The United States Court of Appeals for the Second Circuit recently held that Major League Baseball’s licensing of team logos was subject to rule of reason review under Section 1 of the Sherman Act. The court affirmed summary judgment in favor of MLB because the appellant did not challenge the licensing program under that rule. Major League Baseball Properties, Inc. v. Salvino, Inc., No. 06-1867 (2d Cir. Sept. 12, 2008) (attached MLB Properties v. Salvino). The baseball clubs give (with a few exceptions) exclusive licensing rights to a single entity. According to the MLB’s expert Frank Fisher (a world renowned economist), this system offers many efficiencies including allowing MLB licensing to compete better with other sports licensing; offering one-stop shopping to licensees; centralized management on matters such as quality control, intellectual property rights enforcement and negotiations and sales to licensees. According to Fisher, these efficiencies should result in lower licensing fees. The appellant had offered an expert report from economist Mr. Louis A. Guth, a Special Consultant for NERA, who disputed these efficiencies and asserted that the MLB licensing entity functioned as a cartel unresponsive to demand. The Second Circuit affirmed the exclusion of Guth’s report under Daubert v. Merrell Dow because (unlike Fischer’s report) it was unsupported by evidentiary citations or empirical analysis. The Second Circuit held that the rule of reason and not the per se rule or “quick look” analysis applied because the “arrangement might plausibly be thought to have a net precompetitive effect, or possibly no effect at all on competition.” Through different reasoning, the Second Circuit in this case reached the same result as the Seventh Circuit did in a challenge to a nearly identical licensing program by the NFL. See American Needle Inc. v. Nat’l Football League, No. 07-4006, 2008 WL 3822782 (7th Cir. Aug. 18, 2008) discussed in the Post of September 4, 2008. In that case, the Seventh Circuit held that the NFL teams were incapable of conspiring with themselves under the Copperweld doctrine in these particular circumstances. In this case, the Second Circuit did not address the Copperweld doctrine, but it did observe that the relevant market should include licenses for other professional sports. Therefore, it would be unlikely for the MLB’s licensing activities to have an effect on competition. This case should prove useful for practitioners for its discussion of when the per se rule, rule of reason or quick look analysis applies, the tests used under these analyses and the pitfalls of an inadequate expert report.
Oct
06
Posted by : | On : October 6, 2008
Sep
18
The Ninth Circuit Affirms Dismissal of Foreigners’ Claim Against DRAM Manufacturers for Price Fixing
Posted by : | On : September 18, 2008
The Ninth Circuit affirmed dismissal of foreigner purchasers’ Section 1 claims against DRAM manufacturers for price-fixing. In re Dynamic Random Access Memory (DRAM) Antitrust Litig., No. 06-15636, 2008 WL 3522419 (9th Cir. Aug. 14, 2008). The plaintiffs alleged that they purchased DRAM abroad at supra-competitive prices due to defendants’ price fixing activities. The only link between the effect on U.S. commerce and plaintiffs’ injuries was that in order for the cartel to be successful, defendants had to fix prices in the U.S. and abroad. Constitent with the many courts that have visited this issue since the Supreme Court’s decision in F. Hoffman-La Roche Ltd. v. Empagran S.A., 542 U.S. 155 (2004), the Ninth Circuit held that such allegations were insufficient to bring plaintiffs’ claims within the “domestic injury” exception to the Foreign Trade Antitrust Improvement Act. That statute excludes “conduct that causes only foreign injury” from the reach of the U.S. antitrust laws. Id. at 158. Judge Noonan’s concurring opinion is particularly interesting as he has explains that the decision is nothing more than a policy choice by “Congress and the Supreme Court that the economic interests of consumers outside the United States are normally not something American law is intended to protect.” As Judge Noonan observes, “[w]e reach this vanishing point not from guidance in words like ‘proximate’ or ‘direct’ but from a strong sense that the protection of consumers in another country is normally the business of that country. Location, not logic, keeps [plaintiff’s] claim out of court.”
Sep
11
Posted by : | On : September 11, 2008
The attorneys general of Virginia, Alabama, Colorado, Florida, Kansas, Nebraska, Oklahoma, Utah and Washington filed an amicus curiae brief in favor of petitioner in Pacific Bell Telephone Co. v. Linkline, No. 07-512, which is pending before the Supreme Court. This case raises the issue of whether a price squeeze claim can be maintained against a firm that does not have a duty to deal with the plaintiff. As discussed in the Post of June 24, 2008, this case created a conflict between the Antitrust Division and FTC. The Antitrust Division filed an amicus curiae brief supporting certiorai and urging reversal while the FTC issued a statement asserting that this case was not appropriate for certiorari and in any event, was correctly decided. The brief (attached States Amicus Curiae Brief) filed by these nine state attorneys general supports the Antitrust Division’s position.
Sep
04
Posted by : | On : September 4, 2008
The United States Court of Appeals for the Seventh Circuit applied the Copperweld doctrine to a sports league for the first time. In so doing, it recently 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. American Needle Inc. v. Nat’l Football League, No. 07-4006, 2008 WL 3822782 (7th Cir. Aug. 18, 2008) (attached American Needle v. NFL). The plaintiff — an unsuccessful bidder — alleged that the collective action by the teams to combine all of their intellectual property rights and create an exclusive license was a conspiracy to prevent other vendors from obtaining licenses to the team names and logos in violation of Section 1 of the Sherman Act. The plaintiff also alleged that the teams monopolized “the NFL team licensing and product wholesale markets” in violation of Section 2 of the Sherman Act. Id. at *2. The Seventh Circuit held that the teams should be treated as a single entity under the Copperweld doctrine. As explained in Wild, et al., “Private Equity Groups Under Common Legal Control Constitute a Single Enterprise Under the Antitrust Laws,” 3 NYU Journal of Law and Business 231, 237 and n.31 (attached under articles above), that doctrine treats two or more firms that are under common ownership or have a unity of interest in a common course of action as a single firm incapable of conspiring or otherwise acting collectively under the antitrust laws. The Seventh Circuit did so because “the teams share a vital economic interest in collectively promoting all of NFL football” (id. at *7) and should be able to cooperate so that the NFL “can compete against other entertainment providers.” Id. at *8.
Aug
20
Posted by : | On : August 20, 2008
The Wall Street Journal reported today that the FTC has informed Electronic Arts and Take-Two Interactive Software that is has no objection to the combination of the companies. As you may recall, on June 4, 2008 the parties agreed to give the FTC an additional 45-days to review the transaction under the HSR Act. The clearance might be too late. EA’s tender offer expired on August 18, 2008. The Wall Street Journal reports, however, that EA is still is exploring ways to acquire Take-Two.
Aug
11
Posted by : | On : August 11, 2008
The United States Court for the District of Columbia affirmed summary judgment dismissing a class action brought by wholesalers of brand name drugs, which alleged that Biovail misused its patent for Tiazac – a hypertension drug – to keep a generic version from the market. Meijer, Inc. v. Biovail Corp., Nos. 05-7066, 05-7069, 06-7118, 2008 WL 2853281 (D.C. Cir. July 25, 2008) (attached Meijer v. Biovail). Plaintiffs claimed that Biovail falsely asserted to the FDA its newly acquired patent protected Tiazac from generic competition. After Andrx – the first-to-file generic manufacturer — advised the FDA that it disagreed with Biovail’s claim, Biovail brought an action for patent infringement action. Under the Hatch-Waxman Act scheme, commencement of the patent infringement action barred Andrx from bringing a generic to market for either 30 months from the date that Andrx certified to the FDA that its generic did not infringe Biovail’s patent or when it prevailed in the litigation. While the litigation was pending, Andrx encountered difficulty sourcing its generic. The D.C. Circuit affirmed summary judgment holding that plaintiffs lacked antitrust injury because they failed to demonstrate but-for Biovail’s conduct, Andrx would have been able to enter the market with its generic. Id. at *6.
Jul
29
Posted by : | On : July 29, 2008
Today, the D.C. Circuit reversed the district court’s decision that denied a preliminary injunction in the Whole Foods/Wild Oats merger. FTC v. Whole Foods Markets, Inc., No. 07-5276 (D.C. Cir. July 29, 2008) (Whole Foods decision). Crucial to the decision was the D.C. Circuit’s holding that the FTC might have been able to establish a submarket consisting of premium natural and organic supermarkets.
The case was remanded to the district court and one of the questions was whether there was some remedy available during the pendency of the FTC administrative proceedings. The D.C. Circuit noted that the FTC complained of adverse effects on competition in only eighteen different local markets. The D.C. Circuit also noted that neither party discussed whether sufficient distribution facilities were available for Wild Oats to remain a viable competitor and if only one Wild Oats store can re-open that would be better than nothing. The D.C. Circuit suggested a hold separate order, which seems to imply that the assets would be carved out and transferred from Whole Foods to a trustee. This begs the question, however, of who would (and could) manage the store(s) independent of Whole Foods.
Ultimately, it seems like Whole Foods can expect to lose the administrative proceedings. If it does, Whole Foods may have to divest stores in these markets. The Supreme Court long ago held that divestiture is the preferred remedy. Neither the courts nor the agencies favor rescission.
Jul
29
Posted by : | On : July 29, 2008
On July 25, 2008, the D.C. Circuit reversed summary judgment in favor of the government that denied appellant’s Freedom of Information Act request. Stolt-Nielsen Transportation Group Ltd. v. United States, Nos. 07-5191, 07-5192 2008 WL 2853214 (D.C. Cir. July 25, 2008) (attached Stolt v. U.S.). The appellant (Stolt-Nielsen) had sought the Antitrust Division’s amnesty agreements with other recipients that were based on the model that the Antitrust Division used in the early days of the program. Stolt limited its request to allow for redaction of the names of companies and individuals from the request. The amnesty program allows the first company or individual that self-reports an antitrust violation to receive immunity from prosecution except in extraordinary circumstances. Congress also has enacted legislation that reduces an amnesty recipient’s exposure from treble to single damages in private antitrust litigation. Thus, amnesty can be invaluable to a company that learns of criminal antitrust misconduct of its officers. The D.C. Circuit reversed the district court that held that the information sought by Stolt was not reasonably segregable because the district court did not make any findings to support its decision. The D.C. Circuit remanded the case for the district court to make findings consistent with its opinion. As you may recall, Stolt had been in litigation over enforcement of its amnesty agreement ultimately prevailing at trial. The Antitrust Division revoked the agreement claiming that Stolt breached it by continuing to violate the antitrust laws after entering into the agreement. The Eastern District of Pennsylvania disagreed and dismissed the indictment. (See Mach 15, 2008 Post, “DOJ’s Antitrust Division (Criminal Section) Suffers Four Major Losses Within the Last Year.”