Kensington Antitrust Advisors Group

FTC Pay-for-Delay Drug Patent Challenge Fails

May 1, 2012 – 4:53 pm

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.

Posted in Federal Trade Commission, Patent Litigation, US Federal Courts | Comments (0)

Optical Disc Drive Price Fixing Class Action to Move Forward

May 1, 2012 – 4:52 pm

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.

Posted in Cartel Activity, Standard for Alleging Conspiracy, US Federal Courts | Comments (0)

EU Court of Justice Affirms Antitrust Fine Against Recycler

May 1, 2012 – 4:51 pm

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.”

Posted in EU News, Exclusive Dealing | Comments (0)

Antitrust Challenge to Flash Memory Maker Dismissed with Leave to Amend

May 1, 2012 – 4:49 pm

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.

Posted in Patent Litigation, US Federal Courts | Comments (0)

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

May 1, 2012 – 4:48 pm

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.

Posted in State Antitrust Law, US State Courts, Vertical Restraints | Comments (0)

Follow-on Private Litigation Accusing Hi-Tech Firms of Agreeing Not to Compete for Engineering Talent to Move Forward

May 1, 2012 – 4:45 pm

Northern District of California Judge Lucy Koh refused to dismiss In re: High-Tech Employee Antitrust Litigation, a case in which the plaintiffs allege that agreements among hi-tech companies to not steal each other’s engineers.
In 2010, the Antitrust Division entered a consent decree with Apple, Pixar, Google, Intel, Adobe Systems, Intuit, and Lucasfilms concerning a federal antitrust claim that the companies had agreed not to cold call each others’ engineers.
The defendants argued that alleged parallel conduct alone cannot establish a conspiracy and argued that the plaintiffs had failed to allege anything more than individual similar bi-lateral agreements. The court found, however, that all six separate agreements involved deceased Apple CEO Steve Jobs, which she concluded was alone enough to block an immediate dismissal. “It strains credulity,” Judge Koh explained, “that Apple and Adobe reached an agreement in May 2005 that was identical to the … agreement Pixar entered into with Lucasfilm in January 2005 without some communication or coordination between these two sets of defendants.” Moreover, she emphasized that “[t]he identical nature of the six secret bilateral agreements further support[ed] the plausible inference that the agreements were negotiated, reached and policed at the highest levels of the defendant companies.”

Even if the agreements were not connected, the court concluded, even two-party agreements can restrain competition. “It is plausible to infer that even a single bilateral agreement would have the ripple effect of depressing the mobility and compensation . . . ”
Discovery, which had been stayed since the motion to dismiss was filed, will now resume.

Posted in Antitrust Division Action, Cartel Activity, Standard for Alleging Conspiracy, US Federal Courts | Comments (0)

Court Refuses to Certify Advertiser Class Action Against Facebook

May 1, 2012 – 4:43 pm

Northern District of California Judge Phyllis J. Hamilton refused to certify a proposed of online advertisers in In re: Facebook Inc. PPC Advertising Litigation. The court held that the proposed class representatives did not show that they were harmed by the alleged violations.

The complaint alleged that Facebook charged advertisers for cost-per-click, or CPC, advertising, even when the clicks did not result in any benefit to the plaintiffs. The crux of the problem, the court explained, was that the name plaintiffs could not adequately represent the class because they failed to show that Facebook’s alleged wrongdoing damaged their businesses. “Neither [name plaintiff, the court explained] has attempted to show that he suffered any concrete injury from specific ‘invalid’ clicks, or that he ever disputed his CPC charges within the period needed to avoid waiver under his contract.”

Posted in Antitrust Standing, Class Certification, State Antitrust Law, US Federal Courts | Comments (0)

E-book Publishing Antitrust Case Filed

May 1, 2012 – 4:41 pm

The United States Department of Justice, Antitrust Division, and the European Commission have launched major antitrust initiatives against the e-book publishing industry and Apple.

Both enforcers are attacking the publishers’ decisions to switch from a traditional resale model in which book sellers paid wholesale prices and set their own resale prices to an agency model in which the publishers dictate the resale price and guarantee the retailer a 30% commission.

In early April, the Antitrust Division filed a complaint against Apple and five publishers, Hachette Book Group Inc., HarperCollins Publishers LLC, Penguin Group USA Inc., Simon & Schuster Inc. and Holtzbrinck Publishers LLC. Hachette, HarperCollins Publishers, and Simon & Schuster all agreed to settle without admitting wrong doing. But the other publishers and Apple did not. In addition to ending the challenged agency arrangements, the three publishers’ proposed settlements (1) impose a five-year ban on most favored nation agreements with retailers and (2) require the publishers to adopt antitrust compliance programs and notify the Division before entering any proposed joint venture involving e-books.

Sixteen states also filed actions against Apple, Penguin, Macmillan and Simon & Schuster seeking damages for consumers who allegedly overpaid for e-books.

Joaquin Almunia, the chief European antitrust enforcer, announced that the Commission had received proposed settlements from Apple as well as Simon & Schuster, HarperCollins, Hachette Livre SA and Macmillan.

According to the DOJ’s complaint, over three days in January 2010, each publisher defendant agreed to enter with Apple a “functionally identical” agency agreement set to take effect simultaneously that April. Each agreement allegedly allowed the publishers to set retail prices while promising that they would also raise e-book retail prices at other vendors. The publishers are then alleged to have pursued similar deals with other retailers as well as restraining price competition among themselves. The complaint quotes Apple’s deceased CEO Steve Jobs biography in which he wrote about urging the publishers to adopt the agency model through which “the customer pays a little more, but that’s what you want anyway.”

The complaint seeks to ban the defendants from (1) “fixing the method and manner in which they sell e-books, or otherwise agreeing to set the price or release date for e-books, or collective negotiation of e-book arrangements;” and (2) entering most favored nation agreements in which publishers promise not to sell books less expensively to other retailers.

Posted in Antitrust Division Action, Cartel Activity, EU News, High Importance, Most Favored Nations, Standard for Alleging Conspiracy, State Antitrust Law, US Federal Courts | Comments (0)

Court Allows Price-Fixing Conspiracy Claims Against LCD Panel Makers To Move Forward

April 30, 2012 – 12:54 pm

In Jaco Electronics Inc. v. AU Optronics Corp. et al., Northern District of California Judge Susan Illston denied a motion to dismiss, filed by NEC Corp., and other LCD panel makers, allowing Jaco Electronics Inc.’s, antitrust lawsuit to move forward. Jaco’s suit is part of multidistrict litigation over a massive LCD price-fixing conspiracy, alleging that NEC, along with the top five LCD suppliers – LG, AU Optronics, Sharp, Samsung Electronics Co. Ltd., and Chi Mei Corp. – violated the Sherman Act when they conspired to fix prices on LCD products.

According to the suit, the LCD makers met and agreed on prices for TFT-LCDs, and on the number of products each company would produce. The top five TFT-LCD suppliers collectively shipped 90 percent of all of TFT-LCD products. Such a tight market concentration, strategic alliances, and close relationships between company executives allegedly allowed the LCD makers ample opportunity to agree on prices. As a result, plaintiff claims, it purchased LCD panels directly from defendants at artificially inflated prices.

Basing its ruling on its February ruling in a similar case brought by Tweeter Home Entertainment Group Inc., the court held that Jaco’s antitrust claims were plausible. Judge Illston stated that Jaco’s allegations are not materially different from the allegations in the Tweeter case, therefore, Jaco’s case can move forward. In January, Judge Illston also partially denied NEC’s bid to force Jaco to arbitrate the dispute, finding Jaco’s Sherman Act claims did not fall under the scope of the companies’ distribution agreement, which contained an arbitration clause.

Posted in Arbitration Issues, Cartel Activity, Predatory Pricing, Standard for Alleging Conspiracy, US Federal Courts | Comments (1)

Court Allows Attempted Monopolization Claim Against Cessna to Proceed

April 30, 2012 – 11:53 am

In WM Aviation LLC et al. v. Cessna Aircraft Co., Middle District of Florida Judge G. Kendall Sharp, dismissed a large portion of a suit against Cessna Aircraft Co. over a 2008 runway plane crash. WM Aviation LLC and Tricor International Corp. accused Cessna of performing faulty maintenance on the jet operated by WM Aviation that skidded off a runway at New York’s John F. Kennedy International Airport in April 2008. The court dismissed accusations that Cessna violated the Clayton Act when it forced owners of its aircraft to use only Cessna for repair and maintenance, because the Clayton Act only covers contracts for “tangible goods” and not services. The court also dismissed plaintiffs’ state claims of deceptive and unfair trade practices and conspiracy to monopolize for failure to state a claim. The court did, however, keep the plaintiffs’ attempted monopolization claim in play. In this claim, plaintiffs allege that Cessna tried to monopolize the repair market for its Citation X jets by refusing to share its proprietary data with third parties, thus making it the only entity that can repair and certify its jets to return them to service after repairs have been made. The court held that plaintiffs can proceed with their attempted monopolization claim because they sufficiently alleged that Cessna’s policy “forecloses a substantial violation of commerce” in the state by cornering the repair market.

Posted in State Antitrust Law, US Federal Courts | Comments (0)