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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.
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.
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 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.
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
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).
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.
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