A recent speech by Deputy Assistant Attorney General Leslie Overton emphasized the risk in consummating mergers that do not have to be reported under the HSR Act, but have (or may have) adverse effects on competition. Ms. Overton emphasized that the Antitrust Division devotes substantial resources to, and challenges, non-reportable mergers. The Antitrust Division learns about non-reportable mergers from a number of sources, including customers, industry contacts and trade publications. A successful government challenge to a merger can have drastic consequences for the buyer. The remedy is generally divestiture of key assets and not rescission. The buyer may have paid substantial money for these assets, but will lose them without receiving much value. In addition, any profits earned because of adverse effects of competition are subject to disgorgement. And perhaps most significantly, the buyer and the seller can be sued for treble damages in class actions brought by injured customers. In an article entitled Buyer Beware: Consummating Non-HSR Reportable Mergers May Prove Costly In The End, published by the ABA Antitrust Litigator, the author herein discusses these risks. In sum, parties to non-reportable transactions face significant risks if they consummate an anti-competitive merger.
Posted by : June 20, 2014| On :
Posted by : August 29, 2013| On :
“WASHINGTON, D.C. – The District of Columbia filed a lawsuit against ExxonMobil Oil Corporation and its gasoline distributors for Washington, D.C., to stop enforcement of exclusive-supply agreements that make one group of affiliated distributors the only suppliers of Exxon-branded gasoline in D.C., Attorney General Irvin B. Nathan announced today. The complaint, filed in D.C. Superior Court, alleges that the exclusive-supply agreements violate the District’s Retail Service Station Act.
The affiliated distributors – Capitol Petroleum Group, LLC, Anacostia Realty, LLC, and Springfield Petroleum Realty, LLC – are the exclusive gasoline suppliers for about 60% of the 107 gasoline stations in D.C., including all 31 Exxon stations, 19 of 20 Shell stations, all 12 Valero stations, and 3 unbranded stations. The District’s lawsuit challenges agreements that make these affiliated distributors the exclusive suppliers of Exxon-branded gasoline for the 27 independently-operated Exxon stations in D.C., or about 25% of the gasoline stations in the city.
The exclusive-supply agreements, or earlier versions of them, were established by ExxonMobil and were transferred in 2009 to the affiliated distributors, along with ExxonMobil’s ownership of the 30 D.C. Exxon stations to which the agreements then pertained. According to the District’s complaint, these supply agreements can now be enforced either by the affiliated distributors or by ExxonMobil through its separate agreements with other area distributors.
The District alleges that the exclusive-supply agreements allow the affiliated distributors to “set the wholesale prices paid for Exxon-branded gasoline in D.C., depriving D.C. residents . . . of the benefits of competition in the wholesale supply of Exxon-branded gasoline.”
“Under the District’s gasoline marketing law, a retail gasoline dealer is free to purchase a brand of gasoline from any supplier of the brand,” Attorney General Nathan said. “Our suit seeks to end these unlawful supply restrictions, increase wholesale competition, and bring down retail prices at the pump.”
Posted by : July 11, 2013| On :
On June 17, 2013, in FTC v. Actavis, Inc., the Supreme Court reversed a ruling, which held that settlements that have the patentee paying the patent infringer to withdraw its patent challenge and not to infringe (i.e., reverse payments) are immune from the antitrust laws as long as the agreement not to infringe is within the scope of the patent. The Supreme Court held that these agreements are subject to the rule of reason under § 1 of the Sherman Act and an inquiry into the patent’s validity is unnecessary to the analysis. Rather, the size of the reverse payment alone can be used as a proxy for the strength or weakness of the patent. A large reverse payment can be sufficient for the agreement to violate the rule of reason. The Supreme Court noted that other ways to settle patent litigation, such as allowing the alleged infringer to market the infringing product after a delay but before the patent’s expiration, would pass muster under the rule of reason. This decision is going to change the way brand name pharmaceutical companies settle patent disputes with generic drug manufacturers as those settlements frequently involve large reverse payments in exchange for the generic drug manufacturer staying out of the market. The decision is linked here: FTC v. Actavis.
Posted by : July 10, 2013| On :
Today, the United States District Court for the Southern District of New York held, “Plaintiffs have shown that Apple conspired to raise the retail price of e-books and that they are entitled to injunctive relief. A trial on damages will follow.” The opinion appears here: Apple decision.
Posted by : June 20, 2013| On :
In American Express v. Italian Colors (Amex), the Supreme Court held today that “a contractual waiver of class arbitration is enforceable under the Federal Arbitration Act when the plaintiff ’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery.” The problem is that the decision leaves the plaintiff with no way to vindicates its rights. The plaintiff’s maximum recovery would have been $38,000, but to proceed on its own would require an expert report from an economist that would cost between $100,000 and $1,000,000. The contract’s confidentiality provisions prevent the plaintiff from sharing this expense with other victims. Thus, the clause effectively precludes any method to vindicate the Sherman Act (not just class actions). The dissent summed the import of the decision as “[t]oo darn bad.” It really is.
Posted by : April 22, 2013| On :
Overruling the recent Kansas Supreme Court decision in O’Brien v. Leegin Creative Leather Products, Inc. discussed in the May 8, 2012 Post, the Kansas legislature has mandated that resale price maintenance is subject to the rule of reason. This legislation is remarkable in light of all the uproar over the United States Supreme Court’s decision in Leegin Creative Leather Products v. PSKS, 127 S.Ct. 2705 (2007), that made resale price maintenance subject to the rule of reason. For example, as discussed in previous posts of May 4, 2009 and October 29, 2009, the Maryland legislature enacted the first Leegin repealer statute making resale price maintenance per se unlawful and 41 state attorneys general have urged Congress to repeal Leegin.
Posted by : March 18, 2013| On :
On March 14, 2013, a jury in the United States District Court for the Eastern District of New York awarded $54,100,000 to an antitrust plaintiff class. The jury found that the Chinese Vitamin C manufacturers engaged in price-fixing. This verdict demonstrates that there is no need for a criminal prosecution for a successful civil suit. This was the first case in which Chinese companies have been held liable for violating the United States antitrust laws.
Posted by : February 14, 2013| On :
The Ninth Circuit, in AT&T Mobility LLC v. AU Optronics Corp., No. 11-16188 (9th Cir. Feb. 14, 2013), held that the Cartwright Act (the California antitrust law) applies, consistent with due process, to conspiratorial conduct that took place in California even though plaintiffs (indirectly) purchased the price-fixed goods outside of California. This decision demonstrates the breadth of the Cartwright Act to reach purchases outside of California as long as “defendant’s conspiratorial conduct was sufficiently connected to California.”
Posted by : August 9, 2012| On :
On August 6, 2012, the Second Circuit brought reality back to standards governing summary judgment in antitrust cases. See In re Publication Paper Antitrust Litig., 11-101-cv (2d Cir. Aug. 6, 2012). Stora Enso North America (“SENA”) was acquitted of price fixing with UPM-Kymmene even though UPM’s CEO testified that he agreed with SENA’s CEO to fix prices. A price fixing class action was later brought against SENA, its foreign parent and UPM (which settled). Notwithstanding UPM’s CEO”s sworn testimony admitting the conspiracy, the district court granted summary judgment in favor of the defendants. The Second Circuit reversed against SENA holding that a jury should decide the credibility of UPM’s CEO’s testimony. The Second Circuit also held that there was sufficient proof of impact: “the demonstrable existence of an agreement between [the CEOs] to follow price increases announced by competitors, if proven, constitutes strong evidence that the alleged agreement caused at least some element of the subsequent price increases (e.g., amount or effective date), or, at a minimum, the inability of plaintiffs to negotiate below the list price. Furthermore, the causal link is presumed to be particularly strong when, as alleged here, the agreement is between executives at rival companies, each of whom has final pricing authority.”
There was no evidence of SENA’s parent’s involvement and therefore summary judgment in its favor was affirmed.
In any other type of case, I doubt that a court would grant summary judgment in face of a CEO’s admission or obvious evidence of causation and damages. But with so many cases warning against finding the existence of a conspiracy (or causation from price increases) when it is plausible that the defendants acted independently, district courts lean to granting summary judgment even in face of direct evidence. Such decisions would never fly in any other type of case. Fortunately, the Second Circuit made clear that the plausibility of independent action as opposed to a conspiracy is not an appropriate consideration in the face of direct evidence of the agreement (and the subsequent price increase), and applied the standard governed by Rule 56.
Posted by : May 8, 2012| On :
On May 4, 2012, the Kansas Supreme Court held in O’Brien v. Leegin Creative Leather Products, Inc. that resale price maintenance is a per se offense of the Kansas antitrust law. The Kansas statute differs meaningfully (with express prohibitions on agreements involving the pricing of goods) from the general language of § 1 of the Sherman Act (prohibiting only agreements in “restraint of trade”). As noted in earlier Posts, the U.S. Supreme Court’s decision in, Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007), which held that resale price maintenance is subject to the rule of reason under §1 of the Sherman Act, has not been favorably received. Congress has proposed legislative repeal; several state attorneys’ general have obtained consent decrees prohibiting such practices as per se offenses of their state antitrust laws; and Maryland repealed Leegin. It remains to be seen how long Leegin survives. Companies should remain cautious in imposing RPM programs because they may still face substantial liability under state law.