Cases filed by toy retailers alleging the toy manufacturer Ganz unlawfully tied the purchase of ancillary products to its popular Webkinz toy were consolidated by the Judicial Panel on Multi-district Litigation before the Northern District of California. The case is captioned In re: Webkinz Antitrust Litigation.
Delaware Challenges Title Insurance Rate Setting
October 22, 2008 – 9:57 am
The state of Delaware has challenged rate setting practices by title insurance companies comprising 98% of the Delaware market. The District of Delaware case alleges that the companies agree on rates and implement them without effective regulatory review.
DOJ Challenged Beef Packing Merger
October 22, 2008 – 9:41 am
Earlier this year, JBS SA, the third largest beef packer in the US, acquired National Beef Packing and Smithfield, the fourth and fifth largest packers, respectively. The Antitrust Division filed suit in the Northern District of Illinois challenging JBS’s acquisition of National Beef, but not Smithfield. The acquisition would create the largest beef packer with 35% of the market, and the three largest packers would control 80% of the market. The Division claimed that the merger would restrain both ends of the market, leading to lower prices being paid to cattle raisers and higher prices being paid by beef consumers. The case was joined by antitrust enforcement authorities in 14 states, including most of the plains and mountain states. JBS vowed to defend itself vigorously, arguing that efficiencies made possible by the merger would lead to lower prices for consumers.
Court Dismisses Sham Litigation Claim, Permits Walker Process Claim to Proceed
October 22, 2008 – 9:33 am
In response to a patent enforcement suit by SanDisk, ST Microelectronic’s filed an antitrust counter-claim arguing that SanDisk’s enforcement action was a sham and that it had obtained its patent fraudulently. The court dismissed the sham litigation counterclaim on the ground that SanDisk’s claim was not objectively groundless. It found sufficient allegations of fraud on the patent office, however, to permit the Walker Process claim to proceed. Such a claim requires evidence of intentional fraud, a standard that a jury will evaluate.
DOJ Approves Patent Pool for High Frequency Bagage Tracking
October 22, 2008 – 9:26 am
The Antitrust Division agreed that it would challenge an agreement among seven technology companies owning patents essential to a standard for UHF RFID technology used in airline bagage tracking and event ticketing. The Division agreed that the proposal would lead to more efficient licensing and reduce the potential for blocking technology to slow the development of the industry. The agreement enabled the consortium to license jointly a pool of 10 patents essential to the standard. The participants retained the right to license their patents separately. Other potentially essential patents are not included in the pool.
Fraudulent Agreement to Inflate Drug Prices Not Anticompetitive
October 17, 2008 – 11:07 am
On August 26, 2008, a District of Massachusetts Federal District Court dismissed an antitrust class action challenging an agreement between McKesson, a drug wholesaler, and First Databank, a publisher of drug prices, to inflate the average whole price and thus the price paid by insurer providers to pharmacists. Relying on the U.S. Supreme Court’s decision in NYNEX Corp. v. Discon, 525 U.S. 128 (1998), the court held that high prices to consumers cannot support an antitrust claim where the complaint failed to allege that the competitive process was restrained. Discon, however, is distinguishable on two grounds. First, it held only that a fraudulent agreement between a supplier and a service provider was not per se illegal under the Sherman Act. The Court did not reach the rule of reason argument that was rejected by the Massachusetts court here. Second, the conduct in Discon involved the usually pro-competitive act of changing service providers. The Court made clear that per se condemnation want improperly inhibit firms seeking to change suppliers. Because supplier termination decision are generally made for pro-competitive reasons, fear of per se antitrust liability would likely harm consumers. The McKesson/First Data agreement to artificially inflate prices, by contrast, did not arise in a similarly pro-competitive context. Inhibiting that sort of agreement would thus not likely harm consumers. For these reasons, a more careful examination of the case under the Rule of Reason would be appropriate.
Update: November 2008: While maintaining that it did not act anticompetitively, McKesson has agreed to settle outstanding claims against it for $350 million. The settlement is subject to court review.
Update 10/17/08: The state of Oklahoma has filed similar claims in the Massachusetts court.
9th Circuit Affirms State Law Antitrust Violation
October 15, 2008 – 2:40 pm
The U.S. Court of Appeals for the Nineth Circuit recently upheld a verdict finding that a coupon printer’s right-of-first-refusal contracts constituted unlawful exclusive dealing under the Cartwright Act, California’s antitrust law. The court also upheld, however, the lower courts refusal to impose an injunction permanently banning right-of-first-refusal contracts on the ground that they can be pro-competitive.
Update: The court has denied en banc review.
EC Fines Banana Producers
October 15, 2008 – 10:58 am
The European Commission has fined banana suppliers €60.3m for coordinated the setting of their quotation prices between 2000 and 2002.
MasterCard Fees Again Under Investigation in Europe
October 14, 2008 – 11:02 am
The European Commission is investing whether MasterCard’s recently announced “scheme fees” are an improper attempt to circumvent the Commission’s recent decision that MasterCard’s cross-border interchange fees were anticompetitive. MasterCard discontinued cross-border interchange fees in June, pending discussion of an acceptable alternative.
Court Denies NHL Motion to Dismiss Based on Single Entity Defense
October 14, 2008 – 10:52 am
Madison Square Garden has sued the National Hockey League, arguing that the league anticompetitively restrains competition among the teams in ways that are not necessary to the joint venture. Most relevant to the case is MSG’s claim that the league has anticompetitively forced all of the teams to use a standardized website. The NHL moved to dismiss on the ground that it is a single entity, incapably of conspiring. Southern District of NY Judge Loretta Preska denied the motion with respect to new media. Given the recent Seventh Circuit decision holding that the NFL is a single entity for the purposes of selling loge caps, this should be an interesting case to follow.