Decision Benefits Franchise Businesses and Finds Alston Bars Challenge to No-Poach Agreements

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In June 2021, the Supreme Court reaffirmed in NCAA v. Alston that antitrust claims under Section 1 of the Sherman Act “presumptively” call for rule-of-reason analysis and that only the rare case merits “quick look” or per se treatment. __ U.S. __, 141 S.Ct. 2141, 2151 (2021). Recently, in Deslandes v. McDonald’s USA, LLC, Judge Jorge Alonso of the U.S. District Court for the Northern District of Illinois applied that guidance in dismissing claims that no-poach agreements between McDonald’s franchises and corporate-owned locations violated Section 1, holding that, under the rule-of-reason analysis, the plaintiffs’ failure to allege a relevant market doomed those claims. No. 17 C 4857, 2022 WL 2316187, at *2 (N.D. Ill. June 28, 2022). Judge Alonso also determined that the plaintiffs were not entitled to rely on a “quick look” approach to escape the required analysis of markets and competitive effects under the rule of reason. Judge Alonso’s reliance on Alston to reject the quick-look approach illustrates the difficulty of prosecuting no-poach cases in the context of a franchise or other legitimate business arrangement. Even in a time of increased Federal Trade Commission (FTC) scrutiny of no-poach agreements, plaintiffs must still plead and prove a relevant geographic market when seeking to invalidate no-poach agreements under Section 1 of the Sherman Act and thus face significant burdens in bringing such claims.

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West Virginia v. EPA and ‘Major Questions’ Facing the Competition Agencies

landscape environment questions

The U.S. Supreme Court’s June 30 decision in West Virginia v. Environmental Protection Agency[1] will reverberate throughout the administrative state, inviting challenges to agency actions on major policy issues – including those in the competition arena – that Congress has not directly addressed in legislation.

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Baby Formula Shortage Subject of FTC Scrutiny

Young mother hands pouring powder of milk formula and mixing with water in plastic bottle. Opened container on light blue table background. Baby feeding. Closeup. Point of view shot. Top down view.

On May 23, 2022, the Federal Trade Commission (FTC), at the prompting of President Joe Biden, announced that it will launch a civil investigation into the ongoing shortage of baby formula throughout the country. The FTC is hoping to unearth the factors that have contributed to market consolidation in light of the pressing supply chain issues affecting the baby formula industry. Frequently, investigations such as these impact players up and down the supply chain, including ingredient manufacturers and suppliers, distributors, and retailers.

Read the full Alert.

Antitrust Division Announces Newfound Intent to Pursue Monopolization Cases Criminally

Plan leading strategy of successful business competition leader concept, Hand of player chess board game putting white pawn.

This week, during a panel discussion at the American Bar Association’s annual National Institute on White Collar Crime, Antitrust Division Deputy Assistant Attorney General Richard Powers sent shockwaves through the defense bar with a surprising revelation. Speaking about the Antitrust Division’s plans for vigorous enforcement, he revealed that the Division intends to use its power to criminally prosecute violations of Section 2 of the Sherman Act, i.e., monopolization cases –something the department has not done in four and a half decades, when antitrust crimes were prosecuted as misdemeanors.

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New Executive Order Targeting Noncompete Agreements Foreshadows Significant Issues for Employers

Paper that says Non-Compete Agreement.

On July 9, 2021, President Biden issued a sweeping Executive Order aimed at promoting competition in the American economy. Within the Executive Order, President Biden specifically encourages the Federal Trade Commission (FTC) to regulate noncompetition agreements (generally referred to as “noncompetes”).

Read the full Alert.

Franchise No-Poach Agreements: Is Reform on The Horizon?

In 2016, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) issued Joint Guidance for Human Resource Professionals warning that no-poach agreements restricting employee hiring may violate the antitrust laws.[1] That guidance, along with pre-guidance litigation, has established some clear ground rules. Naked no-poach agreements are per se illegal under §1 of the Sherman Act,[2] while ancillary no-poach agreements, those related to legitimate, procompetitive joint ventures[3] and corporate acquisitions,[4] are subject to the rule of reason, which considers whether the agreement is, on balance, anticompetitive.

Yet, four years later, there remain stubborn pockets of disagreement—for example, no-poach clauses in franchise agreements. Federal courts are struggling to reach a consensus on how to analyze them under the antitrust laws. And there’s a lot at stake. Statistics show more than 8 million Americans work in the franchise sector. The stakes are high for employers too. If the rule of reason applies, private litigation may be financially impractical; the necessity of proving a relevant geographic market in applying the rule of reason makes it difficult, if not impossible, to certify sizable class actions.[5] If the per se rule applies, the Sherman Act’s treble damages and attorneys’ fees provisions can prove disastrous. Continue Reading

NCAA, COVID and Paying Players: Negotiating Payment in the Midst of a Pandemic

In May, three judges on the U.S. Court of Appeals for the Ninth Circuit ruled unanimously against the NCAA in its appeal of the lower court decision, finding that the organization’s policies that prohibit student-athletes from being compensated are, in fact, anticompetitive.

Last year we examined the decision in Alston v. NCAA, an opinion by U.S. District Judge Claudia Wilken of the Northern District of California holding that the NCAA was in violation of Section 1 of the Sherman Act, and therefore the organization could not fix or limit the amount of compensation paid to players unless the money offered to the students was “related to education.”

In May, three judges on the U.S. Court of Appeals for the Ninth Circuit ruled unanimously against the NCAA in its appeal of the lower court decision, finding that the organization’s policies that prohibit student-athletes from being compensated are, in fact, anticompetitive. Of course, there are miles to go with this litigation, as the NCAA has already planned to appeal the decision to the U.S. Supreme Court, which would hear the case in its October 2020 term if certiorari is granted. Continue Reading

Webinar: Antitrust Issues in the Food Industry During the Pandemic

Wednesday, September 23, 2020 | 2:00 p.m. – 3:00 p.m. EDT | Register Now 

You’re invited to join BakerHostetler’s Antitrust and Competition team for a discussion of antitrust issues in the food industry amid the current pandemic. This presentation for in-house counsel and executives at companies involved in all aspects of the food supply chain, from production to distribution to retail sales, will provide thoughtful guidance on how to evaluate and mitigate civil and criminal antitrust risk, before the government comes knocking and private buyer and competitor lawsuits follow. Panelists will walk participants through real-world scenarios to examine the various issues that could and have raised antitrust scrutiny, and provide pragmatic advice about how to avoid inadvertently running afoul of antitrust laws.

Speakers:

  • Carl Hittinger serves as BakerHostetler’s Antitrust and Competition Practice National Team Leader. He focuses his practice on complex commercial and class action litigation, with a particular emphasis on antitrust and unfair competition matters. Carl has more than 40 years of experience handling “bet the company” litigation and successfully trying lengthy jury and non-jury cases. He regularly counsels clients on all aspects of civil and criminal antitrust and unfair competition law, including clients at all levels in the food and retail industries.
  • Ann O’Brien advises companies and their senior executives facing antitrust, criminal cartel, or complex white collar investigations or litigation. Ann has recently advised food and retail clients on the patchwork of price-gouging laws in 38 states and the federal Defense Production Act provisions triggered by states of emergency declared due to the COVID-19 crisis. Prior to joining BakerHostetler, she spent nearly two decades at the Department of Justice, including holding senior leadership and management positions at the DOJ Antitrust Division. In these roles, Ann served as the leading authority on antitrust compliance programs and the application of U.S. Sentencing Guidelines to antitrust crimes, in addition to consulting on complex policy, charging, leniency and sentencing issues.
  • Jeff Martino represents companies and senior executives facing criminal antitrust, fraud, corruption and other complex white collar investigations or litigation being conducted by federal and/or state enforcers. Jeff advises key coalitions on antitrust issues regarding supply chains affected by COVID-19. Prior to joining BakerHostetler, he served as chief of the DOJ Antitrust Division in New York for five years, where he oversaw investigations and prosecutions of individuals and corporations in price fixing, bid rigging and customer allocation matters. Jeff spent 17 years at the DOJ, many of those in senior leadership positions, including chief of the Financial Crime and Public Integrity Section for the U.S. Attorney’s Office in the District of Arizona. Utilizing his experience working with regulators both internationally and domestically, competition agencies abroad, and prosecutors across the United States, Jeff is able to counsel clients operating in high-risk areas around the globe.

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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

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