Antitrust and Unfair Competition Law
E-BRIEFS, NEWS AND NOTES: October 2022
WELCOME to the OCTOBER 2022 edition of E-Briefs, News and Notes.
This edition has a variety of content:
- In Section News, we feature a Message from the Chair previewing our annual Golden State Antitrust and UCL Institute (GSI) and 2022 Antitrust Lawyer of the Year reception and dinner to be held on November 10, 2022. Elizabeth Pritzker (Pritzker Levine, LLP) will be honored as the Section’s 2022 Antitrust Lawyer of the Year. For details, click here. For information on GSI sponsorships, please contact Belinda Lee at belinda.lee@lw.com.
- E-briefs contains summaries of new cases and includes a reversal by the Eleventh Circuit in a franchisee case, denial of a motion to decertify an indirect purchaser class, and denial of a motion to dismiss allegations in a financial aid cartel case.
- The Enforcement Agency Press Releases highlight the enforcement activities of the Antitrust Division, DOJ, FTC, and California AG’s office. Reading the press release is a quick way to keep on top of major developments.
- The In Case You Missed It section re-posts numerous articles and other matters of interest to antitrust and unfair competition lawyers. Thanks to Bob Connolly for agreeing to organize and expand the content of this section.
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). We are starting a new section next month called “MEMBERSHIP SPOTLIGHT.” Please contact us if you have a suggested Section Member that we can spotlight!
MESSAGE FROM THE CHAIR
Dear Section Members:
The Section is delighted to host its in-person 32nd Golden State Antitrust & UCL Institute and 2022 Antitrust Lawyer of the Year Dinner. The Section’s cornerstone event, this conference brings together thought leaders, top enforcement officials, and leading practitioners to discuss important topics in California and federal antitrust and unfair competition law.
This year’s GSI is Thursday, November 10, 2022, at the Julia Morgan Ballroom in San Francisco. It will feature top-notch content and panelists including:
- Keynote Speaker: Jonathan Kanter, Assistant Attorney General, United States Department of Justice
- Fireside Chat: Elizabeth Wilkins, Director, Office of Policy Planning, Federal Trade Commission
- Judges Panel: Hon. Jacqueline Scott Corley, Hon. James Donato, Hon. Susan Illston, U.S. District Court for the Northern District of California
- Recent Developments in Antitrust and Unfair Competition Law
- The Future of Digital Platform Litigation
- Can Sustainability Efforts Thrive Under the Current Antitrust Framework?
- Antitrust Economics: Developments in Economics Theory and Analysis
- UCL Remedies: “You Can’t Always Get What You Want”
Later that evening, we will celebrate Elizabeth Pritzker as our 2022 Antitrust Lawyer of the Year. Elizabeth has been a leading California plaintiffs-side antitrust attorney for over two decades, holding key roles in the In re DRAM Antitrust Litigation, the California Natural Gas Antitrust Cases, In Re TFT-LCD (Flat Panel) Antitrust Litigation, In Re NCAA Grant-in-Aid Antitrust Litigation, In re EpiPen (Epinephrine Injection, USP) Marketing, Sales Practices and Antitrust Litigation, and In re Google Play Store Antitrust Litigation.
Finally, over one hundred and fifty people contributed last year to the Antitrust & UCL Section. Our volunteers are the lifeblood of the Section. At a cocktail party on November 9 at the Vault in San Francisco, we would like to thank our volunteers for contributing to the Section, and celebrate the achievements of the Section that are a result of their work. Please join us in bringing together all our volunteers and thanking them for contributing to or serving the Section. Their commitment makes a difference.
To register for GSI, the Antitrust Lawyer of the Year Dinner, and the Celebration Event click here.
We look forward to seeing you in November.
Dominique-Chantale Alepin
Chair, Antitrust & UCL Section
Be sure to check out the valuable research available in our Section Treatise here.
E-BRIEFS
Eleventh Circuit Reversed Burger King and its Franchisees Win: “Concerted Action” For Section 1 Purposes Was Plausibly Alleged by Plaintiffs.
By Cheryl Johnson
In Arrington v. Burger King Worldwide, Inc., Case No. 20-13561, —F.4th—, 2022 WL 3931471 (11th Cir. Aug. 31, 2022), Burger King (BK) and some 7,000 independent BK franchisees executed “No-Hire Agreements,” under which each agreed not to hire any BK employee for at least six months after he or she left employment at another BK restaurant. 2022 WL 3931471, at *2. A complaint was filed alleging that these agreements were collusive and depressed the employment opportunities of BK employees in violation of Sherman Act Section 1. A Florida district court dismissed the complaint, holding that BK and its franchisees constituted a single economic enterprise and were not capable of conspiring under the Sherman Act. Id. at *4. The Eleventh Circuit reversed, concluding that BK and its independent franchisees were plausibly alleged to have undertaken “concerted action” for purposes of Section 1 of the Sherman Act.
In concluding that “concerted action” was plausible, the Circuit analyzed the relationships between the franchisees and BK to determine if their arrangement “joins together separate decision-makers” and thus deprived “the marketplace of independent centers of decision making.” Id. at *5. Citing American Needle, Inc. v. Nat’l Football League, the Circuit Court noted that “this concerted action inquiry focuses not on whether the actors engaged in concerted activity for all purposes, but only on whether the decision or decisions in question involved concerted action.” Id. at *5.
While the BK and its franchisees had many economic interests in common, each separately pursued its own interests when hiring and recruiting employees. Id. at *7. Since each franchisee was solely responsible for recruiting, hiring, and establishing wages, benefits, and employment policies, each was “an independent center of decision-making” as to employee agreements. Id. at *7. Hence, their no-poach, no-hire agreements removed the ability of individual franchisees to make competitive hiring decisions and qualified as concerted conduct for Sherman Act purposes. Id.
Defendants’ Motion to Decertify Class of Indirect Purchasers
By Katherine Van Horn, (2nd Year), University of the Pacific, McGeorge School of Law
In In Re Namenda Indirect Purchaser Antitrust Litigation, Judge McMahon (SDNY) denied Defendant’s motion to decertify the Indirect Purchaser Plaintiff Class before trial on due process and manageability grounds. Defendants design, manufacture, and distribute Namenda (used to treat Alzheimer’s disease through its active ingredient memantine). Class Plaintiff Sergeants Benevolent Association Health & Welfare Fund (“SBA”) acted as a third-party payor that indirectly purchased Namenda by providing individual consumers with reimbursements in 29 states and the District of Columbia (D.C.). The Indirect Purchaser Class alleged that Defendants participated in reverse payment settlements to delay entry of generic Namenda into the market and that these reverse payments constituted anticompetitive “pay-for-delay” schemes. Defendants sought to decertify the Indirect Purchaser Class on due process (failed damage model) and manageability (application of varying state antitrust protections) grounds.
First, according to Defendants, the Plaintiff Class’s expert’s class wide damages model violated due process when it failed to consider subsidies, premium “pass-ons,” or rebates and discounts. The Court ruled that due process was satisfied because Defendants could cross-examine the Indirect Purchaser’s expert at trial regarding the damages model. The Court further found that regardless of individual class member transactions, they all aggregate to form the class-wide damages and that the expert used appropriate methodologies to determine the class-wide damages.
Second, in addressing Defendants’ manageability argument based on the application of numerous and varied state antitrust laws to apportion damages, the Court ruled that special verdict forms are specifically designed to manage such varying claims. Additionally, the fact that the Plaintiff Class will seek damages based on varying state laws does not detract from predominance on the liability issue. Predominance was based on the fact that the Defendants’ actions forced all of indirect purchasers to pay supracompetitive prices for the active ingredient meantime when Defendants delayed the generic introduction into the market. The Court found that the varying state antitrust laws may prove how much each class member will receive and are insufficient to decertify the class on liability.
Plaintiffs in “568 Presidents Group” Case Plausibly Alleged that Defendant Universities Violated Antitrust Law in Admissions Decisions
By Caroline Corbitt
In Carbone v. Brown University, 2022 WL 3357249 (N.D. Ill. Aug. 15, 2022), Judge Matthew F. Kennelly denied three motions to dismiss filed by Defendants (17 major universities in the “568 Presidents Group”). The 568 Presidents Group is an affiliation of colleges and universities who purport to admit students on a need-blind basis. Under Section 568 of the 1994 Improving America’s Schools Act, universities can collaborate in setting financial aid formulas only as long as none of them consider applicants’ financial need in their admissions decisions. Plaintiffs (Defendants’ alumni) allege that Defendants violated antitrust law by coordinating with each other in setting financial aid packages while also making admissions decisions that factor in the financial circumstances of prospective students. Defendants “participated and are participating in a price-fixing cartel that is designed to reduce or eliminate financial aid as a locus of competition, and that in fact has artificially inflated the net price of attendance for students receiving financial aid,” in violation of Section I of the Sherman Act. 2022 WL 3357249, at *1.
Joint Motion to Dismiss
The Court first considered, and rejected, the defendants’ collective motion to dismiss the case. First, the Court rejected Defendants’ argument that all their actions fell into the 586 Exemption, which pertains to agreements between “2 or more institutions of higher education at which all students are admitted on a need-blind basis.” Id. (quoting 15 U.S.C. § 1). Second, the Court considered both the meaning of the statutory language “need-blind without regard to the financial circumstances of the student involved or the student’s family” and the parties’ differing interpretation. Id. at *3. Even under defendants’ proposed interpretation, the Court found that plaintiffs had sufficiently alleged that the defendants consider some applicants’ need for financial aid in their admissions decisions, particularly as to waitlisted or transfer applicants and the children of wealthy donors. Id.at *4-5. Plaintiffs’ allegations that defendants engage in “enrollment management” to constrain the number of financial aid applicants in accordance with the “financial and budgetary objectives” of their universities were also found to be plausible. Id. at *5. Third, the Court found that Plaintiffs had plausibly alleged that none of the defendant universities were protected under the 568 Exemption and held that plaintiffs only needed to allege that one member of the conspiracy failed to engage in need-blind admissions under antitrust law. Id.at *6.
Finally, the Court deferred determining whether the Rule of Reason or the per se standard applied to plaintiffs’ claims, noting that plaintiffs satisfied even a Rule of Reason standard in pleading that defendants’ actions had an anticompetitive effect in the market for elite private universities. Id. at *7-8. The Court also rejected defendants’ remaining arguments (failure to plausibly allege antitrust injury or antitrust standing and barred by the statute of limitations.) Id. at *8-10.
The Motion to Dismiss of Brown, Emory, Chicago, and Johns Hopkins
Brown, Emory, Chicago, and Johns Hopkins filed a separate motion to dismiss arguing that plaintiffs’ claims against them should be dismissed because they either withdrew from the 568 Group more than four years before the filing of plaintiffs’ action (prior to the statute-of-limitations period) or joined the 568 Group only recently. The Court found that the burden to show withdrawal from a conspiracy falls on defendants, and that there was no evidence that Brown, Emory, and Chicago had withdrawn from the conspiracy. Id. at *10-11 (citing United States v. Nagelvoort, 856 F.3d 1117, 1128–29 (7th Cir. 2017) (a withdrawal defense requires the conspirator to both inform co-conspirators of his withdrawal and disavow the criminal objectives of the conspiracy). The Court also held that “‘a co-conspirator who joins a conspiracy with knowledge of what has gone on before and with an intent to pursue the same objectives may, in the antitrust context, be charged with the preceding acts of its co-conspirators.’” Id. at *11 (quoting Havoco of Am., Ltd. v. Shell Oil Co., 626 F.2d 549, 554 (7th Cir. 1980)).
Yale’s Motion to Dismiss
The Court rejected Yale’s argument that plaintiffs had conceded that Yale did not use the same “Consensus Methodology” as the other defendants in setting financial aid packages. Id. at 11.
OTHER NOTABLE CASES
By E-Brief Editors
NSF International gets US antitrust claims over water treatment dismissed
In Geomatrix, LLC v. NSF Int’l Biomicrobics, Inc. (E.D. Mich. Sept. 21, 2022), a case alleging a conspiracy to manipulate standards-setting in the onsite wastewater treatment systems industry, the Court ruled: “Plaintiff failed to plead a plausible antitrust claim because it has alleged no viable injuries. First, to the extent Plaintiff claims it may be injured if NSF officially proposes and adopts new wastewater treatment standards that exclude Plaintiff’s products, such an injury is not yet ripe for adjudication. Second, the court finds Defendants’ alleged disparaging public relations campaign, specifically targeted at discrediting Plaintiff’s technology in the eyes of state regulators, is protected by the Noerr–Pennington immunity.”
This feature includes excerpts from selected press releases issued by the Antitrust Division, USDOJ, the Federal Trade Commission and the California Attorney General’s Office. It does not include all press releases issued by those offices. This appears to be a truly transitional time in antitrust enforcement and reading the press releases can be very helpful to stay on top of changes.
Antitrust Division, US Department of Justice
To link to all Antitrust Division, DOJ press releases, click here.
To link to all Antitrust Division, DOJ press releases, go to: https://www.justice.gov/atr/press-releases. Highlights include the following:
Tijuana Man Pleads Guilty to “Double-Broker” Scheme Targeting San Diego Truckers
Tijuana resident pleaded guilty in federal court to criminal charges stemming from his scheme to defraud interstate carriers and brokers operating in the trucking industry. According to the plea agreement, defendant conducted a “double-broker” scheme. As a part of the scheme, Padilla stole the identity of a Spring Valley interstate carrier and agreed to make deliveries using the company’s stolen identity. Rather than delivering the loads, Padilla posed as a shipper and re-brokered the same loads to other carriers who delivered the freight. Padilla then collected the payments for the completed deliveries but did not pay the carriers who actually delivered the loads and were unaware of the double-broker scheme.
A former construction contractor became the second person to plead guilty for participating in a bid-rigging and bribery scheme involving California Department of Transportation (Caltrans) improvement and repair contracts. The contractor engaged in a conspiracy, from early 2015 through at least as late as August 2018, to thwart the competitive bidding process for Caltrans contracts to ensure that companies controlled by co-conspirators or himself submitted the winning bid and would be awarded the contract.
The Department of Justice created the Procurement Collusion Strike Force (PCSF), a joint law enforcement effort to combat antitrust crimes and related fraudulent schemes that impact government procurement, grant and program funding at all levels of government – federal, state and local. To learn more about the PCSF, or to report information on market allocation, price fixing, bid rigging and other anticompetitive conduct related to federal government contracts, go to https://www.justice.gov/procurement-collusion-strike-force.
Proposed Deal Would Combine Two of the Three Largest Competitors in Residential Door Hardware, Further Concentrating U.S. Markets
The U.S. Department of Justice filed a civil antitrust lawsuit to block ASSA ABLOY AB’s (ASSA ABLOY) proposed $4.3 billion acquisition of the Hardware and Home Improvement division of its rival, Spectrum Brands Holdings Inc (Spectrum). ASSA ABLOY and Spectrum are two of the three largest producers of residential door hardware in the concentrated, $2.4 billion U.S. industry. The complaint, filed in the U.S. District Court for the District of Columbia, alleges that the merger would eliminate important head-to-head competition between ASSA ABLOY and Spectrum, risking higher prices, lower quality, reduced innovation and poorer service in the sale of at least two types of residential door hardware: premium mechanical door hardware and smart locks.
AGENCY UPDATES
This feature includes excerpts from selected press releases issued by the Antitrust Division, USDOJ, the Federal Trade Commission and the California Attorney General’s Office. It does not include all press releases issued by those offices. This appears to be a truly transitional time in antitrust enforcement and reading the press releases can be very helpful to stay on top of changes.
Antitrust Division, US Department of Justice
To link to all Antitrust Division, DOJ press releases, click here.
To link to all Antitrust Division, DOJ press releases, go to: https://www.justice.gov/atr/press-releases. Highlights include the following:
- Tijuana Man Pleads Guilty to “Double-Broker” Scheme Targeting San Diego Truckers
Tijuana resident pleaded guilty in federal court to criminal charges stemming from his scheme to defraud interstate carriers and brokers operating in the trucking industry. According to the plea agreement, defendant conducted a “double-broker” scheme. As a part of the scheme, Padilla stole the identity of a Spring Valley interstate carrier and agreed to make deliveries using the company’s stolen identity. Rather than delivering the loads, Padilla posed as a shipper and re-brokered the same loads to other carriers who delivered the freight. Padilla then collected the payments for the completed deliveries but did not pay the carriers who actually delivered the loads and were unaware of the double-broker scheme. - Second Guilty Plea in Ongoing Investigation at the California Department of Transportation (Caltrans)
A former construction contractor became the second person to plead guilty for participating in a bid-rigging and bribery scheme involving California Department of Transportation (Caltrans) improvement and repair contracts. The contractor engaged in a conspiracy, from early 2015 through at least as late as August 2018, to thwart the competitive bidding process for Caltrans contracts to ensure that companies controlled by co-conspirators or himself submitted the winning bid and would be awarded the contract.
The Department of Justice created the Procurement Collusion Strike Force (PCSF), a joint law enforcement effort to combat antitrust crimes and related fraudulent schemes that impact government procurement, grant and program funding at all levels of government – federal, state and local. To learn more about the PCSF, or to report information on market allocation, price fixing, bid rigging and other anticompetitive conduct related to federal government contracts, go to https://www.justice.gov/procurement-collusion-strike-force.
- Proposed Deal Would Combine Two of the Three Largest Competitors in Residential Door Hardware, Further Concentrating U.S. Markets
The U.S. Department of Justice filed a civil antitrust lawsuit to block ASSA ABLOY AB’s (ASSA ABLOY) proposed $4.3 billion acquisition of the Hardware and Home Improvement division of its rival, Spectrum Brands Holdings Inc (Spectrum). ASSA ABLOY and Spectrum are two of the three largest producers of residential door hardware in the concentrated, $2.4 billion U.S. industry. The complaint, filed in the U.S. District Court for the District of Columbia, alleges that the merger would eliminate important head-to-head competition between ASSA ABLOY and Spectrum, risking higher prices, lower quality, reduced innovation and poorer service in the sale of at least two types of residential door hardware: premium mechanical door hardware and smart locks.
Federal Trade Commission
To link to all FTC press release, click here.
Georgia-based defendants must cease misrepresenting their “insulating” paint products
October 11, 2022
The Federal Trade Commission won a court order against F & G International Group Holdings, LLC, FG International, LLC, (FGI) and their principal J. Glenn Davis after suing the company and its CEO for deceptively claiming their paint insulates, when it does not. The order from the U.S. Court for the Southern District of Georgia permanently bans FGI from making deceptive claims and prohibits them from supporting similar deception from other companies.
Complaint alleges that manufacturers pay distributors to exclude competitors’ more affordable generic options for essential farming products
September 29, 2022
The Federal Trade Commission and a bipartisan coalition of ten state attorneys general have filed a complaint in federal court against pesticide manufacturers Syngenta Crop Protection and Corteva, Inc. for allegedly paying distributors to block competitors from selling their cheaper generic products to farmers. The complaint alleges that these big pesticide firms run so-called “loyalty programs” in which distributors only get paid if they limit business with competing manufacturers. It further alleges that cutting off competition has allowed the defendants to inflate their prices and force American farmers to spend millions of dollars more for their products. The complaint seeks to shut down this pay-to-block scheme and restore competition to affected markets.
California Department of Justice
To link to All California Department of Justice press releases, click here.
- Attorney General Bonta Announces Lawsuit Against Amazon for Blocking Price Competition
September 14, 2022
California Attorney General Rob Bonta announced a lawsuit against Amazon alleging that the company stifled competition and caused increased prices across California through anticompetitive contracting practices in violation of California’s Unfair Competition Law and Cartwright Act. In order to avoid competing on prices with other online e-commerce sites, Amazon requires merchants to enter into agreements that severely penalize them if their products are offered for a lower price off-Amazon. In today’s lawsuit, Attorney General Bonta alleges that these agreements thwart the ability of other online retailers to compete, contributing to Amazon’s dominance in the online retail marketplace and harming merchants and consumers through inflated fees and higher prices.See https://oag.ca.gov/news/press-releases/attorney-general-bonta-announces-lawsuit-against-amazon-blocking-price
IN CASE YOU MISSED IT
- Articles related to antitrust and UCL enforcement, related legislation and diversity gathered and organized by Bob Connolly. States seen as next battlefield for Big Tech antitrust cases
October 4, 2022, Washington Post, Gus Garcia-Roberts
“Without enforcement, the Rooney Rule failed to create equitable opportunities for Black coaches. Then it spread to corporate America and fell short there, too.”
October 4, 2022, Reuters, Diane Bartz
“The U.S. government has been hit with four painful losses at antitrust trials recently but legal experts do not expect the Biden administration’s regulators to slow efforts to make American business more competitive.”
October 1, 2022, Wall Street Journal, Dave Michaels
“The Federal Trade Commission is investigating one of the country’s largest anesthesiology providers, U.S. Anesthesia Partners, over whether it has amassed too much power in some regional markets through acquisitions….”
September 29, 2022, Reuters, Jonathan Stempel
“A federal judge on Thursday dismissed two antitrust lawsuits accusing Amazon.com Inc and five large publishers of illegally conspiring to fix U.S. prices of electronic and traditional books, causing consumers and bookstores to pay more.”
September 29, 2022, CNBC, Laura Feiner
“The House on Thursday passed an antitrust package that would give federal enforcers more resources to crack down on anticompetitive behavior, even as broader efforts targeting Big Tech have stalled. It passed by a vote of 242-184.”
September 28, 2022, Bloomberg Law, Dan Papscun
“Powers’ departure comes as the antitrust division has faced a string of losses in the courtroom. The division has mostly failed so far to reach convictions in a string of criminal cases alleging widespread price fixing in the broiler chicken industry. It has also come up short in a separate, novel bid, overseen by Powers, to prosecute so-called “no-poach” agreements between competing employers as criminal antitrust violations.”
September 23, 2022, Bloomberg Law, Dan Papscun
“The DOJ has faced several setbacks in recent months. It lost a high-profile jury trial in July in a separate case against five executives—current and former executives from Claxton and Pilgrim’s Pride—who were allegedly involved in the same overarching conspiracy.
The DOJ dropped charges against two ex-Pilgrim’s executives in another price-fixing case in Colorado a month later. Only two defendants remain charged: Jason McGuire and Timothy Stiller, both former Pilgrim’s executives.”
September 23, 2002, Bloomberg Law, Diane Bartz
“ A U.S. judge on Friday ruled in favor of U.S. Sugar Corp’s plans to buy rival Imperial Sugar Co, rejecting a Justice Department argument that the proposed deal would drive up the price of sugar for households as well as for food and soda makers.”
September 21, 2022, Bloomberg Law, Dan Papscun
“Amazon.com Inc. faces rough legal terrain in California as the retail giant battles the state’s lawsuit over its pricing policies and supplier relationships.
The state’s courts are generally more pro-consumer in antitrust litigation than federal courts, and California has a law, the Cartwright Act, that is unfriendly to ‘vertical restraints’ between a company and its suppliers, court watchers say.”
September 20, 2022, Reuters, Mike Scarcella
“ A Boston federal judge on Monday slashed an ‘excessive’ legal fee request in a $485 million antitrust settlement with Sun Pharmaceutical Industries Ltd, awarding a reduced amount of $97 million to the class lawyers while approving the overall deal.”
September 20, 2022, Axios, Dan Primack
“Driving the news: A federal judge yesterday ruled that UnitedHealth can proceed with its $13 billion acquisition of Change Healthcare, denying a U.S. Justice Department effort to block the deal.”
Tech crunch, September 19, 2022, Sarah Perez
“The U.S. Department of Justice has been granted time to present its own oral arguments during the upcoming Apple v. Epic Games appeal, along with the State of California. On Friday, U.S. Dept. of Justice officials filed a request to present 10 minutes of oral arguments during the trial, in addition to the 20 minutes of argument time per side.”
September 15, 2022, DOJ Press Release
“Let me turn now to substance—and the changes the Department is implementing to further strengthen how we prioritize and prosecute corporate crime.”
September 12, 2022, Bloomberg Law, Dan Papscun and Sam Skolnick
“The Justice Department’s antitrust division is ramping up hiring of trial attorneys from Big Law firms as the Biden administration heightens its focus on competition amid a surge in mergers.”