Jul

11

Posted by : Matthew Wild | On : July 11, 2013

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.

Author: Matthew S. Wild, Wild Law Group PLLC

Jul

10

Posted by : Matthew Wild | On : July 10, 2013

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.

Author: Matthew S. Wild, Wild Law Group PLLC

Mar

18

Posted by : Matthew Wild | On : March 18, 2013

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.

Author: Matthew S. Wild, Wild Law Group PLLC

Aug

09

Posted by : Matthew Wild | On : August 9, 2012

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.

Author: Matthew Wild, Wild Law Group PLLC

Apr

11

Posted by : Matthew Wild | On : April 11, 2012

Today, the Antitrust Division sued Apple and a number of publishers for price fixing e-books.  The government alleges that Apple and the publishers agreed to use Apple as their agent – paying Apple a commission and allowing Apple to set the prices.  Apple set the prices at $9.99 with the support of the publishers.  The government alleges that this conduct constitutes price-fixing and is a per se violation of § 1 of the Sherman Act.  The action was brought in the United States District Court for the Southern District of New York where a related multi-district litigation class action is pending, brought  by direct purchasers.  Today, the government also filed a motion for approval of a settlement with three other publishers.  In addition to important reporting requirements, the proposed final judgment provides that “[f]or two years, Settling Defendants shall not restrict, limit, or impede an E-book Retailer’s ability to set, alter, or reduce the Retail Price of any E-book or to offer price discounts or any other form of promotions to encourage consumers to Purchase one or more E-books.”

The E-Books Complaint and E-Books Settlement are available here.

 

Jan

14

Posted by : Matthew Wild | On : January 14, 2011

The Seventh Circuit accepted an interlocutory appeal on a certified question arising from the district court’s denial of a motion to dismiss the second amended complaint in In re Text Messaging Antitrust Litig., No.10-8037, 2010 WL 5367383 (7th Cir. Dec. 29, 2010).  Judge Posner held that the sufficiency of a complaint’s allegations to state a claim was a controlling question of law within the meaning of 28 U.S.C. section 1292(b).  Judge Posner then affirmed the denial of the motion to dismiss because:

“The second amended complaint alleges a mixture of parallel behaviors, details of industry structure, and industry practices, that facilitate collusion. There is nothing incongruous about such a mixture. If parties agree to fix prices, one expects that as a result they will not compete in price-that’s the purpose of price fixing. Parallel behavior of a sort anomalous in a competitive market is thus a symptom of price fixing, though standing alone it is not proof of it; and an industry structure that facilitates collusion constitutes supporting evidence of collusion. An accusation that the thousands of children who set up makeshift lemonade stands all over the country on hot summer days were fixing prices would be laughed out of court because the retail sale of lemonade from lemonade stands constitutes so dispersed and heterogeneous and uncommercial a market as to make a nationwide conspiracy of the sellers utterly implausible. But the complaint in this case alleges that the four defendants sell 90 percent of U.S. text messaging services, and it would not be difficult for such a small group to agree on prices and to be able to detect “cheating” (underselling the agreed price by a member of the group) without having to create elaborate mechanisms, such as an exclusive sales agency, that could not escape discovery by the antitrust authorities.

Of note is the allegation in the complaint that the defendants belonged to a trade association and exchanged price information directly at association meetings. This allegation identifies a practice, not illegal in itself, that facilitates price fixing that would be difficult for the authorities to detect. The complaint further alleges that the defendants, along with two other large sellers of text messaging services, constituted and met with each other in an elite “leadership council” within the association-and the leadership council’s stated mission was to urge its members to substitute “co-opetition” for competition.

The complaint also alleges that in the face of steeply falling costs, the defendants increased their prices. This is anomalous behavior because falling costs increase a seller’s profit margin at the existing price, motivating him, in the absence of agreement, to reduce his price slightly in order to take business from his competitors, and certainly not to increase his price. And there is more: there is an allegation that all at once the defendants changed their pricing structures, which were heterogeneous and complex, to a uniform pricing structure, and then simultaneously jacked up their prices by a third. The change in the industry’s pricing structure was so rapid, the complaint suggests, that it could not have been accomplished without agreement on the details of the new structure, the timing of its adoption, and the specific uniform price increase that would ensue on its adoption.”

As this case indicates, Twombly should not be overly difficult to satisfy even in the absence of a governmental investigation to support the conspiracy allegations.  It is also noteworthy that the although the court entertained an interlocutory appeal by permission, such an approach is the exception, not the rule.  Indeed, even in this case, the court expedited the appeal by not accepting additional briefing and not hearing oral argument.

Mar

12

Posted by : Matthew Wild | On : March 12, 2010

On February 23, 2010, the California Attorney General entered into a consent decree with Dermaquest, Inc., which prohibits Dermaquest from engaging in resale price maintenance.  Specifically, the order enjoins Dermaquest from requiring resellers to charge a specified price or to increase their prices.  The action was brought under the Cartwright Act and the Unfair Competition Law.  California now joins Illinois, New York and Michigan (see March 31, 2008 Post) in treating resale price maintenance as a per se offense in violation of its state antitrust law even though such conduct is subject to rule of reason review under section 1 of the Sherman Act after Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007).  This case reinforces the dangers to a manufacture when it implements a resale price maintenance program under the belief that because such conduct might be permissible under the Sherman Act, there is no genuine exposure.  The California complaint and consent decree appear here:Dermaquest Complaint  and Dermaquest Judgment.

Dec

09

Posted by : Matthew Wild | On : December 9, 2009

On November 25, 2009, the court in In re Static Random Access Memory Antitrust Litig., No. C 07-01819 CW, 2009 WL 4263524 (N.D. Cal. Nov. 25, 2009), certified 28 indirect purchaser classes – one nationwide class for injunctive relief under section 16 of the Clayton Act and 27 separate indirect purchaser damages classes under the laws of Arizona, Arkansas, California, Florida, Hawaii, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Mexico, New York, North Carolina, North Dakota, Pennsylvania, Rhode Island, South Dakota, Tennessee, Utah, Washington, West Virginia, Wisconsin, Puerto Rico and the District of Columbia.
Injunction: the court certified the class under Rule 23(b)(2). It rejected the standing challenge holding “Plaintiffs have alleged sufficient facts to establish Article III standing for their nation-wide injunctive relief class. IP Plaintiffs allege that Defendants and their co-conspirators entered into a continuing conspiracy in restraint of trade artificially to raise prices for SRAM in the United States. They further allege that these market-wide overcharges were then passed through the chains of distribution, and that they were injured by paying supra-competitive prices when they indirectly purchased Defendants’ products.” The court also rejected defendants’ argument “because IP Plaintiffs seek to certify a nation-wide injunctive class from November 1, 1996 through December 31, 2006, they have impliedly alleged that the conspiracy ended in 2006. However, a finite proposed class period does not defeat certification of a class under Rule 23(b)(2). See, e.g., Jaffe v. Morgan Stanley & Co., 2008 WL 346417, at *3 (N.D.Cal.) (certifying injunctive-relief class for settlement affecting persons employed by the defendants “at any time between October 12, 2002 and December 3, 2007). Further, IP Plaintiffs allege that the same market conditions that facilitated the conspiracy from 1996 to 2006 continue today. They allege that Defendants’ price-fixing resulted from a systematic, repeated pattern of sharing sensitive competitive information which was greatly facilitated by the cross-competitor business relationships that still exist. Thus, there is alleged a significant risk that the conspiracy will persist or reform in the future.”
Individual state damages classes: the court certified 27 different classes based on individual state law. The court rejected “Defendants[’] … concern[] that [it] will be unable to manage state-law claims from twenty-seven state classes” holding “there is no qualitative difference between a federal district court considering class certification of state claims under that state law and a federal court serving as a multi-district litigation forum performing the same task for many federal courts. Moreover, courts frequently certify classes under the laws of multiple jurisdictions. See, e.g., Norvir Anti-Trust Litig., 2007 WL 1689899, at *8 (N.D.Cal.) (certifying class under the common law of forty-eight states); In re Pharm. Indus. Average Wholesale Price Litig., 233 F.R.D. 229, 230-31 (D.Mass.2006) (certifying multi-state defendant subclasses under the consumer protection laws of forty-one states).” In holding that the individual issues predominated over the individual issues, the court held that “there [wa]s a reasonable method for determining on a class-wide basis whether and to what extent that overcharge was passed on to each of the IP Plaintiffs at all levels of the distribution chain.”
Experts: the court rejected each parties’ challenge to the other parties’ expert holding that the appropriate standard is “whether the expert evidence is sufficiently probative to be useful in evaluating whether class certification requirements have been met.” The court made short shrift of the challenges holding “Although each side presents myriad valid challenges to the other’s expert, the Court concludes that these challenges are of the type that go to the weight of the evidence, not the admissibility. … The parties’ motions to exclude reflect disagreement with the opposing parties’ position; however, this disagreement does not warrant exclusion.”

Oct

29

Posted by : Matthew Wild | On : October 29, 2009

In letters dated October 27, 2009 (State AG Letter re HR 3190; State AG Letter re S 148), 41 state attorneys general wrote to Congress asking them to overrule Leegin Creative Leather Product, Inc. v. PSKS, Inc., 551 U.S. 877 (2007).  In Leegin, the Supreme Court held that resale price maintenance — the practice in which a manufacturer requires a retailer to sell its products at a certain price — was subject to the rule of reason.  In doing so, the Court overruled Dr. Miles Medical Co. v. John D. Park & Sons, Co., 220 U.S. 373 (1911), which held that resale maintenance is a per se violation of section 1 of the Sherman Act.  The state attorneys general urge passage of H.R. 3190, which provides that “[a]ny contract, combination, conspiracy or agreement setting a minimum price below which a product or service cannot be sold by a retailer, wholesaler or distributor shall violate section 1 of the Sherman Act.”  As reported in the May 23, 2008 Post, 35 state attorneys general wrote to Congress on May 8, 2008 asking that it enact nearly identical legislation (S. 2261).

Practitioners should know that resale price maintenance can still be a per se violation of state antitrust laws.  As reported in the May 4, 2009 Post, Maryland enacted such a law.  And as reported in the March 31, 2008 Post, the New York, Michigan and Illinois attorneys general brought an action against Herman Miller in which they alleged that Herman Miller’s resale price maintenance program was a per se violation of their state antitrust laws.  Herman Miller entered into a consent decree.

Oct

13

Posted by : Matthew Wild | On : October 13, 2009

Google announced today that Arthur D. Levinson resigned from its board of directors.  However, Mr. Levinson remains on Apple’s board of directors.  Mr. Levinson was the remaining common director on the Google and Apple boards.  As reported in the June 3, 2009 Post, Eric D. Schmidt, Google’s CEO, resigned from Apple’s board amid antitrust concerns raised by the FTC.  The June 3 Post noted that it was unclear whether the FTC would require Mr. Levinson’s resignation from one of the boards.  Apparently, the FTC did just that as FTC Chariman Jon Leibowitz said, “Google, Apple and Mr. Levinson should be commended for recognizing that overlapping board members between competing companies raise serious antitrust issues, and for their willingness to resolve our concerns without the need for litigation.”  Chairman Leibowitz further warned, “[b]eyond this matter, we will continue to monitor companies that share board members and take enforcement actions where appropriate.”  It seems that the FTC is warning corporations that it plans to take an increased interest in enforcing section 8 of the Clayton Act, which prohibits interlocking directorates among competitors under some circumstances.  That statute has not been enforced with much frequency.  Nevertheless, antitrust practitioner always have to be concerned that the existence of common directors could be used as evidence of a conspiracy between the two corporations in violation of the Sherman Act because it provides an opportunity to conspire.  Accordingly, antitrust practitioners know to advise against such overlaps among corporations vulnerable to Sherman Act litigation without regard to section 8 of the Clayton Act.