Antitrust Advocate

Antitrust Advocate

News, Developments and Practical Advice from Antitrust Leaders

Is That a Carrot or a Stick in Your Hand? The Third Circuit Examines the Line Between Competition and Coercion in De Facto Exclusive Dealing Agreements

Posted in Antitrust Litigation, Sherman Act 2

We recently wrote about attempts to force exclusivity onto customers. But firms with large or dominant market shares often must walk a fine line between properly offering customers percentage-based discounts and improperly coercing customers into de facto exclusivity. For example, if a dominant firm offers a 25 percent price reduction to a customer that purchases all of its needs for a particular product from the dominant firm, does that offer constitute a competitive 25 percent volume discount, or an anticompetitive 25 percent penalty for purchasing any product from the dominant firm’s competitor? Not surprisingly, it usually depends on whom you ask: the dominant firm or the competitor.

The Third Circuit provided some guidance on the line between price competition and coercion with its recent opinion in Eisai, Inc. v. Sanofi Aventis U.S., LLC, No. 14-2017 (3d Cir. May 4, 2016).[1] In Eisai, the Sanofi defendants, manufacturers of the anticoagulant Lovenox, offered customers the “Lovenox Acute Contract Value Program,” which provided percentage-based discounts. Customers who joined the program received a 1 percent discount from Sanofi’s wholesale price, and increasingly higher discounts if Lovenox exceeded 75 percent of the customer’s total purchases of low-molecular-weight heparin, with the discounts potentially reaching 30 percent. If a customer left the program, the customer lost its discount but could still purchase Lovenox at regular wholesale prices. During the relevant time period, Lovenox’s market share ranged from 81.5 percent to 92.3 percent. Continue Reading

Forcing Exclusivity on Your Customers May Not Be the Best Competitive Response

Posted in FTC Act, Sherman Act 5

In the words of the director of the Federal Trade Commission’s (FTC’s) Bureau of Competition, the recent enforcement against Invibio, Inc., the first company to sell implant-grade polyetheretherketone, known as PEEK, to medical device makers, “affirms that the first company to enter a market cannot rely on anticompetitive contract terms to lock up customers and box out rivals.” But what if you are not the first company to enter the market? More on that below, but first, what exactly did Invibio do when faced with new rivals?

According to the FTC’s administrative complaint, Invibio responded to new rivals seeking to sell PEEK at lower prices by adopting a strategy of expanding the scope and coverage of exclusivity terms in its own PEEK supply contracts. Concerned that if it did not block these new rivals, it would be forced to engage in painful price competition, Invibio implemented its exclusivity strategy through negotiations with existing and potential customers. Continue Reading

Scalia’s Antitrust Legacy: Part 2, The Dissenting Opinions

Posted in Antitrust Litigation, Articles

In March, we wrote about Justice Antonin Scalia’s three majority opinions in substantive antitrust cases. Notably, Scalia also authored three dissenting opinions in substantive antitrust cases, in rapid-fire succession in 1991, ’92 and ’93. In the majority opinions, Scalia seized upon alternative, innocuous explanations for alleged anticompetitive conduct, even when an anticompetitive motive was equally if not more plausible, and in two cases reversed jury verdicts for plaintiffs. In the dissents, Scalia’s skepticism regarding the antitrust laws is even more evident: Scalia does not attempt to explain away what some (including two juries) characterized as anticompetitive conduct, as in the majority opinions; rather, he recognized and accepted plaintiffs’ characterizations of defendants’ conduct (as required by the posture of the cases), but concluded that even so, plaintiffs could not find a remedy in the antitrust laws. Furthermore, in each dissent, he also would have had the court reverse the U.S. Court of Appeals for the Ninth Circuit and affirm the particular California federal district court in the case, and grant judgment for defendants on the pleadings or on summary judgment. Continue Reading

Sounding the Alarm: White House Agency Warns of Decreasing Competition Across U.S. Economy

Posted in Antitrust & Politics

The Council of Economic Advisors, a White House agency charged with advising the president on economic policy, recently issued a report, Benefits of Competition and Indicators of Market Power, addressing the state of competition in the United States economy. The report expresses concern that competition is being eroded in many industries across the U.S. economy, and recommends reversing that trend through government action, including increased enforcement action by the Department of Justice and Federal Trade Commission.

The report also identifies several emerging issues the Council believes may require antitrust enforcement or other governmental action to address competitive concerns. Continue Reading

There Was a Panel on What?? Notes on the ABA Antitrust Spring Meeting Panel on Marijuana Law

Posted in Agriculture, Events

Attendees at this year’s Spring Meeting may have been surprised by an unexpected panel: an overview of the status of the law related to the legalization of marijuana and antitrust issues facing the nascent industry. However, a single number explains why the ABA and others are beginning to address a topic that many legal practitioners still view as taboo: $4,000,000,000.00. That’s right, the fastest growing industry in the United States is marijuana cultivation and sale, which currently represents a $4 billion-per-year industry, with $1 billion flowing to Colorado alone. At its current rate of growth, the marijuana industry is expected to dwarf the revenues of the NFL and is poised to grow 10 times, into a $40 billion-per-year industry.

At “Marijuana, Twenty-Three States and Counting,” panel members from various parts of the industry addressed the current state of the law and the legal issues on the horizon. At the core of the legal issues facing the industry is the tension between federal law, which classifies marijuana as a Schedule 1 drug, and the now 23 states that have legalized some form of marijuana. Driving that shift in state law are the 40 million marijuana users in the United States and the 61 percent of Americans who believe marijuana should be legalized who identify this as a major issue to be addressed by lawmakers. Continue Reading

Supreme Court Nominee Garland: An Assessment of Antitrust Expertise

Posted in Antitrust & Politics, Articles

Last month, our antitrust column was devoted to the late Justice Antonin Scalia’s antitrust legacy on the U.S. Supreme Court, focusing on his three antitrust opinions for the majority. At that time, we promised to continue that analysis, focusing this month on Scalia’s many antitrust dissents. However, history intervened and President Obama nominated Chief Judge Merrick Garland of the U.S. Court of Appeals for the District of Columbia Circuit to replace Scalia. In the wake of that controversial nomination, Garland has been subsequently heralded by some commentators as an antitrust expert who may have an important impact on antitrust cases before the high court. While Garland certainly has experience with antitrust matters, he has not said he is an antitrust expert. Indeed, we respectfully would not go so far as to classify him as an antitrust expert, as was, for example, Justice John Paul Stevens before he was elevated to the Supreme Court. (See “Before Joining Bench, Stevens Molded Antitrust Law,” published May 4, 2010, in The Legal.) This article focuses on the substantive antitrust opinions in which Garland has joined or which he authored during his tenure on the D.C. Circuit since 1997.

Much has been written already regarding Garland’s tenure at Harvard Law School where he taught antitrust law for one year in 1986-87. He also wrote an antitrust ­article 30 years ago for the Yale Law Journal on the state antitrust immunity doctrine where he advocated non-interference with state regulations. While a partner at Arnold & Porter he handled one published antitrust case involving a tying claim. However, less attention has been given to Garland’s actual antitrust opinions from his tenure on the D.C. Circuit. In short, while Garland is certainly a learned jurist versed in antitrust law, his time on the bench has yet to reveal his unique insight or approach to antitrust issues, should he be confirmed to the Supreme Court. In fact, Garland joined in the majority in six cases involving a substantive analysis of antitrust law by the D.C. Circuit, but did not author any of those majority opinions. Continue Reading

FTC’s Latest “Pay for Delay” Action Focuses on Noncash “Payments” and New “Product Hopping” Theory of Harm

Posted in Patents

The Federal Trade Commission (FTC) filed an antitrust complaint this week against Endo Pharmaceuticals and several generic companies, alleging that these companies entered into anticompetitive “reverse payment” settlements of patent infringement litigation under the Hatch-Waxman Act. In its 2013 FTC v. Actavis opinion, the U.S. Supreme Court held that certain settlements involving “reverse payments” may raise antitrust issues, because they represent a payment to a competitor to stay out of the market, rather than reflecting traditional and proper settlement considerations. While the agency’s focus on reverse payments is nothing new, the FTC reports that this is its first complaint targeting a no-authorized-generic (“no-AG”) commitment as a form of reverse payment.

Read the original on IP Intelligence Report.

Arbitration Provision Rejected in Franchise Dispute

Posted in Arbitration

In Case Del Caffe Vergnano SPA v. ItalFlavors, LLC, the Ninth Circuit held that the court, not an arbitration tribunal, could review a franchise contract and determine it was a sham, based upon a second contract signed between the parties, and require the parties to litigate the dispute instead of arbitrate.

The facts of the case were straightforward but for one twist. Caffe Vergnano is an Italian corporation that opens Italian-style coffee shops. ItalFlavors, a U.S. entity formed by Argentinian shareholders, wanted to be a franchisee. So the parties entered into a Franchise Agreement that contained an arbitration clause: any disputes would be resolved under UNCITRAL Arbitration Rules under Italian law in Geneva, Switzerland.

Here’s the twist: a second contract (styled as a “Hold Harmless” agreement) was signed the same day the Franchise Agreement was signed that stated the Franchise Agreement “does not have any validity or effectiveness between the parties, as it was prepared and delivered by [Caffe Vergnano] solely for the purpose of allowing [the Argentinian shareholders] to submit a copy of it to the pertinent international agencies in order to obtain an entry visa to work in the United States of America. . . . This contract does not produce any effect between the parties, who as agreed will sign a future contract which will regulate their commercial relationship as soon as it is prepared in accordance with the federal and national laws of the United States of America.”  Continue Reading

Caught Between a Rock and a Hard Place: The Second Circuit to Decide Appeal From Cartel Defendants Who Argued Compliance With Chinese Law Resulted in Sherman Act Violations

Posted in Antitrust Litigation, Sherman Act 1

bigstock-Vitamins-7239776On January 28, 2016, the United States Court of Appeals for the Second Circuit heard arguments on whether the doctrines of act of state, foreign sovereign compulsion, and international comity required the reversal of a jury’s verdict against two Chinese companies that were found liable for violating Section 1 of the Sherman Act. The plaintiffs in In re: Vitamin C Antitrust Litigation (06-MD-1738) had alleged that defendants Hebei Welcome Pharmaceutical Co. Ltd. and North China Pharmaceutical Group Corporation formed an illegal cartel to fix prices and limit supply for exports of vitamin C sold in the United States. A jury from the Eastern District of New York agreed and awarded $153 million in treble damages.

On appeal, the defendants argued before appellate judges Jose A. Cabranes, Richard C. Wesley, and Peter W. Hall that Chinese law required the price-fixing and barred the plaintiffs’ claims as a matter of law. The defendants’ argument was supported by an amicus brief from the People’s Republic of China, in which the government of China argued that the defendants’ price-fixing was compelled by Chinese law, and as such was completely immune from U.S. antitrust liability. Continue Reading

FTC Skeptical of West Virginia Legislature’s Proposal to Immunize Certain Health Care Providers’ Activities from Antitrust Laws

Posted in Healthcare

We recently wrote about the FTC filing a complaint, In re Cabell Huntington Hospital (FTC Docket No. 9366), objecting to the merger of two West Virginia hospitals. The FTC filed its complaint against the wishes of West Virginia’s antitrust enforcer, Attorney General Patrick Morrisey, who approved the merger. In addition to challenging the merger, the FTC’s complaint portrays West Virginia’s regulation of healthcare facilities as inherently anticompetitive.

The West Virginia legislature has now entered the controversy. Both houses passed legislation that would foster “cooperative agreements” among healthcare providers, as long as one of the providers is “a teaching hospital which is a member of an academic medical center.”[1] The cooperative agreements include “the sharing, allocation, consolidation by merger or other combination of assets, or referral of patients, personnel, instructional programs, support services, and facilities or medical, diagnostic, or laboratory facilities or procedures or other services traditionally offered by hospitals or other health care providers.”[2] Continue Reading