Nov

16

Posted by : Matthew Wild | On : November 16, 2008

On November 10, 2008, the DOJ Antitrust Division’s criminal section lost another high profile criminal price fixing trial. This time the individual defendant was acquitted of alleged participation in the highly publicized marine hose cartel that had resulted in numerous guilty pleas.  After a two-week trial, the jury returned a verdict in less than two hours.  Paul Calli, Michael Pasano and Marissel Descalzo of Carlton Fields, P.A. represented the defendant.  (Carlton Fields press release)  The criminal section has lost a number of high profile trials recently — DRAM (hung jury; decision not to re-prosecute) and magazine paper.

Oct

06

Posted by : Matthew Wild | On : October 6, 2008

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.

Sep

04

Posted by : Matthew Wild | 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.

Jul

18

Posted by : Matthew Wild | On : July 18, 2008

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.

Jul

15

Posted by : Matthew Wild | On : July 15, 2008

On July 11, 2008, the Ninth Circuit affirmed dismissal of a franchisee’s tying claim regarding credit and debit card processing services that was nearly identical to a claim that Judge Posner rejected on June 23, 2008 in Sheridan v. Marathon Petroleum LLC. (See July 11, 2008 Post). In Rick-Mik Enterprises Inc. v. Equilon Enterprises, LLC, No. 06-55937, 2008 WL 2697793 (9th Cir. July 11, 2008), a franchisee claimed that the requirement that it use the franchisor’s credit and debit card processing services was tying in violation of Section 1 of the Sherman Act. The Ninth Circuit rejected this claim for the same reasons that the Seventh Circuit did in Sheridan. The Ninth Circuit affirmed dismissal because that the complaint lacked (1) allegations that Equilon had market power in the gasoline franchise market and (2) credit and debit card processing services was not a distinct product from the rest of the Equilon gasoline station franchise.

Jul

11

Posted by : Matthew Wild | On : July 11, 2008

Resale price maintenance liability remains alive even after Leegin Creative Leather Products v. PSKS, 127 S.Ct. 2705 (2007) (holding that rpm agreements are now subject to the rule of reason). On June 17, 2008, the Third Circuit held that a Mack truck franchisee raised a triable issue of fact under the rule of reason concerning an alleged resale price maintenance scheme. Toledo Mack Sales & Serv. v. Mack Trucks, No. 07-1811, 2008 WL 2420729 (3d Cir. June 17, 2008). In particular, the Court held that the plaintiff came forward with sufficient evidence to show that the existence of an agreement between the manufacturer and dealers to stop discounting and the agreement may have caused prices to increase violating the rule of reason. Relying on Monsanto v. Spray-Rite Serv., 465 U.S. 752 (1984), the dealers’ frequent input and complaints about discounting were sufficient to raise a triable question over the existence of an agreement. With respect to the showing under the rule of reason, the dealer established that the manufacturer had sufficient power in the engine placed in front of the cab and the low cab over engine truck markets to control prices in those markets. Accordingly, its efforts to reduce intrabrand competition could have affected interbrand competition and caused prices to increase in the relevant markets. The Third Circuit rejected the R-P- Act claim holding that the statute does not apply to custom made goods of the type that were at issue in this case. The Third Circuit also rejected the statute of limitations defense holding that the plaintiff could rely on evidence of overt acts that took place before the limitations period to prove the existence of the conspiracy during the limitations period. Counsel must be careful in advising their clients about resale price maintenance. In addition to liability that can arise as demonstrated by this decision, state attorneys general remain active in this area. See March 14 and May 23, 2008 Posts.

Jul

10

Posted by : Matthew Wild | On : July 10, 2008

On June 23, 2008, the Seventh Circuit affirmed dismissal of a Marathon gas station franchisee’s claim that requiring the use of Marathon transaction processing equipment for transactions with Marathon gas cards violated the Sherman Act. Sheridan v. Marathon Petroleum Co. LLC, No. 07-3543, 2008 WL 2486581 (7th Cir. June 23, 2008). To state a claim for tying in violation of Section 1 of the Sherman Act, the franchisee had to plead, among other things, that Marathon had monopoly power and that sale of one product (the tying product) is conditioned on the purchase of another product (the tied product). Judge Posner found that the complaint lacked sufficient allegations of market power because “[n]o market shares statistics for Marathon either locally or nationally are given, and there is no information in that complaint that would enable local shares to be calculated.” Id. at *4. Judge Posner also found no tying because “[a]ll that [Marathon] has done is require its franchisees to honor Marathon credit cards and to process sales with them through the system designated by Marathon so that customers who use its cards have the same purchasing experience no matter which Marathon gas station they buy from.” There is no requirement that franchisees use the Marathon processing system for other credit cards. Although the issues in this case are straightforward, Judge Posner’s opinion is very useful in explaining under what circumstances a tying arrangement might be illegal.

Jul

02

Posted by : Matthew Wild | On : July 2, 2008

According to Reuters, the Antitrust Division has opened an investigation into the proposed revenue sharing agreement between Yahoo and Google. Under the agreement, Yahoo will allow Google to put advertisements on its site in exchange for a share of the revenue. Google and Yahoo are reported to have shares of about 80% and 16% respectively of online advertising revenue. The obvious concern is whether the agreement will reduce the incentives for Google and Yahoo to compete and therefore, violate Section 1 of the Sherman Act. Yahoo may have an incentive to raise its prices knowing that under the agreement, it will share in any lost business to Google. The Antitrust Division reportedly has issued civil investigative demands not just to Google and Yahoo but to many other players in the industry. Although not required to do so, Google and Yahoo agreed not to go forward with their collaboration until the Antitrust Division has an opportunity to review the potential effects on competition. The parties have attempted to shrug-off the investigation as expected. But it certainly is not routine. The Antitrust Division does not take issuance of CIDs lightly.

May

23

Posted by : Matthew Wild | On : May 23, 2008

The state attorneys general continue to be hostile to the Supreme Court’s decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc., 127 S.Ct. 2705 (2007), which overruled Dr. Miles Medical Co. v. John D. Parke & Sons. Co., 220 U.S. 373 (1911), and made resale price maintenance subject to the rule of reason under Section 1 of the Sherman Act. 35 state attorneys general have written to Congress asking that it pass S. 2261 which would make resale price maintenance a per se violation of Section 1.  State Attorney General Letter; S. 2261.  The March 31, 2008 post reported that the New York, Michigan and Illinois attorneys general obtained a consent decree under state law against Herman Miller for its resale price maintenance scheme. The May 8,2008 post reported that although the FTC modified Nine West’s consent decree that had prohibited resale price maintenance, the FTC reminded Nine West that it was still subject to state restrictions. This most recent letter further confirms that counselors must be cognizant of state law when they advise clients about the legality of resale price maintenance. It would be prudent for clients to act unilaterally and follow the Colgate doctrine rather than rely on Leegin.

May

08

Posted by : Matthew Wild | On : May 8, 2008

On May 6, 2008, the FTC granted Nine West’s petition to modify its consent decree to allow Nine West to engage in resale price maintenance with its dealers. In 2000, Nine West — a footwear manufacturer — had entered into a consent decree with the FTC and several state attorneys general to resolve allegations that it fixed the prices at which its retailers may sell its shoes. Because of the Supreme Court’s recent decision in Leegin Creative Leather Products v. PSKS, 127 S.Ct. 2705 (2007), which allowed such agreements to be treated under the rule of reason rather than subject to per se condemnation, the FTC allowed Nine West to engage in resale price maintenance but did not rule that such conduct would be necessarily lawful. Rather, the consent decree requires to Nine West to provide periodic reports to the FTC of prices and output during periods when it has engaged in resale price maintenance. As a practical matter, modification of the consent decree may be bring little comfort as some state attorneys general have taken the position that resale price maintenance is still a per se violation of their antitrust statutes. Herman Miller (discussed in the March 31, 2008 post) is an example of such an application of the state antitrust antitrust laws.  Attached is the FTC’s order in Nine WestNine West (Order)