E-BRIEFS, NEWS AND NOTES: SEPTEMBER 2022

Save the date! Registration and details will be available soon!

• November 9, 2022
  • 6:00 p.m. – 8:00 p.m.:  Welcome Reception
    
• November 10, 2022
  • 7:30 a.m.:  Breakfast and Registration
  • 8:30 a.m. – 5:15 p.m.:  Golden State Antitrust & UCL Institute
  • 5:30 p.m.:  Hosted Cocktail Reception
  • 7:00 p.m.:  Antitrust Lawyer of the Year Dinner and Award Ceremony Honoring Elizabeth C. Pritzker of Pritzker Levine LLP
    

The Antitrust and Unfair Competition Law Section hosts the Golden State Antitrust & Unfair Competition Law Institute (GSI) each year at the Julia Morgan Ballroom in San Francisco. This is the Section’s marquee event and brings together private and public sector attorneys, academics, experts, judges, and law students for a multi-session conference on recent developments in the law, trials, and enforcement, followed by a cocktail reception and dinner honoring the California Antitrust Lawyer of the Year.

This year’s GSI program features all-star sessions on: 

• Recent Developments in Antitrust and Unfair Competition Law  
• Big Stakes Antitrust Trial
• A Conversation with Antitrust Enforcement 
• Competition Economics
• California UCL Practice
• Federal Judges Panel on Competition Litigation 

For more information on GSI sponsorships, please contact Belinda Lee at belinda.lee@lw.com.

The Antitrust and Unfair Competition Law Section is pleased to announce that Marshall Fern is the 2022 recipient of its Inclusion and Diversity Fellowship. As part of the Fellowship award, Marshall has secured a summer internship at the California Department of Justice’s Healthcare Rights and Access Section, Competition Unit, and an educational stipend of $10,000. In addition to the internship, Marshall will participate in and contribute to the CLA’s Antitrust and UCL Section’s activities, and enjoy opportunities to develop relationships with antitrust and UCL practitioners throughout California. Read More

FELLOWSHIP DONOR—Cotchett Pitre & McCarthy LLP

By Cheryl Johnson

In an 89-page decision, In re EpiPen (Epinephrine Injection, USP) Marketing, Sales Practices & Antitrust Litigation, Case No. 21-3005,  44 F. 4th 959,  2022 WL 3273055 (10^th Cir. July 29, 2022), the Tenth Circuit affirmed a grant of summary judgment to defendant Mylan, finding that its exclusive rebate agreements and other alleged conduct presented no triable issue of illegal exclusionary conduct. Mylan, who had a monopoly in the epinephrine auto-injector market with its EpiPen, recognized that the imminent launch of Sanofi’s competing and attractive Auvi-Q device would be disruptive. Accordingly, Mylan embarked on “a proactive strategy,” significantly increasing its rebate offers and using exclusive rebate agreements with PBMs to exclude or disfavor Sanofi in formulary access and blunt any market share momentum that the Auvi-Q device might achieve. 2022 WL 3273055, at *10.

Applying Tenth Circuit law, the court explained that exclusive dealing contracts can often be procompetitive and pose little threat to competition even when used by a monopolist, and that some even contend  that they should be presumptively lawful. Id. at *19. Because Mylan’s exclusive rebate agreements clearly brought about lower prices for epinephrine auto-injectors than nonexclusive agreements, Sanofi was required to prove that Mylan’s exclusive rebate agreements were likely to (1) foreclose Auvi-Q from the epinephrine auto-injector market, and (2) that Mylan could thereafter reduce output or increase prices above the competitive level and that this would produce anticompetitive effects outweighing the procompetitive benefits from the period of lower prices.  Id. at *21. The court conceded this test was “onerous” but that it was necessary to avoid chilling the very conduct the antitrust laws are designed to protect: slashing prices. Id. Price cutting in concentrated industries such as the prescription drug market seemed “sufficiently difficult to stimulate that we hesitate before embracing a rule that could”—through the unintentional prohibition of the monopolist’s legitimate use of exclusive rebate agreements—“stabilize ‘tacit cartels’ and further encourage interdependent pricing behavior.” Id. at *21.

Sanofi conceded that it could not establish that Mylan’s rebate agreements were predatory and/or below Mylan’s costs. Id. at *34, n. 7  Nor could Sanofi establish that Mylan’s rebate agreements were likely to foreclose it from doing business in the epinephrine market. Rather, the court laid Sanofi’s initial market failures on its mistaken strategy to launch Auvi-Q at a premium price, and its failure to offer greater price discounts in light of Mylan’s aggressive pricing “even though the clear answer to Sanofi’s problems was offering better prices.” Id. at *10. When Sanofi decided to discount and change its contracting strategy, it met a “resounding success,” rapidly gained market share and was able to reverse many of the PBM formulary exclusions and restrictions. Id. at *23. At the height of Mylan’s challenged exclusive agreements, they foreclosed only 31 percent of the U.S. which was usually insufficient under the law. Id. at *22. Mylan’s stated intent to prevail over Sanofi also could not save Sanofi’s case: “Were intent to harm a competitor alone the marker of antitrust liability, the law would risk retarding consumer welfare by deterring vigorous competition—and wind up punishing only the guileless who haven’t figured out not to write such things down.” Id. at *24.             The court also concluded that there was no triable issue of exclusionary conduct because exclusive rebate agreements were a normal competitive tool in the epinephrine auto-injector market and were used by Sanofi itself. Mylan’s exclusive rebate agreements were short in duration (being two years or shorter) and “easily terminable,” and there was no evidence that Mylan coerced any PBMs into accepting the agreements. Id. at *23, 27-30. Furthermore, the court disagreed that the rebate agreements wrongfully deprived consumers of choices, noting that consumers could seek formulary exceptions and that consumers in acquiring health insurance were relinquishing choice to PBMs in exchange for lower premiums. Id. at *20.

By E-briefs Staff

In In Re: Local TV Advertising Antitrust Litig., Case No. 18-cv-678-VMK (N.D. Ill.), the Court recently granted a data provider’s motion to dismiss claims it participated in a conspiracy with television broadcasters to elevate the prices of spot and other TV advertisements. There, the plaintiffs had alleged the provider—ShareBuilders—facilitated price-fixing through an unlawful information exchange. In particular, the Plaintiffs allege that ShareBuilders provided: (1) detailed reports to broadcasters concerning “their competitors’ holding capacity data”; (2) “custom station reports” for certain broadcasters containing their competitors’ pricing and pacing information; (3) some “weekly rate cards” that “set forth recommended pricing for each time slot”; and (4) “weekly bottom prices” which purportedly allowed the broadcasters to determine “the lowest rates they should go for any given program in a specific week.” Id. at 4-5.

The Court distinguished between “[d]issemination of aggregated information” (such as industry averages), and “price exchanges that identify particular parties, transactions, and prices.” Id. at 6. According to the Court, the former category “is generally favored in the antitrust context,” while the latter is “seen as potentially anticompetitive because” it “may be used to police a secret or tacit conspiracy to stabilize prices.” The Court further noted that “[t]he conduit theory of antitrust liability in this context is ‘fairly unique’ in that it ‘does not tend to arise frequently.” Id. at 7 (internal citation omitted).

The Court then surveyed other recent motion to dismiss determinations involving claims that a non-horizontal competitor facilitated a price-fixing conspiracy through an information exchange, including In re Broiler Chicken I, In re Broiler Chicken II, and Olean. The Court determined that the plaintiffs “fail to allege that ShareBuilders’s analytics were presented with so much specificity that the Broadcaster Defendants could use them to police a secret or tacit conspiracy to fix prices.” Id. at 12 (internal citation and punctuation omitted). Instead, the Court reasoned that “[a]ll that the” complaint “plausibly suggests is that ShareBuilders conducted market research, recommended pricing strategies to its clients on an ad hoc basis to help improve their profit margins, and that its clients at least sometimes accepted those recommendations.” Id. at 15. Put differently, the Court ruled that the complaint “is devoid of sufficiently concrete allegations that ShareBuilders’s market reports and recommendations were crafted in such a way that enabled” the television broadcasters “to tacitly communicate with one another about their anticompetitive scheme.” Id. The Court granted plaintiffs leave to “timely amend their complaint should they discover additional facts that plausibly implicate ShareBuilders in the underlying conspiracy.” Id. at 16.

By E-briefs Staff

In Evans Hotels, LLC v. United Here Local 30, Case No. 18-cv-2763-RSH-AHG, Dkt. 140 (S.D. Cal. August 30, 2022), the Court denied Plaintiffs’ leave to file “more than 38 months after the initial complaint …. a Fourth Amended Complaint that for the first time includes two claims under Section 1 of the Sherman Act.” The case featured three previous amended complaints, with counts for conspiracy to monopolize and attempted monopolization in violation of Section 2 of the Sherman Act and seven other non-Sherman Act counts. Plaintiffs were granted leave to file a motion for leave to file a Fourth Amended Complaint. The Order advised “that a strong showing must be made for why any claims can survive as well as why they were not brought within the past three years of this case’s pendency.” Id. at 3-4.

Plaintiffs’ motion seeking leave to file a Fourth Amended Complaint was filed more than 38 months after the initial complaint, and for the first time included two claims under Section 1 of the Sherman Act. Plaintiffs’ tried to excuse the delay explaining, “they have been developing an additional theory of liability, having hired additional counsel specialized in antitrust and retained experts.” Id. at 4-5. The Court, however, exercised its discretion to deny leave to file based on undue delay, prejudice, and the fact that the complaint has been amended more than once previously. Id. at 5.

Standard of Review

On a motion for leave to amend a pleading, a court should “freely give leave when justice so requires.” Fed. R. Civ. P. 15(a)(2). The Court considers five factors in determining whether a motion for leave to amend is appropriate: “bad faith, undue delay, prejudice to the opposing party, futility of amendment, and whether the plaintiff has previously amended the complaint.” Id. at 5. (citing Johnson v. Buckley, 356 F.3d 1067, 1077 (9th Cir. 2004). Prejudice to the opposing party carries the greatest weight. Also, a Court’s “discretion to deny leave to amend is particularly broad where plaintiff has previously amended the complaint.” Id. at 5 citing, Ascon Properties, Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir.1989).

Analysis

The Court found that Plaintiffs provided no acceptable reason why they could not have developed Section 1 theories, or hired the relevant attorneys or experts, earlier or at the outset of the case. The Court did not buy that it took 38 months and additional counsel to draft these allegations. Id. at 6. In fact, the Court noted that Plaintiffs argued that the Defendant was not prejudiced because the new antitrust counts were not based on new evidence. The Court, however, found the prejudice to be straightforward: “For over three and-a-half years, Defendants have been, and still are, litigating the pleadings.” Id. at 7. To date, “the litigation include[ed] six motions to dismiss, five motions to strike, [a] pending motion for fees based on the motion to strike, and the motion to dismiss that they are reportedly preparing to file to either the TAC or the FAC, depending on the Court’s ruling. Id. at 8. The Court noted that the litigation was already very expensive and the new claims “will result in significant added complexity, expense, and delay.” Id.

Conclusion

While the Court denied leave to file a Fourth Amended Complaint, the parties still were in litigation with a briefing schedule set for Defendant’s Motion to Dismiss the pending Third Amended Complaint.

By E-Briefs Staff

In Pickett Fence v. Zillow, Case No. 2:21-cv-00012 (D. Vt. August 23, 2022), (“Pickett Fence”), Plaintiff brought an action against Zillow, Inc., alleging violations of the Vermont Consumer Protection Act (the “VCPA”), 9 V.S.A. § 2453(a) (Count I), and the Lanham Act, 15 U.S.C § 1125 (Count II), arising out of Defendant’s policy of providing free online listings for homes that are For-Sale-By Owner (“FSBO”).

Plaintiff began operations in 1993 and was one of the first publications to provide a marketplace where private homeowners could pay to advertise their property directly to potential buyers, bypassing the use of real estate agents or brokers. Zillow permits FSBO sellers to advertise their real property on its website at no cost. Plaintiff contended that Zillow falsely advertised that it was offering FSBO advertisements, because it diverted inquiries on FSBO]advertisements to its Premier Agents and would also sell the FSBO advertisements to its Premier Agents so they would be the only contact listed. Pickett Fence alleged sellers were harmed because the free ad was not really free because inquiries on the FSBO ads were directed to Premiere Zillow agents who would direct the potential buyer to other properties if the FSBO seller did not agree to pay a commission. Pickett Fence also was allegedly harmed because the free FSBO ads offered by Zillow stopped FSBO sellers from seeking alternative means of advertising their property with competing businesses like Pickett Fence.” Id. at 3.

Plaintiff alleged that Zillow has “engaged in illegal and unfair methods of competition as well as fraud and deceit” by illegally undercutting its competitors. Plaintiff further asserts that Defendant’s “pricing scheme is predatory” because while Defendant “claims it is offering a service for free, [] in reality [it] is converting [FSBO] advertisements into a source of contacts for Premier Agents[.]” Id.

Whether Plaintiff Has Standing to Sue on Behalf of FSBO Sellers

The Court dismissed all claims to the extent they relied on FSBO sellers for standing. The Court had previously ruled, “‘to the extent that Plaintiffs Complaint c[an] be construed to assert claims on behalf of FSBO sellers who advertised on Defendant’s website,” any such claims must be dismissed for lack of standing. Picket Fence Preview, Inc. v. Zillow, Inc., 2021 WL 3680717, at *5 (D. Vt. Aug. 19, 2021).” Id. at 8-9.

Whether Plaintiff Plausibly Pleads a VCPA Claim Based Upon Unfair or Deceptive Acts or Practices

To establish a claim under Vermont’s Unfair Competition Act, “(1) there must be a representation, omission, or practice likely to mislead consumers; (2) the consumer must be interpreting the message reasonably under the circumstances; and (3) the misleading effects must be material, that is, likely to affect the consumer’s conduct or decision regarding the product.” Id. at 9 (citation omitted). Because Picket Fence did not allege that it purchased, leased, or contracted for any goods or services from Defendant, the Court held that Plaintiff is not a “consumer” under the VCPA and thus did not have standing to bring a claim for deceptive acts or practices. Id. at 9-13.

Whether Plaintiff Plausibly Pleads a VCP Claim Based on Predatory Pricing

Plaintiff also asserted that it was “entitled to bring an action for damages [against Defendant due to Defendant’s alleged] predatory pricing and [Defendant’s] attempt to create a monopoly and harm competition.”  Id. at 13. The Court relied on Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 224 (1993) (applying Section 2 of the Sherman Act) to reject this claim. In Brooke Group, the Supreme Court held, “[A] plaintiff seeking to establish competitive injury resulting from a rival’s low prices must prove that the prices complained of are below an appropriate measure of its rival’s costs” and “the competitor had a … dangerous probability[] of recouping its investment in below-cost prices.” Pickett Fence at 13 (citation omitted). The Picket Fence Court dismissed the predatory pricing count for failure to provide any plausible allegations to meet the Brooke Group standard. Pickett Fence’s’ complaint contained no allegation that Defendant’s source of income or pricing methodology will change once competition has been eliminated from the market. Plaintiff instead contended that competition had already been destroyed, not by competitors leaving the marketplace and not by Defendant’s alleged monopoly, but by virtue of Plaintiffs own loss of revenue. The Court found “[t]his will not suffice.” (citing, Brooke Grp. Ltd., 509 U.S. at 222 (“[W]e interpret§ 2 of the Sherman Act to condemn predatory pricing when it poses ‘a dangerous probability of actual monopolization[.]”‘)( citation omitted). Pickett Fence at 15.

Whether Plaintiff Plausibly Pleads a Lanham Act Claim

To prevail on a Lanham Act false advertising claim, a plaintiff must establish that the challenged message is, (1) either literally or impliedly false, (2) material, (3) placed in interstate commerce, and ( 4) the cause of actual or likely injury to the plaintiff. Id. at 17 (citations omitted). Because Plaintiff conceded that FSBO sellers on Defendant’s website are not required to hire a real estate agent in order to list their real property for free, Defendant’s representation, which does not use the term “FSBO advertisement[,]” is not literally false. Id. at 18. Because Plaintiff has not identified a statement made by Defendant that is “either literally or impliedly false,” Church & Dwight Co., v. SPD Swiss Precision Diagnostics, GmBH, 843 F.3d 48, 65 (2d Cir. 2016), within the meaning of 15 U.S.C. § 1125(a)(l), Defendant’s motion to dismiss Plaintiffs Lanham Act claim must be granted.” Pickett Fence at 20.

Conclusion

While the case involves no Ninth Circuit law and very little federal law, Zillow has been the subject of similar lawsuits nationwide, so the case is worth noting for the various ways Plaintiffs tried to establish harm and fit a claim into an “unfair competition” or related count.

To link to all Antitrust Division, DOJ press releases, click here.

·      Global Shipping Container Suppliers China International Marine Containers and Maersk Container Industry Abandon Merger after Justice Department Investigation

Acquisition Would Have Combined Two of the Four Suppliers of Insulated Container Boxes and Refrigerated Shipping Containers in the World and Further Concentrated the Global Cold Supply Chain

August 25, 2022–China International Marine Containers Group Co. Ltd. (CIMC) confirmed today that it has abandoned its intended acquisition of Maersk Container Industry A/S and Maersk Container Industry Qingdao Ltd. (collectively, MCI) after the Justice Department’s Antitrust Division’s thorough investigation. 

The proposed transaction would have combined two of the world’s four suppliers of insulated container boxes and refrigerated shipping containers. It would also have consolidated control of over 90% of insulated container box and refrigerated shipping container production worldwide in Chinese state-owned or state-controlled entities.

·      Justice Department and Federal Trade Commission Issue Joint Comment to Federal Energy Regulatory Commission (FERC) to Preserve Competition for Regional Transmission

Agencies’ Joint Comment Urges the FERC Not to Restore Incumbent Transmission Owners’ Right of First Refusal for New Facilities

August 18, 2022–The Department of Justice and the Federal Trade Commission yesterday submitted to the Federal Energy Regulatory Commission (FERC) a joint comment urging it not to restore a right of first refusal that would enable incumbent electricity transmission owners to block competitors from bidding to design, construct, and own certain new interstate transmission facilities.

·       Justice Department and National Labor Relations Board Announce Partnership to Protect Workers

Agencies Will Enhance Enforcement Efforts Through Greater Coordination and Information Sharing, Cross-Agency Training and Outreach

July 26, 2022—“Protecting competition in labor markets is fundamental to the ability of workers to earn just rewards for their work, to live out the American dream, and to provide for their families,” said Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division. “By cooperating more closely with our colleagues in the NLRB, we can share information on potential violations of the antitrust and labor laws, collaborate on new policies and ensure that workers are protected from collusion and unlawful employer behavior. As the department noted in the amicus brief we submitted in the NLRB’s recent Atlanta Opera matter, we support the Board’s ongoing efforts to update its guidance to ensure that workers are properly classified under the labor laws. Protecting the right of workers to earn a fair wage is core to the work of both our agencies, and it will continue to receive extraordinary vigilance from the Antitrust Division.”

To link to all FTC press release, click here.

• FTC Notice of Appeal—Illumina/Grail Merger

September 2, 2022–Pursuant to Rule 3.52(b) of the Commission’s Rules of Practice, 16 C.F.R. § 3.52(b), Complaint Counsel hereby gives notice that it appeals the Initial Decision and Order dated September 1, 2022, entered by Judge D. Michael Chappell in the above-captioned proceeding, as well as any underlying findings of fact and conclusions of law, except certain sections relating to the relevant market and competitive dynamics.

·      FTC Chair Lina M. Khan Files Comment Supporting Proposed USDA Protections for Poultry Farmers

September 1, 2022–Comment highlights how poultry farmers lack buyer options and face unfair contract terms and practices.

·      FTC Publishes New Strategic Plan, Performance Plan, and Performance Report

August 25, 2022–The Federal Trade Commission has published its FY 2022-2026 Strategic Plan and its FY 2021-2023 Performance Report and Performance Plan as required under the GPRA Modernization Act of 2010.

·      Federal Trade Commission Authorizes Three New Compulsory Process Resolutions for Investigations

August 26, 2022–The Federal Trade Commission has approved three omnibus resolutions authorizing compulsory process in investigations involving collusive practices, mergers, acquisitions, and transactions, and the car rental industry. 

·      FTC Policy Paper Warns About Pitfalls of COPA Agreements for Patient Care and Healthcare Workers 

August 15, 2022–Some Hospital Mergers Subject to Certificate of Public Advantage Agreements Led to Higher Prices, Reduced Quality

Today the Federal Trade Commission issued a policy paper andfact sheet highlighting the pitfalls of using Certificates of Public Advantage (COPAs), which purport to shield hospital mergers from antitrust laws in favor of state oversight. The paper details research showing that these COPAs are often detrimental for patient costs, patient care, and healthcare worker wages.

To link to All California Department of Justice press releases, click here.

• Attorney General Bonta Warns Against Illegal Price Gouging as Rapidly Spreading Mill Fire Burns in Siskiyou County

September 3, 2022

California law generally prohibits charging a price that exceeds, by more than 10%, the price of an item before a state or local declaration of emergency. For any item a seller only began selling after an emergency declaration, the law generally prohibits charging a price that exceeds the seller’s cost of the item by more than 50%. This law applies to those who sell food, emergency supplies, medical supplies, building materials, and gasoline. The law also applies to repair or reconstruction services, emergency cleanup services, certain transportation services, freight and storage services, hotel accommodations, and rental housing. Exceptions to this prohibition exist if, for example, the price of labor, goods, or materials has increased for the business.