Antitrust and Unfair Competition Law

E-BRIEFS, NEWS AND NOTES: APRIL 2024

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WELCOME to the APRIL 2024 edition of E-Briefs, News and Notes.

This edition has a variety of content:

In SECTION NEWS, we feature:

  • MONTHLY SECTION MESSAGES:
    • Celebrating the Growth of the Section’s Fellowship Program and Launch of our Mentorship Program!
  • Section Announcements:
    • COMPETITION JOURNAL: Submit an article or abstract by April 30 for our fall 2024 edition!
    • SAVE THE DATES: Summer Mixers in San Francisco (June 20) and Los Angeles (July 11)!
    • Job Postings
  • E-BRIEFS features a record mix of six significant decisions including its first submission of separate E-Briefs by mother and daughter:
    • First, an E.D. Cal. ruling that the Sherman Act applied to land sales and that Plaintiff had antitrust standing and sufficiently alleged a price-fixing conspiracy;  
    • Second, a detailed summary of similar DOJ Statement(s) of Interest submitted in three different cases to argue against dismissal of ongoing algorithmic price-fixing litigations;
    • Third, a Ninth Circuit affirmance of an N.D. Cal. order certifying a Rule 23(b)(3) damages class but vacating and remanding certification of a 23(b)(2) injunction class in an electronic platform case;
    • Fourth, clarification by the Second Circuit of market definitions for functionally equivalent products and of a patents’ scope for determining markets;
    • Fifth, an N.D. Cal. denial of a motion to dismiss by a social network defendant in an alleged monopoly case; and
    • Finally, a D. Nev. order resolving two summary judgment motions and a motion to dismiss brought by two newspaper organizations in a Section 1 action.

From your E-Brief Family, thank you to Cheryl Johnson and daughter Morgan Marmaro for E-Briefs’ first mother and daughter submissions!

Cheryl Johnson and her daughter
  • ENFORCEMENT AGENCY PRESS RELEASES highlight the enforcement activities of the Antitrust Division, DOJ, FTC, and California AG’s office. This month, we also include a release from the EU Office in San Francisco. Reading the press release(s) is a quick way to keep on top of major developments.

Thanks to all the contributors to this edition. If you have any suggestions for improvement, or an interest in contributing to E-Briefs, please contact Editors Betsy Manifold and James Dallal.

SECTION NEWS

Monthly Section Message

Celebrating the Growth of Our Fellowship Program and Launch of Our Mentorship Program!

Four years ago, the Antitrust and Unfair Competition Law Section started the Inclusion and Diversity Fellowship Program to encourage law students from diverse backgrounds to join the practice of antitrust and unfair competition law and increase the level of diversity in these fields. The Section’s Diversity Committee manages the year-long program and celebrates its expansion with a second Fellowship award this year. The Fellowship includes a stipend and summer internship with the California Attorney General’s Office in the Antitrust Section and Competition Unit of the Healthcare Rights and Access Section. We are about to welcome our fourth class of Fellows and congratulate Catalina Martinez-Baenen on completing her successful term as our 2023-2024 Fellow. The program continues to attract exceptional and growing applicant pools year-over-year, and generous sponsorships have supported its expansion.

Building on our mission to increase the participation and visibility of diverse and underrepresented lawyers in our practices, the Committee is pleased to announce the launch of our Mentorship Program, which pairs newer attorneys and law students interested in pursuing careers in antitrust and unfair competition law with more experienced attorney mentors. The goal of the program is to facilitate meaningful professional connections between mentors and mentees. Mentorship can play an important role at any stage of career or student life. We encourage you to apply to become either a mentor or mentee and join our diverse and inclusive network.

The positive impact of our work is only possible because of your support in promoting the next generation of antitrust and unfair competition practitioners and leaders. We are proud to introduce two such individuals, our 2024-2025 Inclusion and Diversity Fellows, Iman Eslami and Karla Lora!

2024-2025 Inclusion & Diversity Fellows

Iman Eslami (UC Berkeley Law School, Class of 2026)

“I will be the first member of my family to become a lawyer and I hope to use my experience in finding my identity as inspiration to add empathy to the legal profession. . . I now recognize the power I have as a future lawyer to make sure American consumers are protected.”

Iman Eslami

Karla Lora (University of San Diego School of Law, Class of 2026)

“By breaking the mold and venturing into areas traditionally underrepresented by individuals from marginalized backgrounds, we can challenge stereotypes and contribute to a more equitable distribution of voices within the legal field.”

Karla Lora

Malinda Lee
Chair, Diversity Committee

https://calawyers.org/antitrust-unfair-competition-law/e-briefs-news-and-notes-april-2024/

SECTION ANNOUNCEMENTS

Competition Call for Journal Articles!

Competition Journal

Competitionis accepting article and abstract submissions for its fall 2024 edition through April 30. Articles may address new developments, simmering debates, unresolved questions, economic analysis, or rising trends in public or private enforcement. Further details and submission guidelines may be found at competition.scholasticahq.com/for-authors.

SAVE THE DATE: Summer Mixers

The Section will be hosting happy hour mixers in San Francisco (June 20) and Los Angeles (July 11) for junior and summer associates. The mixers are designed to connect law students and new lawyers with an interest in antitrust and/or consumer protection law with law firms, public agencies, law departments, or economic consulting firms for potential summer positions or job opportunities.

Guests at the mixers will enjoy light bites and drinks. These mixers aim to introduce students to like-minded peers, as well as established members of the California antitrust and unfair competition bar and specialist economists in a fun and relaxing environment.

Job Postings

E-Briefs

Flannery Associates LLC v. Barnes Family Ranch Associates, LLC, No. 2:23-cv-0097-TLN-AC, 2024 WL 1344663 (E.D. Cal. Mar. 29, 2024)
Cheryl Johnson

By Cheryl Johnson

Flannery Associates was purchasing large properties above the fair market value in Solano County to build a “workable sustainable community.” Flannery complained that defendant Solano landowners began sharing confidential information about Flannery’s price negotiations and conspired to charge supracompetitive prices for their Solano properties. In rejecting the defendant landowners’ motion to dismiss Flannery’s price fixing complaint, the court ruled that the Sherman Act applied to land sales, that Flannery had antitrust standing, and a price fixing conspiracy was sufficiently alleged.

 Land and the Sherman Act. Defendants argued that land is not the type of commoditized product that the Sherman Act regulates. 2024 WL 1344663, at *4. But no cases limited Sherman Act regulation to agreements regarding commodities or certain industries; “horizontal price-fixing conspiracies are a per se violation of the Sherman Act, regardless of the industry in which the conduct occurred.” Id. at *5.

Antitrust Standing. Defendants defended their joint positions on land sales to Flannery as “beneficial or neutral to competition because this conduct prevented plaintiff from establishing a monopolistic ownership of Solano County land.” Id. at *6. However, standing assesses the effect on competition of the defendant’s—not the plaintiff’s—conduct. Id. Rather, Defendants’ efforts to raise prices for Solano land presents the “kind of harm the antitrust laws were designed to prevent.” Id. Moreover, the injuries alleged which included overpayments for lands purchased from third parties and lost profits, were found sufficiently direct and nonspeculative. Id. at *7-8.

Evidence of Horizontal Price Fixing. Flannery alleged sufficient direct and indirect evidence of an illegal pricing agreement, including “plus factors” consisting of a common motive to “make hundreds of millions,” actions in turning down above market offers from Flannery, and the exchange of non-public information about Flannery’s pricing and negotiation strategies. Id. at *10-11.

State Law Claims. Flannery’s Cartwright Act and UCL claims were sustained as the Sherman Act claim was found sufficient and “Defendants have provided no arguments specific” to the Cartwright claim and the UCL claim was “entirely derivative” of the Cartwright claim. Id. at *11-12.

DOJ Statements of Interest, Karen Cornish-Adebiyi v. Caesars Entertainment, Inc., No. 1:23-cv-02536 (N.J. 2024); McKenna Duffy v. Yardi Sys., No. 2:23-cv-01391 (W.D. WA 2024); In re: RealPage, Rental Software Antitrust Litigation, No. 3:23-MD-3071 (M.D. TN 2023)
Morgan Marmaro

By Morgan Marmaro

The DOJ Statement of Interest bundles together three similar Statements – Karen Cornish-Adebiyi v. Caesars Entertainment, Inc. (“Caesars”), In re:RealPage Rental Software Antitrust Litigation (“RealPage”), and McKenna Duffy v. Yardi Sys. (“Yardi”) – to argue against Motion to Dismiss arguments in ongoing algorithmic price fixing litigations. Each case involves allegations of price fixing through the vehicle of an algorithmic pricing software. DOJ’s central argument is that if a certain type of coordination is unlawful, that same coordination via algorithm is also unlawful.

Caesars alleges that Casino-Hotels unlawfully agreed to use the Rainmaker pricing platform to “set prices while knowing and precisely because all other Casino-Hotel Defendants had agreed to do the same.” DOJ Statement of Interest, Karen Cornish-Adebiyi v. Caesars Entertainment, Inc., No. 1:23-cv-02536, at 2 (N.J. 2024). The Defendants have most recently moved to dismiss the case. Id.

RealPage involves two complaints that allege (1) large landlords used RealPage software pricing recommendations to raise multifamily housing prices, and (2) similarly to “artificially inflate the prices of student housing.” Memorandum of Law in support of the Statement of Interest of the United States, In re: RealPage, Rental Software Antitrust Litigation, No. 3:23-MD-3071, at 2-3 (M.D. TN 2023). The complaint alleges that RealPage unlawfully combined competing landlords’ decision making on housing prices by feeding competitively sensitive data into a common algorithm that used these common data to singularly generate forward-looking, unit-specific pricing and supply recommendations.

Yardi similarly alleges that competing landlords unlawfully agreed “to use Yardi’s pricing algorithms to artificially inflate” multifamily rental prices. DOJ Statement of Interest, McKenna Duffy v. Yardi Sys., No. 2:23-cv-01391, at 1-2 (W.D. WA 2024).

Algorithmic Price Fixing is a Sherman Act Section 1 Per Se Violation. With price fixing as a “supreme evil” of antitrust, DOJ asserts the analysis does not differ “simply because a software algorithm is involved.” Memorandum of Law in support of the Statement of Interest of the United States, In re: RealPage, Rental Software Antitrust Litigation, No. 3:23-MD-3071, at 15 (M.D. TN 2023) (citing Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 408 (2004); Catalano, Inc. v. Target Sales, Inc., 446 U.S. 643, 647 (1980) (describing horizontal price fixing as the “archetypal” per se violation).) As price fixing mechanisms have evolved with technology in the 133 years since the Sherman Act’s prohibition on price fixing, algorithms are the new frontier. “[G]iven the amount of information an algorithm can access and digest, this new frontier poses an even greater anticompetitive threat than the last.” DOJ Statement of Interest, In re: RealPage, Rental Software Antitrust Litigation, No. 3:23-MD-3071, at 1-2 (M.D. TN 2023). The Department also cites to Supreme Court precedent that states “the machinery employed by a combination for price-fixing is immaterial.” Id. at 223 (citing United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 223-24 & n.59 (1940)).

Fixing Pricing Floors is also Per Se Illegal. The Ninth Circuit held that using a “fixed uniform list price . . . as a starting point[] is of no consequence” because it prevents free competition from determining prices. DOJ Statement of Interest, Yardi, No. 2:23-cv-01391, at 5 (W.D. WA 2024). The Second and Seventh Circuits have similarly held list prices as per se violations. Id. at 5-6. DOJ asserts these same principles apply to joint delegation of pricing recommendations to a common algorithm.

Formal Agreements are Not Required to Prove Concerted Action. Concerted action is a central element of a Section 1 claim and notes that “[n]o formal agreementis necessary.” DOJ Statement of Interest, Caesars, No. 1:23-cv-02536, at 4 (N.J. 2024) (citing Am. Tobacco Co. v. United States, 328 U.S. 781, 809 (1946)). As an agreement can be express or tacit, id. (citing White v. R.M. Packer Co., 635 F.3d 571, 575-76 (1st Cir. 2011)), the DOJ argues a Sherman Act agreement covers any type of conduct that centralizes separate decision makers and does not require a showing of competitor-to-competitor communications. 

Ninth Circuit Affirms Certification of Damages Class and Vacates Certification of Injunction Class in UCL Suit Against Meta
Wesley Sweger

By Wesley Sweger

DZ Rsrv. v. Meta Platforms, Inc., 96 F.4th 1223 (9th Cir. 2024)

On March 21, 2024, the Ninth Circuit affirmed a N.D. Cal. (Judge Donato) order certifying a Rule 23(b)(3) damages class and vacated and remanded certification of a 23(b)(2) injunction class in a case against Meta Platforms, Inc. (“Meta”) (f/k/a Facebook).

In 2018, a nationwide class of advertisers (“Plaintiffs”) filed this action against Meta, alleging that Meta had misrepresented the “Potential Reach” of advertisements on its platforms. “Meta owns and operates several online social media and messaging platforms and applications, including Facebook, Instagram, and WhatsApp.” (p. 1231.) “Meta tells advertisers that ‘Potential Reach estimates how many people your ad could potentially reach depending on the targeting and ad placement options you select while creating an ad.’” (Id.) Advertisers allege that Meta fraudulently misrepresented the Potential Reach of advertisements on its platforms because Meta claimed Potential Reach was an estimate of people, although it was an estimate of accounts. “[T]hroughout the class period, the number of accounts was always larger than the number of people because non-human entities like businesses and clubs have accounts, some people have multiple accounts, and some people and bots create fake accounts.” (Id.) “Plaintiffs allege that because of the misrepresentation of Potential Reach, they purchased more Meta advertisements and paid more for those advertisements than they would have with accurate information.” (Id.)

The district court sustained three of Plaintiffs’ claims under California state law: fraudulent misrepresentation, fraudulent concealment, and violation of California’s Unfair Competition Law (“UCL”). The district court certified two classes—a damages class and an injunction class—both composed of U.S. residents who purchased at least one advertisement on Meta’s platforms from August 15, 2014 to the present, excluding advertisers who used certain specialized purchasing methods or who were shown a Potential Reach lower than 1,000. Meta appealed certification of both classes of advertisers—a damages class and an injunction class.

Damages Class. Meta challenged only the district court’s findings regarding the predominance of common factual or legal issues under Rule 23(b)(3) and typicality and adequacy of representation under Rule 23(a)(3) and (4).

Predominance

The Court found Meta only legitimately challenged the district court’s findings that misrepresentation and justifiable reliance—both elements of Plaintiffs’ fraudulent concealment and fraudulent misrepresentation claims—are common issues that predominate among the class.

First, misrepresentation. The Court noted it generally categorizes a misrepresentation as falling into one of two groups to determine whether the misrepresentation presents a common question: (1) misrepresentation stemming from a common course of conduct, or (2) if there was material variation in the representations made or in the kinds or degrees of reliance by the persons to whom they were addressed.

Meta raised three arguments for why misrepresentation did not constitute a common course of conduct. First, it argued “the misrepresentation is the numerical discrepancy between people and accounts, rather than the fact that [it] substituted people for accounts.” (p. 1234.) Thus, Meta argued, the misrepresentation materially varied because the numerical discrepancy differed for each advertiser. The Court found Meta misstated the nature of the misrepresentation at issue and found the common issue to be: “Would substituting people for accounts in Potential Range be material to the reasonable consumer?” (p. 1235.)

Second, Meta also argued the misrepresentation was not uniform because Plaintiffs viewed Potential Reach alongside other metrics. The Court was not persuaded, pointing to a series of decisions finding class treatment appropriate despite similar, if not larger, contextual differences between members.

Lastly, Meta argued that “any misrepresentations differed among class members because it updated its disclosures about Potential Reach twice during the class period.” (p. 1236.) The Court found that “none of the disclosures here negated the misrepresentation, which would have required a clear statement that Potential Reach measures accounts.” (Id.)

Therefore, the Court found the misrepresentation to constitute a common course of conduct and was thus fit for class treatment.

Next, justifiable reliance. The Court noted California presumes reliance when the same material misrepresentations are communicated to each member of the class. Meta argued that, despite this presumption, reliance is always an individual inquiry. The Court rejected this argument, noting the purpose of the presumption is to “avoid precluding all fraud class actions.” (p. 1237.) Thus, the Court found reliance presents a common question provable by common evidence.

Typicality and Adequacy of Representation

Meta argued “the named Plaintiffs are not typical or adequate because they suffer from credibility problems that expose them to individualized defenses related to reliance.” (p. 1238.) The Court noted its standard of view here is clear error, and the record supports the district court’s conclusion that the named Plaintiffs have no credibility issues that would destroy their typicality.

Accordingly, the Court affirmed class certification.

Injunction Class. Meta appealed the district court’s order certifying an injunction class on the basis that the named Plaintiffs lack Article III standing to seek injunctive relief under California’s UCL. The named Plaintiffs are two former Meta advertisers, DZ Reserve (an e-commerce business) and Cain Maxwell (who operated an online firearm mount store). Meta argued lack of subject-matter jurisdiction for the first time on appeal.

DZ Reserve is no longer in business. Thus, DZ Reserve did not submit any evidence of a threat of suffering “actual and imminent” future injury that was concrete and particularized, and that could be redressed by injunctive relief. Nor did DZ Reserve demonstrate a sufficient likelihood that it would again be wronged in a similar way. The Court found DZ Reserve lacks standing to assert a claim for injunctive relief.

The Court found Maxwell’s standing to be a closer call and may require additional factual development. Specifically, the Court remanded questions as to how the district court would square Maxwell’s testimony that he “think[s] [he] would” purchase Meta ads in the future, with evidence suggesting Maxwell no longer has a business to advertise. (p. 1241.)

Therefore, the Court vacated and remanded certification of the injunction class.

Regeneron Pharmaceutical, Inc. v. Novartis Pharma AG
Travis West

By Travis West and Lee Berger

In Regeneron Pharmaceuticals, the Second Circuit clarified market definitions for functionally equivalent products and the scope of patents for determining markets. The case arose from a dispute between Regeneron on one side and Novartis and Vetter on the other. Regeneron and Novartis both produce drugs to treat the overproduction of vascular endothelial growth factor, which can lead to blindness. Both originally produced their drugs in vial form from which doctors would fill a syringe and then inject into the patient’s eye. This method, though, was prone to contamination and complications, which led both companies to focus on developing prefilled syringes. Regeneron, in 2005, partnered with Vetter to develop a prefilled syringe version. In 2009, though, Vetter entered into a similar agreement with Novartis. Novartis eventually obtained a patent in 2015 for a prefilled syringe version of its treatment. Vetter’s role in the development effort was concealed from Regeneron and the PTO through leaving Vetter off the patent and hiding its material contributions to the patent. Regeneron alleged that after obtaining the patent, both Vetter and Novartis took steps to delay Regeneron’s release of a prefilled syringe version until 2019, costing it hundreds of millions in sales.

Regeneron sued alleging Walker Process fraud, monopolization, and tortious interference with its contract with Vetter. The district court dismissed, holding that because the non-prefilled syringe version and prefilled syringe versions were functionally similar, they were in the same market and thus Regeneron’s market definition, which included only the prefilled syringe version, failed. It also disagreed that the defendants should be equitably estopped from pleading a statute of limitations defense to the tortious interference claim.

The Second Circuit panel reversed in the entirety. First, it rejected the district court’s contention that vial, and prefilled syringe treatments were in the same market because they used the same medication. While Regeneron argued that the market consisted of only the prefilled syringes, the defendants argued that the market should contain both the prefilled syringes and vials, as they were the same medication and patients could switch between them if prices rose for the prefilled syringes. The district court found this argument persuasive and the issue was dispositive: If vials were in the market, Regeneron would not have sufficient market share to be considered a monopolist. The appellate panel faulted the district court for focusing too much on the functional similarity and not the lack of economic similarities. The panel found it important that 80% of patients had switched from the vial version to the prefilled syringe treatment within six months of the release of the prefilled syringe treatment. They noted that physicians strongly prefer prefilled syringes, and a small but significant price increase would not cause substitution.

Second, the panel rejected the dismissal of the Walker Process claims based on the overlap between Regeneron’s proposed market and the protection afforded to Novartis by its patent. The district court had construed Regeneron’s argument as being that the antitrust market was coextensive with the patent, which would mean all patents immediately confer complete monopoly power. The panel held, instead, that the appropriate question is whether there are effective substitutes which do not infringe the patent. The panel said that the district court should have considered whether Regeneron properly pled that the patent was fraudulently obtained and whether the defendants used that fraudulently obtained patent to acquire market power in the relevant market.

Finally, the panel reversed the district court’s rejection of Regeneron’s tortious interference claim.  Novartis and Vetter had argued that Regeneron brought the claim after the relevant statute of limitations; Regeneron had responded that they were equitably estopped from making that argument, as they had fraudulently concealed their misconduct. The district court had rejected this fraudulent concealment theory because the concealment was directed at the community at large, not just Regeneron. The panel found no support for this theory in New York law and reversed.

Plaintiffs in monopolization cases will readily employ this decision to emphasize that functional similarities are not enough to render two products in the same market. Instead, they will argue, economic factors such as whether a price increase would lead to switching, must be considered, along with other practical indicia mandated by Brown Shoe. Next, the decision is a reminder that some courts have found that market definition at the motion to dismiss stage does not need to be exact and is to a certain extent uncertain. Plaintiffs will surely cite this decision to argue that courts should be lenient with market definitions and reluctant to dismiss based on a market definition. Finally, plaintiffs will find that detailed factual allegations, even if not necessarily required, can help both at the district court level and on appeal, as they helped Regeneron here.

N.D. Cal. Allows LinkedIn Monopoly Case to Go Forward
Lillian Grinnell

By Lillian Grinnell

Facts. In Crowder et al v. LinkedIn Corp., filed by a proposed class of consumer plaintiffs in January 2022, Judge Haywood Gilliam recently denied the social network’s motion to dismiss.

The plaintiffs, a proposed class of LinkedIn Premium subscribers, asserted that LinkedIn held a monopoly in the professional social networking market, allowing it to set prices free from competitive pressure and thus overcharge for the Premium subscription. This monopoly, the plaintiffs contended, was protected by barriers to entry including LinkedIn’s “data centralization, machine learning models, and resulting trove of inferred data”; as well as anticompetitive conduct that includes the selling of private user data to selected third parties in exchange for non-compete agreements, and the integration of its user data with Microsoft’s Azure cloud computing platform.

In its motion to dismiss, LinkedIn argued that the allegation regarding the selling of user data to third parties was speculative and based on a single 2019 blog post. But Judge Gilliam disagreed, pointing out that the complaint had identified the alleged third parties, some of whom would have been able to compete with LinkedIn but for the non-compete agreements. LinkedIn’s arguments by contrast were “fact-based” and thus premature.

Moreover, the plaintiffs had adequately shown harm to competition through the allegation that without the noncompete agreements, “competitors would enter LinkedIn’s market and erode its profits and market share with price competition.” Slip Op. at 6, quoting FAC ¶ 3.

Analysis. It will be interesting to see what the impact is of this case on other social networking companies that may engage in similar kinds of user data sharing agreements, though LinkedIn’s premium subscription model is a fairly unique factor in the space.

Nevada District Court finds newspaper joint operating agreement enforceable and concludes that the Las Vegas Sun alleged a tacit agreement in violation of the Sherman Act
David Lerch

By David Lerch

On March 31, 2024, the Nevada District Court entered an order resolving summary judgment motions and motions to dismiss by two Las Vegas newspaper organizations – the Las Vegas Sun and the Las Vegas Review – arising out of their joint operating agreement (JOA). This type of agreement arises out of the 1970 Newspaper Preservation Act (NPA), which provided limited antitrust immunity for newspapers after Supreme Court decisions finding antitrust liability for these types of arrangements. The court in Las Vegas Sun, Inc. v. Sheldon Adelson, et al., Case No. 2:19-cv-01667-ART-MDC (D. Nev. March 31, 2024) found that the JOA was enforceable but concluded that the Las Vegas Sun had alleged a tacit agreement in violation of Section 1 of the Sherman Act involving Adfam, the Sheldon Adelson family office.

Background. In 1989, the Las Vegas Review-Journal (“RJ”) and the Las Vegas Sun, Inc. entered a joint operating arrangement. The 1989 JOA included the following provisions: (1) the Sun agreed to dispose of its publishing infrastructure; (2) the RJ was to print the Sun although the RJ and Sun were sold and distributed separately except for joint publications on weekends and holidays; (3) the RJ was responsible for handling the production, circulation, and print advertising functions for both newspapers; (4) editorial expenses were allocated between the two newspapers pursuant to a percentage allocation; (5) promotion activity expenses were also allocated according to a percentage allocation; and (6) the parties agreed to share in the operation’s operating profit with a fixed percentage (Order at 2).

The JOA was amended in 2005, such that the two newspapers were no longer sold and distributed separately, but instead distributed together in a bundle (Order at 3). The Sun received an annual payment based on profits instead of a percentage split (Order at 3). The 2005 JOA provided that each newspaper bear their own editorial costs (Order at 3). Under the 2005 JOA, the RJ was granted the power to determine the rates for, solicit, and sell advertising space in the newspapers and the JOA required the parties to preserve high standards of newspaper quality (Order at 4).

In 2014, the Sun filed a state court action alleging that the RJ violated the JOA by charging its editorial and promotional costs against the joint operation (Order at 4). The Sun filed a federal action against the RJ in Nevada District Court in September 2019 and in the First Amended Complaint alleges claims under Section 2 of the Sherman Act (monopolization, attempted monopolization, and conspiracy to monopolize), section 7 of the Clayton Act, Section 1 of the Sherman Act, and Nevada’s Unfair Trade Practices Act (Order at 5).  The RJ asserted counterclaims under Section 2 of the Sherman Act (monopolization and attempted monopolization), Section 1 of the Sherman Act and Nevada common law (breach of contract, breach of the implied covenant of good faith and fair dealing, and tortious interference with contractual relations) and multiple affirmative defenses (Order at 5).

The Court found that the 2005 JOA was enforceable. As the Court noted, a JOA is a contract between newspapers to consolidate operations. See Michigan Citizens for an Independent Press v. Thornburgh, 868 F.2d 1285, 1287-88 (D.C. Cir. 1989). “Typically, a JOA involves one of the newspapers selling off its printing equipment and other assets in order to reduce costs.”  (Order at 13-14). “Papers enter JOAs in order to preserve editorial competition in their region, rather than let a failing paper go out of business and expose the surviving paper to antitrust liability” (Order at 14).

Congress enacted the Newspaper Preservation Act in 1970 in response to Supreme Court decisions limiting circumstances in which newspapers could legally enter JOAs (Order at 14), citing Citizens Publishing Co. v. United States, 394 U.S. 131 (1969). The Court noted  that “[t]o that end, the NPA provides limited antitrust immunity for parties to JOAs that comply with the NPA’s provision; such immunity is important because without it, the parties to a JOA could violate antitrust laws.”  (Order at 14); citing Michigan v. Citizens for an Independent Press, 868 F.2d at 1287 (“The [NPA] creates an exemption to the antitrust laws that permits a joint newspaper operation agreement between two newspapers . . . .”).

The Court concluded that the NPA did not require signatures to amend existing JOAs concluding that “[o]nly new JOAs, those ‘not already in effect,’ require ‘prior written consent of the Attorney General,’” citing 15 USC 1803(b) (Order at 16) and courts have recognized that an amended JOA does not require prior written consent of the AG.  The Court noted that 2005 JOA was subject to a multi-year review process including CIDs, interrogatory responses, and depositions (Order at 17). The Court concluded that the material elements of the 1989 JOA that had eliminated price and other non-editorial and non-reportorial competition, which were previously approved by the Attorney General, remained the same in the 2005 JOA, and so found that the 2005 JOA was enforceable (Order at 18-19).

The Court concluded that the Las Vegas Sun Alleged A Tacit Agreement Under Section 1 of the Sherman Act. The Court concluded that the Las Vegas Sun alleged a tacit agreement in violation of Section 1 of the Sherman, given allegations that Sheldon Adelson’s family office (“Adfam”) was a separate economic entity under Copperweld doctrine than the other co-defendants, including the Las Vegas Review Journal, and that the complaint alleged “plus factors” showing behavior inconsistent with Adfam acting unilaterally in its own economic interest. 

RJ moved to dismiss or strike the Sun’s repleaded Sherman Act Section 2 and Clayton Act Section 7 claims as immaterial or impertinent under FRCP 12(f) and moved to dismiss Adfam (Order at 6).  The court concluded that there was no need for Sun to replead claims that were dismissed with leave to amend solely for appellate preservation purposes and therefore struck those claims (Order at 7).

As to RJ’s motion to dismiss the Sun’s Sherman Act 1 based on the Copperweld doctrine, the Sun alleged that Adfam is a small company whose sole purpose “is to benefit and promote the business and personal interests of the Adelson family” (Order at 8). The Court concluded that under the Copperweld doctrine, the Sun had alleged that Adfam and its codefendants were separate economic entities with distinct interests (Order at 8). In particular, the Sun alleged that Adfam’s business mission was to provide professional services to support the Adelson family and members’ personal and business interests (Order at 9-10).

After concluding that Adfam was a distinct entity under Copperweld, the Court concluded that Sun alleged a tacit agreement under Section 1 of the Sherman Act (rather than an explicit agreement). In particular, the Court concluded that Sun pled several plus factors sufficient to state a claim given parallel behavior inconsistent with Adfam unilaterally acting in its own self-interest, namely that Adfam acted solely in the interest of the RJ to further its anticompetitive scheme by: (1) allowing its CFO to serve as RJ’s only corporate officer; (2) advising the Adelson family on its purchase of the RJ; (3) participating in the redesign of the shared front page; and (4) involving itself in the RJ’s finances, including by weighing in on the RJ’s financial and operations decisions (Order at 11).  The Court therefore denied the MTD as to the Sherman Act Section 1 claim (Order at 11).

The Court denied RJ’s motion for summary judgment as to antitrust injury. For purposes of antitrust injury, the Court adopted the relevant market which the Sun alleged in its complaint, namely the sale of local daily newspapers in Clark County, Nevada (Order at 21). The Sun argued that editorial and reportorial competition amongst newspapers is economic competition under antitrust laws while the RJ argued that editorial and reportorial competition is not commercial competition (Order at 21-22).

Applying the Brown Shoe factors, the Court concluded there was a triable issue of fact as to whether the RJ and the Sun competed for readers’ attention in the relevant market, rejecting RJ’s argument that the JOA precluded any commercial competition (Order at 22-24). In addition, the Court concluded the evidence produced triable issues of fact as to whether RJ’s alleged conduct reduces editorial competition for reader’s attention in the relevant market (Order at 25).  The Court further found that the RJ’s alleged failure to promote the Sun harmed competition and so found triable issues of fact on whether the allegedly unlawful conduct caused injury to the Sun (Order at 26).  Because the Court found that the Sun satisfied its burden as to each of the requirements of antitrust injury, it denied RJ’s MSJ on the issue of antitrust injury (Order at 28).

The Court also rejected RJ’s argument that a prior arbitration order precluded the Sun from litigating intent to monopolize, agreeing the intent issues raised in the Sun’s monopoly claims did not involve the same issue decided in the arbitration regarding tortious breach and punitive damages (Order at 30-32). The Court did find that the RJ was precluded from relitigating its failure to prove damages flowing from the RJ’s breach of the promotional activities and expenses provision of the 2005 JOA (Order at 32). In addition, the Court found that the RJ Defendants were complete participants in the 2005 JOA and were neither forced into the agreement by a need for capital nor empowered by the Sun’s stronger bargaining position, and so the RJ was barred from bringing a Section 1 counterclaim (Order at 35).

The Court rejected the Review Journal’s Section 2 claims on the basis that it did not have monopoly power and rejected other state law claims. As to RJ’s Sherman Act Section 2 claims, the Court concluded that the facts could not support a conclusion that the Sun has monopoly power (Order at 36). The court stated that even if the RJ could show that the Sun reduced its editorial quality, it had not offered evidence showing that had an injurious effect on the market sufficient to demonstrate monopoly power (Order at 37) and that the RJ did not demonstrate that its own quality has improved or at least remained stable in recent years (Order 38).

The RJ brought three additional state law counterclaims based upon (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; and (3) tortious interference with contractual relations against an individual defendant (Order at 38). The Court noted that the RJ pointed to specific ads in the printed Sun driving readers and revenue away from the jointly published newspaper to the online site and concluded that there were sufficient facts to survive summary judgement and that an individual defendant engaged in intentional acts to disrupt the contractual relationship (Order at 44).  Finally, as to damages, the Court concluded that the RJ failed to carry its burden of showing damages related to any loss of subscribers, but the RJ carried its burden as to printing costs (Order at 46). Accordingly, the Court denied summary judgment as to the state law claims (Order at 47).

CASE UPDATE: UFC To Pay Fighters $335M To Settle Wage Suppression Suit

By Thomas Burt

The parties in Le v. Zuffa, LLC, 2:15-cv-01045-RFB-BNW, reached a settlement agreement ahead of a scheduled April 2024 trial.  The total settlement figure was $335 million, but other details will not be available until the parties file for preliminary approval, expected to be approximately six weeks from now. The parties mediated privately during the advanced stages of trial preparation, and with witness lists already submitted at the time the settlement was reached. 

The case was filed in 2015 by three mixed martial artists, Cung Le, John Fitch and Nate Quarry, and quickly consolidated with additional actions.  The fighters alleged that UFC, then run by parent Zuffa, LLC, was a monopsony, the only employer at the top of mixed martial arts.  UFC, they said, systematically suppressed fighter pay by thwarting competition for their services.  The anticompetitive conduct alleged included the use of long term contracts with oppressive terms that prevented fighters from bargaining for better pay even once they developed their own brand through their sporting accomplishments, as well as tactics to thwart rival mixed martial arts promotions so that UFC could maintain its monopsony and fighters could not realistically depart for a rival promotion. 

In 2023, the Court certified a class of all fighters participating in UFC bouts from December, 2010 through June, 2017.  The Court declined to certify an additional class of fighters whose identities were used by UFC.  Plaintiffs’ expert, Dr. Hal Singer, won an award from the American Antitrust Institute for his work in support of the plaintiffs, which estimated the so-called Bout Class losses at $1.6 billion, measured by the difference in fighters’ share of event revenues in the actual world, as against a but-for world in which UFC faced vigorous competition for the talent pool.

In nearly ten years of litigation, Zuffa, LLC, originally owned by casino owners Frank and Lorenzo Fertitta and by executive and public face of the promotion Dana White, was sold to entertainment agency Endeavor Group, which then in 2023 merged it with the professional wrestling promotion WWE to form TKO Group Holdings, a public company with a market capitalization in excess of $14 billion.

Agency Updates

This feature includes excerpts from selected press releases issued by the Antitrust Division, US DOJ, the Federal Trade Commission, and the California Attorney General’s Office. This month, we also include a release from the EU Office in San Francisco. 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.

EU OFFICE IN SAN FRANCISCO

https://www.eeas.europa.eu/delegations/united-states-america/san-francisco_en

PRESS RELEASE / April 11, 2024/ Brussels

Today, European Commission Executive Vice-President Margrethe Vestager, US Federal Trade Commission (‘FTC’) Chair Lina Khan and the Assistant Attorney General of the US Department of Justice Antitrust Division (‘DOJ’) Jonathan Kanter met in Washington for the fourth meeting of the EU-US Joint Technology Competition Policy Dialogue (‘TCPD’). The purpose of the dialogue is to further strengthen the cooperation to ensure and promote fair competition in the digital economy.

“The growth of data monopolies and the rapid expansion of artificial intelligence expand the competitive threats we face from dominant digital gatekeepers,” said Jonathan Kanter, Assistant Attorney General, U.S. Department of Justice Antitrust Division. “Exchanging best practices with our global counterparts helps us to more effectively serve the American people, and we deeply appreciate the European Commission’s continued engagement through the TCPD.”

As businesses move at breakneck speed to build and monetize artificial intelligence and algorithmic decision-making tools, engaging with our international partners and sharing best practices will be especially critical,” said FTC Chair Lina M. Khan. “The Joint Technology Dialogue provides U.S. agencies and the European Commission a key opportunity to discuss emerging threats in a rapidly evolving digital economy.” 

Today’s dialogue focused on: (i) rapidly evolving technologies in the digital sector, such as artificial intelligence and cloud, (ii) ensuring that merger enforcement accounts for the realities of the modern digital economy, and (iii) how to best consider evolving market dynamics in the digital sector, in particular regarding technology platforms.

The three authorities have agreed on the importance of continuing their close collaboration in the framework of the TCPD to ensure fair competition in the technology sector. The TCPD will continue with high-level meetings, as well as regular discussions at a more technical level.

ANTITRUST DIVISION, US DEPARTMENT OF JUSTICE

https://www.justice.gov/atr/press-releases

Highlights include the following:

TopBuild Abandons Proposed Acquisition of SPI After Antitrust Division Concerns

Monday, April 22, 2024/ Office of Public Affairs

Proposed Deal Would Have Combined Close Competitors and Two of the Largest Providers of Important Building Insulation Products

TopBuild Corp. announced its decision today to abandon its proposed $960 million acquisition of its rival, SPI Parent Holding Company (SPI). The abandonment comes after the department’s competition concerns.

The Justice Department issued the following statement from Assistant Attorney General Jonathan Kanter of the Antitrust Division:

“TopBuild’s proposed acquisition of SPI would have harmed competition across the United States by combining two of the largest providers of important building insulation products and eliminating fierce head-to-head competition between them. I am grateful for the tireless efforts of the Antitrust Division’s lawyers, economists, paralegals, and professional staff who made this result possible.”

U.S. Court of Appeals Confirms Justice Department’s Authority to Investigate Potentially Anticompetitive Conduct by the National Association of Realtors

Friday, April 5, 2024 – Office of Public Affairs

Today, the U.S. Court of Appeals for the District of Columbia Circuit lifted restrictions imposed by a lower court that had prevented the Justice Department from investigating potentially anticompetitive conduct by the National Association of Realtors (NAR). The D.C. Circuit’s decision confirms the United States’ position that it retains the authority to investigate NAR’s Participation Rule and Clear Cooperation Policy to protect competition for the benefit of homebuyers.

The United States has filed several amicus briefs and statements of interest supporting competition in the real-estate industry.

See https://www.justice.gov/opa/pr/us-court-appeals-confirms-justice-departments-authority-investigate-potentially

Two Warner Bros. Discovery Directors Resign after Justice Department Expresses Antitrust Concerns

Monday, April 1, 2024 – Office of Public Affairs

Antitrust Division Continues to Focus on Competitors Sharing Company Directors in Violation of Section 8 of the Clayton Act

The Justice Department announced today that two directors of Warner Bros. Discovery Inc. (WBD) have resigned from the WBD board after the Antitrust Division expressed concerns that their positions on both the WBD and Charter Communications Inc. boards violated Section 8 of the Clayton Act (Section 8). Section 8, which Congress made a per se violation of the antitrust laws, prohibits the same person or company from serving simultaneously on the boards of competitors, subject to limited exceptions. The division’s enforcement efforts to date have unwound or prevented interlocks involving at least two dozen companies.

Charter, through its Spectrum cable service, and WBD, including through its Max streaming subscription services, both provide video distribution services to customers. Representatives of the privately-held media company Advance Publications Inc. (Advance) had designees on both Charter’s and WBD’s boards of directors.

“Today’s announcement is a win for consumers,” said Deputy Assistant Attorney General Michael Kades of the Justice Department’s Antitrust Division. “In enacting Section 8 of the Clayton Act, Congress was concerned that competitors who shared directors would compete less vigorously to provide better services and lower prices. We will continue to vigorously enforce the antitrust laws when necessary to address overreach by corporations and their designated agents.”

Federal Trade Commission

https://www.ftc.gov/news-events/news/press-releases  

Highlights include the following:

FTC Moves to Block Tapestry’s Acquisition of Capri

$8.5 billion deal would eliminate competition between Coach, Kate Spade, and Michael Kors

April 22, 2024

The Federal Trade Commission today sued to block Tapestry, Inc.’s $8.5 billion acquisition of Capri Holdings Limited, a deal that seeks to combine three close competitors – Tapestry’s Coach and Kate Spade brands and Capri’s Michael Kors brand. If allowed, the deal would eliminate direct head-to-head competition between Tapestry’s and Capri’s brands. It would also give Tapestry a dominant share of the “accessible luxury” handbag market, a term coined by Tapestry to describe quality leather and craftsmanship handbags at an affordable price.

The Commission issued an administrative complaint and authorized a lawsuit in federal court to block the proposed acquisition, alleging that Tapestry’s acquisition of Capri will eliminate fierce competition between the two companies.

The proposed merger threatens to deprive millions of American consumers of the benefits of Tapestry and Capri’s head-to-head competition, which includes competition on price, discounts and promotions, innovation, design, marketing, and advertising. The deal also threatens to eliminate the incentive for the two companies to compete for employees and could negatively affect employees’ wages and workplace benefits. Post acquisition, the combined Tapestry and Capri would employ roughly 33,000 employees worldwide.

“With the goal to become a serial acquirer, Tapestry seeks to acquire Capri to further entrench its stronghold in the fashion industry,” said Henry Liu, Director of the FTC’s Bureau of Competition. “This deal threatens to deprive consumers of the competition for affordable handbags, while hourly workers stand to lose the benefits of higher wages and more favorable workplace conditions.”

*                *                *                 *

A public version of the complaint is available and linked to the press release. See https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-moves-block-tapestrys-acquisition-capri.

Federal Agencies Launch Portal for Public Reporting of Anticompetitive Practices in the Health Care Sector

April 18, 2024

Today, the Federal Trade Commission, Justice Department, and the U.S. Department of Health and Human Services (HHS) launched an easily accessible online portal for the public to report health care practices that may harm competition.

*                *                *                 *

The online portal, HealthyCompetition.gov, allows the public to report potentially unfair and anticompetitive health care practices to the FTC and the Justice Department’s Antitrust Division.

*                *                *                 *

Complaints will undergo a preliminary review by staff at the FTC and Justice Department, Antitrust Division. If a complaint raises sufficient concern under the antitrust laws or is related to HHS authorities, it will be selected for further investigation by the appropriate agency. This action may lead to the opening of a formal investigation.

Proposed FTC Order will Prohibit Telehealth Firm Cerebral from Using or Disclosing Sensitive Data for Advertising Purposes, and Require it to Pay $7 Million

Complaint alleges that Cerebral and its former CEO, Kyle Robertson, deceived users about its data sharing and security practices, and misled consumers about its cancellation policies.

April 15, 2024

Cerebral, Inc. has agreed to an order that will restrict how the company can use or disclose sensitive consumer data and require it to provide consumers with a simple way to cancel services to settle Federal Trade Commission charges that the telehealth firm failed to secure and protect sensitive health data.

Under the proposed order, filed by the Department of Justice upon notification and referral from the FTC, Cerebral will also be required to pay more than $7 million over charges that it disclosed consumers’ sensitive personal health information and other sensitive data to third parties for advertising purposes and failed to honor its easy cancellation promises. The order must be approved by the court before it can go into effect.

“As the Commission’s complaint lays out, Cerebral violated its customers’ privacy by revealing their most sensitive mental health conditions across the Internet and in the mail,” said FTC Chair Lina M. Khan. “To address this betrayal, the Commission is ordering a first-of-its-kind prohibition that bans Cerebral from using any health information for most advertising purposes.”

Cerebral provides online mental health and related services on a negative option basis, which means consumers are automatically charged unless they cancel those services. Consumers who sign up and use the company’s services provide detailed personal data including their home and email addresses, birthdates, medical and prescription histories, payment account or driver license numbers, as well as information about their treatment plans, pharmacy and health insurance plans, and other personal data, such as their religious or political beliefs, or sexual orientation.

The complaint charges that Cerebral and its former CEO, Kyle Robertson, repeatedly broke their privacy promises to consumers and misled them about the company’s cancellation policies. The complaint also charges that Cerebral and Robertson violated the Opioid Addiction Recovery Fraud Prevention Act of 2018 (OARFPA) by engaging in unfair and deceptive practices with respect to substance use disorder treatment services.

To get consumers to sign up for the company’s services and provide detailed personal data, the company claimed it offered “safe, secure, and discreet” services and that users’ data would be kept confidential, according to the complaint. The complaint charges that Cerebral failed to clearly disclose that it would be sharing consumers’ sensitive data with third parties for advertising and buried disclaimers about its data sharing practices in dense privacy policies. In fact, according to the complaint, the company claimed in many instances that it would not share users’ data for marketing purposes without obtaining consumers’ consent. The complaint alleges that these practices originated under the direction of its former CEO, Robertson, and continued after his tenure.

*                *                *                 *

The proposed order, which must be approved by a federal court before it can go into effect, only applies to Cerebral. Robertson has not agreed to a settlement, and the charges against him will be decided by the court.

Under the proposed order, Cerebral will pay nearly $5.1 million, which will be used to provide partial refunds to consumers impacted by its deceptive cancellation practices, as well as a $10 million civil penalty, which will be suspended after a $2 million penalty payment due to the company’s inability to pay the full amount. The proposed order also will:

  • Permanently ban Cerebral from using or disclosing consumers’ personal and health information to third parties for most marketing or advertising purposes, and generally require the company to obtain consumers’ consent before disclosing such information to outside parties;
  • Prohibit the company from misrepresenting its privacy and data security practices;
  • Require the company to implement a comprehensive privacy and data security program that, among other things, addresses the specific problems outlined in the complaint;
  • Require the company to post a notice on its website alerting users to the allegations outlined in the complaint and detail the steps it is required to take under the order;
  • Require the company to implement a data retention schedule and to delete most consumer data not used for treatment, payment, or health care operations unless consumers consent to its retention, and provide consumers with a clear mechanism to request that their data be deleted; and
  • Prohibit the company from misrepresenting any negative option and cancellation policies or practices and also require it to provide consumers with an easy method to cancel services.

CALIFORNIA DEPARTMENT OF JUSTICE

https://oag.ca.gov/media/news    

Highlights include:

Attorney General Bonta: California’s Unfair Competition Law Supersedes Insurance Policy Statute of Limitations

Thursday, April 11, 2024 Press Release

OAKLAND — California Attorney General Rob Bonta today filed an amicus brief in Rosenberg-Wohl v. State Farm Fire and Casualty Co. (State Farm), a case that hinges on whether an Unfair Competition Law (UCL) action filed by a policyholder against their insurance company is subject to the UCL’s four-year statute of limitations or the Insurance Code’s one-year limitations period for actions to recover on an insurance policy. The brief, filed in the California Supreme Court, argues that a UCL action is distinct from an action to recover policy benefits, therefore an insurance policy claims period cannot override the four-year statute of limitations that applies to all UCL actions.

 A contrary decision would hinder consumers’ ability to challenge unlawful, unfair, or fraudulent conduct by insurance companies. 

“We must protect consumers’ right to challenge abusive business practices by insurance companies,” said Attorney General Bonta. “California’s Unfair Competition Law protects all 39 million Californians from unlawful, unfair, and fraudulent business practices by any industry, including insurance companies. The lower court got it wrong and if allowed to stand the decision threatens to undermine the broad protections afforded to Californians under the Unfair Competition Law. I urge the California Supreme Court to overturn the erroneous decision.”

*                *                *                 *

In today’s brief Attorney General Bonta argues that the one-year limitations period set forth in the Insurance Code does not apply to a UCL action, regardless of whether the action relates to an insurance claim. The brief also notes that the Court of Appeal’s decision departs from long-standing Supreme Court precedent holding that the UCL’s statute of limitations “admits no exceptions.” 

A copy of the amicus brief is linked to the press release. See https://oag.ca.gov/news/press-releases/attorney-general-bonta-california%E2%80%99s-unfair-competition-law-supersedes-insurance.


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