E-briefs, News and Notes: August 2024

By David Lerch

On August 1, 2024, District Court Judge Philip S. Gutierrez in the Central District of California granted Defendants’ motion for judgment as a matter of law pursuant to Fed. R. Civ. P. 59 against the Plaintiffs (two classes of DirecTV NFL Sunday Ticket subscribers) following a jury trial verdict that awarded the two classes over $4.7 billion in damages.  The Court concluded that expert testimony from two expert witnesses was unreliable and as a result no reasonable jury could have found class-wide injury or damages. 

Background

On March 23, 2022, Plaintiffs filed a Second Consolidated Amended Complaint (CAC) for damages and declaratory and injunctive relief pursuant to Sections 1 and 2 of the Sherman Act (ECF 441).  The CAC alleged that NFL teams made the NFL Sunday Ticket out-of-market sports package that carries all NFL Sunday afternoon games produced by Fox and CBS (except those broadcasts on local CBS and Fox affiliates) the only way to view games other than the limited selection of games broadcast through sponsored telecasts in any given geographic area (CAC ¶ 8). The Sunday Ticket package bundles all other games into one package, sold jointly by the NFL to DirecTV and then by DirecTV to commercial and residential subscribers (CAC ¶¶ 7, 8).

This exclusive deal, along with other contractual arrangements between the NFL, its member teams, and DirecTV, as well as Fox, ESPN, CBS, and NBC (collectively, the “Networks”), result in the blackout or unavailability of out-of-market games, except through the bundled NFL/DirecTV Sunday Ticket (CAC ¶ 8).  Plaintiffs alleged that these arrangements result in substantial injury to competition, including through eliminating distribution of out-of-market games through competing Multichannel Video Programing Distributor (“MVPD”) platforms, such as the Dish Network, Comcast Corporation (“Comcast”), and Spectrum Cable (formerly Time Warner Cable); reducing game offerings and package mixes; and imposing supracompetitive pricing for consumers (CAC ¶ 10).  Plaintiffs alleged that but for the NFL teams’ agreements in which DirecTV and others have joined, teams would compete against each other in the market for NFL football programming, which would induce more competitive pricing and content (CAC ¶ 11). 

Plaintiffs further alleged the agreements challenged in the complaint drastically curb output, reduce choice, increase price, unreasonably restrain trade in violation of Section One of the Sherman Act (15 U.S.C. § 1), and allow the NFL to unlawfully monopolize the market for live video presentation of professional football games in violation of Section Two of the Sherman Act (15 U.S.C. § 2).  Accordingly, Plaintiffs, on behalf of themselves and others similarly situated, sought injunctive relief putting an end to the anticompetitive scheme and damages to compensate the Classes for the supracompetitive overcharges they paid (CAC ¶ 20).

The case proceeded to a jury trial and the jury reached a verdict on June 27, 2024 (ECF 1464).  The jury awarded $96,928,272,90 to the commercial class and $4,610,331,671.74 to the residential class (ECF 1481).  On July 3, 2024, the NFL Defendants filed a motion for judgment as a matter of law (ECF 1490).

Admissibility of the Expert Evidence

The Court concluded that two of the NFL Defendants’ experts were unreliable and therefore their testimony was not admissible and should have been excluded pursuant to Federal Rule of Evidence 702 (Order at 3-11, citing Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 149 (1999)). 

The Court noted that one of the experts, Dr. Rascher, used college football as his model of what would happen in the absence of the competitive restraints at issue in the case (“college football but-for world”) (Order at 5).  Rascher opined that if the NFL Teams stopped “colluding and selling” their out-of-market games through the NFL, but sold them either independently or in divisions, the result would be like college football as the games would “become available, just like on Saturday, on over-the-air channels and . . . basic sport cable channels” and customers would not “pay anything extra above what they were already paying for their TV package” (Order at 5).  In support, Dr. Rauscher “looked to see if it was feasible . . . to do what was happening in college football in[] the NFL” by preparing schedules showing games “that actually existed with the NFL schedule” on alternative channels where they could have been shown, stating “[a]nd you can see that CBS and FOX could be showing a couple of games at 10:00 a.m.; ABC, NBC, ESPN, ESPN2, and so forth” and “[s]o all the games are available” (Order at 5).

The Court stated that while it had previously denied Defendants’ Daubert motion and motions in limine as to Dr. Rascher’s opinions, Dr. Rascher’s trial testimony revealed his college football but-for world was not the product of sound economic methodology (Order at 6). In particular, the Court stated that Dr. Rascher needed to explain how these out-of-market telecasts would have been available for free to cable and satellite customers in the but-for world, but did not do so, and instead hypothesized there could have been numerous but-for worlds, asserting that regardless of the but-for world’s structure, consumers would not have paid for an additional subscription (Order at 6).  Dr. Rascher supported his decision to provide multiple variations of a but-for world with the assumption that Defendants and their broadcast partners are sophisticated entities, and they figured it out in college sports, so they would certainly figure it out at the NFL. The Court concluded that while FRE 702 certainly does not require a but-for world to perfectly reflect what the real world would have been, it requires more than just saying market participants would have figured it out, and because Dr. Rascher’s testimony relied on a college football model that was developed based on speculation and ipse dixit opinion, the Court excluded Dr. Rascher’s testimony under FRE 702 (Order at 6).

In their motion for judgment as a matter of law, Defendants also argued that expert testimony from another expert, Dr. Zona, should be excluded for four reasons: (1) Dr. Zona’s models predicted higher prices for Sunday Ticket in the but-for world; (2) his models irrationally predicted that consumers would pay higher prices from an alternative distributor of Sunday Ticket instead of purchasing from DirecTV; (3) his models rested on the unsupportable assumption that there was an alternative possible distributor available—specifically, a streaming service—during 2011 to 2023; and (4) Dr. Zona’s calculation and presentation of an “NFL tax” was untimely and an invalid model (Order at 10).  The Court concluded that the second and third arguments had merit given that Plaintiffs’ responses to them conflict with each other.  (Order at 10). 

The Court concluded that ultimately, and regardless of whether a competitive live streaming service existed, the main flaw with Dr. Zona’s model was that he failed to define an assumption that was necessary for evaluating the rationality and reliability of his models by never deciding what a “direct-to-consumer” product entailed (Order at 11). Without knowing what “direct-to-consumer” meant, it would be impossible to determine if it would have been economically rational for consumers to purchase Sunday Ticket from an alternative distributor at a higher price, and that definition was necessary for determining whether a viable alternative distributor even existed during the class period (Order at 11). Without that information, the Court concluded that it could not determine whether the but-for worlds without exclusivity were modeled reliably.

Judgment as a Matter of Law

Despite finding Dr. Rascher’s and Dr. Zona’s opinions unreliable, the Court did not find at the threshold that it would be unreasonable for a juror to find that there was a conspiracy that unreasonably restrained trade (Order at 12). The Court noted thatthere was evidence in the record—even without the testimony of Dr. Rascher and Dr. Zona—to support a reasonable jury’s finding of an unreasonable restraint of trade at each step of the rule of reason (Order at 12). Given that a reasonable jury could find that there were anticompetitive effects, that Defendants’ procompetitive justifications were pretextual or unrelated to the restraints, and/or that there were less-restrictive alternatives based on the record, the Court concluded that judgment as a matter of law was inappropriate on these grounds (Order at 12).  However, the Court concluded that without Dr. Rascher’s and Dr. Zona’s testimony, it would be impossible for a jury to determine on a class-wide basis that Sunday Ticket subscribers would have indeed paid less in the absence of Defendants’ anticompetitive conduct (Order at 12). Accordingly, the Court concluded that Plaintiffs failed to provide evidence from which a reasonable jury could make a finding of injury and an award of actual damages that would not be erroneous as a matter of law, that would be totally unfounded and/or would be purely speculative.

Jury’s Verdict

The Court concluded that even if it would not have granted judgment as a matter of law, it would have vacated the jury’s damages verdict, remitted Defendants’ award to nominal damages, and conditionally granted a new trial based on the jury’s damages award, which the Court concluded was irrational (Order at 12).  In particular, the Court noted that neither of the jury’s damages awards to the Residential or Commercial Classes were proposed by Plaintiffs or found in the record (Order at 13).  Defendants argued that to arrive at the damages award number, the jury started with: (1) the list price of $294 for Sunday Ticket (offered to residential consumers) in 2018 and 2019 and then subtracted Dr. Zona’s calculation of the average price that consumers actually paid ($102.74 paid by residential Sunday Ticket subscribers) yielding an amount of $191.26.  The jury then multiplied $191.26 by the number of subscriptions to arrive at its damages figure (Order at 13-14).

The Court found that the jury’s damages awards were not based on the “evidence and reasonable inferences” but instead were more akin to “guesswork or speculation” (Order at 15). The Court reasoned that: For the price Plaintiffs actually paid for Sunday Ticket, the jury relied on the residential list price for two years in the class period (Order at 15). For the price that class members would have paid (had there been no agreement to restrict output) the jury used $102.74 (Order at 16). The record shows that this number is the average price that was actually paid by all residential DirecTV subscribers who received Sunday Ticket (Order at 16). 

The Court noted that this was problematic because the average price actually paid cannot be the price that the class members should have paid, and that awarding the actual historical discounts as damages was nonsensical (Order at 16).  The Court stated that this is the “opposite of what the Court instructed and gets the relationship between overcharges and discounts backwards—awarding damages based on the money the residential class members theoretically saved” (Order at 16).

The Court also disagreed with Plaintiffs’ argument that as long as a damages award is “within the range” supported by evidence it “cannot be set aside,” stating that the jury verdict must both “find substantial support in the record and lie within the range sustainable by the proof” (Order at 13), citing Los Angeles Mem’l Coliseum Comm’n, 791 F.2d at 1366.  The Court stated that it cannot be that any award less than the maximum amount sought by Plaintiffs escapes scrutiny and may be untethered to the record (Order at 14).  The Court also rejected the argument that it was speculating about the jury’s deliberations, stating that this was a rare situation where it is clear, without speculation, that the award was based on improperly considered evidence (i.e. the expert testimony) (Order at 14). The Court noted that this was not a case where a jury deviated from an experts’ damages figure for an arbitrary reason, and nor was it a case where the jury split the difference, or arrived at a damages amount within a calculated range, but instead, the jury came up with its own specific damages based on a methodology that the Court can definitively trace (Order at 15).

The Court concluded that the jury did not follow the Court’s instructions and instead relied on inputs not tied to the record to create its own “overcharge,” and so found that the jury’s damagesverdict was clearly not supported by the evidence.

Duke Energy Carolinas, LLC, v. NTE Carolinas II, LLC

By Morgan Marmaro

Background.  On August 5, 2024, the Fourth Circuit overturned the District Court’s grant of summary judgment in Duke Energy v. NTE Carolinas and remanded the case after finding genuine disputes of material fact.^[1]  NTE originally sued Duke for illegal monopoly maintenance of the wholesale power market in the Carolinas in violation of § 2 of the Sherman Act.^[2]

NTE alleges  Duke, the incumbent power company, supported its monopoly by preventing a challenger, NTE, from winning a long-term wholesale power supply contract with the City of Fayetteville, a major Duke customer for more than 100 years who had been providing Duke with $100 million in annual net revenue.^[3]  NTE alleges Duke did so by (i) providing instructions to suspend payments on a $59 million interconnection agreement that was critical to NTE’s development plans (and to winning Fayetteville business); (ii) unilaterally terminating the interconnection agreement and suing for breach of contract; (iii) submitting incomplete filings and false statements to regulatory bodies; (iv) offering in the aggregate $325 million in retroactive discounts and increased payments for excess energy from Fayetteville — thereby mitigating a public Fayetteville RFP; and (v) purposefully destroying the value of NTE’s planned expansion.^[4]  NTE claims this was all done as Duke internally worried about NTE’s efficiency.  Duke’s 2018 internal projections that its costs were 25-30% higher than NTE’s and that Duke’s systems were “no longer competitive” but the “problem [was] mitigated by [the] long-term nature of [its] contracts.”^[5]

Procedural Posture.  On September 6, 2019, Duke sued in North Carolina state court for breach of contract.^[6] NTE removed the action to federal court and filed a counterclaim alleging Duke had monopolized or attempted to monopolize the Carolinas wholesale energy market in violation of § 2 of the Sherman Act, North Carolina’s Unfair and Deceptive Trade Practices Act, and for breach of contract.^[7] Duke then filed a motion for summary judgment, arguing that NTE failed to present sufficient evidence to show that Duke both held monopoly power and had engaged in illegal exclusionary conduct.^[8] On June 24, 2022, the District Court granted summary judgment on the antitrust and unfair competition counterclaims finding that NTE had not demonstrated that Duke had engaged in anticompetitive conduct.^[9] NTE then appealed to the Fourth Circuit.

Analysis and Holdings.  The district court, in finding for Duke, had analyzed each type of alleged conduct individually (e.g., refusal to deal or denial of an essential facility, predatory pricing, breach of contract suit as a sham litigation) and found that under the test appropriate to each type of conduct, none of the conduct was anticompetitive.^[10] The District Court stated that, if the conduct was individually not anticompetitive, then it could not be aggregated to establish an anticompetitive effect.^[11] In its review on appeal, the Fourth Circuit agreed that Duke likely had monopoly power, given its “durably high market share” standing “at or approaching 90%.”^[12]

In reversing, the Fourth Circuit held that, on these facts, the District Court should have considered the conduct holistically and said that a Section 2 analysis does “not [focus] on court-made subcategories.”^[13] The Court noted that “when a court is faced with allegations of a complex or atypical exclusionary campaign, the individual components of which do not fit neatly within pre-established categories, its application of such specific conduct tests would prove too rigid[,]”^[14] citing, e.g., to Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690 (1962) to show it would be a “misapplication of antitrust doctrine” to treat allegations of anticompetitive conduct “as if they were five completely separate and unrelated lawsuits.”^[15] The Fourth Circuit found that a holistic review of conduct is appropriate in more “challenging” cases, where two or more individually-lawful practices can be aggregated into a “pattern capable of sustaining a Sherman Act § 2 offense” or where the individual acts are “part of the same scheme to perpetuate dominance or drive the plaintiff from the market” – concluding that at this stage, the conduct should be considered as a single campaign as NTE alleges.^[16]

The Court similarly found a genuine factual dispute as to whether “Duke’s Fayetteville offer was designed to cut out a more efficient competitor at consumers’ expense,” precluding summary judgment, and rejecting arguments that the Brooke Group two-prong test must be applied to NTE’s exclusionary-pricing argument.^[17] Even under a predatory pricing analysis, a factual dispute still remained – rejecting the argument that the “filed-rate” doctrine bars NTE’s challenge.^[18]

The Fourth Circuit also reviewed the leading cases on refusals to deal, including Aspen Skiing, Trinko, and Otter Tail, and found that there was sufficient evidence that Duke might have sacrificed profits and forsaken short-term profits to achieve anticompetitive ends, precluding a grant of summary judgment.^[19] The Court found that under the current facts, “FERC’s regulatory oversight would not foreclose antitrust liability” and that Duke forewent a profitable arrangement – distinguishing the current case from Trinko and aligning more with Aspen Skiing.^[20]

The Fourth Circuit also emphasized that evidence of Duke’s “anticompetitive malice” bolstered its conclusion that the case should proceed to trial.^[21]

In addition, the Court ordered that a new District Judge should oversee the remanded case as Judge Bell, the original District Court Judge had originally recused himself – but did not do so once the case was reassigned to him – and that “for the appearance of impartiality,” “once a judge is recused, the judge is ‘out of service’ insofar as that case is concerned”^[22] The Court notes that “[s]uch a Brightline rule can be applied with ease and promotes the goal of ensuring public confidence in the impartiality of the judicial process” and that the “rule serves the judicial process well, and we adhere to it.”^[23]

[1] Duke Energy Carolinas, LLC, v. NTE Carolinas II, LLC, No. 22-2168, 2024 WL 3642432, at *4 (4th Cir. Aug. 5, 2024).

[2] Id. at *3

[3] Id. at *7-*8.

[4] Id. at *11-*20

[5] Id. at *10-*11

[6] Id. at *20

[7] Id.

[8] Id. at *20-*21.

[9] Id. at *22.

[10] Id. at *23.

[11] Id.

[12] Id. at *25.

[13] Id. at *27.

[14] Id.

[15] Id. at *28.

[16] Id. at *29-*30.

[17] Id. at *35-*36 (emphasis in original).

[18] Id. at *36, *39-*40.

[19] Id. at *41-*49.

[20] Id. at *46.

[21] Id. at *51.

[22] Id. at *53.

[23] Id. at *53-*54 (noting that the Court does “not find that Judge Bell acted inappropriately in recusing himself in the first instance, nor do we find that he did not allow sufficient time to pass before abandoning his initial policy.”).

By Cheryl Johnson

After the FTC’s issuance of fairly laudatory guidance about pharmacy benefit managers  (PBMs) role in our drug supply chain, the  PBM industry rapidly expanded their roles and consolidated as well as vertically integrated with insurers, health plans, and  pharmacies. Concerns about the power of the three largest PBMs, increasing drug prices, and pharmacy closings have prompted several recent  government reports.

1. FTC, PBMs:  Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies (July 9, 2024).

On July 9, 2024, the FTC issued its 70-page interim report aptly summed in its title:  “PBMs:The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies.” The report was “interim” because some of the 6 largest PBM targets had not finished document productions, but the FTC did not want their “delay tactics”  to delay  its  “insights” underscoring the “importance and urgency of scrutinizing the role and influence of PBMs in the nation’s health care system.” (pp. 2,4)

The report focused on the biggest 3 PBMs which control 80% of the 6.6 billion U.S. prescriptions (p.2) and who often “exercise significant control over which drugs are available, at what price and which pharmacy patients can use to access their prescribed medications.” (p.3) The FTC found these PBMs were steering patients to affiliated pharmacies who received higher reimbursements and profits than nonaffiliated pharmacies. (p.3) Steering was accomplished through a variety of contracting, network design, utilization management and specialty lists and designations. (pp.  11-12, 17-18, 31-37). 

The big PBMs had used their “vast bargaining leverage” (p. 49) to enter non-negotiable and incredibly “opaque and unpredictable”  (p. 55) contracts with pharmacies, allowing these PBMs to unilaterally change prices with little or no notice and pay pharmacies below their drug acquisition costs. (pp. 3-4, 49-65). Pharmacies were also subjected to unknown and unknowable post sale “adjustments” based on “inexplicable” criteria. (pp.59-65).

According to the report, the big PBMs were negotiating and pocketing rebates from drug companies  that required that they exclude patients from using  lower cost medications, thereby increasing consumers’ health costs and discouraging lower cost drugs from being developed. (pp. 4, 44-45, 66-70). It also questioned why the big PBMs were creating offshore entities in Switzerland, Cayman Islands, and Ireland, suggesting it might be to make discovery harder and to avoid US taxes and regulation. (pp. 21-24).

• House Committee Oversight and Accountability, The Role of Pharmacy Benefit Managers in Prescription Drug Markets (July 23, 2024)

On July 23, 2024, the House Committee on Oversight and Accountability Staff issued a 51 page report on PBMs, which in some respects, was more explicit and critical of the big PBMs than the FTC’s Report.    Instead of arresting or checking price increases, the House Report concluded the opposite had occurred: “patients are seeing significantly higher costs with fewer choices” and that  “PBMs inflate prescription drug costs and interfere with patient care for their own financial benefit.”  (p.3). The Report’s key findings included that the big PBMs:  1) were sharing patient information and data across their affiliates to steer patients to their own affiliates  and then to reduce reimbursement to nonaffiliates (pp. 4,11-15); 2) were targeting patients with maintenance and higher cost medications  and steering them to their mail order pharmacies where drugs could cost 35 times more than if filled in independent pharmacies (p.18); 3) were imposing below cost reimbursements to independent pharmacies who lose money filling some prescriptions, contributing  to the closure of 6% of them in an 8 year period (p.23); 4) were using rebates and formulary manipulations to promote high costs drugs to increase their  own profits while precluding access to lower priced drugs by the insureds (pp. 27-31); and 5) were creating foreign business entities to hide rebates and fees and avoid regulation and taxes (pp. 33-35, 38).

The impact of these PBM practices were attributed with a historically low adoption of new lower cost drugs, costing the government and taxpayers billions per year. (pp.35-40). The Report discounted Medicare  price negotiations or the anti-kickback rebate rule to make a difference but discussed prospects of numerous bills pending in Congress and the states to effect any change. (pp.46-49).

RealPage’s Pricing Algorithm Violates Antitrust Laws

The Justice Department, together with the Attorneys General of North Carolina, California, Colorado, Connecticut, Minnesota, Oregon, Tennessee, and Washington, filed a civil antitrust lawsuit today against RealPage Inc. for its unlawful scheme to decrease competition among landlords in apartment pricing and to monopolize the market for commercial revenue management software that landlords use to price apartments. RealPage’s alleged conduct deprives renters of the benefits of competition on apartment leasing terms and harms millions of Americans. The lawsuit was filed today in the U.S. District Court for the Middle District of North Carolina and alleges that RealPage violated Sections 1 and 2 of the Sherman Act.

The complaint alleges that RealPage contracts with competing landlords who agree to share with RealPage nonpublic, competitively sensitive information about their apartment rental rates and other lease terms to train and run RealPage’s algorithmic pricing software. This software then generates recommendations, including on apartment rental pricing and other terms, for participating landlords based on their and their rivals’ competitively sensitive information. The complaint further alleges that in a free market, these landlords would otherwise be competing independently to attract renters based on pricing, discounts, concessions, lease terms, and other dimensions of apartment leasing. RealPage also uses this scheme and its substantial data trove to maintain a monopoly in the market for commercial revenue management software. The complaint seeks to end RealPage’s illegal conduct and restore competition for the benefit of renters in states across the country.

“Americans should not have to pay more in rent because a company has found a new way to scheme with landlords to break the law,” said Attorney General Merrick B. Garland. “We allege that RealPage’s pricing algorithm enables landlords to share confidential, competitively sensitive information and align their rents. Using software as the sharing mechanism does not immunize this scheme from Sherman Act liability, and the Justice Department will continue to aggressively enforce the antitrust laws and protect the American people from those who violate them.”

                           *                         *                          *

The complaint alleges that RealPage’s agreements and conduct harm the competitive process in local rental markets for multi-family dwellings across the United States. Armed with competing landlords’ data, RealPage also encourages loyalty to the algorithm’s recommendations through, among other measures, “auto accept” functionality and pricing advisors who monitor landlords’ compliance. As a result, RealPage’s software tends to maximize price increases, minimize price decreases, and maximize landlords’ pricing power. RealPage also trained landlords to limit concessions (e.g., free month(s) of rent) and other discounts to renters. The complaint also cites internal documents from RealPage and landlords touting the fact that landlords have responded by reducing renter concessions.

The complaint separately alleges that RealPage has unlawfully maintained its monopoly over commercial revenue management software for multi-family dwellings in the United States, in which RealPage commands approximately 80% market share. Landlords agree to share their competitively sensitive data with RealPage in return for pricing recommendations and decisions that are the result of combining and analyzing competitors’ sensitive data. This creates a self-reinforcing feedback loop that strengthens RealPage’s grip on the market and makes it harder for honest businesses to compete on the merits.

RealPage Inc., is a property management software company headquartered in Richardson, Texas.

A copy of the entire press release and complaint can be found on the DOJ Office of Public Affairs website.

Today, the Attorneys General of Indiana, Iowa, Kansas, Louisiana, Mississippi, Nebraska, New Mexico, South Dakota, Utah and Vermont joined a civil antitrust lawsuit filed by the Justice Department, 29 other states and the District of Columbia against Live Nation-Ticketmaster for monopolization and other unlawful conduct in violation of Sections 1 and 2 of the Sherman Act.

A copy of the entire press release and complaint can be found on the DOJ Office of Public Affairs website.

A federal grand jury in Oklahoma City returned an indictment, which was unsealed today, charging Sioux Erosion Control, Inc. (Sioux), its vice president and another employee with a price-fixing conspiracy targeting over $100 million in publicly-funded transportation construction contracts across Oklahoma.

An indictment is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

The Justice Department issued the following statements from Attorney General Merrick B. Garland and Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division, regarding the U.S. District Court for the District of Columbia’s decision in United States v. Google:

“This victory against Google is an historic win for the American people,” said Attorney General Garland. “No company — no matter how large or influential — is above the law. The Justice Department will continue to vigorously enforce our antitrust laws.”

“This landmark decision holds Google accountable. It paves the path for innovation for generations to come and protects access to information for all Americans,” said Assistant Attorney General Kanter. “This victory is a reflection on the tireless efforts of the dedicated public servants at the Antitrust Division and our state law enforcement partners whose work made today’s decision possible.”

EDITORS NOTE:  E-Briefs will cover the United States v. Google decision in the September 2024 edition.  

The Federal Trade Commission is sending more than $222,000 in refunds to consumers harmed by a deceptive mortgage relief operation known as Lanier Law. The scheme collected thousands of dollars in upfront fees from homeowners by promising to lower their monthly payments but then failed to deliver.

The FTC first took action against the Lanier Law in 2014 as part of a joint law enforcement sweep by federal and state authorities. In 2016, as a result of the lawsuit, the defendants were banned from the debt relief business and one of the scheme’s owners, Michael W. Lanier, was disbarred.

Consumers who have questions about their payment should contact the refund administrator, Analytics, at 866-590-8211, or visit the FTC.

The Federal Trade Commission and State of Arizona are taking action against Arizona-based Coulter Motor Company for engaging in a wide array of practices that harm consumers, from deceptive online vehicle pricing to charging Latino car buyers more in interest and add-on products. Coulter, along with its former general manager, Gregory Depaola, will pay $2.6 million to settle the lawsuit, most of which will go to provide refunds to consumers harmed by defendants’ allegedly unlawful actions.

*                     *                *

According to the complaint, Coulter advertised prices for cars online at significant discounts under the cars’ suggested retail prices, in many cases thousands of dollars less, leading consumers to think they could purchase the advertised car for that advertised amount. Consumers complained that when they arrived at the dealership, they were told the advertised price was not available. Instead, the dealership added hundreds or thousands of dollars more than the advertised price in a so-called “market adjustment,” supposed add-ons that were pre-installed on the car, and other miscellaneous fees.

The add-ons included items like vehicle identification number etching, window tinting, nitrogen-filled tires, and theft recovery services – items that Coulter would deceptively tell consumers were required to purchase the car. The complaint alleges that in some cases, Coulter charged consumers twice for the same add-ons, once individually and again as part of an add-on “package.”

The complaint also alleges that Coulter discriminated against Latino consumers in vehicle transactions. On average, Latino consumers who shop at Coulter pay nearly $1,200 more in interest and add-on charges than their non-Latino White counterparts. These increased costs come in the form of higher interest rate markups on financing, as well as higher charges for various add-on products.

The complaint charges Coulter and Depaola for violations of the FTC Act, the Equal Credit Opportunity Act, and the Arizona Consumer Fraud Act.

Under the terms of the proposed federal court order with the FTC and the State of Arizona, Coulter and Depaola are required to pay a $2.6 million judgment, of which $2.35 million will be used to provide refunds to consumers harmed by their allegedly unlawful actions. The proposed settlement also requires Coulter to establish a comprehensive fair lending program that includes appointing a fair lending officer, conducting employee training, and implementing policies for charging fees and markups.

The entire press release and copies of the complaint and proposed order may be found on the FTC website.  See tc.gov/news-events/news/press-releases/2024/08/ftc-state-arizona-take-action-against-coulter-motor-company-deceptive-pricing-discriminatory.

The Federal Trade Commission today announced a final rule that will combat fake reviews and testimonials by prohibiting their sale or purchase and allow the agency to seek civil penalties against knowing violators.

“Fake reviews not only waste people’s time and money, but also pollute the marketplace and divert business away from honest competitors,” said FTC Chair Lina M. Khan. “By strengthening the FTC’s toolkit to fight deceptive advertising, the final rule will protect Americans from getting cheated, put businesses that unlawfully game the system on notice, and promote markets that are fair, honest, and competitive.”

*                *                *

The final rule prohibits:

• Fake or False Consumer Reviews, Consumer Testimonials, and Celebrity Testimonials: The final rule addresses reviews and testimonials that misrepresent that they are by someone who does not exist, such as AI-generated fake reviews, or who did not have actual experience with the business or its products or services, or that misrepresent the experience of the person giving it. It prohibits businesses from creating or selling such reviews or testimonials. It also prohibits them from buying such reviews, procuring them from company insiders, or disseminating such testimonials, when the business knew or should have known that the reviews or testimonials were fake or false.

• Buying Positive or Negative Reviews: The final rule prohibits businesses from providing compensation or other incentives conditioned on the writing of consumer reviews expressing a particular sentiment, either positive or negative. It clarifies that the conditional nature of the offer of compensation or incentive may be expressly or implicitly conveyed.

• Insider Reviews and Consumer Testimonials: The final rule prohibits certain reviews and testimonials written by company insiders that fail to clearly and conspicuously disclose the giver’s material connection to the business. It prohibits such reviews and testimonials given by officers or managers. It also prohibits a business from disseminating such a testimonial that the business should have known was by an officer, manager, employee, or agent. Finally, it imposes requirements when officers or managers solicit consumer reviews from their own immediate relatives or from employees or agents – or when they tell employees or agents to solicit reviews from relatives and such solicitations result in reviews by immediate relatives of the employees or agents.

• Company-Controlled Review Websites: The final rule prohibits a business from misrepresenting that a website or entity it controls provides independent reviews or opinions about a category of products or services that includes its own products or services.

• Review Suppression: The final rule prohibits a business from using unfounded or groundless legal threats, physical threats, intimidation, or certain false public accusations to prevent or remove a negative consumer review. The final rule also bars a business from misrepresenting that the reviews on a review portion of its website represent all or most of the reviews submitted when reviews have been suppressed based upon their ratings or negative sentiment.

• Misuse of Fake Social Media Indicators: The final rule prohibits anyone from selling or buying fake indicators of social media influence, such as followers or views generated by a bot or hijacked account. This prohibition is limited to situations in which the buyer knew or should have known that the indicators were fake and misrepresent the buyer’s influence or importance for a commercial purpose.

As the Commission noted previously, case-by-case enforcement without civil penalty authority might not be enough to deter clearly deceptive review and testimonial practices. The Supreme Court’s decision in AMG Capital Management LLC v. FTC has hindered the FTC’s ability to seek monetary relief for consumers under the FTC Act. This rule will enhance deterrence and strengthen FTC enforcement actions.

A copy of the entire press release and the final may be found on the FTC’s website. The rule will become effective 60 days after the date it is published in the Federal Register.

The Federal Trade Commission filed an amicus brief in a case brought by online video game maker Epic Games Inc. against Google LLC’s app store, which outlines how the court should consider potential remedies when determining effective relief to restore competition after Google was found liable for illegal monopolization.

The FTC filed its amicus brief in the U.S. District Court for the Northern District of California in an ongoing antitrust case where a jury found Google liable for multiple antitrust violations related to its Google App Store, including finding that Google monopolized the Android App Distribution and Android In-App Payment Solutions markets for digital goods and services transactions. Google’s App Store serves as an essential platform used by developers, which includes Epic, to market their software. Google’s App Store is also critical for users that seek to purchase applications, such as Epic’s online game Fortnite.

In its amicus brief, the FTC encourages the court to use its broad power to order a remedy that stops the illegal conduct, prevents its recurrence, and restores competition. Injunctive relief should also restore lost competition in a forward-looking way and should ensure a monopolist is not continuing to reap the advantages and benefits obtained through the antitrust violation, the FTC’s brief stated. Looking forward in cases like Epic v. Google often requires the consideration of network effects, data feedback loops, and other key features of digital markets. This could help ensure that potential competitors can overcome the advantages established digital platforms often gain, which include network effects and data incumbency. These advantages allow established digital platforms to lock-in users, advertisers, and other stakeholders, which create barriers to entry for future competition.

In the Epic case, Google has raised several concerns about the administrability of potential injunctions that impose duties to deal with competitors and the implications of any requirement that Google provide access to its Application Programming Interfaces to non-customers for free. Despite these concerns, courts still have wide latitude to impose these sorts of requirements on monopolists when crafting remedies to restore competition, the FTC stated in its brief.

Google also has expressed concern that the cost of complying with Epic’s proposed remedy may be overly burdensome. Complaints about the burdens of compliance are no excuse, the FTC stated in its brief. Google’s monopolistic behavior has significantly harmed millions of users in the United States. Allowing monopolists to reap the rewards of illegal monopolization while avoiding the costs of restoring the competition that they unlawfully eliminated would undermine deterrence, the FTC stated in its brief.

A copy of the FTC’s amicus brief may be found on the FTC website at: https://www.ftc.gov/legal-library/browse/amicus-briefs/epic-games-inc-v-google-llc-et-al.

OAKLAND — California Attorney General Rob Bonta today, alongside the U.S. Department of Justice, and a bipartisan coalition of eight attorneys general, filed a lawsuit against RealPage, a revenue management software company used by landlords to price multifamily rental housing units. The lawsuit alleges RealPage enabled landlords to artificially raise rents by participating in a pricing alignment scheme that increased their rent revenue across the board, enabled by the illegal sharing of confidential pricing and supply information. This harmed consumers by decreasing competition, limiting price negotiation, and increasing prices in the rental housing industry. Pricing alignment schemes affected rental housing throughout California, especially in multifamily buildings in Southern California including in Orange County, Anaheim, Santa Ana, Irvine, Riverside, San Bernardino, Ontario, Rancho Cucamonga, Temecula, Murrieta, San Diego, and Carlsbad.

“Anticompetitive agreements are illegal, whether done by a human or software program. RealPage misused private and sensitive consumer data to take the competition out of the rental industry, leaving renters no other choice but to pay the intentionally high prices that landlords agreed to set,” said Attorney General Bonta. “This means that even if rental home supply was high, rent prices stayed the same, and in some cases, rents went up. This conduct is unacceptable and illegal, and given California’s current housing shortage and affordability crisis, it is causing real harm. Every day, millions of Californians worry about keeping a roof over their head and RealPage has directly made it more difficult to do so.”

RealPage is in the business of generating rent increases and growing revenue for landlords by using algorithmic models to recommend price increases to subscribers. It does so by amassing competitively sensitive data from competing landlords through its pricing algorithms and sharing this data among subscribers. Landlords understand that their nonpublic data will be used to recommend prices not just for their own units, but also for competitors who use the programs. Landlords agree to provide this information because they understand they will benefit from the information of their rivals. In other words, RealPage knows what competing landlords are charging and can increase profits for landlords by using that information to recommend landlords set or raise their prices uniformly, thereby eliminating competition, and leaving renters no choice but to pay artificially high prices.

Over the last four decades, housing needs have significantly outpaced housing production in California. Housing costs have skyrocketed, making it harder for Californians to keep a roof over their heads. California’s 17 million renters spend a significant portion of their paychecks on rent, with an estimated 700,000 Californians at risk of eviction.   

The lawsuit filed today alleges RealPage violated Sections 1 and 2 of the Sherman Antitrust Act, which prohibits anticompetitive agreements, monopolization, and attempted monopolization. Monopolization offenses occur when a single firm maintains a monopoly unlawfully, by using its control of the market to exclude rivals and harm competition. RealPage’s unlawful sharing of nonpublic, competitively sensitive data aligns landlords’ pricing and effectively removes the competitive pressure that benefits renters. Without competitive pressure, landlords have no incentive to decrease prices or offer discounts common in rental markets, like a free month or waived fees. RealPage’s rivals who lawfully compete on merits cannot guarantee landlords the increased profits that RealPage can provide, this maintains and protects RealPage’s monopoly power. 

The lawsuit seeks to end:

• The anticompetitive agreements between RealPage and its landlord customers to share confidential, competitively sensitive information.
• A pricing alignment scheme to raise rents for the American public.
• RealPage’s illegal monopoly in revenue management software built on the competitors’ data that it collects and uses.

A copy of the complaint can be found attached to the press release on the State of California Department of Justice website.