E-Briefs, News and Notes: JANUARY 2025

The Section was delighted to host the 34th Golden State Antitrust & UCL Institute (“GSI”) at the Julia Morgan Ballroom in San Francisco on October 24, 2024. As the Section’s signature event, GSI brings together thought leaders, top enforcement officials, and leading practitioners to discuss important topics in California and federal antitrust and unfair competition law. Following the 2024 GSI, the Section hosted a reception and a dinner to honor Paul J. Riehle as the 2024 Antitrust Lawyer of the Year. This year the Keynote Speaker was Henry Liu, Director of the FTC’s Bureau of Competition. 

The Institute also hosted six thought-provoking panels.  The 2024 GSI Panels are briefly summarized below by various e-brief contributors in their “views from the floor.”

By Alex J. Tramontano

Moderator Anne Davis guided the panel through the various changes and developments in the law over the past year.

Panelist Kathryn Turner, Deputy District Attorney of San Diego County gave the update regarding California consumer protection and public enforcement:

• California Price Transparency Law (“Honest Pricing Law” or “Hidden Fees Statute”): Effective July 1, 2024, this set of laws apply to the sale or lease of most goods and services for a consumer’s personal use (i.e., event tickets, hotels and other lodging, restaurants, and food delivery) and mandate price transparency in advertising to prevent hidden fees upon checkout. (See Civil Code § 1770(a)(29); 1939.20; 2985.71; Cal. Gov’t Code § 13995.78; Cal. Streets & Highways Code § 36538; Cal. Veh. Code § 11713.27; 11713.28.)
• Mortgage Fraud Law: Cal. Financial Code § 4973 prohibits filing any document with a county recorder that contains: i) a material misstatement, ii) misrepresentation, or iii) omission. (See also, Penal Code § 532f (deliberate conduct now felony wobbler).)
• Auto-Renewal Law (“Click to Cancel”): Cal. Bus. & Prof. Code § 17601 – “Express affirmative consent” is now required for “free-to-pay conversion” or “free trial” contracts, and companies must send annual reminders re: existence of the automatic renewal, price, and means to cancel (using the same medium used to sign-up).
• No Non-Disclosure Agreements for Refunds: Cal. Civil Code § 1748.50 effective Jan. 1, 2025, prohibits conditioning a refund on signing a non-disclosure agreement, and a person or business cannot prevent a consumer review of the business online.
• Deep Fake Disclosures Required for Political Advertising: Cal. Code of Civil Procedure § 35; Election Code §§ 20511-20520, requires disclosures for generated or substantially altered videos using artificial intelligence tools.
• Consumer Medical Debt Disclosure Prohibitions: Cal. Civil Code §§ 1785.3, 1785.13, 1785.20.6, 1785.27, 1786.18, 1788.14; Health and Safety Code §§ 1371.56, 1371.9, 1797.233,127425; Insurance Code §§ 10112.75, 10112.8, 10112.82, 10126.66, prohibit disclosures to credit reporting on medical debt after July 1, 2025.
• Preventing Children from Social Media Addiction: Cal. Health and Safety Code § 27000-27007, effective Jan. 2027 prohibits notifications to minors from 12 a.m. to 6 a.m.; or from 8 a.m. – 3 p.m. Monday through Friday from September through May.
• Litigation Privilege Does Not Apply in Cases Against Debt Collectors: Moten v. Transworld Systems, 98 Cal. App. 5th 691 (2023) held debt collection violations are an exception to the litigation privilege set forth in Cal. Code of Civ. Proc. § 47(b).
• Use of Statistical Sampling and Extrapolation to Support Number of Violations: People of the State of California v. Ashford University, LLC, 100 Cal. App. 5th 485 (2024) upheld extrapolation from a randomized survey of telephone calls as support for the number of misleading calls placed by defendants for determining damages.

Kate Patchen and Ryan Sandrock presented the year’s developments in federal antitrust laws:

• Information Sharing and Algorithmic Price-Fixing: The U.S. Dept. of Justice (“DOJ”) submitted statements of interest in several cases challenging information sharing and algorithmic price-fixing (e.g., RealPage, Agri Stats, Yardi, Caesars, Pork.). The DOJ’s positions are boiled down to: i) information exchange is concerted action under 15 U.S.C. § 1 (“Section 1”); ii) algorithmic price-fixing is a per se violation of Section 1; iii) there is no requirement of direct communication among competitors; and iv) fixing the starting point of prices is per se illegal, even if the ultimate prices deviate
• No-Poach Provisions in Franchise Agreements: Deslandes v. McDonald’s U.S., LLC, 2023 WL 5496957, 2023 U.S. App. LEXIS 22509 (7th Cir. Aug. 25, 2023) (N.D. Ill.), McDonald’s employees challenged McDonald’s alleged use of no-poach provisions in franchise agreements. The Seventh Circuit found the district court failed to sufficiently analyze whether the per se rule should apply, and the pleadings alone were not sufficient to establish that the clauses at issue were ancillary.
• Google Search Monopoly: U.S. v. Google (Search) No. 1:20-cv-03010 (D.D.C. Aug. 5, 2024) victory for the DOJ on the theory that long term agreements to make Google the default browser search engine across multiple platforms was anticompetitive. The remedy proposal was submitted Oct. 8, 2024 and Court to issue final remedy Aug. 2025.
• Right to Repair:  Lambrix v. Tesla, No. 3:23-cv-1145-TLT (N.D. Cal. Jun. 17, 2024) denied motion to dismiss allegations Tesla prevents drivers in an EV foremarket from getting repair services by a Tesla-only aftermarket. Court held that Plaintiffs had alleged an EV-only foremarket in which Tesla had market power. Plaintiffs sufficiently alleged Tesla had coerced Tesla car-buying customer to also purchase only Tesla-authorized parts and services (tying). The District Court rejected the argument that Tesla consumers in the foremarket had sufficient knowledge of aftermarket restrictions to invalidate claim. See also, In re Deere & Co. Repair Servs. Antitrust Litig., No. 3:22-cv-50188, MDL No. 3030, (N.D. Ill. Nov. 27, 2023).

By Cheryl Johnson

The Sports Antitrust session opened with an announcement of the $2.8 billion settlement between the NCAA and the Power Five conferences. While this groundbreaking revenue model paved the way for some collegiate athletes to directly share revenue, it left the bases fully loaded with questions like  how revenue was to be shared between different collegiate sports and non-settling conferences, the NCAA’s retained powers, the great potential for misuse of NILs, and maintenance of  the competitive balance between colleges, conferences and different sports.

Roster changes in the conferences were attributed to changes in the sports media landscape, leaving lots of  conference liability and governance issues on deck for lawyers to clean up. The  judge’s reversal of the jury call for a $4.7 billion award in the Saturday Night Ticket litigation wiped out plaintiffs’ grand slam with a full hail Mary for the NFL.

By Wesley Sweger

This year’s State AG Enforcement Panel was full of interesting updates on recent AG enforcement efforts and helpful tips for any antitrust practitioner. The panelists reviewed areas of competition law the California AG has recently been active in, such as non-competes, wage-fixing, and non-poach agreements. For defense counsel, the panelists walked though helpful tips and common mistakes, such as not being fully aware of how CA antitrust law deviates from federal law or sidestepping, rather than addressing, the AG’s primary concerns. For the plaintiffs’ bar, the panelists provided tips for either working in conjunction with state enforcers, such as coordinating depositions and keeping tabs on the AG’s timelines to know when best utilize the AG’s manpower. This being just a slice of what was covered, the panel was overall an excellent crash course on state enforcement.

By Caroline Corbitt

The always-popular ethics panel featured four ethically thorny scenarios that may be faced by antitrust attorneys, including in-house practitioners. The panel, moderated by Ken O’Rourke, discussed what GCs should do when (1) a CEO plans for their company to engage in predatory pricing; (2) an executive sends competitive information to a competitor; (3) a company starts making huge profits from a new algorithmic pricing model; and (4) the government seeks to view privileged documents under the crime-fraud exception.  The panelists acted out various vignettes in order to present how these ethical dilemmas arise in real world scenarios. The panelists’ thoughtful and informed advice was relevant not just to in-house attorneys, but to all members of the antitrust bar.

By Dennis Dollar

Moderator: Caeli Higney, Gibson Dunn

Panelists:     Chris Hockett, Berkely Law

D. Daniel Sokol, USC Gould School of Law

Lee Hepner, Senior Legal Counsel American Economic Liberties Project

Dr. Lawrence Wu, PhD., NERA Economic Consulting

The panelists divided remedies available for violations of the antitrust laws into two categories: structural remedies and conduct remedies.  In vernacular terms, the panel described structural remedies as “set it and forget it” remedies, which require little judicial monitoring once instituted.  Structural remedies, however, are not adaptable to the rapidly changing markets.

In contrast, conduct remedies may be more narrowly tailored to address the problems created by the anticompetitive conduct.  These remedies, however, require more judicial oversight that threatens to turn the courts into regulators in industries where the judges lack expertise.  But, conduct remedies as a general rule are more adaptable in rapidly changing markets.

The panel emphasized thought should be given to the end game from the outset of the litigation.  In deciding which type of remedy to pursue, a breakup is a rarely utilized remedy.  Often a breakup does not make economic sense in a natural market since certain markets may naturally lead to a monopoly.  Consequently, when economists have studied break ups in retrospect the breakup may not have been needed, might not have been the optimum remedy, or may have led to unintended consequences. 

By David Lerch

The Institute was honored to have the Hon. Casey Pitts (NDCA), Presiding Judge Anne-Christine Massullo (SF Superior Court), and Hon. Jinsook Ohta (SDCA)) participate on the Judges Panel. The highlights from these well-respected California judges include the following:

With regard to settlement, Judge Ohta noted her practice of keeping trial dates on the calendar to push the parties to settlement or trial, rather than acceding to joint requests from the parties to take trial dates off the calendar or extending the pretrial schedule in light of the potential for a settlement.  Presiding Judge Massullo also noted that in SF Superior Court, a privately retained mediator could work directly with a SF Superior Court settlement judge (common in construction defect cases, but also potentially applicable to antitrust).  

During the panel, the judges noted that some judges had adopted the practice of expert debates (or “hot-tubbing”) for expert testimony.  The panel noted that they had not adopted this practice, and that it was not common in their courts. As for tentative rulings and oral argument, the consensus on the panel was that policies varied from court to court and chambers to chambers as to the length and level of detail of the tentative rulings.  However, Judge Massullo and Judge Ohta agreed on the importance of factually based arguments, in which counsel emphasized facts rather that the opinion or argument of counsel.  Finally, as for discovery, Judge Massullo noted that the SF Superior Court could still conduct informal discovery conferences, and she preferred this type of conference to avoid discovery motion practice.

By Cheryl Lee Johnson 

On February 22, 2022, Kroger and Albertsons announced that Kroger would acquire rival grocer Albertsons for $24.6 billion.  Kroger, with 2,700 grocery stores, and Albertsons, with 2,269 stores, agreed as part of the merger to divest some 579  stores to C&S Wholesale Grocers. On February 26, 2024, the FTC initiated a Part 3 proceeding and filed an action challenging the merger in an Oregon federal court with eight states (including California) and D.C.  Washington state’s Attorney General filed a separate action in a Washington superior court challenging the merger under Washington state law.  A few weeks earlier, the Colorado AG challenged the merger as well as some no-poach agreements under Colorado law in a Colorado district court suit. 

 On December 10, 2024, the Oregon district judge issued an opinion enjoining the merger pending the FTC’s Part 3 merger challenge.  About an hour later, the Washington state court judge issued an opinion permanently enjoining the merger A decision in the Colorado suit is expected soon. The two December 10 opinions are described below.

A day later, on December 11, Albertsons announced it was abandoning the merger and had sued Kroger in the Delaware Chancery Court for breaching the merger agreement by “repeatedly refusing to divest assets necessary for antitrust approval, ignoring regulators’ feedback, rejecting stronger divestiture buyers and failing to cooperate with Albertsons.”  On Friday, December 13, 2026, Kroger announced it would spend $7.5 billion in a stock buyback program.

FTC v. Kroger Company, No, 3:24-cv-00347-AN, 2024 WL 5053016  (D. Or.  Dec. 10, 2024)

After a 15-day preliminary injunction hearing, Oregon federal judge Adrienne Nelson enjoined the merger between Kroger and Albertsons pending the FTC’s administrative challenge to the merger, finding the government had shown a likelihood of success on the merits and that the equities favored an injunction. 2024 WL 5053016, at *1-2, 38-39. The more stringent “traditional equity standard” for injunctive relief was not applied due to the unique public interest standard in section 13(b) of the FTC Act. Id. at *1-2.

MARKET DEFINITION. The government’s market definition of  traditional supermarkets and large format markets was supported by various Brown Shoe factors, including  distinct pricing primarily based on price checks against other supermarkets, distinct customers wanting a one-stop shopping experience with a variety of some 30,000 to 60,000 SKUs, and industry professionals’ understanding of supermarkets as distinct from mass retailers, limited assortment stores or club stores. Id. at *6-9. The Court declined to broaden the market to include other formats used by cross-shoppers, noting an exact or precise market was not required at the preliminary injunction stage and that economic analysis (in the form of the hypothetical monopolist test) confirmed that the great majority of the 2,537 proposed markets were appropriately defined. Id. at *11-13.

ANTICOMPETITIVE EFFECTS.  Under the 2023 Merger Guidelines, most of the proposed markets had post-merger concentration levels that were presumptively unlawful. Id. at *15. Citing multiple courts’ reliance on the 2023 guidelines as persuasive authority, the Court saw “no reason to reject the 2023 Merger Guidelines in favor of a previous edition” as defendants’ expert did in his report. Id. at *16. But even with the laxer 2010 guidelines and prematurely exclusion of divested markets, the defendants’ report showed 65 markets were presumptively unlawful; a “finding of harm in any one significant market would be sufficient” to establish a prima facie case. Id. at *16-17. Additionally, the merging parties’ acknowledgement that they engaged in fierce head-to-head competition was additional evidence of the loss of substantial competition. Id. at *17. Further, a calculation of the merged firm’s incentive to raise its prices post-merger, concluded there would likely be a price increase in 1513 store markets unless the merger were to reduce marginal costs by more than five percent. Id. at *19.

REBUTTAL – EFFICIENCIES, ENTRY.  Defendants were unable to show entry of new competitors that was sufficiently “timely, likely and sufficient” to mitigate the merger’s harm. Id. at *20-21.  While the Ninth Circuit remains skeptical of any efficiencies defense, defendants were unable to adduce proof of any “extraordinary efficiencies” that were merger specific, verifiable and to be passed through to the consumers. Id. at *22-24.   The court was also “skeptical” of Defendants’ “unenforceable” promise to make a $1 billion price investment should the merger go through. Id. at *24.

REBUTTAL – DIVESTITURE. Defendants failed to establish in rebuttal that their proposed divestiture of 579 stores to C&S Wholesale grocery could replace the competitive intensity lost as a result of the merger or that it would mitigate the merger’s effects so it was no longer likely to substantially lessen competition. Id. at *24-25, 30. Even with a “perfectly functioning divestiture,” there were still 65 to 120 markets presumptively unlawful per the defendants’ own report, and the divestiture would result in a much smaller firm than either defendant pre-merger. Id. at *25-26.  There were “serious concerns” about the divestiture buyer, a wholesale company that operated only 25 retail groceries and had closed all but three of the 325 grocery stores it earlier purchased. Id. at *28. Furthermore, the divestiture package conveyed to C&S an assortment of stores without use of some of their existing valuable private label products, banner rights, loyalty program data, distribution centers or media support. Id. at *26-28.  Not only did the package require C&S to rebanner 286 of the 579 divested stores,  but it left C&S dependent on the merged firm for crucial services such as sales and pricing data for many years. This was ample evidence that C&S would be unable to successfully compete with the merged firm. Id. at * 28-20. 

LABOR MARKETS. The government’s claim that the merger would substantially lessen competition for union grocery store labor was found cognizable under the Clayton Act and not within the implicit  antitrust exemption for labor activity. Id. at *31-32. The proposed union grocery labor market  was deemed plausible as was the claim that increased market concentration might result in decreased labor bargaining power. Id. at *34-37. However, the lack of supporting economic modeling  and guidance as to what would be a “substantial” reduction in competition led the court to conclude the government failed to establish a  prima facie case on the labor theory. Id. at *37-38.

EQUITIES. The strong public interest in antitrust enforcement was not overcome by any harm that might befall defendants from the injunction which simply paused the merger.  Id. at *39.  Nor did any possible decrease in defendants’ future ability to compete with Walmart alter the result, as antitrust did not “permit an otherwise unlawful merger in order to permit firms to compete with an industry giant.” Id. at *39.

State of Washington v. Kroger Co., No 24-2-00977-9 SEA, (Wash St., King Cty Sup. Dec. 10. 2024).

Judge Marshall Ferguson in a Washington state superior court issued a 121-page opinion (i) finding the Kroger/Albertsons merger unlawful under Washington’s Consumer Protection Act (modeled on Section 7 of the Clayton Act) and (ii) permanently enjoining the merger.  He also awarded the Washington State AG its attorney’s fees and costs.

MARKETS. The judge found that the relevant product market was supermarkets (including supercenters that contained supermarkets) and that it excluded other grocery formats including club stores, dollar stores, specialty and organic, or mass merchandisers. Op., P. 2. The market definition was supported by evidence of supermarkets’ distinct customer base that sought a one-stop shopping experience, pricing that focused on the parties’ own pricing and not that of other store formats, industry recognition and economic  calculations.  PP. 3, 97-103, 106. The State identified 57 supermarket area markets within Washington state using the parties’ loyalty card data and ordinary course documents, all of which passed the hypothetical monopolist test.  PP. 25-27. Defendants countered with modified economic modeling that the court said was contrary to the economic literature, and  lead to results “facially inconsistent with consumer behavior – or even basic common sense.”   PP. 30-32, 35.

ANTICOMPETITIVE EFFECTS. HHI calculations showed each of the 57 markets had  presumptively high and unlawful  concentration levels  both under the 2023 Merger Guidelines and the more lenient 2010 Merger Guidelines. PP.  37-39, 110. The merger was also deemed “likely to harm Washington consumers by eliminating the fierce head-to-head competition” between the merging parties who were the key restraints on one another’s pricing. PP. 40, 43-44. Economists calculated that the merger would lead to price increases of 5% for Albertsons stores and 8% for Kroger stores, and cause Washington consumers to pay $800 million a year in higher grocery prices. P. 52. Because the merging parties already had coordinated pricing behavior in markets that were concentrated and easy monitored,  the merger was also found likely to produce anticompetitive coordinated effects. PP.  56-58, 110.

DIVESTITURE REMEDY. The judge concluded the divestiture of 579 stores to C & S including 124 stores in Washington, would not restore the lost competition because “C&S is unlikely to be able to run them in a way that restores competition.” P. 119. Thirty pages of the opinion discusses the factors warranting this conclusion. PP. 58-88, 110. C & S was primarily a wholesaler deriving 99% of its income from its wholesale grocery business and lacked the experience and different skills required to successfully run retail stores. P. 59. While C&S operated some 23 retail stores, all described as “weak and unsuccessful,” none were in in Washington and C&S had flipped or closed more than 300 retail stores in the past. P.  61. While other divestiture buyers offered more money and were considered superior buyers by some Kroger senior executives, Kroger bypassed them to select C&S. PP.  62-63. The judge also focused on serious deficiencies in the divestiture structure, including:  a) conveyance to C&S of a poor mix of the least profitable of both parties’ stores while retaining the best performing stores for Kroger (pp. 63-70);  b) failure to convey valuable banner rights, requiring C & S to rebanner 286 stores including 62 in Washington within 3 years, a task deemed highly risky, expensive and “without precedent” (pp. 67- 72);  c) failure to provide C&S with permanent rights to the parties’ successful private label brand portfolios, and requiring  a markup for their use after two years (pp. 73-79); and d) failure to provide essential information technology, promotion, data or pricing capabilities while leaving C&S reliant on Kroger pricing assistance during the first year (pp. 79,  80-84, 114-15).  As a result, Judge Ferguson ruled that the “evidence convincingly shows that C&S, with its limited retail experience and infrastructure, will not compete effectively against the grocery colossus of a merged Kroger and Albertsons.”  P. 86. Finally,  the court noted C&S’s strong incentives and “well-trod playbook to exit retail markets”  and private signals that were inconsistent with C&S’ public insistence to the regulators that it would operate the retail outlets. P. 86-88.

ENTRY AND EFFICIENCIES. Evidence of likely entry into the Washington supermarket that would mitigate the merger’s harm was not provided. PP. 89-90. Likewise, the Court dismissed Kroger’s claim of $1.1 to $1.5 billion in efficiencies over a 4-year period as not “extraordinary” and speculative or not reliable or merger specific.  PP. 90-93. Even if these efficiencies resulted in a 1% cost reduction, the state’s economist calculated Kroger needed to reduce marginal costs by 16% to 49% to offset the merger’s incentive to increase prices. P. 93, 116.  Finally, Kroger’s claim it would make a $1 billion “price investment” in reducing prices was dismissed as an “unenforceable promise.” PP. 95, 116.

INJUNCTION REMEDY. The merits and equities favored issuance of a permanent injunction against the merger, which was not a nationwide injunction as it simply restrained the conduct of defendants doing significant business in Washington. PP. 118-19. The injunction did not bar the parties from negotiating a merger without anticompetitive effects in Washington and did not run afoul of the Dormant Commerce or the Full Faith and Credit Clauses. P. 120.

By Cora Allen

On November 12, 2024, the U.S. Supreme Court declined certiorari for the Fourth Circuit decision in U.S. v. Brewbaker, which held that the criminal per se standard under the Sherman Act does not apply where companies have a hybrid vertical and horizontal relationship.  In doing so, the Supreme Court has let stand a decision that diverges from other circuits and makes it more difficult for the Department of Justice (“DOJ”) to prosecute bid-rigging or price-fixing conduct as a per se violation where the competing companies have a vertical component to their relationship.

BACKGROUND

Brewbaker originates from an October 2020 indictment by the DOJ alleging that aluminum pipe maker Contech Engineered Solutions LLC and its former executive Brent Brewbaker conspired to rig bids on aluminum structure projects for the U.S. Department of Transportation and the North Carolina Department of Transportation (“NCDOT”).

The indictment alleged that Contech and Brewbaker conspired with Pomona Pipe Products, a Contech distributor, to submit hundreds of collusive bids to the NCDOT for nearly a decade.  According to the indictment, Brewbaker and Contech would obtain the prices Pomona intended to bid on NCDOT contracts and then purposefully submit higher bids. The indictment said Contech benefited when Pomona won the bids because it supplied the aluminum pieces used to complete the projects.

Contech pled guilty, while Brewbaker went to trial and was convicted of bid-rigging and fraud in February 2022. He was sentenced to 18 months in prison and a $111,000 criminal fine.

Brewbaker appealed to the Fourth Circuit, arguing that the trial judge incorrectly applied the per se standard under the Sherman Act and therefore wrongly removed elements of the offense from the jury’s consideration. Opening Brief of Appellant at 13, Brewbaker v. United States, No. 5:20-cr-00481 (4th Cir. Feb. 14, 2023), ECF No. 24.

FOURTH CIRCUIT DECISION

In December 2023, the Fourth Circuit reversed Brewbaker’s bid-rigging conviction holding that the indictment failed to allege a per se violation under the Sherman Act. United States v. Brewbaker, 87 F.4th 563 (4th Cir. 2023).

More specifically, because Contech and Pomona were not purely horizontal competitors, but also vertically related companies with complementary offerings, the Fourth Circuit found that the conduct alleged in the indictment did not necessarily amount to a per se antitrust violation.  The court highlighted the hybrid relationship of the two companies, where the two could serve each other as a customer and a supplier and also directly compete against each other for contracts.  The fact that Contech was both supplying aluminum to Pomona and competing with Pomona to sell aluminum to the NCDOT meant they had a vertical and horizontal, or hybrid, relationship.  Accordingly, the Fourth Circuit concluded that the rule of reason, not the per se rule, applied.

The DOJ submitted a petition for rehearing to the Fourth Circuit, which the Fourth Circuit denied. Order Denying Petition for Rehearing, United States v. Brewbaker, No. 5:20-cr-00481 (4th Cir. Feb. 15, 2024), ECF No. 68.

SUPREME COURT PETITION

In June 2024, the DOJ petitioned the Supreme Court for a writ of certiorari, arguing that the Fourth Circuit’s decision “conflict[ed] with this court’s precedents, distort[ed] established antitrust doctrine, and defie[d] common sense.” Petition for a Writ of Certiorari at 2, United States v. Brewbaker, No. 23-1365 (June 28, 2024). The DOJ also argued that the decision “conflict[ed] with decisions of the Second and Seventh circuits, and it ha[d] significant practical implications.”

Brewbaker filed a cross petition raising questions about the constitutionality of the criminal provisions of Section 1 of the Sherman Act that have not been examined for 50 years. Cross-Petition for Writ of Certiorari at 1, 12, Brewbaker v. United States, No. 24-124 (Aug. 1, 2024).

On November 12, 2023, the Supreme Court declined to certify both petitions without comment, as is customary.

TAKEAWAY

As the DOJ argued in its petition for certiorari, allowing the Fourth Circuit’s decision in Brewbaker to stand potentially makes it more difficult for the DOJ to charge companies and individuals with a per se criminal antitrust violation in situations where the competitors have a vertical relationship. Petition for Writ of Certiorari at 23. In addition, the refusal of the Supreme Court to hear the case continues the current circuit split—with the Second and Seventh Circuits holding that such hybrid agreements can constitute per se unlawful horizontal restraints and the Fourth Circuit holding that the existence of any vertical aspect to the competitors’ overall relationship is a sufficient ground for application of the rule of-reason.  Until the Supreme Court resolves these apparent conflicts, as the DOJ noted, the Fourth Circuit’s approach will be “far more accommodating to antitrust defendants.”

By Wesley Sweger

On November 26, 2024, Judge Young of the District of Massachusetts decertified a national class of medical students who were once enrolled at Saba University School of Medicine (“Saba”) and who did not sit for the United States Medical Licensing Examination (“USMLE”).

Background

Medical student, Natalie Ortiz, brought a putative class action against Saba—a for-profit medical school located in the Caribbean but headquartered in Massachusetts—alleging that it deceptively advertised that its students had a near 100% pass rate for Step 1 of the USMLE, taken after the first two years of medical school. The suit alleges that only about 50% of students enrolled actually sit for the exam because Saba dismisses those students who fail a school-administered “pre-test” beforehand. The suit brought claims under various state consumer protection laws.

Soon after the Court preliminarily granted class certification, Defendant Saba filed a petition seeking interlocutory review of the class certification decision. Before the First Circuit accepted Saba’s appeal, the District Court decided to decertify the class in the immediate opinion. Ortiz v. Saba Univ. Sch. of Med., No. CV 23-12002-WGY, 2024 WL 4894727 (D. Mass. Nov. 26, 2024).

Class Certification

The Court found the Rule 23(a) requirements—numerosity, commonality, typicality, and adequacy—satisfied and did not take much space discussing these issues. The thrust of the opinion discusses the lack of predominance of common questions under Rule 23(b)(3) given the various and divergent state laws involved.

Saba argued that numerous material differences between the law of Massachusetts and other states’ consumer protection laws predominated over common issues, such as whether plaintiff must make an affirmative showing of reliance on the representation. Ortiz argued that Massachusetts law should apply uniformly to the entire proposed class because Massachusetts has the most significant relationship to the plaintiffs’ claims, and that Massachusetts has a strong interest in regulating business conduct within its borders.

After acknowledging that there are at least some potentially relevant differences between the various state consumer protection laws, the Court undertook a choice-of-law analysis applying Massachusetts choice-of-law rules (because jurisdiction was grounded on diversity, so the Court must apply the rules of the forum state).

Massachusetts choice-of-law rules follow the Restatement (Second) of Conflict of Laws, which, in consumer fraud cases, looks to a series of factors to determine which state has the “most significant relationship” to the claim and to the parties. Id. at *6. In relevant part, the Restatement considers the place where the plaintiff relied on a defendant’s alleged misrepresentation to be the “more important” part of choice of law analysis. Id. at *7. Accordingly, the Court reasoned that since the putative class members received and relied on the alleged misrepresentations in their respective home states, the guiding factors in the analysis pointed to an application of the various laws of the plaintiffs’ home states. The Court wrapped up by noting that applying Massachusetts law across all states could undermine local interests by limiting each state’s ability to enforce its own standards.

Damages

The opinion ends with a discussion on damages. Ortiz argued for a full refund of tuition and fees as damages, claiming the entire educational experience was premised on the promise of a high likelihood of licensure. The Court found that a full refund model would not be an accurate measure of damages as it ignores any benefit that students may have derived from the education they received and ignores potential affirmative defenses the defendants could raise as to individual plaintiffs.

By Amar S. Naik

On October 10, 2024, the FTC voted unanimously to finalize changes to the pre-merger notification form and rules implementing the Hart-Scott-Rodino Act (“HSR Act”).  On the same day, the DOJ’s Antitrust Division announced its concurrence with the FTC. Although the final rule declined to adopt some of the FTC’s original proposals, merging parties will soon need to provide much more information to government agencies during the merger review process. That said, the FTC lifted its categorical suspension on early terminations on the grounds that the new rules would provide the agency with the information needed to grant early terminations. The new HSR form and rules go into effect on February 10, 2025.

The FTC began the rulemaking process to modify the HSR premerger notification process on June 9, 2023. Its draft rule required filing parties to provide more detailed information regarding transaction rationale, competitive dynamics, corporate structure, and prior acquisitions. The draft rule also mandated more disclosure regarding projected revenue streams, transactional analyses, and internal documents describing market conditions.

The FTC received over 700 comments following its notice of proposed rulemaking. While some comments were supportive of the agency’s proposals and efforts to strengthen the merger review process, others were critical and argued that many proposals would be unduly burdensome on filers and third parties. Ultimately, the FTC declined to adopt many of its original proposals, including those requiring filing parties to provide a timeline of key dates for closing, custom organizational charts designed for HSR purposes, drafts of Item 4(c) and 4(d) documents, additional details regarding minority investors, and descriptions of prior acquisitions involving entities with less than $10 million in sales or that closed more than five years prior to filing.

That said, the FTC kept many of its proposed modifications in its final rule. For example, the final rule requires filers to provide greater specificity when using preliminary non-binding agreements as a basis for their HSR filing. Additionally, the final rule requires filers to provide narrative responses describing the strategic rationale for a transaction and any horizontal or vertical relationships between the filing parties. It also broadens the scope of documents that must be disclosed under Item 4(c) and 4(d) of the HSR Form and requires additional disclosure of documents shared with C-Suite executives and board members regarding competition. The final rule also targets private equity investments and “roll-ups” by requiring additional disclosure about officers/directors, ownership structures, and prior acquisitions. And the final rule creates a separate category of “select 801.30 transactions” that do not require filing parties to comply with most of these new burdens for open market purchase or tender offers, which do not result in the acquisition of control and have less complex internal structures to review. 

The changes coming February 10, 2025, will require significant additional information from filing parties and allow the FTC and DOJ to conduct more detailed investigations of proposed transactions. Although it is unclear how the incoming leadership at the FTC and DOJ will implement this final rule, the fact that the final rule passed with unanimous, bipartisan support suggests that the agencies will take the new rule seriously at the start of the new presidential administration.

By David Lerch

In November 2024, the DOJ Antitrust Division issued new guidance regarding corporate compliance programs in criminal antitrust investigations.  The Antitrust Division first published guidance regarding prosecutors’ evaluation of corporate compliance programs at the charging and sentencing stage in July 2019.   The revised November 2024 guidance includes additions on issues such as how compliance personnel utilize and evaluate technology, including AI, both to monitor compliance with the antitrust laws and to determine if the company is using technology for anti-competitive purposes such as price-fixing.

I.        Overarching Considerations

The DOJ guidance notes that when deciding whether and to what extent to bring criminal charges against a corporation, the DOJ Justice Manual provides that prosecutors should consider the Antitrust Division’s Leniency Policy and factors including “the adequacy and effectiveness of the corporation’s compliance program at the time of the offense, as well as at the time of the charging decision” and the corporation’s remedial efforts “to implement an adequate and effective corporate compliance program or to improve an existing one.”  Although DOJ has no formulaic requirements for evaluating corporate compliance programs, the Justice Manual asks prosecutors to consider three “fundamental” questions in their evaluation:

(1) Is the corporation’s compliance program well designed?

(2) Is the program being applied earnestly and in good faith? In other words, is the program adequately resourced and empowered to function effectively?      

(3)  Does the corporation’s compliance program work in practice?

In addition, the new DOJ guidance provides that at the outset of any inquiry into the efficacy of an antitrust compliance program, prosecutors should ask three preliminary questions:

(1) Does the compliance program address and prohibit criminal antitrust violations?

(2) Did the compliance program detect and facilitate prompt reporting of the violation? 

(3) To what extent was a company’s senior management involved in the violation?

II.      Elements of an Effective Compliance Program

In the new guidance, DOJ noted that the factors that prosecutors should consider when evaluating the effectiveness of an antitrust compliance program include: (1) the design and comprehensiveness of the program; (2) the culture of compliance within the company; (3) responsibility for, and resources dedicated to, antitrust compliance; (4) antitrust risk assessment techniques; (5) compliance training and communication to employees; (6) monitoring and auditing techniques; (7) reporting mechanisms; (8) compliance incentives and discipline; and (9) remediation methods.

III.     United States Sentencing Guidelines (USSG) Considerations

In the guidance, DOJ notes that under the USSG and 18 U.S.C. § 3572, prosecutors should evaluate whether to recommend a sentencing reduction based on a company’s antitrust compliance program.  DOJ notes that U.S.S.G. § 8C2.5(f) provides for a three-point reduction in a corporate defendant’s culpability score if the company has an “effective” compliance program.  In addition, the existence and effectiveness of a compliance program also may be relevant to determining whether a company should be sentenced to probation pursuant to U.S.S.G. § 8D1.1.  A compliance program also may be relevant to determining the appropriate corporate fine to recommend within the Guidelines range or whether to recommend a fine below the Guidelines range. See U.S.S.G. § 8C2.8; 18 U.S.C. § 3572.

DOJ states that compliance programs are to be evaluated on a case-by-case basis and will depend on the program’s implementation and operation.  However, the guidance notes that the Sentencing Guidelines are clear that a sentencing reduction for an effective compliance program does not apply in cases in which there has been an unreasonable delay in reporting the illegal conduct to the government. See U.S.S.G. § 8C2.5(f)(2).  In addition, there is a rebuttable presumption that a compliance program is not effective when certain “high-level personnel” or “substantial authority personnel” “participated in, condoned, or [were] willfully ignorant of the offense.” U.S.S.G. § 8C2.5(f)(3)(A)–(C).  

In each criminal case in which a company will be sentenced, prosecutors must also recommend whether a corporate defendant be placed on probation pursuant to U.S.S.G. § 8D1.1.  The DOJ guidance provides that antitrust prosecutors generally will not seek corporate probation for corporations that cooperate with the investigation and accept responsibility, except in limited circumstances, such as when a company has left culpable individuals in positions of authority or has received a “Penalty Plus” fine adjustment for failing to report other cartel conduct at the time of a prior plea. In contrast, when a company is found guilty at trial, prosecutors may seek probation if the company does not accept responsibility and declines to take measures to implement or improve its antitrust compliance program.

IV.     Fines Under Section 3572

Finally, the DOJ guidance states that if the Antitrust Division recommends that a company receive a “Penalty Plus” fine enhancement for the recurrence of antitrust violations, prosecutors are likely to seek probation and recommend periodic compliance reports as a condition of probation.  In determining whether to impose a fine, and the amount and timing of that fine, courts shall consider any measure taken by a company to discipline personnel responsible for the offense and to prevent recurrence of the offense. See 18 U.S.C. § 3572(a)(8).

The DOJ guidance notes that prosecutors should consider whether a company’s extraordinary post-violation compliance efforts warrant a fine reduction.  A company’s dedicated effort to change company culture after the antitrust violation and to prevent its recurrence are relevant to whether prosecutors should recommend such a fine reduction under 18 U.S.C. § 3572(a)(8).

By Cheryl Lee Johnson

On December 11, 2024, the FTC and DOJ jointly announced the withdrawal of the Antitrust Guidelines for Collaborations Among Competitors (Collaboration Guidelines) issued in 2000.  They said that the Guidelines “no longer provide reliable guidance about how enforcers assess the legality of collaborations involving competitors” and encouraged a review of the relevant statutes and caselaw to assess a collaboration’s lawfulness.

Commissioner Bedoya defended the Guidelines’ withdrawal  as necessary  because “it contained out-of-date guidance that did not account for the significant evolution of Supreme Court and federal court guidance on these issues, relied on numerous outdated and withdrawn policy statements, and described safe harbors that have no basis in federal antitrust law.” Dec. 11, 2024 Bedoya Statement. Two Commissioners dissented. Commissioner Ferguson, the presumptive next FTC Chair, dissented that the withdrawal was done within 40 days of the inauguration of a new President. Dec. 11, 2024 Ferguson Dissenting Statement. Commissioner Holyoak agreed, and also objected to the withdrawal for “leaving businesses in the dark” without future replacement plans. Dec. 11, 2024  Holyoak Dissenting Statement.

Antitrust Division Continues to Focus on Interlocking Directorates that Violate Section 8 of the Clayton Act

The Justice Department announced today that two directors of Epic Games Inc. (Epic), who had been appointed by Tencent Holdings Ltd. (Tencent), resigned from the Epic board after the Antitrust Division expressed concerns that their positions on both the Epic and Tencent boards violated Section 8 of the Clayton Act. Tencent owns a minority interest in Epic. The interlock was created because Tencent also is the parent company of a gaming competitor to Epic, Riot Games Inc. Tencent also decided to amend its shareholder agreement with Epic to relinquish its unilateral right to appoint directors or observers to the Epic board in the future. This is the latest of the division’s ongoing Section 8 enforcement efforts, which to date have unwound or prevented interlocks involving at least two dozen companies.

A group of 10 car dealerships doing business as Leader Automotive Group and their parent company, AutoCanada, will be required to pay $20 million to settle allegations they systematically defrauded consumers looking to buy vehicles as a result of a lawsuit by the Federal Trade Commission and state of Illinois.

In addition to paying $20 million, which will be used to refund harmed consumers, the proposed settlement also would require the companies to make clear disclosures of a car’s offering price—the actual price any consumer can pay to get the car, excluding only required government charges—and get consent from buyers for any charges. The $20 million proposed monetary judgment is the largest the FTC has secured against an auto dealer.

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In a complaint filed by the FTC and the Illinois Attorney General, the agencies charge the companies, along with former vice president of U.S. operations James Douvas with violating federal and state laws. The complaint alleges the defendants have deceived consumers about the price and availability of vehicles, charged them for expensive add-ons without consent, tacked on unwanted junk fees to purchases, posted fake reviews, and failed to disclose that U.S. customers were buying cars imported from Canada, along with other unlawful conduct.

Leader has frequently advertised new and used cars online with low prices designed to entice consumers into their dealerships, but those prices are often false, according to the complaint. When consumers arrive at a Leader dealership, salespeople often tell them the car has preinstalled add-ons like protective coatings (often under the name Xzilon) and theft protection (under the name LoJack) that cost thousands of dollars, and that these add-ons are required despite not being included in the advertised price of the car.

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The Commission vote authorizing the staff to file the complaint and stipulated final order was 5-0. The FTC filed the complaint and final order in the U.S. District Court for the Northern District of Illinois.

The Federal Trade Commission sued the largest U.S. distributor of wine and spirits—Southern Glazer’s Wine and Spirits, LLC (Southern)—alleging the company violated the Robinson-Patman Act, harming small, independent businesses by depriving them of access to discounts and rebates, and impeding their ability to compete against large national and regional chains. This loss of competition ultimately harms consumers on choice and price.

The FTC’s complaint alleges that by selling wine and spirits to small, independent “mom and pop” businesses at prices that are drastically higher than what Southern charges large chains—with dramatic price differences that provide insurmountable advantages that far exceed any real cost efficiencies for the same bottles of wine and spirits—Southern engaged in anticompetitive and unlawful price discrimination.

Under the Robinson-Patman Act, it is generally illegal for sellers to engage in price discrimination that harms competition by charging higher prices to disfavored retailers that purchase similar goods. The FTC’s case filed today seeks to ensure that businesses of all sizes compete on a level playing field with equivalent access to discounts and rebates, which means increased consumer choice and the ability to pass on lower prices to consumers shopping across independent retailers.

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The FTC’s enforcement action via the Robinson-Patman Act does not prohibit quantity discounts, also known as volume discounts. Instead, under the Robinson-Patman Act, volume discounts are permitted so long as a seller can demonstrate real cost efficiencies achieved from selling goods at different quantities to purchasers. However, as the complaint alleges, in many instances, Southern’s price discrimination exceeds any such cost savings permitted under the Robinson-Patman Act.

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The FTC’s lawsuit seeks to obtain an injunction prohibiting further unlawful price discrimination by Southern against these small, independent businesses. When Southern’s unlawful conduct is remedied, large corporate chains will face increased competition, which will safeguard continued choice which can create markets that lower prices for American consumers. The Commission vote to authorize staff to file for a permanent injunction and other equitable relief in the U.S. District Court for the Central District of California was 3-2 with Commissioners Andrew Ferguson and Melissa Holyoak dissenting. EDITORS’ NOTE: Commissioner Alvaro M. Bedoya issued a statement joined by Chair Lina M. Khan and  Commissioner Rebecca Kelly Slaughter.  Commissioners Ferguson and Holyoak each issued separate dissenting statements.

Today, the Federal Trade Commission and the Justice Department’s Antitrust Division (DOJ) jointly announced the withdrawal of the Antitrust Guidelines for Collaborations Among Competitors (Collaboration Guidelines).

The Collaboration Guidelines, issued in April 2000, no longer provide reliable guidance about how enforcers assess the legality of collaborations involving competitors, according to the FTC and DOJ’s joint withdrawal statement.  Businesses considering collaborating with competitors are encouraged to review the relevant statutes and caselaw to assess whether a collaboration would violate the law.

The FTC and DOJ are committed to vigorous antitrust enforcement on a case-by-case basis in the area of competitor collaborations because such collaborations can harm competition and subvert the competitive process, according to the withdrawal statement.

The vote to withdraw the guidelines was 3-2, with Commissioners Andrew Ferguson and Melissa Holyoak dissenting. Commissioner Alvaro M. Bedoya issued a statement. Commissioners Ferguson and Holyoak each issued separate dissenting statements.

The U.S. District Court for the District of Oregon granted on December 10, 2024, the Federal Trade Commission’s request for a preliminary injunction to prevent Kroger Company from acquiring Albertsons Companies, Inc. in what would be the largest supermarket merger in U.S. history. The FTC challenged the $24.6 billion deal alongside a bipartisan group of nine state attorneys general.

The Federal Trade Commission has stopped a scheme that allegedly bilked millions of dollars out of consumers burdened with student loan debt by pretending to be affiliated with the U.S. Department of Education in violation of the FTC’s Impersonation Rule, collecting illegal advance fees, and making other deceptive claims.

A federal court temporarily halted the scheme and froze its assets at the request of the FTC, which seeks to end the defendants’ deceptive practices.

“The defendants promised consumers student debt relief and forgiveness but gave them virtually nothing, keeping over $10 million for themselves and leaving consumers deeper in debt,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The FTC will continue taking decisive action against those who prey on Americans with student debt.”

According to the FTC’s complaint, since at least January 2023, Nevada-based Superior Servicing and its operator Dennise Merdjanian made telemarketing calls and sent personalized mailers to borrowers falsely claiming that consumers enrolled in defendants’ program could obtain benefits such as loan consolidation, reduced interest rates on their student loans, reduced monthly student loan payments, or loan forgiveness. The operators collected illegal advance fees of up to $899 as an initial payment followed by monthly payments that defendants falsely represented were going towards consumers’ student loan debt.

To convince borrowers that their claims were legitimate, the operators allegedly pretended to “work with” or be affiliated with the Department of Education or its approved loan servicers and, in some instances, even advised consumers to stop making payments to their existing loan servicers. The operators then falsely claimed that they would take over responsibility for servicing consumers’ loans, collect monthly student loan payments for a term of up to 20 years, and said that upon completion of those monthly payments, the consumers’ federal student loan debt would be forgiven.

Contrary to Superior Servicing’s false promises, borrowers have reported that they never received loan consolidation, lowered payments, or loan forgiveness, according to the complaint. The FTC noted that at most, and if anything at all, the defendants filled out simple applications for debt relief that are available for free from the Department of Education.

The FTC charged that the scheme’s operators violated the Impersonation Rule by claiming to be affiliated with the Department of Education, as well as the FTC Act’s prohibition on deceptive practices, the Telemarketing Sales Rule, and the Gramm-Leach-Bliley Act.

The Commission vote authorizing the staff to file the complaint was 5-0. The U.S. District Court for the District of Nevada entered a temporary restraining order on November 22, 2024 and a preliminary injunction against corporate defendant Superior Servicing on December 6, 2024. 

The lead staff attorneys on this matter were John O’Gorman, Luis Gallegos, and Reid Tepfer of the FTC’s Bureau of Consumer Protection.

OAKLAND — California Attorney General Rob Bonta today urged Californians to beware of package delivery text message scams. These messages often state that there’s an issue with your delivery and include a link to “resolve” the problem. Package delivery scams can occur more frequently over the gift giving season, when holiday shopping is in full swing.

“The gift giving season is in full swing, and with it, comes a parade of package deliveries. Scammers can take this opportunity to use fake delivery text messages and fraudulent links to steal consumers money or personal information,” said Attorney General Bonta. “I urge Californians to beware of these scams, avoid clicking on unexpected text message links, and slow down — scammers prey on urgency.”

Follow these tips to protect yourself:

Be Suspicious of Unexpected Messages. Ignore unsolicited text messages, emails, or phone calls claiming issues with a package delivery. 

Don’t Click the Link! Never click on links from unknown senders or emails claiming to be from a delivery company. Instead, go to the official carrier website and enter your tracking number directly.

Be Skeptical of Payment Requests. Delivery companies do not ask for payment to release a package or correct a delivery error. Any such request is a scam.

Look for Red Flags. Scammers often use words like “urgent action required” to pressure you into clicking a link. Be cautious if the message lacks personalization (e.g., “Dear Customer”) or contains spelling or grammar errors.

Enable Package Alerts. Sign up for alerts from trusted carriers like UPS, FedEx, or USPS. These alerts will notify you of package updates directly from the source. 

Monitor Your Financial Accounts. Regularly check your bank and credit card statements for unauthorized transactions, especially after suspecting a scam.

If you receive a suspicious message you can report it to the Federal Trade Commission here and the Federal Bureau of Investigation here. If you believe you’ve received a text message scam, you can report it to your wireless provider, including by forwarding them to the number 7726 or “SPAM”.

OAKLAND — California Attorney General Rob Bonta today issued a statement after Albertsons announced it was terminating its $24.6 billion merger with Kroger. Kroger and Albertsons are the largest supermarket chains in the country, and the proposed merger presented a significant risk of reduced competition and higher food prices nationwide, especially in Southern California. In February 2024, Attorney General Bonta joined the Federal Trade Commission and a bipartisan coalition of states in filing a lawsuit in the U.S. District Court in Portland to challenge the proposed merger. Today’s announcement follows a court decision yesterday halting the proposed merger. 

“As the fifth largest economy in the world, California has an outsized responsibility in ensuring business practices are fair and competitive, and this week, we’ve delivered. Corporate consolidation means big profits for corporations out of the pockets of California consumers and our local economies. The end of the proposed Kroger-Albertsons merger is a tremendous victory for grocery shoppers, workers, and businesses who compete fairly,” said Attorney General Bonta. “I am proud of the work my office has done in collaboration with the Federal Trade Commission and remain steadfast in my commitment to economic justice and protecting an economy where both businesses and families can thrive.”