Antitrust

A few weeks ago, the Justice Department’s Antitrust Division announced the withdrawal of three long-standing policy statements related to antitrust enforcement in healthcare markets — Department of Justice and FTC Antitrust Enforcement Policy Statements in the Health Care Area (Sept. 15, 1993), and Statements of Antitrust Enforcement Policy in Health Care (Aug. 1, 1996), Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program (Oct. 20, 2011) — finding them to be “overly permissive” in light of significant changes in the healthcare landscape during the past three decades.

Last month, the DOJ finally secured its first criminal conviction for a labor-market antitrust offense.  (Check here for our previous coverage of this prosecution trend.)  VDA OC LLC (“VDA”), a healthcare staffing company, pleaded guilty to a Sherman Act offense in United States v. Hee.

Recently Judge Matthew F. Kennelly of the Northern District of Illinois denied the motions to dismiss filed by 17 top private universities in a class action lawsuit accusing the universities of conspiring to fix prices by using an agreed-upon “formula” to determine students’ financial aid, in violation of Section 1 of the Sherman Act.  The decision in Henry et al. v. Brown University et al. concludes that the scope of an antitrust exemption to certain financial aid practices among universities is limited to agreements among a group of schools with fully need-blind admissions programs, where each school in the group meets that requirement.  The ruling also addresses the burden associated with proof of a party’s withdrawal from a civil conspiracy.

Missouri resident Elliot Conrad Dale recently filed an antitrust lawsuit against GlaxoSmithKline (“GSK”), claiming GSK employed a “device hopping” scheme to ensure uninterrupted patent and regulatory protection for its brand-name asthma inhalers Ventolin and Arnuity Ellipta.  The complaint, filed in the Western District of Missouri on behalf of putative nationwide and state antitrust classes, alleges violations of Section 2 of the Sherman Antitrust Act, which prohibits the unlawful maintenance of monopoly power, and 28 state antitrust acts.  Alleging that GSK’s practices stifled generic competition, Plaintiff seeks treble damages and injunctive relief.

Under the Biden Administration, the FTC and DOJ have voiced a commitment to an expansive enforcement of antitrust law.  The recent confirmation of Judge Ketanji Brown Jackson to assume Justice Breyer’s position on the Supreme Court raises the question of how antitrust jurisprudence might develop against that backdrop.  Those questions loom particularly large given that Justice Breyer’s antitrust opinions have not reflected a predictable theoretical approach to antitrust issues facing the Court; instead, they have tended to manifest the pragmatism that guides his judicial philosophy.

Two weeks ago, the District of Colorado denied defendants’ motion to dismiss in a criminal case targeting agreements between competitors not to solicit (or “poach”) each other’s employees.  United States v. DaVita Inc. et al. is part of a wave of four criminal cases regarding no-poach and wage-fixing deals brought by the Department of Justice for the first time ever over the past year. The DOJ contends that the arrangements at issue are per se unlawful under the Sherman Act, even though no appellate court has ever expressly held as such.  Defendants in each case, including DaVita, moved to dismiss the charges, asserting that these types of agreements are not per se illegal and that they lacked fair notice that their conduct was a crime.    

In addition to the DaVita decision, the motion to dismiss in United States v. Jindal was also recently denied by the Eastern District of Texas.  Motions to dismiss in two other cases remain pending, but these first decisions illuminate how courts may treat similar prosecutions going forward. 

There have been several developments since we last wrote about Intel and Apple’s suit against Fortress and several of its so-called “patent assertion entities” (collectively, “Fortress”) based on the allegedly anticompetitive practice of patent “aggregation.”  Recall that the plaintiffs’ first amended complaint was dismissed without prejudice in January 2021 because Judge Chen of the U.S. District Court for the Northern District of California found that certain of the alleged product markets were too broad and that the complaint lacked adequate allegations of Fortress’s market power in any of those markets.  The court held that plaintiffs did not sufficiently allege that Fortress was charging supracompetitive prices to license its patents, or that there were no substitute patents that could be licensed instead of Fortress’s patents.

The Supreme Court is the only avenue left for JELD-WEN Inc. after the Fourth Circuit denied the door manufacturer’s motion for rehearing en banc of a panel’s decision in Steves & Sons, Inc. v. JELD-WEN, Inc., 988 F.3d 690 (4th Cir. 2021), to affirm an order directing JELD-WEN to sell a plant it acquired in 2012.  That leaves intact a District Court’s divestiture order—a remedy typically obtained only by government entities—in a suit brought by a “private attorney general” pursuant to § 7 of the Clayton Act. 

On April 13, 2021, the Court of Appeals for the Fifth Circuit issued its long-anticipated decision in Impax v. FTC, marking the first time an appellate court has weighed in on the merits of a so-called reverse payment case prosecuted by the Federal Trade Commission (“FTC”) since the Supreme Court’s Actavis decision in 2013.  The case resulted in a validation of the FTC’s approach to policing reverse payment agreements.  Specifically, the Court affirmed the Commission’s conclusions that (1) large, unjustified reverse payments are anticompetitive regardless of the strength of the underlying patent litigation, and (2) reverse payment settlements are more anticompetitive than procompetitive if a less-restrictive alternative exists, and that a less-restrictive alternative can be an agreement without a payment that results in an earlier generic entry. 

Staples’ parent company recently announced plans for an attempt to buy all outstanding stock of Office Depot’s parent company (ODP) for $2.1 billion, stating that it will pursue an all-cash tender offer in March if the parties cannot reach an agreement by then.

Stop me if you’ve heard this one before: the FTC is suing pharmaceutical manufacturers Endo and Impax over an alleged “reverse payment” agreement to reduce competition in the market for Opana ER, an oxymorphone extended release product.  In fact, the FTC’s complaint follows quickly on the heels of the Commission’s decision that a 2010 agreement between the same manufacturers to settle Impax’s patent litigation against Endo for a $112 million payment constituted an illicit “reverse payment” that delayed the entry of Impax’s generic version of Opana ER.  (Click here for background on that decision.)  Oral argument on Impax’s appeal of the FTC’s decision happened six months ago; the Fifth Circuit’s decision will mark the first time a Circuit Court weighs in on the FTC’s interpretation of the Supreme Court’s 2013 decision in FTC v. Actavis.  (Click here for analysis of the oral argument)

Antitrust litigation has been ongoing for several years in the U.S. District Court for the Northern District of Alabama against one of the biggest business associations in America, the Blue Cross Blue Shield Association (“BCBSA”) and its members.  We previously wrote about this litigation here and here.  BCBSA is comprised of independent health insurers that license the “Blue Cross” and “Blue Shield” trademarks from BCBSA.  As a condition of their licenses, BCBSA members grant each member exclusive geographic territories where each is allowed to use the Blue trademarks; some BCBSA members also happen to enjoy very high market shares in a number of their respective jurisdictions.  There are also licensing rules that limit how much revenue each member can derive from lines of business that do not use the Blue trademarks.  One of these rules was the “National Best Efforts Rule.”  This rule required that two-thirds of each member’s national revenue be derived from Blue-branded plans.  In other words, while each member could theoretically compete in others’ territories using brands that did not include the “Blue Cross” and “Blue Shield” trademarks, there was a cap on how much business a member could generate this way.  These restrictions allegedly reduced competition between BCBSA members

For years, antitrust commentators have warned of threats to innovation and competition posed by “thickets” of patents—the “dense web[s] of overlapping intellectual property rights that a company must hack its way through in order to actually commercialize new technology.”  See Carl Shapiro, “Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard-Setting” (March 2001), available at https://www.nber.org/chapters/c10778.pdf. At least one judge on the Federal Circuit has also noted concern about this issue.  E.g. Intellectual Ventures I LLC v. Symantec Corp., 838 F.3d 1307, 1328-29 (Fed. Cir. 2016) (Mayer, J., concurring) (calling for elimination of “generically-implemented software patents” to “clear the patent thicket”).

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.

Yesterday we discussed 2019’s most significant developments in challenges to reverse-payment settlements.  Today we continue our analysis of recent trends in pharmaceutical antitrust actions with a discussion of cases addressing class certification requirements in the reverse-payment context.

Last October, we discussed the Department of Justice’s announcement that it would be revisiting the 1948 Paramount Consent Decrees, a series of movie-studio concessions and divestments resulting from a landmark antitrust prosecution, United States v. Paramount Pictures, Inc., 334 U.S. 131 (1948).  Among other things, those decrees held unlawful the then-existing vertical integration of production studios, distributors, and exhibitors (i.e., theaters) and held various prevailing practices—“block booking” (bundling movie licenses and strong-arming theaters into accepting all of a studio’s movies); “circuit dealing” ( obtaining mass licenses for entire theater chains, instead of for individual theaters and films); overbroad “clearances” (selling exclusive exhibition licenses for certain geographical areas); and setting minimum movie-ticket prices—to be impermissibly anticompetitive.  Yesterday, Assistant Attorney General Makan Delrahim announced the results of that review at the American Bar Association’s 2019 Antitrust Fall Forum.  He confirmed that the DOJ would, indeed, be seeking to dissolve the 70-year-old Decrees. 

In February 2019, the Second Circuit held that Connecticut’s “post-and-hold” alcohol pricing statute is not preempted by Section 1 of the Sherman Act.   In September 2019, following a petition for en banc review, the Second Circuit declined to reconsider the panel’s decision.  In a vigorous dissent from the decision declining en banc review, Judge Sullivan – joined by Judges Cabranes, Livingston, and Park – criticized the decision for “perpetuat[ing] a longstanding circuit split and continu[ing] to allow de facto state-sanctioned cartels of alcohol wholesalers to impose artificially high prices on consumers and retailers across all three states in our Circuit.” 

U.S. lawmakers, regulators, and agencies charged with antitrust oversight have long been criticized for failing to act on alleged anticompetitive activity by the world’s largest technology companies—the so-called “Big Four” of Google, Facebook, Amazon, and Apple.  This year, however, government interest in oversight has spiked: In February the Federal Trade Commission launched a task force to monitor competition in technology markets and review past mergers, and the FTC and U.S. Department of Justice have reportedly reached an agreement to split jurisdiction over the Big Four, with the FTC taking responsibility for any investigations of Facebook and Amazon and the DOJ taking Google and Apple.  On the legislative front, the House Judiciary Committee Subcommittee on Antitrust, Commercial and Administrative Law has announced a series of hearings on competition in digital markets, promising a “top-to-bottom review of the market power held by tech giant platforms.”  And last Tuesday, DOJ Antitrust Division head Makan Delrahim told the Antitrust New Frontiers Conference in Tel Aviv, Israel that the DOJ was equipped under existing law to combat anticompetitive activity in the digital economy, stressing the particular harms of collusion, exclusivity and tying arrangements, and acquisition of nascent competitors.

In a recently unsealed opinion, U.S. District Judge Broderick (S.D.N.Y.) explained his reasoning for allowing a consolidated antitrust suit to proceed against Keurig Green Mountain, Inc. and its affiliates, the makers of single serve brewer machines and compatible single serve coffee packets, “K-Cups.”  As discussed below, the case may influence future cases involving exclusive licensing agreements and allegedly false marketing tactics.

As we discussed in a previous post, a new school of thought about antitrust law (or, rather, a new application of old antitrust principles) has received increasing attention in recent months.  The so-called “New Brandeis” approach seeks to shift the focus of antitrust law from consumer welfare alone to include the competitive structure of markets.  Recent attention to these arguments is often traced to the publication of Lina Khan’s Yale Law Journal article "Amazon's Antitrust Paradox."  (Khan, who previously served as an advisor to FTC Commissioner Rohit Chopra, was just hired as counsel for the House Judiciary Committee’s Subcommittee on Antitrust, Commercial and Administrative Law.)  Indeed, as we discussed last week, the Senate Judiciary Committee held hearings focusing on potential changes to the consumer welfare standard currently used by federal courts in evaluating antitrust claims.

On January 7, 2019, in Green Sols. Recycling, LLC v. Reno Disposal Co., No. 3:16-cv-00334-MMD-CBC, 2019 BL 4611 (D. Nev. Jan. 07, 2019), the District Court for the District of Nevada granted summary judgment on plaintiff’s antitrust claim in favor of defendants Reno Disposal Company, Inc. (“Reno Disposal”), and Waste Management of Nevada, Inc. (“WMON”), on the basis of the doctrine of state-action immunity.  The litigation arose out of the City of Reno’s entry into an exclusive franchise agreement with Reno Disposal, which provided Reno Disposal with the exclusive right to collect and dispose of waste and certain recyclable materials.  The plaintiff challenged the City of Reno’s authority to grant a monopoly for the collection and disposal of garbage and recyclable materials as an unlawful restraint of trade in violation of Section 1 of the Sherman Act.  The defendants argued that they were entitled to summary judgment under the doctrine of state-action immunity. 

After two hearings over the last week, Judge Richard J. Leon of the District Court for the District of Columbia seems to have put the brakes on the well-publicized merger between health care giants CVS and Aetna.  The merger obtained conditional approval from the DOJ’s Antitrust Division on October 10, 2018, and the parties seemed poised for court approval when they appeared before Judge Leon on November 29, 2018.

For the past several decades, antitrust law has been focused primarily on consumer harm—a given policy is unlikely to be considered anticompetitive if it results in lower prices for consumers.  A student note in a January 2017 edition of the Yale Law Journal titled “Amazon’s Antitrust Paradox,” argues that this focus is too narrow, and that antitrust policy and regulators should be focused on broader measures of competition. Using Amazon as a case study, the author, Lina M. Khan, argues that Amazon should be subject to increasing antitrust scrutiny despite its substantial track record of providing low prices to consumers for a variety of products.

Hollywood and the antitrust laws go way back.  Indeed, antitrust suits have resulted not only some of the most significant cases in the evolution of American antitrust law, but many of the most consequential developments in the history of the movie industry.  Chief among these is United States v. Paramount Pictures, Inc., 334 U.S. 131 (1948), which held unlawful the then-existing vertical integration of production studios, distributors, and exhibitors (i.e., theaters); it also held various prevailing practices—“block booking” (bundling movie licenses and strong-arming theaters into accepting all of a studio’s movies); “circuit dealing” (obtaining mass licenses for entire theater chains, instead of for individual theaters and films); overbroad “clearances” (selling exclusive exhibition licenses for certain geographical areas); and setting minimum movie-ticket prices—to be impermissibly anticompetitive.  By effectively abolishing the so-called “studio system” and requiring the studios to divest themselves of their theater chains, the Paramount case and the resulting consent decrees fundamentally altered the relationships among producers, distributors, and exhibitors, and led to the industry structure that has survived to date.