The Tenth Circuit affirmed summary judgment dismissing a Complaint brought by an owner of a windshield repair shop alleging State Farm’s policy that advises its insureds to replace (rather than repair) windshields with cracks longer than six inches violates Sections 1 and 2 of the Sherman Act and the Colorado Consumer Protection Act. Campfield v. State Farm Mutual Automobile Insurance Co., Nos. 06-1442, 06-1467, 06-1469, 2008 WL 2736656 (10th Cir. July 15, 2008). The Court rejected plaintiff’s Section 1 and 2 claims because he could not establish a relevant product market — a necessary element of both claims. The Court noted that plaintiff alleged State Farm’s misuse of its monopsony power over its insured and therefore the relevant market “is not the market of competing sellers but of competing buyers. This market is comprised of buyers who are seen by sellers as being reasonably good substitutes.” Id. at *4 (citation omitted). Plaintiff alleged a “State Farm insured repairable windshield market, in the geographic area of the United States of America.” Id. The Tenth Circuit rejected this market definition as underinclusive because plaintiff offered no basis why sellers would not view other buyers of repairable windshields as reasonable substitutes. The Tenth Circuit made clear that the rule of reason applied to the Section 1 claim notwithstanding plaintiff’s characterization of State Farm’s conduct as a group boycott. The restraint was vertical in nature and not the classic horizontal group boycott that triggers per se condemnation. The Tenth Circuit rejected the Consumer Protection Act claim because the recommendations to insureds to replace rather than repair windshields were not knowing and intentional concealment or misrepresentations as required under the Act. This opinion is useful for its discussion of limitations on pleading relevant markets as well as the relevant market inquiry in monopsony cases.
Posted by : July 18, 2008| On :
Posted by : May 20, 2008| On :
On May 2, 2008, the Eastern District of Pennsylvania granted class certification in In re Wellbutrin SR Direct Purchaser Antitrust Litig., No. 04-5525, 2008 WL 1946858 (E.D. Penn. May 2, 2008). Plaintiffs claim that GlaxoSmithKline unlawfully extended its monopoly over Wellbutrin SR through fraud on the patent office and sham litigation against potential generic entrants. Defendant argued that a conflict exists among class members because national wholesalers benefit from the lack of generic competition — generic manufacturers often bypass wholesalers. The court rejected this argument because as generic Wellbutrin SR has been available since 2004, no theoretical conflict could still exist. Plaintiffs met the other requirements for class certification. Notably, plaintiffs offered a “colorable method” to prove common impact. Plaintiffs’ expert plans to examine the impact of generic entry on brand name pharmaceuticals through an analysis of public data collected on the dispensation and purchases of prescription drugs. In this case, class certification was straightforward. It can become more difficult when, for example, prices are negotiated on an individual basis. See, e.g., Blades v. Monsanto Co., 400 F.3d 562, 569 (8th Cir. 2005) (denying class certification because, inter alia, “the market for seeds is highly individualized, requiring particularized evidence to determine the competitive price that would have prevailed”).
Posted by : April 24, 2008| On :
Yesterday, the United States Court of Appeals for the D.C. Circuit granted Rambus’ petition for review. This decision was much awaited among antitrust counselors because it represented an attempt by the FTC to extend the antitrust laws to cover deceptive practices directed at standard-setting organizations. After administrative proceedings, the FTC held that Rambus violated Section 2 of the Sherman Act and Section 5 of the Federal Trade Commission Act by concealing to a standard-setting organization that it held patents in a technology which it urged the organization to adopt. Rambus then allegedly used the organization’s adoption of its technology to overcharge for licenses. In rejecting the claim under Section 2, the court explained, “if JEDEC, in the world that would have existed but for Rambus’s deception, would have standardized the very same technologies, Rambus’s alleged deception cannot be said to have had an effect on competition in violation of the antitrust laws; JEDEC’s loss of an opportunity to seek favorable licensing terms is not as such an antitrust harm. Yet the Commission did not reject this as being a possible—perhaps even the more probable—effect of Rambus’s conduct. We hold, therefore, that the Commission failed to demonstrate that Rambus’s conduct was exclusionary, and thus to establish its claim that Rambus unlawfully monopolized the relevant markets.” Rambus Inc. v. FTC, No. 07-1086 at 19 (D.C. Cir. Apr. 22, 2008). With respect to Section 5 of the FTCA, the court also expressed “serious concerns about strength of the evidence relied on to support some of the Commission’s crucial findings regarding the scope of JEDEC’s patent disclosure policies and Rambus’salleged violation of those policies.” Id. Notably, the court did not address whether such conduct would violate Section 5 even if it could not support liability under the Sherman Act. The FTC has recently taken such a position in its action against Negotiated Data in the March 10, 2008 Post. A copy of the slip opinion in Rambus is attached.
Posted by : March 3, 2008| On :
February 13, 2008. The FTC sued Cephalon for exclusionary conduct that is preventing generic competition with its branded drug Provigil. The FTC alleged that Cephalon settled with four different generic manufacturers. These generic manufacturers dropped their patent challenges to Provigil in exchange for cash payments. Under the vagaries of the Hatch-Waxman Act, generic entry is not possible until 180 days after one of these generic manufacturers enters the Provigil — which because their patent challenges have settled, will not be until after Provigil’s patent expires in 2012. The FTC adopted a new litigation strategy in this case. In the past, the FTC challenged these types of settlements in administrative proceedings and claimed that the basis for the “unfair method of competition” was a contract in restraint of trade — a violation of Section 1 of the Sherman Act. However, in FTC v. Schering-Plough, 402 F.3d 1056 (11th Cir. 2005), the FTC’s administrative decision was reversed by the Eleventh Circuit on petition for review. The Eleventh Circuit held that a reverse patent settlement is not by itself a Section 1 violation.The FTC’s current litigation strategy avoids the implication of Schering-Plough in two respects. First, by avoiding administrative proceedings altogether and commencing the action in the United States District Court for the District of Columbia, the FTC avoids review by the 11th Circuit. Second, the FTC is proceeding under a different theory of liability. The alleges that Cephalon willfully maintained its monopoly over Provigil through the patent settlements in violation of Section 2 of the Sherman Act. Accordingly, Schering-Plough — a Section 1 case — is inapposite. The FTC Press Release and Complaint are attached. FTC Press Release (Cephalon), FTC Complaint (Cephalon)
Posted by : February 25, 2008| On :
January 7, 2008. In Kentucky Speedway, LLC v. Nat’l Ass’n of Stock Car Auto Racing, Inc., Civil Action No. 05-138 (WOB), 2008 WL 113987 (E.D.K.y. Jan. 7, 2008), the district court granted summary judgment dismissing plaintiff’s Section 1 and 2 claims. Kentucky Speedway sued because NASCAR refused to sponsor a NEXTEL race at its track. The Court considered it a “jilted distributor” case. It found that Kentucky Speedway failed to come forward with sufficient proof of relevant product market — an essential of element of both its Section 1 and 2 claims. It rejected the proposed relevant markets of a sanctioning market for the NEXTEL race and a hosting market for the same race. It granted NASCAR’s Daubert motion to exclude Kentucky Speedway’s expert because he did no study to determine the cross-elasticity of demand between NEXTEL races and other potential substitutes such as sporting events in general. Rather, Kentucky Speedway’s expert assumed only that a Bush NASCAR race event was a potential substitute.