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By:  Steven J. Cernak

As we described in a prior post, the U.S. House Judiciary Committee Majority Report of its Investigation into Digital Markets included a number of recommendations that went beyond digital markets, including overriding several classic antitrust cases.  One of the Report’s recommendations is to make it easier for plaintiffs to bring predatory pricing and buying monopolization cases by overriding the “recoupment prong” in Brooke Group, Matsushita, and Weyerhaeuser.  While such action would drastically alter monopolization law, it also might inadvertently (?) revive another classic antitrust case, Utah Pie, and certain Robinson-Patman price discrimination claims long considered dead.

Predatory Pricing Under Brooke Group and Matsushita

We covered Brooke Group and predatory pricing in a prior post and so just summarize it here.  Sherman Act Section 2 claims for monopolization can be lodged only against “monopolists” that are “monopolizing,” that is, acting in a way to maintain that monopoly.  There is no general test to judge a monopolist’s actions; instead, courts have developed different tests for different actions, including predatory pricing.

Predatory pricing is pricing below some level of cost so as to eliminate competitors in the short run and reduce competition in the long run.  The Brooke Group Court established a two-part test for such claims:  ”the prices complained of are below an appropriate measure of its rival’s costs … [and the defendant] had a … dangerous probability of recouping its investment in below-cost prices.”

While the Report did not express any concerns about the “below an appropriate measure of costs” prong, its one example (Amazon’s pricing of diapers) just described the pricing as “below cost.”  Lower courts have developed a standard that finds prices “below an appropriate measure of costs” only if they are below some measure of the monopolist’s incremental costs, like average variable costs. It is not clear if the Report’s authors want to modify this prong as well.

Under the recoupment prong, a plaintiff must show that the monopolist has the capability to drive out the plaintiff and other competitors plus keep them (and other potential competitors) out so it can later raise prices and “recoup” its losses.  Such a showing requires an analysis of the relative strengths of the competitors and the attributes of the market, such as high entry barriers.

The Brooke Group test has been difficult for predatory pricing plaintiffs to meet — as the Supreme Court intended, for two reasons.  First, the Court thought it would be difficult for courts to distinguish between competitive low prices and predatorily low ones.  Because “cutting prices in order to increase business is often the very essence of competition,” the Court was concerned that an easier test would deter low prices that benefit consumers.

Second, the Court had earlier in Matsushita expressed skepticism that such competitively harmful predatory pricing schemes occurred often:  “there is a consensus among commentators that predatory pricing schemes are rarely tried, and even more rarely successful.”  As we covered in different prior posts, while Matsushita does concern predatory pricing, its holding is more concerned with the appropriate standard for summary judgment in any antitrust case; because the “consensus” quote has been repeated in nearly every predatory pricing case since Matsushita, however, the Report’s recommendation to override it makes sense.

Weyerhaeuser Extends Recoupment to Predatory Buying and Monopsony

More than a decade after Brooke Group, the Supreme Court in Weyerhaeuser extended its two-part test for predatory pricing by a sell-side monopolist to predatory buying (or overbidding) by a buy-side monopsonist.  There, the defendant allegedly purchased 65% of the logs in the region that were a necessary input for lumber.  Such alleged overbuying drove up the cost of the input while the price of lumber was going down.  These trends led plaintiff, a competing lumber mill, to shut down operations and sue.

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Tying Agreement (Rope)

Author: Jarod Bona

Yes, in some instances, “tying” violate the antitrust laws. Whether you arrive at the tying-arrangement issue from the perspective of the person tying, the person buying the tied products, or the person competing with the person tying, you should know when the antitrust laws forbid the practice.

Most vertical agreements—like loyalty discounts, bundling, exclusive dealing, (even resale price maintenance agreements under federal law) etc.—require courts to delve into the pro-competitive and anti-competitive aspects of the arrangements before rendering a judgment. Tying is a little different.

Tying agreements—along with price-fixing, market allocation, bid-rigging, and certain group boycotts—are considered per se antitrust violations. That is, a court need not perform an elaborate market analysis to condemn the practice because it is inherently anticompetitive, without pro-competitive redeeming virtues. Even though tying is often placed in this category, it doesn’t quite fit there either. Again, it is a little different.

Proving market power isn’t typically required for practices considered per se antitrust violations, but it is for tying. And business justifications don’t, as a rule, save the day for per se violations either. But, in certain limited circumstances, a defendant to an antitrust action premised on tying agreements might defend its case by showing exactly why they tied the products they did.

At this stage, you might be asking, “what the heck is tying?” Do the antitrust laws prohibit certain types of knots? Do they insist that everyone buy shoes with Velcro instead of shoestrings? The antitrust laws can be paternalistic, but they don’t go that far.

A tying arrangement is where a customer may only purchase a particular item (the “tying” item) if the customer agrees to purchase a second item (the “tied” item), or at least agree not to purchase that second item from the seller’s competitors. It is sort of like bundling, but there is an element of express coercion.

With bundling, a seller may offer a lower combined price to buyers that purchase two or more items, but the buyers always have the right to just purchase one of the items (and forgo the discount). With tying, by contrast, the buyer cannot just purchase the one item; if it wants the first item, it must purchase the second.

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Antitrust Superhero

Author: Jarod Bona

Some lawyers focus on litigation. Other attorneys spend their time on transactions or mergers & acquisitions. Many lawyers offer some sort of legal counseling. Another group—often in Washington, DC or Brussels—spend their time close to the government, usually either administrative agencies or the legislature. And perhaps the most interesting attorneys try to keep their clients out of jail.

But your friendly antitrust attorneys—the superheroes of lawyers—do all of this. That is part of what makes practicing antitrust so fun. We are here to solve competition problems; whether they arise from transactions, disputes, or the government, we are here to help. Or perhaps you just want some basic advice. We do that too—all the time. We can even help train your employees on antitrust law as part of compliance programs.

Perhaps you are a new attorney, or a law student, and you are considering what area to practice? Try antitrust and competition law. Not only is this arena challenging and in flux—which adds to the excitement—but you also don’t pigeonhole yourself into a particular type of practice. You get to do it all—your job is to understand the essence of markets and competition and to help clients solve competition problems. And in the world of big tech, antitrust is kind of a big deal.

For those of you that aren’t antitrust attorneys, I thought it might be useful if I explained what it is that we do.

Antitrust and Business Litigation

Although much of our litigation is, in fact, antitrust litigation, much of it is not. In the business v. business litigation especially, even in cases that involve an antitrust claim, there are typically several other types of claims that are not antitrust. As an example, we explain here how we see a lot of Lanham Act False Advertising claims in our antitrust and competition practice.

Businesses compete in the marketplace, but they also compete in the courtroom, for better or worse. And when they do, their big weapon is often a federal antitrust claim (with accompanying treble damages and attorneys’ fees), but they may also be armed with other claims, including trade secret statutes, Lanham Act (both false advertising and trademark), intellectual propertytortuous interference (particularly popular in business disputes), unfair competition, unfair and deceptive trade practices, and others.

In many instances, in fact, we will receive a call from a client that thinks they may have an antitrust claim. Perhaps they read this blog post. Sometimes they do, indeed, have a potential antitrust claim. But in other instances, an antitrust claim probably won’t work, but another claim might fit, perhaps a Lanham Act claim for false advertising, or tortuous interference with contract, or some sort of state unfair trade practice claim.

Antitrust lawyers study markets and competition and are the warriors of courtroom competition between competitors. If you have a legal dispute with a competitor, you should call your friendly antitrust attorney.

Antitrust litigation itself is great fun. The cases are usually significant, document heavy, with difficult legal questions and an emphasis on economic testimony. Some of them even involve class actions or multi-district litigation.

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Bundling-antitrust-300x200

Author: Jarod Bona

Let’s pretend that you sell three different types of protein powder: Whey Protein, Casein Protein, and Pea Protein. You sell them each for $10 per container. But for someone—like myself—that likes to include several types of protein in their morning smoothie, you offer a special deal of $25 total for purchasing all three types of protein at once (compared to $30 at the regular price).

Congratulations, you just offered a bundled discount, the subject of this article.

Should you worry that your bundled discount breached the antitrust laws?

Let’s dig in.

You probably recognized the maneuver above because bundled discounts are pervasive in a market system. Companies like it when customers purchase several products and may thus offer a discount—a reduction in margin—when customers do so. At the same time, customers like discounts, so they may purchase a second, third, or fourth product from the same company to obtain the discount.

So what is the problem?

Well, like many pricing policies, there exist a set of conditions such that certain bundled discounts create anticompetitive harm that exceeds their procompetitive benefits.

That sounds too formal, so let’s try this: Sometimes a big company that sells lots of different products can eliminate its competitors that sell fewer types of products by manipulating the prices of their bundles.

How does that work?

If your company has market or monopoly power, your profits are at least a little extra. This is sometimes called supra-competitive pricing or monopoly profits (or monopoly rents if you prefer economist-speak). If that is your world, you worry about not just competing, but also about maintaining your extra level of profits that only exist with market or monopoly power.

Because these extra profits can be so significant, those that have market or monopoly power will burn extraordinary resources to hold onto that power. This, of course, is one of the wasteful aspects of monopoly—the resources that go into maintaining it.

You must keep feeding the monopoly beast or it may grow weak and competition will kill it.

Anyway, monopolists are brilliant at manipulating pricing to exclude their competitors. And even though bundled discounts are usually pro-competitive, a monopolist in certain situations can employ them to exclude competition and protect their market power and, thus, their outsized profits.

In what situation can a monopolist manipulate bundled discounting to maintain or extend their monopoly?

Let’s turn to an actual case that made it to the Third Circuit a couple years after I graduated from law school: LePage’s, Inc. v. 3M, 324 F.3d 141 (3d Cir. 2003).

You’ve probably heard of 3M—Minnesota Mining and Manufacturing Company. They are based in Saint Paul, Minnesota and they are important to the community. I am from Minnesota, originally, and as a local, you hear a lot of good about this innovative company. (Bona Law also has a Minnesota office).

3M makes many products, but relevant to this Third Circuit case, they manufacturer transparent tape (under the Scotch brand)—just like their upstart competitor, LePage’s. I am speaking, of course, from the time perspective of the lawsuit. I am certain that 3M still makes transparent tape, but I haven’t kept up with LePage’s.

Anyway, unlike LePage’s, 3M also made many other products that they sold to major customers that purchased their Scotch tape. Importantly, 3M had monopoly power in the market for transparent tape.

So, according to the lawsuit, here is what 3M did: They offered discounts to major customers (retailers, etc.) conditioned on those customers purchasing products from each of six of 3M’s product lines. 3M linked the size of the rebate to the number of product lines in which the customer met purchasing targets. And the number of targets (i.e. minimum purchases in separate product lines) would determine the rebate that the customer would receive on all of its purchases. So each customer had a substantial incentive to meet targets across all product lines, to maximize the discounts/rebates.

LePage’s sold transparent tape, but not all of the other products. So they didn’t stand a chance to compete because the customers for transparent tape would purchase from 3M because by doing so, they receive substantial discounts on a bunch of other products too.

The Third Circuit explained that “[t]he principal anticompetitive effect of bundled rebates as offered by 3M is that when offered by a monopolist, they may foreclose portions of the market to a potential competitor who does not manufacture an equally diverse group of products and who therefore cannot make a comparable offer.” (155).

Of course, if there were a competitor of 3M, even separate from LePage’s, that could offer these product lines, the Court may have held that there wasn’t anticompetitive harm or antitrust injury.

If you are inclined toward numbers, you might spit out your drink and say—“Gosh darn it! Hold on a Second! How do we know whether the discount forecloses the market or is even anticompetitive without getting into the actual prices and discounts? If LePage’s is super inefficient or insists on crazy-high prices, should they really be able to utilize the machinery of the federal government to stop a benevolent monopolist from reducing their prices?”

Good instincts!

LePage’s was a controversial decision for that reason. While 3M’s bundling could have been anticompetitive, the Court didn’t go deep enough into the analysis to really understand if they were.

For some number crunching, let’s travel west to the Ninth Circuit and see what they did a few years later in Cascade Health Solutions v. PeaceHealth, 515 F.3d 973 (updated Feb. 1, 2008).

The Discount-Attribution Test for Bundled Discounts

In PeaceHealth, the Ninth Circuit overturned a jury verdict against defendant for violating Section 2 of the Sherman Act by bundling (among other conduct). The trial court erred in providing the jury with a LePage’s instruction on bundling that didn’t include specific price-cost requirements.

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DOJ-Antitrust-Amicus-Brief-State-Action-Immunity-SmileDirectClub-300x200

Author: Luis Blanquez

When someone new enters a market with a different or better idea or way of doing business, existing competitors must also innovate, lower their price, or otherwise improve their offerings to maintain their position in the market. That is why competition is good for consumers.

But sometimes competitors choose another path: they avoid competition by banding together to boycott the disruptive new entrant. And sometimes, they use state and local governments to accomplish that end—often under the guise of consumer health, safety, and welfare.

Competitors in some industries have been particularly successful in establishing a perpetual, government-backed gatekeeping role by collectively lobbying the state legislature to enact a licensing regime, imbuing power in a licensing board comprising competitors of the industry. That is what happened in North Carolina State Board of Dental Examiners v. FTC, a 2015 U.S. Supreme Court case about a professional licensing board comprising dentists who used their state government power to attempt to thwart competition from non-dentist teeth whiteners.

At Bona Law we are no stranger to enforcing the federal antitrust laws against anticompetitive conduct enabled by state and local governments. In fact, we filed an amicus curiae brief in the NC Dental case.

State and local governments create anticompetitive schemes that are inconsistent with federal antitrust laws all the time—regulation often displaces competition in some respect. When anticompetitive conduct is the result of government power, the federal antitrust laws sometimes exempt liability under the state-action immunity.

In NC Dental, the Supreme Court held that state regulatory boards dominated by active market participants qualify for the state-action exemption only if two stringent criteria are met: first, the defendants must show they acted pursuant to a clearly articulated state policy and second, their implementation of that policy is actively supervised by the state. NC Dental, 574 U.S. at 504. Defendants bear the burden for establishing both criteria. Id.

Yet five years after the North Carolina dental board lost at the Supreme Court, new disruptive competitors are still battling it out against dental boards across the country. One of those competitors is SmileDirectClub, who is currently litigating antitrust cases against dental boards in Georgia, Alabama and California. Rather than teeth-whitening, this time the product market is teeth alignment treatments. SmileDirectClub provides cost-effective orthodontic treatments through teledentistry.

One of SmileDirectClub’s services is SmileShops. These are physical locations in several states at which they take rapid photographs of a consumer’s mouth. Customers may also use an at-home mouth impression kit, which means that an in-person dental examination is not necessary. Afterwards they send the photographs to the SmileDirectClub lab.

SmileDirectClub connects the customer with a dentist or orthodontist, who is licensed to practice locally but is located off-site (and may be even located out-of-state), who evaluates the model and photographs and creates a treatment plan. If the dentist feels that aligners are appropriate for the patient, she prescribes the aligners and sends them directly to the patient. The patient doesn’t need to visit a traditional dental office for teeth alignment treatment. This results in significant cost savings and greater customer convenience and access.

But the members of the boards of dental examiners in Georgia, Alabama and California––the bullies that want things to remain the same––have, according to plaintiffs, used their government-created power in the marketplace to protect the economic interests of the traditional orthodontia market by using (i) coordinated statewide raids; (ii) false statements; (iii) and other misconduct to prevent SmileDirectClub from competing on the merits.

The Eleventh Circuit cases against the dental boards in Alabama and Georgia

In October 2018, SmileDirectClub together with one of its affiliated dentists in Alabama, Blaine Leeds, sued the Alabama Dental Examiners Board after receiving a cease-and-desist letter accusing him of unauthorized practice of dentistry. The district court declined to grant state-action immunity to the Alabama board members because they couldn’t show, among other things, the second element of the NC Dental test, active supervision. This case is currently on appeal.

In August 2020, SmileDirectClub won its first appellate victory against a state dental board when the Eleventh Circuit held that the Georgia’s board of dental examiners was not entitled to state-action immunity.

SmileDirectClub sued the Georgia board and its members alleging, among other things, that a rule amendment––to require dental assistants taking orthodontic scans to have immediate supervision from a licensed dentist––unlawfully restricted competition from teledentistry services. The district court dismissed SmileDirectClub’s claims against the board in its official capacity on sovereign-immunity grounds, but the claims against the board members in their individual capacities survived dismissal.

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Antitrust-Agency-Call-About-Merger-or-Acquisition-300x199

Author: Steven J. Cernak

It happens all the time.  You read about a merger in your industry, maybe between two suppliers or competitors.  If the merger involves suppliers, maybe your sales rep makes a courtesy call.  You then get back to your business, preparing to adjust as necessary.  A short time later, you get a call.  Some attorney from the Federal Trade Commission or Department of Justice Antitrust Division is “conducting a non-public investigation” in your industry and you deduce that it is about the merger.  Is this normal?  What can — or should — you do next?

Relax.  That attorney most likely is just doing her job as part of the Hart-Scott-Rodino merger review process.  She is asking you to play a role in that process.  Most times, your role will be small as you act as a good corporate citizen and, perhaps, learn something about what is going on in your industry.  Still, you will want to seek assistance and take the right steps to ensure that your actions do not distract you from your daily business.

HSR Basics

To determine if a merger is good or bad for competition, the FTC and DOJ need information about the merging parties and the relevant industries.  For most large mergers, they gather that information through the Hart-Scott-Rodino (HSR) process.

HSR requires the parties to submit certain information and documents and then wait for approval before closing the transaction.  The FTC and DOJ then have 30 days to determine if they will allow the merger to proceed or seek much more detail through a “second request” for information.  A second request can take months, often over a year, to play out.  If the agency still has competition concerns at the end of the process, it can sue to block the merger.

Throughout the process, the reviewing agency will reach out to third parties — suppliers, experts, and, especially, customers — for relevant information to help the agency predict the potential effect of the proposed merger on competition.  That is where you come in.

Immediate Next Steps

After you get that call from the reviewing agency, it is a good idea to get with your friendly, neighborhood antitrust attorney.  That attorney can guide you through the process, saving you time in dealing with the agency attorney and helping you understand the specialized language of merger review.  (While covering hundreds of these matters in-house at General Motors, I often said that my role was to use my “automotive to antitrust” decoder ring for the good of both sides.)

At this point in the process, responding substantively to the agency call is voluntary; however, both the FTC and DOJ have processes that they can tap to compel cooperation if they think your information is key to their investigation.  As you will see below, cooperating with the request usually is not too burdensome and can be the better long-term decision.

If it is not obvious from the initial request, you should obtain assurances that this really is a third-party request and you are not the subject of the investigation.  Because HSR filings are confidential, the agency might not be able to explicitly confirm that they are investigating the merger; however, they can confirm if you are a subject of the investigation or merely a witness.

Then, you should do a quick check with the right people in your organization to ensure that there is no reason why the investigation might suddenly turn on you.  Did you recently try and fail to negotiate a merger with one of the companies?  Did you just finish some acrimonious negotiations where one of the companies accused you of acting anticompetitively?

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Statute-of-Limitations-Antitrust-300x225

Author: Jarod Bona

The short answer to the statute-of-limitations question is that an antitrust action must be commenced “within four years after the cause of action accrued.” (15 U.S.C. § 15b). And the antitrust cause of action accrues when the defendant acts in violation of the antitrust laws and injures plaintiff.

But it isn’t always this simple. Sometimes the statute of limitations doesn’t start running right away, even when the antitrust defendant actually injures the plaintiff. Unlike the victim of a battery—maybe a punch to the face—an antitrust-law victim doesn’t always know right away that he or she or it (i.e. a corporation) suffered injury from an anticompetitive act.

This is called the discovery rule and it isn’t unique to antitrust. There are other types of claims in which the victim doesn’t even know about the injury. Fraud is a good example. The victim may not know that he or she has been swindled. When they find out about the fraud, the statute of limitations may have passed. But if the cause of action doesn’t accrue until discovery, the victim will still have the standard time period to file a lawsuit.

The discovery rule could also apply to a medical malpractice case—the sort of case Bona Law doesn’t handle. Like a fraud injury, the victim may be walking around totally oblivious to an injury. Maybe during a surgery the doctor’s Fitbit fell off and landed in the patient? The doctor, none the wiser because he or she was concentrating so hard, simply didn’t notice. Presumably a Fitbit left in the body causes some sort of medical injury, so when the patient/victim finds out about it, the cause of action begins to accrue. Of course, I don’t know if Fitbits are often left in bodies because we don’t do medical malpractice work.

Not all courts apply the discovery rule in antitrust cases: Check out this article by Michael Christian and Eric Buetzow if you have a Law360 subscription. Of course, even if a Court applies the injury rule to the exclusion of the discovery rule (and they sometimes do), a plaintiff could still invoke fraudulent concealment to postpone accrual of many antitrust claims.

You will likely see a fraudulent concealment count in any case involving a long-lasting conspiracy. That is because the nature of a conspiracy—in most cases—is to hide the anticompetitive conduct. Most antitrust claims where a discovery rule would be useful are ones in which a plaintiff could likely invoke fraudulent concealment.

Fraudulent concealment means that the defendants are purposely trying to hide their bad conduct, with an intent to deceive the victims.

So, for example, if there are a group of competitors that are engaged in a market-allocation or bid-rigging conspiracy and they also cover up the conspiracy, it is likely that a Court will find that the conspirators committed a fraudulent concealment such that the antitrust cause of action doesn’t begin to accrue until the victim discovers the conspiracy.

You will see claims of fraudulent concealment in many antitrust complaints. Of course, if you are an antitrust plaintiff, you may have to show that you exercised diligence during the concealment period.

You can read our article about fraudulent concealment in the antitrust context here.

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Monopoly-go-to-jail-antitrust-compliance-300x200

Author: Luis Blanquez

If you read our articles regularly, you know an antitrust compliance policy is a strong tool to educate directors and employees to avoid risks of anticompetitive conduct. Companies articulating such programs are in a better position to detect and report the existence of unlawful anticompetitive activities, and if necessary, be the first ones to secure corporate leniency from antitrust authorities.

Antitrust Compliance Programs in the US and the European Union

But make no mistake––not any antitrust compliance policy is sufficient to convince the Antitrust Division of the Department of Justice (DOJ) that you are a good corporate citizen. You must show the authorities how your compliance program is truly effective and meets the purpose of preventing and detecting antitrust violations.

And how do you do that? As a start, you should get familiar with the following key documents.

Make sure you read them carefully because they have significantly changed the way DOJ credits compliance programs at the charging stage; and how it evaluates them at the sentencing stage. But that’s not all. For the first time, they also provide public guidance on how DOJ analyzes compliance programs in criminal antitrust investigations.

In this article, we focus on the new DOJ Policy for incentivizing antitrust compliance, as well as the 2019 and 2020 Guidance Documents. We also provide an overview of the most recent Deferred Prosecution Agreements (DPAs) and indictments from DOJ.

If you also want to review the new changes to the Justice Manual, you can see them here. In a nutshell, the new revisions impact the evaluation of compliance programs at the charging and sentencing stage. In the past the Justice Manual stated that “credit should not be given at the charging stage for a compliance program.” That text has now been deleted. The new additions also impact DOJ processes for recommending indictments, plea agreements, and the selection of monitors.

If you discover or suspect your company is under investigation for antitrust violations, you should, of course, consider hiring your own antitrust attorney.

The 2019 DOJ New Policy for Incentivizing Antitrust Compliance

In the past, if a company did not win the race for leniency, the DOJ’s approach was to insist that it plead guilty to a criminal charge with the opportunity to be an early-in cooperator, and potentially receive a substantial penalty reduction for timely, significant, and useful cooperation. This all-or-nothing philosophy highlighted the value of winning the race for leniency. The new Policy departs from this approach.

In July 2019, the DOJ announced the new policy to incentivize antitrust compliance.

Antitrust News: The Department of Justice Wants You to Have a Strong Antitrust Compliance Policy

The new policy was presented by AAG Makan Delrahim on July 11, 2019, at the Program on Corporate Compliance and Enforcement at the New York University School of Law: Wind of Change: A New Model for Incentivizing Antitrust Compliance Programs. Delrahim explained that, unlike in the past, corporate antitrust compliance programs will now factor into prosecutors’ charging and sentencing decisions and may allow companies to qualify for deferred prosecution agreements (DPAs) or otherwise mitigate exposure, even when they are not the first to self-report criminal conduct.

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Antitrust-Group-Boycott-300x200

Author: Jarod Bona

Maybe everyone really is conspiring against you? If they are competitors with each other—that is, if they have a horizontal relationship—they may be committing a per se antitrust violation.

A group boycott occurs when two or more persons or entities conspire to restrict the ability of someone from competing. This is sometimes called a concerted refusal to deal, which unlike a standard refusal to deal requires, not surprisingly, two or more people or entities.

A group boycott can create per se antitrust liability. But the per se rule is applied to group boycotts like it is applied to tying claims, which means only sometimes. By contrast, horizontal price-fixing, market allocation, and bid-rigging claims are almost always per se antitrust violations.

We receive many calls and messages about potential group boycott actions. This is probably the most frustrating type of antitrust conduct to experience as a victim. Companies often feel blocked from competing in their market. They might be the victim of marketplace bullying.

You can also read our Bona Law article on five questions you should ask about possible group boycotts.

Many antitrust violations, like price-fixing, tend to hurt a lot of people a little bit. A price-fixing scheme may increase prices ten percent, for example. Price-fixing victims feel the pain, but it is diffused pain among many. Typically either the government antitrust authorities or plaintiff class-action attorneys have the biggest incentive to pursue these claims.

Perpetrators of group-boycott activity, by contrast, usually direct their action toward one or very few victims. The harm is not diffused; it is concentrated. And it is often against a competitor that is just trying to establish itself in the market. The victim is often a company that seeks to disrupt the market, creating a threat to the established players. This is common.

The defendants may act like bullies to try to keep that upstart competitor from gaining traction in the market. Sometimes trade associations lead the anticompetitive charge.

Group boycott activity often occurs when someone new enters a market with a different or better idea or way of doing business. The current competitors—who like things just the way they are—band together to use their joint power to keep the enterprising competitor from succeeding, i.e. stealing their customers.

Sometimes group-boycott claims are further complicated when the established competitors—the bullies—use their relationships with government power to further suppress competition. Indeed, sometimes the competitors actually exercise governmental power.

This is what occurred in the NC Dental v. FTC case (discussed here, and here; our amicus brief is here): A group of dentists on the North Carolina State Board of Dental Examiners engaged in joint conduct, using their government power, to thwart teeth-whitening competition from non-dentists.

This, in my opinion, is the most disgusting of antitrust violations: a group of bullies engaging government power to knock out innovation and competition. And I am very happy to see the Federal Trade Commission take a pro-active role against such anticompetitive thuggery.

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Author:  Steven J. Cernak

On October 6, 2020, the Antitrust Subcommittee of the U.S. House Judiciary Committee issued its long-anticipated Majority Report of its Investigation of Competition in Digital Markets.  As expected, the Report detailed its findings from its investigation of Google, Apple, Facebook, and Amazon along with recommendations for actions for Congress to consider regarding those firms.

In addition, the Report included recommendations for some general legislative changes to the antitrust laws.  Included in those recommendations were proposals for Congress to overrule several classic antitrust opinions.  Because this blog has summarized several classic antitrust cases over the years (see here and here, for example), we thought we would summarize some of the opinions that now might be on the chopping block.  This post concerns two classic Supreme Court opinions on refusal to deal or essential facility monopolization claims, Trinko and linkLine.

House Report on Refusal to Deal and Essential Facilities

The Report’s recommendations for general changes in the antitrust laws included several aimed at increasing enforcement of Sherman Act Section 2’s prohibition of monopolization.  In particular, the Report recommended that:

Congress consider revitalizing the “essential facilities” doctrine, or the legal requirement that dominant firms provide access to their infrastructural services or facilities on a nondiscriminatory basis.  To clarify the law, Congress should consider overriding judicial decisions that have treated unfavorably essential facilities- and refusal to deal-based theories of harm.  (Report, pp. 396-7)

The two judicial opinions listed were Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004) and Pacific Bell Telephone Co. v. linkLine Communications, Inc., 555 U.S. 438 (2009).

Trinko

Justice Scalia wrote the Court’s opinion dismissing the plaintiff’s refusal to deal claim.  There were no dissents although Justice Stevens, joined by Justices Souter and Thomas, wrote separately to concur in the result but would have dismissed based on lack of standing.

Since the Supreme Court’s 1919 U.S. v. Colgate (250 U.S. 300) decision, courts have found that “in the absence of any purpose to create or maintain a monopoly,” the antitrust laws allow any actor, including a monopolist, “freely to exercise his own independent discretion as to parties with whom he will deal.”  Trinko narrowly interpreted the Court’s earlier exceptions to the rule that even a monopolist can choose its own trading partners.

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