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).
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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.
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.
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.
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.
On March 27, 2018, the Third Circuit affirmed dismissal of an antitrust suit against Uber Technologies, Inc. (“Uber”) by the Philadelphia Taxi Association and its members, individual taxicab companies (together, “Plaintiffs”). In essence, the Third Circuit held that, based on Plaintiffs’ allegations, federal antitrust laws do not reach Uber’s alleged violation of state and local taxicab regulations and that its entrance into the Philadelphia taxicab market created more competition, not less.
On November 20, 2017, the Department of Justice (“DOJ”) filed suit in the District Court for the District of Columbia to block AT&T’s attempted acquisition of Time Warner Inc. AT&T (through its cellular network, its fiber-optic television distribution service U-Verse, and its ownership of DirecTv) is a video distributor, and Time Warner (through its ownership of cable networks like TNT, CNN, and HBO) is a video producer. Because the companies primarily operate in different parts of the supply chain of program content, they do not directly compete with one another. A combination of two such companies is known as a “vertical merger.” The DOJ’s decision to try and block AT&T’s bid surprised many observers because it is unusual for the government to object to a vertical merger; in fact, the last time the DOJ actually filed a lawsuit to block or dissolve a vertical merger was forty years ago.
Eighth Circuit Applies Continuing Violation Doctrine to Extend Statute of Limitations for Sherman Act Claims
Recently in In re Pre-Filled Propane Tank Antitrust Litigation, an en banc panel of the Eighth Circuit clarified the application of the continuing violation exception to the statute of limitations for claims under the Sherman Act. The Court was closely divided, with a 5-to-4 split between the majority opinion and a sharply worded dissent. The majority held that, in an antitrust conspiracy suit, a continuing violation tolls the statute of limitations as long as there were unlawful acts (e.g., sales to the plaintiff) within the limitations period, even if the alleged conspiracy was hatched outside the four-year statute of limitations period. The dissent, however, argued that to avoid dismissal plaintiffs are required to show a live, ongoing conspiracy within the limitations period.
“But what is more common than exclusive dealing?” Affirming summary judgment for defendant Saint Francis Medical Center, the Seventh Circuit recently held that the hospital’s contracts with health care insurers—though admittedly exclusive—did not harm competition. In fact, such contracts were likely the product of a competitive market in which Saint Francis was simply the best competitor.
European competition authorities announced this week an investigation into Aspen Pharmacare’s recent price hikes of five cancer drugs. The European Commission said in a press release that it had “information indicating that Aspen has imposed very significant and unjustified price increases of up to several hundred percent.” The Commission is also looking into reports that the South African-based generic drug-maker withdrew or threatened to withdraw the drugs from countries that would not accept these price hikes. If the investigation demonstrates that Aspen abused its alleged dominant market position to increase prices, the Commission could order fines of up to 10 percent of the company’s yearly revenue.
Last Monday Sanofi brought an antitrust suit against Mylan, alleging that Mylan engaged in illegal conduct to suppress competition in the epinephrine auto-injector (“EAI”) market, which is dominated by Mylan’s billion-dollar EpiPen® product. In particular, Sanofi alleges that Mylan has had a virtual monopoly in the EAI market, but felt threatened when Sanofi entered the market in 2013 with its Auvi-Q® product, which Sanofi touted for its smaller size and voice instructions (as opposed to EpiPen®’s written instructions).
The incentive is high to identify a Sherman Act violation in your competitor’s conduct—three times higher, to be precise, than to bring a claim for an ordinary business tort or even a false advertising claim under the Lanham Act. But as we noted in December, the Fifth Circuit recently refused to recognize a claim for attempted monopolization under Section 2 based on a defendant’s false advertising “absent a demonstration that [the] false advertisements had the potential to eliminate, or did in fact eliminate, competition.” The court relied on a prior decision in which it expressed “extreme reluctance to allow a treble damage verdict to rest upon business torts alone.” The case is Retractable Technologies, Inc. v. Becton Dickinson & Co.
In a recent decision, the Third Circuit held that a public university and its non-profit partner were immune from antitrust liability after the university enacted a student residency policy that benefitted on-campus dormitories at the expense of off campus housing. Absent evidence that a university is controlled by participants in the housing market, it is entitled to a presumption that is acting in the public interest and therefore enjoys more deference than a state board composed of active market participants. The takeaway is that state universities seeking immunity from alleged anti-competitive actions must show that their conduct complies with a clearly articulated state policy but need not show active supervision of the university by the state.
Second Circuit Declares That, to Survive Motions to Dismiss, Antitrust Allegations Require Factual Support for All “Necessary Premises”
Last Wednesday, the Second Circuit Court of Appeals partially vacated the judgment of the district court in In re Actos End-Payor Antitrust Litigation.
It has been over three years since the Supreme Court’s Actavis decision. Since then, numerous putative class actions alleging harm to competition as a result of “reverse-payment” settlements have flooded the courts. The complexity of these cases, along with the vague guidance provided by the Supreme Court, has given rise to intricate questions about how courts should apply Actavis and scrutinize settlements of Hatch-Waxman litigation.
On Monday, Australia’s Federal Government released new draft legislation after a panel conducted a review of Australia’s competition laws last year. The proposed revisions consolidate power and discretion with the Australian Competition and Consumer Commission (the “Commission”) and harmonize some laws with EU competition laws.
Package Size Is Not a “Service” Under Section 2(e) of the Robinson-Patman Act, Says Seventh Circuit in Clorox
On August 12, the Seventh Circuit issued its decision in Woodman’s Food Market v. Clorox Co., an appeal that we have been watching closely. The Seventh Circuit’s ruling, which held that product package size is not a promotional “service,” is an important clarification of the scope of price discrimination liability under Section 2(e) of the Robinson-Patman Act (RP Act).
On August 8, the District of Connecticut issued a noteworthy ruling on how to approach defining the relevant market definition in a pay-for-delay suit.
The European Commission on Tuesday announced its decision finding truck makers MAN, Volvo/Renault, Daimler, Iveco, and DAF liable for violating EU antitrust rules. The companies acknowledged that for 14 years they colluded in setting truck prices, settling the case for a record total of €2.93 billion. Competition commissioner Margrethe Vestager reported that the five-company cartel “account[s] for around 9 out of every 10 medium and heavy trucks produced in Europe.” Vestager also said that the unprecedented fines send a “clear message to companies that cartels are not accepted.”
Freedom to Whiten: Teeth-Whitener’s Antitrust Suit Against Georgia Board of Dentistry Allowed to Proceed
Earlier this week, in Colindres v. Battle, et al., No. 15-CV-2843 (N.D. Ga.), the District Court for the Northern District of Georgia refused to dismiss antitrust claims brought by the owner of a teeth-whitening company against the members of Georgia’s Board of Dentistry. The plaintiffs, the owner and her company, allege that the Board has been sending agents to threaten her and her company with felony charges for unlicensed practice of dentistry, carrying a possible sentence of as much as five years in prison, though the Board has refused to take formal enforcement action or even put its complaints in writing.
The Antitrust Division recently issued its 2016 annual spring update. Taking advantage of modern technology, Bill Baer—now the Acting Associate Attorney General serving in the DOJ’s third-highest ranking position—prepared video remarks for your viewing pleasure. (Still, most of the Division’s updates were included in written commentary.) Renata B. Hesse now serves as the Principal Deputy Assistant Attorney General responsible for overseeing the Antitrust Division.
On May 23, 2016, the Second Circuit issued a long-awaited decision in the In re: LIBOR‐Based Financial Instruments Antitrust Litigation, vacating the District Court’s (Buchwald, J.) prior decision dismissing one case in this consolidated action.
Judge Merrick Garland, if he is confirmed, may become one of the Supreme Court’s foremost authorities in antitrust law. He taught antitrust law at Harvard, and he has published on the subject, so it’s fair to expect him to seek a role in shaping antitrust jurisprudence and perhaps voting to hear more antitrust cases than currently end up on the Court’s docket.
New York District Court Allows Monopolization Claims Alleging Manipulation of Electricity Prices to Proceed Against Barclays
Last week, Judge Victor Marrero of the U.S. District Court for the Southern District of New York partially granted Barclays PLC’s motion to dismiss antitrust and unfair enrichment claims brought against it by Merced Irrigation District.
Direct and indirect purchasers of Nexium recently appealed District of Massachusetts Judge William Young’s denial of a request for a new trial in In re: Nexium to the First Circuit.
Yesterday, the Seventh Circuit heard argument in the Woodman’s Food Market v. Clorox Co. appeal. As members of our team have previously reported, this case concerns whether a plaintiff can state a claim under Section 2(e) of the Robinson Patman Act based on the size of the package offered for sale.
Generic drug manufacturers have come under scrutiny from state and federal regulators for recent generic drug price hikes. These investigations have expanded to include Turing Pharmaceuticals and its former CEO, Martin Shkreli.
Last week the Federal Trade Commission, in an amicus brief before the Seventh Circuit in Woodman’s Food Market, Inc. v. Clorox Co., rejected two decades-old FTC decisions applying Section 2(e) of the Robinson-Patman Act.
Drug company Turing Pharmaceuticals made headlines recently when it reportedly raised the price of Daraprim, used commonly by AIDS patients to fight life-threatening infections, from $13.50 to $750 per tablet. Amidst vociferous protest, the company agreed to reduce the price. But the attention garnered by media reports has led to some allegations that Turing may have run afoul of antitrust laws through a less-publicized aspect of its marketing of Daraprim: the elimination of certain distribution channels, including wholesalers and retailers.
The FTC’s Bureau of Competition recently issued new “Best Practices” guidance for parties involved in merger investigations. This is the Commission’s first guidance on the merger review process since the Merger Process Reforms were issued in 2006. As the Commission explains, it issued the updated guidance because parties rarely have been invoking the Merger Process Reforms and also have been relying on the “withdraw and refile” process in the initial review period of Hart-Scott-Rodino filings.
Together with the State of Michigan, the United States Department of Justice’s Antitrust Division has filed a civil suit against four Michigan hospital systems for allegedly agreeing to limit marketing in each other’s territories. Three of the hospital systems—Hillsdale Community Health Center, Community Health Center of Branch County, and ProMedica Health System—have agreed to settle the charges.
AlarMax Distributors Inc. may pursue price discrimination claims under the Robinson-Patman Act (RPA) against Honeywell International Inc., a federal judge in Pennsylvania ruled last week. Fire and security product distributor AlarMax alleges that Honeywell violated a decade-old settlement and supply agreement by engaging in unlawful pricing activity.
The head of the Department of Justice’s criminal antitrust unit called Monday for greater international cooperation in limiting the cost for companies to cooperate with investigators. Deputy Assistant Attorney General Brent Snyder’s remarks come on the heels of Canadian Competition Commissioner John Pecman’s speech urging development of a “longer term strategic plan” for international antitrust cooperation.
In a long line of European regulators taking aggressive stances against American tech companies, Margrethe Vestager, the European Union’s (EU) antitrust chief, is determined to pursue antitrust claims against Google. In addition to bringing formal charges against Google for allegedly abusing its dominance in web searches, Vestager has opened a formal investigation into Google’s practice of “pre-installing its apps and services onto Android smartphones,” presumably based on the theory that doing so gives Google’s software preferential treatment compared to its competitors.
In today’s technology-heavy world, technical interoperability standards are quite common. Because those standards are often patented, patent owners may have the ability to extract a monopoly price and some argue those owners can “reduce the number of competitors practicing the standard.”
Allegations of conspiracy to restrain trade and exclusive dealing may read like textbook antitrust claims, but if the allegations are made by a plaintiff who is not an “efficient enforcer” of the antitrust laws, the complaint is vulnerable to a motion to dismiss.
On March 17, 2015, a Ninth Circuit panel consisting of Chief Judge Sidley R. Thomas, Circuit Judge Jay S. Bybee and Senior U.S. District Judge Gordon J. Quist, of the Western District of Michigan heard oral argument in O’Bannon v. NCAA.
On Tuesday, March 10, 2015, an employee of the Japan-based Nippon Yusen Kabushiki Kaisha (NYK) pleaded guilty to a violation of the Sherman Act for conspiring to fix prices and rig bids for international ocean shipping from approximately 2004 through 2012. Susumu Tanaka, formerly a manager, deputy general manager and general manager in NYK’s car carrier division, received a 15-month prison sentence and will pay a $20,000 criminal fine.
Court Rules Against American Express Based on Both Direct and Indirect Evidence of Harm to Competition
On February 19, 2015, the District Court for the Eastern District of New York issued its ruling on liability in United States v. American Express. Following a seven-week trial, the Court found that American Express violated Section 1 of the Sherman Act by imposing certain restrictions on merchants that prevent the merchants from offering their customers incentives to use competing credit cards with lower retail charges.
As reported previously, the first post-Actavis jury verdict in a “reverse payment” antitrust case handed a win to the defendants. Now, plaintiffs in In re: Nexium (Esomeprazole) Antitrust Litigation have moved for a new trial, arguing that the Massachusetts federal district court committed error in formulating the jury charge and in excluding some of plaintiffs’ evidence.
Several minor league baseball players have filed an antitrust class action against Major League Baseball, alleging that MLB and its teams operate as a cartel to impose restrictive contracts on minor league players. The suit, Miranda v. Selig, alleges that the league’s anticompetitive conduct has artificially lowered wages for the approximately 6,000 minor league baseball players employed by the league, resulting in some minor leaguers earning as little as $3,000 per year.
Last week, we briefly reported on the injunction granted by the U.S. District Court for the Southern District of New York in the New York Attorney General’s “product hopping” suit against Actavis and its subsidiary, Forest Laboratories LLC. On Monday, the court held a hearing on the injunction and released a copy of its decision (portions of which are redacted from public view).
After six weeks of trial and two days of deliberation, the jury has returned its verdict in favor of the defendants in In re: Nexium. This trial began as a challenge to the allegedly anticompetitive effects of the settlements of prior patent infringement litigations between AstraZeneca and Teva and between AstraZeneca and Ranbaxy concerning AstraZeneca’s Nexium.
How does a court explain the complicated area of law at the intersection of patent settlements and antitrust law to a group of lay-jurors in the wake of Actavis? The district court’s approach to preliminary jury instructions in the on-going Nexium “reverse payment” trial provides one solution. The instructions also raise questions concerning the significance of direct evidence of market power that we previously discussed in connection with the Amex and Cephalon cases.
The current debate over whether Amazon holds the power of a monopolist or a monopsonist is likely to be narrowed to one question in a court room: What is the relevant product market that Amazon is allegedly dominating? Since our last post on the Amazon and Hachette dispute, there has been increased discussion in the general press, culminating with 2008 Nobel Prize winner for economics Paul Krugman telling readers of the New York Times that Amazon is a monopsonist.
The long trial in United States v. American Express has come to an end: on September 18, 2014, the parties exchanged post-trial briefing and on October 9, 2014, the court held oral argument. News reports suggest that the Court (Judge Garaufis in the Eastern District of New York) was looking for ways to avoid court intervention (including urging the parties to settle) and suggest that, if it did find an antitrust violation, the Court would consider holding additional proceedings to determine the appropriate remedies.
The intersection of IP and antitrust has always been fraught. The raison-d’être of the Sherman, Clayton, and FTC Acts is to bust trusts and promote competition. Meanwhile, intellectual property laws create lawful exclusionary rights.
This series will explore one particular point of tension: the battle over “reverse payment settlements” pursuant to which the plaintiff in a patent infringement action agrees to “pay” the alleged infringer to keep the infringer’s product off the market for a period of time. In these “pay-for-delay” arrangements, the province of the pharmaceuticals industry, the settling parties are a brand-name drug manufacturer and the maker of a generic equivalent.
The DOJ’s ongoing civil trial challenging American Express’s merchant rules as a violation of Section 1 of the Sherman Antitrust Act may clarify the significance of market share calculations.
At issue in the case are Amex’s rules barring merchants from steering consumers to cards that charge lower merchant processing fees.
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