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AAI Asks Solicitor General’s Office to Reject Misapplication of the “Monopoly Broth” Label in Section 2 Cases Challenging an Anticompetitive Course of Conduct (Duke Energy v. NTE Carolinas)

In an eight-page letter submitted on July 11, AAI has urged the Solicitor General’s Office to oppose certiorari in Duke Energy v. NTE Carolinas and to credit the difference between monopolization claims that challenge an anticompetitive course of conduct and monopolization claims that rely on a “monopoly broth” theory of liability.

In Duke Energy, NTE Carolinas alleged that Duke Energy violated Section 2 of the Sherman Act by engaging in an anticompetitive course of conduct designed to exclude NTE Carolinas as a new, highly efficient competitor in energy generation. The district court granted summary judgment to Duke Energy, but AAI believed NTE’s claims presented genuine issues for trial and filed an amicus brief urging reversal. The Fourth Circuit agreed, holding that NTE Carolinas raised genuine trial issues with respect to predatory pricing, exclusionary bundling, refusal to deal, and the challenged course of conduct as a whole. Duke Energy petitioned for certiorari in February, and last month the Supreme Court invited the Solicitor General to file a brief expressing the views of the United States.

In its letter to the Solicitor General, AAI explained why certiorari is unwarranted. First, the petition does not present the question on which review was sought. Duke Energy seeks review of whether a monopolization claim can be won by aggregating multiple distinct, independently lawful acts into an unlawful whole. But here the court found that each individual element of the challenged course of conduct independently raised genuine trial issues. Although the court credited the cumulative effect of the alleged course of conduct as a whole, it separately applied conduct-specific monopolization tests to each element of the conduct and found that material factual disputes precluded summary judgment under the applicable tests. The summary judgement record therefore does not present a vehicle for reaching the viability of the monopoly broth theory, under which a series of independently lawful acts are added up and alleged to give rise to liability through their combined, synergistic effect.

Second, the letter argues that certiorari would create confusion in the lower courts by fostering a mistaken conflation of course-of-conduct analysis, which is a common mode of factual analysis found not only in many Section 2 cases but throughout the law, with the monopoly broth theory of liability, which is less common and has been a subject of some debate. Doing so would imperil several pending government actions that properly rely on allegations that an anticompetitive course of conduct, considered as a whole, supports well established theories of antitrust liability. The government’s major, pending actions in, for example, United States v. Google, United States v. Apple, United States v. Live Nation Entertainment, and FTC v. Amazon, all rely on a proper application of course-of-conduct analysis. Several cite directly to the Fourth Circuit’s opinion in this case.

The letter was written by AAI Senior Counsel David O. Fisher and AAI President Randy Stutz, with assistance from AAI Vice President and Director of Legal Advocacy Kathleen Bradish.

Read the full letter here.

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Applying Computer Science Principles to Police Modern Cartels: A Conversation with Giovanna Massarotto

On this episode of Ruled by Reason, AAI Senior Counsel David O. Fisher talks with legal scholar Giovanna Massarotto about what antitrust law can learn from computer science, and particularly how understanding agreement algorithms can help courts and enforcers police algorithmic price-fixing and other illegal agreements under Section 1 of the Sherman Act.

The conversation centers on Massarotto’s recent paper, Detecting Algorithmic Collusion, which examines the characteristics of agreement algorithms and how they can inform the “plus factor” analysis courts use to determine the likelihood of an illegal agreement. It begins with an introduction to the concept of a “distributed system,” which is any network of computers that works together to perform a common task, the Bitcoin blockchain being one notable example (5:25). It then examines the Byzantine Generals Problem, a classic story illustrating how the nodes in a distributed network can reach an agreement despite the existence of one or more unreliable nodes, which has parallels to the formation of stable cartel agreements (9:09).

Massarotto explains how agreement algorithms create stability, and what they can teach courts and enforcers about how algorithmic cartels function. Specifically, she describes how agreement algorithms use digital signatures, cryptography, broadcasting, leader election, and private channels to allow stable decision-making in distributed systems (21:50). Massarotto concludes that, while broadcasting and leader election are accounted for in the existing plus-factor analysis, courts and enforcers should add the use of digital signatures, cryptography, and private channels to the list of plus factors which may indicate the existence of an illegal agreement (30:40).

GUEST

Giovanna Massarotto is an international expert on antitrust, economic regulation, and IP law in the digital economy. She received her PhD in law from Bocconi University and is currently an Academic Fellow at the Center for Technology, Innovation & Competition (CTIC) at the University of Pennsylvania Carey Law School and an affiliate of the University College London Centre for Blockchain Technologies.

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Experts, Daubert, and Judicial Gatekeeping: A Conversation with Edoardo Peruzzi and Christine Bartholomew

On this episode of Ruled by Reason, AAI Senior Counsel David O. Fisher chats with economist Edoardo Peruzzi and antitrust scholar Christine Bartholomew about the role of Daubert challenges in antitrust suits, focusing on the increasing role of Daubert as a gatekeeping device that may be hindering private antitrust enforcement.

The conversation begins with an examination of Peruzzi’s recent working paper, which finds that Daubert challenges have become more frequent in antitrust cases and that, although plaintiffs’ experts are challenged more frequently, defendants’ experts are more often excluded (6:30). Bartholomew places Peruzzi’s findings within a context of increased procedural gatekeeping in antitrust cases, including the conflation of Daubert issues with the requirements of class certification, which she argues has wrongly turned Daubert into an outcome-determinative mechanism that is hindering private antitrust enforcement (22:20).

The group then discusses potential solutions to this problem—including a different admissibility standard for economic testimony, increasing the use of court-appointed experts, and delaying the consideration of admissibility until the eve of trial—but finds none of them to be feasible. (30:15). Instead, they conclude that the solution lies in a return to the language of the Daubert trilogy and its goal of liberalizing the admissibility of expert testimony, which means keeping Daubert questions separate from the standards of class certification and rejecting efforts to treat the “fit” inquiry into a strict requirement of admissibility (40:05).

GUESTS

Edoardo Peruzzi is a postdoctoral researcher at Leibniz University Hannover. He studied philosophy and economics at the Scuola Normale Superiore, the University of Pisa, and the University of Siena. He was a visiting scholar at the TINT Centre for Philosophy of Social Science at the University of Helsinki and the Center for the History of Political Economy at Duke University. During his doctoral research, Edoardo studied the application of economic theory in legal proceedings, employing tools from philosophy of economics, philosophy of science, and empirical analysis.

Christine Bartholomew is the Vice Dean for Academic Affairs, a professor of law at University at Buffalo School of Law, and an associate editor for the ABA Antitrust Law Journal. Her academic publications have appeared in many leading academic journals and have been cited by state and federal courts and major news outlets. She is also the co-editor of the ABA’s forthcoming Antitrust Daubert Handbook. Prior to joining academia, she served in executive and lead counsel positions for numerous national, multi-million-dollar antitrust cases.

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AAI Asks Supreme Court to Mind the Nuances of Antitrust Class Actions (Labcorp v. Davis)

AAI has filed an amicus brief in Labcorp v. Davis, urging the U.S. Supreme Court to avoid unwittingly upending antitrust class actions in a case challenging statutory damages under the Americans with Disabilities Act (ADA).

In Labcorp, the defendant is a diagnostic testing company that provides medical blood and urine screenings. The plaintiffs are a putative class of blind patients who could not use Labcorp’s self-service kiosks to register and check-in at Labcorp locations, because the kiosks allegedly failed to comply with the ADA and California state law. The plaintiffs sued to recover statutory damages. A district court certified the class, and the Ninth Circuit affirmed.

Labcorp petitioned the Supreme Court for certiorari, arguing that the class should not have been certified because it allegedly contains uninjured members. Such classes, Labcorp argues, violate Article III and fail to satisfy Rule 23(b)(3), which requires that common issues predominate over individual issues in class litigation. The Supreme Court granted certiorari on the question of “Whether a federal court may certify a class action pursuant to Federal Rule of Civil Procedure 23(b)(3) when some members of the proposed class lack any Article III Injury.”

AAI’s amicus brief urges the Court to avoid painting with a broad brush. It explains that Labcorp’s arguments rest upon several false assumptions and threaten harmful unintended consequences because they fail to account for important distinguishing features of antitrust class actions.

The brief explains, first, that Article III injury can be a common question that supports a finding of predominance in antitrust class actions; it does not invariably give rise to any individual issues at all or necessarily imply that individual issues would predominate.

Second, Labcorp’s proposed rule, which would prohibit certification of classes containing uninjured members, would unnecessarily prevent settlements designed to avoid the cost of litigating the issue of whether there is a classwide Article III injury.

Third, Labcorp’s proposed rule elides important differences in the standards for establishing Article III injury and for establishing antitrust injury on the merits. The Supreme Court has held that (1) the former changes according to the stage of the litigation, and (2) the latter is subject to unique standards because the vagaries of the marketplace usually deny us sure knowledge of the precise amount of antitrust damages.

Fourth, Labcorp misses that in antitrust cases, unlike in certain statutory damages cases, the presence of uninjured class members usually does not alter the amount of claimed damages. Antitrust plaintiffs usually must rely on classwide econometric techniques to calculate damages because the competitive baseline in a but-for world, absent the antitrust violation, is unknown (owing to the illegal conduct).

Fifth, Labcorp’s policy arguments suggesting that class certification should be discouraged because it is often a death knell for litigation are not true in antitrust litigation.

The brief was submitted by AAI President Randy Stutz, with input and assistance from several leading antitrust class action experts.

Read the full brief here: AAI Amicus Brief in Labcorp v. Davis

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Working Paper No. 25-01: Mergers & Cooptive Acquisitions

A new wave of emerging companies developing foundation models has unleashed fierce competition in generative artificial intelligence. These emergents have significant innovation capabilities threatening incumbent tech companies. To protect themselves, incumbents have responded by partnering with leading product developers and subsuming smaller startups through quasi-mergers.

This working paper by AAI Research Fellow Alexandros Kazimirov explores whether certain quasi-mergers by large technology incumbents are “cooptive” acquisitions. As Mark Lemley and Matthew Wansley have described, cooption is a strategy whereby technology incumbents identify potentially disruptive technologies, gain influence over startups developing the technologies, and strategically influence the startups’ access to resources and regulatory controls affecting their ability to grow.

Using the Google-Character, Microsoft-Inflection and Amazon-Adept transactions as case studies, the working paper makes contextual comparisons of circumstantial evidence like exclusive licensing agreements, price premiums, market product proximity, and product discontinuation to assess the relative risk of harm to innovation caused by quasi-mergers. It finds that, even if there is high probability of harm, the structure of a quasi-merger can shield incumbents from government intervention because enforcement agencies cannot use injunctive relief to restrict employee mobility. It explores potential policy solutions involving startups, their founders, their employees, and the antitrust enforcement agencies to address threatened competitive harms without unduly limiting the exit options of startups.

Access the AAI Working Paper on Mergers & Cooptive Acquisitions.

AAI Working Papers are works in progress that may be revised and published elsewhere. The views expressed are solely the author’s and do not purport to reflect the views of the American Antitrust Institute.

*This paper has been accepted for publication by the Stanford University Codex Center’s Computational Antitrust Project. 

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Commentary by Fisher: Cleaning and Sharpening Our Antitrust Tools for the Age of AI

AAI Senior Counsel David O. Fisher has published a commentary drawing insights from an analysis of recent Section 1 cases involving allegations of algorithmic collusion.

Fisher argues that courts in algorithmic collusion cases can rely on existing antitrust tools to protect the competitive process by ensuring that AI is not used in ways that deprive the marketplace of independent centers of economic decisionmaking. Recent cases involving allegations of algorithmic price fixing show us that protecting competition in the era of AI means revisiting traditional assumptions about what tacit agreements look like and how tacit collusion may be addressed. Courts evaluating allegations of algorithmic collusion should focus functionally on whether the challenged conduct interferes with individual firms’ pursuit of their own independent self-interests. The threat posed by algorithimic collusion should prompt us to revisit our assumptions about the difficulty of crafting legal remedies to combat oligopoly pricing. AI-powered oligopoly pricing should be treated as a tacit price-fixing agreement when it has collusive effects and is capable of being enjoined.

Read the commentary: AAI Commentary on Algorithmic Pricing

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AAI’s Randy Stutz and Kathleen Bradish Discuss Multi-Market Balancing, Epic v. Google, and Key Antitrust Cases on Rethinking Antitrust

AAI’s Randy Stutz, President, and Kathleen Bradish, Vice President and Director of Legal Advocacy, sit down with Bilal Sayyed of Rethinking Antitrust to discuss key developments in antitrust law. Stutz shares insights from his recent Pro-Market blog post, Multi-Market Balancing in a New Antitrust Paradigm. Bradish discusses AAI’s recent amicus brief in Epic v. Google, arguing that the 9th Circuit reject balancing out-of-market benefits against in-market harms. They also explore other recent AAI amicus briefs, including two in the algorithmic price-fixing cases, one arguing against Noerr-Pennington protection for fraudulent claims, another arguing against a carve-out of the scope of the Foreign Trade Antitrust Improvements Act in private litigation.

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AAI Issues 2024 Impact Report

The American Antitrust Institute (AAI) has issued its 2024 Impact Report, highlighting its achievements and leadership in protecting and promoting competition for the benefit of American markets. In 2024, AAI’s work delivered tangible benefits for consumers, workers, and businesses through research, education, and advocacy that generated significant improvements in antitrust enforcement and policy outcomes. It is committed to expanding its resources, growing its capabilities, and strengthening its impact in 2025.

View the Impact Report

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AAI Urges Third Circuit to Overturn Dismissal of Suit Alleging Algorithmic Price-Fixing among Atlantic City Casino-Hotels (Cornish-Adebiyi v. Caesars Entertainment)

The American Antitrust Institute (AAI) has filed an amicus brief in Cornish-Adebiyi et al. v. Caesars Entertainment, Inc., et al., urging the Third Circuit to reverse the dismissal of a class action suit against six Atlantic City casino-hotels (Borgata, Caesars, Hard Rock, Harrahs, MGM, and Tropicana) and a revenue-management software company (Cendyn) for colluding to raise the prices of Atlantic City hotel rooms.

The suit alleges that the casino-hotels knowingly shared commercially sensitive information with Cendyn’s pricing algorithm, which used that information to make pricing and vacancy recommendations, and that the hotels’ near-universal acceptance of those recommendations raised the prices of Atlantic City hotel rooms above competitive levels. Following the reasoning of the district court in Gibson v. Cendyn Group, the district court dismissed the complaint for failing to satisfy the concerted-action requirement under Section 1 of the Sherman Act, emphasizing that the hotels contracted with Cendyn at different times, did not share the information directly with each other, and did not commit to accepting the algorithm’s recommendations in all cases.

In its brief, AAI argues that the district court’s formalistic analysis relied on plus factors that courts have traditionally used to identify human collusion, but which are not helpful in identifying algorithmic collusion. Such an approach effectively immunizes algorithmic price-fixing and threatens substantial consumer harm as AI becomes an increasingly common feature of our economy.

AAI’s brief explains that software powered by AI can help firms monitor and predict each other’s behavior in ways that were not previously possible. Rivals who contract with the same software provider can collude tacitly on price and output without communicating directly or making express agreements with each other. The brief argues that the antitrust laws were designed to be flexible enough to distinguish between procompetitive and anticompetitive uses of new technologies like AI, and long-standing Supreme Court precedent requires courts to focus on competitive realities rather than formalistic distinctions.

The brief was written by AAI Senior Counsel David O. Fisher, with assistance from AAI President Randy Stutz, AAI Board member Joshua Davis of Berger Montague PC and UC Law San Francisco, and Matthew Summers of Berger Montague PC.

Read the full brief here: AAI Amicus Brief in Cornish-Adebiyi v. Caesars

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AAI Asks Ninth Circuit to Prevent Trial Courts from Playing Monday Morning Quarterback with Juries’ Antitrust Damages Awards (Ninth Inning, Inc. v. NFL)

AAI has filed an amicus brief in the Ninth Circuit in Ninth Inning, Inc. v. NFL (In re NFL Sunday Ticket Antitrust Litigation), Nos. 24-5493 & 24-5691, asking it to reverse the district court’s alternative judgment vacating the jury’s $4.7 billion verdict. The district court’s judgment as a matter of law overturned a jury verdict against NFL teams for an illegal agreement to make out-of-market games available to live broadcast viewers only through Sunday Ticket, a bundled premium-price package on DirecTV.

AAI’s brief argues that the district court’s second-guessing of the jury verdict is not consistent with Supreme Court or Ninth Circuit precedent because it failed to assess the damages award by the correct standard: “just and reasonable” given the “totality of the circumstances.” Instead, the district court accepted defendants’ post-trial reverse engineering of the verdict and engaged in a piece-by-piece analysis of the hypothetical inputs into the damages calculations. It used that analysis to determine that the verdict was not supported by the evidence even though the aggregate amount of damages was significantly lower than models presented by the plaintiffs and admitted at trial.

AAI’s brief argues that the district court’s approach is overly stringent and allows defendants to profit from the uncertainty their illegal conduct created. Such a searching analysis of the jury’s damage award also impinges on the constitutional right to trial by jury that is guaranteed for private antitrust damages actions.

AAI’s brief explains that the right to a jury trial and respect for the integrity of the jury award are particularly important in private antitrust damages actions for at least two reasons. First, the jury trial is a key way in which antitrust law is held to its original democratic goals. Second, the jury damages award is a vital element of antitrust enforcement’s deterrence goals. To allow defendants found to have engaged in illegal conduct to escape unpunished is not just fundamentally unfair, it compromises the ability of antitrust enforcers to dissuade others tempted to engage in illegal but profitable conduct.

The brief was written by AAI Vice President & Director of Legal Advocacy Kathleen Bradish.

Read the full brief here: AAI Amicus Brief in In re NFL Sunday Ticket