Kensington Antitrust Advisors Group

Baseball Fans Launch Antitrust Suit Over Internet and TV Baseball Game Packages

Steve Semeraro — Wed, 16 May 2012 19:06:54 +0000

In Garber et al. v. Office of the Commissioner of Baseball et al., a group of baseball fans launched a putative class action against Major League Baseball Enterprises Inc., the Office of the Commissioner of Baseball, several baseball clubs, and several cable and Internet providers, including Comcast and Directv LLC, claiming their live-game video offerings violate antitrust laws. The plaintiffs claim that the defendants created an illegal monopoly over the availability of live baseball games online or on television that allows them to inflate their prices. According to the complaint, the only way fans can watch teams and games that are not in their geographic areas is by purchasing “out of market” package online or through a cable or satellite provider. However, local games are not available through the “out of market” package, forcing fans who want to watch local games to subscribe to a cable package that includes channels that carry the local team’s games. The suit also claims that defendants have colluded to sell the “out of market” packages only through the league. This enables them to exploit their allegedly illegal monopoly by charging sky-high prices, and force subscribers to buy all “out of market” games, even if the subscriber is only interested in one team or one game.

Resale Price Maintenance Agreements Held To Be Legal In New York

Steve Semeraro — Wed, 16 May 2012 19:04:04 +0000

In People of the State of New York et al. v. Tempur-Pedic International Inc., New York state appeals court upheld a dismissal of the state’s suit against Tempur-Pedic International Inc., claiming that Tempur-Pedic’s policy forbidding retailers of its products from setting their prices below the range set out by the company’s guidelines, constitutes illegal resale price fixing. The state claimed that although under New York state law contracts for resale price restraints (“RPM”s) are not illegal, New York fair trade law had been specifically amended in order to prevent the artificially high prices enabled by Tempur-Pedic’s business practices. The court disagreed, holding that there is nothing in the text of the law to declare RPMs to be illegal or unlawful; rather the statute provides that such provisions are simply unenforceable in the courts of New York. And even if the plain language of the statute could be held to render RPMs illegal as a matter of law, the state failed to adduce sufficient evidence to support its petition against Tempur-Pedic.

First Circuit Revives U-Haul Price-Fixing Suit

Steve Semeraro — Wed, 16 May 2012 19:02:15 +0000

In Liu et al. v. Amerco et al., First Circuit Court of Appeals vacated the dismissal of a putative class action brought against U-Haul International, Inc., alleging that it invited its rival, Avis Budget Group, Inc., to collude on truck rental prices. In her suit, plaintiff claimed that U-Haul’s unfair and deceptive practices caused her and all persons who purchased one-way truck rentals from U-Haul in Massachusetts between September 2006 and September 2008, to pay more for their truck rental. Massachusetts District Court initially dismissed the suit, holding that the complaint outlined the mechanics of the alleged collusion between U-Haul and Avis and the purported effect of the scheme on truck rental rates, but failed to connect those allegations to plaintiff’s situation. However, the First Circuit disagreed, holding that the plaintiff’s complaint is not “threadbare or speculative”, and that the suit included more than enough facts to get the claims past the pleading stage.

This suit follows a June 2010 settlement reached between U-Haul and the Federal Trade Commission over similar allegations of collusion. According to the FTC’s complaint, after finding out that Budget was charging lower rates for one-way truck rentals, U-Haul CEO urged regional managers to either raise prices and encourage Budget to do the same, or lower prices below Budget’s and inform Budget of the reduction to teach it that its low-price policy was fated to be ineffective. As part of its settlement with the FTC, U-Haul agreed to a settlement order, barring it from colluding or inviting collusion with competitors.

Kansas Supreme Court Saves Fashion Accessories Price-Fixing Suit

Steve Semeraro — Wed, 16 May 2012 18:59:07 +0000

In O’Brien et al. v. Leegin Creative Leather Products Inc., Kansas Supreme Court overturned a state district court decision to grant Brighton Collectibles, a unit of Leegin Creative Leather Products Inc., summary judgment in the state antitrust consumer class action suit. In their suit, the plaintiffs allege that Brighton’s policy, requiring all of its retailers to sell their products at Brighton’s suggested retail prices, constitutes illegal price-fixing under state antitrust laws. Kansas state district court granted Brighton’s motion for summary judgment, holding that O’Brien did not present concrete evidence that she paid higher prices due to Brighton’s pricing policy, and that a 2007 Supreme Court decision that upheld this pricing policy, preempted the state suit. Kansas Supreme Court disagreed, holding that (1) the language of Brighton’s pricing policy is subject to an inference that it was for the purpose of fixing prices; (2) the policy was designed to and tended to control the prices of Brighton’s goods; (3) O’Brien presented enough circumstantial evidence that consumers actually paid prices for Brighton goods, inflated by the pricing policy; and (4) the federal decision does not preempt the present state claims.

Antitrust Claim Based on Nike/Apple Joint Venture Dismissed

Steve Semeraro — Tue, 01 May 2012 23:54:12 +0000

In Cherdak v. Vock et al., Eastern District of Virginia Judge Liam O’Grady dismissed antitrust claims filed by an inventor against Apple, Nike, and PhatRat. The plaintiff alleged that a fitness monitoring system sold by Apple and Nike infringed his patents. Apple and Nike licensed patent rights from PhatRat, a company that, the plaintiff alleged, misled the USPTO to grant it patents infringing the defendants.
The court held that the complaint failed to allege fraud on the patent office, explaining that “[t]he antitrust laws are directed at protecting market competition, not at protecting the inherent monopoly power and benefits provided under intellectual property laws.” The court permitted the patent infringement claim to proceed.

FTC Pay-for-Delay Drug Patent Challenge Fails

Steve Semeraro — Tue, 01 May 2012 23:53:13 +0000

In FTC v. Watson Pharmaceuticals Inc. et al., the Eleventh Circuit Court of Appeals affirmed the dismissal of the FTC’s complaint alleging that Solvay Pharmaceuticals Inc. and manufacturers of generics versions of Androgel violated the antitrust laws by settling patent claims through an arrangement in which the branded drug company paid the generics to keep their version of the drug off the market.

The FTC has long argued that these sorts of settlements are anticompetitive. The branded and generic drug companies can both earn higher profits by agreeing not to compete. But consumers, who have no say in the settlement negotiations, pay higher prices for the drugs than they would if the generics had been introduced.

In a series of cases, the appellate courts have held that a drug patent is presumed valid and that no antitrust liability can arise as long as the settlement remains within the legitimate scope of the patent. In this case, the FTC argued that where the patent is likely to be held invalid, the settlement exceeds the patent’s legitimate scope. But the court rejected that argument on the ground that litigating the validity of the patent in an antitrust challenge would undermine the benefits of the settlement.

Optical Disc Drive Price Fixing Class Action to Move Forward

Steve Semeraro — Tue, 01 May 2012 23:52:10 +0000

In In re: Optical Disk Drive Products Antitrust Litigation, Northern District of California District Judge Richard Seeborg rejected motions to dismiss the class claim that the defendants conspired to rig bidding and fix prices on optical disc drives. The court had dismissed the initial complaint alleging a broad conspiracy among companies selling products containing disc drives for failure to allege sufficient facts supporting the conspiracy allegations.

The amended complaint narrowed the scope of the conspiracy to the disc drive manufacturers’ efforts to stabilize prices through bid rigging and included numerous specific allegations of bid-rigging in the procurement of optical disk drives.

The court expressed concern about the definition of the direct and in-direct purchaser classes, but allowed the case to go forward explaining that those concerns do not undermine the plausibility of the conspiracy claims.

EU Court of Justice Affirms Antitrust Fine Against Recycler

Steve Semeraro — Tue, 01 May 2012 23:51:10 +0000

The EU Court of Justice affirmed a €24 million ($31.7 million) antitrust fine against recycling firm Tomra Systems ASA. The European Commission had found that the company used a system of exclusivity agreements with large retailers to restrain potential entrants into the market for automated machines that dispense cash in exchange for empty bottles. The EC also alleged that the defendant employed rebates and quantity targets essentially forcing retailers to use Tomra machines exclusively.

“Rebates and discounts,” then-Competition Commissioner Neelie Kroes explained when the initial fine was impose, “cannot be used by a dominant company as part of a strategy to exclude actual and potential competitors.”

Antitrust Challenge to Flash Memory Maker Dismissed with Leave to Amend

Steve Semeraro — Tue, 01 May 2012 23:49:28 +0000

In PNY Technologies Inc. v. SanDisk Corp., Northern District of California Judge Yvonne Gonzalez Rogers held that the plaintiff failed to properly allege anticompetitive effect, but permitted PNY to amend its complaint.

The case involves allegations than SanDisk used the threat of patent litigation to force potential licensees to enter anticompetitive licensing agreements. The court faulted the complaint for failing to allege improper monopolization because SanDisk’s dominant position was supported by patents. And to the extent that the license may have exceeded the scope of those patents, PNY failed to show anticompetitive effect. For example, the plaintiff alleged that a “grant-back” provision requiring a licensee to cross-license SanDisk to use the licensees new technological innovations reduced licensees’ incentives to innovate, but not that it actually restrained innovation.

State Argued For Broad Prohibition of Resale Price Maintenance Under State Law

Steve Semeraro — Tue, 01 May 2012 23:48:14 +0000

In People of the State of New York v. Tempur-Pedic International Inc., New York State is appealing a decision dismissing a case challenging Tempur-Pedic’s policy of informing retailers that it stop selling to them, with limited exceptions, if they undercut the mattrace manufacturer’s suggested retail price. Although federal antitrust law permits such a policy, the state is arguing New York law does not.
The defendant has argued that the applicable state law prohibits enforcing resale price fixing agreements, but does not make Tempur-Pedic’s policy illegal. Trial Judge Joan B. Lobis agreed and dismissed the suit. Appellate Justices Dianne Renwick, David Saxe, Angela Mazzarelli, Karla Moskowitz and Helen Freedman will decide the appeal.