Jonathan H. Hatch, Counsel

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.

The Supreme Court has granted certiorari and will hear, next term, an appeal from Ninth Circuit’s decision in In re Apple iPhone Antitrust Litigation, a case we previously reported on. In In re Apple iPhone, the Ninth Circuit held that because Apple sold iPhone apps directly to consumers, consumers are...

A court’s decision regarding the proper standard of review in a Sherman Act Section 1 case—whether to analyze the defendant’s conduct as a per se antitrust violation or under the “rule of reason”—is highly significant.  The rule of reason requires a plaintiff to show that the anticompetitive effects of the conduct are not outweighed by its procompetitive benefits—often, a factually intensive analysis.  But under the per se standard a plaintiff (and the court) may dispense with this balancing test; it is necessary only to prove that the conduct actually happened.

Economists are endemic to antitrust litigation.  Their expertise is often necessary to explain why the conduct or merger at issue will have no impact (or a huge impact!) on competition in a market.  Typically the opinions of economists are presented through the expert witnesses each party calls.  Sometimes, though, economists who are not officially retained to opine on the issues will weigh in through the filing of an amicus brief, and sometimes such briefs can have a demonstrable impact.

On January 10, 2018, in In re Lantus Direct Purchaser Antitrust Litig., the District Court for the District of Massachusetts dismissed the antitrust case against Sanofi-Aventis U.S. LLC (“Sanofi”), the manufacturer of Lantus and Lantus SoloSTAR, which use the insulin product glargine to treat Type I and Type II diabetes.  The plaintiffs in the multi-district litigation, a group of purchasers of the Lantus products, alleged that Sanofi unlawfully prolonged its monopoly for the glargine products after the expiration of the relevant patent in two ways.  First, the plaintiffs alleged that Sanofi improperly listed six patents in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (the “Orange Book”).  Second, the plaintiffs alleged that Sanofi pursued sham litigation against Eli Lilly in which Sanofi asserted claims of patent infringement without any reasonable basis. That litigation was settled by Sanofi and Lilly shortly before trial.

A federal judge in California has refused to allow indirect purchasers of semiconductor chips—i.e., cell phone consumers—to bring claims against Qualcomm under federal antitrust law.

Outlet malls are popular destinations for consumers seeking a bargain, even if not everyone agrees that the deals are as good as advertised.  But although the prices may seem low, a common provision in lease agreements between the operators of outlet malls and retailers may have reduced competition and raised the prices consumers paid.  This week, the operator of the most popular outlet mall in the New York City metropolitan area reached a settlement with the New York Attorney General that may lead to increased competition in the outlet mall space in New York and beyond.

Last month, the FTC staff sent a letter warning North Carolina’s General Assembly that a pending bill regarding the state’s real estate appraisal board could run afoul of competitive principles.  The staff notes that it is prepared to investigate and recommend challenges to potentially anticompetitive actions by state appraisal boards.  However, in light of Supreme Court precedent on state sovereign immunity, it is not certain that the FTC could successfully challenge state board actions with which it disagrees.

On Monday, just a few days after the Justices of the Supreme Court conferred on the cert petition in the Vitamin C price fixing antitrust case, the Court asked the Acting Solicitor General to file a brief “expressing the views of the United States.”  The cert petition comes after a Second Circuit decision reversing a $147 million jury award to vitamin C importers who successfully argued in the court below that two Chinese companies fixed the prices of vitamin C exported to the United States in violation of the Sherman Act.

Last Friday, in the latest development in the massive auto parts antitrust litigation, the State of California settled with Sumitomo Electric Industries, Ltd. and related companies regarding their sale of wire harness systems and heater control panels at allegedly supracompetitive prices.  (For prior posts on this case, see here and here.)  Sumitomo did not admit to any wrongdoing, but agreed to pay California over $800,000 and cooperate with California’s litigation efforts against the many other defendants in the case.  Sumitomo and its related entities are the only auto parts defendants named in the State of California’s complaint.

Media outlets have reported that the U.S. Department of Justice raided the maritime industry’s “Box Club” meeting, which is more formally known as the meeting of the International Council of Containership Operators.  Box Club meetings include the CEOs of all major container lines, and even though the meeting locations are not publicly disclosed, the DOJ managed to serve subpoenas in mid-March at the San Francisco meeting, including top executives at A.P. Moller-Maersk, Evergreen, the Orient Overseas Container Line, and Hapag Lloyd.  Notably, the subpoena recipients are not U.S.-based companies—the DOJ may have used the Box Club meeting as an opportunity to exercise its subpoena power over foreign entities.

Since we last reported on the state and federal government’s generic drug pricing investigations and litigations (click here to read more), the U.S. Department of Justice (“DOJ”) has obtained its first guilty pleas.  On January 9, 2017, Heritage Pharmaceutical Inc.’s former CEO and its former president (the defendants are brothers-in-law) pleaded guilty to manipulating the prices of and divvying up customers for an antibiotic, doxycycline hyclate, and a diabetes medicine, glyburide.  The defendants are scheduled to be sentenced on September 28, 2017, and they face up to ten years of imprisonment.  The government’s filings in other lawsuits make clear that the defendants’ sentencing was delayed until the defendants complete their cooperation with the government.

In the past month, the DOJ and several state governments scored two trial wins in their challenges to mergers among some of the country’s largest health insurers.  First, Judge Bates of the District of Columbia blocked the combination of Aetna and Humana, finding that the “proffered efficiencies do not offset the anticompetitive effects of the merger.”  Weeks later, Judge Jackson of the same district scuttled a deal between Anthem and Cigna, which she found “likely to lessen competition substantially” in the relevant market. 

Manufacturers of containerboard and corrugated products have asked the Supreme Court to weigh in on a Circuit split concerning the impact of negotiated prices on class certification in antitrust cases brought under Section 1 of the Sherman Act.  Petitioners filed for a writ of certiorari on December 30, 2016, arguing that the Seventh Circuit in Kleen Products LLC, et al. v. International Paper Company, et al., Nos. 15-2385, 15-2386 (7th Cir. Aug. 4 2016), erred in two related ways, both of which flow from the fact that prices of the containerboard products at issue in the case tend to be individually negotiated. 

As we have previously reported, (click, here, here, here, and here to read more), generic drug manufacturers have recently come under intense scrutiny from state and federal regulators for their price hikes.  Last week, the Department of Justice and twenty state attorneys general instituted criminal and civil proceedings in connection with alleged generic drug price manipulation.

The Department of Justice (DOJ) and the Federal Trade Commission (FTC) last week issued antitrust guidelines for human resources (HR) professionals.  The guidelines highlight the most common antitrust violations, based on a review of cases in which federal antitrust agencies have taken enforcement actions against employers.  There are three main takeaways from this guidance.  

How explicitly must a complaint sounding in antitrust allege causation?  At oral argument last week, the Court of Appeals for the Second Circuit evaluated the sufficiency of the plaintiffs’ allegations that certain Takeda entities, in their representations to the FDA, falsely described patents for the antidiabetic drug ACTOS in order to delay the entry of generic competitors into the market—specifically, whether the plaintiffs had pleaded enough facts to show that these representations plausibly caused the delay.

It is probably safe to say that most voters in the 2016 presidential election do not view antitrust policy as a key campaign issue.  Accordingly, the candidates’ and their parties’ views on competition policy were scarcely, if at all, mentioned during the recent party conventions.  However, the parties’ official platforms suggest how the candidates, once in office, would handle competition policy.

As our loyal readers know, on May 23, 2016, the Second Circuit issued a decision in the In re: LIBOR-Based Financial Instruments Antitrust Litigation vacating the District Court’s prior decision dismissing one case in this consolidated action.  Our analysis of that decision is available here.  Notably, however, the Second Circuit declined to rule on whether the plaintiffs (the “Plaintiffs”) are “efficient enforcers” of the antitrust laws and remanded that question for the District Court’s consideration.

The Department of Justice ("DOJ") announced this week that Hitachi Chemical Co. will plead guilty to a criminal charge for conspiring with competitors to fix the prices of electrolytic capacitors sold in the United States and elsewhere. The Tokyo-based company will pay an undisclosed fine and has agreed to cooperate with the DOJ's investigation.

We will soon know whether the Supreme Court will grant Apple’s cert petition asking the Court to review and reverse its antitrust violation for conspiring with publishers to fix the prices of e-books.  The Court will consider the petition at its next conference on February 19.  As we previously reported here and here, a divided Second Circuit panel affirmed the district court’s findings that the per se rule applied to Apple’s conduct and that Apple violated Section 1 of the Sherman Act.

Earlier this month, defendants in the In re Cathode Ray Tube Antitrust Litigation moved to challenge the standing of major retailers to pursue damages claims under the Supreme Court’s 1977 Illinois Brick decision.

On November 12, 2015, the Third Circuit Court of Appeals issued an opinion partially reversing the dismissal of the plaintiff’s claims in Hanover 3201 Realty, LLC v. Village Supermarkets, Inc., finding that plaintiff Hanover Realty had successfully pleaded antitrust standing with regard to certain of its claims. The Third Circuit clarified—and potentially expanded the scope of—its prior interpretations of the Supreme Court’s seminal standing decision in Blue Shield of Va. v. McCready, 457 U.S. 465 (1982), which held that a plaintiff did not necessarily need to be a consumer or a competitor of a defendant to establish antitrust injury, if it could show that its injury was “inextricably intertwined” with the injury to intended victims of an antitrust conspiracy.

Yesterday, the Ninth Circuit issued an opinion affirming the dismissal of plaintiffs’ consolidated complaint in In re Musical Instruments and Equipment Antitrust Litigation. In addressing plaintiffs’ allegations of a hub-and-spoke conspiracy, the Ninth Circuit reiterated that each component of such a conspiracy (both vertical and horizontal) must be evaluated separately.