Tag Archives: antitrust

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Newest Commissioner Makes the “Wright” Call for FTC Act’s Section 5

MurinoGuest Commentary

By Andrea Agathoklis Murino, Wilson Sonsini Goodrich & Rosati

In a speech last week, the Federal Trade Commission’s (FTC) newest Commissioner, Joshua D. Wright, provided an unusually candid and public exploration of his would-be agenda as a sitting Commissioner.  Foremost among his to-do list is the issuance of a binding public “Unfair Methods Policy Statement,” that would specify both guiding and limiting principles the FTC would use in the application of Section 5 of the Federal Trade Commission Act.  Section 5, though deceptively straight-forward in language, has a tortured history of enforcement and remains among the more muddled doctrines in United States competition law today.  Commissioner Wright’s bold attempt to eliminate this uncertainty is assuredly the “Wright” call.

All seem to agree that Section 5 was established to reach conduct that could otherwise not be condemned under the Sherman or Clayton Acts.  There is uniform consensus behind the history of the legislation that the FTC was designed to be a tribunal which could assess potential Section 5 violations using its accumulated and competition-specific expertise and knowledge in ways that a generalist adjudicator could not.  Like so much in life, this was easier in theory than in practice.  I certainly agree with Commissioner Wright that Section 5 enforcement has fallen short.  You need look no further than the fact that not since the 1960s – over 50 years ago – is there a case where the FTC prevailed on a Section 5 appeal.  Indeed, for most of the years since, Section 5 was barely used as it was intended at all.

Using deliberate and determined language, Commissioner Wright’s call-to-arms begins with the premise that there is an “unfortunate gap between the theoretical promise of Section 5 as articulated by Congress and its application in practice by the Commission.”  He then moves on to explain that there is little hope for Section 5 application if the FTC cannot properly articulate its enforcement policy, and most importantly, that this Commission can “put an end to the state of affairs” by issuing a “policy statement articulating its views on the appropriate application of its signature statute in unfair methods of competition cases.”   Continue reading →

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Vigorous Antitrust Enforcement Forecast at WLF Media Briefing Event

FTC_Man_Controlling_TradeAt Washington Legal Foundation’s media briefing program last Tuesday, Same Administration, New Management: What to Expect from DOJ and FTC on Antitrust and Consumer Protection, speaker Janet McDavid noted the aggressive challenges William Baer, the Justice Department’s new Assistant Attorney General for the Antitrust Division, initiated against mergers when he was director of the Federal Trade Commission’s Bureau of Competition.

Mr. Baer wasted no time substantiating Ms. McDavid’s point, filing suit to prevent the consummation of a merger between America’s highest market-share brewer, Anheuser-Busch InBev and Mexico’s largest, Grupo Modelo.

If the Justice Department takes action to keep inexpensive beer inexpensive (an action certainly counter to governments’ taxation and other policies aimed at advancing temperance), the business community can be sure that it won’t hesitate to move against other combinations, joint ventures, etc. in the next four years. Our hour-long program would be thus be a worthy investment of time.

In addition to Ms. McDavid, a partner at Hogan Lovells LLP, WLF’s January 29 program (which can be viewed by clicking the title above) included experienced perspectives from Squire Sanders partner Brady Dugan and Wilson Sonsini Goodrich & Rosati Of Counsel Andrea Murino. WLF Legal Policy Advisory Board Chairman, K&L Gates Counsel Dick Thornburgh, moderated the discussion.

In addition to assessing the future of merger review and enforcement, the speakers addressed civil exclusionary conduct actions; FTC and DOJ approaches to intellectual property (including standards-essential patents and patent “trolls”); criminal enforcement; international antitrust cooperation; and the division of labor between the two federal agencies.

A Powerpoint deck including slides utilized by Ms. McDavid and Ms. Murino can be downloaded here.

Addendum (Feb. 5): Further evidence of a more aggressive approach to mergers can also be seen in the Justice Department’s challenge to an already-consumated merger between two online product review companies.  Read more about it from several of Janet McDavid’s colleagues here.

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Update: DOJ/USPTO’s Curiously Timed “Statement” on Standards-Essential Patents

DOJusptoIn our January 8 post, FTC’s Standards-Essential Patent Settlement: The Real “Elephant” in the Room?, we advanced the question of how much of a role regulatory turf has played in motivating the Federal Trade Commission’s recent actions regarding “standard-essential patents” (SEPs). SEPs are a major legal policy issue, and the Commission and the Justice Department both want to be the cop on the beat regarding alleged competition-related abuses of such patents.

The concept of a turf battle seems a bit more plausible to us today after reading about, and then reading, a joint Justice Department-U.S. Patent Office “Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/Rand Commitments.” While not directed specifically at any case or open docket, the statement is clearly aimed at the U.S. International Trade Commission (USITC) and its consideration of injunction requests in cases involving SEP patents.

After five pages of extolling the purposes and virtues of SEPs, the statement offers that in “some circumstances” injunctions or exclusions “may be inconsistent with the public interest.” One page later though, the agencies state, “This is not to say that consideration of the public interest factors set out in the statute would always counsel against the issuance of an exclusion” where patents are encumbered by a F/RAND commitment. It goes on to note some of those exceptional circumstances, adding, “This list is not an exhaustive one.”

The statement also declares, “The DOJ is the executive-branch agency charged with protecting U.S. consumers by promoting and protecting competition” (emphasis ours). FTC shares the same consumer protection mission, though it is an independent, not an “executive-branch,” agency.

The DOJ/USPTO statement’s declaration of regulatory primacy, the timing of its release (one week after the FTC settlement with Google), and the statement’s complete failure to reference the very relevant Google consent decree, are certainly all very curious.

The possibility of regulatory turf battles should be of interest not only to inside-the-Beltway antitrust policy types, but also to anyone effected by government action on standards-essential patents. In its statement, DOJ/USPTO related a desire to “ensure greater certainty concerning the meaning of a F/RAND commitment.” DOJ/USPTO’s perspective on SEPs and injunctions arguably differs in some significant respects from what four FTC Commissioners said regarding the Google consent decree, fomenting, not alleviating, uncertainty from the U.S. government.

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FTC’s Standards-Essential Patent Settlement: The Real “Elephant” in the Room?

elephantCross-posted at WLF’s Forbes.com contributor page

Our 700th post!

The Federal Trade Commission’s decision last Thursday not to pursue a case under the Sherman Act or the Federal Trade Commission Act regarding Google’s online search business practices has elicited a wide range of opinions, including one particularly biting quip from within the Commission. Departing Commissioner J. Thomas Rosch noted in his statement of concurrence and dissent that “after promising an elephant more than a year ago, the Commission instead has brought forth a couple of mice.”

Perhaps that elephant was in the FTC press room last Thursday after all, however, in FTC’s resolution of its other investigation involving Google. Though it was completely unrelated to FTC’s online search practices inquiry, Chairman Leibowitz announced the same day that a formal Complaint and a Proposed Consent Order had been filed involving Google-owned Motorola Mobility’s standards-essential patents (SEPs).

Like it alleged in settlements involving Robert Bosch GmbH (November 2012) and Negotiated Data Solutions (2008), FTC concluded that Motorola’s refusal to license SEPs on fair, reasonable and non-discriminatory (FRAND) terms was “unfair” under FTC Act Section 5. The Commission’s use of Section 5 always raises eyebrows and motivates some to invoke the specter of the “National Nanny” FTC of the 1970s. We’re not sure if the Google/Motorola agreement will usher in an era of renewed “unfairness jurisdiction” cases, but it certainly raises some interesting issues and questions:

Regulatory Turf/Muscle-Flexing? FTC Act Section 5 provides the Commission with a unique regulatory weapon, and the Google SEPs case offered it a seemingly undeniable opportunity to sharpen this tool while also one-upping its counterparts at the Justice Department. When announcing its approval of Google’s purchase of Motorola Mobility last February, DOJ-Antitrust expressed “concern” that the company’s commitments to FRAND licensing of SEPs were “ambiguous” and that “how Google may exercise its patents in the future remains a significant concern.” Such concern did not rise to the level of a violation of the Sherman Act, so DOJ could only wring its hands. Continue reading →

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Professor Joshua Wright Confirmed as FTC Commissioner

2-theusfederalWith all the sturm und drang over whether the automatic sequestration process could be avoided, it was easy to (almost) overlook the news that the U.S. Senate has confirmed George Mason University School of Law professor Joshua Wright as Commissioner of the Federal Trade Commission.

We first noticed his confirmation at the blog to which Commissioner Wright was a major contributor for many years, Truth on the Market. He has published extensively throughout his academic career, which is quite evident from the number of works he has on SSRN. Washington Legal Foundation was fortunate to have published a Legal Backgrounder by Commissioner Wright and University of Pennsylvania Law School Professor Jonathan Klick last March, The Anti-Competitive Effects Of “Any Willing Provider” Laws.

We wish Commissioner Wright the best and look forward to the impact he will have on FTC regulation and enforcement for some years to come.

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New WLF Publication Offers Contrasting Views on Antitrust and Online Search Engines

KanterRobertson CW2Media reports in the last several weeks indicate that a resolution to the Federal Trade Commission’s internal deliberation on whether to pursue an antitrust and/or an unfair competition case against Google is drawing near. Other reports indicate that regardless of what FTC decides in the coming days or weeks, those seeking government action will continue to pursue other avenues.

In order to inform the current and future debates over the specific issues related to online search, and the broader consideration of how antitrust principles apply to the online space, WLF has released a new publication in its Conversations With publication series: Competition in Online Search – What Role for Antitrust?

WLF’s Legal Policy Advisory Board Chairman, The Honorable Dick Thornburgh, directs the conversation between attorneys Jonathan Kanter and Robby Robertson.

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Update: U.S DOJ & California Pursue Antitrust Claim vs. eBay on “Anti-Poaching” Agreement

In separate Legal Pulse posts last February and April, we noted developments in a private antitrust class action lawsuit, In re: High-Tech Employee Antitrust Suit. The suit piggybacked on a settlement the U.S. Department of Justice had reached with a number of companies who had entered into an agreement to avoid “poaching” each other’s engineering employees.

While that private suit advances towards trial, reports this past Friday indicated that DOJ and the California Attorney General have filed complaints against eBay for having an anti-poaching agreement with Intuit. Intuit was not named as a party to the complaints, according to DOJ, because it was one of the five companies to enter into the settlement in 2011. According to a Reuters story, the eBay complaint arose out of the earlier investigation which led to charges against Intuit.

One would expect a follow-on class action lawsuit against eBay (whose path to trial has been made easier by the April ruling in In re: High-Tech Employee) to be filed any day.

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Ohio Supreme Court Adopts “Objectively Baseless” Test for Sham Litigation Claims

Guest Commentary

by Thomas J. Collin and Darcy M. Brosky, Thompson Hine LLP*

The Ohio Supreme Court held in American Chemical Society v. Leadscope, Inc., 2012 Ohio LEXIS 2236 (Sept. 18, 2012), that a firm suing for unfair competition based on a legal action must show both that the defendant had a subjective intent to injure it and that the action was objectively baseless.  The court adopted the U.S. Supreme Court’s test for liability for sham litigation under the antitrust laws.  The decision is important because it resolves uncertainty about liability for such a claim under Ohio law.  The lower court had held that liability could stand on proof of a subjective intent to injure alone.

The case arose when the American Chemical Society (“ACS”) sued former employees and their new company, Leadscope, Inc., (collectively, “Leadscope”) in the Franklin County Court of Common Pleas for breach of contract and trade secret theft.  Leadscope counterclaimed for defamation, tortious interference and unfair competition, alleging that ACS had filed the action in bad faith with the intent of destroying it. Continue reading →

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Congress Fails to Act on Issue of Generic Drug Makers’ Access to “Reference Listed” Drugs

In a Legal Pulse post last month, Is FTC Becoming an All-Purpose Health Care Cost Regulator?, we examined a brewing controversy over some prescription drug makers’ refusal to sell certain drugs to generic drug manufacturers. Generic makers want large amount of the “reference listed drug” that they intend to copy for testing purposes. Branded drug makers have cited legal and safety concerns in refusing to sell treatments which are subject to federally mandated “Risk Evaluation and Management Strategies” (REMS).

The Chairman of the Federal Trade Commission finds such refusals to sell branded drugs to be “particularly troubling” and FTC is investigating whether Celgene’s decision not to sell a REMS-covered drug to a generic manufacturer was anti-competitive. In our May post we argued that if refusals to sell are contrary to the public interest, we’d prefer it is Congress, and not federal regulators, that takes action. Through legislation reauthorizing the drug user fee process, the Senate in fact proposed a process where branded companies would have to sell treatments to generic companies. The House of Representatives did not, however, include such a provision in its drug user fee bill.

This week, the Senate voted on a final Senate-House version of the bill, S. 3187, which did not include the provision targeted at requiring branded product sales to generics.

The action in this area now shifts back to FTC, as well as to FDA and the federal courts. It is unclear how Congress’s decision to once again consider and ultimately omit language addressing branded companies’ refusal to sell will affect ongoing antitrust litigation between innovator Celgene and generic Dr. Reddy’s, or FTC’s investigation of Celgene.

There is also a Citizen Petition pending at FDA in which Dr. Reddy’s urged agency action against Celgene. Celgene argued in its 2009 reply that Congress has not authorized FDA to compel the sale of drugs subject to REMS. It argued that Congress’s consideration and specific final omission from the FDA Amendments Act of 2007 of a provision on drug sales was “compelling evidence” that FDA lacks statutory authority. Congress’s action (or more accurately, inaction) on this issue in S. 3187 may give greater force to Celgene’s argument.

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DOJ-Antitrust Out of Step on Awarding Credit for Compliance Programs

Guest Commentary

Katie Owens, a 2012 Judge K.K. Legett Fellow at the Washington Legal Foundation and a student at Texas Tech School of Law.

According to the Antitrust Division of the U.S. Department of Justice, no corporate compliance program is worthy of credit when considering punishment of corporations.  The U.S. Sentencing Commission should correct this outlier policy.

 

At the Department of Justice (“DOJ”), corporate compliance programs are not treated equally among the agencies various divisions. The U.S. Attorney’s Manual expressly “recognizes that no compliance program can ever prevent all criminal activity by a corporation’s employees.” All but one of DOJ’s divisions applies this principle. The Antitrust Division believes that an antitrust violation directly correlates to a “failed” compliance program, one not deserving of credit under the Federal Sentencing Guidelines (“Guidelines”).

DOJ-Antitrust reserved a carve-out from the Guidelines specifically for antitrust violations based on its stance that these violations go to “the heart” of a company’s activities. Note that this carve out applies to antitrust violations only, meaning that all other crimes, including fraud, bribery, and environmental harm, may receive credit for maintaining an effective compliance program. Furthermore, this antitrust rule is an absolute with no exceptions. No compliance program, no matter how diligent, will be considered, because the program is deemed a “failure” by the Division if there is any antitrust law violation.

Rather than rewarding compliance efforts as a means of overall prevention of antitrust violations, the Division focuses instead on amnesty as a means of enforcement. Under this idiosyncratic approach, the first member of a cartel to admit wrongdoing receives amnesty from prosecution, regardless of guilt. The reporting company is then required to do nothing, while in other contexts, violations reported to the Criminal Division of the DOJ require violators to implement compliance programs or to improve existing ones. As commentator Joe Murphy observed, this policy could potentially lead a company to not “worry about compliance, but instead to devote its attention to making sure that it was always the first one to confess to the government if a cartel was about to be discovered. It could then keep most of its excess cartel profits, since it would not be responsible for large fines, and its plea would limit its civil exposure to single damages.” Continue reading →