Alert: The Supreme Court clarified the principles of international comity this week in a ruling pertaining to the long-running vitamin C antitrust class action litigation. International comity is the recognition a nation shows to the legislative, executive or judicial acts of another nation. Principles of comity state that US courts should defer to the laws of other nations when actions are taken pursuant to those laws. In this week’s ruling, Justice Ginsberg wrote that federal courts should accord respectful consideration to foreign government submissions when analyzing comity issues, but are not bound by them. This ruling vacates the Second Circuit’s decision in the case overturning the jury verdict for the class, and is a win for the class of US purchasers of vitamin C. Continue Reading Supreme Court Clarifies Principles of International Comity in Vitamin C Ruling
Ashley (Lee) McMahon focuses her practice on antitrust and competition matters. Lee advises clients on complex issues relating to and arising under the antitrust laws in connection with civil litigation, international cartels, and mergers and acquisitions. She assists clients with premerger notification, review and analysis under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act. Lee is experienced in areas of e-discovery, document review and production for investigations before the Federal Trade Commission (FTC), Department of Justice (DOJ) and state attorneys general office. Read Lee McMahon's full bio.
- Senator Elizabeth Warren (D-MA) gave a speech at the Open Markets Institute on December 6 entitled “Three Ways to Remake the American Economy for All”, in which she repeatedly positioned antitrust policy as a tool to rebalance competition between “big, powerful corporations” and “just about everyone else.”
- Senator Warren spoke critically about recent antitrust enforcement and advocated three steps for improving antitrust enforcement: (1) block mergers that choke-off competition; (2) crack down on anticompetitive conduct; and (3) get all government agencies to defend competition.
- On mergers, Senator Warren asserted that “settlement agreements that allowed bad mergers if the companies promised to take actions” have not worked out because “those expertly crafted provisions have been epic failures” and that “[s]tudies show that those settlement conditions often fail to bring about the cost savings and other benefits giant corporations promised.”
- She advocated that to improve antitrust enforcement “we need to demand a new breed of antitrust enforcers … Enforcers who will turn down papier-mache settlement agreements and actually take cases to court.”
- Senator Warren stated that increased enforcement is needed not just for horizontal mergers between direct competitors, but also for vertical mergers (e.g., between customers/suppliers). In her view, the “Chicago School party line” that vertical mergers do not harm competition may be accepted theory, but is “not often the reality” when large companies are involved.
- On anticompetitive conduct, Senator Warren singled out no-poach agreements as an area for increased enforcement—specifically franchises that do not allow an employee of one franchisee to be hired by another franchisee.
- On getting other agencies to defend competition, Senator Warren noted that while not enforcers like DOJ, other government agencies like the Defense Department, the Food and Drug Administration, the Federal Deposit Insurance Corporation and the Federal Communications Commission, can significantly impact competition through regulation and purchasing.
- Finally, Senator Warren highlighted several consolidated industries that she views as significantly concentrated for which she would like to see increased antitrust focus including: airlines, banking, healthcare, pharma, agriculture, telecom and tech.
WHAT THIS MEANS:
- Senator Warren’s theme that antitrust can be used to protect small businesses, entrepreneurs, innovators, workers and just about everyone else from the “rich and powerful” shows that increasing antitrust enforcement has become a key party line for the upcoming midterm elections.
- Additionally, Senator Warren stated that “[t]he individuals who lead the [FTC and DOJ] determine the federal government’s competition priorities,” and have a significant impact on antitrust enforcement by deciding which cases to open or take to court. Given these statements and that several high-profile mergers will be decided before the midterms, we expect that Senator Warren will continue to highlight the potential impact of high-profile mergers on small business and individuals.
- On October 2, 2017, the US Court of Appeals for the Third Circuit unsealed its opinion in Valspar Corp. v. E.I. Du Pont De Nemours & Co., No. 16-1345 2017 WL 4364317 (3d Cir. Sept. 14, 2017) in which the court affirmed the district court’s grant of summary judgment for defendant on the grounds that plaintiff lacked sufficient evidence to allege a conspiracy to fix prices.
- Valspar alleged that titanium dioxide suppliers engaged in price-fixing, citing evidence that the manufacturers announced 31 price increases in a twelve year period and other circumstantial evidence. at *5. The parties agreed that the titanium dioxide market is oligopolistic, with a handful of firms, substantial barriers to entry, and no substitute products. Id. at *1.
- After Valspar settled with all defendants but DuPont, the latter moved for summary judgment. The district court found that Valspar lacked evidence of an actual agreement among defendant suppliers to fix prices. at *1.
- The Third Circuit agreed with the district court and found that Valspar’s argument failed on two grounds. First, the court explained that Valspar neglected to consider conscious parallelism when it claimed that it was “inconceivable” that defendants executed identical price increases on 31 occasions without a conspiracy. at *5. Price movement in an oligopoly is expected to be interdependent, as rational decision makers anticipate the movements of other firms. Second, Valspar was required to show that defendants’ parallel pricing “went beyond mere interdependence and was so unusual that in the absence of advance agreement, no reasonable firm would have engaged in it.” Id. at *6 (quoting In re Baby Food Antitrust Litig., 166 F.3d 112, 135 (3d Cir. 1999)).
WHAT THIS MEANS:
- The Valspar case is interesting in that it is an opt-out case from the In re Titanium Dioxide class action litigation, in which the United States District Court for the District of Maryland denied defendants’ motion for summary judgment based on the same evidence that here allowed the District of Delaware, as affirmed by the Third Circuit, to grant it. The Third Circuit attributed the different outcomes in the class and opt-out cases to the fact that the District of Maryland—which sits in the US Court of Appeals for the Fourth Circuit—is not bound by Third Circuit precedent while the District of Delaware is so bound. at *11 (“This resulted in the Maryland court applying a standard quite different from the one we have developed and that the [Delaware court] applied.”).
- The opinion clarifies the evidence required under Third Circuit precedent to prove a conspiracy in an oligopolistic industry. The court explained that in oligopoly cases, evidence that price increases are not correlated to supply or demand is “largely irrelevant.” at *7. Awareness among defendants of the conscious parallelism is similarly not enough. Id. at *4 n.3. Plaintiffs must show proof of an explicit, manifest agreement. Id. A plaintiff alleging a conspiracy among defendants may not rely on “ambiguous evidence alone” to survive summary judgment. Id. at *5 (quoting In re Chocolate Confectionary Antitrust Litig., 801 F.3d 383, 396 (3d Cir. 2015)).
This week, the Federal Trade Commission filed an administrative complaint against the Louisiana Real Estate Appraisers Board (LREAB). This complaint is the FTC’s first against a state licensing board since it prevailed in the Supreme Court in the decision in NC State Board of Dental Examiners v. FTC in 2015. There, the Court held that immunity from the antitrust laws under the state action doctrine does not apply to a state board that regulates an industry if: 1) a majority of the board members are active participants in the market they are regulating, and 2) the board has not been actively supervised by the state. McDermott reported in detail about the NC Board of Dental Examiners at the time of the decision. The complaint comes on the tail of a settlement agreement between the FTC and a trade organization, the American Guild of Organists, as reported this week.
FTC alleges that the LREAB violated Section 5 of the Federal Trade Commission Act by unreasonably restraining price competition for real estate appraisal services provided to appraisal management companies (AMCs) in Louisiana.
On February 9, the US Court of Appeals for the Third Circuit upheld a ruling by the US District Court for the District of Delaware that indirect purchasers of Class 8 transmissions did not meet the requirements for class certification. The Third Circuit found that only the individual claims may proceed in the case. The opinion is significant because it reaffirms the difficulty indirect purchaser plaintiffs face when attempting to certify a class.
This month, the US Department of Justice Antitrust Division revised its “Frequently Asked Questions About the Antitrust Division’s Leniency Program and Model Leniency Letters” (FAQs), with releases both before and after the new administration took office. The revisions serve as a signal that the continuity we have seen in previous years from the Antitrust Division is likely to continue. The changes include long-needed clarifications and updates since the release of the FAQs in 2008.
This month has seen significant changes in the landscape of federal leadership and the changes have now reached the Federal Trade Commission (FTC). On January 13, current Chair Edith Ramirez announced that she would resign from her position effective February 10, 2017. This Wednesday, January 25, the new administration designated Maureen Ohlhausen as Acting Chair. Ohlhausen, a Republican, was one of two remaining commissioners at the agency, along with Democrat Terrell McSweeny.
Ramirez served as a commissioner since 2010 and chair since early 2013 by designation of fellow Harvard Law Review member, President Obama. She spent her early career as a litigator with Quinn Emanuel and focused on antitrust, unfair competition and Lanham Act work. From the beginning of her tenure as chair, Ramirez developed a reputation as a hard-working and effective leader who was experienced, even-handed and not afraid to bring mergers to court. As a Latina and the daughter of Mexican immigrants, Ramirez was the first member of an ethnic minority to oversee the agency. During her tenure, she also secured a number of high-profile wins for the commission.
Ohlhausen has been a commissioner since 2012, though she started at the FTC’s General Counsel’s Office back in 1997. She has also worked as an advisor to former FTC Commissioner Orson Swindle and has been Deputy Director and then Director of the Office of Policy Planning. Ohlhausen stated at a Heritage Foundation antitrust conference this month that “all signs point to a new antitrust policy.” She discussed narrowing the scope of “Second Requests” in merger reviews by making them more targeted and therefore less burdensome. She also expressed a priority of greater protection for intellectual property rights, complaining that the agency has been too quick to accuse standard essential patent (SEP) holders of anticompetitive behavior when suing to defend their rights.
Meanwhile, the new administration’s position on merger activity hasn’t been clear. While in October 2016, Donald Trump described the AT&T-Time Warner deal as “a deal we will not approve in my administration because it’s too much concentration of power in the hands of too few,” and said that Comcast’s acquisition of NBC Universal “concentrates far too much power in one massive entity that is trying to tell the voters what to think and what to do,” he has subsequently chosen advisers on telecom and antitrust issues who appear to apply traditional antitrust analysis that is more merger-friendly than the prior administration.
Republican and Former Commissioner Joshua Wright leads the new administration’s transition of the FTC. The incoming administration will need to find three new commissioners for the five-member panel. At least one of the three must be a Democrat. The new appointments will be very important to follow for clients considering mergers in the near future.
On Friday, January 13, 2017, the Department of Justice (DOJ) and Federal Trade Commission (FTC) released the new Antitrust Guidelines for International Enforcement and Cooperation. These guidelines were jointly developed by the agencies and serve to update the Antitrust Enforcement Guidelines for International Operations that have been in place since April 1995. The new guidelines include a revised discussion on conduct involving foreign commerce, a new chapter on international cooperation, and updated language, case law, and illustrative examples throughout.
On October 14, 2016, former vice president and director of information technology of Coach USA, Inc. (Coach), Ralph Groen, entered a guilty plea for concealing and attempting to destroy documents and giving false and misleading statements under oath in a deposition during the US Department of Justice Antitrust Division’s (DOJ) investigation of a joint-venture involving Coach.
The DOJ’s complaint alleged that despite two preservation notices issued by Coach to its management team, which included Groen, Groen directed subordinates to destroy month-end backup tapes of emails and electronic records. Due to the destruction, the records were not produced to the United States during discovery. The government argued that these materials were relevant and responsive to the DOJ’s discovery requests. Additionally, Groen then falsely informed the company’s outside counsel that these materials did not exist. Groen also concealed versions of backup procedure documents that would have been relevant and responsive to the DOJ’s requests, and only provided one version. Finally, during a deposition where Groen testified as a 30(b)(6) deponent in September 2013, he lied under oath, providing false and misleading statements to the government about Coach’s document retention practices and policies. Continue Reading Criminal Charges for Executive Stemming from Discovery Responses in DOJ Civil Antitrust Litigation
On October 6, the Federal Trade Commission (FTC) released its report on patent assertion entity (PAE) activity. The report is the result of research that began in September 2014 to address a gap in the agency’s understanding of PAEs, how they operate and how policies can be developed to reduce nuisance litigation. The study focused on PAE practices, including acquisition, litigation and licensing. The FTC recommends that policymakers address asymmetries in PAE litigation through various procedural and substantive reforms.
Read the full article here.