American Antitrust Institute

Promoting competition that protects consumers, businesses, and society.

Home / Work Products

by on

AAI Asks En Banc Ninth Circuit to Reconsider Rigid Predominance Standard in Antitrust Class Actions (Olean v. Bumble Bee)

AAI submitted an amicus brief on May 19 urging the Ninth Circuit Court of Appeals to grant en banc rehearing to address a flaw in a recent panel opinion vacating class certification in a closely watched price-fixing case.

In Olean Wholesale Grocery Cooperative, Inc. v. Bumble Bee Foods, LLC, a district court certified three classes of purchasers, including direct purchasers and two groups of indirect purchasers, seeking to recover for the confessed price fixing of the three leading producers of packaged tuna, Bumble Bee Foods LLC, Starkist, and Chicken of the Sea.  The defendants had either sought leniency or pled guilty after a Department of Justice Investigation, and several of their executives have been sentenced to prison.

Unable to contest liability given their admissions, the defendants focused extensive resources and attention on defeating class certification.  In district court proceedings, they introduced rebuttal experts seeking to counter plaintiffs’ economic experts, which had introduced statistical analysis attempting to show that the price fixing caused widespread injury across the respective classes.  The district court, after a three-day evidentiary hearing, found plaintiffs’ experts more persuasive and held that the plaintiffs’ common statistical evidence of impact was sufficient to help satisfy Rule 23’s predominance requirement, though it allowed that defendants could still challenge the admissibility and probative value of the common statistical evidence at trial.

On interlocutory appeal, the defendants, supported by the U.S. Chamber of Commerce and the Washington Legal Foundation, argued that the district court erred by refusing to definitively resolve the battle of the experts at class certification, and that plaintiffs’ expert statistical analysis was inherently problematic because it relied on the average overcharges to the classes, thereby masking the possibility that some of the class members were uninjured by the price fixing.  The defendants maintained that, because plaintiffs’ expert evidence could not necessarily sustain a jury finding for every class member, it should not be a permissible means of establishing that common questions would predominate at a class trial.

In an amicus brief submitted last August, AAI argued that such evidence need only be relevant and reliable to be admissible; it does not have to assure that each plaintiff would prevail on the merits of the impact element in an individual action. Rule 23 requires only that common “questions” must predominate over individual questions at trial; it cannot be read to suggest that the questions’ answers must be determined to permit class certification. Moreover, any uninjured class members may be identified after trial, and longstanding case law prevents defendants from capitalizing on the uncertainty created by their own illegal conduct, including uncertain damages calculations.

The AAI brief also argued that the court should unequivocally reject the defendants’ effort to cast categorical doubt on statistical analysis, and specifically regression modelling, in antitrust cases.  Regression models frequently rely on averaging techniques, but that is not where they begin and end.  Such models are routinely accepted as reliable methods of proving widespread injury to antitrust classes because econometric techniques can control for price changes caused by supply and demand factors and then focus on the uniformity of differences across class members to reliably show common impact.

All three judges on the merits panel adopted the position advocated by AAI in rejecting defendants’ categorical arguments on the use of statistical analysis and regression modeling to prove class-wide impact in antitrust cases.  However, the three judges sided with defendants in holding that the district court erred by refusing to resolve the disagreement among the parties’ experts over the number of potentially uninjured members in the class.  And the panel then split over the standard for determining whether the presence of uninjured class members may defeat predominance.  The panel majority concluded that the district court, before certifying a class, must find that only a “de minimis” number of class members are uninjured. Judge Hurwitz, partially dissenting, maintained that neither the text of Rule 23 nor Ninth Circuit precedent permit the court to implement such a requirement.

In the aftermath of the panel opinion and partial dissent, neither party petitioned for panel or en banc rehearing, instead agreeing to accept remand. But on April 28, the Court sua sponteordered briefing on whether en banc hearing is warranted and directed the parties to focus on the “de miminis” issue that divided the panel.

AAI’s brief argues that en banc rehearing is warranted because the panel majority’s ruling is unduly rigid and will undermine the efficacy of private antitrust class actions. The brief points out that in this case and many other antitrust cases, the presence of uninjured class members does not create a risk that individual questions will predominate over common questions at trial because the plaintiffs rely solely on common statistical evidence of aggregate damages, meaning the claims rise or fall as one, both as a legal and practical matter.  Moreover, common issues need only predominate in a case as a whole, not as to each element of a claim.  Impact need not be a common question for common questions to predominate as a whole in an antitrust case.

The brief was written by Professor and AAI Board Member Joshua Davis of the University of San Francisco Law School, with assistance from AAI Vice President of Legal Advocacy Randy Stutz and AAI Research Fellow Berk Bahceci.

by on

Study Finds Private Equity Investment Accelerates Concentration and Undermines a Stable, Competitive Healthcare Industry

A decade’s worth of evidence supports troubling findings that private equity business practices have a negative impact on competition in healthcare and on patients. A new white paper, produced by experts at the American Antitrust Institute (AAI) and UC Berkeley, calls for immediate attention to the role that private equity investment plays in harming patients and impairing the functioning of the healthcare industry.  In this groundbreaking new white paper, Soaring Private Equity Investment in the Healthcare Sector: Consolidation Accelerated, Competition Undermined, and Patients at Risk, AAI’s Laura Alexander and Professor Richard Scheffler of The Nicholas C. Petris Center on Health Care Markets and Consumer Welfare in the School of Public Health at UC Berkeley detail the emerging threat posed by private equity investment in healthcare markets.

“The report documents the astronomical growth of private equity’s investment in healthcare, which focuses on short-term profits and not the wellbeing of patients, and its consequences” says UC Berkeley School of Public Health Professor and Petris Center Director Richard Scheffler.

The paper’s major conclusions include:
  1. Private equity investment in healthcare has grown dramatically—to nearly $750 billion in the last decade—and is poised to increase even further due to the COVID-19 pandemic’s impact on the healthcare sector and its projected growth.
  2. The private equity business model is fundamentally incompatible with a stable, competitive healthcare system that serves patients and promotes the health and wellbeing of the population.
  3. Private equity’s focus on short-term revenue generation and consolidation undermines competition and destabilizes healthcare markets.
  4. Private equity acts as an anticompetitive catalyst in healthcare markets, amplifying and accelerating concentration and anticompetitive practices.
  5. Private equity funds operate under the public and regulatory “radar,” leaving the vast majority of private equity deals in healthcare unreported, unreviewed, and unregulated.
  6. Urgent action is needed to oversee, investigate, and understand the impact of private equity on patients and healthcare markets, including changes to antitrust reporting requirements, withdrawal of the Department of Justice’s guidance on remedies, and study of additional oversight of healthcare mergers by the Department of Health and Human Services.

“The ramifications of private equity investment in healthcare are still unfolding,” says study co-author and AAI Vice President of Policy Laura Alexander. “But given the speed with which private equity is transforming healthcare markets and the implications for competition, patients, and public health, the time to act is now.”

Media Contacts:

Laura Alexander
American Antitrust Institute
lalexander@antitrustinstitute.org
(202) 276-4050

Dr. Richard Scheffler
Petris Center
rscheff@berkeley.edu
(510) 508-5079

by on

AAI Says UnitedHealth Group’s Acquisition of Rival, Change Healthcare, Could Harm Competition: Letter to DOJ Examines Features of Digital Healthcare Technology Markets That Exacerbate Antitrust Concerns

The American Antitrust Institute sent a letter to the U.S. Department of Justice Antitrust Division outlining concerns that the proposed acquisition of independent digital healthcare technology rival, Change Healthcare, by UnitedHealth Group (UHG) is likely to harm competition and consumers. Such harm could result from the effects of eliminating competition between UHG’s information and technology-enabled health services subsidiary, Optum, and Change Healthcare. AAI’s letter also states the concern that a larger and more powerful Optum could enhance UHG’s incentives to favor its dominant health insurer, UnitedHealthcare, to the disadvantage of rivals. This letter highlights important issues that arise from the unique characteristics of competition in digital technology markets and, more specifically, in digital healthcare technology markets.

The substantive issues of competition and antitrust analytics raised by UHG’s proposed acquisition of Change Healthcare are summarized below. In light of these concerns, AAI’s letter urges the Antitrust Division to apply careful scrutiny. The U.S. healthcare system is under siege by consolidation and concentration. The current matter provides an important opportunity for the Antitrust Division to move the ball forward on protecting competition in critically important healthcare markets, but also in leveraging its knowledge of digital technology markets and the unique challenges they pose for competition.

1. The proposed acquisition is a takeover of an independent, disruptive digital healthcare technology company by the largest, vertically integrated health insurer in the U.S. Consolidation in the digital technology sector more broadly has flown under the antitrust “radar” for two decades, including significant and rapid consolidation involving data analytics and cloud infrastructure that is at the heart UHG-Change Healthcare acquisition. The Antitrust Division has an opportunity here to address the problematic accretion of market power in digital healthcare technology markets.

2. The timing of the acquisition occurs at the intersection of COVID-19 disruption, rapid growth in digital healthcare technology markets, and high and rising concentration in critical healthcare markets. This confluence of factors highlights the high stakes nature of the Antitrust Division’s investigation into the proposed acquisition of Change Healthcare by UHG/Optum that, among other adverse effects, could stifle innovation in a critical sector.

3. UHG’s acquisition of Change Healthcare raises myriad competitive concerns. These include elimination of head-to-head rivalry in digital healthcare technology markets in which UHG’s Optum competes. But competition concerns also include stronger incentives for UHG/Optum to favor its own healthcare insurer, UnitedHealthcare, and disadvantage rivals, thus harming competition. Unique economic aspects of digital technology markets significantly exacerbate these competitive concerns.

4. Given the competitive concerns raised by the acquisition, any efficiencies claims should be viewed with extreme skepticism. Such efficiencies are likely to be achievable without the acquisition. And the many unique features of digital healthcare technology markets that amplify anticompetitive incentives and abilities would likely diminish the purported value of claimed efficiencies. This significantly raises the bar for UHG-Change Healthcare to prove their transaction is not anticompetitive.

5. Structural divestiture remedies, if included in a settlement agreement, would gut the gains from the strategic accretion of market power that motivates UHG’s acquisition of Change Healthcare and likely force the parties to abandon the deal. Given the unique features of digital technology markets, antitrust conduct remedies, applied in the digital healthcare technology markets at issue here, would be highly unlikely to restore competition.

6. The U.S. healthcare system is under siege by consolidation and high and rising concentration, to the proven detriment of consumers and healthcare providers. The current matter presents an important opportunity for the Antitrust Division to advance the ball on protecting competition in critically important healthcare markets, but also to leverage its knowledge of digital technology markets and the unique challenges they pose for competition enforcement.

by on

AAI Director Roberta Liebenberg Publishes “Practicing in the Pandemic”

AAI Director Roberta Liebenberg and Stephanie Scharf published findings from a national survey of 4,200 members of the American Bar Association. “Practicing Law in the Pandemic and Moving Forward,” covers how the pandemic has affected lawyers and the future plans for law practice as the worldwide health crisis winds down.:

The authors said “The report calls out for new approaches to challenges that have been heightened by the pandemic, which have disproportionately affected women lawyers and lawyers of color, and which will impact how well corporations and law firms move forward.”

Among the findings:

  • Lawyers feel overwhelmed by the pressures of their work — especially women with children and lawyers of color — with many considering leaving the legal profession.
  • More than a third of respondents (35%) are thinking significantly more often about working part time. Women with children age 5 or younger (53%) and women with children age 6-13 (41%), were even more likely to be thinking about part-time work.
  • Lawyers are stressed about workplace resources, recognition and job security. At the top of the list were worries about a salary reduction (55%), getting furloughed or laid off (40%) and advancement (28%).
  • Clear pathways to advancement are viewed as important throughout the profession, and especially valued by lawyers of color (57%) and women (58%).
  • Lawyers want their employers to provide programs and policies around wellness, better resources for working parents and comprehensive plans for family leave and sick leave.
  • Lawyers are seeking a culture where leaders are engaged, empathic and show that they value the effort and contributions made throughout the organization.

 

by on

Fifth Circuit Sides with FTC, AAI in Preserving Supreme Court’s Actavis Ruling (Impax v. FTC)

The Fifth Circuit has affirmed an FTC administrative decision finding generic drug manufacturer Impax liable for entering an illegal reverse-payment settlement with brand manufacturer Endo, adopting several positions advocated in AAI’s amicus brief.

The case began when Impax sought to launch a generic version of Endo’s Opana ER, a branded opioid pain medication. Endo sued Impax alleging that Impax’s planned entry would infringe Endo’s patents on Opana ER.  Under the Hatch-Waxman Act, Impax is permitted to seek to enter the market prior to the expiration of the patent term by filing an Abbreviated New Drug Application (ANDA) with the Food and Drug Administration (FDA), and certifying that Endo’s patents covering the brand drug are invalid or not infringed.  But by filing an infringement lawsuit, Endo obtains an automatic 30-month stay during which the FDA may not grant final approval of the ANDA and Impax may not enter the market.

Shortly after Impax received preliminary FDA approval and just before expiration of the 30-month stay, Impax and Endo settled their patent litigation with Endo agreeing to make a “reverse payment” to Impax in exchange for Impax agreeing to delay its entry into the Opana ER market.  The FTC challenged the settlement as a violation of Section 5 of the FTC Act.   After an administrative trial, an administrative law judge dismissed the FTC’s complaint.  Complaint Counsel then appealed, and in an opinion authored by Commissioner Phillips, a unanimous Commission reversed.

On appeal of the Commission decision to the Fifth Circuit, Impax conceded that it made a large and unjustified reverse payment, but it characterized the FTC’s burden in establishing a prima facie case under FTC v. Actavis as requiring the FTC to prove that Impax’s entry was delayed longer than it would have been had the patent litigation continued.

AAI, Public Knowledge, and Patients for Affordable Drugs  submitted an amicus brief asking the Fifth Circuit to affirm the FTC’s ruling.  The brief explained why Impax’s argument, if accepted, would amount to a radical rewrite of the Supreme Court’s watershed ruling in Actavis.  When drug companies settle infringement claims with reverse payments, Actavis identifies the relevant antitrust harm as eliminating a “risk of competition,” without regard to the strength of the underlying patents.  By asking the court to require the FTC to show the elimination of more risk than the strength of Endo’s patents warranted, Impax effectively sought to resurrect the “scope of the patent” test, which Actavis rejected.

The brief also explained why Impax’s claimed procompetitive justifications—that entry occurred earlier than if the patent infringement claim had been litigated and won, and that the agreement included a broad license covering future patents on Opana ER, which could not have been obtained in litigation—are non-cognizable.  Among other things, the proper benchmark is the date of entry without a payment, not the date of entry without any settlement at all.  And broad licenses covering after-acquired patents on brand drugs are routinely included in procompetitive settlements that do not include a payment for delayed entry.

In a carefully written, unanimous opinion authored by Judge Gregg Costa, the Fifth Circuit squarely rejected Impax’s arguments.  With regard to Impax’s patent-validity argument, the court correctly found that “[t]he fact that generic competition was possible, and that Endo was willing to pay a large amount to prevent that risk, is enough to infer anticompetitive effect.”  With regard to Impax’s argument that the agreement did not prove anticompetitive in hindsight, the court recognized that “it is a basic antitrust principle that the impact of an agreement on competition is assessed as of ‘the time it was adopted,’” and it held that “[t]hat approach also makes sense in reverse payment cases.”

The opinion is also notable and important for its recognition that an early-entry-date settlement, without a payment, is a less restrictive alternative to a reverse-payment settlement as a matter of economic logic.  The court found “more than enough evidence” to support the unanimous view of the Commissioners that a no-payment settlement was a viable less restrictive alternative to a reverse-payment settlement based on industry practice and witness credibility determinations, but also based on “economic analysis.”  The court recognized it is “fairly obvious” that “those large payments were the price for Impax’s delayed entry” insofar as a settlement with an earlier entry date would have allowed Endo to keep the more than $100 million it ended up paying Impax.

This aspect of the Court’s holding embraces a key point that AAI has emphasized in this and other reverse-payment briefs: namely that “the relevant baseline is the entry date that the parties would have agreed to in the absence of a reverse payment,” and “[d]eparture from the baseline (towards delay) is established by the large, unjustified payment itself.”

The AAI brief was written by Hilliard & Shadowen partner Rick Brunell, with assistance from AAI Vice President of Legal Advocacy Randy Stutz and AAI Research Fellow Taryn Smith.

AAI Advisory Member Michael Carrier, a leading authority on antitrust and intellectual property law, also submitted an amicus brief on behalf of 82 professors in support of the FTC, which was joined by numerous other AAI Advisory Board members.

by on

U.S. Supreme Court Prevents Copyright Owners from Controlling Functional Elements of Software APIs; Cites and Follows Position Advocated in AAI Amicus Brief (Google v. Oracle)

In a high-stakes copyright case, the U.S. Supreme Court, by a 6-2 majority, has held that the reimplementation of copyrighted software APIs to achieve interoperability is a “fair use” as a matter of law, following the position advocated in AAI’s amicus brief.

Oracle and Google have been engaged in a long-running dispute over whether certain aspects of Google’s Android operating system infringe Oracle’s copyrights.  In developing Android, Google copied some of the “declarations” used in “application programming interfaces,” or API packages, from Java SE, a platform built on the Java open source programming language developed for desktop computers by Sun Microsystems, which was acquired by Oracle in 2010.

API packages are shortcuts that allow computer programmers to build basic functions into their software programs without having to write new code from scratch.  The declarations specify the name of the function (or “method”), the inputs used, and the type of output that will be returned.  Google copied the declarations from 37 out of Java SE’s 166 API packages but developed its own “implementing code” for each of the API packages.

Initially, a jury found that Google had infringed Oracle’s copyrights, but the district court set aside the verdict upon determining that the API declarations were not copyrightable as a matter of law because they constituted an unprotectable “method of operation” under section 102(b) of the Copyright Act.  On appeal, the Federal Circuit reversed and remanded for a determination of Google’s fair-use defense.  After a jury found Google’s copying was fair use, Oracle appealed again. The Federal Circuit reversed again, ruling that Google had failed to establish fair use as a matter of law.  Google successfully petitioned for certiorari in 2019, and, after a postponement, the case was argued in the fall of 2020.

AAI’s amicus brief argued that the Federal Circuit’s holdings threatened to slow innovation and competition in software-dependent markets, which are pervasive in the U.S. economy. Copyright on largely functional elements of software that become an industry standard gives a copyright holder anticompetitive power to thwart or tax innovative developments that build upon the elements.  The overprotection of software interfaces is particularly anticompetitive because it tends to prevent new entrants from challenging dominant incumbent platforms protected by network effects. It also allows a copyright owner to misappropriate for itself investments by users and developers in learning the elements.

The brief also argued that the Federal Circuit gave short shrift to copyright law’s core competition safeguards, including Section 102(b), the “merger” doctrine, and fair use. The court erred by failing to account for interoperability and compatibility considerations in all three phases of its analysis, and it gutted the fair-use doctrine as applied to software by narrowly construing the transformativeness element of fair-use to exclude utilitarian transformations that do not change the expressive content or message of the original work.  The brief argued that this construction of transformativeness in the context of computer software is perverse. While the expressive components of software may be protectable under copyright law, software’s primary benefit is functional and utilitarian in nature, and software interfaces are copied because of their functional, not expressive, value.

Justice Breyer’s opinion for the Court, joined by Justices Roberts, Sotomayor, Kagan, Gorsuch, and Kavanaugh, did not reach the Section 102(b) and merger issues because it decided the case on fair-use grounds.  Applying the four fair-use factors set forth in the Copyright Act, the Court cited and quoted from AAI’s amicus brief and emphasized several points that AAI emphasized, including: (1) that computer programs differ from other copyrightable works because of their inherently functional nature, (2) that the value of APIs is derived primarily from the investment of third-party computer programmers in learning the Java language (and not from the APIs’ expressive or creative value), (3) that a fair use need not change the expressive content or message of the original work to be ‘transformative,’ (4) that compatibility and interoperability goals can serve a legitimate, transformative purpose, and (5) that the risk of harm to the public from enforcing copyright protections should factor into fair-use analysis.

The AAI brief was written by AAI Vice President of Legal Advocacy Randy Stutz.  AAI Advisory Board Member Shubha Ghosh, who is the Crandall Melvin Professor of Law and Director of the Syracuse Intellectual Property Law Institute at Syracuse University College of Law, Hilliard & Shadowen Partner Rick Brunell, and former AAI Research Fellow Taryn Smith, assisted in drafting and preparing AAI’s previous briefs in this case.  AAI’s previous Federal Circuit briefs are available here and here, and its brief in support of certiorari is available here.

by on

AAI Urges FCC to Deny Verizon’s Proposed Acquisition of Tracfone: Warns of “Big 3” Oligopoly in Pre-paid Wireless and Harm to Vulnerable Consumers

The American Antitrust Institute (AAI) submitted Reply Comments on April 2, 2021 in the Federal Commissions Commission proceeding regarding the Proposed Transfer of Control of Tracfone Wireless to Verizon Communications, Inc. AAI argues that Verizon’s acquisition of Tracfone raises significant concerns under the Commission’s public interest standard. The proposed transfer will eliminate the largest standalone rival (Tracfone) in the pre-paid wireless market and put it into the hands of Verizon, one of the “Big 3” facilities-based mobile network operators (MNOs). Verizon’s share of the pre-paid wireless market will increase substantially, while it continues to control the network access needed by smaller mobile virtual network operators (MVNOs) in order to resell pre-paid wireless services to consumers. The acquisition would cement an oligopoly in the pre-paid wireless market between Verizon, T-Mobile, and AT&T. These are very same companies that make up the Big 3 facilities-based MNO oligopoly created in the premium, post-paid market in the aftermath of the Sprint-T-Mobile merger only a year ago. Both the pre-paid and post-paid wireless markets in the U.S. would thus be fundamentally restructured in the space of two years, to the detriment of competition and consumers. AAI’s urge the Commission to assess the proposed transfer in light of this bigger, troubling picture of a restructured wireless communications sector.

AAI’s Reply Comments spell out the concern that the proposed transfer will likely have harmful horizontal and vertical competitive effects in the market for pre-paid wireless service, leading to higher prices, lower quality, and less innovation. These effects would be felt by an important segment of consumers that have already been hard hit by the COVID-19 pandemic, economic downturn, and other disruptions. These concerns have been either ignored or downplayed in the Application, which waves away competitive issues and makes broad and unsupported claims of public interest benefits. Verizon’s motivation for acquiring Tracfone, namely, to secure its own “flanker” brand, only highlights this flaw, since the acquisition would enhance its incentives to extend its already considerable market power to the market for pre-paid wireless service. AAI therefore urges the Commission to deny Applicants’ proposed transfer in order to preserve competition in the market for pre-paid wireless service and protect the consumers who depend on it.

by on

AAI Urges Supreme Court to Reject NCAA’s Antitrust Arguments in Dispute Over Paying Student-Athletes (NCAA v. Alston)

AAI has filed an amicus brief urging the U.S. Supreme Court to categorically reject the NCAA’s arguments seeking to overturn a Ninth Circuit ruling that upheld an antitrust challenge to the NCAA and its member institutions’ limitations on student-athlete compensation.  After a class of players successfully challenged the NCAA’s and schools’ compensation rules as an illegal trade restraint in the labor market for athletes’ services, the appellate court issued a compromise ruling that allows the athletes to be paid in excess of their tuition and grants-in-aid, but not unlimited sums.

In the district court the NCAA and its member institutions had argued that their compensation rules benefit the athletes, schools, and consumers of college sports products. However, on appeal to the Ninth Circuit, they waived the argument that the rules benefit the athletes, choosing to focus instead on the benefits to schools and sports fans. In December 2020, they successfully petitioned the Supreme Court to review the Ninth Circuit’s ruling, continuing to press the argument that benefits to schools and universities should offset any competitive harms to athletes.  They also argued that the lower courts erred by refusing to accord deference to what amounted to the product-design decision of a beneficial joint venture to produce college sports products.

AAI’s brief urges the Court to categorically reject the NCAA’s and its member institutions’ arguments.  First, federal courts are not permitted to engage in “multi-market balancing.”  The antitrust laws protect competition in upstream markets, which benefits workers, on equal terms that they protect competition in downstream markets, which benefits consumers.  And under the statutory terms of the Sherman Act, a century of precedent, and the national Congressional policy favoring competition as the rule of trade, federal courts have neither the authority nor any practical ability to trade-off the value of competition in one market against the value of competition in another market.  This is a policy question reserved for the legislative branch, and Congress answered the question already by enacting the antitrust laws.

AAI also argues that the Court should reject the invitation to create a “product-design” exception to the ancillary restraints framework that governs joint ventures under the rule of reason.  Substantive and economic realities have always guided judges in antitrust cases.  Courts do not inquire as to a joint venture’s preferred label for a restraint, but rather whether the restraint, as a factual and economic matter, is necessary to effectuate the procompetitive purpose of the joint venture.

The brief was written by AAI Vice President of Legal Advocacy Randy Stutz and AAI Vice President of Policy Laura Alexander, with assistance from AAI Research Fellow Berk Bahceci.

Two professors on AAI’s Advisory Board, Michael Carrier and Chris Sagers, also filed an amicus brief in support of the Student-Athletes on behalf of 65 professors Law, Business, Economics, and Sports Management.  The professors’ brief, signed by numerous other members of AAI’s Advisory Board, explains why the NCAA’s arguments misapply the rule of reason and wrongfully assume the power to justify trade restraints on the basis of values other than their competitive effects.

by on

Peter Carstensen Analyzes Poultry, Pork, and Turkey Class Actions and Calls for Agency Intervention

AAI Advisory Board Member Peter C. Carstensen published an analysis of the recent series of class-action antitrust settlements with poultry, pork, and turkey processors, stating antitrust enforcers should intervene. “Paltry Poultry Settlements and a Paralyzed Public Interest Protection” appeared on March 8, 2021 in ProMarket, a publication of the University of Chicago Booth School of Business. Read the article here.

by on

AAI Issues Update on Digital Technology: The Failure of Merger Enforcement and Need for Reform

The American Antitrust Institute (AAI) has released the White Paper, Update on Digital Technology: The Failure of Merger Enforcement and Need for Reform. The new White Paper updates and expands on analysis AAI originally released in July 2019.

The widely cited 2019 AAI White Paper, The Record of Weak U.S. Merger Enforcement in Digital Technology, was the subject of AAI testimony before the Senate Judiciary Committee and drew attention to the acquisitive history of the five largest multinational online service or computer hardware or software companies: Amazon, Apple, Facebook, Google, and Microsoft (“Big Tech”). It also unpacked the history of merger enforcement under Section 7 of the Clayton Act in a major segment of the digital technology sector. The White Paper concluded that, as compared to enforcement across all sectors, the rate of merger challenges in digital technology is exceptionally low.

Since then, much has happened in the digital technology sector. Big Tech has solidified its hold on the top-most slots, by market value, in the Fortune 500. Federal and state monopolization cases have been filed against Google and Facebook. Among other things, the Facebook complaints allege that acquisitions of small rivals, such as social media firms Instagram (2012) and WhatsApp (2014), were a strategy to snuff out potential competition to maintain a monopoly in personal social networking services. The public policy debate over the dominance of Big Tech has also generated numerous proposals to remedy competitive and consumer harm, including breakups and digital market regulation. A 2020 House Judiciary Committee report examined competitive issues raised by the platforms that are at the core of many of the large digital ecosystems. Moreover, the digital ecosystems have been the subject of ongoing economic, business, and policy research, which has advanced the state of thinking over potential policy solutions to the problems they raise.

Results of AAI’s updated analysis indicate that expansion by acquisition continues to be a leading method by which the large digital ecosystems grow. Enforcers can expect to see further growth that, when juxtaposed with persistent, weak merger enforcement in the sector, will likely exacerbate competition problems. Indeed, stronger merger enforcement over the last two decades would have mitigated the monopolization concerns that AAI sees now. As it stands, however, Section 2 of the Sherman Act is virtually the only antitrust tool left to combat dominance in the digital technology sector. This White Paper turns first to updating data on acquisitions by Big Tech through 2020 and merger enforcement statistics through the latest available reporting year, 2019. It then examines the implications of Big Tech’s likely trajectory of further expansion through acquisition and growth in critical cloud infrastructure capability. It closes with an analysis of reforms necessary to revitalize merger enforcement in digital technology.