The Antitrust Bulletin published the article “The Antitrust Revolution: A Microcosm of the Antitrust Enterprise” by AAI President Diana Moss. The Antitrust Revolution, co-edited by John E. Kwoka and Lawrence J. White, is celebrating its 30th anniversary. The volume, first published in 1989 and most recently in 2019, remains the leading comprehensive framework for understanding major developments in antitrust through the economic case study device. In putting the debate over the role of economics in modern antitrust at center stage, The Antitrust Revolution identifies the broader themes that have emerged in antitrust enforcement over the last four decades. The article explores The Antitrust Revolution as a “microcosm” of antitrust, and valuable pedagogical tool, by unpacking the co-editors’ approach to case selection across seven editions. The analysis highlights how The Antitrust Revolution has, in retrospect, identified with remarkable accuracy the major developments and conflicts in antitrust law and economics over a critical period of time in U.S. history.
Antitrust Experts Assess New Data on Private U.S. Antitrust Enforcement, Highlight Trends in Compensating Victims and Deterring Illegal Conduct
The American Antitrust Institute (AAI) and the University of San Francisco School of Law (USF Law) released a commentary (Commentary) on a new annual report examining antitrust class actions in federal court from 2009 to 2019. The 2019 Antitrust Annual Report (2019 Report) finds that cases settled since 2009 have recovered more than $24 billion on behalf of victims of antitrust violations. The 2019 Report, which expands on last year’s 2018 Antitrust Annual Report (2018 Report) was jointly produced by USF Law and Huntington National Bank.
Private enforcement actions are brought under two main federal statutes—the Sherman Antitrust Act and the Clayton Antitrust Act—and various states’ laws. The laws prohibit collusive agreements, monopolization, and mergers that are likely substantially to lessen competition. Federal courts oversee many private enforcement actions.
“With increasing concerns over the ill effects of high market concentration in critical sectors and markets, private enforcement is more important than ever,” said AAI President Diana Moss. “We see strong evidence of increased filings and recoveries in antitrust class actions from 2009-2019, and at the same time we see federal antitrust enforcement action, particularly against illegal conspiracies, in decline. Private enforcement remains a critical tool in the U.S. enforcement system and can deliver meaningful compensation to victims and deter future illegal conduct. The 2019 Report and Commentary together highlight the significant results achieved through private antitrust enforcement,” explained Moss.
“The 2019 Antitrust Annual Report is the second installment in this pioneering annual research effort,” Professor Joshua Davis, Director of the Center for Law and Ethics, University of San Francisco School of Law, noted. “The law firms prosecuting private antitrust enforcement actions play a crucial role in the public interest as private attorneys general, particularly when enforcement by federal agencies is waning. The U.S. system relies almost entirely on private enforcement to compensate victims. Moreover, private damages often dwarf the sanctions imposed by government actors, providing a critical deterrent to wrongdoers,” Professor Davis explained.
“The depth and breadth of the data assembled in the 2019 Report provides critical perspective for understanding trends in public and private enforcement over time,” said Laura Alexander, AAI’s Vice President of Policy. “With this report, we can better understand the real impact of pivotal court decisions on the ability of private enforcers to bring cases and recover compensation for victims illegal anticompetitive conduct.”
The AAI-USF Law Commentary highlights a number of key takeaways from the 2019 Report’s data on antitrust actions over the period 2009-2019. These collectively signal the efficiency and effectiveness of private enforcement — and the antitrust class action in particular.
- Private enforcement resources are focused efficiently on violations that harm victims, such as consumers and businesses. The 2019 Report reflects, among other things, considerable overlap between the industries where private and public enforcers find misconduct. “The data demonstrate that the congressional plan for parallel private and public enforcement works efficiently, often against well-resourced defendants,” commented AAI’s Moss.
- Private antitrust enforcement continues to be effective. From to 2009 to 2019, there was robust growth in total annual settlement amounts, with smaller settlement providing the backbone for private antitrust enforcement. Total settlement amounts showed robust growth over the period, which was particularly driven by an increase in very large settlements (around or above $1 billion). But smaller settlements of up to $50 million per case also held steady over the period, notwithstanding increasingly challenging law and procedure facing enforcers. “This growth in recoveries overall signals that private enforcement is effective, and that smaller settlements continue as the strong core of private enforcement” noted Moss.
- Private enforcement focused on victims directly harmed by large, often global antitrust conspiracies remains critical, but enforcement on behalf of indirect purchasers and victims of illegal monopolization also plays a crucial role. While the vast majority of the recoveries over the period 2009-2019 came from conspiracy cases brought by direct purchasers, both indirect purchaser cases and monopolization cases played an important role. “Monopolization and attempted monopolization cases—so-called conduct cases—are often thought to be unicorns. This data shows that, far from it, these cases result in substantial recoveries and may represent an overlooked area where more enforcement would be fruitful,” observed Professor Davis.
The Commentary provides additional insight into antitrust class actions over the period 2009-2019, with sections on influential case law surrounding two-sided transaction platforms, the indirect-purchaser rule, classes containing uninjured members, and agreements among employers that restrict employee hiring and wages.
“The Commentary uses the occasion of the 2019 Report to step back and observe the U.S. private enforcement system and the antitrust class action device through a broader lens, both empirically and qualitatively,” Alexander stated. Davis noted further that the 2019 Report “Highlights fruitful areas for further academic work in studying private antitrust enforcement actions, their deterrence effect, and compensation for victims of illegal activity.”
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Based in Washington, D.C., the American Antitrust Institute is an independent, nonprofit organization devoted to promoting competition that protects consumers, businesses, and society. It serves the public through research, education, and advocacy on the benefits of competition and the use of antitrust enforcement as a vital component of national and international competition policy.
Founded in 1912, the University of San Francisco School of Law provides a rigorous education – from intellectual property law to litigation and more — with a global perspective in a diverse, supportive community. It is fully accredited by the American Bar Association and a member of the Association of American Law Schools.
For more information, contact:
Diana Moss, President, American Antitrust Institute
720-233-5971
dmoss@antitrustinstitute.org
Joshua Paul Davis, Professor of Law, University of San Francisco School of Law
415-422-6223
davisj@usfca.edu
Laura Alexander, Vice President of Policy, American Antitrust Institute
202-276-4050
lalexander@antitrustinstitute.org
Stutz Article on Two-Sided Markets Published in Concurrences
Concurrences has published an article by AAI Vice President of Legal Advocacy Randy Stutz that challenges the Supreme Court’s framework for evaluating two-sided markets in the Court’s Ohio v. American Express (“Amex”) opinion. The article, “We’ve Seen Enough—It is Time to Abandon Amex and Start Over on Two-Sided Markets,” criticizes the Amex framework for failing to grapple with competition that occurs between one-sided and multi-sided firms. It was originally published as an AAI commentary in the aftermath of the Department of Justice’s defeat in attempting to block the merger of Sabre and Farelogix.
John Connor Publishes Private International Cartels Data Set
AAI Advisory Board member John M. Connor published the Private International Cartels Full Data 2019 edition. This data set comprises the largest known collection of legal-economic information on contemporary price-fixing cartels. This publication constitutes a subset of the data collection that covers 1990 to 2019 in a Microsoft Excel spreadsheet. It also includes a data guide that details the scope, strengths, and limitations of the data. The first sections explain the scope, strengths, and limitations of the PIC data. The second section analyses the size of, injuries caused by, and antitrust penalties imposed on contemporary price-fixing cartels.
AAI Asks Ninth Circuit for Proper Predominance and Evidentiary Standards in Antitrust Class Actions (In re Packaged Seafood Antitrust Litig.)
AAI filed an amicus brief on August 21 urging the Ninth Circuit Court of Appeals to apply proper standards to class plaintiffs seeking to rely on statistical analysis as common evidence of antitrust impact in satisfying Rule 23’s predominance requirement for class certification.
In In re Packaged Seafood Antitrust Litig., 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.
The AAI brief argued that the defendants’ and their amici’s arguments must be rejected under binding precedent and sound principles of competition policy. First, the defendants conflated proof of actual impact to each class member with the required Rule 23 showing, which is satisfied by evidence that is capable of supporting a prima facie showing of impact. Under binding Supreme Court precedent, 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 impact in an individual action.
Second, in the Ninth Circuit, the plain meaning canon applies to the Federal Rules. And the plain meaning of Rule 23’s requirement that common “questions” must predominate over individual questions at trial cannot be read to suggest that the questions’ answers must be determined to permit class certification.
Finally, any uninjured class members, which the district court found to be de minimis, 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 modeling, 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.
The brief was written by AAI Vice President of Advocacy Randy Stutz, with assistance from AAI Board Member Ellen Meriwether of Cafferty Clobes Meriwether & Sprengel and AAI Research Fellow Henry Visser Melville.
AAI Urges Second Circuit to Resist Raising Bar for Allegations of Antitrust Conspiracy (In re ICE LIBOR Antitrust Litigation)
AAI has filed an amicus brief in the Second Circuit asking the court to hold the line against an overbroad reading of Twombly and restore antitrust plaintiffs’ access to discovery.
In Putnam Bank v. Intercontinental Exchange (In re ICE LIBOR Antitrust Litigation), a collection of small banks and pension funds allege that a coalition of large financial institutions conspired to artificially suppress the ICE LIBOR rate. ICE LIBOR is an index, widely used as a benchmark in contracts, that is supposed to reflect the rates at which large financial institutions can borrow from one another.
Plaintiffs’ complaint included detailed allegations of the banks’ parallel submission of lending rates that defied financial logic as well as specific allegations of the structural characteristics of the industry and details of the banks’ motive, opportunity, and means to fix artificially low rates.
In March of this year, without any merits discovery, the district court dismissed the complaint, finding that it failed to allege a plausible conspiracy under Bell Atlantic v. Twombly.
AAI’s brief in support of the plaintiffs-appellants argues that the district court wrongly analyzed the plausibility of plaintiffs’ factual allegations, instead of following Twombly’s dictate to credit plaintiffs’ factual allegations and then determine if a conspiracy can be inferred from them. The brief also explains the critical role of plus factors in providing the requisite context for making allegations of conspiracy based on parallel conduct plausible, and faults the district court for rejecting alleged plus factors that fall short of direct evidence. The district court’s overbroad and confused reading of Twombly would make it nearly impossible to plead an antitrust conspiracy case absent a “smoking gun” of direct evidence of the conspiracy.
The brief was written by AAI Vice President of Policy Laura Alexander.
AAI Provides Winning Arguments in Third Circuit Antitrust Class Action
On July 28, the Third Circuit Court of Appeals delivered a resounding victory to plaintiffs and embraced AAI’s amicus arguments in an important antitrust class action on behalf of victims of the ongoing U.S. opioid epidemic.
In cases first consolidated in a Pennsylvania district court in 2013, a class of direct purchasers of Suboxone, a brand drug used to treat opioid addiction, allege that Reckitt-Benckiser, now known as Indivior Inc., engaged in a product hopping scheme to coerce patients into using a patented film formulation of Suboxone instead of a tablet form, just as the latter was on the brink of becoming open to generic competition.
According to a study by the Federal Trade Commission, generic entry typically reduces the price of prescription drugs by 85%, resulting in enormous savings for patients. But because most generic drug substitution laws do not permit pharmacists to substitute a different formulation of the same drug, even if the formulation administers the same amount of the active ingredient, brand drug manufacturers have a perverse incentive to attempt “product hops” from one formulation to another, which can effectively extend their exclusive control of a drug market and preserve monopoly prices.
A class of direct purchasers allege that Reckitt violated Section 2 of the Sherman Act by engaging in a six-part scheme to force patients onto film and off of tablets, thereby thwarting generic competition. Specifically, they allege that Reckitt (1) falsely disparaged Suboxone tablets as dangerous to children, (2) falsely announced the withdrawal of tablets due to fabricated safety concerns (to hasten switching), (3) eliminated tablet rebate contracts in favor of film rebate contracts, (4) significantly raised tablet prices above film prices to manipulate the market, (5) eventually removed tablets from the market altogether, and (6) manipulated the FDA’s Risk Evaluation and Mitigation Strategy process.
The district court denied an early motion to dismiss and eventually certified the class, and Reckitt sought and obtained an interlocutory appeal of the class certification order. In the Third Circuit, Reckitt argued that the plaintiffs wrongly attributed injury and damages to lawful, pro-competitive pricing practices, namely Reckitt’s decision to price film lower than tablets. It argued that, under the Supreme Court’s predatory pricing precedent, all pricing practices are per se lawful if they are above cost, and therefore the plaintiffs could not rely on common evidence to prove antitrust injury in satisfaction of Rule 23’s predominance requirement.
Moreover, Reckitt argued that the class could not be certified under the Supreme Court’s holding in Comcast v. Behrend, which requires that a plaintiff’s theory of damages match its theory of liability. Reckitt contended that Comcast prohibits class certification when a plaintiff’s theory of damages does not match a viable theory of liability—that is, when a plaintiff’s theory would base recovery of damages upon lawful conduct.
On March 12, AAI filed an amicus brief urging the court to reject Reckitt’s arguments, and today, the court issued an opinion accepting all of AAI’s arguments.
The AAI brief emphasized that Rule 23’s “common impact” requirement demands a separate showing of “injury-in-fact” and “antitrust injury,” and here, Reckitt had conceded injury-in-fact. AAI explained that Reckitt’s per se lawfulness argument necessarily was unavailing because the remaining analysis into “antitrust injury” hinges on the plaintiff’s theory of liability, not the defendant’s theory of non-liability. The court agreed. It scrupulously analyzed “antitrust injury” as distinct from injury-in-fact, and it evaluated Reckitt’s antitrust-injury argument based on “[t]he Purchasers’ theory of their case” rather than Reckitt’s theory that purchasers had challenged lawful conduct.
The AAI brief also challenged Reckitt’s Comcast argument, and the court again agreed with AAI’s views. AAI argued that this was not a case where “a general verdict may rest on either of two claims—one supported by the evidence and the other not,” because “Reckitt’s argument and plaintiffs’ argument are mutually exclusive.” AAI explained, because “there is only one claim—the interconnected [six-part] scheme,” this case presents “no risk of a mismatch between the plaintiff’s liability and damages theories, as in Comcast.” The court agreed again, stating: “This case is unlike Comcast because there is only one theory of antitrust injury, and that theory corresponds to a theory of liability.”
Finally, the AAI brief argued that, although the merits were not properly before the court, Reckitt was wrong to suggest that above-cost pricing is per se lawful. Not only has the Third Circuit held that above-cost prices can be part of a cognizable anticompetitive scheme, but “Reckitt’s argument is incorrect because this product-hopping case does not bear any resemblance to a predatory pricing case.” Thus, if the court were to reach the merits, AAI argued that the plaintiffs’ claims would be properly reviewed under the rule of reason rather than the price-cost test applicable to predatory pricing claims.
The court agreed with AAI on both counts. It held unequivocally that, when evaluating an alleged monopolization scheme compromised of multiple intertwined acts, “we look to the monopolist’s conduct taken as a whole rather than considering each aspect in isolation.” And here, without regard to the ultimate merits of plaintiffs’ claims, it was sufficient that the plaintiffs alleged “a multifaceted yet single scheme to move the market to Suboxone film” and “that the totality of Reckitt’s actions . . . suppressed generic competition and thus violated the antitrust laws.” Accordingly, the court added, “Reckitt’s price-cost argument is inapt.”
AAI Outlines Major Issues For Merger Enforcement During the COVID-19 Pandemic
AAI’s Diana Moss shares a presentation to the Organization for Economic Cooperation and Development (OECD) on merger enforcement during the COVID-19 pandemic. A video recap of her remarks at the OECD virtual event can be found here. The disruption caused by the pandemic has triggered numerous proposals for acquisitions of smaller, struggling rivals but also by large incumbent firms to integrate horizontally and vertically. Moss’ presentation touches on the challenges these rapid developments pose for competition enforcers across all aspects of merger review, including the timing of reviews, defining markets, competitive effects, efficiencies, remedies, and failing firm defenses. The analysis builds on AAI’s expanding research and advocacy on critical issues around antitrust enforcement during and after the COVID-19 pandemic, particularly in the food supply chain and the healthcare system.
AAI Successfully Defends California’s Pay-for-Delay Legislation in Ninth Circuit
On July 24, the Ninth Circuit sided with the Attorney General of California, AAI and fellow consumer groups in affirming a district court’s rejection of a pharmaceutical trade association’s challenge to California’s new pay-for-delay legislation, California Assembly Bill 824 (AB 824). AAI, joined by Consumer Reports and Public Citizen, had filed an amicus brief in the Ninth Circuit countering the association’s efforts to thwart the pro-consumer legislation.
AB 824 creates a framework for California courts to treat pay-for-delay agreements as presumptively unlawful under the Cartwright Act. AAI has long advocated for a similar approach under both state and federal law in numerous amicus filings in courts throughout the United States.
In November, the Association for Accessible Medicines (AAM), which represents the interests of generic pharmaceutical manufacturers, filed a motion for a preliminary injunction against California Attorney General Xavier Becerra, seeking to bar the state from implementing or enforcing AB 824. Among other things, AAM argued that AB 824 would prevent procompetitive patent litigation settlements, leading to fewer generic challenges to branded pharmaceuticals, higher drug prices, and diminished public health. AAI had filed an amicus brief in district court countering AAM’s arguments.
On New Year’s Eve, the district court denied AAM’s motion and later denied a subsequent motion for an injunction pending appeal. On appeal to the Ninth Circuit, AAM made arguments similar to those it made below.
AAI’s brief, which was written by Hilliard & Shadowen Partner Rick Brunell, with assistance from AAI Vice President of Legal Advocacy Randy Stutz, explained the severity of the harm caused by payments to exclude generic competition, and why AB 824 is an appropriate and beneficial outgrowth of the logic underlying the Supreme Court’s watershed decision in FTC v. Actavis and the California Supreme Court’s decision in In re Cipro Cases I & II. Among other things, the brief explained that the public interest does not support an unfettered right for litigants to reach anticompetitive settlements, why AAM’s arguments were wrong on the merits, and why similar arguments were appropriately rejected by the Supreme Court in Actavis.
In ruling for the California Attorney General, the Ninth Circuit held that, in light of the statute’s restrictions on illegal reverse payment agreements, AAM failed to demonstrate a substantial risk that AB 824 will cause any of its members to suffer an injury sufficient to confer Article III standing.
Antitrust and Legislative Reform: A Conversation with Senator Amy Klobuchar
In this podcast, AAI President Diana Moss sits down with Senator Amy Klobuchar, who has represented the state of Minnesota since 2007. Senator Klobuchar serves on numerous Senate committees, including the Judiciary, where she is the Ranking Member of the Subcommittee on Antitrust, Competition Policy and Consumer Rights. Their conversation focuses on important themes in the debate over strengthening antitrust enforcement in the U.S. for the benefit of competition, consumers, workers, and innovation. Senator Klobuchar touches on how the COVID-19 pandemic is influencing enforcement of the antitrust laws, political influence and antitrust, growing public concern about declining competition, the role of the courts, and her legislative priorities for strengthening and clarifying the antitrust laws.
Moderator:
Diana Moss, President, American Antitrust Institute
Guest:
Senator Amy Klobuchar (MN), Ranking Member, Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights
Materials:
Testimony of John W. Elias U.S. House Committee on the Judiciary June 24, 2020
S. 3426: Anticompetitive Exclusionary Conduct Prevention Act of 2020
S. 307: Consolidation Prevention and Competition Promotion Act of 2019
