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Antitrust Update Blog is a source of insights, information and analysis on criminal and civil antitrust and competition-related issues. Patterson Belknap’s antitrust lawyers represent clients in antitrust litigation and counseling matters, including those related to pricing, marketing, distribution, franchising, and joint ventures and other strategic alliances. We have significant experience with government civil and criminal/cartel investigations, providing the unique perspectives of former top U.S. Department of Justice Antitrust Division lawyers from both the civil and criminal sides.
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.
The Tenth Circuit recently became the first federal court of appeals to address an antitrust challenge to a relationship central to modern pharmaceutical drug markets: the price negotiations between drug companies and pharmacy benefit managers (“PBMs”) hired by health plans to manage prescription drug programs.
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.
Last month, the first two trials arising from the DOJ’s recent push to criminally prosecute wage-fixing and employee non-solicitation agreements both ended in acquittals on the antitrust charges. (Check here for our previous coverage of this prosecution trend.) In United States v. Jindal, the defendants were acquitted on charges of price-fixing, while in United States v. DaVita Inc., DaVita and its CEO were acquitted on charges that they engaged in no-poach agreements with competitors. Though the DOJ has publicly declared its intent to continue pursuing such prosecutions, these setbacks may affect how it approaches other alleged labor-market antitrust violations.
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.
More than two years into the COVID-19 pandemic, and driven in part by the suspension of indoor dining, the practices of restaurant platforms and food delivery services are facing increased scrutiny. A few weeks ago, U.S. District Judge Lewis Kaplan denied Grubhub, Postmates and Uber’s joint motion to dismiss in Davitashvili et al. v. Grubhub Inc. et al., allowing the proposed antitrust class action against the food delivery giants to move forward.
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.
District Court Rejects Intel’s Claims, but Leaves Door Open to Patent “Aggregation” Theories of Antitrust Liability
Last month, we wrote a post on the patent “aggregation” suit Intel had filed against various entities affiliated with the investment firm Fortress. The post was timely; the next day, Judge Chen granted Fortress’s motion to dismiss with prejudice and entered judgment for the defendants. The opinion dismissing the action was sealed until October 7.
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 past decade has witnessed significant development in class action certification standards in the antitrust context, and the past year has been no exception. Questions of predominance continue to be at the forefront, although the numerosity requirement has also been put to the test. This chapter places these issues of class certification in context by tracing the standards of certification and discussing the evolution of the ‘rigorous analysis’ requirement now required by federal courts. It then spotlights notable decisions from the past year that have grappled with challenges to the sufficiency of plaintiffs’ statistical models used to demonstrate the preponderance of class-wide questions, principally on the issue of showing class-wide harm, and with the number of putative class members required to be sufficiently numerous for certification.
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.
The Fourth Circuit ruled last month that the Charlotte-Mecklenburg Hospital Authority, which does business as Atrium Health, is immune from antitrust damages as a “special function governmental unit” under the Local Government Antitrust Act of 1984 (the “Act”). The decision in Benitez v. Charlotte-Mecklenburg Hospital Authority clarifies the scope of local government antitrust immunity and confirms that mere growth of an organization beyond local borders does not prevent it from continuing to enjoy antitrust immunity as a “local government.”
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.
Recent decisions in two different antitrust cases involving price increases and marketing practices for the EpiPen address a relationship solidly embedded in the current architecture of pharmaceutical drug markets: payments between manufacturers and pharmacy benefit managers (“PBMs”) hired by health plans to manage prescription drug programs. These new rulings suggest that while certain manufacturer rebates have come under increased scrutiny in recent years, the standard industry practice remains on firm footing.
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.
Intel and Apple’s challenge to Fortress’s allegedly anticompetitive practice of patent “aggregation,” which we discussed previously on this blog, suffered another setback earlier this month. The Northern District of California dismissed the plaintiffs’ first amended complaint, although it granted them leave to amend again.
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)
Litigation concerning reverse-payment settlements remains active. In the coming year, we expect to see material developments regarding treatment of non-monetary settlements of underlying patent litigation, as courts continue to grapple with what constitutes a “large and unjustified” payment. Likewise, we expect further insights regarding the admissibility of expert opinions concerning the likelihood of success of the underlying patent litigation. Read our recent article on this subject here.
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
Does HHS’s Elimination of the Safe Harbor for Manufacturer Rebates Leave Manufacturers with Increased Antitrust Risk?
On November 20, 2020, the U.S. Department of Health & Human Services (HHS) finalized a rule to take effect in 2022, which eliminates the safe harbor under the federal anti-kickback statute for manufacturer rebates to Medicare Part D plan sponsors. Under the current statutory scheme, drug manufacturers may negotiate rebates with providers of pharmacy benefits—either directly or through a pharmacy benefit manager (PBM)—in exchange for preferential placement or avoiding being disadvantaged on a PBM’s or provider’s drug formulary. The safe harbor permits such payments by confirming that rebates do not constitute illegal kickbacks under the federal statute. HHS’s new rule eliminates that safe harbor, but creates a safe harbor for negotiated discounts on the “list price” of the drug..
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”).
On June 9, the United States Court of Appeals for the Fifth Circuit heard oral argument in Impax Laboratories, Inc., Etc. v. Federal Trade Commission. The appeal by pharmaceutical manufacturer Impax marks the first time a court will review the Federal Trade Commission’s (“FTC”) interpretation of the Supreme Court’s watershed decision on reverse payment settlements, FTC v. Actavis, 570 U.S. 136 (2013).
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.
As this blog has previously reported, new strains of thought about antitrust law are blossoming in the United States. The “New Brandeisians” challenge the Chicago School “consumer welfare” standard that has dominated policymaking for decades. They assert that the authors of the statutes that form the backbone of American antitrust law were primarily focused on the manifold danger of concentrated market power beyond simply the economic effects on the ultimate consumer.
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.
2019 witnessed a number of developments in challenges to reverse-payment settlements. In its first decision on a pay-for-delay settlement since the Supreme Court’s seminal 2013 decision in FTC v. Actavis, the FTC took an aggressive approach to evaluating a plausible restraint on trade and analyzing proffered procompetitive benefits, reversing the ALJ who heard the case. In the Southern District of New York, an attempt by direct purchasers to plead a conspiracy arising out patent-infringement settlements without an alleged reverse payment failed. And, in the class certification context, district courts grappled with Rule 23(b)(3)’s predominance requirement. These notable cases in antitrust actions concerning the pharmaceutical industry are discussed below.
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.
Recently, Judge Goldberg in the Eastern District of Pennsylvania certified two classes of plaintiffs asserting antitrust claims based on alleged “product hopping” by the manufacturer of branded tablets treating opioid addiction. In re: Suboxone (Buprenorphine Hydrochloride and Nalaxone) Antitrust Litig., 13-md-2445, 2019 U.S. Dist. LEXIS 166524 (E.D. Pa. Sept. 26, 2019). While declining to certify a class of end payors seeking injunctive relief, the court nevertheless certified (1) a damages class of direct purchasers of Suboxone tablets under Rule 23(b)(3) and (2) an issues class of end payors certified under Rule 23(c)(4). The court held that certification of the latter class would materially advance the litigation because the issue of alleged anticompetitive conduct—which focuses only on the conduct of defendants—is “wholly severable” from the issues of antitrust impact and damages, which could raise individualized issues.
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.”
Public discourse about antitrust law has been expanded to include a wider range of ideas about the purpose of antitrust law. “New Brandeisians” believe that the consumer welfare standard, which prioritizes end-user prices over most other considerations, does not account for all the harms caused by a lack of competitive markets. They contend that this standard is particularly ill-suited for policing the large technology companies that dominate their markets. As previously discussed here and here and here, certain American regulators, legislators, and presidential candidates appear to be listening.
Congress, Regulators, and Justice Department Gear Up to Investigate “Big Tech,” But Focus and Scope Under Current Law Remains Unclear
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.
Evolving Antitrust Principles in the Age of Big Tech: Supreme Court Allows Antitrust Suit to Move Forward Against Apple
In a recent decision decided on May 13, 2019, the Supreme Court allowed an antitrust suit to move forward against Apple. Consumers brought suit based on Apple’s operation of its App Store – which serves as the exclusive electronic marketplace through which iPhone owners may purchase iPhone applications (“apps”). Independent app developers create these apps, and then contract with Apple in order to make the apps available for purchase to iPhone owners in the App Store. Apple allows app developers to set the retail price, but charges a 30% commission on every app sale. The plaintiffs allege that Apple has unlawfully monopolized the retail market for app sales, and used its market dominance to force iPhone owners into purchasing apps exclusively from Apple while paying Apple’s 30% commission. Apple moved to dismiss, arguing that Illinois Brick’s direct-purchaser rule bars the plaintiffs from suing Apple under the antitrust laws.
In Long-Awaited Opinion, Court Rules That Keurig Must Face Antitrust Suits by Competitors and Customers
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.
Update: NCAA Loses in Suit Challenging Student-Athlete Compensation and Benefit Limits, Prepares for Appeal
Last year we wrote about the summary judgment decision in an MDL class action then pending in the U.S. District Court for the Central District of California, In re NCAA Athletic Grant-In-Aid Cap Antitrust Litigation. The suit against the National Collegiate Athletic Association and eleven member athletic conferences is a challenge by the plaintiffs (men’s football, men’s basketball, and women’s basketball student-athletes) to the NCAA’s student athlete compensation-cap rules as a violation of Section One of the Sherman Antitrust Act. In that decision, the court rejected several of the NCAA’s defenses and permitted the case to proceed to a bench trial, which was held last September. On March 8, the court issued its decision, siding against the defendants and holding that the challenged rules were unlawful.
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.
The purpose and goals of United States antitrust policy have not remained static over time. Since 1979, the Supreme Court has focused on a “consumer welfare” theory of antitrust law. See Reiter v. Sonotone Corp., 442 U.S. 330, 343 (1979) (The floor debates “suggest that Congress designed the Sherman Act as a ‘consumer welfare prescription.’” (citation omitted)). Under the consumer welfare standard, an act is deemed anticompetitive “only when it harms both allocative efficiency and raises the prices of goods above competitive levels or diminishes their quality,” Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421, 1433 (9th Cir. 1995); whether an action or policy is found to be anticompetitive depends ultimately on whether consumers pay higher prices. The consumer welfare theory has the advantage of focusing on the impact to consumers through the application of economic theory, but doesn’t always have much to say about firms that occupy a dominant position in an industry while continuing to provide services to consumers cheaply (or without any fee at all)—a hallmark of many modern tech companies.
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.
Though the merger of CVS and Aetna received conditional approval from the DOJ’s Antitrust Division back in October, the road to final approval has been rocky as the court’s exasperation with the parties appears to grow. Last week, Judge Richard J. Leon of the District Court for the District of Columbia ordered the Antitrust Division to respond to public comment on the merger by February 15, 2019—notwithstanding the fact that appropriations to the Antitrust Division lapsed on January 4, leaving the Division without funding.
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.
U.S. Supreme Court’s Decision in China Agritech May Limit The Availability of Class-Action Tolling For Litigants That File Suit Before Class Certification
On June 11, 2018, the U.S. Supreme Court issued its opinion in China Agritech, Inc. v. Resh, 138 S. Ct. 1800 (2018). The China Agritech decision resolved a circuit split, finding that the statute of limitations for a follow-on class action is not tolled under American Pipe. Currently, a related circuit split exists on the question whether class action tolling is available for litigants that file opt-out lawsuits prior to a decision on class certification. Currently, the Second Circuit permits tolling in those circumstances, while the Sixth Circuit does not.
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.
In re Asacol: First Circuit Sharply Limits Certification of Antitrust Classes Containing Uninjured Members
In a recent decision, the U.S. Court of Appeals for the First Circuit held that Rule 23’s “predominance” requirement barred certification of a class of all indirect purchasers of a prescription drug because the class included members who were uninjured by the alleged anti-competitive activity – they were “brand loyal” and would not have purchased a cheaper generic product even were it available. Asacol makes it more difficult to certify antitrust class actions in the First Circuit and its effects may extend further if the First Circuit’s reasoning is adopted by other circuits.
As DOJ Reconsiders Watershed Consent Decrees, Claims of Unlawful “Circuit Dealing” Proceed Against Landmark Theaters
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.
As the Supreme Court prepares to hear Apple Inc. v. Pepper, a major case involving antitrust standing, interested parties across the political spectrum are weighing in with their ideas of how the case should be resolved. As we previously reported, the Supreme Court decided to review the Ninth Circuit’s decision that because Apple sold iPhone apps directly to consumers, consumers are direct purchasers that have standing to sue Apple for alleged monopolization of the market for iPhone apps. Apple contends that the app developers – not Apple – are the sellers of apps to consumers because the app developers set prices; Apple contends that it sells only distribution services, and sells those services to the app developers, not to consumers.
We wrote before about a decision by an Alabama federal district court to analyze claims in the Blue Cross Blue Shield multi-district litigation under a per se standard. The court found that a licensing rule allegedly requiring member plans to derive at least two-thirds of their revenue from Blue-branded plans was effectively an “output restriction” which, especially combined with the designation of exclusive service areas among the member plans, constituted a per se Sherman Act violation.
Disagreeing with D.C. Circuit Colleagues, Supreme Court Nominee Brett Kavanaugh Would Have Rejected Challenges to Major Mergers in Antitrust Enforcement Actions
On Monday, President Trump announced Brett Kavanaugh, a judge on the United States Court of Appeals for the District of Columbia, as his nominee to replace Supreme Court Justice Anthony Kennedy. Judge Kavanaugh’s most notable antitrust-related decisions in his 12 years on the federal bench include the dissents he issued in United States v. Anthem, Inc. and FTC v. Whole Foods Market, Inc. In both cases, Judge Kavanaugh disagreed with his colleagues’ decisions to block the contemplated mergers, suggesting an antitrust jurisprudence leery of excessive enforcement activity.
On March 26, 2018, the Supreme Court heard argument in China Agritech, Inc. v. Resh (No. 17-432), a case in which the justices will determine whether a plaintiff whose otherwise untimely claim has been tolled by the rules articulated in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974) and Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983) may bring a putative class action, or is limited to filing an individual claim. In American Pipe and Crown, Cork, the Supreme Court held that the filing of a class action complaint tolls the statute of limitations for persons that fall within the proposed class definition until the court denies the motion for class certification. In American Pipe, this rule rendered timely the claims of plaintiffs who sought to intervene in the pending action after the court denied class certification, 414 U.S. at 561, and in Crown, Cork, the Court held that tolling applied to plaintiffs who initiated individual actions after the district judge issued the decision denying class treatment, 462 U.S. at 354.
In late March, a district court in the Northern District of California partially granted and partially denied dueling summary judgment motions in an MDL class action—In re NCAA Athletic Grant-In-Aid Cap Antitrust Litigation—challenging the National Collegiate Basketball Association’s student athlete compensation-cap rules as a violation of Section One of the Sherman Antitrust Act. Defendants—the NCAA and eleven member athletic conferences—previously reached a $208 million settlement with the consolidated plaintiffs, which the court approved in December 2017. Claims for injunctive relief remain pending, however—and, as a result of the District Court’s ruling, will proceed to a bench trial currently scheduled for December 2018. (Defendants have asked to postpone the trial until mid-2019; the court will hear argument on that motion later this month.)
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