Industry: Telecommunications

With the Democratic primary process in full swing, we thought it fitting to take a look at where the candidates stand with respect to antitrust issues.  As it turns out, this is a fairly active election cycle for antitrust, with most Democratic candidates invoking antitrust laws (and proposed laws) in connection with their visions for the future.  The increased focus on antitrust has not been lost on other observers.

Last week, a Rhode Island Congressman published a letter he sent to the Chairman of the House Judiciary Committee requesting that the committee hold a hearing on the recently-announced Amazon-Whole Foods merger.  This post explores when and why Congress holds hearings on particular mergers and what power Congress has to stop a merger.

Last week, the FTC filed a complaint against Qualcomm, a manufacturer of baseband processors, which are chips included in cell phones and other products with cellular connectivity that allow the devices to connect to cell networks.  Qualcomm holds patents to technologies incorporated in the standards that allow all cell phones to communicate with one another, referred to as standard-essential patents or SEPs.  Qualcomm’s patents mostly relate to older, 3G-CDMA cellular technologies, which are still necessary for modern cell phones to work as consumers expect.  As a condition of declaring its patents standard-essential, Qualcomm committed to the telecommunications industry’s standard-setting organizations that it would license its patents on a “fair, reasonable, and non-discriminatory” (FRAND) basis.

As we previously reported (click here, to read more), last month, a jury returned a $6 million verdict for a class plaintiff in a suit alleging that Cox Communications had illegally tied its premium cable services to rentals of its set-top boxes.  Yesterday, the court granted Cox’s renewed motion for judgment as a matter of law, overturned the jury’s verdict, and entered judgment for Cox.

After a near two-week trial in the consumer class action lawsuit against Cox Communications, the jury began deliberations this past Monday to decide whether Cox’s alleged practice of tying premium cable services to rentals of its cable boxes violated the Sherman Act by harming competition in the set-top box market.  

On July 16, the European Court of Justice issued a decision stating that standard essential patent (“SEP”) owners that seek injunctions against companies willing to license intellectual property on fair and reasonable terms may be illegally abusing their dominance. The dispute between Huawei Technologies Co. Ltd. (“Huawei”) and ZTE Corp. (“ZTE”) arises from Huawei’s patent on Long Term Evolution (“LTE”), a technology that is used in mobile phones and was developed by the European Telecommunications Standards Institute (“ETSI”).  

In July, we wrote about two putative class action lawsuits alleging that Panasonic, Samsung, and other electronics manufacturers had formed a cartel to boost prices of certain electronic capacitors. Since then, the cases have been consolidated, interim lead co-counsel have been appointed, the Antitrust Division has confirmed its own investigation, and the court has set a preliminary case schedule.

In Motorola Mobility LLC v. AU Optronics Corp. et al., the Seventh Circuit is currently considering the reach of the Sherman Act beyond United States borders and will join the Second and Ninth Circuits in interpreting some key provisions of the Foreign Trade Antitrust Improvements Act (“FTAIA”). In that case, which will be heard by the Seventh Circuit on a motion for rehearing, the parties have advanced vastly different interpretations of the FTAIA  and the extent to which defendants’ conduct abroad has impacted the United States market, if at all.

China’s antitrust regulators have been on a tear lately.  Last year the State Administration for Industry and Commerce (“SAIC”) began its investigation of Qualcomm for allegedly violating China’s 2008 Anti-Monopoly Law.  SAIC recently released a statement indicating that this investigation is coming to an end, but Qualcomm may be facing a fine of over $1 billion.  Then, in July of this year, SAIC raided offices of Microsoft and its partner Accenture PLC throughout China in connection with an investigation into Microsoft’s alleged anti-competitive bundling of software. And during the last month alone, the National Development and Reform Commission (“NDRC”) accused Chrysler, Mercedes Benz, Volkswagen, and a dozen Japanese auto parts makers of various violations of the Anti-Monopoly law in connection with their pricing of auto parts. 

Many of you will recall that on March 27, 2014, the Seventh Circuit issued a long-awaited decision concerning the scope of the Foreign Trade Antitrust Improvements Act (“FTAIA”) in Motorola Mobility v. AU Optronics.  The Seventh Circuit held that the higher prices for mobile phones Motorola sold in the United States did not “give rise to” its foreign subsidiaries’ antitrust claims, and that Motorola could not show a “direct” effect on U.S. commerce sufficient to satisfy the FTAIA.  Just days after this opinion, Motorola asked for a rehearing.  After multiple letters back and forth between the Court, the parties, and the Solicitor General’s Office, on July 1, 2014 the Seventh Circuit vacated its prior opinion.  Additional briefing is now underway, and is expected to be completed in October.

With DOJ’s Antitrust Division and the FTC ramping up antitrust enforcement, it is critical for companies to take a hard look at their compliance programs and update them on a regular basis to avoid potential antitrust violations and discover antitrust malfeasance early on so a company can have the option of self-reporting and applying for leniency under DOJ’s leniency program. The United States Sentencing Guidelines provide guidance to companies in the organization of their corporate antitrust compliance programs; Guidelines considerations include establishing standards and procedures to prevent and detect criminal conduct and monitoring, auditing and periodically evaluating compliance with the program, including providing anonymous or confidential means for reporting potential breaches.  In addition to these threshold requirements, it is important that any antitrust compliance program provide guidance in a number of areas that present potential pitfalls.  Today, we discuss guidance on communications with competitors and dealing with customers and suppliers.