Eric Schmidt, Google’s CEO, resigned today from Apple’s board of directors because the increased competition between Google and Apple raised conflicts for him that precluded his participation in many of Apple’s business decisions. It is unclear whether his resignation was in response to an inquiry by the FTC into Google’s and Apple’s interlocking directorates first reported on May 5, 2009 by the New York Times. Section 8 of the Clayton Act forbids competitors from having common directors and has been interpreted broadly. Nevertheless, it is a toothless statute that is rarely enforced and imposes no penalties for violations. The offending director must simply resign from one board. In this case, it is unclear whether the FTC has undertaken to enforce the statute as Arthur Levison remains on the boards of Google and Apple. His presence on both boards would seem to violate Section 8. It should be noted, however, that the genuine issue that can arise from interlocking directorates is that it can provide circumstantial proof of a conspiracy in violation of Section 1 of the Sherman Act. If the two firms engage in parallael conduct, for example, plaintiffs might allege that the companies had an opportunity to conspire through the common directors. Thus, antitrust practitioners advise companies to avoid interlocking directorates where meaningful competition between the two companies exists.
Aug
03
Posted by : | On : August 3, 2009
Jun
29
Posted by : | On : June 29, 2009
The Supreme Court granted certiorari to review American Needle Inc. v. Nat’l Football League, No. 07-4006, 2008 WL 3822782 (7th Cir. Aug. 18, 2008). As explained in the September 4, 2008 Post, that case applied the Copperweld doctrine to a sports league for the first time. In so doing, it affirmed summary judgment in favor of the NFL, its teams and Reebok in an antitrust challenge to an exclusive license of team names and logos to Reebok for use on headwear. (The decision is linked to the September 4 Post). This case’s journey to the Supreme Court was unusual. As explained in the February 24, 2009 Post, the NFL — the prevailing party — also sought review because it wanted an authoritative decision on the scope of its antitrust liability for league activity. And the Supreme Court requested the Solicitor General’s view about whether to grant certiorari. The Supreme Court ultimately disagreed with the Solicitor General’s view and granted certiorari.
May
15
Posted by : | On : May 15, 2009
On April 27, 2009, a district judge ruled in favor of a Robinson-Patman Act plaintiff and granted injunctive relief. Feesers, Inc. v. Michael Foods, Inc., 2009 WL 1138126 (M.D. Penn. Apr. 27, 2009). On remand after the Third Circuit (498 F.3d 206 (3d Cir. 2007)) reversed summary judgment in favor of the defendants Michael Foods (the seller) and Sodexho (the favored purchaser), the district court held after trial that plaintiff demonstrated competitive injury because it competed with Sodexho for the same institutional customers and that Sodexho received prices that were “massive[ly]” lower than plaintiffs. The court rejected defendants’ meeting competition defense because Sodexho never provide Michael Foods with competing offers nor did Michael Foods investigate the same. The court also held Sodexho liable for knowingly inducing price discrimination. This case should remind practitioners that the Robinson-Patman Act is alive and well. Clients should exercise caution before offering discounts to competing customers and carefully document the basis for their meeting competition defense.
May
04
Posted by : | On : May 4, 2009
Maryland has amended its antitrust law to make resale price maintenance agreements per se illegal, thus overruling Leegin Creative Leather Products v. PSKS, 127 S.Ct. 2705 (2007). In Leegin, the Supreme Court overruled Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U. S. 373 (1911), and held that a resale price maintenance agreement in which the manufacturer requires a reseller to sell at a certain price is no longer a per se violation of Section 1 of the Sherman Act but instead is subject to rule of reason analysis. Application of the rule of reason creates a burden on plaintiffs because they have to show that the restraint had an adverse effect on the relevant market and not just the price of the manufacturer’s goods that were subject to restraint. This abrupt change in the law has been poorly received by state antitrust authorities. As reported in the May 23, 2008 Post, 35 state attorneys general petitioned Congress to amend the Sherman Act to overrule Leegin. And as reported in the March 31, 2009 Post, the state attorneys general of New York, Illinois and Michigan obtained a consent decree against Herman Miller in the United States District Court for the Southern District of New York for resale price maintenance involving the Aeron chair. Their position was that their state antitrust law do not recognize the departure by Leegin and still provide that resale price maintenance is a per se offense.
Mar
08
Posted by : | On : March 8, 2009
As examined in the February 17, 2009 Post, there have been a number of recent appeallte decisions reviewing successful Noerr-Pennington immunity defense assertions. Alternative Electrodes, LLC v. EPMI, Inc., No. 08-CV-1247 (JFB)(ETB), 2009 WL 250474 (E.D.N.Y. Feb. 4, 2009), provides a recent illustration of the allegations necessary to defeat that defense.
In that case, plaintiff, a medical device manufacturer, claims that its competitor filed sham patent litigation against it and other competitors and made false statements about the patent litigation to plaintiff’s customers to allow it to monopolize (or gain a dangerous probability of monopolizing) the market for electrical muscle stimulation devices used to treat difficulty swallowing. Plaintiff alleged, among other things, “from the beginning of the patent litigation that the primary, if not sole purpose, of instigating suit was to advise customers of the pending (but meritless) litigation and attempt to drive [plaintiff] from the market. The litigation was objectively unreasonable and was initiated in order to interfere directly with [plaintiff’s] business relationships and activities. … The sham patent suit strategy failed. Recognizing the frivolity of the claim in light of prior art, these Defendants completely dismissed their suit … without any penalty or payment of any kind.” Id. at *7. The Court held that “such allegations are sufficient to withstand a motion to dismiss” based on the Noerr-Pennington immunity defense because “Plaintiff alleges that the litigation was both subjectively and objectively baseless and plausibly supports this claim with the assertion that there could be no valid patent claim due to the existence of ‘prior art.’” Id.
Feb
26
Posted by : | On : February 26, 2009
Yesterday, the Supreme Court in Pacific Bell Telephone Co. v. Linkline Communications, Inc., No. 07-512 (Feb. 25, 2009) (LinkLine decision here) unanimously rejected a price squeeze claim alleged under Section 2 of the Sherman Act. Pac Bell is a DSL transport service and retail service provided. Linkline, an independent DSL service provider, competed with Pac Bell on the retail level but needed to purchase Pac Bell’s transport service to provide DSL to its retail customers. Linkline alleged that Pac Bell engaged in a price squeeze by charging Linkline too high a wholesale price for DSL transport service and charging its retail customers too low a price on DSL service. The Court rejected this claim because (1) Pac Bell had no obligation to deal with Linkline and thus the prices it charged to Linkline are of no consequence and (2) Pac Bell was not alleged to have engaged in predatory pricing at the retail level — i.e., charging prices below cost with a dangerous probability that it can raise its prices later and recoup its losses. Chief Justice Roberts aptly summarized the Court’s rationale, “Trinko holds that a defendant with no antitrust duty to deal with its rivals has no duty to deal under terms and conditions preferred by those rivals. Brooke Group hold that low prices are only actionable under the Sherman Act when prices are below cost and there is a dangerous probability that the predator will be able to recoup the profits it loses from low prices. In this case, plaintiffs have not stated a duty-to-deal claim under Trinko or a predatory pricing claim under Brooke Group. They nontheless tried to join a wholesale claim that cannot succeed with a retail claim that cannot succeed and alchemize them into a new form of antitrust liability never before recognized by this Court. We decline the invitation to recognize such claims. Two wrong claims do not make one that is right.”
The background to this case is unusual. The June 3, 2008 Post reported a rare disagreement between the DOJ’s Antitrust Division and FTC over whether to grant certiorari. The Antitrust Division filed a brief supporting certiorari (which the FTC declined to join) and the FTC issued a statement explaining why certiorari should be denied. It also seems as if the Supreme Court reached out to decide this case as Linkline argued that it abandoned its price squeeze claim and wanted to pursue a predatory pricing claim under Brooke Group. The Court rejected the mootness argument and believed that the issues were adequately explored to make a reasoned decision based on the amici’s submissions.
Feb
24
Posted by : | On : February 24, 2009
The September 4, 2008 Post examined a recent Seventh Circuit decision that held that the NFL was immune under the antitrust laws for its exclusive licensing of team logos on headwear to Reebok. American Needle Inc. v. Nat’l Football League, No. 07-4006, 2008 WL 3822782 (7th Cir. Aug. 18, 2008). The Supreme Court has just expressed an interest in reviewing the case. It has “invited” the Solicitor General to “file briefs expressing the views of the United States.” This case is also unusual because both parties sought Supreme Court review. Although it won below, the NFL sought Supreme Court review so that its potential antitrust liability for league activity will no longer depend on which Circuit it is sued.
Feb
23
Posted by : | On : February 23, 2009
On February 18, 2009, the United States Court of Appeals for the Tenth Circuit affirmed dismissal of a complaint filed by a ski rental store against the Deer Valley, Utah ski resort operator with its own ski rental operation alleging monopolization and attempted monopolization in violation of Section 2 of the Sherman Act. Christy Sports LLC v. Deer Valley Resort Co., Ltd., No. 07-4198 (10th Cir. Feb. 18, 2009) (Christy Sports v. Deer Valley Resort Decision). Plaintiff had sought to prevent enforcement of a restrictive covenant governing its use of property sold by the ski resort operator. When the ski resort operator sold the parcel of land on which the ski rental store operates, it imposed a restrictive covenant in the deed only permitting the operation of a ski rental business with its permission. For years, the ski resort operator permitted plaintiff to operate accepting a share of the profits in return. Preferring to capture that business in the future, the ski resort operator sought to enforce the restrictive covenant and put the ski rental store out of business. The Tenth Circuit rejected plaintiff’s claims under Section 2 of the Sherman Act for two independent reasons. First, the Court rejected plaintiff’s relevant product market definition of ski rental stores. Rather the Court held that the relevant market was the skiing experience. It reasoned that skiers do not come to the area to rent skis and that ski rentals are just one component of the skiing experience that they seek. It should be of no consequence that the ski resort operator charges more for ski rentals and as a consequence, less for e.g., lift tickets. Second, the Court held that there were no allegations of anticompetitive conduct. The antitrust laws do not forbid a business from imposing a restrictive covenant on a neighboring parcel of land to avoid competition and justify its investment in entry. Accordingly, nothing precludes the enforcement of an otherwise permissible restrictive covenant.