In Commonwealth of Pennsylvania, Thomas W. Corbett Jr., Governor v. National Collegiate Athletic Association,Pennsylvania’s governor, Thomas W. Corbett filed suit against NCAA, claiming the NCAA’s sanctions against Pennsylvania State University (“Penn State”) in response to the sexual abuse scandal surrounding former assistant football coach Jerry Sandusky, violated antitrust laws and would cause dire economic harm to both the school and the state’s citizens. Sanctions against Penn State included a $60 million fine, a four-year ban on football post-season play and a four-year reduction in athletic scholarships for football. According to the governor’s complaint, Penn State did not engage in any conduct expressly prohibited by the NCAA, but was only suspected of violating vague principles of “institutional control” and “individual integrity.” The suit further alleges that because a finding that Penn State violated any NCAA rules would not be a certainty, NCAA forced Penn State to voluntarily accept the sanctions through a “consent decree” to save Penn State’s football program from being shut down by NCAA for four years. As such, the complaint contends that the NCAA’s ad-hoc efforts to punish the university would interfere with markets for post-secondary education, Division I football players, and the sale of athletic apparel and memorabilia, violating the Sherman Act.
Court Dismisses Drugmaker’s Counterclaim in Vaccine Class Action Suit
January 22, 2013 – 2:21 pm
In Catro M.D. PA v. Sanofi Pasteur Inc., New Jersey District Court Judge Jose L. Linares granted medical practitioners’ motion to dismiss Sanofi Pasteur Inc.’s antitrust counterclaim in a proposed class action that claims Sanofi pushed anti-competitive contract restrictions onto vaccine customers. In their suit, plaintiffs allege that Sanofi is cornering the market on pediatric vaccines by linking bundling agreements that require purchasers to buy 90 percent or more of their pediatric vaccine requirements from Sanofi to avoid price penalties on its pediatric meningococcal vaccine, with physician buying groups. Sanofi filed a counterclaim against the plaintiffs, claiming that the physicians colluded to demand discounts that lowered vaccine prices to non-competitive levels.
Plaintiffs moved to dismiss Sanofi’s counterclaim. The court granted plaintiff’s motion to dismiss, holding that Sanofi did not allege facts to support the plausible inference that the physician buying groups that entered agreements with the drugmaker to buy vaccines either fixed prices or restricted purchases. The court further held that Sanofi hadn’t adequately alleged that the groups are anti-competitive in nature, cause an anti-competitive effect in the vaccine market and have market power.
EU General Court Upholds Ban on Payment Card System Fees Against New Issuing Members
January 21, 2013 – 6:26 pm
The EU General Court has ruled that a French bank card group imposed anticompetitive fees on new entrants. The decision upheld a 2007 European Commission decision banning the charges because they inhibited smaller banks from offering discounted card programs.
The defendant contended that the fees were necessary to its payment system and that the EC had failed to adequately consider that possibility. Although the General Court agreed that the fees could fulfill the legitimate goal of preventing free riding, it also agreed with the EC that potentially legitimate goals do not insulate anticompetitive fees from antitrust challenge. “It is apparent from the caselaw,” the court explained, “that the measures[‘] legitimate objective of fighting against free-riding on the [defendant’s payment] system does not” foreclose the possibility that the defendant also seeks to restrict competition.
Claim that Facebook Stole Advertising Customers Dismissed
January 21, 2013 – 6:25 pm
In Sambreel Holdings LLC et al. v. Facebook Inc., Southern District of California Judge Cathy Ann Bencivengo dismissed without prejudice a case brought by Sambreel Holdings LLC, online advertising display company, accusing Facebook of anticompetitively stealing ad business. The plaintiff helps businesses design a Facebook presense that incorporates the clients’ own website images. The complaint alleged that Facebook responded to this competition by steering advertisers away from Sambreel in part by organizing a boycott and threatening not to deal with any company working with Sambreel. The plaintiff claims to have lost 80% of its revenue as a result of Facebook’s conduct.
Additionally, Sambreel claimed that Facebook scanned the browsers of users who logged on to Facebook to determine whether they had downloaded PageRage without the users’ permission. Facebook then required users who had downloaded PageRage to remove the entire platform from their computers and disable all Sambreel products — not just PageRage — before they were allowed to access the site, the suit says.
The court found that Facebook was merely defending against an illegitimate invasion of its business and held that it had no duty to enable companies like Sambreel to use its social-networking platform.
Taxi Monopolization Claims Dimissed, But Merger Claims to Move Forward
January 16, 2013 – 4:13 pm
In Association of Taxicab Operators USA et al. v. Yellow Checker Cab Co. of Dallas/Fort Worth Inc. et al., Northern District of Texas Judge David C. Godbey dismissed price-fixing and predatory pricing claims against several defendants, but denied the a defendant’s request for antitrust immunity and let some merger and price fixing claims move forward.
Taxi drivers and the Association of Taxicab Operators USA, among other plaintiffs sued several cab companies alleging that the companies’ charge drivers permit fees that are predatorily low and that these fees rested on anticompetitive conspiratorial conduct and mergers. The plaintiffs alleged that although the cab market appeared to be competitive, two individuals effectively controlled companies with 52% of the market.
Defendants moved to dismiss, and the court held that the plaintiffs failed to provide sufficient allegations to support most of the claims. Judge Godbey explained that the “[p]laintiffs neither allege[d] nor c[a]me forward with summary judgment proof that defendants had the specific intent to monopolize.” Similarly, the plaintiffs failed to provide any grounds to conclude that defendants’ prices either were below cost or that the defendants’ could recoup losses if the prices were below cost. Finally, the conspiracy claims failed because the related nature of the companies essentially made them a single entity for antitrust purposes.
The court ruled against one defendant on the claim that its actions were protected by the state action doctrine. According to the court, the defendant failed to identify either (1) the municipal policy that authorized, or (2) how any government entity actively supervised, its allegedly anti-competitive conduct activity.
The suit will move forward on merger claims as well as some conspiratorial claims.
Drug Patent Settlements May Include Provisions in Which the Patent Holder Agrees Not to Introduce Its Own Generic Version of the Drug
January 15, 2013 – 12:51 pm
In Louisiana Wholesale Drug Co. Inc. v. SmithKline Beecham Corp. et al., District of New Jersey Judge William H. Walls dismissed a putative class action against leading drug makers alleging that the patent holder improperly promised not to introduce its own generic version of the drug as part of a settlement delaying the entry of a generic competitor. Judge Walls held that the Third Circuit’s recent decision subjecting so-called pay-for-delay pharmaceutical patent settlements to tougher antitrust scrutiny only applied to deals including cash payments.
Although the Federal Trade Commission in an amicus brief urged the court to extend the Third Circuit’s ruling, Judge Walls concluded that the defendants’ deal involved negotiated dates for generic entry, not cash payments. “This is exactly the type of settlement,” the court explained, “that is not subject to antitrust scrutiny.” To be sure, the patent holder’s agreement not to introduce its own generic during the exclusivity period is a benefit to the generic producer. Citing the Third Circuit’s repeated references to cash payments, the court concluded that non-cash benefits are permissible. After all, the court stressed, some benefit is always necessary to secure an agreement.
EU High Court Upholds Fine Against Drug Company Improperly Blocking Generic Competition
January 15, 2013 – 12:49 pm
In AstraZeneca v. Commission, the European Court of Justice upheld a €52.5 million ($68 million) abuse of dominance fine against AstraZeneca. The EC had fined the drug maker for manipulating the applicable regulatory systems in order to block generic versions of the defendant’s ulcer drug Losec.
The Commission found that the company provided misleading information to national patent offices in order to improperly extend its exclusive patent rights and pulled an older version of the product from the market. Both strategies, the Commission alleged, were designed to delay generic competition.
Although the court upheld the EC’s decision with respect to AstraZeneca, it indicated that false information submitted in support of a patent must be “objectively misleading” to trigger liability. Commentators believe that this language indicates that basic IP protection strategies will not violate the antitrust laws.
“The assessment of whether representations made to public authorities for the purposes of improperly obtaining exclusive rights are misleading,” the court explained, “must be made in concreto and may vary according to the specific circumstances of each case.” The mere rejection of a patent application, the court stressed, would not “automatically give[] rise to liability.” The European high court appears to be struggling to draw a line between anticompetitive efforts to obtain exclusive patent rights and protecting legitimate rights as “part of the normal competitive process.”
US Supreme Court to Decide Whether Reverse Payment Settlements Between Patented and Generic Drug Manufacturers Violate the Antitrust Laws
January 15, 2013 – 12:48 pm
In Federal Trade Commission v. Watson Pharmaceuticals Inc., the US Supreme Court will review the Federal Trade Commission’s finding that Solvay Pharmaceuticals Inc. and several generic drug makers violated the antitrust laws by agreeing that Solvay would pay the generic companies to forestall challenges to the patent protecting its popular testosterone-replacement drug AndroGel. The FTC has long argued that when a patent-owning drug company agrees to pay money to a generic manufacturer that requires the generic to drop a challenge to the patent, and wait to enter the market until some later agreed upon time, that consumers are harmed. The settlement, in the Commission’s view, amounts to an agreement to divide monopoly profits by restraining competition.
Until a recent Third Circuit decision struck down a similar deal, however, the Second, Eleventh, and Federal circuit courts had all upheld this type of patent settlement in the face of FTC and private antitrust challenges. They held that so long as the agreement did not exceed the scope of the patent, the settlement could not violate the antitrust laws. Because a patent generally permits a restraint on competition and settlement is a preferred means of resolving disputes, antitrust concerns would arise only when the patent at issue was either (1) obtained through fraud or (2) the owner instituted objectively unreasonable sham litigation. In the reverse payment cases, the courts have also suggested that attempting to block non-parties to the agreement from challenging the patent might also exceed the scope of the patent. But these courts have held that virtually nothing else would go too far in the context of a settlement agreement.
In reaching the opposite conclusion, the Third Circuit held that reverse payment settlements undermine Congress’s intent to spur generic competition, which it expressed in the Hatch-Waxman Act. That law allows generic companies to use patented information to obtain FDA approval sooner than would otherwise be possible.
The Court granted certiorari on the FTC’s petition for review of an Eleventh Circuit ruling that reverse payment generic drug settlements are legal as long as they do not exceed the scope of the patent. The Court did not mention two petitions asking it to review the Third Circuit’s contrary decision.
FTC Chairman Jon Leibowitz celebrated the Court’s decision. As he explained, the FTC has long contended that “[t]hese pay-for-delay deals are win-win for the drug companies but big losers for U.S. consumers and taxpayers.” The Commission estimates that these deals cost consumers $3.5 billion a year. He thus stated that the Commission is “glad that the Supreme Court will determine, once and for all, whether branded pharmaceutical companies should have free reign to pay off potential generic competitors to stay out of the market.”
Federal Circuit Court Dismisses Slot Machine Antitrust Claims
December 27, 2012 – 4:15 pm
In IGT v. Alliance Gaming Corp. et al., Federal Circuit Court of Appeals affirmed the dismissal of Bally Gaming Inc.’s antitrust claim accusing International Game Technology of filing patent lawsuits to corner the market for spinning-wheel bonus game slot machines. The appeal stems from a patent infringement lawsuit filed by IGT, accusing Bally of violating certain slot-machine technology. Bally filed counterclaims alleging the lawsuit was an attempt by IGT to monopolize the wheel-game market by asserting patents the company knew were invalid and not infringed. At the trial level, the court dismissed Bally’s antitrust allegations on the grounds that Bally could not show that there exists a submarket for its specialized slots.
Federal Circuit Court affirmed the lower court’s decision, holding that Bally had failed to provide sufficient evidence to meet the standard for establishing so-called “submarkets” set out in the U.S. Supreme Court’s 1962 decision in Brown Shoe Co. v.U.S.. According to Brown Shoe, a submarket exists when several factors related to production, sale and price of a particular product distinguish it from the larger market. Federal Circuit Court further held that the undisputed facts in this case show that meaningful competition exists between wheel games and all gaming machines. And, according to the court, even viewing all evidence in the light most favorable to Bally, the Brown Shoe factors do not support a conclusion that wheel games should be considered a separate submarket.
Court Certifies Class of Direct Purchasers in Chocolate Price-Fixing Suit
December 27, 2012 – 3:51 pm
In In re: Chocolate Confectionary Antitrust Litigation, Middle District of Pennsylvania Judge Christopher C. Conner, certified a class of direct chocolate purchasers in price-fixing multidistrict litigation against Nestle USA Inc., The Hershey Co., and Mars Inc. Despite limited guidance from the Third Circuit on the level of evidence required to determine whether the testimony of certain expert witnesses is admissible at the class certification phase, the court did the Daubert analysis to conclude that the testimony of both of the plaintiffs’ expert witnesses were reliable. The court held that the Daubert analysis is appropriate in this case at the class certification stage because direct purchasers’ proof of predominance rests entirely on the shoulders of their expert witnesses, so the court must evaluate the reliability and fitness of the proffered testimony.
The main dispute over certification in this case was the fact that some of the class members paid different net prices for chocolate than others. However, the judge ruled that this issue had no bearing on several of the class certification requirements. According to the court, the same allegations of a conspiracy to fix the price of chocolate products will be made for all class members; the fact that class members ultimately paid a different price for certain products is a damages question which plaintiffs chose to address through expert witnesses. And based on those expert witnesses, the judge said he was satisfied that the plaintiffs could show damages on a classwide basis.