Competition-in-Politics-Harvard-Business-Review-300x169

Author: Jarod Bona

As antitrust attorneys, we advocate for competition in product and service markets. The US Supreme Court recognizes that “the heart of our national economy long as been faith in the value of competition,” and we agree.

But competition matters elsewhere too. We certainly see it in sports. You might notice that sport leagues strive to increase parity to make the league more competitive overall. So when your favorite NFL Football team creates twelve to sixteen sleepless nights for you one year, the league rewards it with a high draft pick the next year. And if your team wins more than it loses, the NFL scheduling gods will punish them the next year with a tougher path to the playoffs.

Anyway, if you read the Harvard Business Review, you may have noticed an article that is sure to pique the interest of an antitrust lawyer like myself. (July-August 2020 Issue). It isn’t about sports, but it is still interesting.

Katherine M. Gehl and Michael E. Porter wrote “Fixing U.S. Politics: What business can—and must—do to revitalize democracy.”

Everyone seems unhappy with the current state of political affairs—so maybe more competition is the solution?

(This is a good reminder that every profession—including antitrust attorney—sees solutions to problems through their own, very specific, eyes. Knee injury? You need more competition. Of course, it isn’t always effective.)

Before we jump into Gehl and Porter’s work, as a disclaimer, Bona Law isn’t a political law firm: we don’t take any specific positions on politics or candidates. Our firm is made up of actual people, all of whom have freedom of thought and their own individual views, which we respect. As a firm, we take positions on certain types of policy—like encouraging competition and discouraging the government from destroying competition. But Bona Law is an antitrust law firm, so that’s not a surprise. But when it comes to politics, that is for each person to decide for themselves. Politics is personal.

According to the authors, politics are driven by the same five forces that affect more traditional markets: “the nature and intensity of rivalry, the power of buyers, the power of suppliers, the threat of new entrants, and the pressure from substitutes that compete in new ways.” (117). The authors explain that—unfortunately—the politics industry doesn’t have healthy competition.

The key problem, according to the authors, is that the Democrats and Republicans have a duopoly and that they work hard to keep it that way—with great success.

Continue reading →

Colgate Doctrine

Author: Jarod Bona

As an antitrust attorney with an antitrust blog, my phone rings with a varied assortment of antitrust-related questions. One of the most common topics involves resale-price maintenance. “Resale price maintenance” is also a common search term for this blog.

That is, people want to know when it is okay for suppliers or manufacturers to dictate or participate in price-setting by downstream retailers or distributors.

I think that resale-price maintenance creates so many questions for two reasons: First, it is something that a large number of companies must consider, whether they are customers, suppliers, or retailers. Second, the law is confusing, muddled, and sometimes contradictory (especially between and among state and federal antitrust laws).

If you want background on resale-price maintenance, you might also review:

Here, we will discuss alternatives to resale-price maintenance agreements that may achieve similar objectives for manufacturers or suppliers.

The first and most common alternative utilizes what is called the Colgate doctrine.

The Colgate doctrine arises out of a 1919 Supreme Court decision that held that the Sherman Act does not prevent a manufacturer from announcing in advance the prices at which its goods may be resold and then refusing to deal with distributors and retailers that do not respect those prices.

Businesses (with some exceptions) have no general antitrust-law obligation to do business with any particular company and can thus unilaterally terminate distributors without antitrust consequences. Before you rely on this, however, you should definitely consult an antitrust attorney, as the antitrust laws create several important exceptions, including refusal to deal, refusal to supply, and overall monopolization limitations.

Both federal and state antitrust law focuses on the agreement aspect of resale-price maintenance agreements. So if a company unilaterally announces minimum prices at which resellers must sell its products or face termination, the company is not, strictly speaking, entering an agreement.

Continue reading →

antitrust-exemptions-300x196

Author: Jarod Bona

Congress and the federal courts have—over time—created several exemptions or immunities to antitrust liability.

The US Supreme Court in National Society of Professional Engineers v. United States explained that “The Sherman Act reflects a legislative judgment that ultimately competition will produce not only lower prices, but also better goods and services.” 435 U.S. 679, 695 (1978). And “[t]he heart of our national economy long has been faith in the value of competition.” Id.

National Society of Professional Engineers holds, effectively, that those that think that they should not be subject to competition—for whatever reason—don’t get a free pass.

But there are several areas that do have limited exemptions to federal antitrust liability. Importantly, however, the US Supreme Court has repeatedly emphasized that courts should narrowly interpret these exemptions.

Here are the primary antitrust exemptions created by Congress and the federal courts:

State-Action Immunity. State-action immunity comes up a lot at Bona law, as we work hard to enforce the federal antitrust laws against anticompetitive state and local conduct. This exemption allows certain state and local government activity to avoid antitrust scrutiny. Lately, the US Supreme Court has narrowed the doctrine, including for state licensing boards that seek its protection when sued under the antitrust laws (North Carolina State Board of Dental Examiners v. Federal Trade Commission). Bona Law also advocates a market-participant exception to state-action immunity, but the courts are split on that issue.

Filed-Rate Doctrine. The filed-rate doctrine is a defense to an antitrust action that is premised on the regulatory rates filed with a federal administrative agency. In many regulated industries (like insurance, energy, shipping, etc.), businesses must, generally, file the rates that they offer to customers with federal agencies. The filed-rate doctrine eliminates antitrust liability for instances in which, to satisfy the antitrust elements, a judge or judge must question or second guess the level of these filed rates (i.e. that they included overcharges resulting from anticompetitive conduct).

Business of Insurance. The McCarran-Ferguson Act exempts certain acts that are the business of insurance and regulated by one or more states from antitrust scrutiny. You can read more about the McCarran-Ferguson Act and its requirements at The Antitrust Attorney Blog.

Baseball. That’s right—there is a baseball exemption to antitrust liability. This is a judge-made doctrine developed long ago. The other sports don’t have an antitrust exemption and the question of whether baseball should have one comes up periodically. If you want to learn more, you should read the five-part series on baseball and antitrust that Luke Hasskamp authored.

Agricultural Cooperatives. The Capper-Volstead Act provides a limited antitrust exemption to farm cooperatives. Under certain circumstances, this Congressional Act allows farmers to pool their output together and increase their bargaining power against buyers of agricultural products. You can read more about this in Aaron Gott’s article on the Capper-Volstead Act.

The Noerr-Pennington doctrine. The Noerr-Pennington immunity—named after two US Supreme Court cases—is a limited antitrust exemption for certain actions by groups or individuals when the intent of that activity is to influence government actions. The Noerr-Pennington doctrine can apply to actions that seek to influence legislative, executive, or judicial conduct. There is, however, an important sham exception to Noerr-Pennington immunity that often comes up in litigation.

You can learn more about the Noerr-Pennington doctrine and antitrust liability here.

Statutory and Non-Statutory Labor Exemptions. The statutory labor exemption allows labor unions to organize and bargain collectively in limited circumstances, including requirements that the union act in its legitimate self-interest and that it not combine with non-labor groups. The non-statutory labor exemption arrives from court decisions that further exempt certain activities that make collective bargaining possible, like joint action by employers that is ancillary to the collective bargaining process.

You can read more about both the statutory and non-statutory labor antitrust exemptions here.

Implied Immunity. Implied immunity occurs in the rare instances in which there is no express antitrust exemption, but the anticompetitive conduct falls into an area of such intense federal regulatory scrutiny that antitrust enforcement must yield to the pervasive federal regulatory scheme.

The typical area where this comes up is with the federal securities laws, which is a good example of pervasive federal regulation. The US Supreme Court case to read for this antitrust exemption is Credit Suisse Securities (USA) LLC v. Billing, from 2007.

Keep in mind that courts do not easily find implied immunity of the antitrust laws—there must be a “clear repugnancy” or “clear incompatibility” between the antitrust laws and the federal regulatory regime.

Export Trade Exemptions. A little-known exemption involves export trade by associations of competitors. This antitrust exemption arises primarily from the Webb-Pomerene Act and the Export Trading Company Act. These FTC and DOJ guidelines provide more information about this antitrust exemption.

Continue reading →

Antitrust-and-Distribution-200x300
Contrary to the belief of many of today’s businesspeople, antitrust law’s coverage of distribution did not start with Amazon or even the Internet.  For decades, manufacturers have sold their products to resellers of all types to increase the distribution of their products.  Manufacturers always have been interested in how their products, often with their brands, are resold.  They often have tried to dictate or influence the pricing and marketing tactics of their resellers.

Since 1890, US federal antitrust law has been there every step of the way, drawing the line between permissible and impermissible restraints.  The 2020 edition of Cernak’s Antitrust in Distribution and Franchising summarizes where those lines are today.

In just over one hundred pages, the book provides concise, plain English coverage of all the antitrust topics manufacturers and retailers—and their representatives—need to understand.  Businesspeople can quickly get up to speed on potential distribution options.  Libraries can provide their users, especially students, an efficient way to start their research.  Generalist lawyers can review summaries of the key principles and cases necessary to assist their clients.

Non-Compete-California-263x300

Author: Luis Blanquez

California’s long-standing public policy in favor of employee mobility over an employer’s ability to prohibit any worker from going to work for a competitor is included in California Business & Professions Code Section 16600. So how do employers outside of California try to get around this powerful public policy?

First, employers in states where non-competes are still enforceable have attempted to implement choice-of-law clauses in employment agreements with California employees––requiring disputes between the parties to be governed not by California law, but rather by the law of a state more favorable to the enforcement of non-competes. But, as a general rule, California courts refuse to enforce such clauses. This is because California courts will not apply the law of another state where that law is “contrary to a fundamental public policy of the State of California.” In this case, the fundamental policy is open competition and employment mobility.

Conflict-of-law rules vary from state to state. Most states will not enforce a choice-of-law provision that violates the public policy of a state with a “materially greater interest” in the dispute or where the parties enjoy a “substantial relationship” with such state––i.e. where (i) the employee performs his/her work, (ii) the employee’s residence is, (iii) the contract was negotiated and formed, or (iv) the headquarters of the company is, among other factors.

Second, an employment agreement may also include a forum selection clause. In most cases it’s the employer––who sees one of its key employees leave to work for a competitor––who brings the case in the state court of the choice-of-law clause. When that happens, there is not much an employee can do, unless the case is moved to federal court and then transferred to another state. And even then, unless the case ends up in California federal court, the employee will have to rely on the courts of that other state to apply California choice-of-law principles to find the non-compete provision invalid.

To avoid such a hostile scenario, employees in California try to engage in what is called a “race to the courthouse.” They do so in the hope to effectively void their non-compete agreements under California law, before their former employers outside California enforce the non-compete agreement in a different state. This strategy sometimes works, but not always. For instance, the California Supreme Court has held that while California has a strong public policy against enforcing non-competition agreements, it’s not so strong as to warrant enjoining an employer from seeking relief in another state.

In any event, employers outside California have systematically struggled to enforce non-compete agreements in the past. And now it is even more complicated for them. For agreements entered into after January 1, 2017, California Labor Code Section 925 clarifies that employers may not require employees––who primarily work and reside in California––to agree to forum-selection and choice-of-law clauses that select non-California forums and/or laws, unless such employee is “individually represented by legal counsel in negotiating the terms of an agreement.

RESTRICTIVE COVENANTS

Usually the way employers try to restrict their workers from going to work for a competitor is by including in the employment contract a so-called “restrictive covenant.”

A restrictive covenant is an agreement between an employer and employee that limits an employee’s ability to compete after leaving the employer. The most common and restrictive type of agreement is a non-compete agreement. It prohibits the employee from offering its services within the agreement’s geographic scope for a period of time after leaving the employer. Other types of restrictive covenants may also limit an employee’s ability to solicit the employer’s customers or employees for a period of time.

They are, unquestionably, restraints on trade. But are they unreasonable restraints on trade? In many states outside California that is the issue—if they are reasonable, a court will enforce them. And what does reasonable mean? Again, it depends. But typically, like other restraints on trade, they must usually be narrowly tailored to serve their purpose. They should contain “reasonable” limitations as to time, geographic area, and scope of activity. The laws, of course, vary from state to state. But as a practical matter, most judges are skeptical. Some courts will actually rewrite the agreements to make them reasonable.

Is My Restrictive Covenant Legal Under California Law?

In California, however, the law does not allow employers to enforce a restrictive covenant against their former employees, particularly when it takes the form of a non-compete agreement.

NON-COMPETE CLAUSES

These clauses usually have two primary purposes.

Continue reading →

predatory-pricing-venture-capital-221x300

Author: Jarod Bona

The US Supreme Court said in 1986 that “[T]here is a consensus among commentators that predatory pricing schemes are rarely tried, and even more rarely successful.”

This was the famous Matsushita Elec. Indus. Co. v. Zenith Radio Corp. case that is known mostly for stating that to survive summary judgment on antitrust conspiracy, a plaintiff must present evidence that tends to exclude the possibility of independent (rather than conspiratorial) activity. 475 U.S. 574 (1986). Unfortunately, many federal trial judges have misunderstood this standard to apply to the motion-to-dismiss level.

If you don’t know what predatory pricing is, you should first read Steven Cernak’s outstanding article detailing the doctrine’s history and requirements (and rarity).

The purpose of this article is much more modest—to ask whether the quote above from the 1986 Supreme Court decision is out-of-touch with current scenarios that may or may not be reality (you decide).

As you learned from reading Steve Cernak’s article, a predatory pricing claim is one that asserts that defendants (with monopoly power) harmed competition by pricing below cost to run competitors out of the market in the short run, so they could raise prices later, after the pesky competitors are out of their way (that is called recoupment).

To prevail, besides antitrust injury, a predatory-pricing plaintiff must show that defendant has monopoly power, priced below some appropriate measure of cost, and had the ability to recoup the costs of taking a loss after they vanquished competition and could again raise prices. This is one form of a monopolization claim.

Let’s look at that 1986 Matsushita Supreme Court quote again: “[T]here is a consensus among commentators that predatory pricing schemes are rarely tried, and even more rarely successful.”

If you are an antitrust attorney or have studied antitrust, this quote is familiar to you and shows up in the defense briefing of just about every predatory-pricing case. And judges like to cite it too. Indeed, it represents the dismissiveness with which courts and, frankly, the entire antitrust world view predatory-pricing claims. And there is some good reason for that.

But is the statement correct and will it continue to be correct?

Let’s reminisce for a moment to the “olden days.” It used to be, I think, that companies sought to make a profit from the start to the finish. And if they didn’t make a profit, they failed, and whoever ran them would face scandal, scorn, and certain involuntary succession. Each company rise and stood alone, so each would try to be profitable. And if the business wasn’t profitable and didn’t survive, the equity of its shareholders or owners would perish, along with hopes and dreams.

Of course, like most general descriptions of a time or the past, this statement has holes and exceptions and could, in many instances, be plain wrong. But it is the narrative that was told (purposeful passive voice here) and that informed statements like that in the 1986-Matsushita-Supreme-Court decision, which is all that really matters for my point.

So, to price below cost, a company risked bankruptcy because pricing below cost, even for part of the company’s offerings, threatens profits, which threatens survival. And it may take a long time to vanquish competition to be able to later increase prices at monopoly-profit levels. And most companies weren’t willing or able to do that. So “predatory-pricing schemes were rarely tried,” as the quote goes. And, I suppose, those that did try them probably did mostly fail. But I haven’t reviewed the empirical evidence on that.

With that narrative, which is part of the history of predatory-pricing doctrine, we can see why the dismissive quote makes sense.

But what if this is the true world?

But what happens if you have a culture in which financial resources are aggregated into individual entities and you have smart people that place bets on large numbers of companies with the knowledge that most of them are going to fail? The financial entities, however, know and accept that and, instead, make their money from the extremely small percentage of companies that blow up (in a good way) and turn into unicorns or otherwise take over an entire market or industry.

And, at the same time, let’s say that a substantial percentage of these companies that are the subject of these financial bets are the type that succeed only if they reach the scale of monopoly. Maybe these are the sort of companies that create two-sided markets or exchanges, in which network effects are necessary to succeed?

And, what if, to obtain sufficient participants on both sides of the market (and the scale necessary to dominate the market), each of the companies (subject to the bets by the smart-financial entities) priced their products or services at zero or some extremely low amount in a race to get everyone on their website or app or system?

If that were to happen, I wonder if most of these companies would fail—they are pricing below cost, after all—and not everyone is going to be able to pull of a victory in these circumstances. But I bet a handful or more of them would survive and end up dominating their market. And I imagine that some of them would continue pricing below cost between the points of market penetration and complete market domination.

After all, profitability isn’t necessary because the money funding these companies—in this scenario—is not incented by mediocre or even strong profits. What makes these smart financial entities rich are the big winners—the companies with monopoly profits that dominate their markets.

If that were to happen, how would that change the accuracy of the 1986-Matsushita-Supreme Court quote: “[T]here is a consensus among commentators that predatory pricing schemes are rarely tried, and even more rarely successful.”

In the scenario I just described—you can decide for yourself whether it sounds familiar or is true—I think that predatory pricing schemes would be commonly tried and periodically successful.

Here is another possible scenario:

Let’s say there is a foreign country that owns or controls a substantial number of companies. It is possible, I suppose, that the bureaucrats in the government are calculating profits and forcing decisions based entirely or mostly on profit-maximization. It is possible that control, power, and influence have nothing to do with their decisions. And that the funding acts just like any other market funding.

But let’s pretend for a second that this isn’t true. Maybe the government money (and control and incentives usually follow the money) is less concerned about profit-maximization and more concerned about other goals. In that case, I wonder if this government money would have the same reluctance to risk profits as companies in the narrative we told earlier. If that is the case, I probably wouldn’t be dismissive of the idea that a predatory-pricing scheme could be tried or successful. Money seeking power or control likes monopoly and may be willing to fund it.

What about this?

This is a little outlandish, but let’s pretend that the people in the government making decisions about bailouts haven’t heard of the term “moral hazard” and are willing to send taxpayer dollars to giant companies whenever the companies have trouble making a profit. For the sake of the story, let’s call them, I don’t know, maybe “too big to fail.”

Continue reading →

Predatory-Pricing-300x200

Author: Steven Cernak

Your much larger competitor sells the same products as you do but at a much lower price, so low you think that it must be losing money on each sale. Can such “predatory pricing” ever violate the antitrust laws? It is a very difficult monopolization case to make but, as Uber recently discovered, not all such claims are quickly dismissed.

Monopolization is illegal under Sherman Act Section 2 of the antitrust laws. Such claims can only be lodged against a “monopolist,” a competitor with monopoly power. Finding “monopoly power” is a difficult question this blog covered here. But even a monopolist is only liable for “monopolization,” actions that help it acquire or 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 has been defined by the U.S. Supreme Court as “pricing below an appropriate measure of cost for the purpose of eliminating competitors in the short run and reducing competition in the long run”.¹ The Court expressed skepticism toward such claims several times for two reasons. First, it noted that “there is a consensus among commentators that predatory pricing schemes are rarely tried, and even more rarely successful”.² Second, it can be difficult to distinguish pro-competitive low prices from predatorily low ones; after all, “cutting prices in order to increase business often is the very essence of competition”.³

Because of that skepticism, the Court has established a test that is difficult for plaintiffs to meet. In Brooke Group, the Court evaluated claims that a cigarette producer was using low prices to discipline a competitor.⁴ The Court held that predatory pricing allegations will be upheld only if ”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.⁵

On the “below cost” element, the Court has declined to specifically define the “appropriate measure” of costs.⁶ While commentators have developed several potential measures, the most popular are variations on prices below a manufacturer’s reasonably anticipated marginal costs,⁷ such as average variable costs.⁸ The rationale is that no competitor would knowingly spend the incremental costs to make one more product if it did not plan to sell it for a price that covered at least those incremental costs unless such pricing was part of an anti-competitive scheme.

The “recoupment” element itself has two parts. First, the low prices must be capable of driving competitors from the market: “This requires an understanding of the extent and duration of the alleged predation, the relative financial strength of the predator and its intended victim, and their respective incentives and will.”⁹ Second, those expelled competitors and any other new entrants must stay out of the market and the market must have other attributes, such as high entry barriers, necessary to sustain high monopoly pricing so that the costs of the low prices can be recouped.¹⁰

The Brooke Group test has proven difficult for plaintiffs to meet. Despite those difficulties, plaintiffs continue to make predatory pricing claims, as illustrated by two 2019 opinions. But a May 2020 case involving Uber shows that some predatory pricing claims can survive a motion to dismiss.

In Clean Water Opportunities, Inc. v. Willamette Valley Co., plaintiff claimed that defendant put it out of business through various tactics, including predatory pricing.¹¹ In an unpublished opinion, the Fifth Circuit affirmed dismissal of this claim because plaintiff’s claims were both conclusory and implausible.¹² Plaintiff only alleged that defendant’s discounts to plaintiff’s customers “were substantial and represented a benefit below [defendant’s] cost to produce [product].” The court affirmed the lower court’s ruling that this allegation required “further factual enhancement” to rise above mere conclusory allegations that the court was not bound to accept as true under the motion.¹³

The remainder of the allegations in the complaint made the possibility of such “factual enhancement” unlikely. Plaintiff alleged that its and defendant’s original undiscounted price both were well above the alleged competitive price. The court found that this allegation left plenty of room for defendant to undercut plaintiff’s price while staying above the competitive price, let alone any potential measure of defendant’s average variable costs.¹⁴

Continue reading →

Resale-Price-Maintenance-Toys-300x252

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 straight 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 in 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 (mostly).

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. You might also want to read Steven Cernak’s article about the four questions you should ask before worrying about the antitrust risks of new distributor restraints.

Continue reading →

Hollywood-Entertainment-Antitrust-300x212

Author: Jarod Bona

As an antitrust lawyer, I find it interesting to see the inner workings of different types of markets—how people and companies buy and sell things. And the entertainment industry is one of the more fascinating ones.

The entertainment industry includes an interesting mix of concentrated players at various levels of production and distribution, often vertically integrated. Streaming services like Netflix have brought on changes that the coronavirus pandemic will likely accelerate.

Indeed, the federal government is even ending the old Paramount Antitrust Consent Decree, which governed the motion-picture industry for decades. You can read about that from our attorney, Steven Madoff, who was a top-level lawyer for Paramount for years, and an expert (literally) in the entertainment and media industry.

If the entertainment market or Hollywood itself interests you, there is a federal antitrust case in the Central District of California that you should follow: William Morris Endeavor Entertainment, LLC. v. Writers Guild of America, West, Inc.

This is a lawsuit by the major Hollywood agencies against the Writers’ unions, along with a counterclaim by the Writers’ union against the agencies. Labor unions, of course, create some unique antitrust issues, which you can read about here.

On April 27, 2020, the Court granted in part and denied in part a motion to dismiss by the agencies.

What I found interesting about this case, among other items, is that it attacks a practice developed by Michael Ovitz and his Creative Artists Agency firm called “packaging.”

Before I dig into packaging, I have to recommend that you read Michael Ovitz’s autobiography: Who is Michael Ovitz? In his book, he is open about his successes and excesses. If you are building a professional services firm, like I am, you will particularly appreciate riding along as Michael Ovitz builds a talent agency that changes the way business is done in Hollywood. You hear some “inside baseball” about Hollywood and learn how to build a business from scratch, all at once. Indeed, you learn how to change an industry. Seriously, it’s a good read.

//ws-na.amazon-adsystem.com/widgets/q?_encoding=UTF8&ASIN=1591845548&Format=_SL250_&ID=AsinImage&MarketPlace=US&ServiceVersion=20070822&WS=1&tag=suchealif01-20&language=en_UShttps://ir-na.amazon-adsystem.com/e/ir?t=suchealif01-20&language=en_US&l=li3&o=1&a=1591845548

Back to “Packaging.” Instead of letting the studios take the lead in building movie or television projects and hiring the writers, actors, and directors that the agencies represented, the agencies would create their own project proposals for the studios. Not surprisingly, in doing so, they would “package” together a group of people, in different roles and positions, that they represent.

As part of the cost of this packaging service, the talent agencies would receive a fee from the studio. Before packaging, talent agencies were compensated by commissions as a percentage of their clients’ compensation.

The writer unions asserted that these packaging services harmed both writers and the guilds themselves and created conflict of interests for the agencies between their writer-clients and the production studios.

The complaint also alleged that the talent agencies price-fix the fees for these packages and exchange competitive sensitive information with each other about their packaging fee practices.

I won’t get into all the details here—my purpose is merely to whet your appetite to follow the case—but the writer guilds took certain actions that the talent agencies didn’t like, who then took their own actions, and eventually they all sued each other, leaving a California federal judge to sort it out.

As I mentioned above, the Court issued a motion to dismiss ruling, which allowed some claims, while dismissing others. I am not going to go into the details, but I will point out one interesting aspect of the ruling: The Court dismissed the federal antitrust price-fixing claims for lack of standing because the injured parties didn’t participate in the market that was competitively harmed. But the Court allowed a price-fixing claim under the same facts to go forward under the California antitrust statute—the Cartwright Act—because this statute doesn’t have the more restrictive definition of antitrust standing that the federal antitrust laws have.

For antitrust attorneys, this is particularly interesting because in most cases in which a plaintiff includes both federal and state antitrust claims, they rise and fall together. Here, the California antitrust claims (under the Cartwright Act) survived while the federal ones fell.

Continue reading →

Certificate-of-Need-Minnesota-300x225

Author: Jarod Bona

We do our best to describe antitrust and other legal issues as straightforwardly as possible here. We tend to speak directly and avoid the guarded language that you often see from lawyers elsewhere (a little secret: most big-firm attorneys are afraid of getting in trouble in one way or another).

So, in case there was any doubt, I’ll tell you what I really think of certificate-of-need laws. These are laws, still on the books in many states, that actually require a new healthcare provider that wants to move into a market to get permission from the state to do so (a certificate of need). And, even more bizarre, the existing competitors—who certainly don’t want any more competition—often have a say or a role in whether the new provider receives a certificate of need, which can sometimes take months or years to obtain, if at all.

We hear all the time how important health and safety is: The sanctity of human life. Take care of yourself. Eat well. Exercise. Get your yearly physical. Follow your doctor’s advice.

We also hear complaints from every politician, news agency, and anyone that’s ever paid a medical bill about the costs of health care.

And, although healthcare workers have been heroes both before and during this pandemic, I think we would all agree that there is a lot of room for improvement in healthcare in the United States. I’ve been to the Mayo Clinic in Rochester, Minnesota many times and my son was born there, so I know how good healthcare can be. We have a lot of room to improve healthcare as a country.

I think we can all agree that healthcare is vitally important to us as human beings. That is what I hear the media tell me and what politicians preach all the time. And this makes sense: If you are sick or dying, getting better shoots up the priority list of needs and wants.

Switching gears briefly, here is something that I’ve learned as an antitrust attorney and as a student of economics: Markets with monopolists and markets with less competition have higher prices, lower supply, and lower quality for products and services.

Let’s say you are an evil troll that hates people. Let’s also say that you have the single opportunity to pass legislation in a state to hurt human beings that care about health and healthcare, but you don’t want it to be something that is so obvious that they’d just repeal it after your opportunity passes. You want something that is sneaky bad.

What would you do if you were that evil troll?

You’d pass certificate-of-need laws.

These laws are sneaky bad because it takes a couple steps of reasoning to see how they harm our health and healthcare. By creating the barrier to entry of these certificate-of-need laws, the evil troll can artificially limit the supply of healthcare, decrease its quality, and raise healthcare costs—almost without detection. And by offering the existing monopolist or provider an opportunity to participate in the process, the government agency is much less likely to award the certificate to improve people’s lives. At the very least, if the existing healthcare provider is involved, they will be able to help delay any competition.

Let’s say that you end up with a pandemic and really need a lot of hospital beds or other healthcare all at once. If that happens, the evil troll has won because their certificate-of-need laws are specifically designed to reduce the supply of healthcare, including hospital beds.

Bona Law opposes certificate of need laws and we call for their repeal and challenge. You can read our earlier article about certificate of need laws on this website here.

On April 28, 2020, Aaron Gott and I published an article in the Minneapolis Star Tribune entitled “State Certificate-of-Need Laws for Hospitals Must Go: These anti-competition laws have left us unprepared for the current pandemic, with fewer hospital beds for care.”

Continue reading →

Contact Information