Antitrust Law Blog

California Court of Appeal Allows Injunction Under Unfair Competition Law To Prevent Horizontal Competitor From Diverting Business Through Unlawful Means

Sheppard Mullin — Mon, 13 May 2013 11:50:47 -0500

For many years, California’s Unfair Competition Law had no traditional standing requirements. But since the passage of Proposition 64 in 2004, standing has been required, and standing continues to be litigated regularly. In Law Offices of Higbee v. Expungement Assistance Services, __ Cal.App.4th ___, No. G046778 (4th Dist. March 14, 2013), the Court of Appeal decided that a plaintiff had standing to sue under the Unfair Competition Law (Bus. & Prof. Code Section 17200, et seq.) to enjoin a horizontal competitor’s diversion of business to itself through unlawful means. The Court held that a plaintiff need not be threatened with the type of injury that would be compensable through restitution under Cal. Business and Professions Section 17204 to have standing to pursue an injunction against unfair competition under Section 17203.

Only a specific type of restitution is allowed pursuant to Section 17204. Higbee, slip op. at 12, quoting Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 323 (2011) (giving four examples of when restitution may be awarded under Section 17204); e.g., Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134, 1152 (2003) (“nonrestituionary disgorgement of profits is not an available remedy . . . under the UCL”). No damages can be awarded. The plaintiff in Higbee did not allege the type of injuries that would entitle it to restitution. The trial court recognized this. Higbee, slip op. at 1 (“It is not alleged that plaintiff had a transaction with defendant in which it lost money or property or that it was deprived of money or property to which it had a cognizable claim”). Plaintiff had not transacted any business with the defendant.

Plaintiff and defendant were competitors. Plaintiff law firm asserted that defendant, an Internet company, had diverted business from plaintiff to itself through the unlawful means of practicing law without a license, causing plaintiff law firm to lose profits; lose going concern value; spend more on advertising; and lower prices to consumers. These types of alleged damages do not fit within the definition of Section 17204 restitution.

The trial court did not think that the loss of market share, which plaintiff alleged, constituted injury under the UCL, and sustained a demurrer (roughly the same as granting a Rule 12(b)(6) motion) without leave to amend, stating:

Plaintiff only alleges that defendant is getting some business that plaintiff might possibly obtain for itself. This is insufficient. One may not sue a competitor under [section] 17200 because the competitor is obtaining some market share.

Higbee, slip op. at 1.

The Court of Appeal reversed:

(1) The Court stated that it was already settled law that a plaintiff need not allege any entitlement to restitution under Section 17204 to have standing to pursue an injunction under Section 17203. Higbee, slip op. at 8-9, citing Allergan, Inc. v. Athena Cosmetics, Inc., 640 F.4th 1377, 1380 (Fed. Cir. 2011). It was enough that the plaintiff could point to some form of injury.

(2) The Court held that plaintiff had adequately alleged an injury, which the Court called a “market injury.” Higbee, slip op. at 9 (plaintiff injured where defendant diverted business to itself while competing without a professional license to do so, costing plaintiff “lost sales, revenue, market share, and asset value”), citing Allergan, 640 F.4th at 1382.

(3) The Court rejected the argument that an injunction under Section 17203 can only be granted when the plaintiff had entered into a transaction directly with the defendant. The court pointed out that unfair competition law originally was for suits between competitors where a defendant employed the “use of unfair means in drawing away customers from a competitor.” Id. at 12 (citation omitted). In the Court’s view, nothing about the UCL had eliminated that original purpose. The UCL “is to protect both consumers and competitors . . .” Id. Taking away business from plaintiff law firm by violating the law requiring a license to practice law could serve as a predicate for a UCL claim.

Comcast v. Behrend Sets a Higher Bar for Class Certification

Sheppard Mullin — Mon, 01 Apr 2013 11:47:09 -0500

By Jennifer Driscoll-Chippendale

On March 27, 2013, the U.S. Supreme Court continued its recent trend of imposing more stringent standards for class certification in Comcast Corporation v. Behrend, 569 U.S. ___ (2013). At issue was whether the proponents of certification satisfied Federal Rule of Civil Procedure 23(b), which requires that “questions of law or fact common to class members predominate over any questions affecting only individual members,” when calculating damages with a regression model that did not isolate the effect of specific misconduct. In a 5-4 decision authored by Justice Scalia, the Court held that the class was improperly certified, reversing the decisions of the lower courts.

Background

The respondents consisted of approximately two million current and former Comcast subscribers from December 1, 1999 to the present within the Philadelphia “Designated Market Area” (“DMA”). They alleged that Comcast entered into unlawful agreements and monopolized or attempted to monopolize the DMA through a strategy of “clustering,” i.e., purchasing a competitor’s system in one region in exchange for Comcast’s system in another region, violating Sections One and Two of the Sherman Act.

At the district court level, respondents offered four forms of “antitrust impact” to meet Rule 23(b)(3)’s predominance requirement. However, only one theory was accepted—that Comcast’s clustering reduced competition from companies that built competing cable networks in areas where an incumbent cable company already operates. The court determined that the damages arising out of “overbuilder-deterrence” could be calculated on a class-wide basis. Respondents’ expert calculated damages of $875,576,662 using a regression model that combined the effects of the original four theories of injury. A divided court of appeals affirmed the lower court’s decision to certify the class, reasoning that “at the class certification stage, respondents were not required to ‘tie each theory of antitrust impact to an exact calculation of damages.’” Maj. Op. at 4 (citation omitted).

Analysis

The Majority Opinion

The Court reversed the grant of class certification. Justice Scalia emphasized that the rigorous standards used in Rule 23(a) analyses applied with equal if not more force to scrutiny of Rule 23(b)’s predominance requirement. To that end, it “may be necessary for the court to probe behind the pleadings before coming to rest on the certification question.” Maj. Op. at 6 (citations omitted). Here, the court of appeals erred “[b]y refusing to entertain arguments against respondents’ damages model that bore on the propriety of class certification simply because those arguments would also be pertinent to the merits determination.” Maj. Op. at 6-7 (citations omitted). Although the damages calculations “need not be exact . . . at the class-certification stage (as at trial), any model supporting a ‘plaintiff’s damages case must be consistent with its liability case, particularly with respect to the alleged anticompetitive effect of the violation.” Maj. Op. at 7 (citations omitted). Because the potential award of damages was premised exclusively on overbuilder-deterrence, “a model purporting to serve as evidence of damages . . . must measure only those damages attributable to that theory.” Maj. Op. at 7. From the majority’s perspective, certifying a class based on respondents’ inclusive methodology “would reduce Rule 23(b)(3)’s predominance requirement to a nullity.” Maj. Op. at 8.

The Dissent

After criticizing the Court’s post-briefing decision to recast the issue under review, the dissent, led by Justices Ginsburg and Breyer, insisted that the majority opinion “breaks no new ground on the standard for certifying a class action” pursuant to Rule 23(b). Dissent at 3. From the dissent’s vantage point, “[i]n the mine run of cases, it remains the ‘black letter rule’ that a class may obtain certification under Rule 23(b)(3) when liability questions common to the class predominate over damages questions unique to class members.” Dissent at 5 (citation omitted).

Nonetheless, the dissent maintained that the majority opinion “sets forth a profoundly mistaken view of antitrust law.” Dissent at 5. The dissent found it sufficient that respondents’ model demonstrated Comcast’s conduct resulted in higher prices in the Philadelphia DNA, rather than focusing on precisely how Comcast achieved this outcome. Accordingly, the Court should not have overturned the lower court’s determination that the regression model “could measure damages suffered by the class—even if the damages were limited to those caused by deterred overbuilding.” Dissent at 10.

Implications

Commentators will likely debate whether the Comcast decision has added an extra layer of rigor or a dose of common sense to antitrust damages calculations. However, despite the dissent’s assertion to the contrary, the “universal” principle that individual damages calculations do not preclude class certification under Rule 23(b)(3) appears to be at risk. Dissent at 4. In rendering its opinion, the Court has added a potent weapon for rebuffing class certification.

What this means for antitrust cases, where the predominance test was once “readily met,” Dissent at 5, will be resolved by lower courts through fact-intensive opinions or seemingly inconsistent decisions. Comcast may articulate the law of the land today, but the Court will need to revisit its words when circuit splits inevitably occur.

MOFCOM Requests Public Comments on Draft Provisions Related to Remedies Imposed in Conditional Approvals

Sheppard Mullin — Mon, 01 Apr 2013 11:45:16 -0500

By Becky Koblitz

Since the Anti-monopoly Law (“AML”) has come into effect in August 2008, MOFCOM has issued 16 conditional approvals requiring certain structural or behavioral remedies in order to prevent the anticompetitive consequences that, from MOFCOM’s perspective, could arise as a result of the transaction. On March 27, 2013, the Ministry of Commerce (“MOFCOM”) requested public comments by April 26, 2013 on draft provisions (for unofficial translation by SMRH, please see here) concerning the evaluation, negotiation, implementation, monitoring, reconsideration of the remedies used in the conditional approvals issued as a result of the pre-merger review process as well as related sanctions. Once the draft provisions are finalized, they will replace the 2010 interim provisions on the acquisition and divesture of assets.

The current draft provisions reflect MOFCOM’s effort to provide more guidance and transparency to the process related to conditional approvals. These provisions are important not only for parties to the transaction but also for third parties who may be affected by the transaction or may be interested as being part of the remedy.

The 2010 interim provisions focused only on the structural remedy of divestiture of assets. The draft provisions have expanded the scope to include behavioral remedies related to the vertical relationships between the parties to the transaction. The draft provisions sets forth more guidance regarding the negotiation and evaluation period, as well as offering more due process for the parties to the transaction as well as third parties, albeit at the request of MOFCOM. In contrast to the interim provisions, there are references to timing, which no doubt will be revised as a result of the public comment period.

MOFCOM sets forth the factors which are considered when it reviews the possibility of removing or altering the remedies imposed by the conditional approval, among others, whether the competitive elements of the relevant market have changed and whether the modification of the remedies are in the social and public interests. Through public comments there may be more precision added to these factors.

The most significant addition is the chapter on sanctions. Similar to the sanctions imposed in the regulations for failure to file a reportable transaction, if the parties violate the terms of the remedies, they can be subject to a fine up to 500,000 CYN or ordered to restore the situation existing before the transaction. There are additional provisions concerning violations of the respective duties of the trustee, the purchaser of the assets and any MOFCOM official or staff.

Given that this is the first round for requesting public comment, there will probably be more changes. However, these draft provisions reflects MOFCOM’s commitment to developing an effective and transparent pre-merger review process to support a competitive market.

Court Finds No Inference of Conspiracy Arising From Members of Standard Setting Organization Pursuing Self Interest In Refusing To Approve Plaintiff's Competing Technology

Sheppard Mullin — Mon, 18 Mar 2013 11:35:27 -0500

By Thomas D. Nevins

The Massachusetts United States District Court granted a Rule 12(b)(6) motion dismissing antitrust claims brought under Section 1 of the Sherman Act by a company that had invented a new technology for testing metallic materials. Plaintiff alleged that defendant horizontal competitors, whose technology allegedly was inferior, had conspired to “stack the vote” and take other steps to prevent plaintiff’s product from gaining approval by a standard setting organization (“SSO”) and an International Standards Organization (“ISO”) of which they were voting members. The Court found that plaintiff had failed to plead a plausible conspiracy because each defendant unilaterally would choose to “decline[] to support a standard that would promote another competitor’s technology.” Advanced Technology Corp. v. Instron, Inc., Civil Action No. 12-10171-JLT, slip op. at 12 (D. Mass. Feb. 26, 2013) (“Instron”). In the Court’s view, there was no reason, therefore, to believe that a conspiracy had taken place.

The Court held that plaintiff had pleaded nothing more than parallel behavior in an oligopolistic market, and so plaintiff’s Section 1 claim failed. The Court relied primarily on Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), in reaching that result. Instron, slip op. at 10 (“parallel conduct, even conscious parallelism, ‘could just as well be independent action.’”), citing Twombly, 550 U.S. at 553 quoting Theatre Enters., Inc. v. Paramount Film Distr. Corp., 346 U.S. 537, 540 (1954).[1]

Plaintiff alleged that it had developed a new and innovative patented technique for measuring the tensile properties of metallic materials, such as in pipelines and bridges. Plaintiff asserted that its product was superior to defendants’ equipment, which employed a conventional destructive testing technique, because plaintiff’s method was non-destructive and allowed testing of in-service pipelines, and because the testing was faster.

The relevant SSO’s regulations allowed “a single negative vote [to] stop the progress of any draft standard.” Slip op. at 4. All three defendants voted against SSO approval of plaintiff’s product, and then variously engaged subsequently in a number of asserted “procedural irregularities” to ensure non-approval by the SSO. Slip op. at 15. Plaintiff also went to the ISO for approval, where one defendant assertedly employed procedural irregularities to manipulate the ISO into refusing to approve plaintiff’s product. Id. at 6-7.

Plaintiff relied on allegations of parallel conduct together with “plus factors” and “a market conducive to collusion.” Slip op. at 11. Defendants allegedly comprised 70 percent of the relevant market for this type of testing. The test employed by the Court for determining whether there were plus factors that revealed the existence of a conspiracy was “(1) evidence that the defendant had a motive to enter into a [] conspiracy; (2) evidence that the defendant acted contrary to its interests; and (3) evidence implying a traditional conspiracy.” Instron, slip op. at 11 (citations omitted).

As to motive to enter into a conspiracy, the Court stated that each defendant:

had its own economic incentive to independently oppose [plaintiff] and promote is own products. Nothing in the complaint indicates that opposition to [plaintiff] “was anything more than the natural, unilateral reaction of each defendant intent on keeping its dominance.” [Citation.] “There is no reason to infer that the companies had agreed among themselves to do what was only natural anyway.”

Instron, slip op. at 13, quoting Twombly, 550 U.S. at 566. In the Court’s view, this eliminated any need or motive for defendants to conspire. Instron at 14 (defendants “had no apparent need to conspire”).

Nor did the Court consider the defendants’ conduct to be against their self interests. Instead, preventing SSO and ISO approval of plaintiff’s product was “fully consistent with Defendants’ individual stakes in the mechanical testing equipment market.” Instron, slip op. at 14. Preventing approval of plaintiff’s product “was nothing more than the natural, unilateral reaction of each [defendant] intent on keeping its market dominance.” Id. at 13 (citation omitted). They were doing “what was only natural anyway.” Id., quoting Twombly, 550 U.S. at 566.

The Court also stated that there was no traditional evidence of a conspiracy. Parallel conduct in an oligopoly is not evidence of a conspiracy. Instron, slip op. at 16. Nor did the Court believe that meetings and conversations among defendants supported an inference of conspiracy because they had not resulted in “unprecedented or anomalous conduct.” Id. at 17.

Plaintiff’s Section 1 claims, therefore, failed. The Court granted defendants’ Rule 12(b)(6) motion to dismiss the Sherman Act claims without leave to amend.

[1] The Court did not address whatever effect Twombly and Iqbal may have on Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492 (1988), and American Society of Mechanical Engineers v. Hydrolevel Corp., 456 U.S. 556 (1982).

Second Circuit Rules That Putative Auction Rate Securities Class Action Complaints Failed to Adequately Plead Antitrust Conspiracy

Sheppard Mullin — Wed, 13 Mar 2013 13:50:36 -0500

By Rena Andoh

In Mayor and City Council of Baltimore v. Citigroup, Inc., No. 10-0722-cv(L) and 10-0867-cv(CON), 2013 WL 791397 (2d Cir. Mar. 5, 2013), the United States Court of Appeals for the Second Circuit upheld the dismissal of two related class action complaints brought on behalf of purchasers of auction rate securities (“ARS”) and ARS issuers, respectively, against a number of large financial institutions. The complaints alleged that the financial institutions violated Section 1 of the Sherman Act, 15 U.S.C. § 1, by conspiring to stop purchasing ARS, thereby rendering ARS almost valueless and triggering the collapse of the ARS market. The Second Circuit based its holding upon a principle first announced by the United States Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) [see blog article here] — that antitrust complaints must allege sufficient factual matter to allow a fact-finder to plausibly infer that the plaintiffs’ alleged injuries were the result of an unlawful conspiracy, rather than independent parallel business conduct.

ARS are long-term bonds with interest rates that fluctuate depending on the outcome of periodic auctions. Since its conception, the ARS market has been concentrated among a group of elite financial institutions that underwrote the issuance of ARS. Auctions would occur at times dictated by a given ARS issuance’s offering documents (typically every 7, 28 or 35 days). If ARS up for auction sold out (demonstrating high demand), the interest rates on the ARS would reset at a lower rate — specifically, the auction would “clear,” such that all of the ARS subject to that auction would reset to the rate at which the last order in the auction was filled.

Because no secondary market for ARS developed, ARS were difficult to liquidate and could not be sold for par value outside of the required auctions. Further, if an auction did not sell out (indicating that there were more people looking to sell than to buy), the auction would “fail” and no ARS could be exchanged — putative sellers would be stuck with their ARS — and the interest rates would default to the maximum rate set out in the offering documents. Because of the dire consequences of a failed auction, the defendant financial institutions would sometimes intervene in the auctions by using proprietary trading accounts to place “support bids” which would result in clearing the auctions despite insufficient external demand.

As the financial market deteriorated throughout 2007 and early 2008, these support bids became increasingly critical to clearing auctions. There were a few isolated failures in 2007, but the ARS market began its implosion on February 12, 2008, when many of the auctions scheduled for that date failed. On February 13, 2008, eighty-seven percent of the auctions failed, and by the next day, the ARS market had essentially shut down. Plaintiffs filed their class action complaints in September of 2008, claiming that defendants had conspired to restrain trade by refusing to issue support bids to protect the auctions they managed.

The United States District Court for the Southern District of New York dismissed the complaint, relying upon the Supreme Court’s decision in Credit Suisse Securities (USA) LLC v. Billing, 551 U.S. 264 (2007) [see blog article here]. The Second Circuit affirmed the dismissal, but did so based on a Twombly analysis, and therefore did not reach the question of whether the Southern District’s Billing analysis was correct.

The Second Circuit explained that the facts pleaded in a complaint must raise a reasonable expectation that discovery will reveal evidence of illegal conduct and that mere legal conclusions couched as factual allegations will get no consideration at all. To state a claim under Section 1 of the Sherman Act, the complaint must allege sufficient facts — as opposed to mere labels or legal conclusions — making the inference that the plaintiff’s injuries were the result of an unlawful conspiracy more plausible than competing inferences, such as that the injuries result from independent, legitimate business decisions by similarly situated actors. The required factual allegations — referred to by Twombly and its progeny as “plus factors” — can include allegations that parallel acts were against defendants’ individual economic self-interests, or that competitors frequently communicated with each other.

In this case, the plaintiffs failed to adequately plead the requisite Twombly plus factors. For example, although plaintiffs pled two interfirm communications, the vast majority of alleged communications were intrafirm. The Court found these predominantly internal communications were insufficient to demonstrate more than a high level of interfirm awareness, which is not in itself unlawful.

Plaintiffs also failed to connect any plus factors to the alleged conspiracy. The Court observed that “the [ARS] market as a whole was essentially holding its breath and waiting for the inevitable death spiral of ARS auctions,” which made “abandoning bad investments [] not just a rational decision, but the only rational business decision.” In other words, the most plausible explanation for defendants’ simultaneous withdrawal of support for ARS auctions was not an antitrust conspiracy, but independent (and widespread) assessments that the ARS market was dying and ARS were a bad investment.

The Second Circuit underscored its unease with permitting large antitrust class actions to proceed absent a well-documented inference of conspiracy, noting: “[i]f we permit antitrust plaintiffs to overcome a motion to dismiss simply by alleging parallel conduct, we risk propelling defendants into expensive antitrust discovery on the basis of acts that could just as easily turn out to have been rational business behavior as they could a proscribed antitrust conspiracy.”

Higher Filing Thresholds for HSR Act Premerger Notifications Effective February 11, 2013

Sheppard Mullin — Wed, 13 Feb 2013 14:23:25 -0500

By Bob Magielnicki and Malika Levarlet

1. Higher Thresholds For HSR Filings

Higher thresholds for premerger filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 became effective on February 11, 2013. The filing thresholds are revised annually, based on the change in gross national product.

The HSR Act notification requirements apply to transactions that satisfy the specified "size of transaction" and "size of person" thresholds. The key adjusted thresholds are summarized in the following chart:

Size of Transaction Test

Notification is required if the acquiring person will acquire and hold certain assets, voting securities, and/or interests in non-corporate entities valued at more than $70.9 million.

Size of Person Test

(Transactions valued at more than $283.6 million are not subject to the Size of Person Test and are therefore reportable)

Generally one "person" to the transaction must have at least $141.8 million in total assets or annual net sales, and the other must have at least $14.2 million in total assets or annual net sales.

While the filing thresholds have changed, the filing fees have not, but will be based on the new thresholds as follows: $45,000 for transactions valued at more than $70.9 million but less than $141.8 million; $125,000 for transactions valued at more than $141.8 million but less than $709.1 million; and $280,000 for transactions valued at more than $709.1 million.

The above rules are general guidelines only and their application may vary depending on the particular transaction.

2. Higher Thresholds For the Prohibition Against Interlocking Directorates

Higher thresholds for the prohibition in Section 8 of the Clayton Act against interlocking directorates became effective on January 14, 2013. Section 8 prohibits, with certain exceptions, one person from serving as a director or officer of two competing corporations if two thresholds are met. Applying the new thresholds, competitor corporations are covered by Section 8 if each one has capital, surplus and undivided profits aggregating more than $28,883,000, with the exception that the interlock is not prohibited if the competitive sales of either corporation are less than $2,888,300. As with HSR thresholds, the FTC is required to revise Section 8 thresholds annually based on gross national product.

California Supreme Court Resolves Split Over Accrual Rules for Unfair Competition Claims

Sheppard Mullin — Fri, 01 Feb 2013 12:44:02 -0500

By Tyler M. Cunningham

The California Supreme Court has offered hope to plaintiffs facing statute of limitations problems under California’s Unfair Competition Law, holding that special rules for calculating accrual dates for so-called “continuing wrongs” can, in some cases, apply to UCL claims.

In Aryeh v. Canon Business Solutions, Inc., __ Cal. 4th __ (Jan. 24, 2103), the Supreme Court resolved a split among California’s Courts of Appeal. Some had held that the UCL’s four-year statute of limitations begins to run as soon as the last element giving rise to a claim occurs, and that common-law exceptions to that default rule, such as the continuous accrual doctrine, were categorically inapplicable to UCL claims. Others were contra. In Aryeh, the Supreme Court said that the continuous accrual doctrine might apply to UCL claims, depending on the nature of the claim.

“[T]he UCL is a chameleon,” providing remedies for a wide variety of conduct, Justice Kathryn Mickle Werdegar wrote for a unanimous Court. “Given the widely varying nature of the right invoked, it makes sense to acknowledge that a UCL claim in some circumstances might support the potential application of one or another exception … and in others might not ….” Slip op. at 11.

Plaintiff in Aryeh ran a copy business, and leased copiers from defendant Canon Business Solutions, Inc. (“Canon”). Soon after leasing the copiers, Aryeh suspected that Canon employees were running test copies during service visits, causing Aryeh to exceed his monthly allowances and incur additional fees. Aryeh filed a purported class action under the UCL, claiming that Canon’s practice of charging for test copies was both unfair and fraudulent. Aryeh alleged that the overcharges began in 2002, and acknowledged that he was aware of the practice soon thereafter, but did not sue until 2008.

The trial court found that Aryeh’s claims were time-barred, because he sued more than four years after the first violation occurred. A divided Court of Appeal affirmed. Aryeh v. Canon Business Solutions, Inc., 185 Cal.App.4th 1159 (2010).

California courts evaluating statute-of-limitations issues generally start with the “last element” rule: a cause of action accrues when the last essential element to that cause of action occurs. But courts have also developed several exceptions to that rule. These include the delayed discovery rule (which “postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action”); fraudulent concealment (which “tolls the statute of limitations where a defendant, through deceptive conduct, has caused a claim to grow stale”); the continuing violation doctrine (which “aggregates a series of wrongs or injuries for purposes of the statute of limitations, treating the limitations period as accruing for all of them upon commission or sufferance of the last of them”); and the continuous accrual rule (under which “a series of wrongs or injuries may be viewed as each triggering its own limitations period, such that a suit for relief may be partially time-barred as to older events but timely as to those within the applicable limitations period.”). Slip. Op. at 6.

In Aryeh, the Supreme Court found that the UCL’s legislative history indicates an intent to subject UCL claims to common-law accrual rules, including the default “last element” rule. The Court also rejected a line of cases that categorically foreclosed any exceptions to that default rule -- such as the delayed discovery or continuous accrual doctrines -- in UCL claims. The Court held, rather, that those exceptions might apply to UCL claims, depending on the nature of the claim. For example, the discovery rule “should” apply to some UCL deceptive practices claims, but “might not” apply to a claim under the UCL’s unlawful prong. Slip. Op. at 10-11 (citing Broberg v. The Guadian Life Ins. Co. of America, 171 Cal.App.4th 912, 920-921 (2009) and Sea-Pac Ins. Managers, Inc., 202 Cal.App.4th 1509, 1531-32 (2012)).

Applying those principles to Aryeh’s suit, the Court declined to treat Canon’s alleged overcharges as a single continuous act, which would have permitted Aryeh to sue for all overcharges under the continuing violation doctrine (since the last overcharge occurred less than four years before Aryeh filed suit). The Court found that doctrine inapplicable because Aryeh alleged a series of “discrete, independently actionable alleged wrongs” that he noted soon after they began. The Court instead applied the continuous accrual doctrine, under which each overcharge gives rise to a separate claim, each with its own accrual date. The Court found the doctrine applicable because Canon owed a continuing duty (to not impose unfair charges) which it periodically breached (with each bill).

The Supreme Court expressed hope that its opinion would “resolve the lingering uncertainty over the timing of accrual” in UCL cases. Slip op. at 3. But by advocating a case-by-case approach, Aryeh more likely shifted the battleground: the Court may have debunked the notion of an across-the-board accrual rule applicable to all UCL cases, but attorneys will no doubt continue to disagree over which accrual rule applies to the facts of a particular case.

In a Rarely-Seen Joint-Effort in the Competition Arena, the DOJ and the USPTO Unite in Issuing a Policy Statement on Remedies Involving Standard Essential Patents

Sheppard Mullin — Wed, 16 Jan 2013 13:20:46 -0500

By Mona Solouki

On January 8, 2013 – less than a week after the Federal Trade Commission ("FTC") entered into a consent order with Google,[1] under which Google is generally banned from seeking injunctions on its F/RAND[2] -encumbered standard essential patents ("SEPs")[3] – the United States Department of Justice ("DOJ") banded together with the United States Patent and Trademark Office ("USPTO") (jointly referred here as "the Agencies") in issuing the Policy Statement on Remedies for Standard Essential Patents Subject to F/RAND Commitment ("Policy Statement on Remedies for SEPs").

This was a rare pairing in that, in the past, the DOJ has generally joined forces with the FTC in jointly issuing guidelines in the area of competition and antitrust enforcement policy. Examples include the DOJ-FTC joint "Antitrust Policy Enforcement Regarding Accountable Care Organizations," "Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition," "Antitrust Guidelines for the Licensing of Intellectual Property," "Antitrust Guidelines for Collaborations Among Competitors," and "Horizontal Merger Guidelines." The Policy Statement on Remedies for SEPs is, therefore, a departure from that established practice.

The DOJ issued the policy statement in its capacity as "the executive-branch agency charged with protecting U.S. consumers by promoting and protecting competition," and the USPTO in its capacity as "the executive-branch agency charged with responsibility for examining patent applications, issuing patents, and—through the Secretary of Commerce—advising the President on domestic and certain international issues of intellectual property policy." Policy Statement on Remedies for SEPs at 8.

Noting the procompetitive virtues of consensus-driven standards along with their risks, the Agencies sought to balance the rights of SEP holders against the risk of hold-up to implementers. On the one hand, the Agencies recognized that "[i]n some circumstances, the remedy of an injunction or exclusion order may be inconsistent with the public interest" and "may harm competition and consumers." Id. at 6. On the other hand, they rejected a general ban on injunctive relief actions for SEPS, see id. at 7-8, or rigid imposition of "one-size-fits-all mandates for royalty-free or below-market licensing, which would undermine the effectiveness of the standardization process and incentives for innovation," id. at 5-6.

In determining whether an injunction or exclusion order may be appropriate, or otherwise should be denied, the Agencies offered a flexible approach that could be used to adapt the remedy to the specific facts of each case by identifying non-exhaustive "relevant factors when determining whether public interest should prevent the issuance of an exclusion order… or when shaping such a remedy." Id. at 7-9. One such factor is "whether a patent holder has acknowledged voluntarily through a commitment to license its patents on F/RAND terms that money damages, rather than injunctive or exclusionary relief, is the appropriate remedy for infringement." Id. at 9.

However, according to the Agencies, "This is not to say that consideration of the public interest factors … would always counsel against the issuance of an exclusion order to address infringement of a F/RAND-encumbered, standards-essential patent"; such an order may still be "an appropriate remedy" in some circumstances. Id. at 7.

For example, an exclusion order by the International Trade Commission ("ITC") or a district court injunction may be appropriate when "a putative licensee refuses to pay what has been determined to be a F/RAND royalty, or refuses to engage in a negotiation to determine F/RAND terms." Id. The Agencies also made clear that "a constructive refusal to negotiate" could be the basis for injunctive relief or an exclusion order, such as when the putative licensee "insist[s] on terms clearly outside the bounds of what could reasonably be considered to be F/RAND terms in an attempt to evade the putative licensee's obligation to fairly compensate the patent holder." Id. Other factors relevant to a particular case may also justify such a relief, making the inquiry a case-specific one. See id. (noting that "[t]his list is not an exhaustive one," thus leaving room for other considerations).

In contrast, the FTC has taken a much more restrictive view of SEP inunctions. For example, in its Google order, the FTC generally banned efforts by Google to seek injunctive relief on its SEPs, except in the following narrowly enumerated circumstances against a potential licensee who (a) is outside the jurisdiction of the United States, (b) has stated in writing or sworn testimony that it will not license on any terms, (c) refuses to enter a license on terms determined to be F/RAND in the “Final Ruling” of a court (after exhaustion of all appeals) or through binding arbitration or other mutually-agreed process, or (d) fails to provide a written confirmation to a SEP owner in response to a F/RAND Terms Letter as outlined in the FTC Order. FTC Decision & Order at 7-8. The order also allows Google to seek injunctive relief in certain circumstances when the putative licensee first sues Google for injunctions on the potential licensee’s own SEPs. Id. at 11-12. The order also requires rigid adherence to an offer of a detailed licensing agreement and specific steps for negotiating and resolving disputes before pursuing any injunctive relief consistent with the above conditions. See, e.g., id. at 9-12.

Notably, the FTC order is not based on the antitrust laws, but instead relies on Section 5 of the FTC Act, which is primarily a consumer protection statute that prohibits "unfair method of competition" and "unfair acts or practices." See FTC Complaint, ¶¶ 31-32. Commissioner Ohlhausen dissented generally questioning the applicability of Section 5 to Google's conduct and the "doctrinal confusion" the order would cause, among other reasons. See generally Dissenting Statement of Commissioner Ohlhausen. Commissioner Rosch issued a separate statement that called into question the FTC's use of Section 5's "unfair method of competition" prong without any "limiting principles" – such as "the requirement that a respondent have monopoly or near-monopoly power" – which risked "unsettl[ing] 'settled principles of [Sherman Act] Section 2 law' as defined by the Supreme Court case law under Section 2, … as well as the language of Section 2 itself." Sep. Stmt. of Commissioner Rosch at 3-4.

[1] All of the relevant documents, including the FTC Complaint, the Decision and Order, and Separate and Dissenting Statements respectively of Commissioners Rosch and Ohlhausen can be found on the FTC's website at http://www.ftc.gov/os/caselist/1210120/index.shtm.

[2] "F/RAND" refers to a commitment made by a patentee to an industry standard setting organization ("SSO") that the patentee will license its patents that are, or will become, essential to a standard adopted by the SSO on fair, reasonable, and non-discriminatory terms.

[3] Throughout, "SEPs" is used to refer only to F/RAND-encumbered standard essential patents. These are patents that have been designated as essential to the functionality of an approved standard, such as the telecommunications standards applicable to mobile devices operating on a 3G network, pursuant to the specifications of an SSO.

Latest LCD Criminal Conviction - Stephen Leung Of AUO Convicted On Retrial

Sheppard Mullin — Thu, 20 Dec 2012 20:39:24 -0500

By James L. McGinnis

After a 3-week trial and less than 24 hours of deliberation, a federal jury in San Francisco convicted Mr. Stephen Leung of AUO of one felony count of price-fixing in violation of Section 1 of the Sherman Act. He was charged with participating in a worldwide conspiracy to fix LCD panel prices. This was a retrial following a seven-defendant trial that concluded on March 13, 2012. In that first trial, AUO, AUO America, and two individuals were convicted of conspiring to fix LCD panel prices, but the jury hung with respect to Mr. Leung 8-4 in favor of conviction. Two other individuals were acquitted.

DOJ’s decision to retry Mr. Leung was not a surprise. It was consistent with their “get-tough” policy on international cartels, and it would have been very hard to walk away from a case in which the jury was leaning heavily toward conviction.

The result also was consistent with what often happens in the retrial of a criminal case. Retrial typically favors the government because the defense has lost the element of surprise, and the government can address whatever held the jury back in the first trial. Perhaps even more importantly, where as here the first trial involved multiple defendants, the government can focus its entire retrial case on the remaining individual. During the eight-week first trial, the government’s case against Mr. Leung may have essentially been lost in the evidence against the other defendants. Further, during that first trial, the two more senior executives who were convicted probably appeared more responsible and more culpable. On retrial, Mr. Leung lacked what may have been a helpful contrast present in the first trial.

So the government put on a much shorter, necessarily more focused case against a single individual. As the convictions in the first trial made clear, there was no shortage of documents and testimony for the government to use, this time against a defendant who could not be lost in a much longer, more complicated trial. He had attended many multi-party meetings in which the government argued price-fixing agreements were made. The government had extensive testimony from cooperating witnesses and, more importantly, contemporaneous documents—including emails—that corroborated their testimony. That evidence, and the government’s advantage on retrial proved to be too much for Mr. Leung to overcome. His sentencing likely will take place in 90-120 days. The individuals previously convicted received three-year prison terms and $200,000 fines.

Challenge To Alleged Restraints On Baseball And Hockey Programming Survive Motion To Dismiss And Advance To The Next Round Of Litigation

Sheppard Mullin — Wed, 19 Dec 2012 13:34:58 -0500

By David Garcia and Leo Caseria

Have you ever been away from home when your favorite baseball or hockey team is playing an important game? Ever wished you could watch that game, and just that game, live while you are on the road? If plaintiffs in Laumann v. Nat’l Hockey League, Case No. 1:12-cv-01817 (S.D.N.Y.) have their way, you might get your wish. On December 5, 2012, District Judge Shira A. Scheindlin largely denied a motion to dismiss plaintiffs’ Sherman Act Section 1 and 2 claims challenging agreements that allegedly restrain the markets for baseball and hockey programming. Plaintiffs, consumers of television and internet packages that include baseball and hockey programming, allege that competition has been eliminated in the distribution of baseball and hockey games through a web of collusive agreements between and among numerous defendants, including the National Hockey League (“NHL”), Major League Baseball (“MLB”) (collectively, the “Leagues”), the teams within those leagues, regional sports networks that televise the games (“RSNs”) and multichannel video programing distributors (“MVPDs”) Comcast and DirecTV, which sell cable programming packages. Defendants’ agreements purportedly divide the market into exclusive “in-market” territories protected by blackouts, prohibit any option for viewing in-market games on the internet, and provide consumers with only one option for viewing “out-of-market” games, an all-or-nothing package containing all out-of-market games. The result, according to plaintiffs, is a double play—higher prices and reduced output of sports programming.

According to plaintiffs, the teams within the MLB and NHL own the rights to telecast their own home games. Each team permits visiting teams to generate their own telecasts as well. RSNs negotiate with teams for the rights to broadcast their games locally (“in market” games). RSNs then sell programming to MVPDs, and MVPDs sell a standard package of programs to consumers that includes in-market games. The teams give the Leagues exclusive rights to broadcast their games outside of the in-market region (“out-of-market” games). In order to watch out-of-market games, consumers have to purchase an all-or-nothing television package from an MVPD or an all-or-nothing internet package directly from the League, with one exception—a small percentage of games are nationally televised pursuant to agreements between the Leagues and national networks. If a consumer wants to purchase a package that includes all in-market, out-of-market and nationally televised games, the only option is through a television package offered by MVPDs; no internet option exists.

Defendants raised numerous arguments in their motion to dismiss but largely struck out with Judge Scheindlin. Even though plaintiffs purchased programming from MVPDs and not directly from the Leagues or the teams, she held that plaintiffs did not lack standing under Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977). Consumers had standing, according to Judge Scheindlin, because plaintiffs alleged that the RSNs and MVPDs were co-conspirators, making consumers the first non-conspirator purchasers in the chain, and therefore not “indirect” purchasers within the meaning of Illinois Brick. The Court also ruled that, under Associated Gen. Contractors v. Cal. State Council of Carpenters, 459 U.S. 519 (1983), consumers of out-of-market packages were “the most efficient enforcers” of the antitrust laws in this instance, because they were consumers in the allegedly restrained markets for professional baseball and hockey video presentations, and also because all of the more direct purchasers were alleged co-conspirators. However, the Court agreed with defendants’ argument that consumers of Comcast and DirecTV who did not subscribe to out-of-market packages lacked standing because their “coincidental” purchase of in-market sports programming as part of an overall cable package made them too remote to be “proper plaintiffs” and their damages too speculative.

The Court also held that plaintiffs’ Sherman Act Section 1 claims were sufficiently stated, rejecting defendants’ arguments that their conduct was immune or presumptively legal. Judge Scheindlin explained that under American Needle, Inc. v. Nat’l Football League, 130 S. Ct. 2201 (2010), the fact that teams are organized into Leagues does not make their conduct immune under Sherman Act Section 1, because the teams “do not possess either the unitary decisionmaking quality or the single aggregation of economic power,” of a single entity and lacked common objectives. Thus, agreements regarding out-of-market games are properly the subject of Section 1 scrutiny. The Court also held that RSNs’ vertical agreements with teams for the right to produce video presentations of games in exchange for local monopolies could be challenged under Section 1 as either (1) vertical agreements facilitating horizontal collusion among the teams; or (2) horizontal collusion between RSNs, based on plaintiffs’ allegations that each RSN only entered into these agreements contingent upon all other RSNs entering into similar agreements. Similarly, the Court held that MVPDs’ vertical agreements with RSNs also facilitated, and were essential to, horizontal market divisions, since MVPDs are the parties that actually implement them. In addition, MVPDs own and control several RSNs, and directly benefit from restrictions on internet streaming of in-market games.

To survive defendants’ motion to dismiss, plaintiffs’ allegations had to raise a “reasonable expectation” that discovery would lead to evidence of injury to competition. The Court held that plaintiffs sufficiently alleged harm to competition because plaintiffs alleged that in a competitive market, each team would try to increase, not decrease, opportunities for consumers to view their games. The Court rejected defendants’ argument that the all-or-nothing out-of-market packages offered by the Leagues eliminated this harm, noting plaintiffs’ allegations that even with these packages, consumer choices were reduced and prices increased.

With respect to plaintiffs’ Sherman Act Section 2 claim, the Court held that plaintiffs had sufficiently alleged a monopolization claim against the teams and the Leagues. Plaintiffs sufficiently alleged that these defendants had monopoly power within a relevant market characterized by high barriers to entry, and had used that power to restrain competition. Specifically, plaintiffs alleged that the teams and the League had monopoly power in the alleged relevant market for the provision of professional baseball and hockey games via the internet and television, because only they had the power to produce games. Defendants allegedly used that monopoly power to restrict competition through the agreements described above. However, the Court dismissed plaintiffs’ Section 2 claims against the RSN and MVPD defendants, because plaintiffs did not allege that they had monopoly power or that they participated in a conspiracy to monopolize.

Supreme Court Will Now Hear Two Appeals Concerning Class Arbitration

Sheppard Mullin — Fri, 14 Dec 2012 09:15:17 -0500

By David Garcia and Leo Caseria

On Friday, December 7, 2012, the Supreme Court granted certiorari in Oxford Health Plans LLC v. John Ivan Sutter MD, No. 12-135 to address whether the parties to an arbitration agreement authorize class arbitration when the agreement provides that “any dispute” will be submitted to arbitration. The Third Circuit’s decision in Oxford, which upheld an arbitrator’s decision to proceed with class arbitration based on such an agreement, presents a potential conflict with the Supreme Court’s decision in Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 130 S. Ct. 1758 (2010), which held that class arbitration cannot be imposed on parties that have not agreed to it. The Supreme Court has been extremely interested in the topic of class action waivers and arbitration agreements recently. The Court’s decision to hear Oxford comes less than a month after it also granted certiorari in American Express Company vs. Italian Colors Restaurant, No. 12-133 (“AMEX”) to address the following question: “Whether the Federal Arbitration Act permits courts, invoking the ‘federal substantive law of arbitrability,’ to invalidate arbitration agreements on the ground that they do not permit class arbitration of a federal-law claim.” (Previously blogged at Supreme Court to Address Enforceability of Arbitration Agreements and Class Action Waivers Yet Again).

The Supreme Court has also taken on cases involving class action waivers and arbitration agreements in each of the last three years. See, e.g., CompuCredit Corp. v. Greenwood, 132 S. Ct. 665 (2012) (holding that an arbitration agreement could be enforced in a case involving claims under the federal Credit Repair Organizations Act (CROA), because the CROA is silent on whether arbitration is permissible); AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) (holding that a class action waiver in an arbitration agreement was enforceable because the FAA preempts state law); Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 130 S. Ct. 1758 (2010) (holding that class arbitration cannot be imposed on parties that have not agreed to it). The Court’s decision to now hear AMEX and Oxford at the same time indicates that the Supreme Court may intend to settle important questions about class action waivers and arbitration agreements once and for all, in decisions that may dramatically change the landscape of antitrust and other kinds of class actions.

JFTC Releases Survey on Corporate Compliance Efforts and Recommends Best Practices

Sheppard Mullin — Thu, 06 Dec 2012 14:40:48 -0500

By Jennifer Driscoll-Chippendale

On November 28, 2012, the Japan Fair Trade Commission (“JFTC”) published the findings of its 2012 survey of corporate compliance practices based on (i) responses from approximately 879 companies listed on the Tokyo Stock Exchange; (ii) interviews of six attorneys specializing in corporate or antitrust law; and (iii) interviews of 82 companies with informative examples of success or failure. The JFTC’s report, titled “Survey on Corporate Compliance Efforts with the Antimonopoly Act (Summary),” coincides with an unprecedented era of administrative and criminal enforcement against Japanese companies and executives by the JFTC and U.S. Department of Justice, Antitrust Division. Although the results pertained to compliance with Japan’s Antimonopoly Act (“AMA”), the principles can be applied to ensure compliance with virtually any competition law regime.

The JFTC report maintains that a program “aimed only at preventing conduct[ ] against the AMA is insufficient” to curtail antitrust violations within an enterprise. Instead, the JFTC advocates standards described as “the 3Ds” to control and avoid antitrust risk:

Deterrence: Preventing violations of the AMA through training and other measures.
Detection: Early discovery of AMA violations through audits.
Damage control: Appropriate responses to violations of the AMA.

Deterrence

According to the survey, the perceptible support of upper management is “the most important element for ensuring the effectiveness of AMA compliance.” Upper management can demonstrate its commitment to upholding antitrust law through compliance programs and by charging departments and personnel not only with preventing AMA violations, but with helping the sales force achieve its goals in the bounds of the law.

However, the JFTC aptly observed that “[s]pecific risks of individual companies concerning AMA violations differ significantly according to the business content, market environment, and other factors.” To be effective, compliance programs must be tailored to the unique circumstances of the enterprise, such as “the business size, business content, and organizational climate, and external factors including the actual state of the industry, the market situation, and relevant legal systems.” In a similar vein, effective training should also take into account the different products (fungible versus specialized) that are sold and different roles (sales versus administrative) that employees have within the company.

Detection

The JFTC report cited two means of detecting violations of the AMA: (i) obtaining information directly from employees; and (ii) discovering conduct through “activities of the legal and compliance department”—specifically, audits. To encourage employees to disclose AMA violations, the JFTC recommended internal reporting systems and in-house leniency policies. However, “the mere introduction of an internal reporting system is not sufficient.” Upper management must ensure that the existence of the system—and how to use it—is clearly communicated to employees. The JFTC also suggested “creative measures” for conducting audits, such as scrutinizing winning bids or monitoring internal emails.

Damage Control

As with deterrence and detection, upper management plays a significant role in damage control. Eighty-five percent of the companies that responded to the survey place the decision of whether to open an investigation in the hands of their top executives. Upper management also “should show its initiative to secure the employees’ cooperation [during an] internal investigation,” including document collection and preservation efforts.

Recognizing that an internal investigation and, if appropriate, a leniency application may require expertise and resources beyond those encountered in the ordinary course of business, the JFTC favors compiling a “contingency manual” that describes “how to consult the JFTC, how to apply to the leniency program, staffers in charge of internal investigations, the reporting and instructing channels from the department responsible to senior management, and the outlines of the AMA.” However, only 3.2% of the responding companies have such a manual for AMA violations.

Conclusion

The JFTC report outlines best practices not only for Japanese companies seeking to comply with the AMA, but any company operating in a market that is at risk for antitrust misconduct. For more information, the report is available at http://www.jftc.go.jp/en/pressreleases/121128AMA_Compliance.pdf.

Large General Acute-Care Hospital Abandons Acquisition Of 15-Bed Surgical Specialty Center As A Result Of FTC Challenge

Sheppard Mullin — Tue, 27 Nov 2012 08:09:48 -0500

By David R. Garcia and Helen C. Eckert

Just three days after the Federal Trade Commission, jointly with the Pennsylvania Attorney General, issued an administrative complaint challenging Reading Health System’s (RHS) proposed acquisition of Surgical Institute of Reading L.P. (SIR), a 15-bed surgical specialty center, both entities abandoned the proposed acquisition, citing the high costs associated with a protracted court battle with the government. This FTC victory provides more valuable insight into how antitrust enforcement agencies are evaluating the increasing number of consolidations within the healthcare industry, particularly after passage of the Affordable Care Act. Specifically, this case highlights the government’s very granular analysis of effects on competition through highly specialized “service markets,” as well as the risk for entities that ordinary-course-of-business documents surrounding the proposed consolidation can play a significant role in the government’s challenge. It also appears to be another example of an FTC challenge to a transaction below the Hart-Scott-Rodino reporting threshold.

RHS is a comprehensive, not-for-profit health care system in Berks County, Pennsylvania which operates, among others, a 735-bed general acute-care hospital. According to the FTC, RHS has been and is the dominant healthcare provider in the Reading area due to its market share and ownership of the largest hospital, several outpatient facilities, two large physician groups, and a local provider network. The FTC included within RHS’s market share calculations an outpatient ambulatory surgery center and a provider network, of which RHS has 50 percent ownership, based on the fact that RHS has significant control over the entities’ daily operations and treats them as its own facilities in competitive analyses conducted in the ordinary course of business.

SIR, on the other hand, is a much smaller, for-profit specialty surgical center owned largely by a small group of physicians providing a variety of inpatient and outpatient surgical services, with only 15 licensed beds. Since its opening in 2007, SIR has focused on high quality of care and better patient service, achieving patient satisfaction rates above national standards and well above those of its competitors (including RHS).

The FTC’s complaint alleged that SIR has drawn significant volumes of patients in important surgical service lines away from RHS. RHS, in response, competed aggressively with SIR by lowering its rates and seeking to improve quality to attract patients back to RHS, all benefits of vigorous competition which, according to the FTC, would be lost if the acquisition were allowed to proceed. The FTC also alleged that one of RHS’s primary motivations in acquiring SIR – as evidenced by documents created by RHS executives in the ordinary course of business – was to protect its market share. The FTC’s redacted complaint suggests that RHS executives were alarmed by the loss of patients to SIR and ultimately decided that it made more sense to respond to competition from SIR by acquiring it and eliminating it as a competitor. Other internally-created RHS documents suggested that the acquisition would indeed dampen RHS’s incentive to improve quality and efficiency in response to competition from SIR. And notably, the FTC found no evidence that either RHS or SIR attempted to ever consider or quantify any likely efficiencies from the proposed acquisition.

The FTC concluded that significant anticompetitive effects could be inferred from the direct evidence alone. However, substantial increases in post-acquisition market share and market concentration in each of the relevant markets provided additional support to demonstrate that the acquisition would result in significant harm to competition. The FTC cited four highly specialized relevant “service markets” in which head-to-head competition between RHS and SIR would be eliminated: (1) inpatient orthopedic surgical services; (2) outpatient orthopedic surgical services; (3) outpatient ear, nose and throat surgical services; and (4) outpatient general surgical services. The FTC alleged that the proposed acquisition would result in combined market shares ranging from 49 to 71 percent. Notably, the FTC also hinted at the appropriateness of even more granular analysis of relevant markets delineated by a single medical procedure. For example, the FTC explained, inpatient orthopedic surgical services represented a cluster of basic orthopedic and spine surgical services, such as knee, hip and joint replacement surgeries and spinal fusions. And, while the acquisition’s “likely effect on competition could be analyzed separately for each of the dozens of affected medical procedures,” it was appropriate in this case to evaluate competitive effects across this cluster of services because they are offered to Reading area residents under similar competitive conditions (e.g., by the same set of competitors).

The FTC also alleged that high barriers to entry by new firms and the difficulties the few remaining competitors faced in expanding their services made it impossible to counteract the acquisition’s likely serious competitive harm in the relevant markets. The FTC highlighted the prohibition on both the formation of any new physician-owned hospitals and the expansion of existing ones by the Affordable Care Act, rendering it impossible for a new physicians group to replicate SIR’s 2007 entry into the market. On this point, we note that there has been a dramatic increase in physician-owned outpatient centers in the last ten to fifteen years, and owners of such facilities must be cognizant of the fact that sales of these facilities to their natural purchasers (i.e., hospitals) may be subject to full-dress review by antitrust enforcement authorities as horizontal acquisitions, particularly if such sales are driven by the Affordable Care Act’s prohibition on expansion of physician-owned hospitals.

Finally, in noting the absence of any extraordinary competition-enhancing efficiencies necessary to justify the acquisition in light of the significant potential harm to competition, the FTC relied almost exclusively on the fact that RHS and SIR did not quantify or even consider efficiencies when contemplating the proposed acquisition.

Supreme Court to Address Enforceability of Arbitration Agreements and Class Action Waivers Yet Again

Sheppard Mullin — Mon, 19 Nov 2012 08:22:16 -0500

By David Garcia and Leo Caseria

On Friday, November 9, 2012, the Supreme Court granted certiorari in American Express Company vs. Italian Colors Restaurant, No. 12-133 to address the following question: “Whether the Federal Arbitration Act permits courts, invoking the ‘federal substantive law of arbitrability,’ to invalidate arbitration agreements on the ground that they do not permit class arbitration of a federal-law claim.” As we predicted in February, the Supreme Court was likely to grant certiorari in American Express after the Second Circuit held, for the third time in the same case, that a class action waiver in an arbitration agreement between American Express and plaintiff merchants was unenforceable because it would effectively preclude plaintiffs from vindicating their federal statutory rights under the Sherman and Clayton Acts (plaintiffs are merchants alleging a Sherman Act tying claim against American Express for allegedly forcing merchants to accept American Express credit cards and debit cards as a condition of accepting American Express charge cards, at higher rates than competing credit cards and debit cards). See In re American Express Merchants' Litigation, 667 F.3d 204 (2d Cir. 2012) ("AMEX III") (previously blogged at In re American Express Merchants' Litigation - Plaintiffs Survive Three Rounds In The Second Circuit, But Can They Survive The Supreme Court?). To reach its decision, the Second Circuit had to bob and weave its way around three recent Supreme Court decisions all upholding the express terms of arbitration agreements under the Federal Arbitration Act (“FAA”): CompuCredit Corp. v. Greenwood, 132 S. Ct. 665 (2012) (holding that an arbitration agreement could be enforced in a case involving claims under the federal Credit Repair Organizations Act (CROA), because the CROA is silent on whether arbitration is permissible); AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) (holding that a class action waiver in an arbitration agreement was enforceable because the FAA preempts state law); Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 130 S. Ct. 1758 (2010) (holding that class arbitration cannot be imposed on parties that have not agreed to it). American Express will now become part of this line of cases.

In its Petition for Writ of Certiorari and Reply in support of the Petition, American Express asserted that the Second Circuit ignored and disregarded the Supreme Court’s recent decisions. It characterized AMEX III as creating a “sweeping, unwritten loophole” to the FAA. According to American Express, it makes no sense and would eviscerate Concepcion to hold that the FAA permits courts to ignore class action waivers in cases involving federal law claims but not state law claims, since it is not difficult for a plaintiff to “manufacture” a federal statutory claim. American Express also argued that the Second Circuit had misread and improperly expanded dicta from two earlier Supreme Court cases (Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 90 (2000) and Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 (1985)) regarding “effective vindication” of rights. According to American Express, neither case suggested that class arbitration could be imposed if plaintiffs simply proved that the cost of litigating an individual case exceeded the potential recovery or was otherwise “prohibitive,” which would give plaintiffs “an easy-to-follow roadmap . . . to invalidate literally millions of arbitration agreements nationwide.” Instead, Mitsubishi involved the choice of substantive antitrust law in arbitration, while Green Tree concerned excessive arbitration fees. American Express further noted that AMEX III not only conflicts with Supreme Court precedent, but also with other federal circuit court decisions. In particular, American Express cited a recent case involving federal claims against AT&T based on service agreements, Coneff v. AT&T Corp., 673 F.3d 1155 (9th Cir. 2012) where the Ninth Circuit upheld a class action waiver, holding that a class action was not the only economically feasible means for plaintiffs to effectively vindicate their federal statutory rights. See 673 F.3d at 1158-59 & n.3.

American Express’s position echoes the views of Second Circuit Court of Appeals Chief Judge Dennis Jacobs, who American Express cited in its Petition. On May 29, 2012, the Second Circuit denied rehearing en banc in AMEX III. See In re American Express Merchants' Litigation, 681 F.3d 139 (2d Cir. 2012) (“AMEX IV”). In Judge Jacobs’ dissent, he described AMEX III as “a broad ruling that, in the hands of class action lawyers, can be used to challenge virtually every consumer arbitration agreement that contains a class-action waiver – and other arbitration agreements with such a clause.” AMEX IV, 681 F.3d at 143 (Jacobs, J. dissenting). Judge Jacobs also found AMEX III’s attempt to distinguish Concepcion as a case involving state law rather than federal law a “labored analysis” that “does not rise to a distinction.” Id. at 146.

Respondents argued that AMEX III correctly applied the “effective vindication” analysis set forth in Green Tree and Mitsubishi. Because respondents had proven that the cost of proving individual claims would “dwarf” each claimant’s possible recovery, the class action waivers were unenforceable. Respondents characterized the effective vindication principle as a “fundamental” principle that the Court had “repeatedly reaffirmed” in a number of decisions through the years. Respondents also noted that the effective vindication rule sets a very high bar, one that is “almost never met.” Respondents explained that AMEX III did not conflict with Concepcion, because Concepcion only addressed a conflict between the FAA and state law, not a conflict between the FAA and federal law. Moreover, Respondents asserted that since Concepcion, the trend has been to include “consumer-friendly” terms in arbitration agreements similar to those at issue in Concepcion, terms which are absent from the 8-year-old American Express arbitration agreement at issue. Respondents also distinguished Coneff as simply a case involving different facts. According to respondents, the Ninth Circuit applied the same law as the Second Circuit, but to different facts, when it held that the individual claimants in Coneff could effectively vindicate their rights without class procedures.

Many will likely be surprised if the Court decides that the class action waiver in American Express’s arbitration agreement is unenforceable. The Court’s recent decisions all seem to favor strictly enforcing the terms of arbitration agreements. In addition, the Court used broad language in Concepcion, holding that the purpose of the Federal Arbitration Act “is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings. Requiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.” 131 S. Ct. at 1740. The Court in Concepcion also rejected the notion that “class proceedings are necessary to prosecute small-dollar claims that might otherwise slip through the legal system.” Id. at 1753. On the other hand, Concepcion did not squarely address the enforceability of class action waivers in cases involving federal claims, and the Court’s earlier decisions in Green Tree and Mitsubishi may establish a potentially applicable exception to the enforceability of class action waivers when “effective vindication” of federal statutory rights is impossible without class procedures. Indeed, direct purchaser plaintiffs almost always rely on class procedures to effectively vindicate their rights under Sherman Act Section 1, where the disparity between individual damages and the cost to prove those damages is typically far greater than in other types of cases. At the very least, the Supreme Court’s decision in American Express will tell us whether American Express’s arbitration agreement is enforceable against the federal antitrust claims that have been asserted against it. But the Supreme Court also has the opportunity to render what may be its most important decision yet in the area of arbitration agreements and class action waivers, and clarify the scope of numerous earlier decisions, including Concepcion, Mitsubishi, and Green Tree, among others.

FTC Issues Revised "Green Guides"

Sheppard Mullin — Thu, 11 Oct 2012 12:20:03 -0500

By Robert Magielnicki

On October 1, 2012, the Federal Trade Commission issued revised “Guides For The Use Of Environmental Marketing Claims” – the “Green Guides,” 16 CFR Part 260. The Green Guides originally were issued in 1992 and were revised in 1996 and 1998. The review resulting in the latest revisions began in November 2007.

The Green Guides set forth the FTC’s views concerning environmental claims and are intended to help marketers avoid making environmental marketing claims that are unfair or deceptive and thus violative of Section 5 of the FTC Act. The Guides are administrative interpretations of the law and thus do not have the force and effect of law. However, the FTC can take action under the FTC Act if a marketer makes an environmental claim that is inconsistent with the Guides.

The Guides apply to claims about the environmental attributes of a product, package or service in connection with the marketing or sale of such item or service to individuals or in business-to-business transactions. They apply to claims in labeling, advertising, promotional materials and all other forms of marketing in any medium, whether asserted directly or by implication.

The Green Guides consist of general principles, specific guidance on the use of particular environmental claims, and examples. They begin by reaffirming the FTC’s long-standing position regarding deceptive advertising claims:

A claim is deceptive if it is likely to mislead consumers acting reasonably under the circumstances and is material to consumers’ decisions.
Marketers must identify all express and implied claims that the advertisement reasonably conveys, and ensure that all such claims are truthful, not misleading, and supported by a reasonable basis before the claims are made.
A reasonable basis often requires competent and reliable scientific evidence consisting of tests, analyses or studies conducted and evaluated in an objective manner by qualified persons and are generally accepted in the profession to yield accurate and reliable results.

The Green Guides underscore the FTC’s antipathy to general environmental claims, such as “green” or “eco-friendly.” According to the FTC, such claims are difficult to interpret and likely convey a wide range of meanings. In many cases, such claims convey that the product has far-reaching environmental benefits with no negative environmental impact. “Because it is highly unlikely that the marketers can substantiate all reasonable interpretations of these claims, marketers should not make unqualified general environmental benefit claims.”

The Green Guides also provide that an environmental claim should specify whether it refers to the product, the packaging, a service or just a portion of the product, packaging or service. Qualifications and disclosures should be clear, prominent and understandable. This includes using plain language and sufficiently large type, placing disclosures in close proximity to the qualified claim, and avoiding inconsistent statements. Comparative claims should be clear and substantiated. With regard to third party certifications and seals of approval, the Guides warn that they may be an endorsement subject to the FTC’s Endorsement Guides and that their use must include the specific basis for the certification or seal.

The Guides also provide specific guidance, including examples, for a plethora of particular environmental claims. These include:

Carbon Offsets
Certifications and Seals of Approval
Compostable Claims
Degradable Claims
Free-Of Claims
Non-Toxic Claims
Ozone-Safe and Ozone-Friendly Claims
Recyclable Claims
Recycled Content Claims
Refillable Claims
Renewable Energy Claims
Renewable Materials Claims
Source Reduction Claims

The Green Guides can be found at http://business.ftc.gov.

California Attorney General Becomes the Latest Antitrust Enforcer to Investigate Hospital/Doctor Group Combinations

Sheppard Mullin — Mon, 24 Sep 2012 09:19:12 -0500

By David R. Garcia and Helen C. Eckert

California’s Attorney General has recently launched a broad investigation into whether increasing consolidation among hospitals and physician groups may be resulting in supra-competitive prices for medical care, according to several media sources. This investigation reflects increased scrutiny by antitrust regulators on a nationwide basis of rapid consolidation among the healthcare industry, which in large part has recently been motivated by the federal Affordable Care Act which encourages efficiency and higher quality through coordination of care among different groups of providers.

The California Attorney General has issued subpoenas to several large hospital systems in California, including Cottage Health System in Santa Barbara, Dignity Health in San Francisco, Sutter Health in Northern California, and Scripps Health and Sharp Healthcare in San Diego. It has also issued subpoenas to large health insurers in the State, and the focus of the investigation appears to be whether the hospital systems’ consolidations with physician groups are conferring on them enough market power to result in a lessening of competition and raising of prices which implicate antitrust concerns.

And, as mentioned, the California Attorney General is not alone in its close scrutiny of hospital’s acquisitions of physician groups. In April 2011, the Federal Trade Commission (in conjunction with the Washington Attorney General) made its first public announcement of an investigation into a proposed physician practice acquisition: one by Providence Health & Services to acquire two cardiology practices in Spokane, Washington (FTC File No. 101 0191). Notably, these proposed acquisitions constituted non-reportable transactions below the Hart-Scott-Rodino threshold. The FTC nevertheless expressed serious concerns regarding possible anticompetitive effects of the acquisitions that could increase healthcare costs in the Spokane area in violation of Section 7 of the Clayton Act. While the parties ultimately abandoned the acquisitions, the FTC made clear that it was closely watching such physician acquisitions which, although having the potential to generate cost savings and quality benefits for patients, also, in some cases, could “create highly concentrated markets that may harm consumers through higher prices or lower quality of care,” and vowed that “the Commission will aggressively enforce the antitrust laws to ensure that consolidation among health care providers will not increase health care costs in local communities across the United States.”

A more recent FTC action resolved just last month (in conjunction with the Nevada Attorney General) challenging Renown Health’s acquisition of two cardiology practices in Reno (FTC File No. 111 0101) also demonstrates the unwillingness of antitrust agencies to overlook potentially anticompetitive acquisitions because of the relatively small size of the transaction, but more significantly, the agencies’ recent inclination to analyze market effects using a very granular, specialty-by-specialty approach. In that action, Renown had acquired one practice consisting of fifteen cardiologists, and a second consisting of sixteen cardiologists. The FTC alleged that this consolidation of two competing cardiology practices into one eliminated competition based on price, quality, and other terms, and led to increased bargaining power of Renown in relation to its payors, resulting in the potential to increase prices. The consent decrees ordered Renown to allow up to ten cardiologists to terminate their employment with it, and prohibited Renown from enforcing non-compete provisions in their employment agreements. The FTC’s analysis of effects on competition through a very granular, specialty-by-specialty basis is, as far as we can determine, as granular as the antitrust analysis has gotten since the beginning of reported actions in healthcare. And, it is likely no coincidence that the granular approach taken in Renown Health is the same specialty-by-specialty approach taken by the FTC and DOJ when analyzing the likely competitive effects of recently-mandated accountable care organizations in their Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations, notwithstanding the agencies’ disclaimer that the statement did not apply to mergers.

It is important to keep in mind, however, in the face of these recent regulatory challenges, the particular antitrust analysis which governs most traditional hospital, physician group consolidations, i.e., non-horizontal mergers. That is, while conventional merger analysis under Section 7 of the Clayton Act (or Section 2 of the Sherman Act) analyzes either the likely market power (or the actual market power) of the merged entity in the relevant market, non-horizontal merger analysis like that required of hospital, physician group consolidations is much more difficult to quantify as there is no overlap in the respective products or services of the merging entities. As such, antitrust enforcement agencies have more recently left largely unchallenged mergers with no product overlap. The increased regulatory interest in the recent rise in hospital, physician group consolidations, however, will require dusting off methods of non-horizontal merger analysis not widely applied in quite some time. Such an analysis requires attempting to determine whether the new entity could preclude other hospitals or physician groups from competing effectively in the relevant geographic market.

Another important issue to keep in mind is that while hospitals may not continue to take for granted exclusivity provisions which restrict the ability of its physician employees to contract individually with payors or affiliate with other entities, determinations of the legality of exclusivity provisions, if challenged, will necessitate a full-blown, fact-dependent rule of reason analysis weighing the potential anti-competitive effects of exclusivity with its pro-competitive efficiencies. This requires a case-by-case inquiry analyzing the market share of the participants in the relevant market, the terms of the exclusive arrangement at issue, the number of physicians required for the hospital provider and its competitors to compete effectively, and the justifications proffered for the exclusivity. Furthermore, exclusivity can take on various forms which in turn can impact the antitrust analysis: exclusivity in horizontal physician group consolidations generally raises more antitrust concerns than exclusivity within a non-horizontal context.

That said, it would be unwise for hospitals and physician groups to take wholesale comfort in the currently somewhat novel, non-horizontal merger analysis or the rule of reason standard governing exclusive agreements given the costs and uncertainty associated with the burden of responding to investigations by antitrust enforcement agencies like the ones outlined above. Moreover, in California, the Attorney General has the broad, essentially unreviewable discretion, to bar any proposed transaction which sells, transfers, or otherwise transfers control of a nonprofit hospital or its material assets to a for-profit entity, and the Attorney General may consider any number of factors deemed relevant by the Attorney General, including whether the proposed transaction is “fair and reasonable” and is in the “public interest” (Cal. Corp. Code §§ 5914).

Only time will tell if the new federal mandate for integration and coordination among different groups of providers will pave the way for more specific, concrete guidance from the various antitrust enforcement agencies as to how to legally structure hospital, physician group consolidations. In the meantime, interested parties will necessarily have to proceed carefully in order to minimize the risk of antitrust scrutiny and maximize the chances of successful outcomes.

In Agricultural Regulation, A "Flawed Rate" is Not a "Filed Rate" For Damage Purposes

Sheppard Mullin — Wed, 19 Sep 2012 08:51:23 -0500

By Don T. Hibner, Jr.

Notwithstanding the general applicability of the Filed Rate Doctrine, the Ninth Circuit recently held that it does not necessarily bar producer class actions for overcharges. Whether a given rating authority has “rejected” a rate under its regulatory jurisdiction, albeit after the fact, is a creature of its statutory framework. Gerald Carlin, et al. v. DairyAmerica, Inc., et al., No. 10-16448 (9th Cir. August 7, 2012).

The United States Department of Agriculture (“USDA”), pursuant to the Agricultural Marketing Agreement Act of 1937 (“AMAA”), is authorized to issue Federal Milk Marketing Orders (“FMMO’s”) to regulate minimum prices to be paid by “handlers” to “producers” of various milk products. Under the statutory scheme, the Secretary of Agriculture must conduct an appropriate rule making proceeding in order to issue an FMMO. An FMMO may be issued only if the evidence produced at the hearing shows that it will tend to effectuate the policy of the legislation, in displacing competition to enhance producer prices. Before an FMMO may become effective, it is subject to approval by 50% of the handlers subject to the proposed order, and at least two-thirds of the affected dairy milk producers.

An FMMO sets forth the minimum price to be paid to producers, and is subject to a complicated formula depending on the blend price of the milk ingredients covered. In addition, an FMMO merely covers some, but not all regions of the United States.

In Carlin v. DairyAmerica, Inc., the Ninth Circuit upheld a ruling by the Eastern District of California that the Filed Rate Doctrine was applicable to the FMMO involved. However, the Court of Appeals also held that the District Court had erred in concluding that the Filed Rate Doctrine barred the maintenance of plaintiffs’ claims, including claims under California’s Unfair Competition Law, Business and Professions Code § 17200.

The Court of Appeals noted that, notwithstanding that the minimum prices established by the FMMO in question were “market prices”, the Filed Rate Doctrine was nevertheless applicable. This was because the statutory framework of the AMAA evidenced an intent to regulate the commercial activity covered. If the USDA determines that market prices are “fair and reasonable”, they are so determined, as a matter of law.

The plaintiffs are “dairy farmers” who sold raw milk, priced in accordance with the FMMOs, during the period from January 2002 to April 30, 2007. Defendant DairyAmerica Inc. (“DairyAmerica”) is a non-profit entity established by a group of nine dairy cooperatives for the purpose of marketing dairy products manufactured by the plaintiff dairy farmers. It is alleged that DairyAmerica sold approximately 75% of the non-fat dry milk (“NFDM”) produced in the United States during the applicable period. The District Court held that because of the promulgation of the FMMOs regulated by the Department of Agriculture, any suit by plaintiffs claiming that the FMMO prices reflected an “overcharge” would be barred by the Filed Rate Doctrine, and not allowed to proceed.

How is it different on appeal? A few more record facts are in order. During the covered period, DairyAmerica submitted price information to USDA that improperly included wholesale prices for “forward” contracts. It is undisputed that 90% of the contracts executed and reported by DairyAmerica to USDA were such forward contacts, and according to established procedures, should not have been reported. Plaintiffs contend that because these contract prices were significantly below spot prices, the minimum prices set by the FMMOs were significantly lower than they should have been, if accurate information had been submitted. Because of DairyAmerica’s market dominance, the submissions of the erroneous reports allegedly had the effect of pushing the FMMO minimum prices noticeably lower. Thus, because of its own misreporting, DairyAmerica garnered significant financial benefits, to the detriment of the plaintiff dairy farmers.

The misreporting was made public in a March, 2007 dairy industry publication, “The Milkweed”. The fact of the misreporting was subsequently confirmed by DairyAmerica’s CEO. Within a month of the publication, USDA requested that all of the firms reporting NFDM data review their weekly price and sales commissions, and submit revisions. The revised submissions were “spotty”, and USDA was unable to calculate a corrected minimum price.

In March, 2009, each plaintiff filed a class action on behalf of a nationwide class of raw milk producers in federal court, based upon state law violations and diversity jurisdiction. The actions were consolidated in the Eastern District of California. An amended class action complaint sought damages for negligent misrepresentation, negligent interference of prospective economic advantage, as well as violations of California Business and Professions Code section 17200.

Defendants filed motions to dismiss on a number of grounds, all related to the Filed Rate Doctrine. The District court dismissed the monetary portions of the plaintiffs’ claims on the ground that they were not justiciable pursuant to the Filed Rate Doctrine. Noting that the Filed Rate Doctrine consists of a body of case law that has been subject to conflicting interpretations, the District Court’s dismissal was with leave to amend.

Plaintiffs’ initial appeal was dismissed as it was not a final order. Plaintiffs then moved the District Court to dismiss their complaint with prejudice, so that the Court of Appeals could exercise jurisdiction. It did so.

In reversing the District Court’s dismissal of the monetary claims, the Court of Appeals distinguished, in large part, Filed Rate Decisions based upon other statutory authority, including ICC and Department of Energy cases (FERC). While the Ninth Circuit recognized that the Filed Rate Doctrine generally provides that state law, and some federal law, including the antitrust laws, may not be used to invalidate a filed rate or assume a rate to be charged other than the rate adopted by the federal agency in question, the Court noted that the federal statutory enactments are dissimilar in many regards, and are a function of the congressional history and statutory language involved.

Thus is the case with milk. While the Ninth Circuit upheld the basic integrity and rationale of the Filed Rate Doctrine, the AMAA leads to a different conclusion, where the defendants themselves filed erroneous data, and duped the regulator. The Court noted that state efforts to regulate commerce must fail when they conflict with or interfere with federal authority over the same activity. Allowing the courts to second guess the federal agency in its determination of a rate, based upon industry filings, would destroy the federal interest in uniformity. In addition, the Court recognized that courts have no expertise or valid reason to interfere in the rate-making process. It recognized the authorities standing for the proposition that when a federal agency statutorily granted the authority to set rates exercises that authority, such rates are just and reasonable as a matter of law, and cannot be collaterally challenged under either federal antitrust law of state law.

But wait a minute! Here, the result is different. Why? When the USDA become informed that defendants, representing 75% of the affected industry, submitted data that was 90% inaccurate, and where the USDA had taken remedial steps to try and correct the situation, what would normally be a filed rate then became a fraud on the industry, and the regulatory agency. The Court held that the USDA had the authority, and exercised the authority, to correct the situation as best as it could, and that, in effect, what defendants argued was a “filed rate”, became a “flawed-rate”, and thus not a bar to plaintiffs’ claim for overcharges. Otherwise, the defendants would benefit from their own misdeeds. On the record before it, the Ninth Circuit held that the rejection of the flawed rate could be retroactive.

In essence, the Court of Appeals held that a flawed filed rate does not pre-empt or otherwise operate as a bar to the plaintiffs’ lawsuit. This is because the federal agency, namely the USDA, had itself determined that the FMMO prices were incorrect. Citing Keogh v. Chicago & Nw. Ry. Co., 260 U.S. 156, 163 (1922), the Court noted that the Supreme Court has held that the Filed Rate Doctrine is inapplicable to bar a private litigant’s rate-related claim, where the rate has been “suspended” or “set aside” by the federal agency in question. The Ninth Circuit held that this was the situation here, based upon a proper analysis of the underlined statutory scheme of USDA rate regulation. The Court noted that unlike the natural gas market, for example, there is nothing in the AMAA that specifically bars the USDA from revising its rates where handlers have supplied incorrect data to the agency. In such a situation, as in the instant case, the Filed Rate Doctrine is not a bar to a plaintiff seeking reparation from the imposition of the unreasonable rate. The Court concluded that the USDA’s actions constituted a sufficient rejection such that the filed rate doctrine is not a bar. In addition, it concluded that the statutory mandate of the AMAA, as well as the policies of the Filed Rate Doctrine more generally, were furthered by the conclusion that the filed rate doctrine is not a bar to the plaintiff’s claims for monetary reparation for the defendants’ misconduct. In effect, and in drawing from the conclusion of the Bard in Hamlet, Act III, the defendants were “hoisted with their own petard.” Under AMAA at least, there is no such thing as a “Flawed Filed Rate” bar to the recovery of handler-induced over-charges.

Anti-Competitive Conduct in China: A Dialogue with NDRC and SAIC Officials on Enforcement under China's Anti-Monopoly Law

Sheppard Mullin — Wed, 19 Sep 2012 08:50:32 -0500

On August 27, 2012 the American Chamber of Commerce, Beijing, hosted a luncheon meeting where Ms. Li Qing, Deputy Director, National Development and Reform Commission (“NDRC”) Price Supervision and Anti-Monopoly Bureau, and Ms. Yang Jie, Section Head, the State Administration for Industry and Commerce (“SAIC”) Anti-Monopoly Law Guidance Division spoke on their respective enforcement activities as well as answered questions from the audience. Ms. Becky Koblitz, Special Counsel, Sheppard Mullin Richter & Hampton moderated the panel.

The following is a brief summary of the event.

Introduction: Ms. Koblitz, Sheppard Mullin Richter & Hampton

Enforcement related to anticompetitive conduct is split between the NDRC and SAIC. The NDRC handles price-related violations and SAIC the non-price related violations. The Anti-Monopoly Law (“AML”) has been in effect since August 2008 and continues to evolve on two levels as the agencies adopt additional regulations to provide more guidance and clarification and as the agencies interact with antitrust authorities world-wide.

Effective early 2011, the NDRC and SAIC adopted rules setting forth how the two agencies would enforce the AML with respect to anticompetitive conduct (the terminology used in the AML is monopoly agreements and abuse of dominance). In July 2011, a Memorandum of Understanding (“MOU”) was signed between the US Department of Justice (“DOJ”) and US Federal Trade Commission (“FTC”) and the three Chinese enforcement agencies—NDRC, SAIC and Ministry of Commerce (“MOFCOM”) which focuses on merger control—under which they agreed to cooperate in developing competition policy and enforcement. The combination of the enforcement regulations and international cooperation has given the NDRC and SAIC more impetus to investigate and conclude cases.

In late 2011 the NDRC opened an investigation of China Telecom and China Unicom, which allegedly restricted broadband access through their pricing policies. The investigation was suspended after the two parties promised to improve internet interconnection quality, adjust their pricing system and improve the broadband network in China. In 2012, the Henan provincial division of SAIC settled a cartel case against eleven used car dealerships. The used car dealerships entered into agreements to, for example, allocate markets, unify service fees, and centralize operations. The dealerships’ illegal income (RMB 1,470,000) was confiscated and a fine (RMB 265,000) was imposed. Foreign companies doing business in China would be well advised to have effective antitrust compliance programs to prevent risks and losses related to anticompetitive activities.

NDRC: Statutory framework, types of conduct, cases: Ms. Li, NDRC

Under the AML, the NDRC’s duty is to investigate monopolistic conduct related to pricing such as price-fixing agreements among competitors, abuse of dominant positions through pricing, and the abuse of administrative positions through pricing. The NDRC’s Bureau of Price Supervision and Anti-Monopoly is responsible for antitrust enforcement. Based on the AML and subsequent decisions and provisions, the NDRC delegated enforcement authority to the provincial and municipal price control departments. NDRC issued implementation regulations which shed more light on the types of conduct which is prohibited and how the agency will enforce the AML.

The Provisions on Anti-Monopoly covers three types of behavior: monopoly (collusive) agreements related to pricing, abuse of dominant market positions by means of pricing, and abuse of administrative power by means of pricing. The Provisions on Administrative Procedures for Law Enforcement of Anti-Price Monopoly covers topics such as reporting a suspected violation, the responsibilities of the government and the rights of the targets in investigations, leniency programs, suspension of investigation and responsibilities of the price departments.

The following are examples of monopolistic conduct related to pricing:

Horizontal pricing agreement where competing companies agree to fix or change prices.

A paper association in Shejiang comprised of 20-plus members met five times in 2010 to jointly discuss ex-factory pricing of white packaging paper. The association was fined RMB 500,000.
Vertical monopolistic pricing agreement where industry associations have agreements for its members that fix prices, change prices or restrict the minimum resale prices to third parties.

The members of the association for book publishing companies were required to agree to certain conduct, such as “newly published books which have been on the retail market for less than one year shall not be discounted” and “discount price shall not be lower than 85% of the price shown on colophon page.” The NDRC demanded the removal of such restrictions.
Abuse of dominant market positions where companies use their dominant position to sell commodities at unfairly high prices.

Two pharmaceutical companies in Shandong which had control over promethazine hydrochloride sold the drug at unfairly high prices and refused to enter into transactions by proposing excessively high prices. The NDRC confiscated the illegal gains of the companies and imposed a fine. The total penalty for the companies was RMB 7,029,600.

SAIC: Update on case load, leniency program, and coordination between SAIC and NDRC, cooperation between China and United States: Ms. Yang, SAIC

As of August 2012, SAIC has authorized provinces and cites, such as Jiangsu, Jiangxi, Chongqing, and Zhejiang, to investigate a total of 16 cases for suspected monopolistic conduct. One case concerns suspected abuse of dominance and fifteen concern suspected cartel agreements. Decisions have been reached in four cases. The investigations are time consuming because the agencies will carefully and seriously conduct investigations and make decisions based on adequate evidence.

SAIC encourages companies to voluntarily report illegal conduct. Under the Provisions for Industry and Commerce Administrations on the Prohibition of Monopolistic Agreements, reference is made to “important evidence”. Important evidence refers to evidence which has significant influence on either the decision by the industry and commerce administrations to open investigations or the identification of the monopoly agreements including such information as the participants of the monopoly agreements, the range of products involved or the methods used to reach such agreements.

The first company to voluntarily report the relevant information related to a monopoly agreement, provide important evidence and fully cooperates during the investigation will be exempted from penalties. Companies that subsequently voluntarily report relevant information and important evidence about the monopoly agreement will receive reduced penalties.

NDRC and SAIC have a division of responsibilities: SAIC handles investigations and cases where there are non-price related violations and will not open an investigation or file a case where the case only concerns price-related violations. In the event a complaint involves both price and non-price violations of the AML, the agency that opens a file first will be in charge of the investigation and decide the penalties. The NDRC and SAIC are continuing to strengthen the coordination and exchange of information.

In July 2011, a Memorandum of Understanding (“MOU”) was signed between the DOJ and FTC on the one side and the three Chinese enforcement agencies—NDRC, SAIC and MOFCOM –to promote communication and cooperation among the agencies of the two countries. The key to such cooperation is the exchange of policies and development of antitrust enforcement. This cooperation is achieved through high-level consultations and exchange of information and advice.

SUMMARY of issues raised during Q&A

Legislation-related

Intellectual Property Rights

Are there any updates regarding the progress of the fifth draft of the Guidelines for AML Enforcement with respect to Intellectual Property Rights which were drafted by SAIC?

Answer: Article 55 of PRC AML provides:” This law is not applicable to business operators who exercise their intellectual property rights in accordance with the laws and administrative regulations on intellectual property rights; however, this Law shall be applicable to the business operators who eliminate or restrict market competition by abusing their intellectual property rights.” This article is a little abstract and needs more provisions to clarify the details in practice. A specialists committee has been established for this issue, and questionnaires have been designed and widely spread to address related concerns. Due to an absence of cases in this area in China to date, there has been insufficient understanding of IP abuse and it may not be ripe to release these guidelines. However, relevant agencies treat these guidelines as important and will do more research on related issues.

Conduct-related

Retail price maintenance:

Article 14 of PRC AML prohibits the restriction of the lowest prices for commodities resold to a third party. However, it doesn’t prohibit the restriction of the highest party. Thus, when manufacturers “suggest” the lowest prices/ highest prices of their products to distributors, is it legal?

Answer: Vertical monopoly agreements are complicated. And the identification of vertical monopoly agreements should consider lots of elements, including the dominant marketplace position. As to China, things can be even more complicated. Governmental agencies will consider different economic models and adjust their approach accordingly. Agencies have clear knowledge about how important economic analysis is in the AML enforcement, and will refer to the experiences of developed countries.

Trade associations

You have mentioned the case regarding trade associations. When trade associations make arrangements for members to engage in monopolistic practices, wouldn’t it be unfair for members to bear the responsibility?

Answer: When making decisions regarding trade associations, the agencies will consider both their actions and the influence on the marketplace. Their motives will be considered, however most of the time the motive is to protect the interest of their industry. The agencies know sometimes that enterprises are forced to participate in those monopolistic practices. The approach of NDRC is to punish the trade associations and to educate the member enterprises by criticism, while the approach of SAIC is to punish both the associations and their member enterprises.

Mergers

Some business operators will conduct anti-competitive behaviors by means of merger. Will the agencies have active intervention regarding this?

Answer: The PRC AML defines “monopoly agreements” as “agreements, decisions and other concerted conducts designed to eliminate or restrict competition”. Regarding merger, MOFCOM would be the agency to review an operator’s concentration; while for other concerted conduct, SAIC and NDRC would refer to MOFCOM’s experience and consider the consensus and collusion of such concerted operators.

Enforcement-related

NDRC’s dual roles

It is interesting because the NDRC is not only responsible for pricing, but also responsible for enforcing the AML. How can NDRC price commodities at one hand while investigating unfair pricing on the other hand?

Answer: It is actually not contradictory. There are regulations dividing different kinds of commodities into different categories; some commodities are priced by the government, some in accordance with government guided-price, while others are priced by the market price. Those commodities which are priced by the government may become the object of price monopoly. Also, there are internal allocations of functions, namely, some bureaus would be responsible for anti-price monopoly and some other bureaus would be responsible for pricing.

Leniency programs

Regarding the leniency programs, it was mentioned that so far no company has reported itself violating AML. Why do you think are those companies are taking the wait-and-see approach? Are there any guidelines that are more specific regarding the regulation of the procedures of how the leniency programs work?

Answer: Currently there are no specific published procedural regulations for leniency programs; however, there are standard regulations on how penalties will be reduced according to the actions of the reporting companies.

To be precise, the penalties of first reporting company will be eliminated, the penalties of second reporting company will be reduced at least 50%, and the penalties of third reporting company will be reduced at most 50%. The government agencies will keep their promises on leniency programs. Another aspect the governmental agencies will strengthen regarding leniency programs is transparency. We admit there are still issues to be perfected, and perhaps this is one of the reasons why companies have taken the wait-and-see approach.

Exemptions/justifications

Article 15 of AML provides several circumstances where Articles 13 and 14 will not be applicable. What elements or facts will the enforcement agencies consider when doing such reviews?

Answer: The general principle is to prohibit monopoly agreements stated in Article 13 and Article 14, with very limited exceptions. The agencies will consider each case specifically—whether the actions will substantially restrict competition in the relevant market and whether they can enable the consumers to share the benefits derived therefrom.

Article 43 of AML provides that business operators under investigation and interested parties shall have the right to make statements. At the same time, enforcement agencies will consider the statement of those concerned parties.

International cooperation

Can you further describe the agencies’ activities to support international cooperation with regard to antitrust enforcement?

Answer: One of the divisions under NDRC is called the Division of Competition Policy and International Cooperation Bureau of Price Supervision and Anti-monopoly. This division is formulated with the purpose to strengthen the international cooperation and research on foreign antitrust policies/experiences. Communication mechanisms have been established between China and foreign governments to exchange information.

Currently these types of communication are not for specific cases, just at a general and theoretical level. There are clauses in relevant memoranda of understanding to protect confidential information. In general, the governmental agencies are currently attaching increasing importance to international cooperation.

Objectivity of enforcement

I am anxious about the AML enforcement in China, because it appears to be subjective and lack certainty. I doubt the credibility of the resources for data and am fully aware of the complex nature of China. How can the agencies ensure objectivity of AML enforcement?

Answer: Initially the agencies thought people would be anxious about our omissions and it turns out that people are also anxious about our actions! It is better for people to assume that we are reliable. The decisions made by agencies are not easy ones and usually take years to make, based on thorough investigation and analysis.

Treatment of state-owned enterprises (“SOEs”)

Will the governmental agencies give preferential treatment to SOEs in terms of AML enforcement?

Answer: No. The government will treat every company as the same, regardless of its corporate nature.

Interpretation of “cooperation”, extraterritorial enforcement of AML

Recently, 13 agencies including the NDRC and SAIC jointly issued an “Implementation Opinion” entitled “Encouragement and Guidance on Private Capital’s Healthy Development.” There is language potentially ripe for misinterpretation in the Implementation Opinion: “The government intends to guide the enterprises to intensify the coordination and cooperation among each other to prevent disorderly and malicious competition.” Will the coordination and cooperation requested by the government lead to the risk of being identified as anti-competitive behavior? Does the AML have exterritorial effect on anti-competitive behavior overseas?

Answer: The cooperation here in the Implementation Opinion is not the same as the cooperation, namely the concerted conduct, mentioned in AML. The government’s intention is to better regulate the behavior of enterprises doing business in foreign countries.

However, the AML may provide different treatment of overseas conduct. According to Article 15 of the AML, conduct can be defined as not anti-competitive under several conditions: (1) improving technologies, or engaging in research and development of new products; or (2) improving product quality, reducing cost, and enhancing efficiency, unifying specifications and standards of products, or implementing specialized division of production; (3) increasing the efficiency and competitiveness of small and medium-sized business operators; (4) serving public interests in energy conservation, environmental protection and disaster relief; (5) mitigating sharp decreases in sales volumes or obvious overproduction caused by economic depression; (6) safeguarding legitimate interests in foreign trade and in economic cooperation with foreign counterparts; or (7) other purposes as prescribed by law or the State Council.

In the circumstances specified in Subparagraphs (1) through (5) of the preceding paragraph, where the provisions of Articles 13 and 14 of the AML are not applicable, the business operators shall, in addition, prove that the agreements reached will not substantially restrict competition in the relevant market and that they can enable the consumers to share the benefits derived therefrom.

Note that under Article 15, when business operators are claiming they intend to safeguard legitimate interests in foreign trade and to cooperate with foreign counterparts, they do not need to prove that the agreements reached will not substantially restrict competition in the relevant market and that they can enable the consumers to share the benefits derived therefrom.

In addition, just as with other foreign AMLs, the PRC AML also has exterritorial effect, which means operators doing business in foreign countries should comply with PRC AML and foreign AMLs at the same time.

Summary Judgment Dooms Attempted Monopolization Claim in Small Container Trash Hauling Market

Sheppard Mullin — Tue, 04 Sep 2012 08:43:12 -0500

By Don T. Hibner, Jr.

In All Star Carts and Vehicles, Inc., et al. v. BFI Canada Income Fund, et al., Case No. 2:08-cv-01816-LDW-AKT, August 1, 2012, the District Court for Eastern District of New York recently granted defendants’ motion for summary judgment on the grounds that the plaintiffs failed to establish the element of “dangerous probability” for an antitrust claim for attempted monopolization under Section 2 of the Sherman Act. Plaintiffs are members of a certified class consisting of “all persons and entities that have contracted with, and purchased small containerized waste disposal services in the relevant market directly from defendants.” The relevant time period is from May 5, 2000 forward. The relevant business market described in the complaint is the market for “small containerized waste hauling and disposal services”. The relevant geographic market is alleged to consist of Long Island, New York.

Plaintiffs seek damages and injunctive relief for alleged overcharges within the relevant market. The court held that the use of 7-10 year exclusive dealing contracts with “evergreen” renewal provisions in a concentrated trash hauling market was not sufficient to raise a genuine issue of attempted monopolization. This is so notwithstanding the fact that the relevant market consisted of two major firms with 39% and 25% market share respectively, for a total of 64%, with the remaining portion made up of competing firms with approximately 10% share each. Although that market share had been relatively stable through time, the respective 39% and 25% shares enjoyed by two of the defendants nonetheless was held legally insufficient, and summary judgment on the attempted monopolization claim was therefore found appropriate.

Citing the seminal attempt to monopolize case of Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456 (1993) the court notes that an element of an attempt to monopolize claim under Section 2 is a dangerous probability of achieving monopoly power as a result of the defendants’ course of conduct. It notes that while a specific intent to monopolize may be inferred from the course of anticompetitive conduct, the element of a dangerous probability of success must be separately established, and by an analysis of the size, shape, dynamics, and proclivities of a properly defined relevant product and geographic product, citing Volvo North America Corp. v. Men’s Intern. Professional Tennis Council, 857 F.2d 55, 74 (2d Cir. 1988).

The court noted that the highest market shares attributable to the defendants, based upon admissible evidence in the record, was 39% and 25%. Other defendants each had approximately 10% market share each. The court was much influenced by the declarations from ten competitors in the market, that stated that they used similar exclusive dealing contracts with “evergreen” renewal provisions, as used by the defendants. The declarations stated that such contracts were in “common industry use”. The declarants also identified 89 companies that compete in the relevant market for small containerized waste hauling services on Long Island, New York. Plaintiffs themselves identified 59 competing providers. An expert witness for plaintiffs testified that with the exception of the presence of “evergreen” contracts, there were no significant technical or financial barriers to entry. The plaintiffs’ expert testified at deposition that she had not conducted any study that would lead to the conclusion that a defendant had the ability to raise prices in the relevant market. Finally, the court relied on declarations from competitors that stated that there was robust competition and low barriers to entry. The declarations characterized the waste carting industry on Long Island as “highly competitive”.

Since Swift & Co. v. United States, 196 U.S. 375 (1905), an attempt to monopolize under Section 2 has been closely analogized to the criminal law of attempt. As Justice Holmes pointed out, not every act “done with intent to produce an unlawful result constitutes an attempt. It is a question of proximity and degree.” Swift at 402. “The distinction between mere preparation and attempt is well known in the criminal law.” Id.

Quoting from Commonwealth v. Peaslee, an opinion by Justice Holmes when on the Supreme Judicial Court of Massachusetts, Justice White wrote in Spectrum Sports:

Where acts are not sufficient in themselves to produce a result which the law seeks to prevent – for instance, the monopoly – but require further action in addition to the mere forces of nature to bring that result to pass, an intent to bring it to pass is necessary in order to produce the dangerous probability that it will happen.

506 U.S. at 455, quoting 177 Mass. 267, 272 (1901).

In a nutshell, attempt to monopolize is not a “shared monopoly” theory. That would describe a combination or conspiracy to monopolize, which was not alleged. Rather, it describes the activities of an individual defendant engaged in a course of conduct that is intended to, and but for an interruption or miscalculation, would have actually resulted in obtaining a monopoly – namely the power to raise price and exclude competition. These are not the facts present on the record in All Star Carts.

While not discussed by the court, it is more likely that the industry structure of a local trash hauling market could resemble a “tight oligopoly.” One might expect that the dynamics of route economics would be present. One might expect that each of the participants would use exclusivity contracts to develop sufficient route density for efficient scale and scope. Network externality effects would be sought, and would be in evidence. It would be counter-intuitive to expect an atomistic market or widely shifting shares. The economics of route efficiency seemingly describe the structure of the market, as evidenced in the record before the court. One might also expect that customers might welcome the benefits of exclusivity in securing stable trash hauling services.

One must wonder, however, whether the plaintiffs would have had a longer lease on life if they had included a Section I claim or claims. A Sherman I claim or a series of claims, would have been aided, arguably, by the concept of “quantitative substantiality”, as recognized in the venerable 1949 Standard Stations case, and more recently in United States v. Dentsply International, 399 F.3d 181 (3d Cir. 2005), and the shifting patterns that could be drawn from market share data, as a function of the height of entry barriers, and the dynamics of change within a given market. See, Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421 (9th Cir. 1995).

While the court was correct in dismissing the “contract power” arguments also presented by plaintiffs, it also noted that the market power proclivities that may flow from a given form of contract must be considered within the context of the market to which it is used, in order to better understand the dynamics of the market structure and shape presented. See, e.g., United Farmers Agents Association, Inc. v. Farmers Insurance Exchange, 89 F.3d 233, 236-37 (5th Cir. 1996).

Perhaps by presenting these arguments and authorities within the framework of a series of Section I claims, a genuine issue of material fact could have been presented, at least for a while longer. However, the court was correct in determining that an attempt to monopolize case, this was not.

FTC Proposes Amendments to the Premerger Notification Rules to Expand the Reportability of Transfers of Exclusive Patent Rights in the Pharmaceutical Industry

Sheppard Mullin — Thu, 16 Aug 2012 08:30:35 -0500

By Bob Magielnicki and Malika Levarlet

On August 13, 2012, the Federal Trade Commission (“FTC”) proposed amendments to the Premerger Notification Rules issued under the Hart Scott Rodino Antitrust Improvements Act of 1976 (the “HSR Act”). The proposed amendments would expand when a transfer of exclusive rights to a patent in the pharmaceutical industry is potentially reportable under the HSR Act.

The HSR Act requires the parties to an acquisition of assets, voting securities or non-corporate interests meeting certain thresholds to file notifications with the FTC and the Antitrust Division of the Department of Justice and observe a waiting period before they can consummate the transaction. As a patent clearly is an asset, there is no question that the acquisition of a patent is potentially subject to the requirements of the HSR Act. However, it is not so clear as to when an exclusive patent license qualifies as an asset acquisition.

Under the present HSR Rules, the Premerger Notification Office (“PNO”) of the FTC (which provides informal interpretations of the Rules) has taken the position that, in order to qualify as an asset acquisition, the license must grant the licensee exclusive rights to “make, use and sell” under the patent, even against the licensor. Thus, if the licensor retains the right to manufacture under the patent, the transaction is not reportable.

In explaining the rationale for the proposed amendments, the FTC noted that in many exclusive licenses in the pharmaceutical industry, the licensor retains rights in one or both of two categories: manufacturing rights and co-rights. According to the FTC, if the retention of manufacturing rights is solely to manufacture for the licensee, that is substantively the same as giving the licensee the exclusive right to manufacture. As to co-rights, which permit the licensor to assist in the Food and Drug Administration approval process, and in the promotion and marketing of the product, they do not detract from the exclusivity of the license.

Proposed new Section 801.2(g) of the HSR Rules provides that transfers of patent rights in the pharmaceutical industry (NAICS Industry Group 3254) constitute an asset acquisition if and only if “all commercially significant rights” to a patent for any therapeutic area or specific indication are transferred to another entity. However, all commercially significant rights are transferred even if the patent holder retains “limited manufacturing rights” or “co-rights”.

The proposed amendments also add three new definitions to the HSR Rules. The first, “all commercially significant rights” means the exclusive rights to a patent that allow only the recipient to use the patent in a particular therapeutic area or specific indication within a therapeutic area. “Limited manufacturing rights” means the retention of manufacturing rights “solely to provide the recipient of the patent rights with product(s) covered by the patents.” The third, “co-rights”, means “shared rights retained by the patent holder to assist the recipient of the exclusive patent rights in developing and commercializing the product covered by the patent.”

According to the FTC: “The proposed rule thus clarifies the analysis of the reportability of transfers of pharmaceutical patent rights while providing the Agencies with a better opportunity to review the transfers of exclusive rights to a patent in the pharmaceutical industry for competitive concerns.” It estimates that the amendments will result in an increase of 30 HSR filings per year.

The proposed amendments are open to public comments until October 25, 2012.