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Antitrust Alert

A Global Resource for Compliance Officers & Legal Advisors

MOFCOM Asks Second Circuit to Reverse Judgment Against Chinese Vitamin Manufacturers

Posted in Chinese Developments, Private Litigation

On April 14, 2014, China’s Ministry of Commerce (MOFCOM) filed an amicus brief asking the Second Circuit to overturn a ruling by the Eastern District of New York against Chinese vitamin manufacturers.  See Brief for Amicus Curiae Ministry of Commerce of the People’s Republic of China in Support of Defendants-Appellants, In re Vitamin C Antitrust Litigation, No. 13-4781 (2d Cir. filed Apr. 14, 2014).  The lower court rejected the defendants’ argument that the challenged conduct was required by Chinese law and refused to dismiss the case.  The case was later tried by a jury and ultimately resulted in a $157 million judgment against the defendants.

As MOFCOM recounted in its brief, the Chinese agency has been involved in the litigation since 2006, when it filed its first amicus brief in support of defendants’ motion to dismiss.  MOFCOM explained that beginning in 1997, it required the defendants to participate in a Vitamin C Subcommittee in order to obtain export licenses, which “could be revised or revoked if a licensee failed to comply with mandatory export price and quantity constraints.”  Brief at 5.  The lower court characterized MOFCOM’s involvement in the case as “a post-hoc attempt to shield defendants’ conduct from antitrust scrutiny.”  Id. at 2.  In its April 14 filing, MOFCOM fired back, calling the court’s statement “profoundly disrespectful, and wholly unfounded.”  Id.

MOFCOM’s central legal argument is that under United States v. Pink, 315 U.S. 203, 220 (1942), American courts must accept a foreign government’s official interpretation of its own law as conclusive.  The district court, however, “ignored these fundamental precepts” and “instead invented its own mode of analysis that yielded a strikingly incorrect conclusion of Chinese law.”  Brief at 14.  The case has raised thorny international relations issues, and the appeal will no doubt be closely watched by the Chinese government.  In MOFCOM’s words, “[t]he district court’s approach and result have deeply troubled the Chinese government, which has sent a diplomatic note concerning this case to the U.S. State Department.”  Id. at 13.  A reversal by the Second Circuit would “reaffirm that principles of international comity require district courts to treat official statements of a foreign government with a high degree of deference and respect, and with due caution about the court’s ability to determine accurately the law of an unfamiliar legal system.”  Id.

Judge Ends Indirect Purchaser Plaintiffs’ Case in Refrigerant Compressors

Posted in Private Litigation

Last week, on April 8, 2014, the District Court for the Eastern District of Michigan dismissed the remaining claims of indirect purchaser plaintiffs (IPPs) in the ongoing Refrigerant Compressors litigation.  In re: Refrigerant Compressors, Case No. 2:09-md-02042 (E.D. Mich. April 8, 2014).  Almost exactly one year ago, the court dismissed most of the IPPs’ claims, mainly on the basis that the IPPs lacked antitrust standing to bring them.  In re: Refrigerant Compressors, Case No. 2:09-md-02042, Doc. 343  (E.D. Mich. April 9, 2013).  As a result of that decision, the IPPs’ case was limited to claims based on only two state statutes seeking damages against manufacturers of fractional compressors used in refrigeration devices, based on sales that occurred in only those two states.  The court’s decision dismissing the last two state claims was brief and resulted from a stipulation among the IPPs and those particular manufacturers to dismiss the claims.  The parties have not filed their agreement with the court, and it is not publicly available.   

Significantly, the court dismissed the IPPs’ claims with prejudice, eliminating these IPPs’ ability to refile their claims.  This order now ends the indirect purchaser litigation with respect to these IPPs in the refrigerant compressors litigation five years after the IPPs filed their initial complaint, but before the parties reached discovery.  It is unclear whether this agreement will bar any future claims by other potential indirect purchasers.  Typically, when a class plaintiff settles a litigation prior to the actual certification of a class, the parties seek to certify a settlement class.  By certifying a settlement class, the settlement becomes binding on all of the absent class members who do not opt out.  Accordingly, a settlement with a class of plaintiffs will bar any future litigation by members of that same class.  Here, there is no certification of a settlement class.  Therefore, it is possible that other indirect purchasers may be able to bring claims against these defendants in the future.

The court also ordered each party to bear its own costs and legal fees.  The court explicitly noted no one should consider its order and stipulation as an admission of liability against any defendant.  Such an order and stipulation likely means that the parties agreed to a settlement.  It is unclear whether the settlement involves some small payment to the IPPs or whether there was no payment, which is possible if the parties felt that the costs to all parties of litigating the case vastly exceeded the plaintiffs’ potential damages.

This settlement shows that if a defendant can eliminate a significant number of indirect purchasers’ state claims, the indirect purchaser plaintiffs may be more likely to settle prior to engaging in expensive discovery.  However, defendants should still consider moving the court to certify a settlement class in order to bar any future claims from all indirect purchasers.

Section 1 Claims Dismissed in LIBOR, TIBOR Class Action

Posted in Private Litigation

On March 28, 2014, Judge Daniels of the Southern District of New York dismissed antitrust and unjust enrichment claims against over 20 banks accused of manipulating prices in the Euroyen interbank lending market by submitting false rate quotes to Yen-LIBOR and Euroyen TIBOR rate-setting organizations.  Laydon v. Mizuho Bank, Ltd., No. 12-cv-3419 (S.D.N.Y. Mar. 28, 2014).  The plaintiff, a short purchaser of Euroyen TIBOR futures contracts, also brought claims under the Commodities Exchange Act, which the court allowed to go forward.

The court based its dismissal of the price-fixing claim on lack of antitrust standing and failure to allege a restraint of trade.  The plaintiff lacked antitrust standing for two reasons: (1) failure to plead antitrust injury and (2) the indirect, remote and speculative nature of his alleged injury—while the alleged misconduct involved manipulating present-day interbank lending rates, the alleged injury was suffered in the futures market.  Although the plaintiff alleged that prices were distorted, he failed to allege that the distortion resulted from a reduction in competition.  The ruling was partially based on the unique nature of the rate-setting process, which is neither supposed to be competitive nor collaborative.  Instead, “each bank was supposed to independently contribute its submission to be evaluated collectively with other bank submissions.”

In holding that the plaintiff failed to allege a restraint of trade, the court noted, “Plaintiff merely alleges that prices may have been different.  Plaintiff does not, however, allege that trades in Euroyen TIBOR futures contracts were in any way restrained by the alleged misconduct.”  The court analyzed the alleged misconduct under the rule of reason and found that the plaintiff had failed to plead any anticompetitive effects.  “There are no allegations that banks competed less, or were forced out of any of these markets.  Nor is there any allegation that output of Euroyen futures contracts was eliminated or diminished.  Absent any such allegations, Plaintiffs’ claim does not sufficiently plead a violation of the Sherman Act.”

Terrell McSweeny Confirmed as Fifth FTC Commissioner

Posted in FTC Developments

10 months after President Obama nominated her, Terrell McSweeny has been confirmed as the fifth FTC commissioner.  The vote was 95-1 for McSweeny with David Vitter, a Republican from Louisiana, voting against her nomination.

McSweeny’s confirmation marks the first time in history that four women have served as FTC commissioners at the same time.  It also gives the FTC its full complement of commissioners (now three Democrats and two Republicans), which may increase the number of matters that move forward to investigation and may help to resolve matters more quickly. A full panel of commissioners will be key in several upcoming large mergers, including a plan by food distributor Sysco Corp to merge with rival U.S. Foods Inc., and a proposed combination of grocery chains Kroger and Harris Teeter.

Prior to the FTC, Ms. McSweeny served at the DOJ on many high-profile matters such as the Anheuser-Busch InBev NV-Grupo Modelo SAB de CV merger and the merger between American Airlines Inc. and US Airways Group Inc.  She also worked on the DOJ’s e-books price-fixing suit against Apple Inc. and its work on the International Trade Commission’s decision to block the import of Apple Inc. products based on Samsung Electronics Co. Ltd.’s standard-essential patents.

Her experience at the DOJ will carry over to the FTC and will likely increase the cooperation between the two agencies.  Her prior work at the DOJ in particular, as well as at her former law firm, O’Melveny Myers, gives her experience on an issue the FTC is currently pursuing on patent assertion entities, pay-for-delay arrangements and privacy issues.

Previously, Ms. McSweeny advised three presidential candidates on domestic policy and related matters. In 2008, she worked for Vice President Biden in various capacities including domestic policy issues.

FTAIA and Foreign Sales: Seventh Circuit Limits Extraterritorial Reach of U.S. Antitrust Law in Motorola Mobility v. AU Optronics

Posted in Private Litigation

On March 27, 2014, in Motorola Mobility LLC v. AU Optronics Corp., the Seventh Circuit set precedent in the growing body of law interpreting the Foreign Trade Antitrust Improvements Act (FTAIA).  Judge Posner held that the FTAIA bars antitrust suits over restraints in foreign markets for parts (inputs) used abroad to manufacture products later imported into the United States.  The court held that such price fixing fails the FTAIA’s “direct effects” test, as well as the FTAIA requirement that the effect of the defendant’s conduct “gives rise to” an antitrust claim in the United States.

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Commission Holds Goldman Sachs Liable for Former Portfolio Company’s Antitrust Infringement

Posted in Cartel Enforcement, EC Developments

by Veronica Pinotti, Lionel Lesur, Martino SforzaNicolò di Castelnuovo

In its decision of 2 April 2014 in relation to the underground and submarine high voltage power cables cartel case (COMP/39610), the European Commission (Commission) held the parent companies of the producers involved liable, on the basis that they had exercised decisive influence over the producers. The fines levied by the Commission in this case totalled €301.6 million. One of the businesses found liable was Goldman Sachs, the former owner of Prysmian, which is one of the companies that allegedly participated in the cartel.

This case has important implications for private equity funds. It confirms that, in principle, the Commission does not view private equity funds differently to other businesses for the purpose of the application of the parental liability doctrine.

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First Successful Extradition of Foreign National for Price-Fixing Violation

Posted in Cartel Enforcement, DOJ Developments, German Developments

For the first time, the U.S. Department of Justice (DOJ) has successfully litigated an extradition of a foreign national on an antitrust charge.  This extradition shows that the DOJ is still pursuing individuals it charged several years ago with criminal price-fixing conduct and is a watershed moment in DOJ criminal enforcement of the antitrust laws.

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Non-Direct Competitors May Sue Under the Lanham Act, Doctrine of Prudential Standing Eliminated

Posted in IP Antitrust, Private Litigation

The Supreme Court of the United States swept away the different standards for Lanham Act prudential standing previously applied by the courts of appeals, and expressly discarded the amorphous concept of prudential standing in all federal statutory cases.

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Significant Changes to UK Competition Regime Now Effective

Posted in Cartel Enforcement, EC Developments, EU Developments

by Andrea Hamilton, David Henry, Aiste Slezeviciute

The Enterprise and Regulatory Reform Act 2013 took effect on 1 April 2014. Increased efficiencies and deterrence are the main drivers of this reform.

As of 1 April 2014, the Enterprise and Regulatory Reform Act 2013 (ERRA) brings about significant substantive and structural change to the United Kingdom’s competition regime. As part of a more general overhaul of this regime, the recently created Competition and Markets Authority (CMA) becomes fully operational, a revised criminal cartel offence enters into force, and the merger control regime becomes more robust. These changes bring in their wake a swathe of new investigatory and enforcement powers and penalties for failure to comply. Businesses are therefore urged to take note of these new changes and to be alert to compliance risk. This On the Subject summarizes some of the key aspects of the reforms.

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German Court Rejects National Competition Authority Liability for Damages After Unlawful Prohibition of a Merger

Posted in German Developments, Mergers & Acquisitions

The Higher Regional Court in Düsseldorf yesterday dismissed an action for damages of €1.1 billion brought by GN Store Nord against the German Federal Cartel Office. The judgment sheds some light on the possibility for companies to claim damages in the context of an unlawful prohibition of a proposed merger.

Click here to read the full article.