Articles Posted in Antitrust News

Bona Law Helps Deliver Successful 2023 Spring Meeting for the ABA Antitrust Section

April 3, 2023 | Bona Law PC

Authors: Steve Cernak, Dylan Carson, Kristen Harris

Back in person again, the 71st edition of the American Bar Association Antitrust Law Section’s annual Spring Meeting did not disappoint and Bona Law was there for the formal and informal conversations that will help shape antitrust enforcement in the U.S. and abroad. With over 3700 registrants from over 60 countries and dozens of panels, events, and receptions — formal and informal — the 2023 Spring Meeting was the place to be for antitrust and consumer protection lawyers last week. Bona Law attorneys Steve Cernak, Dylan Carson, and Kristen Harris represented the firm and engaged with numerous public antitrust enforcers, private practitioners and in-house antitrust counsel from across the globe on a variety of hot topics. Next year’s event promises to continue this tradition when Cernak becomes Antitrust Section Chair-elect in August 2023 and Harris joins him in Section leadership.

Cernak moderated a panel of the Federal Trade Commission Bureau Directors. Our takeaway of their message is that they have no plans to slow down the aggressive antitrust and consumer protection enforcement, despite some court losses and other resistance. Some commentators had complained that this FTC was downplaying or completely ignoring economic learning. The new Director of the Bureau of Economics swatted away that claim, saying he and his economists are fully on board with the enforcement direction. Expect continued aggressive enforcement out of this FTC, with a focus on revitalizing vertical merger enforcement, the Commission’s Section 5 authority, and Robinson-Patman Act enforcement. On the DOJ side, the importance of corporate antitrust compliance programs and the future of criminal and civil monopolization cases were repeated themes on multiple panels.

The Spring Meeting attracts practitioners and enforcers with a wide range of views on antitrust enforcement priorities. An interesting vibe we picked up from panels on the Biden Administration as well as hallway conversations is the newer ideological splits. On one side are the Biden Administration enforcers and their many supporters who want to see new or revived enforcement theories or laws very different from those that have prevailed for over forty years. On the other side are the supporters of that economics-based status quo, including both Obama-era enforcers and big business types, who, while not always agreeing on specifics, have found a common opponent in the Biden Administration enforcers. The split is not the same “red v. blue” split seen elsewhere in U.S. politics and expect to see strange bedfellows for some time to come.

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Domestic Companies and Their Execs Plead Guilty to Criminal Price-Fixing

February 16, 2023 | Bona Law PC

Authors: Jon Cieslak & Molly Donovan

Two individuals and four of their corporate entities pleaded guilty to an antitrust conspiracy to fix the prices of DVDs and Blu-Rays sold on Amazon’s platform during the 2016-2019 time period.

According to the plea agreements, the defendants “engaged in discussions, transmitted across state lines both orally and electronically, with representatives of other sellers of DVDs and Blu-Ray Discs on the Amazon Marketplace. During these discussions, the defendant[s] reached agreements to suppress and eliminate competition for the sale of DVDs and Blue-Ray Discs . . . by fixing prices” paid by consumers throughout the United States. Further details about the operation of the conspiracy are not public.

The total affected commerce done by the six guilty-plea defendants is $2.875 million. The agreed-to fines imposed against the corporate defendants range from $68,000 to $234,000, some payable in installments. Sentencing for the individuals is forthcoming with the plea agreements specifying that the Department of Justice is free to argue for a period of incarceration to be served by each of the individuals at issue.

The action is pending in the District Court for the Eastern District of Tennessee. It serves as a reminder that the DOJ’s Antitrust Division will not excuse price-fixing by relatively small companies, even if the volume of affected commerce is also relatively small.

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2022 Developments in Antitrust and Distribution

February 6, 2023 | Bona Law PC

Author: Steven Cernak

In the antitrust world in 2022, stories about Big Tech, government enforcement, and merger challenges dominated the headlines. But in putting together the 2023 edition of Antitrust in Distribution and Franchising (available for purchase soon!), I found a number of less-famous opinions that US distributors and their counsel should know. Just like last year at this time, I thought it made sense to share some of the research highlights. Below, I summarize opinions on important topics like Robinson-Patman, vertical price agreements, and locked-in consumers.

Robinson-Patman

Robinson-Patman’s Depression-era prohibition of some price and promotion discrimination has not been enforced by the federal antitrust authorities for decades — although, as we discussed recently, that might change soon. Even as government enforcement disappeared, private enforcement continued — again, as we have discussed before. Courts dealing with those private suits have been stingy, sometimes even hostile, in their interpretations of the law — once again, as we have discussed very recently. Two 2022 opinions continued those trends.

In Dahl Automotive Onalaska Inc. v. Ford Motor Co. (588 F.Supp. 3d 929, W.D. Wisc.), the defendant paid its dealers a portion of the MSRP of every vehicle sold so long as the dealer was building, or had built, a dealership exclusive to defendant’s brand. Plaintiffs were several small dealers who claimed the payments were harmful price or promotional allowance discrimination because other, larger, dealers sold more cars and so could recoup the cost of the exclusive dealership construction more quickly.

The court granted defendant’s Robinson Patman Act summary judgement motion. The court found that even if the payments allowed larger dealers to recover their construction costs more quickly, “it doesn’t mean that the payments result in price discrimination” because the promised payments merely allowed the dealers to recoup their cost of construction already incurred. Therefore, plaintiffs’ Section 2(a) claim failed. The court also found that the payments were not for “promotional allowances” because the dealership building did not resemble “advertising-related perks.” The court agreed with prior courts that had “concluded that buildings where sales occurred were not promotional facilities.” Therefore, plaintiffs’ Section 2(d) claim failed.

In In re Bookends & Beginnings LLC (2022 U.S. Dist. LEXIS 152596, S.D.N.Y.), plaintiff independent booksellers claimed that major publishers and Amazon violated various laws, including Robinson-Patman Section 2(a), when the publishers granted Amazon a larger discount than it granted plaintiffs. The magistrate judge recommended granting defendants’ motion to dismiss this claim because the Morton Salt inference of competitive injury was inappropriate when the actual discount to Amazon was not known or alleged and there was no other factual support for the complaint’s “conclusory allegation” that the discount was “steep,” “huge,” or “substantial.

Vertical Price Agreements and Retailer Cartels

As we have discussed on the blog, the Leegin case changed the evaluation of vertical price agreements under federal antitrust law from per se illegality to a rule of reason analysis. But while the Court found that such agreements were not always anticompetitive, it did discuss some situations when they might be anticompetitive: For example, when “there is evidence retailers were the impetus for a vertical price restraint, there is a greater likelihood that the restraint facilitates a retailer cartel.” The Court also expressed concern if the restraint were imposed by a manufacturer or retailer with market power.

In Davitashvilli, et. al. v. GrubHub Inc. (2022 U.S. Dist. LEXIS 58974 S.D. N.Y.), purported classes of restaurant customers survived a motion to dismiss their claims that defendants, three of the most popular online platforms for meal deliveries, harmed competition through vertical price agreements. The three defendants require the restaurants whose meals they deliver to charge the same price to customers using defendants’ services as those customers dining in and/or using a competitive delivery service. Plaintiffs likened defendants to the retailers and the restaurants to the manufacturers in Leegin, a comparison the court found “somewhat strained” but “plausible.” Because of the alleged market power of each or all of the defendants, plaintiffs plausibly claimed that the restaurants were forced to work through defendants and raise their prices to the purported classes of diners to recoup some of their additional costs.

Market Power Over Locked-In Customers

In the Supreme Court’s classic tying case, Kodak, the defendant required purchasers of replacement parts for its copiers to also purchase copier service from it. Because defendant often was the only seller of those parts, plaintiffs claimed that defendant had market power sufficient to force customers to accept this tie. Defendant, and the Court’s dissent, argued that defendant could not have power in the aftermarket for parts for its copiers because it had no power in the foremarket for copiers. The Court’s majority responded that defendant could have market power over that subset of its customers who were “locked in” to defendant’s copiers, perhaps because they purchased a copier before defendant adopted its tying policy and because switching to a different copier was costly. As a result, defendant’s summary judgment motion in Kodak was denied.

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FTC’s Proposed Noncompete Ban Has Already Succeeded

January 19, 2023 | Bona Law PC

Author: Steven Cernak

Recently, the Federal Trade Commission proposed a nearly complete ban on noncompete provisions in employment agreements. Because it faces the usual lengthy rulemaking process and several expected legal challenges, the proposed rule might not become effective for months, if ever. Through the proposal and attendant publicity, however, the FTC already has drastically changed how such provisions will be used.

Noncompete Basics and the Law Today

Noncompetes prevent workers from leaving an employer to work for other employers, typically competitors. The clauses usually are limited in time and geography. So, for example, a worker is prohibited from working for specific other employers — say, competitors — in a particular geographic area — say, Michigan — for a limited period of time — say, six months after leaving the first employer. Through these clauses, employers hope to better protect their secrets and avoid training a worker for a competitor. For example, a nondisclosure agreement might not adequately prevent use of the first employer’s competitive details that are embedded in the worker’s brain.

Today, such provisions are usually evaluated under state common or statutory law. A handful of states ban them. A few statutorily limit their use to high salary workers. Most try to balance the interests of the employer with those of the worker trying to earn a living in a chosen field. Such provisions are more likely to be upheld if the interests of the employer are legitimate and the restrictions on the worker’s mobility are limited.

FTC Proposed Rule

On January 5, 2023, the FTC proposed a rule that would upend that status quo developed over hundreds of years, declaring nearly all noncompetes as an “unfair method of competition” under the FTC Act, and outlawing nearly all of them. The proposal would allow some noncompetes in the sale of a business and sought comment on partially exempting noncompetes for high salary workers. The proposal would prohibit parties from entering new noncompete provisions and employers from enforcing existing ones. Also, all state laws that were not as restrictive would be pre-empted. The FTC is seeking comment on the proposal through March 10.

Reaction was quick. The proposal at regulations.gov generated thousands of official comments, mostly positive, in the first couple weeks. Negative commentary in the media took several angles. First, some renewed arguments that the FTC does not have the authority to issue rules under its “unfair methods of competition authority.” Others questioned whether the FTC has the authority under recent Supreme Court precedent to answer, without explicit Congressional direction, such a “major question” that has generated thousands of opinions and state laws over hundreds of years.

Finally, even granting that the FTC has the authority for such a rule, some argued that the FTC’s 200+ page notice did not adequately support the wisdom of departing from the typical case-by-case evaluation because other analyses found the overall effect of such noncompetes to be mixed. The FTC will need to consider all the official comments and decide if any tweaks to the proposed rule are appropriates. Unless the rule drastically changes, legal challenges seem certain. Therefore, a ban on nearly all noncompete provisions might not be effective for many months, if ever.

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FTC Antitrust Challenge of Altria/JUUL Gets Curiouser and Curiouser

November 14, 2022 | Bona Law PC

Author: Steven J. Cernak

The FTC’s challenge of Altria’s investment into its e-cigarette competitor JUUL Labs, Inc. (JLI) already raised interesting antitrust and administrative law issues: Did the parties’ discussions of FTC compliance during merger negotiations create an unreasonable agreement? Are the structure and procedures of the FTC constitutional?

Recently, the case took another unusual turn. In early November 2022 — after the Commission voted out the complaint; FTC Complaint Counsel tried the case; the in-house administrative law judge issued a decision favoring the parties; and the Commissioners heard oral argument on an appeal — the Commissioners sought additional briefing on the possibility of applying different theories that would make it easier for the FTC to win. The Commissioners’ request seems to be allowable under the FTC’s procedures but might not help it in responding to potential constitutional challenges to those procedures, whether in this case or another one before the Supreme Court.

Facts and Prior History

We covered the case’s facts and procedural history in detail for this Washington Legal Foundation Legal Backgrounder. Here is a short recap.

Altria was the largest and one of the oldest cigarette companies in the country but struggled mightily with e-cigarettes. JLI was a new, smaller company successfully focusing on e-cigarettes. In early 2018, the two parties began nearly year-long negotiations towards a large Altria investment in JLI. Throughout the rocky negotiations, the parties and their respective antitrust counsel discussed and exchanged documents about the likely need to take some action regarding Altria’s competitive e-cigarette assets during the expected FTC antitrust review.

After some FDA communications and during a break in the negotiations, Altria announced that it would pull some of its e-cigarette products. Negotiations resumed and shortly before reaching an agreement with JLI (which included a formal non-compete agreement), Altria announced that it would cease all e-cigarette sales.

The FTC investigated and the then-Commissioners, including current Commissioners Slaughter and Wilson, issued a complaint challenging the entire transaction. The complaint, inter alia, alleged an unreasonable agreement by which Altria agreed not to compete with JLI in the e-cigarette market “now or in the future” in exchange for an ownership interest in JLI. Specifically, that agreement took the form of the non-compete provisions of the written agreement as well as an implicit agreement to exit the market reached during negotiations as a “condition for any deal.”

Per the FTC’s procedures, the challenge was heard by the FTC’s internal administrative law judge. After extensive pre- and post-trial briefing, 20 witnesses, 2400 exhibits, and 13 days of hearing, in February 2022 the ALJ issued a 250-page opinion finding that the FTC’s Complaint Counsel did not prove that the parties reached an agreement for Altria to exit the e-cigarette market and that the non-compete provision of the investment agreement was not unreasonable. FTC Complaint Counsel immediately appealed to the Commissioners.

Throughout the challenge, the parties challenged the constitutionality of the FTC and its procedure on separation of powers and due process grounds. The parties’ briefing made much of the FTC’s enviable 25-year winning streak of the Commissioners never ruling against a challenge that they voted out. A different company whose actions are being challenged by the FTC, Axon Enterprise, recently argued to the Supreme Court that it should be allowed to raise similar constitutional issues before going through the same FTC’s procedures as Altria/JLI did.

Latest Request from Commissioners

In the WLF piece just before the oral arguments to the Commissioners, I suggested that the most interesting antitrust issue would be whether discussions among parties about actions they might take to address expected FTC antitrust concerns could ever add up to an agreement. I also wondered whether the Commissioners might, for the first time in 25 years, rule against a complaint they had issued to avoid any constitutional challenges in this case and, perhaps, to assist in any constitutional challenge in the Axon case.

I expected that by early November, the four remaining Commissioners would be well on their way to deciding the case and issuing an opinion; instead, on November 3, the Commissioners issued an Order requiring the parties and Complaint Counsel to brief two new issues. Specifically, assuming they overturn the ALJ’s opinion that the parties did not reach an unwritten agreement for Altria to exit the e-cigarette market, the Commissioners sought briefing on whether such an agreement should be analyzed as either per se illegal or inherently suspect. The Commissioners also ask if the history of this matter poses any impediments to considering these different standards and, if so, what steps would be necessary to overcome those impediments.

Applying the per se standard would make automatically illegal any such agreement that the Commissioners find the parties to have reached. Applying the inherently suspect standard would drastically lower the standard that the FTC must clear to find unreasonable any unwritten agreement reached by the parties. The inherently suspect standard, and an appellate court’s criticism of it the last time it was used in a high-profile case, are summarized in this recent post.

Conclusion

The briefing by the parties and Complaint Counsel will end just before Christmas. A ruling by the Commission would then be required by around the end of March, unless the Commission again further delays its responsibilities unilaterally. Here are three take-aways.

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Three Strikes But Not Out: Antitrust Enforcers Swing and Miss in Recent Merger Challenges: Illumina/Grail; UnitedHealth/Change Highlights; and U.S. Sugar Corp/Imperial Sugar

October 7, 2022 | Bona Law PC

Authors: Steven Cernak and Luis Blanquez

Hard times for the Federal Trade Commission (“FTC”) and Department of Justice (“DOJ”). In the last few weeks, the Biden Administration has suffered three significant antitrust loses. This is the result of the Government’s determination to try to block mergers that, despite their size, were found by courts to not hinder competition.

Below is a short summary of the three merger cases with some final remarks on what to expect from the Government moving forward.

Illumina/Grail

In March 2021 the FTC filed an administrative complaint to block Illumina’s $7.1 billion proposed acquisition of Grail. Grail is a maker of a non-invasive early detection (MCED) test to screen multiple types of cancer using DNA sequencing, known as next generation sequencing or NGS.

In its complaint, the FTC alleged that the proposed transaction would substantially lessen competition in the U.S. MCED test market by reducing innovation and potentially increasing prices and diminishing the choice and quality of MCED tests. According to the FTC, Illumina, as the dominant provider of NGS––an essential input for the development and commercialization of MCED tests in the United States––would have the ability to foreclose or disadvantage Grail’s rivals while having at the same time the incentive to also disadvantage or foreclose firms that pose a significant competitive threat.

In September 2022, Chief Administrative Law Judge D. Michael Chappell dismissed the complaint in an unexpected decision ruling for the first time against the FTC in a merger case. In a nutshell, Judge Chappell concluded that the FTC failed to prove that Illumina’s post-acquisition ability and incentive to advantage Grail to the disadvantage of Grail’s alleged rivals would likely result in a substantial lessening of competition in the relevant market for the research, development, and commercialization of MCED tests.” On September 2, the FTC Complaint Counsel filed a Notice of Appeal.

Of interest is the fact that shortly after Judge’s Chappell ruling, in parallel the European Commission decided to block the acquisition under the EU Merger Regulation using similar antitrust arguments as the FTC. And that was despite the fact that the transaction did not initially trigger EU merger control thresholds and that the parties closed the acquisition during the investigation. The stakes are also high on that side of the Atlantic.

UnitedHealth/Change Highlights

In February 2022, the DOJ, together with Attorneys General in Minnesota and New York, filed a complaint to stop UnitedHealth Group Incorporated (UHG) from acquiring Change Healthcare Inc. According to the complaint the proposed $13 billion transaction would harm competition in commercial health insurance markets, as well as in the market for a vital technology used by health insurers to process health insurance claims and reduce health care costs.

In the complaint the Government argued that the proposed acquisition was (i) an illegal horizontal merger because it would create a monopoly in the sale of first-pass claims editing solutions in the U.S., (ii) an illegal vertical merger because UHG’s control over a key input—Change’s EDI clearinghouse—would give it the ability and incentive to use rivals’ CSI for its own benefit, which in turn would lessen competition in the markets for national accounts and large group commercial health insurance; and (iii) an illegal vertical merger because United’s control over Change’s EDI clearinghouse would give it the ability and incentive to withhold innovations and raise rivals’ costs to compete in those same markets for national accounts and large group plans.

In its press release, the DOJ also stated that the proposed transaction would give United access to a vast amount of its rival health insurers’ competitively sensitive information. Post-acquisition, United would be able to use its rivals’ information to gain an unfair advantage and harm competition in health insurance markets. The proposed transaction also would eliminate United’s only major rival for first-pass claims editing technology — a critical product used to efficiently process health insurance claims and save health insurers billions of dollars each year — and give United a monopoly share in the market. It further claimed that the proposed acquisition would eliminate an independent and innovative firm, Change, that today supports a variety of participants in the health care ecosystem, including United’s major health insurance competitors, with vital software and services.

To tackle DOJ’s three theories of harm, UHG agreed to divest Change’s claims editing business, ClaimsXten, to TPG upon consummation of the proposed acquisition. The divestiture package included all four of Change’s current claims-editing products. In May 2022, UHG also issued its “UnitedHealth Group Firewall Policy for Optum Insight and Change Healthcare,” addressing the sharing of customers’ competitively sensitive information (CSI) following the transaction.

In September 2022, U.S. District Judge Carl J. Nichols, after a two-week trial concluded that the Government was not able to meet its burden of proving that the transaction would substantially lessen competition in the relevant markets, which allowed the deal to move forward.

First, on the horizontal theory of harm, Judge Nichols determined that UnitedHealth’s proposal to divest ClaimsXten to TPG, allowed TPG to adequately preserve the level of competition that existed previously in the market for claims-editing software. In other words, the DOJ failed to show that the proposed merger was likely to substantially lessen competition in the market for first-pass claims-editing solutions in the U.S. Thus, the Court required UHG to divest ClaimsXten to TPG as proposed.

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Fair to Say Robinson-Patman No Longer “Forgotten”?

October 4, 2022 | Bona Law PC

Author: Steven Cernak

Recently, FTC Commissioner Bedoya made one of his first speeches and called for a “return to fairness” when enforcing the antitrust laws. In particular, he called for renewed enforcement of the Robinson-Patman Act. This speech is just the latest reason why businesses need to prepare for a new antitrust landscape. But Commissioner Bedoya and anyone else calling for drastic basic changes in antitrust enforcement need to be prepared to patiently work for such change with a skeptical judiciary.

In the speech, Bedoya argued that all the antitrust statutes were passed with the intention of improving the “fairness” of markets, not necessarily their “efficiency,” as the laws have come to be interpreted. Therefore, he wants the FTC to focus the interpretation of all the antitrust statutes on fairness, not efficiency, which he claims to be unambiguous: “People may not know what is efficient — but they know what’s fair.” Specifically, Bedoya called for a rejuvenated enforcement of the Robinson-Patman Act and its prohibitions on various types of discriminations, usually against smaller competitors.

On Bedoya’s Robinson-Patman point in particular, please allow me a short “I told you so.” In a prior post, I explained that Robinson-Patman was forgotten but not gone, still affecting negotiations and leading to a few private suits each year. I have insisted on teaching my Antitrust students about the basics of the law, warning them that it is still alive and was unlikely to ever be repealed. If the FTC were to begin actively enforcing the statute after a couple decades, all that knowledge will come in handy once again for many more lawyers.

More generally, it is not clear that interpretation of antitrust law would need to jettison “efficiency” or consumer welfare and move to “fairness” to reach a different result in some of the anecdotes covered in Bedoya’s speech. At least some of the matters might have come out differently with a longer-term view of competition and consumer welfare. In my view — a view that I know Comm. Bedoya does not share — such a standard would be less ambiguous than trying to figure out what “fairness” requires in any situation.

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Altria Group/JUUL Labs: An Antitrust Violation for Antitrust Clearance Strategy and Transaction Non-Competes?

September 11, 2022 | Bona Law PC

Authors: Steven Cernak and Luis Blanquez

The FTC’s challenge of Altria Group’s proposed minority investment in JUUL Labs, Inc. (JLI) in April 2020 generated attention in both the mainstream media and the competition law press. Press coverage since that time has hit the latest developments but often missed the important issues this challenge raises: When can parties reach an anticompetitive agreement before they sign their official merger documents? Non-compete agreements have been pilloried lately, but are they anticompetitive even in a partial merger situation like this one?

This summary should help you prepare for the September 12 oral arguments in front of the Commissioners. You can read Steve Cernak’s more detailed article on these issues for the Washington Legal Foundation here.

The Parties and the Transaction

Altria, together with its subsidiaries, is the largest and one of the oldest cigarette companies in the U.S. In addition to its other products, it also sold e-cigarettes during the relevant period. JLI, is a smaller, newer company focused only on e-cigarettes.

As with most antitrust matters, especially merger investigations, market definition was contentious. Generally, e-cigarettes are electronic devices that aerosolize nicotine-containing liquid using heat generated by a battery as the user puffs. Open system e-cigarettes contain a reservoir that a consumer can refill with their choice of a nicotine-containing liquid. Closed system e-cigarettes have a container that already contains that liquid. Closed systems include cig-a-likes, which mimic the shape and look of a traditional cigarette, as well as pod products that have various shapes, including a shape like a USB thumb drive.

The e-cigarette category began growing rapidly about ten years ago. A few companies offered different options. Altria offered cig-a-like products and then pod products, but JLI offered only pod products. At the time of the challenged transaction, pods were the dominant choice of consumers, with JLI’s product the market leader.

While sales of pods, especially JLI’s pods, grew strongly at the end of 2017, Altria was only selling cig-a-likes and their sales fell. For regulatory reasons, Altria sought to purchase an existing pod product because it couldn’t develop its own product in a reasonable timeframe. In late 2017, it licensed the rights to a Chinese pod product and rushed it to market in early 2018.

Altria then approached JLI in early 2018 about an acquisition. By the end of July, the up-and-down negotiations centered around a multi-billion-dollar investment by Altria in exchange for a minority interest in JLI, possibly a non-voting interest convertible to voting after antitrust clearance. (An acquisition of non-voting securities does not require Hart-Scott-Rodino approval; conversion of such securities does.) At this point, the parties were far from reaching a deal, but began to discuss two other items that would lead to the FTC’s challenge of the eventual transaction.

The ironic first issue was how the parties could obtain antitrust clearance for the entire transaction. The parties’ term sheet described cooperation with the FTC and agreement to any “concessionary requirements of the FTC” related to Altria’s e-cigarette business. That is, the parties agreed that Altria would “divest (or if divestiture is not reasonably practicable, contribute at no cost to [JLI] and if such contribution is not reasonably practicable, then cease to operate” Altria’s e-cigarette business. JLI did not want to compete with Altria because Altria, as a major JLI shareholder, would have access to important JLI information. JLI’s executives later testified that they expected the FTC to oversee this process.

Second, in exchange for regulatory aid, Altria would agree to not compete with JLI’s e-cigarette products. Again, JLI didn’t want Altria’s to access sensitive JLI information when performing these services would allow Altria to improve its current e-cigarette products (before divestiture) or develop better new ones.

While negotiating over financial considerations and Altria’s voting rights, the parties continued to refine these two items. In later term sheets, the requirement that Altria “cease to operate” its e-cigarette assets disappeared while the requirement that Altria either contribute those assets to JLI or divest them remained.

Negotiations broke down in early September, but improved in October as Altria came around to terms much closer to JLI’s proposals. In early December, Altria announced that it was pulling its remaining e-cigarette products from the market, allegedly to conserve costs for product development or to invest in JLI. The parties finally reached an agreement later in December. Altria then ceased its other e-cigarette development efforts.

The Challenge and Initial Decision

On April 20, 2020, the FTC issued a two-count administrative complaint against the parties. Count I alleged an unreasonable agreement by which Altria agreed not to compete with JLI in the e-cigarette market “now or in the future” in exchange for the ownership interest in JLI. Specifically, that agreement took the form of the non-compete provisions of the written agreement as well as an agreement to exit the market reached during negotiations as a “condition for any deal.” Count II alleged that the transaction, including the agreed upon market exit by Altria and the written non-compete provisions, violated Clayton Act Section 7’s prohibition of mergers that “substantially lessen competition” in the relevant market.

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Federal Court Denies Golfers’ Request for Order to Play in the FedEx Cup Playoffs

August 10, 2022 | Bona Law PC

Author: Luke Hasskamp

Two days before the FedEx Cup Playoffs—a federal court in San Francisco denied three players’ requests for an order allowing them to participate in the marquee event. Those three players—Talor Good, Hudson Swafford, and Matt Jones—had asked the court to immediately enjoin their recent suspensions, handed down by the PGA Tour, but District Court Judge Beth Labson Freeman denied the request, holding the players did not meet their legal and evidentiary burden to show that they would be “irreparably harmed” if barred from the sport’s end-of-season playoff series.

By way of background, the PGA has banned from PGA Tour events any player who chooses to participate in events held by rival upstart league LIV Golf.

The ban includes the FedEx Cup Playoffs—a three-tournament series to conclude the PGA Tour’s season. The top 125 tour players are eligible to participate in the playoffs, which represent a significant accomplishment and “gateway” for players. Not only is lots of money at stake in the playoffs themselves, but there are important implications for a player’s future career. After the playoffs, the top 30 players qualify for next year’s Tour Championship and all four Major Championships, while the top 70 players qualify for all Tour events.

Only three of the 11 plaintiffs in the PGA Tour lawsuit—Gooch, Swafford, and Jones—sought the temporary injunction (called a “TRO”) because these three would have otherwise qualified for the FedEx Cup Playoffs but for their suspensions. Indeed, when the players launched the lawsuit, Gooch was ranked 20th, Jones was 62nd, and Swafford was 63rd, all comfortably within required standings.

In considering a request for a TRO, courts generally consider four elements: (1) whether the players are likely to succeed on the merits; (2) whether the players are likely to suffer irreparable harm without injunctive relief; (3) whether the balance of equities tip in the players’ favor; and (4) whether the injunction is in the public interest. The players requesting the TRO needed to establish all four elements to be entitled to the relief.

In general, TROs are hard to get because courts are typically reluctant to grant quick, injunctive relief on a limited evidentiary record. And as to irreparable harm in particular, a loss of money by itself is not considered irreparable harm, meaning if money damages could make a party whole, injunctive relief is not appropriate.

Here, after a hearing lasting more than two hours, featuring extensive argument by attorneys for the players and the PGA Tour, the court found that the players failed to show that they would suffer irreparable harm without immediate injunctive relief.

Although Judge Freeman agreed that the FedEx Cup Playoffs were important, marquee events, she cited, on the other hand, the substantial money that the players were making as part of their contracts with LIV Golf, plus the fact that the players’ contracts with LIV Golf specifically contemplated they would lose significant money if they had to miss out on the FedEx Cup playoffs (and other PGA Tour events). The players understood that risk, and, indeed, it was part of their negotiations with LIV Golf—allowing them (arguably) to extract more money from LIV Golf because of the possibility of a PGA ban. Judge Freeman also noted that the players would make significantly more money as part of the LIV Golf series than they might make in the FedEx Cup playoffs. Thus, she could not see how the players would suffer irreparable harm.

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China Makes Major Changes to its Antitrust Law

July 26, 2022 | Bona Law PC

Author: Yang Yang.

Ms. Yang is an Antitrust Partner at Fairsky Law Firm, which has a New York office. She is also a lecturer and researcher at China University of Political Science and Law. She authored a treatise on China Merger Control and is a member of the expert advisory team for Amendments to China Anti-Monopoly Law (with a total number of 8 members). Indeed, she leads the drafting of an expert report on suggested amendments to China Merger Control regime, Chapter 4 of Chinese Anti-Monopoly Law. She is also a frequent contributor to the Antitrust Report of LexisNexis and Competition Policy International (Asia Column and Asia Chronicle).

On June 24, 2022, the Chinese Standing Committee of the National People’s Congress passed amendments to the Chinese Anti-Monopoly Law, which will come into force on August 1, 2022. These amendments have been the first ones since the first adoption of Chinese Anti-Monopoly Law in 2008.

They cover the following topics: (i) antitrust investigations by the Chinese Antirust Bureau under the SAMR, (ii) merger control review by the Chinese Antitrust Bureau under the SAMR, and (iii) civil litigation or private actions seeking damages or claiming invalidations of contractual provisions based on a violation of Chinese Anti-Monopoly Law. These amendments mark significant changes to China’s antitrust regime.

You might also enjoy the following articles that I’ve authored on The Antitrust Attorney Blog:

Antitrust Merger Control in China: Notifiable Transactions under the People’s Republic of China Anti-Monopoly Law

Draft Amendment to Chinese Antitrust Law Calls for Further Clarifications

Administrative Enforcement by Chinese Antitrust Bureau

With regard to antitrust investigations by Chinese Antirust Bureau under the SAMR, the changes primarily relate to (a) vertical agreements––i.e., RPM; (b) hub-and-spoke agreements, and (c) to the abuse of dominance by internet/technology companies.

Vertical Agreements

These amendments introduce a new “safe harbor” rule for vertical agreements based on the market share of investigated parties in their relevant markets. They now supply more detailed guidance on relevant-market definition, including specific precedents for certain industries. This guidance reduces uncertainty for the investigated parties.

Hub-and-Spoke Agreements

Hub-and-spoke agreements involve manufactures and distributors not entering directly into Resale Price Maintenance provisions (RPM), but rather holding meetings to facilitate horizontal agreements. These fall within the scope of prohibited horizontal agreements in Chinese Anti-Monopoly Law.

For any investigation relating to horizontal or vertical agreements, there is also a new issue of whether any party to such agreements has hosted meetings, organized exchanges of information, or provided substantial facilitation. This also calls for more future guidance from the regulators.

Abusive Conduct by Technology Companies

For internet companies, the provision on prohibiting abusive conduct by algorithms or platform policies is not new. Algorithms and platform policies are commonly used by internet companies. But this new provision may indicate a potential priority from law enforcement. This seems to be consistent with merger control rules and the Chinese Antitrust Bureau’s priority relating to markets impacting the national economy and people’s daily lives, which includes areas of public facilities, pharmaceutical manufacturers and internet platforms.

Merger Control

In the merger control realm, there are three main changes: (i) notification of voluntary transactions, (ii) the introduction of a “Stop the Clock” mechanism, and (iii) a new merger review process by categories and levels. These changes can cause the following uncertainties in practice and may require more detailed guidance.

Notification of Voluntary Transactions

Under this new provision the Chinese Antitrust Bureau has the power to require parties to notify transactions before they are implemented if there is evidence of potential anticompetitive effects. There is no mandatory obligation, however, to notify transactions that do not trigger the relevant merger thresholds before their implementation.

But, despite the new law, current rules do encourage voluntary transactions involving, for example, active pharmaceutical ingredients. These changes create uncertainty on whether the authority has any power to reverse such transactions or impose remedies after their implementation.

In addition, under the new law, the authority must first require the parties to notify the transaction. If the parties do not comply with the notification request, the authority will initiate an official investigation. This process allows the parties to provide evidence and prove that the transaction does not have anticompetitive effects. The authority then has the power to approve (with or without remedies), or prohibit the transaction.

“Stop the Clock” Provision

The new “Stop the Clock” provision grants the authority more time to review the transaction if the notifying parties fail to provide documents on time. At the same time, the notifying parties will now have more time to respond to the authority and to other parties’ concerns. But under the current law and rules, the authority usually requires the parties to withdraw and refile a notification if the review process has reached the 180-day deadline. Therefore, the new law may restrain the Chinese Antitrust Bureau from extending an investigation longer than 180 days. We will have to see what happens.

New Merger Review Process by Categories and Levels

Finally, the new merger review process by categories and levels calls for more detailed rules on implementation and policies and creates uncertainty as to whether some industries will have higher scrutiny than others.

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