William F. Cavanaugh, Jr., Partner

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.

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 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;[1] in fact, the last time the DOJ actually filed a lawsuit to block or dissolve a vertical merger was forty years ago.

“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.

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).

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.

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. 

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.  

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.  

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.

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.

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.

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.

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. 

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. 

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.

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 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.  

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.

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).  

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 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 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.