2018 NYSBA Antitrust Section Annual Meeting

853 Pages·2017·10.69 MB·English

2018 NYSBA Antitrust Section Annual Meeting – Annual Developments Panel
I. MERGERS
1. Assistant Attorney General Makan Delrahim Delivers Keynote Address at American Bar
Association’s Antitrust Fall Forum (November 16, 2017)
• Summary: In November, AAG Delrahim delivered the keynote address at the American
Bar Association’s antitrust fall forum. During these remarks, AAG Delrahim explained
that the Department of Justice’s Antitrust Division will curtail its use of behavioral
commitments, such as consent orders regulating conduct, and will instead rely on
structural changes, such as divestitures, to remedy merger concerns.
• Material:
Assistant Attorney General Makan Delrahim Delivers Keynote Address at
o
American Bar Association’s Antitrust Fall Forum (November 16,
2017), https://www.justice.gov/opa/speech/assistant-attorney-general-makan-
delrahim-delivers-keynote-address-american-bar.
2. United States v. AT&T, Complaint (D.D.C. Nov. 20, 2017)
• Summary: In November, the U.S. Department of Justice (“DOJ”) filed suit against AT&T
to block its merger with Time Warner, alleging that consumers would face higher prices
for Time Warner content because AT&T would be able to charge more for licensing
programming. The DOJ further argues that AT&T’s acquisition of Time Warner would
stifle innovation from online streaming firms which compete AT&T’s DirecTV Now
service, as AT&T could withhold programs from those online providers.
• Material:
United States v. AT&T, 17-CV-02511, Complaint (D.D.C. Nov. 20,
o
2017), https://www.justice.gov/atr/case-document/file/1012916/download.
3. United States v. Parker-Hannifin Corp.
• Allegations: The DOJ filed a complaint in federal court challenging Parker-Hannifin
Corporation’s completed acquisition of CLARCOR, Inc. Notably, the DOJ filed its
complaint several months after the expiration of the waiting period applicable to the
transaction under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The DOJ
alleges that the transaction eliminated head-to-head competition between the only two
domestic manufacturers of aviation fuel filtration systems and filter elements. Alleging
the creation of an unlawful monopoly that would increase prices, reduce innovation,
decrease the reliability of delivery times, and lead to less favorable terms of service, the
DOJ seeks divestiture of either Parker-Hannifin or CLARCOR’s aviation fuel filtration
assets. The DOJ also seeks temporary relief preventing any integration of the businesses
during the pendency of the lawsuit.
• Materials:
United States v. Parker-Hannifin Corp., No. 17-CV-01354-UNA, Complaint (D.
o
Del. Sept. 26, 2017), https://www.justice.gov/atr/case-
document/file/999341/download.
United States v. Parker-Hannifin Corp., No. 17-CV-01354-UNA, Press Release
o
(Sept. 26, 2017), https://www.justice.gov/opa/pr/justice-department-files-
antitrust-lawsuit-against-parker-hannifin-regarding-company-s.
4. Statement of Federal Trade Commission’s Acting Director of the Bureau of Competition on
the Agency’s Review of Amazon.com, Inc.’s Acquisition of Whole Foods Market Inc.
• Summary: The FTC declined to further pursue an investigation of Amazon.com Inc.’s
acquisition of Whole Foods Market Inc.
• Material:
Statement of Federal Trade Commission’s Acting Director of the Bureau of
o
Competition on the Agency’s Review of Amazon.com, Inc.’s Acquisition of
Whole Foods Market Inc. (Aug. 23, 2017), https://www.ftc.gov/news-
events/press-releases/2017/08/statement-federal-trade-commissions-acting-
director-bureau.
II. SECTION 5 OF FEDERAL TRADE COMMISSION ACT, 15 U.S.C. § 45(a)
5. Federal Trade Commission v. Qualcomm Inc.
• Allegations: In a January Complaint, the Federal Trade Commission (“FTC”) alleges that
Qualcomm illegally maintained its monopoly over baseband processors by refusing to
sell Qualcomm processors to any device makers that will not agree to Qualcomm’s
licensing terms. According to the FTC, Qualcomm forces customers to pay patent
royalties on top of the price of the chip, amounting to an anti-competitive tax on
cellphone makers seeking to use other companies’ processors. The FTC seeks a
permanent injunction against Qualcomm. Federal Trade Commission v. Qualcomm Inc.,
No. 17-CV-00220-LHK, Complaint (N.D. Cal. June 26,
2017), https://www.ftc.gov/system/files/documents/cases/170117qualcomm_redacted_co
mplaint.pdf.
• Dissenting Statement: Commissioner Maureen K. Ohlhausen dissented from the filing of
the lawsuit, asserting that the FTC action is “based on a flawed legal theory that lacks
economic and evidentiary support, that was brought on the eve of a new presidential
administration, and that, by its mere issuance, will undermine U.S. intellectual property
rights in Asia and worldwide.” Dissenting Statement of Commissioner Maureen K.
Ohlhausen In the Matter of Qualcomm, Inc.)
2
• Status: The action is ongoing. In June, U.S. District Judge Lucy Koh denied
Qualcomm’s motion to dismiss the FTC’s lawsuit. Judge Koh held that the FTC
adequately alleged that Qualcomm entered into “de factor exclusive dealing
arrangements” and that the arrangements “foreclosed a substantial share of the market for
premium LTD modern chips.” Federal Trade Commission v. Qualcomm Inc., No. 17-
CV-00220-LHK, 2017 WL 2774406, at *25 (N.D. Cal. June 26, 2017).
• Materials:
Federal Trade Commission v. Qualcomm Inc., No. 17-CV-00220-LHK,
o
Complaint (N.D. Cal. June 26,
2017), https://www.ftc.gov/system/files/documents/cases/170117qualcomm_reda
cted_complaint.pdf.
Dissenting Statement of Commissioner Maureen K. Ohlhausen In the Matter of
o
Qualcomm,
Inc., https://www.ftc.gov/system/files/documents/cases/170117qualcomm_mko_d
issenting_statement_17-1-17a.pdf.
Federal Trade Commission v. Qualcomm Inc., No. 17-CV-00220-LHK, 2017 WL
o
2774406, at *25 (N.D. Cal. June 26, 2017).
6. Assistant Attorney General Makan Delrahim Delivers Remarks at the USC Gould School of
Law’s Center of Transnational Law and Business Conference (November 10, 2017)
• Summary: In November, Assistant Attorney General Makan Delrahim delivered remarks
at the USC Gould School of Law’s Center of Transaction Law and Business Conference.
During these remarks, AAG Delrahim addressed the Department of Justice’s Antitrust
Division’s position on fair, reasonable and nondiscriminatory terms, or FRAND,
violations involving standard setting organizations.
• Material:
Assistant Attorney General Makan Delrahim Delivers Remarks at the USC Gould
o
School of Law’s Center of Transnational Law and Business Conference
(November 10, 2017), https://www.justice.gov/opa/speech/assistant-attorney-
general-makan-delrahim-delivers-remarks-usc-gould-school-laws-center.
7. Harry First, Unfair Drug Prices and Section 5, Law & Economics Research Paper Series
Working Paper No. 16-03, New York University School of Law (January 2016)
• Summary: This essay addresses whether pharmaceutical drug acquisitions followed by
price raises should bring antitrust action, specifically, action by the FTC under Section 5
of the Federal Trade Commission Act. Drawing on prior Section 5 proceedings involving
patent holders that breach FRAND commitments and charge licensees unfair high prices,
as well as an FTC case involving pharmaceutical drug acquisitions, it argues that drug
acquisitions followed by excessive prices are good candidates for a Section 5 proceeding.
3
• Material:
Harry First, Unfair Drug Prices and Section 5, Law & Economics Research Paper
o
Series Working Paper No. 16-03, New York University School of Law (January
2016), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2699843.
8. Harry First, Exploitative Abuses of Intellectual Property Rights, Law & Economics Research
Paper Series Working Paper No. 16-26, New York University of Law (July 2016)
• Summary: Current enforcement practice worldwide with regard to price-raising
exploitation of intellectual property rights by monopolists shows a willingness to
condemn such conduct as anticompetitive. This paper describes this concern for
exploitation, focusing on competition law enforcement in the United States, China,
Europe, Japan, and Korea in three substantive areas: patents subject to FRAND licensing
obligations, disclosure requirements imposed on patent holders with monopoly power to
prevent them from exploiting licensees or potential licensees, and post-expiration
royalties. The paper argues that this concern for exploitative behavior is consistent with
sound competition policy.
• Material:
Harry First, Exploitative Abuses of Intellectual Property Rights, Law &
o
Economics Research Paper Series Working Paper No. 16-26, New York
University of Law (July
2016). https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2799682.
9. In the Matter of 1-800 CONTACTS, Inc., Initial Decision (United States of America Federal
Trade Commission Office of Administrative Law Judges Oct. 27, 2017)
• Allegations: In August, 2016, the FTC brought an administrative action against 1-800
CONTACTS alleging that it unlawfully orchestrated anticompetitive agreements with
rival online contact sellers (as part of settlement of trademark actions brought by 1-800-
CONTACTS against these rivals) that suppress competition in certain online search
advertising auctions and that restrict truthful internet advertising to consumers. As a
result, some consumers pay higher retail prices for contact lenses.
• Status: In October, Chief Administrative Law Judge D. Michael Chappell upheld the
FTC’s complaint, ruling that the agency has proved that the nation’s largest online
retailer of contact lenses unlawfully orchestrated a web of anticompetitive agreements
with rival online contact lens sellers. Specifically, Judge Chappel held, the “evidence in
this case demonstrates that the advertising restraints imposed by the Challenged
Agreements cause harm to consumers and competition in the market for the sale of
contact lenses online. This is sufficient to establish Complaint Counsel’s prima facie
case that the agreements are anticompetitive. The evidence fails to prove that the
Challenged Agreements have countervailing procompetitive benefits that outweigh or
justify the demonstrated anticompetitive effects of the Challenged Agreements.
Accordingly, the Challenged Agreements violate Section 5 of the FTC Act.”
4
• Material:
In the Matter of 1-800 CONTACTS, Inc., Initial Decision (United States of
o
America Federal Trade Commission Office of Administrative Law Judges Oct.
27, 2017), https://www.ftc.gov/system/files/documents/cases/docket_9372_1-
800_contacts_inc._initial_decision_final_redacted_public_version.pdf.
III. PROVING AGREEMENTS
10. Valspar Corp. v. E.I. Du Pont de Nemours and Co., No. 16-CV-1345 (3d Cir. Sept. 14, 2017)
• Allegations: Valspar alleged in its November 2013 lawsuit that DuPont’s use of public
announcements of price hikes was part of a conspiracy that resulted in the 31 parallel
price increases, and said that, consequently, DuPont and other producers charged an
average of 16 percent more for titanium dioxide than they otherwise would have.
• Status: In September, the Third Circuit affirmed the district court’s grant of summary
judgment to DuPont. The appeals court concluded that Valspar failed to demonstrate that
DuPont had conspired with others in the marketplace to inflate the price of the chemical,
noting that proof of parallel behavior alone was insufficient. The majority held that
because oligopolies lend themselves to interdependent actions, plaintiff must provide
clear evidence of anti-competitive behavior.
• Material:
Valspar Corp. v. E.I. Du Pont de Nemours and Co., No. 16-CV-1345 (3d Cir.
o
Sept. 14, 2017), https://law.justia.com/cases/federal/appellate-courts/ca3/16-
1345/16-1345-2017-10-02.html.
IV. INJUNCTIONS
11. Authenticom, Inc. v. CDK Global, LLC, 874 F.3d 1019 (7th Cir. 2017)
• Allegations: Data scraper, Authenticom, alleged that car dealership software management
companies CDK Global and Reynolds and Reynolds conspired to block Authenticom
from obtaining information in violation of the Sherman Act. Specifically, the complaint
alleges that the two created a duopoly in the dealership data integration market, agreeing
to cut off access for third parties to its databases and, as a result, locking Authenticom out
of databases necessary to its business.
• Status: The Seventh Circuit vacated a preliminary injunction requiring competing car
dealership software management companies to allow Authenticom to access information
from consenting customers. Specifically, the appeals court held that the injunction forced
Reynolds and CDK to do business with Authenticom on terms they never agreed to.

5
• Material:
Authenticom, Inc. v. CDK Global, LLC, 874 F.3d 1019 (7th Cir. 2017).
o
V. MONOPOLIZATION / ABUSE OF DOMINANCE
12. Pfizer Inc. v. Johnson & Johnson and Janssen Biotech, Inc., Complaint (E.D. Pa. Sept. 20,
2017)
• Allegations: In September, Pfizer Inc. filed a complaint alleging that it cannot break into
the market with its biosimilar version of Johnson & Johnson’s (“J&J”) biologic
Remicade, as J&J and its subsidiary Janssen Biotech have been holding onto a monopoly
through a series of anti-competitive actions. Specifically, Pfizer alleges that J&J enters
into contracts with insurance companies that blocks insurance companies from
reimbursing any infliximab other than Remicade except when Remicade does not work.
Pfizer alleges, however, that the “fail first” caveat is useful, as the two are the same
medication so a patient would not switch to Pfizer’s medication if Remicade did not
work. Pfizer further alleges that when insurance companies refuse such contracts, J&J
denies them costly rebates for Remicade and other drugs.
• Status: The parties are briefing a motion to dismiss.
• Material:
Pfizer Inc. v. Johnson & Johnson and Janssen Biotech, Inc., Complaint (E.D. Pa.
o
Sept. 20, 2017), https://www.courthousenews.com/wp-
content/uploads/2017/09/pfizer-jj.pdf.
13. European Commission fines Google €2.42 billion for abusing dominance as search engine by
giving illegal advantage to own comparison shopping service (June 27, 2017)
• Summary: In June, the European Commission (“EC”) fined Google €2.42 billion for
breaching EU antitrust rules. Specifically, the EC found that Google abused its
dominance as a search engine by giving an illegal advantage to another Google product,
its comparison shopping service.
• Material:
European Commission fines Google €2.42 billion for abusing dominance as
o
search engine by giving illegal advantage to own comparison shopping service
(June 27, 2017), http://europa.eu/rapid/press-release_IP-17-1784_en.htm.
14. European Commission send Statement of Objections to Google on Android operating system
and applications (April 20, 2016)
• Summary: In April 2016, the EC informed Google of its preliminary view that Google
abused its dominant position by imposing restrictions on Android device manufacturers
6
and mobile network operators to preserve and strengthen its dominance in general
internet search.
• Material:
European Commission send Statement of Objections to Google on Android
o
operating system and applications (April 20, 2016), http://europa.eu/rapid/press-
release_IP-16-1492_en.htm.
VI. STATE ACTION
15. Chambers of Commerce of the United States v. Seattle, No. C17-0370RSL (W.D. Wash.
Aug. 1, 2017)
• Allegations: The U.S. Chamber of Commerce filed suit challenging Seattle’s ordinance
allowing Uber and Lyft drivers to unionize. The Chamber of Commerce argued that
because Uber, Lyft and taxi drivers are contractors, not employees, federal and state laws
do not give them the right to unionize
• Status: In August, U.S. District Judge Robert Lasnik dismissed the Chamber of
Commerce’s complaint, holding that Seattle’s ordinance is not preempted by federal
antitrust law.
• Material:
Chambers of Commerce of the United States v. Seattle, No. C17-0370RSL (W.D.
o
Wash. Aug. 1, 2017), https://www.leagle.com/decision/infdco20170802e90.
Chamber of Commerce of the United States v. Seattle, No. 17-CV-35640, Brief
o
for the United States and the Federal Trade Commission as Amici Curiae in
Support of Appellant and in Favor of Reversal (9th Cir. Nov. 3,
2017), https://www.justice.gov/atr/case-document/file/1009051/download.
VII. 2018 PREVIEW
16. Ohio, et al., v. American Express Company, et al.
• Question Presented to the Supreme Court: Under the rule of reason, did the
Government’s showing that Amex’s anti-steering provisions stifled price competition on
the merchant side of the credit card platform suffice to prove anticompetitive effects and
thereby shift to Amex the burden of establishing any procompetitive benefits from the
provisions?
• Material:
Ohio, et al., v. American Express Company, et
o
al., http://www.scotusblog.com/case-files/cases/ohio-v-american-express-co/.
7
17. Crack Down on Corporate Monopolies & the Abuse of Economic and Political Power
• Summary: Democratic legislators proposed “A Better Deal” which includes proposals to
revisit antitrust law, especially with respect to mergers. The proposed new merger
standards would require a broader, longer-term view of anticompetitive effects and strong
presumptions that market concentration can result in anticompetitive conduct.
• Material:
Crack Down on Corporate Monopolies & the Abuse of Economic and Political
o
Power, https://abetterdeal.democraticleader.gov/crack-down-on-abuse-of-power/.
18. Antitrust Consumer Welfare Standard, Senate Judiciary Committee — Subcommittee on
Antitrust, Competition Policy and Consumer Rights
• Summary: A Hearing of the Antitrust, Competition Policy and Consumer Rights
Subcommittee of Senate Judiciary Committee hearing on “The Consumer Welfare
Standard in Antitrust: Outdated or a Harbor in a Sea or Doubt?”
• Material:
Antitrust Consumer Welfare Standard, Senate Judiciary Committee —
o
Subcommittee on Antitrust, Competition Policy and Consumer Rights (Dec. 13,
2017), https://www.judiciary.senate.gov/meetings/the-consumer-welfare-
standard-in-antitrust-outdated-or-a-harbor-in-a-sea-of-doubt.

Prepared with the assistance of Margaret A. Barone, an associate at Cahill Gordon &
Reindel LLP
8
Case 1:17-cv-02511 Document 1 Filed 11/20/17 Page 1 of 23
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA
450 Fifth Street, NW
Washington, DC 20530;

Plaintiff,

v.

AT&T INC.
208 South Akard Street,
Dallas, TX 75202;

DIRECTV GROUP HOLDINGS, LLC
2260 E. Imperial Hwy,
El Segundo, CA 90245; and

TIME WARNER INC.
One Time Warner Center,
New York, NY 10019;

Defendants.
COMPLAINT
AT&T/DirecTV is the nation’s largest distributor of traditional subscription television.
Time Warner owns many of the country’s top TV networks, including TNT, TBS, CNN, and
HBO. In this proposed $108 billion transaction—one of the largest in American history—AT&T
seeks to acquire control of Time Warner and its popular TV programming. As AT&T has
expressly recognized, however, distributors that control popular programming “have the
incentive and ability to use (and indeed have used whenever and wherever they can) that control
as a weapon to hinder competition.” Specifically, as DirecTV has explained, such vertically
integrated programmers “can much more credibly threaten to withhold programming from rival

1
Case 1:17-cv-02511 Document 1 Filed 11/20/17 Page 2 of 23
[distributors]” and can “use such threats to demand higher prices and more favorable terms.”
Accordingly, were this merger allowed to proceed, the newly combined firm likely would—just
as AT&T/DirecTV has already predicted—use its control of Time Warner’s popular
programming as a weapon to harm competition. AT&T/DirecTV would hinder its rivals by
forcing them to pay hundreds of millions of dollars more per year for Time Warner’s networks,
and it would use its increased power to slow the industry’s transition to new and exciting video
distribution models that provide greater choice for consumers. The proposed merger would
result in fewer innovative offerings and higher bills for American families.
For these reasons and those set forth below, the United States of America brings this civil
action to prevent AT&T from acquiring Time Warner in a transaction whose effect “may be
substantially to lessen competition” in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18.
I. INTRODUCTION
1. American consumers have few options for traditional subscription television. For
the nearly one hundred million American households that pay a monthly bill to traditional video
distributors (cable, satellite, and telephone companies), this means paying higher prices year
after year and waiting on hold to hear why a service technician is running late or why their
monthly bill has skyrocketed.1 For traditional video distributors, this lack of competition means
huge profit margins. Indeed, AT&T/DirecTV describes the traditional pay-TV model as a “cash
cow” and “the golden goose.”

1 Indeed, the Federal Trade Commission sued DirecTV for deceptively advertising its rates and misleading
consumers about the cost of its satellite television services and cancellation fees by not clearly disclosing that the
cost of the package will increase by up to $45 more per month in the second year, and that early cancellation fees of
up to $480 apply if consumers cancel the package before the end of the two-year period. See FTC v. DirecTV LLC,
N.D. Cal., case number 4:15-cv-01129 (March 11, 2015).

2