Southern District of New York Judge Denise L. Cote stayed multidistrict litigation against HarperCollins Publishers LLC and Hachette Book Group Inc. after the two publishers agreed to settle with the 15 states and Puerto Rico that had filed antitrust claims similar to those filed by the United States Department of Justice, Antitrust Division, against Apple and other publishers. Using their parens patriae power, the states may seek damages to their citizens, a remedy not available to the federal enforcement authorities.
The case alleges that the publishers switched from the traditional book resale model, in which publishers sell books outright to retailers, to an agency model, in which the publishers set the retail price for the e-books, including a retailer commission.
Three of the publishers — Hachette, HarperCollins and Simon & Schuster Inc. — quickly agreed to settle the DOJ’s claims, while Apple and two others are vowing to litigate.
The stay of the state cases will last until early July and is intended to give the parties time to work out the details of the settlement. These settlements, because they can include damages, may trump private class action litigation except for library and small business plaintiffs not covered by the states’ parens patriae authority.
European Union’s General Court affirmed a 2007 European Commission decision banning MasterCard Inc.’s multilateral interchange fees because the fees inflated the financial institutions’ actual costs and thwarted competition. The court rejected MasterCard’s claims that the fees were objectively necessary to run its payment system, pointing out that it was unlikely that many banks would stop issuing MasterCard products without the fees. The court held that the multilateral interchange fee limits the pressure that merchants can exert on acquiring banks when negotiating the merchant service charge by reducing the possibility of prices dropping below a certain threshold. This was sufficient to show effects restrictive of competition. The court also held that the decision about setting the interchange fees was made by a group of companies, even though MasterCard went public in 2006 and ceased to be run by its founding banks. The banks still had the authority to make decisions about some key parts of how MasterCard’s payment system functions, and still had a strong interest in setting the interchange fees at a high rate.
In Oliver et al. v. SD-3C LLC et al., Northern District of California Judge Jeffery S. White dismissed a putative consumer class action accusing Panasonic Corp., Toshiba Corp., and SanDisk Corp. of trying to corner the SD memory card market by requiring competitors to enter restrictive patent-licensing agreements that allegedly inflated prices. Defendants filed a motion to dismiss on the ground that the antitrust claims violate the statute of limitations. In opposing defendants’ motion, plaintiffs argued that the licensing deal resulted in inflated prices within the typical four-year statute of limitations. The court disagreed, holding that the alleged transgressions stem from a 2003 licensing agreement. As such, on the continuing violation theory alleged in this case, the statute of limitations runs from the time of the last overt act made by the defendant, not from the last purchase made by a potential plaintiff. The court did not grant indirect purchasers leave to amend their complaint because the court had already dismissed a similar related suit brought against SD-3C and Panasonic by Samsung Electronics Co. Ltd., for being time-barred.
In Church & Dwight Co. Inc. v. Mayer Laboratories Inc., Northern District of California Judge Edward M. Chen granted Mayer Laboratories Inc.’s motion for reconsideration, reviving Mayer’s claim that Trojan condom maker Church & Dwight Co. Inc. had infringed its trademark for the term “microthin.” This case originally began in 2008, when C&D filed an action seeking a declaratory judgment that its rebating practices, which offer retailers a discount on wholesale prices if they agree to shelve the condoms in more visible areas, were fair under state and federal competition laws. Mayer responded with a dozen counterclaims, including allegations that the program violated the Sherman Act, the Lanham Act, and infringed on trademarks. In March, the court dismissed 11 of Mayer’s 12 counterclaims, including that the rebate offers were anti-competitive and that C&D had wrongly used the term “microthin.” Following the dismissal, Mayer filed a motion for reconsideration of the dismissal of the trademark infringement claim. In granting Mayer’s motion for reconsideration, the court held that it failed to properly consider that the U.S. Patent and Trademark office specifically ruled that “microthin” had developed a secondary, distinctive meaning. As such, there is a genuine issue of material fact as to the likelihood of confusion from C&D’s use of the microthin mark.
In Pro-Sys Consultants Ltd. et al. v. Microsoft Corp. et al., Canada’s highest court granted defendants leave to appeal the decision from a Quebec appeals court that granted class certification to indirect purchasers of dynamic random access memory. This is the third case addressing this issue that is now pending before the Supreme Court of Canada. All three cases are asking the Canadian Supreme Court to settle a question that the U.S. Supreme Court resolved more than 30 years ago in Illinois Brick, when the justices concluded that only those who bought allegedly price-fixed products directly from cartel participants could sue for damages under the Sherman Act. While vast majority of the Canadian antitrust class actions include indirect purchaser claims, the courts have not applied Illinois Brick logic in Canada because Canadian law has remained murky about whether indirect purchaser claims were available. But after the Canadian high court rejected the notion of a pass-on defense in a tax case in 2007, the British Columbia Court of Appeal concluded that the same logic would apply in antitrust litigation and eventually denied certification in the Microsoft and ADM cases. The hearing on all three cases is scheduled for late October.
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.
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.
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.
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.
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.