Antitrust and Unfair Competition Law

E-Briefs, News and Notes: January 2024

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

This edition has a variety of content:

  • In SECTION NEWS, we feature:
    • MONTHLY SECTION MESSAGES:
      • The Section Looks Ahead to a Great 2024!
    • Section Announcements:
      • Nominations are due by February 9, 2024 for Antitrust Lawyer of the Year!
      • Applications are due by March 1, 2024 to join our Executive Committee!
      • Register Now for the Seventh Annual “Celebrating Women in Competition Law in California” on March 7, 2024!
      • Job Postings
  • E-BRIEFS features an interesting mix of three significant recent decisions:
    • First, a Pennsylvania district judges denies a motion to dismiss an antitrust challenge to loyalty provisions in a company’s vaccine contracts;   
    • Second, the Ninth Circuit, in an opinion with two partial dissents, recently upheld a jury’s denial of a Robinson-Patman Act 2(a) claim but reversed the district court for its legal errors in denying a permanent injunction under 2(d); and
    • Third, in a lengthy opinion, a Tennessee district judge simultaneously denied a motion to dismiss a “Multifamily” complaint but granted a motion to dismiss a “Student” complaint, both alleging illegal price fixing through a revenue management software in different housing markets.
  • ENFORCEMENT AGENCY PRESS RELEASES highlight the enforcement activities of the Antitrust Division, DOJ, FTC, and California AG’s office.  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 (Manifold@whafh.com) and James Dallal (JDallal@cpmlegal.com).

SECTION NEWS

Message From our Vice Chair of Operations

The Antitrust and Unfair Competition Law Section is looking ahead to a great 2024!  The year started off strong with our second annual UCL Institute on January 18 in Los Angeles.  My personal highlight was the lunchtime conversation between the audience and Director of the FTC’s Bureau of Consumer Protection Samuel Levine.  Other highlights included a panel on enforcement priorities featuring federal, state, and local enforcers, and discussions of the latest applications of the UCL through privacy law and Epic v. Apple.  Later in January, the section also co-sponsored a hybrid CLE with the ABA on Best Practices for Working with DOJ During an Antitrust Investigation.  We are looking forward to March 7, when we will gather for our seventh annual Celebrating Women in Competition event in San Francisco. Register here. This summer we will host mixers for summer associates and newer attorneys, and we are planning for another day of groundbreaking panels and connecting with each other at the Golden State Institute on October 24.  Stay tuned for updates about these events and other opportunities for education, connection, and mentorship we are developing. 

We’d like to welcome all of our new members – we look forward to getting to know you.  To our returning members, thank you for joining us for another year.  If you have not yet renewed your membership for 2024, you can do so at this link.

Beyond attending our events, there are many ways to get more involved!  Applications for the Section’s Executive Committee are currently open through March 1.  Members of the Executive Committee meet monthly and take the lead on our section’s activities and programs.  I first became active in the Section by contributing to the section’s treatise, through which I developed my knowledge of the Cartwright Act and met other members of the section, and I highly recommend this route to anyone who wants to get more involved.  Another great option is to apply to join one of our standing committees, where you can contribute to running education programs, planning diversity or unfair competition law programming, or assist with managing our Competition journal or treatise.  Find out more here. Other ways to get involved include writing an article for Competition and contributing to E-Briefs.  To learn more about any of these opportunities, please reach out to our Chair, Aaron Sheanin (asheanin@gmail.com) or myself, Shira Liu (sliu@brsllp.com).

Finally, if you know any law students interested in a career in antitrust or unfair competition law, please let them know about our Section’s Inclusion and Diversity Fellowship.  The Fellowship provides financial assistance as well as mentoring and an unpaid summer internship with a federal or California state governmental antitrust or UCL enforcer.  More information is available here.

Here’s to a great 2024!

Shira Liu

Shira Liu

MONTHLY SECTION MESSAGES

  • Nominations are due by February 9, 2024 for Antitrust Lawyer of the Year!
    • Each year, the Section honors an Antitrust Lawyer of the Year following the annual Golden State Antitrust and Unfair Competition Law Institute. The award acknowledges that attorney’s achievements, contributions, and advancements in the field of antitrust and unfair competition law.  Click here to learn more and to nominate a deserving candidate.
  • Applications are due by March 1, 2024 to join our Executive Committee!
    • The Executive Committee manages the Section and is charged with overseeing the Section’s current activities and developing new programs and initiatives to further the development of antitrust and competition law in California. A core component of the Executive Committee’s work is to provide opportunities to develop the next generation of California antitrust and unfair competition law practitioners. Click here for further information and to apply now.
  • The Seventh Annual “Celebrating Women in Competition Law in California,” will be held on March 7, 2024 from 5:30 pm to 8:00 pm in San Francisco.
    • This panel of exceptional female trailblazers of the competition bar features Dena Sharp (Girard Sharp, LLP), Kathryn Cahoy (Covington & Burling LLP), Renée Dupree (Google), and Leslie Wulff (U.S. Department of Justice).  The panel will be moderated by United States District Judge Rita F. Lin.  Click here for more details and to register today.

Job Postings

Deputy Attorney General, Consumer Protection Section, California Department of Justice. Apply here.

E-BRIEFS

Merck’s Motion to Dismiss on Lack of Market Foreclosure Denied By Cheryl Johnson

By Cheryl Johnson

Merck Sharp & Dohme’s motion to dismiss an antitrust challenge to loyalty provisions in its vaccine contracts was denied by a Pennsylvania district court.  Merck sold at least 12 vaccines and was the sole supplier of three essential pediatric vaccines: the MMR, varicella and PV1. In 2006, Merck also became the sole supplier of a rotavirus vaccine called Roto Teq which required three doses.  Two years later, GSK introduced a competing rotavirus vaccine which required only two doses. Mayor and City Council of Baltimore v. Merck Sharp & Dohme, No. 23-828, 2023 WL 8018980 at *2 (E.D. Pa. Nov. 20, 2023).  Merck’s vaccine contracts required customers to purchase nearly of their rotavirus vaccine from Merck or face significant price penalties ranging from 2% to 58% of the purchase price on all their Merck vaccine purchases. Id. at *3.  Merck also paid fees and rebates to physician buying groups based on their members’ compliance with the bundled loyalty condition. Id. at *3.  By 2016, Merck still had 80% of the rotavirus vaccine market even though it maintained or increased Roto Teq’s price every year.  GSK claimed the loyalty provisions left it no rational incentive to even compete for the 40 percent of the rotavirus market locked up by Merck’s loyalty conditions.

Cheryl Johnson

Merck argued that there was cognizable harm to competition because GSK could have competed but chose not to do so.  The court disagreed, relying on LePage‘s Inc. v. 3M, 324 F. 3d 141, 155-56 (3d Cir 2003), a case that recognized competitive harm may occur “when a defendant forecloses competition to its product in a competitive market by linking sales of that product to a product for which it faces no competition.” Id. at *4.  The court rebuffed Merck’s suggestion that LePage’s, an en banc Third Circuit decision, lacked vitality or was limited by the panel decisions in Eisai, Inc. v. Sanofi, 821 F.3d 394 (3d Cir. 2016) or ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254 (3d Cir. 2012).  All these cases involved choices in the marketplace where “anticompetitive conduct rendered that choice meaningless.” Id. at *4-5.  Eisai also affirmed LePage’s critical holding that bundled discounts foreclosing portions of the market to a potential competitor not manufacturing an equally diverse group of products may be anticompetitive. Id. at *5. Nor did it matter that GSK could offer its own bundle of ten vaccines because it could not counter Merck’s bundle with three essential vaccines that GSK did not manufacture. Id.  

Plaintiffs’ allegations that 40% of the rotavirus market was foreclosed was sufficient to support a federal antitrust claim, as “there is no fixed percentage at which foreclosure becomes ‘substantial’ and courts have varied widely in the degree of foreclosure they consider unlawful.” Id. at *9.  Moreover, there were additional factors pled, such as limits on the providers’ ability to switch vaccines as well as Merck’s exclusion of an equally efficient competitor, which sufficed to establish foreclosure. Id. at *9.

Claims under numerous state antitrust and consumer protection laws were sustained except for those under the Idaho and Utah consumer protection laws. Id. at *15, 18, 20.  In sustaining the state claims, the court ruled that allegations of a nationwide anticompetitive scheme raising drug prices in all states sufficed to satisfy intrastate pleading requirements, and that third party plaintiffs who reimbursed patients for their vaccines could be considered “consumers” who were “transitively” purchasing consumer goods and involved in consumer transactions. Id. at *15-18.

Energizing the Robinson-Patman Act By Travis West

By Travis West

U.S. Wholesale Outlet & Distribution, Inc. v. Innovation Ventures, LLC, 89 F.4th 1126 (Dec. 22, 2023)

The Ninth Circuit, in an opinion with two partial dissents, recently upheld a jury’s denial of a Robinson-Patman Act 2(a) claim but reversed the district court for its legal errors in denying a permanent injunction under 2(d). 

The appeal centered on a dispute between a group of wholesalers (the “Wholesalers”) and Living Essentials.  Living Essentials is the manufacturer of 5-Hour Energy drinks, the small energy booster bottles ubiquitously sold at stores ranging from grocery stores to gas stations.  The Wholesalers alleged that Living Essentials violated the Robinson-Patman Act by offering Costco more favorable pricing, discounts, and reimbursements than it offered the Wholesalers.  Costco sold Five-Hour Energy drinks at its Costco Business Centers, which are aimed at restaurants, small businesses, and other retailers.  Costco received lower prices per bottle, prompt payment discounts, and payments for display in stores and advertising.  Costco also allowed Living Essentials to participate in a coupon program that lowered the price for consumers with Living Essentials reimbursing Costco for the cost.  

Travis West

The Wholesalers alleged these actions violated both Sections 2(a) and 2(d) of the Robinson-Patman Act.  Section 2(a) bars a seller from discriminating in price between competing purchasers of commodities of like grade and quality.  For this action, the Wholesalers alleged Living Essentials engaged in secondary-line discrimination.  This theory requires a party to prove four elements: (1) the goods were sold in interstate commerce; (2) the items sold were of like grade and quality; (3) the seller discriminated in price between the disfavored and the favored buyer; and (4) the discrimination harms competition to the advantage of the favored buyer.  Section 2(d) prohibits a manufacturer from discriminating in favor of one purchaser by making payments to that purchaser in connection with the sale or offering for sale of any products unless that payment or consideration is available on proportionally equal terms to all other customers competing in the distribution of such products.  To obtain injunctive relief, the plaintiff must show that it competes with the favored buyer and a threat of antitrust injury. 

The district court found that the Wholesalers had proven the first three elements of a Section 2(a) claim and sent the fourth element to the jury.  The trial focused on whether the Wholesalers and Costco were in competition with each other.  The appeal arose from the instructions given to the jury: for the 2(a) claim, the judge instructed the jury that the Wholesalers needed to show that Living Essentials made “reasonably contemporaneous” sales to them and to Costco at different prices.  The judge also instructed the jury that the Wholesalers had to prove that any difference in price could not be justified as “functional discounts” to compensate Costco for engaging in marketing or promotions.  Interestingly, in both cases, the Wholesalers agreed that the judge had stated the law correctly but argued that they had already met their evidentiary burden.  When the jury returned a verdict for Living Essentials, the judge then ruled on the 2(d) claim, holding that the jury implicitly found there was no competition between the Wholesalers and Costco so the court could not issue the injunction.

The Wholesalers appealed on multiple grounds.  First, they argued that the jury instruction on “reasonably contemporaneous” sales was erroneous because there was no legitimate dispute that the Wholesalers had already proven that element.  The panel in a section written by Judge Miller rejected that argument and held instead that the Wholesalers had failed to direct the district court to evidence to substantiate their claims.  The panel noted that the Wholesalers had a spreadsheet showing all sales by Living Essentials, but they had failed to point to specific pairs of sales to demonstrate contemporaneity.  The panel also noted that it was not the district court’s responsibility to dig through exhibits and find paired transactions to support the Wholesalers’ theory. 

On this point, Judge Gilman, sitting by designation from the Sixth Circuit, dissented. He noted that the spreadsheet was self-explanatory and, on its face, showed thousands of contemporaneous transactions. He also pointed out that an expert relied on the document.  Because he did not see the error as harmless, he would have reversed the judgment and remanded for a new trial.

Second, the Wholesalers objected to the jury instruction for the functional discount doctrine.  The functional discount doctrine allows a supplier to provide a purchaser with reimbursement or discount for services performed by the purchaser for the supplier.  For instance, a supplier can give a discount for marketing efforts conducted by a purchaser.  The Wholesalers argued that the jury instruction was improper because the doctrine does not apply between favored and disfavored wholesalers and the discounts given to Costco did not bear a relationship to Living Essential’s savings or Costco’s costs.  The panel disagreed. It first held that the Wholesalers had the burden of demonstrating that the discounts were not justified by Costco’s actions.  And because there was evidence in the record to support the relationship between the discounts and Costco’s actions, the panel could not find an error.

Finally, the Wholesalers challenged the denial of injunctive relief under Section 2(d).  In this challenge, they were successful. This section of the opinion was written by Judge Ikuta. The challenge boiled down to a dispute about whether Costco and the Wholesalers were customers competing with each other for resale of 5-Hour Energy drinks, which depended on whether they resell a like grade and quality at the same functional level of distribution.  The Ninth Circuit’s test asks if the two customers (1) have outlets in geographical proximity to those of the other; (2) purchase goods of the same grade and quality from the seller within approximately the same period of time; and (3) operate on a particular functional level such as wholesaling or retailing.  The district court held that Costco and the Wholesalers were operating at a different functional level.  Based on the fact that the jury had found in favor of Living Essentials on the Section 2(a) claim, the district court determined the jury had also necessarily found there was no competition between Costco and the Wholesalers.  Not so, according to the panel.  The panel noted that, because a Section 2(a) claim required both a finding of competition and harm to competition, it was possible for the jury to find competition but no harm.  The panel also disagreed factually with the district court, which had found that Costco was a retailer.  Instead, the panel noted there was no evidence to support that and the Costco stores in question targeted businesses.  The panel vacated, reversed, and remanded to the district court to consider the injunction issue again.

Judge Miller dissented from this portion of the opinion and contended that the district court did not err in rejecting the Section 2(d) claim.  He argued that the evidence established that the Wholesalers did not compete for the same customers.  The other members of the panel rejected his argument, noting that many of the distinctions he drew were not relevant for a Section 2(d) claim and the evidence about lack customers switching between Costco and the Wholesalers went to harm to competition, not to whether they competed.

Court Grants One Motion to Dismiss and Denies Another in Price-Fixing Suit Against RealPage, Inc. By Wesley Sweger

By Wesley Sweger

In re: RealPage, Inc., Rental Software Antitrust Litigation, Case No. 3:23-cv-00413 (M.D. Tenn. Dec. 28, 2023)

In a lengthy seventy-six-page opinion, Judge Crenshaw (M.D. Tenn.) simultaneously denied the motion to dismiss the “Multifamily” Complaint but granted the motion to dismiss the “Student” Complaint.  Alleging violations of Section 1 (Sherman Act) and similar state antitrust laws, both plaintiff groups alleged that “student and multifamily rental housing markets throughout the United States have been tainted by an illegal price-fixing conspiracy” between RealPage Inc. and its clients, facilitated by RealPage’s revenue management software (“RMS”).  Id. At *2.

RealPage is a software company that developed an integrated technology platform that provides software solutions for the multifamily and student housing markets. “RealPage solicits clients to use its [RMS] by promising that they will ‘outperform the market’ with ‘software that . . . use[s] a database of rental prices in [each client’s] area (including competitors’ prices) and provide[s] the optimal price to charge prospective tenants, with both short- and long-term goals of increasing revenues by raising rents.’” Id. At *3-4. “To achieve this promised revenue outperformance, RealPage’s clients must allow RealPage to use their commercially sensitive pricing and supply data in its RMS algorithms, both to set each client’s own rent prices and to help set rent prices of its horizontal competitors. These clients must also be willing to ‘outsource [their] daily pricing and ongoing revenue oversight’ to RealPage by accepting RealPage’s price recommendations upwards of 80–90% of the time.” Id. At *4. RealPage’s RMS also allows its clients “with multifamily properties [to] artificially control the supply of rental units by ‘allow[ing] a larger share of their units to remain vacant,’ and staggering lease renewals to ‘minimize naturally occurring periods of oversupply.’” Id. At 7. “By the end of 2022, RealPage’s RMS was being used to price over four million multifamily housing units across the United States,” and now manages “hundreds of thousands of student beds across the country.” Id. At *4-5.

The Court noted that “[i]n order for RealPage to ensure it delivers on its promise to ‘outperform the market,’ RealPage must ensure that its clients actually adopt the prices it recommends.” Id. At *7. The Court reviewed in detail the robust multi-layer monitor system created by RealPage which included assigned pricing or revenue managers; close monitoring of clients’ pricing recommendations through quarterly, weekly, and even daily reports; and “educating” on pricing methodology and potential RealPage’s pricing recommendations.

MULTIFAMILY COMPLAINT

The Multifamily Plaintiffs allege that Client Defendants used RealPage’s RMS to fix rental properties prices above market and “agreed to participate in the data co-operative and price their multifamily rental units according to RealPage’s RMS.” Id. At *18. The Plaintiffs rejected “the characterization of the alleged agreement as a hub and spoke conspiracy because ‘RealPage is [not] in a true vertical relationship to these property defendants.’” Id. at *19.  However, the court found that Plaintiffs adequately alleged both vertical agreements (sale of RealPage’s software solution and on-going pricing monitoring to Defendants) and horizontal agreements (an agreement between Client Defendants to use RealPage to fix prices of the multifamily rental properties above market rates).  Although the Court did not find direct evidence, the Court found circumstantial evidence of parallel conduct because the new pricing strategy “prioritized raising rent prices even if doing so resulted in higher vacancy rates” and because Defendants “raise their rent prices in parallel fashion upon adopting their new pricing strategies.” Id. at * 22. This Court found “no infirmity” in the type of parallel conduct alleged.

In evaluating whether the parallel changes were plausibly alleged, the court noted that “[b]efore the widespread adoption of RealPage’s RMS, competition in the multifamily rental housing market was driven by property owners’ and managers’ desire to keep ‘heads in beds’—in other words, maintain the highest possible occupancy levels and keep turnover among tenants to a minimum.” Id. at *24.  The change in pricing strategy from “heads in beds” to “price over volume” was the “meat of Plaintiffs’ conduct allegations.” Id. At *25. Plaintiffs offered statements by RealPage’s clients regarding adoption of a different pricing strategy which prioritized increasing prices regardless of apartment vacancies or market downturn. Plaintiffs also presented data showing the rent prices in cities RealPage operated in became far less correlated with vacancy rates after 2016. Although Defendants pointed out that the multiple statements concerning a change in strategy were statements made before 2016, the Defendants did not point to any deficiencies in the Multifamily Plaintiffs’ regression analysis in four submarkets.

The court reviewed the graphs presented in the Multifamily Complaint which allegedly showed that price increases were perfectly coordinated in nine submarkets and agreed with the Defendants that the charts were not persuasive. Nonetheless, the Court concluded that at the motion to dismiss stage the Court “need not . . . engage in a Daubert-like analysis of Plaintiffs’ statistical pleadings” and “must[] accept as true Plaintiffs’ factual assertions regarding pricing and other data.” (Id. [citations omitted].)  The Court found that Plaintiffs have adequately alleged parallel conduct through Defendants’ change in pricing strategies following their adoption of RMS but failed to satisfy Twombly as to parallel pricing.

Next, looking at any plus factors that point to agreement, the court stressed that the Sixth Circuit holds action against economic interest to be the most probative plus factor. Accordingly, the court noted that the clients’ “price-raising during periods of high vacancy and/or market downturns,” (p. 30) and “contribut[ion of] data to RealPage without knowing that it would benefit from its horizontal competitors doing the same” (id. at *31) are actions against the clients’ economic self-interest.  The court stated that “a successful hub and spoke theory of Sherman Act liability based on the use of algorithmic pricing depends in part on the exchange of nonpublic information between competitors through the algorithm” and that a horizontal agreement was adequately plead. Id. at *34 [citations omitted]. 

STUDENT HOUSING COMPLAINT

The Student Plaintiffs alleged that Lessors used RealPage to fix the prices of rental properties above the market rate and characterized the agreement as “a horizontal price-fixing agreement subject to per se analysis.”  Id. at *35. The Lessors allegedly agreed to follow RealPage’s recommendation on the “mutual understanding that competing lessors would do the same.” The Lessors argued that Plaintiffs have alleged “at most, a rimless hub and spoke conspiracy.”   With no direct evidence, the Court reviewed the Student Plaintiffs’ circumstantial evidence of “uniform business conduct or other concerted action.” Having found similar allegations sufficient in the Multifamily Complaint, the court found persuasive evidence of a horizontal agreement.

Although the Student Plaintiffs alleged “reduced output,” the allegation lacked the same support provided in the Multifamily Complaint discussed above.   However, taking the allegations in the light most favorable to plaintiffs, the Court found that the Student Plaintiffs’ “price and volume” strategy change, although different from the Multifamily Complaint, plausibly alleged this parallel shift.

Taking a holistic approach to the various plus factors alleged by the Student Plaintiffs (e.g., high barriers to entry, inelastic demand, fungibility of residential real estate, and the frequent exchange of sensitive information with multiple opportunities to collude), the court concluded that the Student Plaintiffs’ allegations support a “reasonable expectation that discovery will reveal evidence of [an] illegal agreement.” Id. at * 43. What mattered to the Court was Lessors’ knowledge that their information would be used for the “mutual benefit of competitors—not their means of sharing that information.” Id.  The court discounted Defendants’ attack on each plus factor individually as “a legally flawed approach.”

UNREASONABLE RESTRAINT OF TRADE     

Next, the court examined whether the conspiracy between Defendants constituted an unreasonable restraint of trade under the per se rule or the rule of reason.

Per Se Analysis

Confusing the efficacy of the agreement with the type of agreement, the Court refused to apply the per se rule to both complaints because, inter alia, Plaintiffs “have not alleged that either RealPage or any of Client Defendants can enforce acceptance of price recommendations through removing an uncooperative member from the conspiracy or applying some other form of punishment.” Id. at *46. The Court additionally noted “that courts are cautious . . . to apply per se treatment to new or novel ways of doing business, [and] the Court does not find the conspiracy alleged in the [complaints] to be a traditional straightforward price-fixing conspiracy.” Id. at *48. Rather, the court found the rule of reason should apply.

The Rule of Reason Standard

For each complaint, the Court ran through the well-accepted rule of reason analysis, starting with defining the relevant market, evaluating market power, then weighing anticompetitive effects against procompetitive justifications.

Multifamily Complaint  

In the Multifamily Complaint, the relevant product market, undisputed by Defendants, was “the market for the lease of multifamily residential real estate” (id. at *51–53.)  The real points of contention were defining the geographic market and market power. The court, for the most part, reserved a full analysis of the geographic market for a later time, reasoning determining the geographic market is a fact-intensive inquiry that is better suited to address after discovery. However, the court noted that many courts have used Metropolitan Statistical Areas (MSAs) to define geographic submarkets. An MSA is “a geographic entity associated with at least one core urbanized area of 50,000 or more population, plus adjacent territory that has a high degree of social and economic integration with the core as measured by commuting ties.” (id. at *52.)  The court concluded that the Multifamily Plaintiffs had met their initial burden of showing the anticompetitive effects of the alleged conspiracy in the relevant market. “Discovery will reveal the appropriate percentage of market share needed to presume market power and the actual percentage RealPage enjoys in each . . . alleged submarket[].”  Id. at *59.

Defendants’ procompetitive justifications included, inter alia, reducing the number of vacancies (although that is the opposite of what is alleged) and maximizing revenue for clients. The Court dismissed Defendants’ procompetitive justifications as describing benefits only for Defendants rather than the market. The Court held that the Multifamily Plaintiffs have plausibly alleged restraint of trade using the Rule of Reason standard.

Student Complaint

For the Student Complaint, the relevant product market, also undisputed by Defendants, was “the market for lease of student housing real estate.” Id. at * 61.  The Court agreed with Defendants that Student Plaintiffs’ proposed nationwide market was implausible and failed to appreciate the industry reality that “students are a captive market” and need to live near campus.  Even considering the alternative twenty-seven regional submarkets, the Student Plaintiffs failed to explain “how large cites with multiple universities, as opposed to markets with a reasonable perimeter around each campus meets the proposed geographic market standard.” Id. at *65.  The Student Plaintiffs also failed to “plausibly allege—or permit the inference of—market power across the regional submarkets over the supposed thirteen-year conspiracy.” Id. at * 66. 

The Court examined and discounted the Student Plaintiffs alleged anticompetitive effect.   “To show direct evidence of anticompetitive effects, Plaintiffs . . . rely upon ‘Defendants’ admissions that they have achieved “above market” [performance] using RealPage’s pricing,’” Id. at *67. The Court found that Plaintiffs “overstate” the significance of Defendants’ admissions as evidence of anticompetitive effects. Additionally, the Court criticized the Student Plaintiffs’ regression analysis because it focused only on four RMS clients in four cities for a single month over a thirteen-year conspiracy.  “Taken together, Plaintiffs’ allegations of price increases fall short.” Id. at *69) As a result, the Court concluded that Plaintiffs failed to plead unreasonable restraint of trade under the rule of reason and dismissed the Complaint.

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.  It does not include all press releases issued by those offices.  This appears to be a truly transitional time in antitrust enforcement and reading the press releases can be very helpful to stay on top of changes.

ANTITRUST DIVISION, US DEPARTMENT OF JUSTICE

To link to all Antitrust Division, DOJ press releases, go to:  https://www.justice.gov/atr/press-releases.  Highlights include the following:

Justice Department and the FTC Update Guidance that Reinforces Parties’ Preservation Obligations for Collaboration Tools and Ephemeral Messaging

Friday, January 26, 2024 (Office of Public Affairs)

The Justice Department’s Antitrust Division and the Federal Trade Commission (FTC) today announced that both agencies are updating language in their standard preservation letters and specifications for all second requests, voluntary access letters and compulsory legal process, including grand jury subpoenas, to address the increased use of collaboration tools and ephemeral messaging platforms in the modern workplace. These updates reinforce longstanding obligations requiring companies to preserve materials during the pendency of government investigations and litigation.

“These updates to our legal process will ensure that neither opposing counsel nor their clients can feign ignorance when their clients or companies choose to conduct business through ephemeral messages,” said Deputy Assistant Attorney General Manish Kumar of the Justice Department’s Antitrust Division. “The Antitrust Division and the Federal Trade Commission expect that opposing counsel will preserve and produce any and all responsive documents, including data from ephemeral messaging applications designed to hide evidence. Failure to produce such documents may result in obstruction of justice charges.”

“Companies and individuals have a legal responsibility to preserve documents when involved in government investigations or litigation in order to promote efficient and effective enforcement that protects the American public,” said Director Henry Liu of the FTC Bureau of Competition. “Today’s update reinforces that this preservation responsibility applies to new methods of collaboration and information sharing tools, even including tools that allow for messages to disappear via ephemeral messaging capabilities.”

Companies continue to adopt new technologies to do their work, and in recent years there has been an increase in use of collaboration tools and ephemeral messaging applications, such as Slack, Microsoft Teams and Signal. Some of these technologies allow, or even automatically enable, immediate and irretrievable destruction of communications and documents. Documents created through use of these technologies have long been covered by Justice Department and the FTC document requests. However, companies have not always properly retained these types of documents during government investigations and litigation.

Today’s announcement underscores the continued cooperation between the Antitrust Division and FTC’s Bureau of Competition on criminal enforcement of antitrust laws and related issues that arise in antitrust actions.

Justice Department and Federal Trade Commission Hold Trilateral Meeting with Competition Enforcers from Mexico and Canada

Tuesday, January 23, 2024 (Office of Public Affairs)

On January 23, 2024, the Justice Department participated in a trilateral meeting with enforcers from Mexico’s Federal Economic Competition Commission (COFECE), Canada’s Competition Bureau and the Federal Trade Commission (FTC). Discussions were held among Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division, Chair Lina M. Khan of the FTC, Canadian Commissioner of Competition Matthew Boswell and President Andrea Marván Saltiel of COFECE.

The meeting in Mexico City, included “discussions on competition in the technology and platform sectors and the impact of competition on labor markets, as well as discussions on new enforcement tools and bringing a whole-of-government approach to competition law.”

Justice Department Joins Lawsuit Challenging National Collegiate Athletics Association’s (NCAA) Transfer Eligibility Rule

Thursday, January 18, 2024 (Office of Public Affairs)

On January 18, 2024, the DOJ joined 10 states and the District of Columbia in a civil antitrust lawsuit challenging the National Collegiate Athletics Association’s (NCAA) Transfer Eligibility Rule. “The amended complaint alleges that the NCAA unreasonably restricts college athletes’ freedom to transfer between academic institutions by limiting their eligibility to participate in intercollegiate contests if they transfer more than once during their college careers. By deterring transfers, the rule also denies athletes educational opportunities.”

According to the press release, the states of Ohio, Colorado, Illinois, New York, North Carolina, Tennessee and West Virginia filed this lawsuit in the Northern District of West Virginia; and shortly thereafter, “the court granted the states’ request for a temporary restraining order, finding the NCAA’s Transfer Eligibility Rule likely violates Section 1 of the Sherman Act.”

“We are proud to stand with our state law enforcement partners on behalf of college athletes across the nation,” said Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division. “NCAA Division I institutions compete with each other not just on the playing field or in the arena, but to recruit and retain college athletes. College athletes should be able to freely choose the institutions that best meet their academic, personal and professional development needs without anticompetitive restrictions that limit their mobility by sacrificing a year of athletic competition.”

The amended complaint the states of Minnesota, Mississippi and Virginia and the District of Columbia as co-plaintiffs and “alleges that the NCAA’s one-time-transfer rule unreasonably restrains competition in the markets for athletic services in men’s and women’s Division I basketball and Football Bowl Subdivision (FBS) football, as well as for athletic services in all other men’s and women’s Division I sports.” “The rule forces college athletes who transfer more than once to sit on the sidelines for an entire season before they are eligible to compete in NCAA athletic competitions at their new school.” The amended complaint further alleges “that the restriction limits college athletes’ bargaining power and harms both their educational and athletic experiences.”

A link to the amended complaint is provided at: https://www.justice.gov/opa/pr/justice-department-joins-lawsuit-challenging-national-collegiate-athletics-associations-ncaa

Justice Department Statements on District Court Decision to Block JetBlue’s Acquisition of Spirit Airlines

Tuesday, January 16, 2024 (Office of Public Affairs)

On January 16, 2024, the U.S. District Court for the District of Massachusetts blocked JetBlue Airways’ $3.8 billion dollar acquisition of Spirit Airlines.  According to the press release, “The court found that JetBlue’s proposed takeover of Spirit is unlawful because it ‘does violence to the core principle of antitrust law: to protect the United States’ markets – and its market participants – from anticompetitive harm.”

“Today’s ruling is a victory for tens of millions of travelers who would have faced higher fares and fewer choices had the proposed merger between JetBlue and Spirit been allowed to move forward,” said Attorney General Merrick B. Garland. “The Justice Department will continue to vigorously enforce the nation’s antitrust laws to protect American consumers. I want to thank the Antitrust Division for their excellent work on this case.”        

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The court’s decision follows a 17-day trial that began in October 2023. In March 2023, the Justice Department, California, Maryland, Massachusetts, New Jersey, New York, North Carolina, and the District of Columbia sued to stop the merger under Section 7 of the Clayton Act.

FEDERAL TRADE COMMISSION

To link to all FTC press releases, see https://www.ftc.gov/news-events

FTC Sues to Block Novant Health’s Acquisition of Two Hospitals from Community Health Systems

January 25, 2024

Proposed acquisition would eliminate competition, increase health care costs in North Carolina’s Eastern Lake Norman Area

The FTC sued to block Novant Health, Inc.’s $320 million acquisition of two North Carolina hospitals from Community Health Systems, Inc. (“CHS”).

The Commission issued an administrative complaint “to block the proposed acquisition, alleging that Novant Health’s proposed deal to acquire Lake Norman Regional Medical Center and Davis Regional Medical Center from CHS threatens to raise prices and reduce incentives to invest in quality and innovative care that would benefit patients.”

“Hospital consolidations often lead to worse outcomes for nurses and doctors, result in higher prices, and can have life and death consequences for patients,” said Henry Liu, Director of the FTC’s Bureau of Competition. “There is overwhelming evidence that Novant’s deal with Community Health Systems will be detrimental to patients in the Eastern Lake Norman Area, including leading to higher out-of-pocket costs for critical health care services.”

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According to the press release,

As the FTC alleges, the proposed deal with CHS would allow Novant to control nearly 65% of the market for inpatient general acute care services (“GAC”) in the Eastern Lake Norman Area of North Carolina, which primarily includes Iredell County and northern Mecklenburg County. Inpatient GAC services include a broad range of essential medical, surgical, and diagnostic services that require an overnight hospital stay.

With fewer alternatives for in-patient GAC services, Novant would be able to demand higher rates for its services. The FTC alleges the proposed acquisition would likely increase annual health care costs by several million dollars. These higher costs would then be passed on to patients. The deal would also reduce Novant’s incentive to compete to attract patients by improving its facilities, service offerings, and quality of care.

The federal court complaint and request for preliminary relief will be filed in the U.S. District Court for the Western District of North Carolina to halt the transaction pending an administrative proceeding.

FTC Launches Inquiry into Generative AI Investments and Partnerships

Agency Issues 6(b) Orders to Alphabet, Inc., Amazon.com, Inc., Anthropic PBC, Microsoft Corp., and OpenAI, Inc.

January 25, 2024

The FTC “announced today that it issued orders to five companies requiring them to provide information regarding recent investments and partnerships involving generative AI companies and major cloud service providers.”   “The compulsory orders were sent to Alphabet, Inc., Amazon.com, Inc., Anthropic PBC, Microsoft Corp., and OpenAI, Inc.”

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“The FTC is seeking information specifically related to:

  • Information regarding a specific investment or partnership, including agreements and the strategic rationale of an investment/partnership.
  • The practical implications of a specific partnership or investment, including decisions around new product releases, governance or oversight rights, and the topic of regular meetings.
  • Analysis of the transactions’ competitive impact, including information related to market share, competition, competitors, markets, potential for sales growth, or expansion into product or geographic markets.
  • Competition for AI inputs and resources, including the competitive dynamics regarding key products and services needed for generative AI.  
  • Information provided to any other government entity, including foreign government entities, in connection with any investigation, request for information, or other inquiry related to these topics.”

The companies will have 45 days from the date they receive the order to respond.

FTC Signs on to Multilateral Arrangement to Bolster Cooperation on Privacy and Data Security Enforcement

January 17, 2024

The Federal Trade Commission has agreed to participate in an international multilateral arrangement that will enable the agency to cooperate, provide assistance with investigations and share information with other privacy authorities around the world that participate in the program.

The FTC’s participation in the Global Cooperation Arrangement for Privacy Enforcement (Global CAPE) ensures the agency can keep pace with the increasingly global nature of commerce. The FTC’s participation in the nonbinding Global CAPE will help the agency to cooperate with other members of the organization on privacy and data security related law enforcement issues without having to negotiate a separate memorandum of understanding with each participant.

CALIFORNIA DEPARTMENT OF JUSTICE

To link to all California Department of Justice press releases, see https://oag.ca.gov/media/news

Attorney General Bonta Announces Investigative Sweep, Focuses on Streaming Services’ Compliance with the California Consumer Privacy Act

Friday, January 26, 2024

“Ahead of Data Privacy Day, California Attorney General Rob Bonta today announced an investigative sweep, and is sending letters to businesses with popular streaming apps and devices alleging that they fail to comply with the California Consumer Privacy Act (CCPA). Specifically, this year’s sweep focuses on the compliance of streaming services with CCPA’s opt-out requirements for businesses that sell or share consumer personal information, including those that do not offer an easy mechanism for consumers who want to stop the sale of their data.” 

According to the Press Release,

“The California Consumer Privacy Act is a landmark law that secures increased privacy rights for California consumers, such as the right to know how businesses collect, share, and disclose their personal information. Businesses that are subject to the CCPA have specific responsibilities, including responding to consumer requests to exercise these rights and giving consumers certain notices explaining their privacy practices. 

Under the CCPA’s right to opt out, businesses that sell personal data or share personal information for targeted advertising must permit consumers the right to opt-out. Exercising this right should be easy and involve minimal steps. For example, consumers that are using a SmartTV should be able to navigate to the settings menu in a streaming service’s mobile app and enable the service’s “Do Not Sell My Personal Information” setting. Consumers should also be able to have this choice honored across different devices if they are logged into their account when they send their opt-out request. And, consumers should be able to easily encounter a streaming service’s privacy policy that discusses their CCPA rights. “


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