In Stewart et al. v. Gogo Inc., Northern District of California Judge Edward M. Chen denied Gogo Inc.’s motion to dismiss a putative class action, alleging that Gogo’s unfair long-term contracts with airlines created a monopoly. Plaintiffs allege Gogo carved out a dominant industry position to the detriment of consumers and the wider market space through a series of long-term exclusive contracts with the major domestic airlines in the U.S. that thwarted competition on the merits and on price, and allowed Gogo to charge supra-competitive prices. According to the plaintiffs’ amended complaint, these contracts tied 85 percent of the airline Internet market. In denying Gogo’s motion to dismiss, the court rejected Gogo’s argument that the 85 percent figure was wrong and incomplete because the plaintiffs did not fully explain how they reached that number. According to the court, plaintiffs made specific enough allegations for this stage of the litigation, and whether the plaintiffs’ figures are correct is a matter for discovery. And even if the 85 percent figure is not accurate, the plaintiffs had alleged contracts with enough major airlines, including American and Delta that the suit should advance, the court found.
In MasterCard and Others v. Commission, the European Court of Justice adviser Advocate General Paolo Mengozzi, backed a European Commission decision drastically reducing MasterCard Inc.’s bank-to-bank credit card processing fees. Advocate general rejected MasterCard’s argument that the lower court used the wrong standard in deciding whether the court should treat the company’s conduct as a concerted practice by a group of companies once it went public. According to the advocate general, the concepts of “agreement,” “concerted practice” and “decision by an association of undertakings” are intended to catch all collusion between undertakings which produce the effects prohibited by that provision, irrespective of the form which it takes. Accordingly, undertakings cannot avoid the prohibition laid down in that provision by the mere fact that they coordinate their conduct on the market through a body or a joint structure or that they entrust such coordination to an independent body, according to Mengozzi.
Mengozzi also rejected MasterCard’s attempt to apply a stricter standard to determine whether it counts as an association of undertakings, saying the test MasterCard advocated applies to public bodies that serve a professional purpose — not purely private enterprises like MasterCard. Finally, Mengozzi dismissed MasterCard’s contentions that the General Court improperly relied on the fact that MasterCard and the banks had similar interests to support the notion that they formed an association of undertakings capable of violating the antitrust rules.
In In re: Skelaxin (Metaxalone) Antitrust Litigation, Eastern District of Tennessee Court Judge Curtis L. Collier denied class certifications to two groups claiming Pfizer Inc.’s King Pharmaceuticals Inc. settled a patent dispute with a deal to keep muscle relaxant Skelaxin off the market in a pay-for-delay arrangement that kept the drug prices at brand-name levels. A group of end payors and a group of indirect purchasers sued Pfizer, claiming that Pfizer wronged them, as classes, in the patent dispute because the deal kept the price of Skelaxin artificially high. The complaint also alleged that King launched sham patent infringement suits and along with Mutual Pharmaceuticals Co. Inc., engaged in a campaign of filing meritless petitions with the U.S. Food and Drug Administration as part of an effort to block generics from coming to market.
In denying end payor plaintiffs’ class certification, the court held that the end payor class was too complicated of a class to be ascertained as a whole. Rather, each transaction would have to be analyzed individually to determine whether and how each end payor was harmed, according to the court. With respect to the indirect purchasers, the court ruled that the would-be class failed to make an adequate choice of law showing. According to Judge Collier, Tennessee law does not apply to a nationwide class regardless of the fact that the statute at issue may be available to nonresidents in certain situations, and indirect purchasers failed to contend with defendants’ argument against certification of their alternative state subclasses.
In William Beaumont Hospital v. Federal Insurance Co., Sixth Circuit Court of Appeals ordered Federal Insurance Co. to reimburse WilliamBeaumontHospital 80 percent of an $11.3 million settlement with nurses who alleged wage suppression in an antitrust class action. The court found that failing to hand over wages is different from illicitly acquiring wages. As a result, the hospital’s settlement does not trigger an exception in an insurance policy that would shield Federal from covering disgorged profits.
On a separate question, Federal argued that Michigan public policy barring entities from benefiting from their own wrongdoing should prevent it from having to cover the settlement. The Sixth Circuit disagreed, finding that the policy has been interpreted to apply only to claims involving intentional property damage or infliction of bodily harm, and there is no bar against buying a policy that would cover intentional civil rights violations.
The Federal Trade Commission announced that it has increased the threshold for reporting proposed mergers and acquisitions subject to enforcement under Section 7A of the Clayton Act to $75.9 million. The new thresholds will take effect 30 days after they are officially published in the Federal Register. In November, the FTC approved a $1.2 billion merger agreement between OfficeMax Inc. and Office Depot Inc. This decision came 16 years after the FTC successfully challenged a similar deal between Staples Inc. and Office Depot. The FTC attributes the difference in the outcome to the office supply market becoming much broader now than it was 16 years ago. On the other hand, in June 2013, the FTC successfully unwound a $76 million transaction through which Polypore International Inc. had purchased Microporous Products LP because, according to the FTC, the deal substantially reduced competition in the market for battery separators.
In U.S. v. Frank Peake, District of Puerto Rico Judge Daniel Dominguez sentenced Sea Star Line LLC’s former president, Frank Peake, to five years in prison for his role in a conspiracy to manipulate the ocean-shipping company’s prices. According to the prosecutors, Sea Star, Peake and his unnamed co-conspirators schemed to inflate the rates and surcharges they charged customers for their freight services, held meetings to enforce the artificially high prices, and rigged bids they submitted to government and commercial customers. In addition to the five year prison sentence, which is the longest-ever for an antitrust violation, the court ordered Peake to pay $25,000 in fines.
In U.S. v. Grimm et al., Second Circuit Court of Appeals explained its earlier decision to reverse the municipal bond bid-rigging convictions of three former General Electric Co. officials. The three former GE executives were accused of paying kickbacks to brokers as part of a scheme that cheated cities and towns out of funds for public works projects. The prosecutors chose to bring conspiracy charges against the executives based on artificially low interest payments that GE allegedly paid to municipalities. According to the prosecution, each time such payment was made, the statute of limitations started. Second Circuit disagreed, holding that the prosecutors’ characterization of the alleged scheme as continuing was an improper attempt to evade the statute of limitations. The court further said that payments did not prolong the conspiracy because they were made unilaterally and over a long period of time, so they were not criminal themselves, but were ordinary commercial obligations. According to the court, the interest rate payments were the result of a completed conspiracy, not in furtherance of an ongoing one.
EU Inspects Electronic Manufacturers and Distributors Due To Suspicions of Online Price Manipulation
The European Commission announced that it made several unannounced inspections at several companies active in the manufacture, distribution, and retail of consumer electronics throughout the European Union. Although the Commission did not publicly disclose the names of the companies, according to the Associated Press, the companies include Samsung Group, Royal Phillips NV, and Media-Saturn-Holding GmbH. The EC said that the inspections came in response to suspicions that the companies violated EU antitrust rules by manipulating the online prices of some electronics and domestic appliances. Although the inspections do not mean that the companies are guilty of anti-competitive behavior, these inspections are a preliminary step into suspected anti-competitive practices, according to the commission.
In In Re: Lithium Ion Batteries Antitrust Litigation, Northern District of California Judge Yvonne Gonzalez Rogers ordered Panasonic Corp. to hand over documents used in a separate grand jury investigation that led Panasonic subsidiary Sanyo Electronics Co. Ltd. to plead guilty to antitrust charges and pay $10.7 million. The present case is a multidistrict price-fixing suit, where direct and indirect purchasers of lithium ion batteries sued manufacturers for allegedly conspiring to fix or raise prices. Besides the argument over the disclosure of the documents, the defendants argued that the entire case should be dismissed because the complaint lacked key details about the purchases at issue and defendants’ involvement in the alleged conspiracy. During the argument, the court pointed out that if a party was involved in the conspiracy for sales and it had repercussions down the line, that party would still be held responsible for the conspiracy. Although Judge Gonzalez Rogers did not issue a formal ruling on the motions to dismiss, she did say that the complaints will need to be revised and she hopes to issue a formal ruling within 30 days.
In Carolyn Fjord et al. v. AMR Corp. et al., Southern District of New York Judge Loretta A. Preska affirmed a bankruptcy judge’s decision to allow a merger between American Airlines and U.S. Airways to move forward. In their suit, a group of customers claimed that the merger would drive prices up and service down and would make planes more crowded. An earlier ruling by the bankruptcy court shut down the customers’ bid to stop the merger, so the customers appealed to the District Court. Judge Preska rejected the customers’ appeal, saying she fully supported the bankruptcy judge’s decision to allow the merger to proceed. Last month, the U.S. Department of Justice approved the merger, as long as the combined airline agreed to hand over a number of departure gates and takeoff and landing slots at several key airports to low-cost carriers.