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THE LATEST: Court Nixes Indirect Purchaser Claims for Lack of Standing

by Hillary Webber | Mar 8, 2017 | Private Litigation

To bring a claim for antitrust damages, indirect purchasers must show that they have antitrust standing. They must demonstrate that their injuries are sufficiently direct and intertwined with the alleged cartel conduct that they are entitled to recover an overcharge, despite being downstream – sometimes by several levels – from the direct purchasers.

WHAT HAPPENED:

In Supreme Auto Transport LLC, et. al. v. Arcelor Mittal, et al. (Supreme Auto), defendant steel producers defeated state antitrust, consumer protection, and unjust enrichment claims brought by a purported class of indirect purchasers of retail products containing steel. The court found that plaintiffs lacked antitrust standing to recover for their alleged indirect harm.

Plaintiffs alleged that defendant steel manufacturers conspired to restrict steel output, thereby raising the price of steel. Plaintiffs contended that direct purchasers of steel passed on these price overcharges to the plaintiff purchasers of steel-containing products such as refrigerators, dishwashers, automobiles, and construction equipment.

The court found it appropriate to apply the Associated General Contractors (AGC) standard – the prevailing test for antitrust standing under federal law – to each of the state antitrust claims. AGC looks at factors including the causal connection between the violation and the harm, the directness of the injury, and the risk of speculative and duplicative damages to determine whether a plaintiff is a proper party to bring the antitrust action.

Though plaintiff retail customers described their injury as inextricably intertwined with the defendants’ alleged restriction of the steel market, the court held that plaintiffs’ injury was too remote to confer standing. The complaint failed to account for interceding steps in the distribution and manufacturing chain that occurred between defendants’ production of raw steel and plaintiffs’ purchase at retail of a product containing steel as a component. Nor did the complaint provide a basis to link the steel in an end-use product to that produced in any of defendants’ steel mills.

The court determined that remoteness similarly doomed the plaintiffs’ other state law claims because they could not establish proximate cause between plaintiffs’ harm and defendants’ alleged misconduct.

The court also found that plaintiffs’ claims were time-barred, rejecting class action tolling of the statutes of limitations or relation back of the amended claims.

WHAT THIS MEANS:

Supreme Auto adds to a growing body of caselaw (see, e.g., In re Aluminum Warehousing Antitrust Litigation; In re Dairy Farmers of America, Inc. Cheese Antitrust Litigation) in which courts have found that indirect purchasers’ relationship to the alleged misconduct is too attenuated for plaintiffs to possess antitrust standing. Courts are rejecting attempts by indirect purchaser plaintiffs to justify standing based on their injury being “inextricably intertwined” with injuries of market participants.

A defendant facing antitrust claims by indirect purchasers should raise any gaps in the link between the alleged misconduct and the ultimate injury, highlighting interceding parties, steps in the manufacturing and distribution processes, and component traceability issues. This can be done in a [...]

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Third Circuit Upholds Dismissal of Indirect Purchaser Class in Auto Transmission Case, Revives Individual Claims

by McDermott Will & Emery | Feb 17, 2017 | Monopolization/Abuse of Dominance, Private Litigation

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.

Read the full article here.

President-Elect Trump Has Once-in-a-Century Opportunity to Substantially Revise the FTC’s Law Enforcement and Regulatory Agenda

by Bilal Sayyed | Jan 6, 2017 | FTC Developments, Private Litigation

Bilal Sayyed, a McDermott partner and former official at the Federal Trade Commission, has prepared a thoughtful series of recommendations for actions which the new administration’s FTC might take. His paper considers options which the new administration may take based on prior precedents.

Read the full report here.

CJEU to Rule on Extradition of EU Citizens in Criminal Antitrust Proceedings

by Christian Krohs and Louise Aberg | Apr 4, 2016 | Cartel Enforcement, EC Developments, German Developments, Private Litigation

The first European citizen to be extradited from Europe to the United States for criminal antitrust conduct recently succeeded in having a Berlin court refer the matter of his extradition to the Court of Justice of the European Union (CJEU) in the context of his damages action with regard to his extradition, after a series of multiple setbacks and a 24-month period of imprisonment.

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Judge Merrick Garland’s Antitrust Past: A Brief Summary

by Katharine M. O'Connor | Mar 23, 2016 | Cartel Enforcement, Private Litigation

Since President Obama announced Judge Merrick Garland’s nomination to the Supreme Court of the United States last Wednesday, March 16, 2016, many have opined on his qualifications as well as the political fight about his confirmation this election year. A few articles have noted Judge Garland’s academic background—that he taught Advanced Antitrust at his alma mater, Harvard Law School, while working in private practice in the 1980s. During that time, Judge Garland also published articles in the Yale Law Journal and Harvard Law Review on antitrust issues.

Although his time as an antitrust academic ended nearly 30 years ago, Judge Garland’s articles remain relevant and continue to be cited by the courts and legal academics. For example, his article, Antitrust and State Action: Economic Efficiency and the Political Process, 96 Yale L.J. 486 (1986), was cited by Justice Kennedy in North Carolina State Board of Dental Examiners v. FTC, 135 S. Ct. 1101 (2015), in February 2015. In Antitrust and State Action, Judge Garland argued that courts and legal theorists should not rely on antitrust principles of economic efficiency to justify interference with state regulations and should not permit preemption of state regulations except where state governments delegate market regulation to private parties. 96 Yale L.J. at 487-88. The Supreme Court cited Judge Garland’s article in recognizing this limited exception to state immunity. N.C. State Bd. of Dental Examiners, 135 S. Ct. at 1111.

Since his appointment to the U.S. Court of Appeals for the District of Columbia Circuit in 1997, Judge Garland has been on several panels deciding antitrust cases, but has not authored any opinions. The panel decisions, however, can give us some insight as to how he may decide antitrust issues if his nomination is successful:

In In re Rail Freight Fuel Surcharge Antitrust Litigation, 725 F.3d 244 (D.C. Cir. 2013), the court vacated class certification in a price-fixing case and remanded to the district court for consideration under Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). In particular, the D.C. Circuit was concerned that Plaintiff’s damages model yielded false positive results, which, “if accurate, [] would shred the plaintiffs’ case for certification” because “[c]ommon questions of fact cannot predominate where there exists no reliable means of proving classwide injury in fact.” In re Rail Freight, 725 F.3d at 252-53.
The court held interlocutory review under Rule 23(f) was not appropriate where defendant’s challenges to class certification—that plaintiffs lacked antitrust standing—was a merits question unrelated to the Rule 23 factors. In re Lorazepam & Clorazepate Antitrust Litig., 289 F.3d 98, 107-09 (D.C. Cir. 2002).
In Andrix Phamaceuticals, Inc. v. Biovail Corp. Int’l, 256 F.3d 799 (D.C. Cir. 2001), the court held that the district court erred in dismissing with prejudice defendant’s counterclaim based on lack of antitrust injury or standing where the defendant could have amended its counterclaim to allege a cause of action. In that case, plaintiff had an agreement with a third-party that contained “allegedly anticompetitive provisions, including [plaintiff’s] pledge to continue to [...]

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French Class Action Law Has Less Impact Than Expected

by McDermott Will & Emery | Feb 10, 2016 | Consumer Protection/Privacy, French Developments, Private Litigation

Since the entry into force on 1 October 2014 of the provisions of the “Hamon” law of 17 March 2014, which introduced class actions into French law in relation to consumer and competition law matters, only six class actions have been brought.

The first action was filed on the date the new law came into effect by the consumer association UFC – Que Choisir against Foncia, a real estate group, to obtain compensation for the service charges levied by Foncia. The most recent class actions seem to have been brought in May 2015 by the consumer association Familles Rurales: one against SFR, a network operator that allegedly misled consumers as to the geographic coverage of its 4G network, and one very limited action against a campground operator who forced campervan owners to buy new ones after 10 years if they wanted to keep their plots.

Class actions are clearly not as popular as had been hoped, at least not yet. Indeed, of the (only) six procedures brought before the French Courts, four were brought around one month after the law came into effect, and all relate to consumer matters. One action led to a €2 million settlement intended to compensate the damages suffered by 100,000 consumers who had been required to pay excessive charges for elevator tele-surveillance.

The limited attractiveness of class actions is probably due to the strict conditions for bringing an action under the Hamon law.

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The UK Consumer Rights Act 2015: A New Advance in Private Antitrust Enforcement

by McDermott Will & Emery | Jan 11, 2016 | Consumer Protection/Privacy, EU Developments, Private Litigation

On 1 October 2015 the UK Consumer Rights Act 2015 (CRA 2015) entered into force, bringing with it a raft of changes pertaining to consumer protection law and competition law litigation. These changes were discussed in an article featured in our most recent issue of our flagship publication, International News: Focus on Tax (Issue 3 2015).

The CRA 2015 sets the scene for the future proliferation of competition damages actions in the United Kingdom and consolidates the country’s reputation as one of the most advanced competition regimes in Europe.

The new rules introduce a series of significant changes to facilitate claims, including the establishment of a fast-track procedure for simple claims, the introduction of a collective settlement regime, and an extension of the limitation period for actions before the Competition Appeal Tribunal (CAT), the United Kingdom’s specialist competition law tribunal.

Arguably the most controversial and high-profile measure is the introduction of collective proceedings before the CAT which, subject to the CAT’s discretion, can be brought on an opt-in or opt-out basis for both follow-on and stand-alone claims.

The CAT will certify claims that are eligible for inclusion in collective proceedings. In this regard the following three conditions must be met. There must be an identifiable class; the claim must raise common issues; and it must be suitable for collective proceedings, taking into account, inter alia, whether or not collective proceedings are an appropriate means for the fair and efficient resolution of the common issues, the costs and benefits of the collective proceedings, and the size and nature of the class.

If the CAT decides that collective proceedings are appropriate, it then determines whether the proceedings should be “opt-in” or “opt-out”. The CAT will take into account all the circumstances, including the estimated amount of damages that individual class members may recover, the strength of the claims, and whether it is practical for the proceedings to be brought on an opt-in or opt-out basis.

If appropriate, the CAT will also authorise an applicant to act as class representative. The representative must not have, in relation to the common issues for the class members, a material interest that is in conflict with the interests of the class members, and must be someone who would act fairly and adequately in the interests of all class members.

In order to prevent the rise of a “litigation culture”, certain safeguards are included. For instance, the CAT may not award exemplary damages in collective actions, and contingency fees, i.e., damages-based agreements whereby the lawyers are paid a proportion of the damages obtained, are not permitted in opt-out collective actions.

There will no doubt be considerable up-front litigation surrounding the issue of class certification before the first cases get off the ground. It is likely, however, that the mere threat of class actions before the CAT will represent a powerful weapon in the hands of the claimant when negotiating a settlement.

Court Declines To Certify Damages Class in Baseball Blackout Suit

by McDermott Will & Emery | Jun 17, 2015 | Distribution/Franchising, Private Litigation

On May 14, 2015, the Southern District of New York issued two opinions in Laumann v. Nat’l Hockey League, No. 12-cv-1817, excluding plaintiffs’ damages expert under Daubert and denying plaintiffs’ motion to certify a damages class. The court did, however, certify a class under Federal Rule of Civil Procedure 23(b)(2) for the purpose of pursuing injunctive relief. The case is part of a growing body of case law in which courts have considered Daubert motions at the class certification stage. The plaintiffs had sought to certify two classes of individuals who purchased “out-of-market” baseball or hockey packages, either online or through a television service provider.

The plaintiffs in Laumann alleged that agreements between the defendants—sports leagues, regional television networks that produce each team’s games, and television service providers—violated Section 1. The challenged restraint was “territorial exclusivity,” the restriction on regional networks from selling content to consumers who live outside the network’s geographic market. Instead, a Yankees fan who lives in Iowa, for example, could only watch Yankees games by purchasing an “out-of-market package,” a bundle that includes all games except games involving teams from the Iowa region. The agreements required “blackouts” of games in class members’ home team areas, thereby requiring out-of-market package subscribers to also subscribe to a local cable package in order to watch their favorite teams. Plaintiffs’ theory of damage was that, without the challenged restraint, regional sports networks would sell content directly to out-of-market fans, and therefore consumers would have a second option, which would put downward pressure on the price of the all-inclusive out-of-market package. The court held that having fewer options and paying higher prices were distinct forms of injury that were both recognizable. Laumann, 2015 WL 2330107 (class certification opinion), at *8.

The court decided to exclude the opinion of plaintiffs’ damages expert because his model was “largely untethered from the actual facts of th[e] case.” Laumann, 2015 WL 2330036 (Daubert opinion), at *11. Therefore, the model was not a “scientifically-reliable way to predict with some precision the prices of [out-of-market] telecasts,” and it had to be excluded. Id. at *10. The expert, Dr. Noll, used the defendants’ viewership data to create a model with variables estimated by statistical techniques. The court noted that “many pages of Dr. Noll’s declarations consist[ed] almost entirely of complex equations beyond the comprehension of the Court or the lawyers in this case.” Id. At *5. Defendants’ economist called the model “junk science” that “relie[d] too heavily on mathematical assumptions and random error, and too little on actual data about consumers and their preferences,” and in effect the court agreed. Id. at *7, *14.

Regarding class certification, the court held that, with Dr. Noll’s opinion excluded, a class could not be certified under Rule 23(b)(3). The court noted that Rule 23(b)(3) requires plaintiffs to “show that they can prove, through common evidence, that all class members were . . . injured by the alleged conspiracy.” Laumann, 2015 WL 2330107 (class certification opinion), at *9 (internal quotation marks omitted) (quoting Sykes v. Mel S. Harris & Assoc., 780 F.3d 70, 82 (2d Cir. 2015)). [...]

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Supreme Court Finds No Pre-emption in Natural Gas Act Case

by Emily Townsend | May 1, 2015 | Energy/Commodities, Private Litigation

The U.S. Supreme Court recently held in ONEOK Inc. v. Learjet, Inc., that the Natural Gas Act (NGA) does not pre-empt state-law antitrust suits over manipulation of natural gas indices. The court’s decision has important ramifications for natural gas regulation and the regulation of the energy industry more broadly.

In ONEOK, a group of direct-sales natural gas customers sued gas pipelines, alleging that the pipelines violated state antitrust laws by reporting false information to privately published market-based price indices, which are used as a tool to determine prices in contracting. The pipelines, in response, argued that the NGA subjected the conduct to federal oversight that pre-empted the lawsuits. The justices resolved the issue 7-2 in favor of the direct-sales customers, over a spirited dissent from Justice Scalia in which the Chief Justice joined.

The majority based their reasoning upon Congressional intent in regulating the natural gas industry. Traditionally, the industry has been regulated in three distinct segments: (1) the production and gathering of gas in the field; (2) the pipelines’ interstate transportation and sale at wholesale of gas to local distributors; and (3) the distributors’ local sale at retail of gas to business and residential customers. The NGA divides the regulation of the three segments into federal and state domains: Generally, the Federal Energy Regulatory Commission (FERC) has jurisdiction over the second segment, and the states have jurisdiction over the first and third segments.

In this context, the question of responsibility over regulation of conduct affecting natural gas price indices arises (these indices list the prices at which natural gas has been sold across the country). Here, the group of direct-sales customers alleged that the pipelines manipulated the market price indices, resulting in excessively high retail prices. The alleged manipulation of the price indices by the pipelines, however, necessarily affected the wholesale prices for natural gas. The question for the court, therefore, was whether federal regulation pre-empts state regulation of conduct that affects both retail and wholesale prices for natural gas.

The majority opinion, delivered by Justice Breyer, relied upon U.S. Congress’s “meticulous regard for the continued exercise of state power” through its express designation in the NGA of state authority in regulation of local retail sales. After distinguishing previous case law relied upon by the dissent, the majority ultimately held that the doctrine of field pre-emption does not bar state antitrust regulation of price indices manipulation in this context, even if such conduct affects wholesale prices.

In dissent, Justice Scalia argued for a “straightforward” application of pre-emption regarding the NGA, relying on precedents suggesting that the test for determining a field pre-empted is simply whether FERC has the exclusive authority over a field of conduct. Here, the dissent reasoned, FERC has exclusive authority to regulate conduct affecting interstate wholesale gas sales. Therefore, the state regulation of this conduct, even if it is solely aimed at regulation of intrastate retail gas sales, is pre-empted by the NGA.

This case has several important ramifications for the natural gas industry and energy [...]

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Seventh Circuit Upholds Dismissal of Text Messaging Price-Fixing Claims

by Emily Townsend | Apr 16, 2015 | Cartel Enforcement, Private Litigation

On Thursday, April 9, 2015, the Seventh Circuit affirmed the district court’s grant of summary judgment for AT&T Mobility LLC, Verizon Wireless LLC, T-Mobile USA Inc. and Sprint Corp., in a text messaging price-fixing litigation. In re Text Messaging Antitrust Litigation, case number 14-2301. Plaintiffs alleged that these wireless telephone providers and a trade association to which those companies belong, The Wireless Association, conspired to raise the price of “price per use” text messages from 2005 to 2008 in violation of Section 1 of the Sherman Act. In May 2014, the district granted defendants’ motion for summary judgment, and the plaintiffs appealed. On appeal, the plaintiffs argued that the lower court’s ruling should be reversed because 1) they uncovered “smoking gun” emails showing a defendant employee admitting to collusive behavior, 2) the risk of losing customers made it irrational for the providers to raise the price unless they agreed to all implement increases and 3) The Wireless Association orchestrated the exchange of information between defendants. The Seventh Circuit found these arguments unpersuasive.

In writing the opinion for the Seventh Circuit, Judge Richard Posner explained that “follow-the-leader” pricing, also known as “conscious parallelism” or “tacit collusion,” does not violate the Sherman Act. Instead, to survive summary judgment, plaintiffs must present sufficient evidence of “express collusion.” The plaintiffs failed to do so. First, Posner addressed the plaintiffs’ purported “smoking gun” e-mails from a T-Mobile employee. In one of these e-mails, the employee called a T-Mobile price increase “collusive [sic] and opportunistic.” Upon a review of the language in the smoking gun e-mails as well as other missives from this employee, Posner determined that nothing in the e-mails suggested that the employee was accusing T-Mobile of express collusion; the e-mails were discussing legal, follow-the-leader pricing. In fact, Posner even admonished the plaintiffs for wasting so much of the space in their briefs on these e-mails. Second, Posner explained the weaknesses in the plaintiffs’ argument that, but for an agreement with its competitors, a provider would not risk losing customers to raise the price. Mainly, this argument ignored the fact that a seller cares about total revenues, not the number of customers. Even if a seller loses a third of its customers by doubling its price, then the seller is still earning greater revenues. Third, Posner found the plaintiffs’ argument that defendants colluded at trade association meetings unconvincing. Because the plaintiffs offered no evidence regarding the content of the information exchanged at these meetings, the court had no basis to infer that the gatherings were used for collusive purposes. Overall, the plaintiffs’ evidence was equally consistent with independent behavior as it was with conspiracy and, therefore, insufficient to overturn the lower court’s summary judgment ruling.

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