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.

 

Oct

06

Posted by : Matthew Wild | On : October 6, 2011

On October 3, 2011, the Ninth Circuit held that parens patriae actions commenced by state attorneys general are not “class actions” under the Class Action Fairness Act (“CAFA”) and, therefore, could not be removed from federal to state court under the CAFA removal provisions.  Washington v. Chimei Innolux Corp., No. 11–16862, 2011 WL 4543086 (9th Cir. Oct. 3, 2011).  The California and Washington attorneys general commenced actions under state law in their respective state courts to recover damages for their citizens as a result of price fixing among LCD manufacturers.  These actions are based on the same allegations in MDL No. 1827.  Defendants removed them asserting jurisdiction under CAFA.  CAFA creates subject matter jurisdiction and authorizes removal in a class action where there is minimal diversity of citizenship between a defendant and one named or unnamed putative class member and the amount sought by the class exceeds $5,000,000.  Defendants argued that a parens patriae action is just like a class action and the CAFA removal provision should thus apply.  Joining the Fourth Circuit, West Virginia ex rel. McGraw v. CVS Pharm., Inc., 646 F.3d 169 (4th Cir.2011), the Ninth Circuit held that the language of CAFA does not permit treating parens patriae actions as class actions.  It then affirmed the district court’s remand orders.

Sep

15

Posted by : Matthew Wild | On : September 15, 2011

In antitrust litigation, defendants routinely resist discovery pending a motion to dismiss.  They rely on Bell Atlantic Corp. v. Twombly, arguing that they should not be put through the expense of discovery until the Court decides whether the claims are plausible.  On September 8, 2011, the United States District for the District of Colorado rejected such tactics.  SOLIDFX, LLC v. Jeppesen Sanderson, Inc., 11-CV-01468-WJM-BNB, 2011 WL 4018207 (D. Colo. Sept. 8, 2011).  The Court held that Twombly “does not erect an automatic, blanket prohibition on any and all discovery before an antitrust plaintiff’s complaint survives a motion to dismiss.”  (citation omitted).  It explained that “[w]hen the discovery would not be so burdensome, a closer question is presented, a question calling for the exercise of discretion and the balancing of competing factors.” (citation omitted).  The Court noted that “[a] party seeking a protective order under Rule 26(c) has the burden of demonstrating good cause and cannot sustain that burden simply by offering conclusory statements.  Accordingly, the party moving for a protective order must make a particular and specific demonstration of fact in support of its request.”  The Court denied the stay because the defendant did not make a factual showing of burden.

Plaintiffs would be well advised to press for at least targeted discovery, such as documents produced in government investigations.  To extent that no genuine burden exists, such discovery should be obtainable pending a motion to dismiss regardless of its strength.

Sep

13

Posted by : Matthew Wild | On : September 13, 2011

On September 6, 2011, the United States District Court for the Eastern District of New York denied summary judgment for vitamin C manufacturers in In re Vitamin C Antitrust Litig., MDL No. 1738 (Decision (Vit C)).   The Court rejected defendants’ act of state defense under which defendants claimed immunity contending that Chinese law required them to fix prices.

The Chinese government provided support for defendants, by providing a statement that the scheme was required by the Chinese legal system (the Chamber also filed an amicus brief).  The Court disagreed – what at first glance appears surprising is explained by the fact that the Chinese government did not explain many aspects of the law and was vague on other aspects.

The Court acknowledged that trying to apply some foreign legal systems to U.S. law is akin to fitting a round peg in a square hole.  For example, experts explained to the Court that “law” in China is not based so much on the written law, but rather a mix of law (as we understand it) and voluntary behavior.

After analyzing these cultural differences, the Court found that the Chinese legal and regulatory system was not sufficiently concrete to justify a finding that the otherwise illegal (within the U.S. Court’s jurisdiction) behavior was required by the Chinese law.  Thus, while the behavior was legal under the Chinese system, it was not required.  The lack of a requirement to comply with a law was, inter alia, fatal to the defendants.  The Court was unconvinced of compulsion because the statement of Chinese law read like a litigation position and the Chinese government had made contrary representations to the WTO.

There are a number of other noteworthy  issues.  The Court refused to defer to the Chinese government’s evidence on the Chinese law. The Court did not need to set a standard of deference; so it did not so.  The jurisprudence is still uncertain on the level of deference to be afforded a foreign government’s statements of foreign law.  The Court took notice of a WTO Panel decision (July 5, 2011, not yet (and, may not be) appealed to the Appellate Body), which neither of the parties had made reference.  The Court also did not examine the level of deference to a WTO Member’s statements that the WTO affords – both during accession negotiations and at a Panel hearing.  The Court appeared to take the findings of the WTO Panel at face value, and not subject it to a factual analysis.  This is particularly interesting because at the WTO the U.S.’s position is that Panel and Appellate Body decisions are not “law.”

As an aside, the U.S. recognized China’s market economy status in 2010.

This post was co-authored by Adrian Render.

Jan

19

Posted by : Matthew Wild | On : January 19, 2011

On January 11, 2011, Bioelements and the California Attorney General entered into a consent decree that enjoins Bioelements from entering into any agreements with retailers and distributors concerning what price they may charge for Bioelements’ products and to send notice to all retailers and distributors that any such polices are immediately rescinded.  The action was brought in California Superior Court under the Cartwright Act, which the California Attorney General has interpreted to provide per se treatment for resale price maintenance in contrast to Section 1 of the Sherman Act after Leegin.  See March 12, 2010 Post.  Notably, the injunction extends to all of Biolelements’ transactions even if they take place outside of California.  Bioelements also had to pay $51,000 in fines and expenses.  This action is a cautionary tale that companies cannot rely on Leegin that resale price maintenance will be subject to lenient rule of reason treatment.  A number of state attorneys general have brought resale price maintenance actions under their state laws and Maryland amended its antitrust law expressly to prohibit resale price maintenance.

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.

Jan

05

Posted by : Matthew Wild | On : January 5, 2011

On December 21, 2010, the United States District Court for the Northern District of California in Pecover v. Electronic Arts, Inc., No. 08-cv-02820-VRW, Dkt. #198 (N.D. Cal. Dec. 21, 2010), certified a nationwide class of consumers, who purchased Madden NFL, NCAA or Arena Football since January 1, 2005.  The suit alleges that that EA’s exclusive license agreements violated the Cartwright Act.  The case is important for two distinct reasons.  First, the Court held that California law applied to all claims regardless of where the consumers purchased the products because of EA’s nexus to California.  This is a tremendous development because it allows for a nationwide class based on a single state law and therefore eliminates conflict between different state laws, which is often a barrier to certification of nationwide class actions.  Second, the Court held that the consumers provided a model that would show that they suffered common impact and therefore satisfied the predominance requirement for class certification — which can be a difficult element to satisfy.  The decision appears here.  ea class cert

Jul

07

Posted by : Matthew Wild | On : July 7, 2010

On July 3, 2010, the Justice Yates (the trial judge) overturned his decision after a bench trial convicting William Gilman and Edward McNenny of violating the Donnolly Act (New York’s antitrust statute) for rigging bids on insurance contracts.  According to the New York Times, he did so based on “newly discovered contradictory statements made by witnesses who cooperated with prosecutors, and the suppression of documents that would have been ‘invaluable’ to the defense.”  Gilman and McNenny are the only Marsh executives that were convicted after a trial.  As reported in earlier posts, Marsh paid an $850 million civil penalty and was not prosecuted.  One former Marsh executive pleaded guilty and others had their cases voluntarily dismissed by the government or were acquitted after a bench trial.

Mar

31

Posted by : Matthew Wild | On : March 31, 2010

The Supreme Court held today that district courts must follow Fed.R.Civ. 23 in class actions alleging violations of state law even though the state statute prohibits prosecution of the claim as a class action.  In Shady Grove Orthopedic Assoc. v. Allstate Insurance Co., No. 08-1008, 2010 WL 1222272 (Mar. 31, 2010), the Court held that Rule 23 trumps NY CPLR 901(b), which prohibits class actions under New York statutes authorizing a claim for statutory or multiple damages.  That statute has barred claims under New York’s antitrust statute (the Donnelly Act) as well its Deceptive Trade Practices Act.  Numerous state consumer protection statutes likewise have prohibitions on class actions.  Shady Grove breathes life into class actions in federal court under those statutes.

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.