US Supreme Court

The US Supreme Court Hears Arguments in North Carolina Board of Dental Examiners v. FTC

October 16, 2014 | Bona Law PC

The US Supreme Court does not review many antitrust cases. So when they do, it is kind of a big deal for antitrust attorneys around the world.

On Tuesday, the Supreme Court heard oral arguments in North Carolina Board of Dental Examiners v. FTC, which addressed the scope of state-action immunity from antitrust liability. More specifically, the Court is reviewing whether a state licensing board must satisfy both prongs of what is known as the Midcal test to avoid antitrust scrutiny.

The first element, which everyone agrees applies, requires the defendant entity to show that the State “clearly articulated and affirmatively expressed” the challenged anticompetitive act as state policy. The Supreme Court is deciding whether state licensing boards are subject to the second element as well: whether the policy is “actively supervised by the State itself.” Municipalities and other local governments have a free pass from this second element, but private people and entities must satisfy the active supervision requirement.

So what is the big deal? If an entity—state or private—can show that state-action immunity doesn’t apply, it can violate the antitrust laws at will. It can grab consumer surplus for itself; it can exclude competition; it can behave under different rules than everyone else. And monopoly is quite profitable.

In NC Board of Dental Examiners v. FTC, a state-sanctioned dental board—composed of six licensed dentists, one licensed dental hygienist, and one public member—engaged in actions to exclude non-dentist teeth-whitening services. As you might recall, Bona Law filed an amicus brief in this case. You can learn about the case and our amicus brief here. Among other points, we argued that the Supreme Court should analyze the case as the Court outlined in American Needle, by reference to whether the units of competition—the independent decision-makers—are private. They are. We also advocated that the Supreme Court apply an active state supervision requirement with some teeth.

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We Filed a US Supreme Court Amicus Brief Supporting Antitrust Lawsuits Against Licensing Boards

August 7, 2014 | Bona Law PC

By Jarod Bona and Aaron Gott

We filed an amicus curiae brief with the U.S. Supreme Court on behalf of We All Help Patients, Inc. in North Carolina State Board of Dental Examiners v. FTC, a federal antitrust case challenging anticompetitive conduct by professional-licensing boards.

Let us tell you a little bit about this interesting case.

The Antitrust Case

The North Carolina Board of Dental Examiners is composed of six licensed dentists, one licensed dental hygienist, and one “public member.” Dentists make a lot of money by offering teeth-whitening services. So when non-dentists started providing teeth-whitening services at a far lower cost, dentists started complaining to the Board about the lower-priced competitors.

Naturally, a Board made up of self-interested private parties had an incentive to do something about it. They began sending cease-and-desist letters to non-dentist teeth whiteners and even went so far as to ask shopping malls to not lease kiosks to teeth whiteners. It wasn’t clear, of course, that North Carolina law limited teeth-whitening services to dentists.

The Board’s actions were, in fact, a conspiracy to restrain trade. The members were competitors that acted in agreement to exclude other competitors. The conspiracy question was not at issue with the US Supreme Court.

The Federal Trade Commission, which has long advocated for “free and unfettered competition as the rule of trade” to protect consumers and economic liberty, issued an administrative complaint against the State Board and ultimately held that the Board engaged in anticompetitive conduct and the state-action immunity doctrine did not apply. The case made its way up through the Fourth Circuit—which agreed with the FTC—and finally to the U.S. Supreme Court.

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What Does the Supreme Court’s Decision in Halliburton Co. v. Erica P. John Fund, Inc. Mean for Antitrust Law?

July 3, 2014 | Bona Law PC

The defendants in Halliburton Co. v. Erica P. John Fund, Inc. failed to show the US Supreme Court the “special justification” necessary to overturn settled precedent.

As we explained in a previous post, the Supreme Court in this case agreed to reconsider its 1988 decision in Basic v. Levinson, which allowed a shareholder class in a securities fraud lawsuit to satisfy statutory “reliance” requirements by invoking a presumption that stock prices traded in “efficient” markets incorporate all material information, including alleged misrepresentations.

But between then and now, academics, economists, and commentators chipped away at the economic theory underlying this presumption, which is based upon “the efficient capital markets hypothesis.”

So if a legal precedent depends upon an economic theory that now appears less valid than it did before, do you overrule it or keep it in place because it has ingrained itself into a larger legal structure?

Here is a similar question from real estate: If part of the wood in a load-bearing wall has started to rot, do you replace it? The Supreme Court held that you do, if you can show a “special justification.”

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The Lanham Act and POM Wonderful LLC v. Coca Cola: A Cause of Action for Competitors

June 20, 2014 | Bona Law PC

Many of my cases will pit one competitor against another in litigation. An antitrust claim is often at the center of the dispute, but a number of other claims can find their way into the case; sometimes even in a starring role.

Litigation between competitors can include, for example, trade secret or intellectual property disputes, tortious interference claims, and Lanham Act claims, to name just a few. Our focus today is on the Lanham Act because the U.S. Supreme Court last week issued an interesting opinion on its scope in POM Wonderful LLC v. Coca Cola Company.

The question was whether The Federal, Food, Drug and Cosmetic Act (FDCA) precluded a plaintiff from filing a Lanham Act claim related to food labeling. Justice Kennedy explained for a unanimous court (which did not include Justice Breyer) that plaintiffs can pursue their claim about pomegranate-blueberry juice labeling: The statutes don’t conflict—they complement each other.

First, some background. The Lanham Act is a federal private right of action to enforce trademark rights, as well as (and relevant here) “unfair competition through misleading advertising or labeling.” What is particularly interesting about the Act is that it is specifically designed for competitors. That is, consumers that discover false advertising or labeling can’t bring a Lanham Act case. Only competitors that can “allege an injury to a commercial interest in reputation or sales,” have standing. You might recall that the Court addressed Lanham Act standing earlier this term in Lexmark International, Inc. v. Static Control Components, Inc., discussed here.

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Will the Supreme Court’s Lexmark Standing Decision Lead Indirect-Purchaser Antitrust Plaintiffs to Federal Court?

April 3, 2014 | Bona Law PC

While waiting for my flight to leave San Diego on my way to Washington, DC for the ABA Antitrust Spring Meeting, I saw on Twitter—the best source for immediate Supreme Court news—that the Supreme Court had decided Lexmark International, Inc. v. Static Control Components, Inc.

The Supreme Court in that case clarified standing requirements for Lanham Act claims, which create liability for false association and false advertising. The Lanham Act often comes up in legal battles between competitors, as competition often devolves into allegedly false statements about each other’s products or services.

The case is significant for standing in general, but I wonder if it may have some antitrust implications down the road as the lower courts grapple with its broader implications.

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What Does the Possible Demise of the Securities Class-Action Lawsuit Mean for Antitrust?

February 28, 2014 | Bona Law PC

On March 5, the Supreme Court will hear arguments on whether the fraud-on-the-market presumption in securities class actions should survive. The case is Halliburton v. Erica P. John Fund and it could be groundbreaking. If the Supreme Court jettisons the presumption, it will close a major avenue for securities class-action lawsuits.

Update: The US Supreme Court issued its decision on June 23, 2014.

But what does this mean for antitrust lawsuits? We’ll get to that in a moment.

First, some background: In 1988, the Supreme Court held in Basic v. Levinson that when a shareholder class sues a company under Rule 10b-5 (for misrepresentation, etc.), it need not show that the individual class members relied on the misrepresentations because the stock market is “efficient” and such statements are quickly incorporated into the stock price.

So if you purchased a share of stock after a management official said that the company increased revenue twenty-percent year-over-year even though the manager knew that the revenue numbers were not accurate, you purchased stock that was already inflated from the statements because the market incorporated those statements immediately into the stock price.

Remember the classic book, A Random Walk Down Wall Street? It is all about efficient-market theory. Great book, by the way.

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