Sherman Act Archives - ANTITRUST ALERT

Sherman Act

Seventh Circuit Denies Rehearing in LCD Price-Fixing Suit by Motorola

by Emily Townsend | Jan 20, 2015 | Cartel Enforcement, Private Litigation

On January 12, the Seventh Circuit Court of Appeals refused Motorola Mobility LLC’s petition for a rehearing en banc of its price-fixing claims against foreign manufacturers of liquid crystal display (LCD) panels. Motorola Mobility LLC v. AU Optronics Corp., et al., case number 14-8003. Motorola alleged that these foreign manufacturers violated Section 1 of the Sherman Act by conspiring with each other to set the price for LCD panels. Only approximately 1 percent of the panels sold to Motorola by defendants were purchased by and delivered to Motorola in the United States to be used in the assembly of Motorola cellphones. Motorola’s foreign subsidiaries purchased the rest – with 57 percent of all panels bought by a Motorola entity incorporated into cellphones sold abroad, and the remaining 42 percent assembled by the Motorola foreign subsidiary into cellphones and then sold to and delivered to Motorola for resale in the United States. The Northern District of Illinois granted partial summary judgment to the defendants, ruling that Motorola’s claim as to the 99 percent of panels purchased by foreign subsidiaries was barred by the Foreign Trade Antitrust Improvement Act (FTAIA), 15 U.S.C. §§ 6a, which has been interpreted to limit the extraterritorial reach of U.S. antitrust law. The district judge certified an order for immediate appeal.

In November, the Seventh Circuit affirmed the district court’s partial grant of summary judgment. In his amended opinion filed January 12, Judge Posner determined that the effect of the alleged foreign cartel did not give rise to a federal antitrust claim because the plaintiff could only be injured indirectly. Under federal antitrust jurisprudence, claimants that purchase indirectly and/or suffer derivative harm lack antitrust standing to bring suit in the United States. Posner explained that plaintiff’s foreign subsidiaries were the direct purchasers injured by the alleged LCD panel conspiracy. In response to Motorola’s argument that it and its foreign subsidiaries should be treated as a single entity, Posner asserted that the corporate formalities of the U.S. parent and its foreign subsidiaries should be respected. Motorola decided to have its subsidiaries incorporated in and pay taxes to these foreign jurisdictions, and therefore, the subsidiaries must seek relief in the countries in which they or the alleged conspirators are incorporated. A parent does not have a right to sue for damages on behalf of its foreign subsidiaries in the United States. Importantly, although Posner’s opinion could protect an alleged foreign conspirator from facing treble damages in U.S. civil court, his opinion also made clear that if the alleged price-fixing has a direct, substantial and reasonably foreseeable effect on U.S. commerce, then the FTAIA does not block the U.S. Department of Justice from seeking injunctive or criminal relief.

In December, Motorola petitioned the Seventh Circuit for a rehearing en banc. It argued that defendants purposefully negotiated directly with Motorola in the United States and that Motorola determined the prices and quantities of panels purchased from defendants by its U.S. subsidiaries. The defendants purposefully engaged in business with the plaintiff, and [...]

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Japanese Shipping Company Rolls Over, Pleads Guilty to Price Fixing

by Lisa A. Peterson | Oct 21, 2014 | Cartel Enforcement, DOJ Developments

On September 26, 2014 Japanese transportation company Kawasaki Kisen Kaisha Ltd. (K-Line) agreed to plead guilty to price fixing, bid rigging and allocating customers for international ocean shipping services for “roll-on, roll-off” cargo. K-Line will be fined $67.7 million. Roll-on, roll-off cargo is a special type of ocean shipping for cars, trucks, agricultural and construction equipment, and other objects that can be rolled on and rolled off a vessel. Roll-on, roll-off cargo does not involve shipping containers.

K-Line pleaded guilty to one count—a violation of Section One of the Sherman Act. The plea agreement states K-Line participated in the conspiracy from at least February 1997 until at least September 2012. The conspiracy involved customers and shipping routes both to and from the United States at the Port of Baltimore and other ports. The conspiracy regarding roll-on, roll-off ocean shipping involved only deep-sea (or trans-ocean) shipping. It did not include short-sea or coastal water freight shipping.

K-Line and its co-conspirators attended meetings and engaged in communications to discuss bids and tenders, including refraining from competing for certain bids and tenders for ocean shipping; to allocate customers by refraining from competing for each other’s existing business on certain routes; and to discuss prices. K-Line acted on these illegal restraints of trade by submitting in accordance with its agreement with co-conspirators and providing roll-on, roll-of shipping services at supra-competitive rates.

K-Line’s guilty plea is the second plea agreement in the Department of Justice’s investigation into the international shipping cartel for roll-on, roll-off cargo. In February 2014, Chilean company, Compania Sud Americana de Vapores SA pleaded guilty and agreed to pay a $8.9 million criminal fine.

S.D.N.Y. Dismisses Cotton Traders’ § 1 Claims Under Copperweld

by McDermott Will & Emery | Oct 17, 2014 | Agriculture, Monopolization/Abuse of Dominance, Private Litigation

On September 30, 2014, the Southern District of New York reconsidered the Commodities Exchange Act (CEA) and Sherman Act claims brought against Louis Dreyfus Commodities B.V. and its affiliates in In re Term Commodities Cotton Futures Litigation, 12 Civ. 5126 (ALC)(KNF) (S.D.N.Y. Sept. 30, 2014). The plaintiffs, cotton futures traders, alleged that the defendants manipulated the price of cotton futures by “unreasonably and uneconomically demanding delivery of certificated cotton in fulfillment of futures contracts,” among other allegations of manipulative behavior. In December 2013, the court denied defendants’ motion to dismiss, and defendants subsequently moved for reconsideration. On reconsideration, the court dismissed plaintiffs’ § 1 claim under the intra-enterprise conspiracy doctrine set forth in Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984), but declined to dismiss the CEA or § 2 claims.

The court began its analysis by emphasizing the narrow holding of Copperweld. It noted that Copperweld’s holding was limited to the relationship between “a parent and its wholly owned subsidiary”; where the relationship between two conspirators is anything less than complete ownership, lower courts “must draw from the analysis in Copperweld without the benefit of a bright line rule.” Cotton, 12 Civ. 5126 at 6-7. While the court rejected an interpretation of the intra-enterprise conspiracy doctrine that “Section One claims are not viable where the only named coconspirators are a parent corporation and its subsidiaries” as an overstatement of the law, it did not go so far as to hold that the doctrine only applies to parents and their wholly owned subsidiaries.

The five defendants in Cotton were all related through a web of parent-subsidiary relationships. The plaintiffs did not specify whether each subsidiary was wholly owned, or clearly plead the nature of the defendants’ relationships. The court held that, viewing the allegations in the light most favorable to the plaintiffs, it could not conclude that the allegations supported “a reasonable inference that Defendants ha[d] ‘separate corporate consciousnesses.’” Cotton, 12 Civ. 5126 at 10. For the defendants that were not wholly owned by other defendants, “the allegations portray[ed] the other Defendants as having ‘ownership’ and ‘control over’ them and giving ‘directions to’ them. Nothing in the [complaint] demonstrate[d] a rational possibility that Defendants were ‘previously separate and competing entities [that combined] to act as one for their common benefit.’” Id.

Regarding the § 2 claim, defendants argued that the court should apply the pleading standards for predatory pricing claims established by the Supreme Court in Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., Inc., 549 U.S. 312 (2007). The court disagreed and concluded that Weyerhaeuser was inapplicable to these facts because the case did not present a classic predatory bidding scheme. Due to the procedural posture of the case, the court did not discuss any additional issues related to defendants’ alleged monopolization. Though it did not dismiss the § 2 claim, the court noted “the delicate factual balance in which Plaintiffs’ remaining claims hang” and granted defendants leave to move for summary judgment before the plaintiffs could [...]

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Local Wholesaler-Retailer Dispute Has Federal Implications

by McDermott Will & Emery | Oct 16, 2014 | Distribution/Franchising, Monopolization/Abuse of Dominance, Private Litigation

On August 14, the U.S. District Court for the Southern District of Mississippi issued an opinion finding that state regulations bolstered one antitrust claim and hindered another in an ongoing dispute between a northern Mississippi convenience store chain, Major Mart, and an Anheuser-Busch InBev (ABI, a/k/a “Red Network”) distributor, Mitchell Distributing Company.

In Mississippi, by statute, like those of many other states, beer manufacturers must designate exclusive sales territories for each brand. Mitchell holds the exclusive right to sell ABI brands to retailers in the counties in which Major Mart operates its 11 convenience stores.

The relationship between Mitchell and Major Mart started to break down in 2010, when Major Mart claimed that it was receiving inaccurate and confusing price information from Mitchell. Major Mart asked Mitchell for compensation of lost profits due to the incorrect pricing information. Mitchell denied the request, and Major Mart decided later to remove ABI displays and signs, lower the prices of competitors’ products, and reduce the cooler space allocated to ABI in some of its stores. According to Major Mart’s complaint, Mitchell retaliated by (1) demanding shelving allocation that represented ABI’s market share of approximately 70 percent, (2) demanding price parity with competing products of ABI, (3) changing its deliveries to Major Mart stores to once a week so as to fill up Major Mart’s coolers and storerooms, leaving no room for competitor products and (4) delivering on Fridays so that Major Mart stores would not have cold beer on the “best selling day of the week.”

After litigation was first initiated, the parties reached a settlement in 2011, agreeing that Mitchell would increase its deliveries to at least twice per week and Major Mart would reconsider shelf space allocation and increase prices on competing brands of beers to the same price as ABI products. This temporary resolution, however, failed when Major Mart did not reallocate its shelf space. In response, Mitchell once again cut deliveries to one day per week and thereafter began to provide sales coupons and promotional giveaways exclusively to Major Mart’s competitors. Major Mart also claimed that Mitchell delivered beer that was close to the end of its shelf-life, replaced fresher beer Major Mart had with older beer and missed deliveries during key dates, including July 4 and just as students were returning to college. Eventually, Major Mart sued.

Major Mart alleged that Mitchell engaged in monopolization and attempted monopolization in violation of the Sherman Act and price discrimination in violation of the Robinson-Patman Act. In response, Mitchell filed a motion for summary judgment asserting that the Sherman Act did not apply, as (1) Mitchell’s actions were immunized by the State Action Doctrine—the principle that the Sherman Act does not apply to states acting in their capacities as sovereigns—and (2) Mitchell’s actions, which occurred solely in Mississippi, did not affect interstate commerce—as required for Sherman Act jurisdiction.

Quickly discarding the State Action Doctrine assertion, the court noted that to qualify as a state’s action, conduct must be “undertaken pursuant to [...]

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Section 1 Claims Dismissed in LIBOR, TIBOR Class Action

by McDermott Will & Emery | Apr 15, 2014 | 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.”

NCAA Compensation Cartel Allegations Take Center Court

by Young Cynn | Mar 18, 2014 | Private Litigation

On March 17, 2014, a class action lawsuit was filed against the National Collegiate Athletics Association (NCAA), alleging that capping compensation to college athletes violates Sherman Act Section 1.

The lawsuit was filed on behalf of all Division I college football and men’s basketball players, and named five major conferences within the NCAA as co-defendants: the Atlantic Coast (ACC), Big Ten, Big 12, Pacific-12, and Southeastern (SEC). The suit alleges that “Defendants have entered into what amounts to cartel agreements with the avowed purpose and effect of placing a ceiling on the compensation that may be paid to these athletes for their services.” Currently under NCAA rules, colleges may only compensate student athletes with a “full grant-in-aid” (the amount of tuition, room and board, and textbooks).

The complaint goes on to state that the NCAA “rules constitute horizontal agreements” among the defendants who drafted and agreed upon the rules, yet “compete with each other for the services of top-tier college football and men’s basketball players.” In addition to monetary damages, the plaintiffs are seeking injunctive relief that would allow colleges to freely negotiate with and compensate student athletes. The case is filed in the U.S. District Court of New Jersey.

Sixth Circuit Vacates Class Certification in Detroit Nurses Antitrust Case

by McDermott Will & Emery | Jan 17, 2014 | Private Litigation

On January 6, 2014, the Sixth Circuit vacated a class certification order for reconsideration in light of the Supreme Court’s 2013 decision in Comcast v. Behrend, 133 S. Ct. 1426 (2013). In re VHS of Michigan, Inc., No. 13-0013 (6th Cir. Jan. 6, 2014). In Comcast, the Supreme Court reversed a grant of class certification on the ground that the plaintiffs had failed to demonstrate that damages could be proven on a classwide basis because their damages model was inconsistent with their theory of liability.

Pre-Comcast, the plaintiffs in VHS filed a class action complaint alleging two theories of liability under the Sherman Act: (1) a “per se” claim that the defendant hospitals conspired to depress the wages of the plaintiff nurses, and (2) a “rule-of-reason” claim that the defendants exchanged information about nurse wages in order to reduce competition. Subsequently, the district court granted the defendants’ motion for summary judgment on the per se claim.

Post-Comcast, the defendants moved to exclude the plaintiffs’ expert witness’s testimony, which was based on the assumption that the plaintiffs could prove both of their claims, and the district court denied the defendants’ motion without considering the potential impact of Comcast on its decision. The district court later certified the class on the rule-of-reason claim, and the defendants appealed. Because the district court did not take Comcast into account in its certification decision, and because the parties failed to analyze the issue before the district court, the Sixth Circuit held that it would be premature to accept an appeal. Instead, it vacated the district court’s order and directed the court to reconsider its certification decision in light of Comcast.

District Court Declines to Certify Damages Subclass in NCAA Case

by McDermott Will & Emery | Nov 20, 2013 | Private Litigation

On November 8, 2013, the Northern District of California certified a class of current and former student athletes seeking injunctive relief under the Sherman Act but declined to certify a damages subclass in the case In re NCAA Student-Athlete Name & Likeness Licensing Litig., 4:09-cv-01967-CW (N.D. Cal. November 8, 2013). The plaintiffs, current and former NCAA Division I men’s football and basketball players, alleged that the National Collegiate Athletic Association (NCAA) conspired with a video game developer and a marketing firm in developing rules prohibiting student athletes from receiving compensation for the commercial use of their names, images and likenesses.

Plaintiffs sought certification of the injunctive relief class pursuant to Rule 23(b)(2) and certification of the damages class under Rule 23(b)(3). The Court certified the injunctive relief class, rejecting defendants’ argument that certification under Rule 23(b)(2) is inappropriate where plaintiffs are also seeking monetary relief. The court explained that plaintiffs generally may seek certification of multiple classes pursuant to different subdivisions of Rule 23(b).

The proposed damages subclass by definition included only those athletes who were depicted in video games or game footage after 2005. The court declined to certify the damages class under Rule 23(b)(3), holding that plaintiffs failed to satisfy the manageability requirement because they did not provide a feasible way to identify class members that were actually harmed by the NCAA’s conduct. One barrier to manageability was the “substitution effect:” if student athletes had not been prohibited from receiving compensation, many athletes who left college early to play professionally would have stayed in college and displaced other student athletes on their respective teams. Therefore, some members of the damages class may have actually benefitted from the NCAA rules by earning roster spots that would not have otherwise been available. Plaintiffs failed to provide a feasible method for determining which class members would have still played for Division I teams without the NCAA’s rules.

The court also identified two other barriers to manageability: plaintiffs did not provide a feasible method for determining on a classwide basis (1) which athletes were depicted in video games, or (2) which class members appeared in game footage during the relevant period. With respect to the latter, plaintiffs referenced third-party sources such as team rosters, game summaries and televised game schedules, but the court found this inadequate because “they have not provided any formula for extracting the relevant information from each of these resources and using that information to identify putative class members.”

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