Big Day for Big Tech: CEOs Testify in House Antitrust Hearing

On Wednesday, July 29, 2020, the House Judiciary Committee’s Subcommittee on Antitrust conducted its sixth hearing into online platforms and market power, welcoming as witnesses the chief executive officers of Amazon, Apple, Google, and Facebook. The hearing lasted more than five hours and was styled as “Examining the Dominance of Amazon, Apple, Facebook and Google.” Due to COVID-19, the CEOs testified virtually, adding an ironic digital twist with the tech titans appearing together in video tiles on a screen with no big-tobacco moment standing side-by-side to take their oath.

The Subcommittee’s hearing culminated its year-long investigation into Big Tech, and the questioning was informed by requests for information posed to each tech company last September, which generated millions of pages of documents and hundreds of hours of interviews. Subcommittee Chair Cicilline opened the hearing by describing each of the tech companies as a “bottleneck for a key channel of distribution,” whether that be a channel of retail distribution, distribution of software applications, or distribution of information. Chair Cicilline began and ended the hearing by expressing concerns about the dominance of each firm and abuse of their purported monopoly power. Continue Reading

DOJ Takes a Stance on Section 230 Reform that Could Place Additional Burdens on Online Platforms

The Department of Justice (DOJ) recently outlined proposed reforms to Section 230 of the Communications Decency Act of 1996.[1] Section 230 has been in place since the early days of the Internet and protects online platforms from liability for certain third-party posts. It has recently become a point of contention between Big Tech and the Trump Administration.  Recently, a presidential tweet was labeled with a fact-checking message that described the content as “unsubstantiated.”[2] The President claimed the label was intended to chill his rights under the First Amendment and subsequently signed the Executive Order on Preventing Online Censorship, calling for review and clarification of the scope of Section 230. The Executive Order also calls on the Secretary of Commerce and the Attorney General to engage in rule-making with the Federal Communications Commission to clarify when a tech company could be deemed to be taking part in “not ‘taken in good faith.’”[3] Additionally, the Order encouraged the Federal Trade Commission to investigate “unfair or deceptive acts or practices” committed by online platforms. Continue Reading

Fishy Price Fixing Leads to 40-month Jail Stint

On June 16, following a monthlong trial, Christopher Lischewski, former CEO and president of Bumble Bee Foods LLC, was sentenced by Judge Edward Chen of the Northern District of California to 40 months in prison plus a $100,000 fine for orchestrating a canned tuna price-fixing conspiracy. Lischewski’s sentence demonstrates the punishment individuals should be prepared to face if involved in price fixing and that such criminal behavior cannot be shielded by any corporate protections. Assistant Attorney General Makan Delrahim, head of the Department of Justice’s Antitrust Division, remarked that “[t]he sentence imposed … will serve as a significant deterrent in the C-suite and the boardroom.”[1] Indeed, Chen himself stated that Lischewski’s sentence was intended to send a message of general deterrence, particularly where a basic food staple relied upon by many households is concerned. Continue Reading

Limits of State Action Protection for Colleges and Universities

A recently filed antitrust complaint against Duke University (Duke) provides a fresh reminder for colleges and universities that the state action immunity doctrine is unlikely to be a complete shield from antitrust liability even if a public university is involved. On May 29, a professor at the University of North Carolina (UNC) filed a complaint against Duke alleging that UNC and Duke had an agreement not to recruit each other’s faculty.[1]

The alleged conduct came to light during discovery in a similar lawsuit, Seaman v. Duke University, brought in 2015 against Duke’s and UNC’s medical schools related to a no-poach agreement regarding medical faculty.[2] Continue Reading

1-800 Contacts Settles Class Action Lawsuit With Roots in FTC Action

Back in 2016, the Federal Trade Commission (FTC) sued 1-800 Contacts, claiming the online retailer devised an anticompetitive scheme with other online lens retailers to restrict search terms.  The FTC charged that 1-800 Contacts and its competitors entered into agreements which prevented the other online contact lens retailers from bidding for search engine keywords in advertising auctions conducted by internet search engines, such as Google and Yahoo.

Last week, in a separate but related consumer class action, 1-800 Contacts settled with consumer-plaintiffs who brought suit in the Central District of Utah alleging similar facts.  The consumer complaint alleged that 1-800 Contacts forced some of its competitors to implement negative keyword lists so that when a potential consumer typed “1-800 Contacts,” no links to other retailers would appear in the search results and instead would only se links directing to 1-800 Contacts’ website. Continue Reading

The Failing Firm Defense in Times of Economic Uncertainty

As many businesses look for solutions to weather the economic impact of the COVID-19 pandemic, one potential avenue for distressed companies is to seek to be acquired by a more stable firm looking to expand. The antitrust regulators have made clear that all types of mergers – even during a global crisis – will be subject to ordinary antitrust scrutiny. As those principles are applied, merging companies may look more frequently to the “failing firm” defense to convince regulators that their deal should pass regulatory hurdles when it otherwise might not. However, the requirements for meeting the failing firm standard are high, and merging parties should not assume that financial struggles during the pandemic will provide a free pass through merger review. Continue Reading

DOJ Declines to Challenge New Bidding Platform for Commercial Advertisement Producers

On April 16, the Department of Justice (DOJ) announced that it would not challenge a proposal by the Association of Independent Commercial Producers (AICP) to operate an online platform for advertisers and advertising agencies to solicit bids from companies that produce commercials for television, the internet and other media platforms. The DOJ stated its position in a business review letter from Assistant Attorney General Makan Delrahim of the Antitrust Division to counsel for the AICP. Under the DOJ’s business review procedure, an organization may submit a proposed action to the Antitrust Division and receive a statement on whether the division currently intends to challenge the action under the antitrust laws based on the information provided.

As outlined in the AICP’s request letter, bidding on commercial productions is primarily conducted in one of two ways: (1) Agencies solicit bids on behalf of advertisers, or (2) advertisers solicit bids directly, without engaging an agency. Production companies then directly submit responsive bids to the agencies or advertisers, as the case may be. However, the AICP noted that, increasingly, advertisers and agencies are requiring AICP members (the production and post-production companies) to use third-party bidding portals designed to aggregate the input data and provide bidding exchange services. In some cases, advertisers and agencies have formed affiliated entities that offer bidding platform services to the industry as well. Continue Reading

COVID-19 and the DPA: First Criminal Complaint Filed by the Justice Department in New York

On Friday, April 24, 2020, the Justice Department announced the filing of a criminal complaint against a New York man, Amardeep “Bobby” Singh, for the hoarding and subsequent price gouging of personal protective equipment (PPE) under the Defense Production Act (DPA) – the first of its kind since the beginning of the COVID-19 outbreak in the United States. Singh faces up to one year in prison or a fine of up to $10,000 if convicted of violating the DPA. In addition to the Eastern District of New York and the United States Postal Inspection Service, this case is being handled with assistance from the Department of Justice’s nationwide COVID-19 Hoarding and Price Gouging Task Force.

According to the complaint, Singh operates a retail store selling apparel and shoes. However, beginning in mid-March, Singh began to accumulate merchandise he called “COVID-19 Essentials,” including but not limited to N-95 filtering face piece respirators, PPE face shields, PPE gloves, and clinical-grade sanitizing and disinfecting products. According to the charges, this merchandise was sold at inflated prices to the public. For example, according to the complaint, Singh purchased three-ply disposable face masks for a per-unit price of $0.07. He resold those same masks at a per-unit price of $1.00 – a markup of approximately 1,328%. Among the entities allegedly price gouged were particularly vulnerable organizations, such as the Association to Benefit Children, the New York Foundation for Senior Citizens and Rewarding Environments for Adult Living Inc. Overall, investigators seized a total of more than 100,000 face masks, 10,000 surgical gowns, nearly 2,500 full-body isolation suits and more than 500,000 pairs of disposable gloves. Continue Reading

Fuel Supply Bid-Rigging Prosecution Highlights Interplay of Whistleblower Statute and Antitrust Division’s Leniency Program

On April 8, the Department of Justice (DOJ) Antitrust Division (Division), the DOJ Civil Division and the U.S. Attorney’s Office for the Southern District of Ohio (collectively, the Government) announced a civil antitrust and False Claims Act (FCA) complaint and concurrent settlement regarding a bid-rigging conspiracy that targeted fuel supply contracts for U.S. military installations in South Korea.[1] A continuation of the larger line of cases involving South Korean fuel contract bid-rigging,[2] this final settlement with Jier Shin Korea Co. Ltd (Jier Shin) and its president, Sang Joo Lee (Lee) (together, the Defendants), demonstrates the DOJ’s commitment to using Section 4A of the Clayton Act[3] and the FCA to regulate anticompetitive conduct in which the U.S. is the victim.

Case Background and Defendants’ Conduct

Jier Shin is a small Korean logistics company privately held by Lee and his family as majority owners. As mentioned above, the DOJ alleged that Jier Shin agreed with five Korean transportation and oil refinery companies to fix prices and rig bids for U.S. military fuel supply contracts. Interestingly, this case arose out of a FCA qui tam whistleblower claim alleging the Defendants made false claims regarding their involvement in the conspiracy. This indicates that someone either inside the company or with significant knowledge of the company’s operations possessed the evidence necessary to convince the Government to initiate an enforcement action. Continue Reading

COVID-19 Update: Pricing During COVID-19 Without Gouging or Fixing

As antitrust counsel, we have done our best to keep up to date with the latest news coming from the federal and state governments on price gouging and efforts to combat shortages and hoarding of PPE. Today, we write to provide a few more details on price gouging and how you can set prices in these difficult times while avoiding exposure for price gouging, price fixing or other antitrust violations.

On March 23, 2020, President Trump signed Executive Order 13910 aimed at preventing price gouging and hoarding of crucial medical and health supplies needed to fight COVID-19.[1] The Executive Order invokes the Defense Production Act and for certain items designated by the U.S. Department of Health and Human Services, such as personal protective equipment (PPE) and ventilators, makes it a misdemeanor for individuals and companies to accumulate these items either (1) in excess of reasonable needs or (2) for the purpose of selling them in excess of prevailing market prices.[2] U.S. Attorney General William Barr has said that the government’s crackdown was aimed at “people hoarding these goods and materials on an industrial scale for the purpose of manipulating the market and ultimately driving windfall profits. If you have a big supply of toilet paper in your house, this is not something you have to worry about. But if you are sitting on a warehouse with masks, surgical masks, you will be hearing a knock on your door.”[3] It remains to be seen what “in excess of prevailing market prices” means in this context. Continue Reading

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