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.”
Dec
09
Posted by : | On : December 9, 2009
Oct
13
Posted by : | 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.
Aug
03
Posted by : | On : August 3, 2009
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.
Jan
13
Posted by : | On : January 13, 2009
On January 12, 2009, the FTC sought a hold separate order against Whole Foods on remand from the D.C. Circuit’s reversal of the lower court’s denial of a preliminary injunction. During the pendency of its administrative proceeding, the FTC seeks an order that enjoins Whole Foods from further integration of Wild Oats’ assets, rebranding of former Wild Oats stores and appointment of an independent trustee and management team to run the former Wild Oats stores. (Whole Foods Remand) It is questionable whether such relief would be effective to restore competition if for example, Wild Oats lost key employees, a loyal customer base and a distribution network. Prior coverage of the Whole Foods litigation appears on the July 29, 2008, December 1, 2008 and December 11, 2008 Posts. This remand proposal is likely to spark Whole Foods to seek expedited relief in its lawsuit against the FTC challenging the fairness and integrity of the FTC’s administrative process. (See December 11, 2008 Post) On December 12, 2008, the FTC has moved to dismiss the Complaint in that action contending that only a U.S. Court of Appeals has subject matter jurisdiction because Congress only granted those courts the power to review the FTC’s actions. (FTC Motion to Dismiss)
Dec
11
Posted by : | On : December 11, 2008
On December 8, 2008, Whole Foods brought an action in federal court claiming that the FTC’s administrative process is unconstitutional as applied to it. (Whole Foods Complaint) Whole Foods claims that the FTC has prejudged the FTC’s challenge to its merger with Wild Oats. Whole Foods also claims that the Scheduling Order entered in the administrative proceedings is so expedited that it is impossible for it to complete discovery and be ready for trial and therefore represents a denial of due process. Whole Foods seeks to have the FTC’s challenge heard in federal court and bypass the administrative process. One would think that Whole Foods is ensured of due process because it can file a petition for review of an adverse administrative decision before any United States Court of Appeals and if it was denied due process, the administrative decision would be vacated. This is the latest saga in the Whole Foods litigation. While Whole Foods defeated the FTC’s federal court action for a preliminary injunction in aid of the administrative process to enjoin consummation of the merger, the D.C. Circuit reversed. The transaction had closed but the D.C. Circuit remanded to the action to the district court to inquire whether there was any way to restore competition notwithstanding consummation. After Whole Foods sought reharing en banc, the original panel amended its decision to make it on behalf of a single judge with one judge concurring in the result and the other judge dissenting. This effectively mooted any need for en banc review because there was no decision of the Court which would have been binding on future panels. See Posts of December 1 and July 29, 2008 for more coverage of FTC v. Whole Foods.
Dec
01
Posted by : | On : December 1, 2008
On November 21, 2008, the United States Court of Appeals for the D.C. Circuit denied rehearing and rehearing en banc in FTC v. Whole Foods with Judge Kavanaugh dissenting. Judge Kavanaugh had dissenting in the original decision. The original opinion is linked to the July 29, 2008 Post, which also analyzes it. On November 21, the court also issued a revised and amended decision. The revision and amended decision is particularly interesting because it clarifies that Judge Tatel concurred only in the judgment and not in Judge Brown’s opinion. (Whole Food’s Amended Decision ) As a result, it has become clear that Judge Brown’s opinion has no binding affect on the rest of the Court. Judges Ginsburg and Sentelle voted against rehearing en banc “because, there being no opinion for the Court, that judgment sets no precedent beyond the precise facts of this case. See King v. Palmer, 950 F.2d 771, 783 (D.C. Cir. 1991) (en banc) (‘without implicit agreement’ among a majority of the judges ‘we are left without a controlling opinion’).” (Whole Food’s Rehearing Denial)
Nov
30
Posted by : | On : November 30, 2008
On November 25, 2008, the FTC issued an administrative complaint challenging the proposed merger between CCC Information Services and Mitchell International. The FTC alleges that “the merger would hinder competition in the market for electronic systems used to estimate the cost of collision repairs, known as “estimatics,” and the market for software systems used to value passenger vehicles that have been totaled, known as total loss valuation (TLV) systems. The FTC’s administrative complaint alleges that the merger, which is valued at $1.4 billion, would harm insurers, repair shops and, ultimately, U.S. car owners by reducing from three to two the number of competitors in the two related businesses.” FTC CCC-Mitchell Press Release The FTC claims that with the existence of high barriers to entry, the merger would allow the combined firm to raise prices to its customers unilaterally as well as allow the remaining two firms to collude and raise prices. Absent extraordinary circumstances, the agencies will challenge mergers to duopoly. The posture of this challenge is interesting. The FTC issued the administrative complaint and approved commencement of action in federal court to seek a temporary restraining order and preliminary injunction but has not commenced such an action. The parties must have consented to delay closing or the HSR waiting must not have yet expired. These actions are usually brought at the very end of the waiting period and parties do not routinely consent to delay their mergers. It would be interesting to know what happened here.
Nov
03
Posted by : | On : November 3, 2008
It appears that in United States v. JBS, S.A., the government is using the same tactics that it did in United States v. UPM-Kymmene Oyj — both of which were brought in the United States District Court for the Northern District of Illinois. The government is hoping to kill the deal by trying to delay the case and seeking to avoid a consolidated trial on the merits with a preliminary injunction hearing. If the preliminary injunction hearing is not consolidated, the government can prevail by only showing that there is a serious question going to the merits rather than by a preponderance of evidence. This approach will allow the government to avoid proving its case at trial because as the parties have made clear, a preliminary injunction will kill the deal. They will not wait for a trial at a later date.
UPM was successful in obtaining a prompt preliminary injunction hearing because UPM was not required to consent to an extension of the temporary restraining order. Notwithstanding that Section 15 of the Clayton Act and the legislative history of the HSR Act support a prompt consolidated trial on the merits as the Clayton Act directs that “the trial shal be as soon as may be” and the HSR Act was enacted to “promote the legitimate interests of business community” as well as the nearly uniform line of cases that consolidated such proceedings, the UPM Court did not do so. As the parties had promised, they abandoned the merger after the preliminary injunction was granted. Thus, UPM further supports the proposition that consolidation is the most practical approach because as numerous courts have observed, a preliminary injunction will kill the deal.
It is regrettable that the government chooses to engage in these tactics rather than allow a court to decide the merits.
Oct
24
Posted by : | On : October 24, 2008
On October 20, 2008, the Antitrust Division, Colorado, Iowa, Kansas, Minnesota, Missouri, Montana, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Texas and Wyoming sued to enjoin JBS Beef’s acquisition of National Beef Packing in the United States District Court for the Northern District of Illinois. (Beef Complaint; Beef Press Release) The government alleges that the merger would combine the third and fourth largest U.S. beef packers, which would result in lower prices for cattle and higher prices for beef consumers. This action is interesting in two respects. First, one of the theories of competitive harm is that the beef packers will gain monopsony power. While the monopsony theory is well established and has been pursued in Antitrust Division challenges to mergers (e.g., Cargill’s acquisition of Continental Grain’s Commodity Marketing Group), some academics reject it because it is inconsistent with the monopsonist’s economic interest to drive prices so low that suppliers exit. Second, although venue and personal jurisdiction were available in any district where the companies did business, the government chose the Chicago as its forum. It likely did so because it has received favorable treatment there in the past and Seventh Circuit cases are favorable to merger challenges. For example, the government prevailed in United States v. UPM Kymmene Oyj (a case in which this author was trial counsel) even though the government’s case was at best shaky and viewed by many as without merit.