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Do you want to learn about antitrust? If so, now is a great time to do so. Concurrences, an international antitrust website with an outstanding reputation, is accepting votes for their 2018 Antitrust Writing Awards, which will be announced at the Awards Gala Dinner on April 10, 2018 (right before the ABA Antitrust Spring Meeting, where you may find me on a panel).

I haven’t been to the Awards Gala Dinner, but I can only assume it is similar to the Oscars, if the Oscars were run by antitrust lawyers. We can pause for a moment while you try to picture what that might entail.

Back to the Antitrust Writing Awards: A jury of distinguished antitrust experts selected articles from 2017 in several categories: Best Academic Articles, Best Business Articles, Best Soft Law, and Best Newsletters. Within each category are articles in several substantive antitrust and competition areas.

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Author: Saurabh Vishnubhakat, Associate Professor of Law and Associate Professor of Engineering, Texas A&M University. 

This guest post is based upon Professor Vishnubhakat’s innovative new paper applying antitrust concepts to patent law, which is now published in the Seton Hall Law Review: “The Antitrusting of Patentability”

Courts facing difficult questions of patent validity are increasingly turning to a form of decision-making that has long been familiar to antitrust lawyers: using per se analysis rather than the rule of reason.  In this post, I will discuss the analytical origins of this trend, fresh empirical data on how it is emerging, and some thoughts for improvement.

The Patent-Antitrust Interface

To begin, it is worth noting the very fact that antitrust law and patent law are intersecting so directly.  The complexity and specialization of these fields can often stand in the way of dialogue between them, though the need for such dialogue is plain.  One of antitrust law’s main concerns is fostering competition and promoting economic efficiency.  Meanwhile, patent rights by design restrict competition and efficiency in the short run.  A patent owner can exclude others from quintessentially economic activities: making, using, selling, offering, and importing the patented invention.

This is meant to produce gains for inventor and society alike, but on different timelines.  Market power and the ability to charge higher prices are today’s reward for the patent owner in return for developing the invention in the first place.  Society’s reward comes tomorrow, when the patent expires and the technical know-how becomes freely available to make and sell, to use in follow-on innovation, and so on.  Another important reward to society is the credible incentive to future would-be innovators that their efforts, too, will enjoy a similar benefit.

Theoretically, this tradeoff between static current losses to competition and efficiency in favor of dynamic future gains could be made entirely within patent law itself.  However, antitrust has much to say on these systemic choices, too, and the proper treatment of so-called “patent monopolies” has been a source of perennial debate and even tension in the law since the 19th century.

The Origins of Per Se Analysis in Patent Law

In this longstanding debate, the use of per se-style analysis in patent law is a recent development aimed at solving a specific problem.  Inventions are evaluated, and patents are granted, by Patent Office examiners with expertise in the relevant technology.  Federal judges and juries who later confront these patents in litigation generally have no such expertise, but they must frequently decide whether a patent is valid.  In doing so, they must pass judgment on whether an expert agency—one that deals every day with the law and the science of patents—got it wrong.

Under the best of circumstances, this is intimidating.  Making this decision accurately is costly and time-consuming, even with compelling stories from attorneys and authoritative opinions from expert witnesses.  If one could dispense with the thorny question of patent validity early in litigation, things would be simpler.

One straightforward way to front-loading an issue, of course, is to decide it as a matter of law without delving much into idiosyncratic facts.  This is where per se analysis of patent validity begins.  Of the major requirements for a patent to be granted—and for a granted patent to be found valid—most require a good deal of factual detail about the state of the art and what people trained in that art knew at the time of the invention.  But one does not: the threshold question of the invention is even patent-eligible subject matter.  This is primarily a legal question, and so the subject matter eligibility doctrine is a good candidate for reducing the decision costs associated with determining patent validity.

How the Per Se Analysis of Patent Validity Actually Works

The way it works, in essence, is that a court applies the subject matter eligibility doctrine to find a patent invalid rather than reaching the same conclusion through other, more fact-intensive doctrines.  Patent lawyers tend to think of the different patentability requirements as separate hurdles to be cleared, but it turns out that these requirements reflect similar, overlapping concerns.

To be patentable, an invention must be useful and new as compared to the prior state of knowledge.  It must be nonobvious, which means it must embody more than trivial combinations or extensions of existing inventions or pieces of knowledge.  These requirements are intended to ensure that an invention is innovative enough to merit a patent.

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Author: Jarod Bona

If you are looking for controversy, you came to the right place. Today, we discuss resale price maintenance, one of the most contentious issues in all of antitrust. If you look around and see a bunch of antitrust economists, hide your screen so they don’t start arguing with each other. Trust me; that is the last thing you want to experience.

Let’s start with some background: A resale price maintenance agreement is a deal between, for example, a supplier and a retailer that the retailer will not sell the supplier’s product to an end user (or anyone, for that matter) for less than a certain amount. It is a vertical price-fixing agreement.

That type of agreement has a storied—and controversial—past. Over a hundred years ago, the Supreme Court in a case called Dr. Miles declared that this type of vertical price fixing is per se illegal under the federal antitrust laws. This is a designation that is now almost exclusively limited to horizontal agreements.

During the ensuing hundred years or so, economists and lawyers debated whether resale price maintenance (RPM) really should be a per se antitrust violation. After all, there are procompetitive reasons for certain RPM agreements and the per se label is only supposed to apply to activity that is universally anticompetitive.

After a trail of similar issues over the years, the question again landed in the Supreme Court’s lap in a case called Leegin in 2007. In a highly controversial decision that led to backlash by certain states, the Supreme Court lifted the per se veil from these controversial vertical agreements and declared that, at least as far as federal antitrust law is concerned, courts should analyze resale price maintenance under the rule of reason.

You can read more about Leegin and how courts analyze these agreements in our prior article. And if you want to learn more about how certain states, like California, handle resale price maintenance agreements, you can read this article. Finally, if you are looking for a loophole to resale price maintenance agreements, read our article about Colgate policies and related issues.

Minimum advertised pricing policies (MAP) are related to resale price maintenance: you can read our article on MAP pricing and antitrust here.

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Author: Aaron Gott

Last month, the U.S. Supreme Court granted a writ of certiorari to decide a circuit split on an important procedural question concerning the state-action immunity to the federal antitrust laws: whether a decision denying the state-action immunity is immediately appealable or must await a final decision just like most issues raised on a motion to dismiss.

The case, SolarCity Corporation v. Salt River Project Agricultural Improvement and Power District, is about a power company that changed its rate structure to make it less appealing for consumers to switch to solar power. Power companies are typically quasi-natural monopolies because of the way power is delivered—through a massive infrastructure of physical lines.

But new technology is changing that: people can generate electricity straight from the sun by installing panels on their roofs, and soon it will be more cost effective to install batteries to hold that power for when it is needed than to continue paying the power company. In places like Southern California, where the price of peak electricity is more than four times the national average, solar power is a no-brainer.

It comes as no surprise that some power companies are using their incumbency to slow the disruption of this innovative technology. SolarCity (now Tesla, Inc.) sued an Arizona power district for attempting to maintain its monopoly over the supply of electrical power in its territory, alleging that the power district created new fees that penalize solar customers, which ultimately had its intended effect: solar retailers received 96% fewer applications for new solar systems among customers in the power district after the new rates took effect.

The power district moved to dismiss, arguing that it is immune from the federal antitrust laws under the state-action immunity. The district court denied the motion because the power district had not met its burden of showing that it acted pursuant to a clearly articulated state policy to displace competition. The power district sought an order certifying the denial for interlocutory appeal, which was also denied. Nevertheless, the power district immediately appealed to the Ninth Circuit, arguing that a denial of the state-action immunity should be immediately appealable under the collateral order doctrine.

Before we dive into the Ninth Circuit decision, let’s discuss some of these terms.

The Collateral Order Doctrine

The collateral order doctrine is an exception to the general rule that the federal courts of appeal have jurisdiction to hear only appeals of “final orders” from the district courts.  The exception is narrow and must be strictly applied.

A collateral order is appealable immediately if it meets three requirements: first, the order being appealed must be conclusive. Second, it must address a question that is separate from the merits of the case. Third, it must raise “some particular value of a high order” and evade effective review if not considered immediately.

With these requirements, there are only a few categories of decisions that meet the collateral order doctrine, and they are all “immunities”: Eleventh Amendment immunity, absolute immunity, qualified immunity, foreign and tribal sovereign immunity. Given this, it might seem that the state-action “immunity” also fits. But it isn’t quite that simple because the state-action immunity isn’t actually an immunity, but a judicially recognized exemption.

What Is An Immunity?

Read broadly, an immunity could mean many different things. It could mean immunity from suit, immunity from liability, or even just immunity from money damages.

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For the third time in recent years, the US Supreme Court decided to review an antitrust case involving state-action immunity.

Unlike the first two cases, however, the primary issue in this case is procedural: The petition requesting review fairly described the issue as “Whether orders denying state-action immunity to public entities are immediately appealable under the collateral-order doctrine.”

The case at issue is a Ninth Circuit case called SolarCity Corporation v. Salt River Project Agricultural Improvement and Power District. SolarCity, of course, is now a unit of Elon Musk’s Tesla.

You can read our more complete analysis of the upcoming SolarCity case here.

The substantive case underneath the procedural issue involves a monopolization lawsuit by SolarCity against a public entity power company in Arizona, which is the only supplier in that area of traditional electrical power.

Here is what they did: SolarCity, like other solar-energy-panel companies, was having success in selling and leasing rooftop solar panels to customers, especially in sunshine places like Arizona (and Southern California, of course). Instead of viewing the move toward solar power as good for the environment and peoples’ pocketbooks, the power company—a public entity—viewed it as a threat. And, like many government entities that view private enterprise as a threat to their budgets and influence, the power district changed the rules.

That is, the power company changed the pricing structure so customers that acquire power from their own system—a solar-panel system, for example—must pay a prohibitively large penalty. The government entity’s rule change had its intended effect: SolarCity received ninety-six percent fewer applications for new solar-panel systems in that territory.

This is, of course, one of the grossest forms of government abuse and a disgrace to competition. It is also one of the reasons why Luke Wake of the NFIB Small Business Legal Center and I argued both as an amicus in Phoebe Putney and in a law review article that the Supreme Court should adopt a market-participant exception to state-action immunity. If a government entity is a commercial participant in a market, it shouldn’t be immunized from cheating in that market.

Bona Law currently has another case pending in the Ninth Circuit in which government entities that compete in the market violated antitrust laws and are using the shield of state-action immunity to try to get away with it.

The Collateral Order Doctrine

In the SolarCity case, the trial court rejected state-action immunity at the motion-to-dismiss stage. Typically, a defendant that loses a motion to dismiss cannot appeal the issues until later in the case, sometimes after trial. The plaintiff gets to take a shot at proving its case.

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Author: Jarod Bona

We see many antitrust issues in the distribution world—and from all business perspectives: supplier, wholesale distributor, authorized retailer, and unauthorized retailer, among others. And at the retail level, we hear from both internet and brick-and-mortar stores.

The most common distribution issues that come up are resale-price-maintenance (both as an agreement and as a Colgate policy), terminated distributors/retailers, and Minimum Advertised Pricing Policies or MAP.

Today, we will talk about MAP Policies and how they relate to the antitrust laws.

What is a Minimum Advertised Price Policy (more commonly known as a MAP policy)?

A MAP policy is one in which a supplier or manufacturer limits the ability of their distributors to advertise prices below a certain level. Unlike a resale-price-maintenance agreement, a MAP policy does not stop a retailer from actually selling below any minimum price.

In a resale price maintenance policy or agreement, by contrast, the manufacturer doesn’t allow distributors to sell the products below a certain price.

As part of a “carrot” for following MAP policies, manufacturers often pair the policy with cooperative advertising funds for the retailer.

The typical targets of a MAP policy are online retailers. These policies also do not typically restrict in-store advertising. The manufacturers that employ MAP policies are usually the ones that emphasize branding in their corporate strategy or have luxury products and fear that low listed prices for those products will make them seem less luxurious. But these policies exist in many different industries.

In any event, MAP policies are accelerating in the marketplace. Indeed, brick and mortar retailers that fear “showrooming,” will often pressure manufacturers to implement either vertical pricing restrictions or MAP policies.

Do MAP Policies Violate the Antitrust Laws?

MAP policies don’t—absent further context—violate the antitrust laws by themselves. But, depending upon how a manufacturer structures and implements them, MAP policies could violate either state or federal antitrust law. So the answer is the unsatisfying maybe.

But we can add further context to better understand the level of risk for particular MAP policies.

There is some case law analyzing MAP policies, but it is limited, so if you play in this sandbox, you can’t prepare for any one approach. I had considered going through the cases here, but I think that has limited utility.  The fact is that there isn’t a strong consensus on how courts should treat MAP policies themselves. So the best tactic is to understand the core competition issues and make your risk assessments from that.

In any event, you will need an antitrust attorney to help you through this, so the best I can do here for you to is to help you spot the issues and understand if you are moving in the right direction.

If you are familiar with resale price maintenance or Colgate policies, you will notice a lot of overlap with MAP policy issues. But there are important differences.

A minimum advertised price policy is not strictly a limit on pricing. From a competitive standpoint, that helps, but not necessarily a lot. The reality is that a MAP policy can be—for practical reasons—a significant hurdle for online distributors to compete on price for the restricted product. That is, for online retailers, sometimes the MAP policy price is the effective minimum price.

Resale Price Maintenance

Before we go further, let’s review a little bit. A resale price maintenance agreement is a deal between a manufacturer and some sort of distributor (including a retailer that sells to the end user) that the distributor will not sell the product for less than a set price. Up until the US Supreme Court decided Leegin in 2007, these types of agreements were per se illegal under the federal antitrust laws.

Resale price maintenance agreements are no longer per se federal antitrust violations, but several states, including California and New York, may consider them per se antitrust violations under state law, so most national manufacturers avoid the risk and implement a unilateral Colgate policy instead.

Under federal law, courts usually analyze resale-price-maintenance agreements under the antitrust rule of reason.

Colgate Policies

Colgate policies are named after a 1919 Supreme Court decision that held that it is not a federal antitrust violation for a manufacturer to unilaterally announce in advance the prices at which it will allow its product to be resold, then refuse to deal with any distributors that violate that policy. You can read our article about Colgate policies here.

The bottom line with Colgate is that in most situations the federal antitrust laws do not forbid one company from unilaterally refusing to deal with another. There are, of course, exceptions, so don’t rely on this point without consulting an antitrust lawyer.

Back to MAP Policies and Antitrust

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Antitrust News is a new feature at The Antitrust Attorney Blog. We will periodically report on and address new developments in the antitrust world, from FTC or DOJ guidance to important court decisions to relevant legislative developments to worldwide antitrust issues.

Although some of our prior articles involve antitrust developments, most of these posts consist of content that is less timely and more evergreen. Our intent is to help our readers by describing Antitrust News through the filter of our antitrust expertise.

On November 16, 2017 in Washington, DC, Deputy Assistant Attorney General Donald G. Kempf, Jr. made news about antitrust merger review at the American Bar Association’s Antitrust Fall Forum.

Kempf said—simply—that the DOJ will try to shorten the time it takes it to review mergers for antitrust and competition issues. In 2011, the average merger took just over 7 months to review. In 2016, the review time increased to 11.6 months on average.

That is unacceptable. Companies that want to merge should not have to wait almost full year to do so. A lot can happen in a year, particularly now where technology and low entry barriers mean that entire markets often change in a short period of time.

How did the excess delays happen?

To explain, let’s back up and explain—briefly—how an antitrust merger review works:

The merging parties begin by completing what is called a Hart-Scott-Rodino (HSR) filing. Either the DOJ or FTC has 30 days to decide whether to issue what is called a second request. If one of the antitrust agencies thinks that there could be genuine competition issues for the merger, they may issue this second request, which opens up a heavy set of fact-finding, including document production.

At some point, the antitrust agencies may either approve the merger, reach an agreement with the parties to approve the merger with certain requirements (like selling assets) or (in the case of the DOJ) to seek a preliminary injunction stopping the merger.

According to Kempf, over time the second request period increased in scope and complexity and the preliminary injunction hearings became mini-trials. Indeed, they often have the same effect as a trial on the merger because if the DOJ wins, the parties often abandon the merger. If the DOJ loses, it often halts the challenge.

Kempf went on to articulate why shortening merger review time is so important. His best line was that “delaying competitive mergers is anticompetitive, and that’s not the business the Antitrust Division wants to be in. Just the opposite.”

He offered five suggestions to shorten antitrust merger reviews: Continue reading →

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Author: Luis Blanquez

As a US company doing business internationally, you might wonder what are the legal rules and procedures currently in place in the European Union to file an antitrust complaint.

First, you should understand that The Treaty on the Functioning of the European Union (TFEU) is based on the existence of a single market with free movement of goods and services throughout the European Union.  The antitrust rules included in the TFEU, such as those against anti-competitive agreements, abuses of dominant position, certain problematic mergers and state aid, are essential to achieve that free movement.

Second, an important distinction from US antitrust law is that EU antitrust law is mainly enforced by public authorities: by the European Commission at EU level, and by national competition authorities (NCAs) at national level.

Third, EU antitrust law is also enforced—to a lesser extent—through ordinary litigation before the appropriate national courts of each Member State.

Last but not least, we shouldn’t forget that each Member State within the EU has also its own domestic antitrust rules, often mirroring EU rules, but sometimes with important procedural and substantive differences.

How the different antitrust laws are applied in the EU between NCAs, the European Commission and national courts, deserves an independent post on its own.  For now, however, just keep in mind that as a plaintiff, you could also file an antitrust complaint in the EU before a national court.

In the meantime, if you want to know more about this issue, please see: (i) Council Regulation (EC) No 1/2003 on the implementation of the rules on competition, (ii) Commission Notice on the co-operation between the Commission and the courts of the EU Member States in the application of Articles 81 and 82 EC (See more information here), and (iii) Notice on Cooperation within the network of competition authorities in the European Competition Network (See more information here).

Let’s return to our discussion on the application of EU antitrust rules by the European Commission.  In the European Union, the Directorate General for Competition of the European Commission (“the Commission”), together with NCAs, directly enforces EU competition rules, Articles 101-109 of the Treaty on the Functioning of the European Union.  The two most important articles, for the purpose of this post, are articles 101 and 102 TFEU.

Article 101 of the Treaty prohibits agreements between two or more independent market operators that restrict competition.  It covers: (i) horizontal agreements between actual or potential competitors operating at the same level of the supply chain; (ii) and vertical agreements, between firms operating at different levels, such as an agreement between a manufacturer and its distributor.

Article 102 of the Treaty prohibits dominant firms from abusing that position, for example, by charging unfair prices, by limiting production, or by refusing to innovate to the prejudice of consumers.

HOW DOES AN ANTITRUST CASE START IN THE EU?

  • The investigation

For Article 101 TFEU cases, the Commission and NCAs have important investigative powers under Regulation 1/2003.

The initiation of a Commission investigation might be the result of: (i) the Commission (or an NCA) launching an inquiry of its own initiative; (ii) a third party with information who approaches the Commission, such as a competitor or customer, (iii) a party to a cartel (or anti-competitive agreement) acting as a whistleblower under the existing leniency program, or (iv) when an NCA refers a case with a cross border element to the Commission through the ECN network.

Under Article 102, a case can originate either upon receipt of a complaint or through the opening of an investigation at the commission’s initiative.

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We are ecstatic that Steve Levitsky agreed to join us in New York. It isn’t every day that an antitrust attorney of Steve’s caliber becomes available, let alone fits so perfectly into a law firm’s approach, culture, and plans. But that is the happy situation in which we find ourselves.

You can read our press release about the move here. And you can read Steve Levitsky’s impressive biography here.

As you can tell, I am very excited about this next chapter in Bona Law’s history. As you can see, we now have two offices: La Jolla, California and New York, New York.

Bona Law is an antitrust boutique firm. Our client base has been worldwide for quite some time and we have had cases and other matters all over the country. So the move to add a New York office doesn’t change our focus: We have always been a national antitrust boutique firm.

But I think opening our New York office signals to the marketplace more directly that we are a national law firm that competes with biglaw for antitrust. And adding Steve to our team—with his decades of big firm antitrust experience and worldwide client base—confirms our place.

Steve Levitsky’s antitrust experience includes the big three of litigation, antitrust counseling, and antitrust merger work. But what is even more exciting for us is that Steve is particularly known for his antitrust merger expertise, which is an area in which I have much less experience.

Over the last few years, I have heard repeatedly that many companies that have an HSR filing or other antitrust merger issues are frustrated that they don’t options other than big law firms. Well, now they do: Steve has managed the antitrust side of countless complex merger transactions, domestic and global—many of them worth over $10 billion.

So if you are a corporate attorney or business with antitrust merger or acquisition issues, you should contact Steve.

Steve has such an impressive background that he would, frankly, fit in at any law firm. He would substantially raise the average quality of the attorneys no matter where he would have gone. Our traditional press release and website article goes into his background, so I am not going to repeat it here.

I enjoy writing articles for The Antitrust Attorney Blog because it allows greater flexibility in what I tell you. I try to offer some of the informal truths relating to antitrust and law practice that, although vitally important, are not usually discussed so straightforwardly.

So, obviously, adding Steve to our team is a huge deal because he is a great lawyer. But my excitement about this move goes well beyond that obvious point.

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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—a victim of the antitrust laws doesn’t always know 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 we don’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 Blaze watch 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 price-fixing 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.

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