Antitrust Lawyer Blog Commentary on Current Developments

Articles Posted in Antitrust Litigation Highlights

On May 25, 2021, the D.C. Office of the Attorney General (DC AG) filed an antitrust complaint against Amazon.com, Inc. in the Superior Court of the District of Columbia. The complaint accuses the company of monopolization and illegal restraints of trade. Interestingly, the complaint does not include allegations of federal antitrust violations.

The complaint alleges that Amazon “fair pricing policy” requires third-party sellers who sell products through Amazon to agree to what is really a most-favored-nation (“MFN”) provision. According to the complaint, this fair pricing policy restrains third-party sellers, which wish to sell on Amazon’s platform, from selling their products on other websites, including their own websites, at prices lower, or on better terms, than offered through Amazon. This fair pricing policy replaced Amazon’s price parity provision, but the claim is that this new policy has the same effect as Amazon’s old policy.  It is considered a platform most-favored nation agreement and allows for Amazon to penalize third parties found in violation of these policies. Allegedly, the provisions have the effect of creating a price floor with Amazon’s prices being the lowest. Because these third-party sellers incorporate Amazon’s fees – which can be up to 40% of the product’s price – into their prices, they are forced to inflate their product prices on other platforms since they must account for the fees in their sale price. The claim of the Office of the Attorney General is that this policy suppresses competition and unnaturally inflates prices for consumers across all online retail platforms. The complaint asserts that these unreasonably high fees are built into prices market wide, due to the alleged price floor caused by the most-favored nation provisions.

According to the complaint, Amazon allegedly violates D.C. antitrust law in a variety of ways. First, Amazon is alleged to be engaged in unlawful horizontal agreements because Amazon horizontally competes with many third-party sellers (i) as online retailers, and (ii) in particular products. Second, Amazon is alleged to be engaged in unlawful vertical agreements because the most-favored-nation provisions eliminate competition in online retail. Third, Amazon, accounting for 50-70% of all online retail sales and benefiting from network effects, is alleged to monopolize and attempt to monopolize the online retail sales market.

McDonald’s couldn’t get its no-poach claims dismissed for lack of standing so it will have to continue to litigate allegations that it drove down wages by enforcing a “no poach” agreement barring different franchise locations from hiring one another’s workers.  The case is  Turner v. McDonald’s, USA LLC, N.D. Ill., No. 19-cv-5524, 4/24/20 which is consolidated with Deslandes v. McDonald’s, USA, LLC, N.D. Ill., No. 17-cv-4857.
McDonald’s arguments were limited because of past decision in Deslandes.  In Deslandes, the court held that the plaintiff employees plausibly alleged that the franchises’ no-poach restraints could be found unlawful under a quick-look analysis so McDonald’s did not move to dismiss for failure to state a claim.  
The Northern District court rejected McDonald’s argument that the lead plaintiff lacked standing because she was never denied a job based on the no-poach policy.  The Northern District’s opinion stated that “[t]he argument misses the point of plaintiff’s alleged injury: Plaintiff alleges she suffered depressed wages.” The court added that “[p]laintiff’s claim is akin to a supplier who sells at a reduced price due to the anti-competitive behavior of a cartel of buyers.”  The court also found that complaint sufficiently supported the claim that the policy’s effects could be isolated from broader economic conditions like the unemployment rate.  The court added that “[p]laintiff’s causation allegations are plausible due to basic principles of economics.”  Indeed, “[i]f fewer employers compete for the same number of employees, wages will be lower than if a greater number of employers are competing for those employees.”  So, the case will move forward.
The suit is part of a wave of challenges to franchise no-poach provisions amid considerable uncertainty about their legality.  Franchise employees have filed a number of private class actions in federal courts across the country. The complaints challenge the use of no-poach agreements in franchise agreements, with lawsuits pending against several fast-food restaurant chains, tax preparation services (e.g., H&R Block), car repair services (e.g., Jiffy Lube) and other franchise-based businesses that include broad no-poach clauses in their franchise agreements.  The private actions typically allege that agreements among the franchisor and franchisees to avoid poaching employees violate Section 1 of the Sherman Act and call for per se treatment or, in the alternative, quick-look review of the alleged conduct.

On January, 17, 2020, smaller rivals such as PopSockets, Basecamp, Sonos, and Tile testified to the the House antitrust subcommittee about how they have been bullied by big tech giants such as Google, Apple, Facebook, and Amazon and called for swift action.

According to the New York Times, the smaller rivals, which have largely been publicly quiet until the hearing, finally stepped up to the plate and sounded off on big tech at a hearing in Boulder, Colorado.  The Congressional subcommittee heard stories of technology giants wielding their massive footprints and platforms as weapons, allegedly copying smaller competitors’ features or tweaking their algorithms in ways that stifle competition.

The pleas for regulatory relief resonated with lawmakers, led by Rep. David N. Cicilline (Democrat – Rhode Island), the chairman of the House’s antitrust subcommittee. Cicilline noted that “it has become clear these firms have tremendous power as gatekeepers to shape and control commerce online.”

The federal antitrust agencies continue their emphasis on investigating, challenging, and unwinding consummated transactions that are not reportable under the Hart Scott Rodino (“HSR”) Act.

Most recently, on November 6, 2019, the Federal Trade Commission (“FTC”) issued an Opinion and Final Order in which the Commission upheld the Administrative Law Judge’s (“ALJ”) decision that Otto Bock HealthCare North America, Inc.’s (“Otto Bock”) acquisition of FIH Group Holdings, LLC (“Freedom”) was anticompetitive and that Otto Bock must divest Freedom’s entire business with the limited exceptions granted by the ALJ.  The Commission’s order was approved by all five commissioners and continues the trend of unwinding consummated acquisitions that are deemed to be anticompetitive.

Accordingly, buyers must be aware of the risks of closing a non-reportable transaction that eliminates competition.  Here are a couple of points to keep in mind:

On September 12, 2019, a coalition of unions, consumer groups, and public interest organizations filed a letter with the U.S. Federal Trade Commission (“FTC”) opposing AbbVie Inc.’s (“AbbVie”) acquisition of Allergan plc (“Allergan”).

Coalition Opposing the Merger

The coalition includes Families USA, Public Citizen, U.S. PIRG Education Fund, Service Employees International Union, American Federation of State, County, and Municipal Employees, UNITE HERE, Consumer Action, American Federation of Teachers, Alliance for Retired Americans, American Family Voices, Doctors for America, End AIDS Now, Prescription Justice, Social Security Works, the Other 98, Treatment Action Group, and NextGen California.  It is asking the FTC to conduct a thorough investigation and to block the merger if the facts support it and a remedy cannot be devised to restore competition.  The coalition highlights the competitive problems arising from continued consolidation in the pharmaceutical industry and requests that the FTC include in its investigation ongoing anticompetitive conduct by the parties, such as the use of rebate walls, which will have an even more profound anticompetitive effect if this merger is consolidated, as well as past abuse of the patent system.

Commentators all over the spectrum have recognized antitrust is increasingly becoming a game of political football.

The notion that antitrust enforcement is motivated by politics has hung over the Trump administration since the Department of Justice’s failed attempt to block AT&T’s acquisition of CNN’s owner, Time Warner and some antitrust experts might point out that the Obama administration also influenced the DOJ’s decisions to sue or settle cases.

While politics has always played a role in setting the antitrust agenda, typically antitrust investigations and enforcement decisions are based on the facts.  Indeed, there is no credible evidence that the big tech firms have engaged in unlawful monopolization or that they have stifled innovation.  In fact, Iowa’s Attorney General Tom Miller, who is well known for his role of leading 20 states in the DOJ’s antitrust suit against Microsoft, said this past July that “[w]e are struggling with the law and the theory,” to bring a case against the big tech firms.

On March 22, 2019, Judge John Michael Vazquez of the United States District Court for the District of New Jersey granted Allergan’s motion to dismiss Shire’s antitrust complaint that Allergan monopolized the Medicare Part D dry eye disease (“DED”) treatment market through its contracting practices with insurers including rebates based on a bundled portfolio of drugs and an exclusive dealing contract whereby a Medicare Part D plan was contractually barred from offering any other DED drug on its formulary. Shire US, Inc. v. Allergan, Inc., No. 17-cv-7716 (D.N.J. Mar. 22, 2019).

Background

On October 2, 2017, Shire sued Allergan for its bundling and exclusive dealing arrangements with Medicare Part D plans that deny patients access to Xiidra® – Shire’s best-in-class, breakthrough drug to treat DED.

On September 5, 2018, Judge Trevor N. McFadden of the United States District Court for the District of Columbia granted the Federal Trade Commission’s request for a preliminary injunction preventing Tronox Ltd. (“Tronox”) from completing its proposed $2.4 billion acquisition of National Titanium Dioxide Company Ltd. (“Cristal”) until after a final ruling in the FTC’s administrative proceedings challenging the deal.  Federal Trade Commission v. Tronox Ltd. (D.D.C. Sept. 12, 2018).  It is a huge victory for the FTC.

Background

On February 21, 2017, Tronox inked a deal to buy Cristal for $1.67 billion and a 24% stake in the new entity. The transaction would have created the largest TiO2 company in the world, based on titanium chemical sales and nameplate capacity.

On August 10, 2018, the Eastern District of Pennsylvania denied J&J’s motion to dismiss Pfizer’s antitrust action involving infliximab products.

Background on Pfizer/J&J

In September 2017, Pfizer filed an antitrust lawsuit under Sections 1 and 2 of Sherman Act alleging J&J engaged in exclusionary anticompetitive practices to keep Pfizer out of the market for infliximab products.

On March 5, 2018, Sparton Corporation (“Sparton”) announced the termination by Sparton and Ultra Electronics Holdings plc (“Ultra”) of their July 7, 2017 merger agreement.

According to Sparton, during the review of the proposed merger by the United States Department of Justice (“DOJ”), the United States Navy (“Navy”) expressed the view that instead of the parties proceeding with the merger, each of Sparton and Ultra should enhance its ability to independently develop, produce and sell sonobuoys and over time work toward the elimination of their use of the companies’ ERAPSCO joint venture for such activities. DOJ staff then informed Sparton and Ultra that it intended to recommend that the DOJ block the merger. The parties expected the DOJ would follow this recommendation and seek an injunction in court to block the merger. As a result of the view of the Navy and the DOJ’s position, Ultra and Sparton determined it was in the best interests of the parties to proceed to terminate the merger agreement.

Also according to Sparton, the parties understand that the DOJ intends to open an investigation to evaluate their ERAPSCO joint venture. Sparton said that based on historical practice, the company anticipates the Navy will assist in funding Sparton’s transition to independently develop, produce and sell sonobuoys.

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