A new book was recently released about the events surrounding the alleged LIBOR fixing conspiracy. Authored by Wall Street Journal reporter David Enrich, The Spider Network: The Wild Story of a Math Genius, a Gang of Backstabbing Bankers, and One of the Greatest Scams in Financial History tackles the issues from a unique perspective, focusing on one of the main bankers involved, Tom Hayes. Hayes, formerly a trader at UBS and Citigroup, was prosecuted by the U.K. Serious Fraud Office in 2015. He was convicted of conspiracy to defraud for his role in fixing LIBOR and is serving an 11-year prison sentence.
Multi-Defendant Antitrust Litigation: Lessons Learned from In re: Automotive Parts Antitrust Litigation
Last Friday, in the latest development in the massive auto parts antitrust litigation, the State of California settled with Sumitomo Electric Industries, Ltd. and related companies regarding their sale of wire harness systems and heater control panels at allegedly supracompetitive prices. (For prior posts on this case, see here and here.) Sumitomo did not admit to any wrongdoing, but agreed to pay California over $800,000 and cooperate with California’s litigation efforts against the many other defendants in the case. Sumitomo and its related entities are the only auto parts defendants named in the State of California’s complaint.
Manufacturers of containerboard and corrugated products have asked the Supreme Court to weigh in on a Circuit split concerning the impact of negotiated prices on class certification in antitrust cases brought under Section 1 of the Sherman Act. Petitioners filed for a writ of certiorari on December 30, 2016, arguing that the Seventh Circuit in Kleen Products LLC, et al. v. International Paper Company, et al., Nos. 15-2385, 15-2386 (7th Cir. Aug. 4 2016), erred in two related ways, both of which flow from the fact that prices of the containerboard products at issue in the case tend to be individually negotiated.
As we’ve written, Uber, the popular app-based car service, has been on the antitrust defensive, facing allegations that its algorithm for calculating prices restricts price competition. In Wallen v. St. Louis Metropolitan Taxicab Commission, No. 15-cv-01432 (E.D. Mo.), however, it’s on offense, joining forces with some of its riders and drivers in a claim that the St. Louis Metropolitan Taxicab Commission’s refusal to allow it and other ridesharing companies to operate in St. Louis is an antitrust violation. The plaintiffs allege that the Commission, composed of active market participants, is precluding competition by denying ridesharing services the ability to operate. The complaint also names as defendants the cab companies with which the Commission’s members are affiliated. The Commission and its members moved to dismiss on the basis that they are immune from antitrust liability, and the cab companies moved to dismiss for failure to state a claim. On October 7, 2016, the court denied the Commission defendants’ motion to dismiss and granted the cab companies motion to dismiss, with leave to replead.
On August 23, 2016, the District Court for the Eastern District of Missouri allowed claims by a compounding pharmacy to proceed, denying a motion to dismiss filed by the defendant pharmacy benefit manager (“PBM”). In Precision Rx Compounding LLC, et al. v. Express Scripts Holding Co., et al., No. 16-cv-0069 (E.D. Mo.), the plaintiff Precision Rx is a compounding pharmacy and the defendant, Express Scripts, is a PBM that contracts with health plan administrators and insurance payors to manage pharmacy benefit plans.
In another development in the ongoing cathode ray tube (CRT) multidistrict litigation, Judge Tigar of the Northern District of California ruled that Costco could not recover any damages it sustained as an indirect purchaser of price-fixed CRTs. Costco attempted to bring state law antitrust claims against the conspirators under California law, which allows indirect purchasers to recover damages. However, applying Washington choice-of-law principles (where Costco originally filed suit before the case was transferred to the MDL court), the court held that Washington law, which does not allow for recovery by indirect purchasers, governed Costco’s claims.
The European Commission on Tuesday announced its decision finding truck makers MAN, Volvo/Renault, Daimler, Iveco, and DAF liable for violating EU antitrust rules. The companies acknowledged that for 14 years they colluded in setting truck prices, settling the case for a record total of €2.93 billion. Competition commissioner Margrethe Vestager reported that the five-company cartel “account[s] for around 9 out of every 10 medium and heavy trucks produced in Europe.” Vestager also said that the unprecedented fines send a “clear message to companies that cartels are not accepted.”
Procompetitive Effects of Business Associations in the Balance?: Business Association Membership and the Sufficiency of Sherman Act Allegations
What facts beyond mere membership in a trade association trigger Sherman Act liability? Next term, the Supreme Court will hear an antitrust case testing the requirements for pleading the conspiracy element of a claim brought under the Sherman Act—namely, whether the allegation that defendants belong to an association is sufficient for a Section 1 claim.
Certifying a class of direct purchasers of sheet metal parts alleging claims under section 1 of the Sherman Act, Judge Lynn Adelman of the United States District Court for the Eastern District of Wisconsin focused on what it means for common questions to predominate in an antitrust class action.
Freedom to Whiten: Teeth-Whitener’s Antitrust Suit Against Georgia Board of Dentistry Allowed to Proceed
Earlier this week, in Colindres v. Battle, et al., No. 15-CV-2843 (N.D. Ga.), the District Court for the Northern District of Georgia refused to dismiss antitrust claims brought by the owner of a teeth-whitening company against the members of Georgia’s Board of Dentistry. The plaintiffs, the owner and her company, allege that the Board has been sending agents to threaten her and her company with felony charges for unlicensed practice of dentistry, carrying a possible sentence of as much as five years in prison, though the Board has refused to take formal enforcement action or even put its complaints in writing.
The Department of Justice ("DOJ") announced this week that Hitachi Chemical Co. will plead guilty to a criminal charge for conspiring with competitors to fix the prices of electrolytic capacitors sold in the United States and elsewhere. The Tokyo-based company will pay an undisclosed fine and has agreed to cooperate with the DOJ's investigation.
We will soon know whether the Supreme Court will grant Apple’s cert petition asking the Court to review and reverse its antitrust violation for conspiring with publishers to fix the prices of e-books. The Court will consider the petition at its next conference on February 19. As we previously reported here and here, a divided Second Circuit panel affirmed the district court’s findings that the per se rule applied to Apple’s conduct and that Apple violated Section 1 of the Sherman Act.
MLB Pitches Around Consumers by Settling Suit, Avoiding Further Litigation on the Scope of Its Longstanding Antitrust Exemption
We’ve previously written about litigation involving the scope of Major League Baseball’s long-standing antitrust exemption. Earlier this week, on the eve of trial, MLB settled Garber v. Office of the Commissioner of Baseball, a class action lawsuit challenging its territorial broadcasting policy. The lead plaintiff Marc Lerner is a Mississippi resident and New York Yankee fan who was allegedly charged supracompetitive prices to watch the Yankees due to MLB’s territorial broadcast policies. Under MLB’s policy of territorially restricting television broadcasts, consumers could only watch “out-of-market” games subject to certain limitations, including a requirement to purchase every out-of-market game, even if the consumer was only interested in following a single team. By avoiding the bench trial, MLB avoided having to further litigate the scope of its unique “antitrust exemption” in front of Judge Scheindlin of the U.S. District Court for the Southern District of New York, who had previously expressed skepticism about the continuing viability of the exemption.
Defendants Summary Judgment Motion in In re Cathode Ray Tube Antitrust Litigation May Illuminate Policy Justifications Behind Ownership or Control Exception
Earlier this month, defendants in the In re Cathode Ray Tube Antitrust Litigation moved to challenge the standing of major retailers to pursue damages claims under the Supreme Court’s 1977 Illinois Brick decision.
In re Capacitors Antitrust Class Action Update: Claims Slightly Narrowed, Parties Continue Discovery
When we last wrote in June 2015 about In re Capacitors Antitrust Litig., No. 14-03264-JD, consolidated putative class actions pending before Judge James Donato in the Northern District of California, the plaintiffs had just largely survived a motion to dismiss. That blog post, which describes the background of the case and the first round of motions to dismiss, is available here. Recently, on December 30, 2015, the court ruled on several additional motions to dismiss based on plaintiffs’ amended complaints.
A settlement agreement last week in the long-running U.S. Cargo Antitrust Class Action brought the settlement fund in that case to over $1.1. billion. Polar Air Cargo, Polar Air Cargo Worldwide, and Atlas Air Worldwide Holdings agreed to pay $100 million in three installments. The settlement is the second-largest so far in this case, after Korean Air Lines's agreement in December 2013 to pay $115 million. It is subject to approval by the U.S. District Court for the Eastern District of New York, where the case is pending.
EU General Court Overturns EU Commission’s Decision to Fine Airlines €790 Million in Connection with Price-Fixing Cartel
Yesterday, the Ninth Circuit ruled in the long awaited O’Bannon v. NCAA case, which challenged NCAA rules that bar student-athletes from “being paid for the use of their names, images, and likenesses” (NILs) – part of the so-called “amateurism rules.” The Court upheld the district court’s decision finding the NCAA amateurism rules to be an unlawful restraint of trade in violation of the Sherman Act and upheld part of the district court’s remedy which permanently enjoined the NCAA from prohibiting its member schools from giving student-athletes scholarships up to the full cost of attendance at their respective schools. The Ninth Circuit struck down, however, the district court’s second remedy which would have permanently enjoined the NCAA from prohibiting its member schools from giving student-athletes up to $5,000 per year in deferred compensation.
The Ninth Circuit issued an order last Friday staying an injunction from U.S. District Judge Claudia Wilken of the Northern District of California in O’Bannon v. NCAA until it reaches a decision on the merits of the appeal.
Together with the State of Michigan, the United States Department of Justice’s Antitrust Division has filed a civil suit against four Michigan hospital systems for allegedly agreeing to limit marketing in each other’s territories. Three of the hospital systems—Hillsdale Community Health Center, Community Health Center of Branch County, and ProMedica Health System—have agreed to settle the charges.
We previously noted that the UK’s new competition regulator, the Competition and Markets Authority, has indicated that cartel enforcement will be one of its top priorities, hoping to “open as many new criminal cartel investigations as possible” in 2015-2016. However, the agency announced this week that its first trial in this area, concerning cartel conduct in the market for galvanized steel water storage tanks, has resulted in an acquittal.
Today the United States Supreme Court denied certiorari in two cases, Motorola Mobility LLC v. AU Optronics et al. and Hsiung and AU Optronics Corp. America Inc. v. United States, declining to resolve a closely watched circuit split on the applicability of the Foreign Trade Antitrust Improvements Act (“FTAIA”) in regulating foreign conduct.
On May 20, 2015, a federal grand jury in San Juan, Puerto Rico indicted five individuals for bid rigging and fraud conspiracies in connection with an auction for public school bus transportation contracts. The auction was based in Puerto Rico’s Caguas municipality, 20 miles south of San Juan.
AU Optronics Corp. (“AUO”) filed a petition for a writ of certiori in Hui Hsiung, et al. v. United States of America on March 16, 2015, seeking Supreme Court review of the Ninth Circuit’s 2014 decision that upheld the convictions of AUO and its former executives for their participation in a global cartel to fix the price of liquid crystal display (“LCD”) panels. The United States Department of Justice, Antitrust Division, which had tried AUO and its former executives in the district court in San Francisco, filed its brief in opposition to the petition on May 15, 2015, and petitioners filed a reply on May 22, 2015.
Today we bring you the first part of our second biennial update on DOJ criminal actions in the cartel area. This has been a busy six months for the Antitrust Division, so we are breaking this update up into installments. Today, we look at auto parts.
Following Actavis, California Supreme Court Crafts “Structured Rule of Reason” Test for Evaluating Pay-for-Delay Settlements
Last Thursday the Supreme Court of California decided In re Cipro Cases I & II, No. S198616 (Cal. May 7, 2015), holding that reverse payment, or “pay-for-delay,” settlements can be challenged as unreasonable restraints on trade. In so doing, it followed the U.S. Supreme Court’s 2013 decision in Federal Trade Commission v. Actavis, Inc., 133 S.Ct. 2223 (2013).
Last month, the French Competition Authority (“the Authority”) updated the “Procedural Notice” for its leniency program. As in the U.S., the French leniency program allows enterprises that report cartel activity and cooperate in investigations to avoid fines and other penalties.
In what it is calling the Antitrust Division’s “first criminal prosecution against a conspiracy specifically targeting e-commerce,” the Department of Justice has announced that an individual has agreed to plead guilty to charges that he conspired to fix the prices of wall posters sold online through Amazon Marketplace. The matter is United States v. Topkins, No. 15 Cr. 201 (N.D. Cal.).
Russia has amended its criminal code on cartels, signaling a major change in antitrust law enforcement. On March 8, 2015, President Vladimir Putin signed a Federal Law “introducing changes to Article 178 of the Criminal Code of the Russian Federation.”
The UK’s Competition and Markets Authority (CMA) recently released its Annual Plan for 2015/2016. The Plan announces the CMA’s enforcement priorities for what will be the second year since the new organization assumed its role.
On March 17, 2015, a Ninth Circuit panel consisting of Chief Judge Sidley R. Thomas, Circuit Judge Jay S. Bybee and Senior U.S. District Judge Gordon J. Quist, of the Western District of Michigan heard oral argument in O’Bannon v. NCAA.
On Tuesday, March 10, 2015, an employee of the Japan-based Nippon Yusen Kabushiki Kaisha (NYK) pleaded guilty to a violation of the Sherman Act for conspiring to fix prices and rig bids for international ocean shipping from approximately 2004 through 2012. Susumu Tanaka, formerly a manager, deputy general manager and general manager in NYK’s car carrier division, received a 15-month prison sentence and will pay a $20,000 criminal fine.
The Supreme Court has been urged to resolve a circuit split concerning the reach of the Foreign Trade Antitrust Improvements Act (FTAIA) to foreign conduct that may affect U.S. commerce. Motorola this week filed a petition for certiorari in a Seventh Circuit case interpreting the FTAIA as barring Sherman Act claims arising out of the foreign conduct of an alleged liquid crystal display (LCD) panel cartel.
Bill Baer, the Assistant Attorney General in charge of the DOJ Antitrust Division, spoke about the DOJ’s antitrust enforcement priorities last Friday, February 6, at a speech in Miami. AAG Baer emphasized three priorities: exercising patience with market flux due to new disruptive new industry sectors, giving meaningful guidance to the business community, and crafting structural remedies as part of their merger enforcement efforts.
After the Ninth Circuit’s decision on January 15, 2015, Major League Baseball maintains its exemption from the antitrust laws. Since the Supreme Court established baseball’s antitrust exemption nearly a century ago in 1922, neither the Supreme Court nor Congress has significantly changed the rule. As we have previously reported, the Supreme Court revisited the antitrust exemption twice since 1922 and both times upheld it on stare decisis grounds and because Congress had implicitly acquiesced to the Supreme Court’s decision by not overturning it. The exemption extends broadly to the entire “business of providing public baseball games for profit between clubs of professional baseball players.”
On December 1, 2014, we wrote about the Seventh Circuit’s decision in Motorola Mobility LLC v. AU Optronics Corp., which affirmed dismissal of the vast majority of Motorola’s claims regarding LCD panels.
On December 5, 2014, the Official Journal of the European Union published the European Commission’s new directive on antitrust damages in civil actions (the “Directive”). The Directive went into effect on December 26, 2014.
Nippon Cargo Airlines Co. Ltd last week agreed to pay $36.55 million to settle claims that it conspired with other airlines to fix rates for air cargo services in the early 2000s. Two dozen airlines have settled in the long-running multi-district litigation (MDL), bringing the settlement fund to more than $900 million.
Several minor league baseball players have filed an antitrust class action against Major League Baseball, alleging that MLB and its teams operate as a cartel to impose restrictive contracts on minor league players. The suit, Miranda v. Selig, alleges that the league’s anticompetitive conduct has artificially lowered wages for the approximately 6,000 minor league baseball players employed by the league, resulting in some minor leaguers earning as little as $3,000 per year.
On November 21, 2014, professors of antitrust law from 15 universities filed an amicus brief in support of the NCAA’s appeal in O’Bannon v. NCAA. Citing their interest in the “proper development of antitrust jurisprudence,” the professors argue that the district court misapplied the rule of reason analysis under the Sherman Act, and that allowing the trial court’s decision to stand could undermine amateurism in college sports and have a broader impact on antitrust law in general.
Seventh Circuit Affirms Dismissal of 99% of Motorola’s Claims in LCD Case Based on Motorola’s Lack of Standing
On the day before Thanksgiving—less than two weeks after oral argument—the Seventh Circuit issued its ruling on Motorola’s interlocutory appeal in Motorola Mobility LLC v. AU Optronics Corp., affirming dismissal of the vast majority of Motorola’s claims regarding LCD panels.
On November 14, 2014, the National Collegiate Athletic Association (“NCAA”) filed a brief in the Ninth Circuit challenging a district court’s injunction on the enforcement of NCAA rules barring college athlete compensation as violating the federal antitrust laws. This blog previously covered O’Bannon v. NCAA.
On November 12, 2014, the parties in Motorola Mobility v. AU Optronics reargued their case to a three judge panel of the Seventh Circuit – the same panel that ruled on the case earlier this year. The United States Department of Justice (“DOJ”) also had the opportunity to argue its position in this closely-watched Foreign Trade Antitrust Improvements Act (“FTAIA”) case.
Motorola Oral Arguments Today – Will the Seventh Circuit Revise Its Interpretation of the FTAIA, and If so, How?
Today the Seventh Circuit Court of Appeals hears oral argument from the parties and amicus curiae the United States concerning the reach of the Foreign Trade Antitrust Improvements Act (“FTAIA”), 15 U.S.C. § 6a, in Motorola Mobility LLC v. AU Optronics. Last March, as we’ve written previously, the court ruled against Motorola in an interlocutory appeal concerning the FTAIA’s application to offshore components manufacturers. The court subsequently withdrew its opinion, denied a petition for en banc review, and ordered oral argument.
This is the first in what we expect to be a series of updates on DOJ criminal actions in the cartel area. Here, we look at highlights over the last six months in the DOJ’s investigations of the auto parts industry, LIBOR, and municipal real estate auctions.
FTC Commissioner Julie Brill discussed the agency’s competition and consumer protection priorities in her keynote address last Thursday at the ABA’s Antitrust Fall Forum at the National Press Club in Washington. Brill led off with an ode to the antitrust ideals of the Progressive Era – with plenty of references to Justice Brandeis – and focused primarily on health care efforts, emphasizing that the FTC and the Affordable Care Act have the same goals of “promoting high quality and cost-effective health care.”
Developments in the Capacitor Cartel Litigation: Class Counsel Appointed and the Antitrust Division Intervenes
In July, we wrote about two putative class action lawsuits alleging that Panasonic, Samsung, and other electronics manufacturers had formed a cartel to boost prices of certain electronic capacitors. Since then, the cases have been consolidated, interim lead co-counsel have been appointed, the Antitrust Division has confirmed its own investigation, and the court has set a preliminary case schedule.
Our regular readers know that we have been carefully following the developments in Motorola Mobility LLC v. AU Optronics Corp., currently pending in the Seventh Circuit. The case addresses the reach of the Foreign Trade Antitrust Improvements Act (“FTAIA”), and will join recent decisions issued by the Second Circuit and Ninth Circuit earlier this year.
We have written extensively about the scope of the Foreign Trade Antitrust Improvement Acts and the extraterritorial reach of U.S. antitrust laws. Now, the scope of the U.S. antitrust laws has arisen in a different context: the Foreign Sovereign Immunities Act (“FSIA”).
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