Carrington, Coleman, Sloman & Blumenthal, L.L.P. | 901 Main Street , Suite 5500 | Dallas, Texas 75202 | www.ccsb.com

PRESENTED BY: Ken Carroll

Carrington, Coleman, Sloman & Blumenthal, L.L.P. | 901 Main Street , Suite 5500 | Dallas, Texas 75202 | www.ccsb.com

2015 in the Rearview Mirror:

The Antitrust Year in Review

DBA Antitrust & Trade Regulation Section

15 February 2016

SCOTUS

North Carolina State Board of Dental Examiners v. FTC, 135 S.Ct. 1101 (2015)

ONEOK, Inc. v. Learjet, Inc., 135 S.Ct. 1591 (2015)

N.C. State Dental Examiners NC State State Board of Dental Examiners is the

“agency of the State for the regulation of the practice of dentistry.” Devises and enforces licensing system At least 6 of 8 Board members must be

practicing dentists, elected by dentists Board issued cease-and-desist letters to non-dentist

teeth whiteners State Action Immunity? FTC says no SCOTUS says …

N.C. State Dental Examiners Under Midcal and Phoebe Putney, State Action

Immunity for nonsovereign actor only when (1) challenged restraint is “clearly articulated and

affirmatively expressed as state policy”; and (2) the actors’ implementation of the policy is

“actively supervised by the State”

Where a controlling number of members of a state board’s decisionmakers are market participants, board must satisfy the “active supervision” requirement to secure State Action Immunity

N.C. State Dental Examiners To satisfy “active supervision” requirement, must show “State’s review mechanisms provide ‘realistic assurance’ that a nonsovereign actor’s anticompetitive conduct ‘promotes state policy’ rather than [regulators’] individual interests.” I.e., Supervisor must review substance of decisions Supervisor must have power to veto or modify Mere potential for review is not adequate Supervisor must not itself be an active market

participant or controlled by market participants

ONEOK v. Learjet State antitrust claims based on “pipelines’ behavior

[that] affected both federally regulated wholesale natural-gas prices and nonfederally regulated retail natural-gas prices.”

“Field Pre-emption” vs. “Conflict Pre-emption” under the Natural Gas Act

ONEOK v. Learjet “Field Pre-emption” = “Congress intended to

foreclose any state regulation in the area” “Conflict Pre-emption” = “where ‘compliance with

both state and federal law is impossible,’ or where ‘the state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.”

Held: No “field pre-emption” here, because of

Congress’s intent in the NGA to allow States to regulate non-FERC/“nonjurisdictional” sales, but remanded to consider “conflict pre-emption.”

Fifth Circuit Court of Appeals Abraham & Veneklasen Jt. Venture

v. AQHA, 776 F.3d 321 (5th Cir. 2015)

Felder’s Collision Parts, Inc. v. All Star Advertising Agency, Inc., 777 F.3d 756 (5th Cir. 2015)

► Sanger Ins. Agency v. HUB International, Ltd., 802 F.3d 732 (5th Cir. 2015)

► MM Steel, LP v. JSW Steel (USA) Inc., 806 F.3d

835 (5th Cir 2015)

Abraham & Veneklasen Jt. Venture v. AQHA AQHA declares cloned horses do not have distinct

sire and dam bloodlines and so cannot be registered.

§ 1 claim: Is the AQHA a “single entity” incapable of conspiring with its committees and members, or, as in American Needle …. Gosh, we don’t know, but conspiracy wasn’t proven here.

► § 2 claim: DOA because the AQHA doesn’t participate in the relevant market.

Felder’s Collision Parts v. All Star Advertising Predatory pricing attack on GM parts program

unfortunately named, “Bump the Competition.” Designed to boost sales of OEM parts over aftermarket

alternatives, the program had distributors selling below their actual cost, but GM made up for dealer losses through rebates and a 14% profit kicker.

Curiously, plaintiff “never alleged that GM is selling parts below its costs, focusing instead on allegations that GM dealer … is selling … below its costs.”

Plaintiff argued post-sale rebates and profit guarantees should not be considered. Fifth Circuit disagreed: Plaintiff’s “’freeze-frame’ approach … ignores the economic realities that govern antitrust analysis.”

Sanger Ins. Agency v. HUB International

Dispute regarding brokerage of liability and other insurance for veterinarians: HUB’s “The Program”

Sanger had “antitrust standing,” though not competing in the market, because Had an intention to enter the business; and Showed “a preparedness to enter the business”—i.e., would

have done so absent the anticompetitive conduct alleged Issues involved “the business of insurance” so federal

antitrust claims barred by McCarren-Ferguson. But McCarran-Ferguson did not bar parallel Texas state antitrust claims.

MM Steel, LP v. JSW Steel

$52mm jury verdict, trebled to $156mm

Horizontal “group boycott” organized by MM’s competitors, joined by supplier(s) Nucor, no JSW, yes

Individual vertical refusal to deal = okay

Joining horizontal conspiracy to refuse to deal ≠ okay. Instead, it’s per se illegal.

Capt. Charles C. Boycott

Capt. Charles C. Boycott

U.S. District Courts in Texas Games People Play, Inc. v.

Nike, Inc., 2015 U.S. Dist. LEXIS 33217 (E.D. Tex. 2015)

Xitronix Corp. v. Kla-Tencor Corp., 2015 U.S. Dist. LEXIS 82312 (W.D. Tex. 2015)

Universal Hospital Svcs., Inc. v. Hill-Rom Holdings, Inc., 2015 U.S. Dist. LEXIS 154154 (W.D. Tex. 2015)

►Teladoc, Inc. v. Texas Medical Board, 2015 U.S. Dist. LEXIS 166754 (W.D. Tex. 2015)

Games People Play v. Nike

“Secondary line” Robinson-Patman Act case

2(a) claims can proceed, even though comparable

sales not at exactly the same time

2(d) & (e) claims fail because “it is well settled law that refusing to deal is not an independent violation of the [RPA].”

Xitronix v. Kla-Tencor

Walker Process case involving “the dopant activation metrology marketplace”

Per the SCOTUS in Walker Process: “The enforcement of a patent procured by fraud on the Patent office may be violative of § 2 of the Sherman Act provided the other elements … are present.”

In Xitronix, Judge Sparks held “Enforcement” doesn’t require an overt act. “Fraud” regarding prior art can occur even if all

relevant prior art is supplied to the examiner. Supplying the art doesn’t give license to mislead.

Universal Hospital Svcs. v. Hill-Rom Holdings

“This is a national antitrust case ….” Monopolization case alleging illegal bundling,

predatory pricing, etc., to leverage monopoly power in standard hospital beds (SHBs) into related hospital equipment markets.

CEO told investors H-R “intended to leverage its dominant position in the SHB market to move into adjacent markets because ‘nobody else could compete with Hill-Rom if it did so.”

Thorough discussions of most aspects of monopolization, antitrust injury, and other issues.

Teladoc v. Texas Medical Board “TMB is a state agency ‘statutorily

empowered to regulate the practice of medicine in Texas.” Largely composed of market participants.

TMB issued rule requiring a “face-to-face visit before a physician can issue a prescription ….”

Burden of showing state action immunity rests with TMB.

►N.C. Dental “active supervision” not satisfied by • Judicial review • Legislative review

BONUS: Elite Rodeo v. PRCA Elite Rodeo Ass’n v. PRCA, 2016 U.S. Dist. LEXIS 13353 (N.D. Tex. Feb. 4, 2016)

Elite Rodeo v. PRCA PRCA is “the largest and most prestigious rodeo

sanctioning organization in North America.” The ERA, formed in 2015, is a contestant-owned rival. PRCA enacted new bylaw prohibiting members of

“Conflicting Rodeo Associations” from competing. Judge Lynn denied preliminary injunction (no

irreparable harm), but also denied motion to dismiss: Followed AQHA to assume PRCA could conspire with its

members and committees. Allowed § 2 claim to proceed, but market share won’t be

enough. ERA must show PRCA has power to exclude competitors from the market. But see, the PBR …

State Courts in Texas

In re Memorial Hermann Hospital System, 464 S.W.3d 686 (Tex. 2015)

Profinity, LLC v. One Technologies, L.P.,

2015 Tex. App. LEXIS 12822 (Tex. App.—Dallas 2015, pet. filed)

In re Memorial Hermann

SCoT applies the “anticompetitive action” exception to the confidentiality of medical committee and medical peer review committee matters—

“If a judge makes a preliminary finding that a

proceeding or record of a medical peer review committee or a communication to the committee is relevant to an anticompetitive action, … the proceeding, record, or communication is not confidential to the extent it is considered relevant.” TEX. OCC. CODE § 160.007(b).

(cont’d)

In re Memorial Hermann (cont’d)

“Anticompetitive action” = lawsuit, not conduct

“Preliminary finding” is based on pleadings, not evidence.

Where “medical committee” [Health & Safety Code §161.032(a)] and “medical peer review committee” [Occ. Code §151.002] statutes overlap as to the actions and functions of the committee in question, the “anticompetitive action” exception will remove confidentiality for both.

Profinity v. One Technologies

Covenant-not-to-compete claims versus Texas antitrust claims in the internet credit monitoring industry

Harmar kills the TFEAA claim: “The TFEAA will not support extraterritorial relief in the

absence of a showing that such relief promotes competition in Texas or benefits Texas consumers.”

Profinity’s expert testified about nationwide damages, and did not segregate as to Texas…. And anyway ….

Noerr-Pennington bars Profinity’s claims, which were based on OT’s non-sham litigation and acts incidental to litigation

Other Federal Courts

McWane, Inc. v. FTC, 783 F.3d 814 (11th Cir. 2015)

In re Chocolate Confectionary Antitrust Litigation, 801 F.3d 383 (3d Cir. 2015)

McWane v. FTC

FTC Act § 5 Case: McWane’s “Full Support Program” McWane held monopoly in domestic ductile pipe

fittings market. Star attempted to enter market. McWane imposed exclusive-dealing arrangement on

distributors, enforced by loss of rebates, withholding of products, to hinder Star’s entry.

Internal McWane documents were a problem, e.g., concern about “[e]rosion of domestic pricing if Star emerges as a legitimate competitor.”

11th Circuit affirmed FTC finding of § 5 violation

In re Chocolate

Leader-follower price increases among oligopolists, without more ≠ conspiracy; does = summary judgment for defendants

What happens in Canada, stays in Canada “Conscious parallelism” in “interdependent”

oligopolistic markets won’t create an inference of conspiracy sufficient to survive summary judgment

Motive, advance knowledge of competitors’ pricing, pretext, and opportunity for improper communications aren’t sufficient “plus factors”

DOJ and FTC

DOJ

United States v. Kayaba Industry Co., Case No. 1:15-cr-00098-MRB (S.D. Ohio) — Guidance on Antitrust Compliance Programs in Gov’t Sentencing Memo

“The Yates Memo”: Individual Accountability for Corporate Wrongdoing (Sept. 9, 2015) (available at http://www.justice.gov/dag/file/769036/download )

DOJ

United States v. Kayaba Industry Co.— Gov’t Sentencing Memo recommended 40% “downward departure” from USSG standard based largely on Kayaba’s adoption of a new compliance program: Directed by senior management Training for personnel at high risk for antitrust issues Prior approval of contact with competitors and reports

of such contacts actively audited by in-house counsel Sales personnel certified prices independently set Anonymous hotline for whistleblowers

DOJ

“The Yates Memo” “1. To be eligible for any cooperation credit,

corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct.”

“4. Absent extraordinary circumstances, no corporate resolution will provide protection from criminal or civil liability for any individuals.”

But …

DOJ

“The Yates Memo” – cont’d Section 4 of the Memo addresses and implicitly

exempts the Antitrust Division’s “Corporate Leniency” program. So, likely no change there.

Ass’t AG Bill Baer has implied, however, the Memo may increase “individual accountability” in civil cases.

In 11/16/15 address to an ABA group, Yates clarified that a company “must provide all non-privileged information about individual wrongdoing” —“legal advice is privileged,” “facts are not.”

FTC

Statement of Enforcement Principles Regarding “Unfair Methods of Competition” Under Section 5 of the FTC Act (August 3, 2015) (available at https://www.ftc.gov/system/files/documents/public_statements/735201/150813section5enforcement.pdf; Olhausen dissenting at https://www.ftc.gov/system/files/documents/public_statements/735371/150813ohlhausendissentfinal.pdf)

FTC Staff Guidance on Active Supervision of State Regulatory Boards Controlled by Market Participants (Oct. 13, 2015) (available at https://www.ftc.gov/system/files/attachments/competition-policy-guidance/active_supervision_of_state_boards.pdf)

FTC Statement of Enforcement Principles Regarding “Unfair Methods of Competition” Under Section 5 of the FTC Act (August 3, 2015)

Section 5 of the FTC Act, 15 U.S.C. § 45(a), says (1) Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful. (2) The Commission is hereby empowered and directed to prevent persons, partnerships, or corporations, [with certain exceptions] … from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce.

FTC

Statement of Enforcement Principles Regarding “Unfair Methods of Competition” Under Section 5 of the FTC Act (August 3, 2015): the Commission will be guided by the public policy underlying the

antitrust laws, namely, the promotion of consumer welfare; the act or practice will be evaluated under a framework similar to

the rule of reason, that is, an act or practice challenged by the Commission must cause, or be likely to cause, harm to competition or the competitive process, taking into account any associated cognizable efficiencies and business justifications; and

the Commission is less likely to challenge an act or practice as an unfair method of competition on a standalone basis if enforcement of the Sherman or Clayton Act is sufficient to address the competitive harm arising from the act or practice.

FTC FTC Staff Guidance on Active Supervision of State Regulatory Boards Controlled by Market Participants (Oct. 13, 2015) : “A state may avoid all conflict with the federal antitrust laws by

creating regulatory boards that serve only in an advisory capacity, or by staffing a regulatory board exclusively with persons who have no financial interest in the occupation that is being regulated.”

“First, when does a state regulatory board require active supervision in order to invoke the state action defense?”

“Second, what factors are relevant to determining whether the active supervision requirement is satisfied?”

Finally, “[t]his FTC Staff guidance addresses only the active supervision prong of the state action defense, [not] the ‘clear articulation’ prong.”

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