) plaintiffs. Class Plaintiffs have again asserted as a defense the doctrine of fraudulent concealment, for which each element was found by the Court to have sufficient triable issues of facts. In Re: Packaged Seafood Products Antitrust Litigation, February 11th, 2022, 15-MD-2670 DMS (MDD) (ECF No. 2007).
Class Defendants were in this situation trying to get summary judgment only on a portion of class periods. For example, Class Defendants argued CFPs and EFPs are time-barred from June 1, 2011, to August 24, 2014, for a State claim with a 1-year statute of limitations. In total, Class Defendants contended that 1,181 days of the class period are barred for claims with a one-year statute of limitations, 816 days for claims with a two-year statute of limitations, 451 days for claims with a three-year statute of limitations, and 85 days for claims with a four-year statute of limitations. Class Plaintiffs disagreed, arguing the doctrine of fraudulent concealment would toll the statute of limitations. Id. at 4.
Having already found triable issues of fact on the first element of the fraudulent concealment doctrine in the February 7th order, the Court did not have to discuss this element again. Id. at 5. The Court also found that its reasoning in discussing the second element of the doctrine applied in this situation too, but still cared to further discuss some of Class Defendants’ arguments. Specifically, Class Defendants alleged Class Plaintiffs had actual knowledge of the facts giving rise to the antitrust claims as early as July 2008, because class representatives have confirmed in depositions they noticed the changes in can sizing in 2008. Id. at 5. The Court found this argument to be a stretch, because EPPs—who are ordinary consumers—cannot be expected to be on notice that they should investigate the possibility of a tuna cartel based on observing cans downsizing. Id. at 7. Finally, the Court also found triable issues of fact on the third element. Id. at 8.
In both orders, the Court denied the motions for partial summary judgment because it found sufficient triable issues of fact on each element of the doctrine of fraudulent concealment, used as a defense by Class Plaintiffs to toll the statute of limitations on their state and federal antitrust law claims. It is important to underline that the Court did not decide whether the statute of limitations is effectively tolled. It will be relevant to follow future proceedings on this matter to consider whether Class Defendants were or not right in their assertion that the doctrine should not apply.
Another “Swing and a Miss” Dooms Inductor Class Action Price Fixing Complaints, By Sean Kolkey
Sean Kolkey, University of California, Berkley School of Law, J.D. Candidate 2022
In re: Inductors Antitrust Litigation, Case No., 5:18-cv-00198-EJD (N.D. Cal. Feb 3, 2022) involved a putative class action by Dependable Component Supply Corporation on behalf of electronic component distributors against a variety of Japanese electronics manufacturers. Brought under sections 15 and 26 of the Clayton Act and sections 1 and 3 of the Sherman Act, the lawsuit alleged that Defendants had conspired to fix the price of circuit board inductors, a component with a variety of uses in consumer and industrial electronics. Flextronics International opted out of the class action and instead brought a substantially similar individual claim against the manufacturers. Plaintiffs contended that the manufacturers had fixed prices in response to increased international competition brought on by the Information Technology Agreement, a 1997 international treaty that removed tariff protections on the disputed components, as well as a decline in demand following the 2001 recession. After rejecting several previous complaints and allowing ample time to sufficiently plead a case that would survive a Motion to Dismiss, Judge Davila dismissed the complaints with prejudice.
Initially, the litigation encompassed two distinct but related conspiracy allegations. The first theory alleged a broad conspiracy between a vast assortment of manufacturers, while the second was limited to only three of the manufacturer Defendants. Plaintiffs’ direct evidence of the alleged conspiracies centered around a leniency application filed by one of the Defendants, TDK, with the U.S. Department of Justice. This application contained admissions of bid rigging with regards to certain customers, and it implicated two other manufacturers, Murata and Taiyo Yuden, in the scheme. Plaintiffs also argued that confidential pricing information shared between the Defendants at meetings of the Japan Electronics and Information Technology Industries Association (“JEITA”) suggested a broader conspiracy to control prices. Plaintiffs further advanced a variety of circumstantial evidence showing that the market for inductors was conducive to a conspiracy and showed signs of coordinated parallel pricing. Plaintiffs also noted that several of the Defendants had admitted to participating in prior unrelated price-fixing conspiracies.
On January 13, 2021, Judge Davila of the Northern District of California dismissed the class action, with leave for Dependable to amend. The court reasoned that TDK’s admissions in its leniency application did not evince a larger conspiracy and were at most “circumstantial evidence of a much narrower conspiracy.” Judge Davila, citing the Ninth Circuit’s opinion in In re Musical Instruments, 798 F.3d 1186 (9th Cir. 2015),further concluded that Defendants’ “mere participation in trade-organization meetings where information is exchanged and strategies are advocated does not suggest an illegal agreement.” The court similarly found that the other circumstantial evidence put forward by Dependable did not sufficiently support its broad allegation.
In response, the Dependable amended its complaint to advance only the more refined conspiracy between the TDK, Murata, and Taiyo Yuden Defendants. Simultaneously, opt-out Plaintiff Flextronics continued to allege both the wide and narrow conspiracy. However, on February 3, 2022, the court dismissed both amended complaints. Judge Davila concluded that Dependable lacked standing because it had not sufficiently alleged that it was injured by the narrower conspiracy. Similarly, Flextronics complaint was dismissed because it still failed to sufficiently plead parallel pricing. The court concluded: “This Court has previously dismissed two other complaints and has provided Flextronics and Dependable ample opportunity to cure the deficiencies identified in those Orders. Because Plaintiffs have not remedied those deficiencies, the Court finds that amendment would be futile, and Plaintiffs’ claims are dismissed without leave to amend.”
Inclusion & Diversity Fellowship Applications Due
The Antitrust and Unfair Competition Law Section has adopted diversity and inclusion initiatives as integral components of its mission. The Section’s Executive Committee is committed to promoting diversity and inclusion in the Section’s membership and leadership. The Inclusion & Diversity Fellowship is a joint program managed by the California Lawyers Foundation and the CLA Antitrust and Unfair Competition Law Section. The Fellowship provides training, mentorship, and career opportunities for students from underrepresented groups in the legal profession, increases interest in antitrust and unfair competition law, and promotes the work of the Section. Get full details here. Applications are due March 18, 2022.
Fifth Annual Celebrating Women in Competition Law in California | March 10, 2022 @ 5:30 PM – 8:00 PM
Location: Dirty Habit, Hotel Zelo, 12 Fourth Street San Francisco, CA 94103
In a conversation moderated by the Honorable Beth Labson Freeman, a 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. Having this event in person (as opposed to virtual) is critical to the core principle of the event: to provide an opportunity for female antitrust practitioners and those who support them to be together in the same room to share experiences, stories and make connections. We’ll see you in San Francisco! All Details.
The 31st Annual Antitrust Lawyer of the Year Reception and Dinner
As you know, the Section is honoring Dan Wall of Latham & Watkins as the 2021 Antitrust Lawyer of the Year. We began celebrating with Dan in November 2021 at the Golden State Antitrust and UCL Institute (GSI). We will continue to do so on May 5, 2022 with our in-person GSI, reception and dinner. Registration details will follow.
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. Link here.
A DEEPER DIVE: Justice Department and Federal Trade Commission Seek to Strengthen Enforcement Against Illegal Mergers
The FTC and Antitrust Division have been active in challenging mergers including mergers with vertical implications and involving nascent competitors. Just recently, both Lockheed Martin and Nvidia Corp. abandoned mergers after the FTC filed challenges in court (here) (here). There is definitely a more aggressive “Sheriff” in town. You may or may not think the Sheriff’s aim is good but you have a chance to have your views known. The Agencies are considering revisions to the Merger Guidelines and have requested comments from the public. The comment period ends Monday, March 21, 2022.
Below are some excerpts from the joint FTC/DOJ press release:
“The public inquiry launched today seeks comments on developments in the modern economy and new evidence of mergers’ effects on competition to inform potential revisions to the guidelines. The agencies encourage the public, including market participants, government entities, economists, attorneys, academics, unions, employees, farmers, workers, businesses and consumers, to share feedback, evidence and ideas that may inform revisions to the guidelines. Some of the specific areas of inquiry on which the agencies are seeking public input and information include:
- Purpose and scope of merger review: The agencies seek information on whether the guidelines explain and implement the statutory ban on transactions that “may” substantially lessen competition or tend to create a monopoly, and what harms are contemplated by those standards. The agencies further seek input on whether distinctions between horizontal and vertical transactions reflected in the guidelines should be revisited in light of trends in the modern economy.
- Presumptions that certain transactions are anticompetitive: The guidelines identify certain market circumstances that justify a presumption of competitive harm based on market concentration. The agencies seek information on whether concentration thresholds should be adjusted to improve the efficiency and effectiveness of enforcement, whether alternative metrics or qualitative factors should also trigger presumptions of competitive harm, and evidence regarding the accuracy of such presumptions.
- Use of market definition in analyzing competitive effects: The agencies seek input on potential updates to the guidelines’ market definition analysis to better account for non-price competition. They also seek to input on when direct evidence of a transaction’s likely competitive effects, such as evidence of head-to-head competition, may eliminate the need for a separate market definition exercise.
- Threats to potential and nascent competition: The agencies seek input on potential updates to the guidelines’ discussion of potential and nascent competitors, which may be key sources of innovation and competition.
- Impact of monopsony power, including in labor markets: The agencies seek input on how to address the issue of buyer power in more detail in the guidelines. Labor markets are a key example of buyer power, and the agencies seek information regarding how the guidelines should analyze labor market effects of mergers.
- Unique characteristics of digital markets: The agencies seek information on how to account for key areas of the modern economy like digital markets in the guidelines, which often have characteristics like zero-price products, multi-sided markets and data aggregation that the current guidelines do not address in detail.
The Request for Information is available at https://www.regulations.gov/docket/FTC-2022-0003/document.
The comment period is open for 60 days. Comments can be submitted to regulations.gov and must be received no later than Monday, March 21, 2022. The information will be used by the agencies to consider updates and revisions to the guidelines. If such revisions are contemplated in light of the evidence received and the agencies’ independent research, the agencies will publish proposed guidelines for public comment.”
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.
Antitrust Division, US Department of Justice
To link to all Antitrust Division, DOJ press releases, click here.
- Justice Department Sues to Block UnitedHealth Group’s Acquisition of Change Healthcare
February 24, 2022
Acquisition Would Allow Health Care Giant to Use Competitively Sensitive Claims Data of Hundreds of Millions of Americans to Reduce Competition and Innovation to the Detriment of Health Insurance Consumers
The Department of Justice, together with Attorneys General in Minnesota and New York, filed a civil lawsuit today to stop UnitedHealth Group Incorporated (United) from acquiring Change Healthcare Inc. (Change). The complaint, filed in the U.S. District Court for the District of Columbia, alleges that the proposed $13 billion transaction would harm competition in commercial health insurance markets, as well as in the market for a vital technology used by health insurers to process health insurance claims and reduce health care costs.
- Department of Justice Announces Initiative to Protect Americans from Collusive Schemes Amid Supply Chain Disruptions
February 17, 2022
In the wake of persistent price increases initially stemming from supply chain disruptions caused by the COVID-19 global pandemic, the Antitrust Division and the FBI announced an initiative today to deter, detect and prosecute those who would exploit supply chain disruptions to engage in collusive conduct.
- Justice Department and U.S. Department of Agriculture Launch Online Tool Allowing Farmers, Ranchers to Report Anticompetitive Practices
February 3, 2022
“[T]he U.S. Departments of Justice and Agriculture (USDA) launched farmerfairness.gov, a new online tool that allows farmers and ranchers to anonymously report potentially unfair and anticompetitive practices in the livestock and poultry sectors. The launch of the new portal will advance the goals of Biden-Harris Administration’s Action Plan for a Fairer, More Competitive, and More Resilient Meat and Poultry Supply Chain, including by creating more competitive agricultural markets that are fairer to producers and consumers.”
- Former Engineering Executive Convicted of Rigging Bids and Defrauding North Carolina Department of Transportation
February 1, 2022
“Following a week-long trial in the U.S. District Court for the Eastern District of North Carolina, a jury convicted Brent Brewbaker, a former Contech executive, for participating in conspiracies to rig bids and submit false certifications of non-collusion for more than 300 aluminum structure projects funded by the state of North Carolina between 2009 and 2018. Evidence showed that Brewbaker instructed a co-conspirator to submit non-competitive bids to NCDOT and to hide his bid rigging and fraud by varying the number of inflated bids submitted. He also made clear to a co-conspirator that he would hide illegal conduct by deleting text messages he received about the conspiracy.”
- Four Individuals Indicted on Wage Fixing and Labor Market Allocation Charges
January 28, 2022
“A federal grand jury in Portland, Maine, returned an indictment charging four managers of home health care agencies with participating in a conspiracy to suppress the wages and restrict the job mobility of essential workers during the COVID-19 pandemic.
According to the one-count felony indictment filed yesterday in the U.S. District Court for the District of Maine, four Portland residents: Faysal Kalayaf Manahe; Yaser Aali; Ammar Alkinani; and Quasim Saesah — all owners and/or managers of home health care agencies — conspired to eliminate competition for the services of Personal Support Specialist (PSS) workers by agreeing to fix the rates paid to these workers and by agreeing not to hire each other’s workers. This indictment is the first in this ongoing investigation into wage fixing and worker allocation schemes in the PSS industry.”
Federal Trade Commission
- Administrative Law Judge Dismisses FTC Antitrust Complaint against Altria Group and JUUL Labs, Inc.
February 24, 2022
“The FTC’s April 2020 complaint alleged that Altria and Juul entered a series of agreements, including Altria’s acquisition of a 35% stake in JUUL, that eliminated competition in violation of federal antitrust laws. According to the complaint, this series of agreements involved Altria ceasing to compete in the U.S. market for closed-system electronic cigarettes in return for a substantial ownership interest in JUUL, by far the dominant player in that market.
Judge Chappell concluded that Complaint Counsel failed to demonstrate both the anticompetitive effects of the non-compete provision, and a reasonable probability that Altria would have competed in the e-cigarette market in the near future, through marketing a competing product independently, or through collaboration or acquisition.”
- FTC Requests Public Comments on the Impact of Pharmacy Benefit Managers’ Practices
February 24, 2022
“The Federal Trade Commission announced it is soliciting public input on the ways that practices by large, vertically integrated Pharmacy Benefit Managers’ (PBMs) are affecting drug affordability and access. The Request for Information covers a wide range of issues in the PBM market, including contract terms, rebates, fees, pricing policies, steering methods, conflicts of interest, and consolidation. The agency seeks information on these practices and their impact on patients, physicians, employers, independent and chain pharmacies, and other businesses across the distribution system.”
- FTC and Rhode Island Attorney General Step in to Block Merger of Rhode Island’s Two Largest Healthcare Providers
February 17, 2022
“The Federal Trade Commission has authorized an administrative complaint, and authorized a suit in federal court, to block the proposed merger of Rhode Island’s two largest healthcare providers, alleging the deal would lead to higher prices and lower quality care. The FTC, jointly with the Rhode Island Office of the Attorney General, will file a complaint in federal district court seeking a temporary restraining order and preliminary injunction to stop the deal and to maintain the status quo pending an administrative trial on the merits of the case.”
- Statement Regarding Termination of Lockheed Martin Corporation’s Attempted Acquisition of Aerojet Rocketdyne Holdings Inc.
February 15, 2022
“In response to the announcement that Lockheed Martin Corporation has terminated its proposed acquisition of Aerojet Rocketdyne Holdings Inc., FTC Bureau of Competition Director Holly Vedova issued this statement:
“I am pleased that, for the second time in the span of a week, merging parties have abandoned an anticompetitive vertical transaction in the face of an FTC challenge. Lockheed Martin announced two days ago that it would terminate its attempt to acquire Aerojet Rocketdyne. The acquisition would have eliminated the country’s last independent supplier of key missile propulsion inputs and given Lockheed the ability to cut off its competitors’ access to these critical components.”
- Statement Regarding Termination of Nvidia Corp.’s Attempted Acquisition of Arm Ltd.
February 14, 2022
“In response to the announcement that Nvidia Corp. (Nvidia) has terminated its proposed acquisition of Arm Ltd. (Arm) from SoftBank Group Corp., FTC Bureau of Competition Director Holly Vedova issued this statement:
“More than two months into its litigation with the FTC, Nvidia this week announced that it would abandon its acquisition of Arm. The termination of what would have been the largest semiconductor chip merger will preserve competition for key technologies and safeguard future innovation. This result is particularly significant because it represents the first abandonment of a litigated vertical merger in many years.”
- Revised Jurisdictional Thresholds for Section 7A of the Clayton Act
January 24, 2022
SUMMARY: The Federal Trade Commission announces the revised thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 required by the 2000 amendment of Section 7A of the Clayton Act.
California Department of Justice
For a complete list of California AG press releases click here.
OTHER NEWS AND NOTES
- FTC Has The “Help Wanted” Sign Out
The FTC is hiring a number of early career attorneys to beef up its enforcement effort in the FTC’s Bureau of Competition. The FTC calls the hiring “Continuous.” Complete information about these openings can be found here.
- Companies Embracing Diversity Are Reaping the Benefits Like Never Before
“The CEO Magazine has coined the term ‘kaleidoscope companies’ to describe the new breed of organisations that don’t just pay lip service to the issue with table tennis tables, funky coloured walls and Taco Tuesdays, but enshrine it in their core values.
They proactively seek to eliminate the gender pay gap, increase racial diversity at board level, publicly support LGBTIQA+ causes, offer generous packages for new mums, seek ways to employ more disabled workers and invest in comprehensive training programs to facilitate internal promotions and upskilling.”
- National Association of Law Placement (NALP) 2021 Report on Diversity in U.S. Law Firms
“There are many things to celebrate in NALP’s latest Report on Diversity in U.S. Law Firms, and there is much that should give the industry pause and continue to challenge all of us to do better, but on balance I’m going to take an uncharacteristically upbeat approach in describing the most important findings that I see in this year’s data analyses. Chief among those findings are the gains made at the summer associate level in the representation of women, summer associates of color, and LGBTQ summer associates.” Commentary and Analysis, by James Leipold, Executive Director, pages 2-3.