Update May 2011: The Ninth Circuit upheld the dismissal of a private challenge to the merger, holding that the plaintiff’s allegation of a pharmaceutical market was inadequate.
Update October 2009: The FTC has signed off on the merger on the condition that Pfizer sell some of its animal health business. But a group of pharmacists and pharmacies have renewed a private case challenging the merger. In response to the dismissal of their August complaint, the plaintiffs allege that the merger will lessen competition in 13 specific products.
The massive merger between pharmaceutical giants Pfizer and Wyeth has raised a number of concerns with respect to both competition in the pharmaceutical industry and with respect to the propriety of banks funding such a large merger after receiving massive federal bailout money. The issuing of a second request for additional information could not have come as a surprise to the parties.
Update May 2011: The 9th Circuit affirmed the district court’s decision.
Judge Jeremy Fogel, N.D. California, has granted summary judgment to E-bay in a case alleging that it monopolized the online auction market on the ground that the plaintiffs lacked antitrust injury. The court found that the plaintiffs had presented no evidence of either restricted output or supra-competitive prices.
The Sixth Circuit has upheld a Federal Trade Commission ruling that a Michigan MLS service acted anticompetitively in adopting a rule that discount real estate listings would not (1) be transmitted to other public sites that provided access to full commission listings; and (2) listed within the MLS’s default search function. The court upheld the FTC’s findings that the MLS constituted an agreement among realtors and that it possessed market power in the area because of its large market share and the difficulty of competitive entry given that network effects make a MLS more valuable as the number of listings increases.
The FTC held that the exclusions should be deemed illegal under either a quick look analysis or under a full rule of reason review. The Sixth Circuit refused to consider a quick look analysis, commenting that while the exclusion of certain brokers or all discount listings from an MLS had been held to violate that antitrust laws, the sort of rules challenged in this case had not.
Under the full rule of reason, however, the court held that the challenged rules had anticompetitive effect. The rules restrained the availability of discount listings to the public either by prohibiting access to certain public sites altogether or by increasing the realtors costs of reaching those sites. In addition, when discount listings are observed by the public, they tend to create downward pressure on real estate commissions generally. Hindering access to discount listings was thus anticompetitive because it blunted this form of price competiiton. The FTC also presented economic analysis that tended to show that these rules had actually reduced the number of discount listings within the defendant’s geographic market.
The court also agreed with the FTC that the defendents’ proferred procompetitive justifications were insufficient to outweigh those effects. The defendants argued that discount brokers were free riding on MLS services. But discount brokers were required to pay the same dues and fees as non-discount brokers for access to the MLS. The defendants argued that free riding nonetheless occurred because discount brokers often did not always work with a cooperating broker, thus reducing the number of fee paying brokers to the MLS and creating a bidding advantage by buyers who did not have to compensate a second broker in the transaction. The court rejected these arguments because (1) discount brokers paid cooperative brokers in the 80% of transactions in which they were used, and (2) full commission brokers did not always pay cooperative brokers when buyers came directly to the full commission broker. To be sure, full commission brokers still collected the entire commission when a cooperating broker was not used, creating a bidding advantage for discount listings. But the court explained, this bidding advantage was pro-competitive in that it created downward pressure on commissions.
The Seventh Circuit in an interlocutory appeal written by Judge Richard Posner upheld the district judges decision in a multi-district litigation to allow an antitrust claim to move forward. The claim alleges a conspiracy among the largest cell phone providers to restrain competition with respect to text messages. Although the complaint did not allege direct smoking gun evidence of a conspiracy, the court held that circumstantial evidence can be sufficient. The plaintiffs’ second amended complaint alleged the cell phone companies exchanged price information at trade association meetings where they met in a leadership council. The council within urged its members to substitute “coopetition” for competition, plaintiffs allege. The complaint also alleged that each defendant increased price despite falling costs and each moved from a unique complex pricing structure to a uniform one that increased prices by a third. According to plaintiffs, the defendants all charge 20 cents per single text message, a price that is almost all profit because there is virtually no cost for the cell phone companies to transmit the messages.
Update May 2011: The court has granted summary judgment for Harley-Davidson on the ground that it is permitted to protect its rights in its trademark by limiting the companies that may sell bags bearing the Harley mark.
In Packaging Supplies Inc. v. Harley-Davidson Inc., Northern District of Illinois Judge Robert M. Dow Jr. refused to toss out an antitrust suit against Harley Davidson alleging that Harley illegally tied the purchase of motorcycles to the purchase of shopping bags. Harley allegedly instructed its dealerships to sever their relationship with other shopping bag makers and to purchase bags only from Harley. PSI further alleged that after this notice was sent, Harley dealerships that liked its products over Harley’s refused to buy them, fearing repercussions from Harley for continuing a relationship with PSI. Harley moved to dismiss, arguing that PSI did not sufficiently show that both 1) a tying arrangement existed and 2) Harley would acquire power in the market for plastic shopping bags. The court rejected Harley’s argument, holding that “what matters for purposes of the sufficiency of PSI’s complaint is that PSI alleges that the dealers were coerced,” since tying can be shown by the fact that a buyer did not want to take both products from the same vendor. The court also held that Harley’s claim that it merely acted to protect its intellectual property rights could not be resolved on a motion to dismiss and is more properly resolved on a motion for summary judgment.
The EC is investigating the planned acquisition of MWM Holding GmbH of Germany by Caterpillar Inc. of the US. Both companies are active in the reciprocating engine generator sets (“gensets”) market. Gensets are used to generate power, and the Commission is concerned that the merger would restrain competition in the gas powered genset market.
The EC is investigating the credit default swaps market, examining whether (1) 16 investment banks and Markit, the leading provider of financial information in the CDS market, colluded in order to control financial information, and (2) 9 of the banks and ICE Clear Europe, the leading clearing house for CDS. The Commission will investigate in particular whether the preferential tariffs granted by ICE to the 9 banks have the effect of locking them in the ICE system to the detriment of competitors
The European Court of Justice has upheld a 2007 EC decision finding that Visa infringed EU rules on restrictive business practices by refusing to admit Morgan Stanley Bank as a member to its payment card network. The Court also upheld the €10.2 million fine imposed on Visa.
The EC fined Procter & Gamble and Unilever € 315.2 million for operating a cartel together with Henkel in the market for household laundry powder detergents in eight European Union countries. The fine on the two companies was reduced 10%, because they acknowledged the facts and thus enabled the EC to bring the investigation to a swift conclusion.
EC officials conducted surprise inspections of companies active in the rail freight sector and related products industry in Baltic countries.