The Antitrust Attorney Blog

Can You Make Money From an Antitrust Hedge Fund?

October 9, 2014 | Bona Law PC

So here’s an idea. Let me know what you think: A hedge fund or other investment vehicle centered on antitrust analysis.

I’ll explain.

As you might know, I am an antitrust attorney. And I write a blog on antitrust and competition law. So, as you may expect, I follow antitrust developments somewhat obsessively at times. As a result, I have a good sense of the practical antitrust implications of certain cases, investigations, or prospective mergers.

I don’t have a crystal ball or anything. Nor do I have any inside information. And since human beings—judges or agency officials—make the relevant decisions, nobody can actually predict what will happen.

But by now, I can review a complaint or a motion to dismiss or description of facts and have a good sense of the strength and risk of the antitrust issues. I think I also have a decent idea how the major antitrust agencies—the FTC and Department of Justice—focus their priorities and like to resolve investigations, cases, and mergers. Like I said, I can’t predict anything with certainty, but there is a high learning curve for antitrust (probably more than most specialties) and I’ve spent a lot of time and effort climbing that curve.

Enough about me—for now anyway.

Let’s talk about antitrust and company stock performance. The obvious scenario is a merger. Two companies, perhaps competitors, announce a merger or acquisition. It isn’t a dead-on-antitrust-arrival merger between the first and second leading companies in a product and geographic market that is easily defined. Instead, it is the sort of merger where the markets are somewhat complicated, perhaps in flux, and it isn’t entirely clear whether an antitrust agency will challenge it or a court will stop it.

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Monopoly, Antitrust, and Making Money

September 15, 2014 | Bona Law PC

You may have noticed Peter Thiel’s provocatively titled article “Competition is for Losers” in the Review section of last weekend’s Wall Street Journal. Since we extol the virtues of competition here at The Antitrust Attorney Blog, perhaps you are bracing yourself for me to rip into his article?

No way! It is a great article. And his discussion is not only a good antitrust primer—without the jargon—but is also absolutely accurate. Thom Lambert at the excellent blog, Truth on the Market, seems to agree.

Of course, you have to read beyond the headline, which is, like most headlines, meant to grab your attention. Peter Thiel in his book “Zero to One,” makes a lot of great points, from both the macro and micro level. I’ll focus on the micro level here.

Thiel contrasts perfect competition with monopoly. In the typical perfect-competition scenario, many firms will sell the exact same product, like a commodity. The market, at least theoretically, will achieve equilibrium, and there is no market power. The market sets the price. The profits for the sellers are minimal—zero if you are talking about economic profit (which assumes a modest rate of return).

In a typical monopoly market, by contrast, the seller is the primary or only firm that offers the product and can determine its own price and quantity produced (of course, even a monopolist can often reach the edge of its own relevant market by setting a price too high). A monopolist usually has a high-profit margin and very healthy profits.

Of course, perfect competition and monopoly are endpoints on a continuum, with lots of room between.

There is a lot to say about the article, but I am going to limit myself to the micro level—the perspective of the individual business not the overall economy.

Thiel develops the unremarkable proposition that it is much better to go into business as a fancy monopolist than a perfect-competition soldier. Thiel says “If you want to create and capture lasting value, don’t build an undifferentiated commodity business.” That’s right.

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Antitrust Law as a Negotiating Tool and the Pursuit of Family Dollar Stores

September 3, 2014 | Bona Law PC

When you are a law student, you don’t usually understand that most cases are just one of several business tools that are companies utilize to advance their interests in the marketplace.

You might think that cases are academic-like exercises that reach either trial or some appellate court (perhaps after a motion-to-dismiss or summary-judgment motion). One or the other party or both are seeking justice and will not rest until the case terminates. That’s not a surprise, really, because much of what you do in law school is read such cases. I guess that is why many law students want to become appellate attorneys.

But the reality is that—as much as lawyers like myself like to view the law through an academic lens—a lawsuit or threat of a lawsuit is often just a way for someone to seek leverage. The claim is real and is serious, but litigating the case to termination is usually a last resort. The best result is often a settlement—the earlier the better.

Lawyers don’t like to talk about that much because unless you are on a contingency fee an early settlement means less money for the attorney. But it is the truth; lawyers are not special, really. What we do in litigation is often just another business tool to advance our client’s position in the marketplace. There are exceptions, of course—cases where justice must be done—but most commercial litigation doesn’t fall into that category.

Most of commercial litigation is a negotiating tool.

And an antitrust claim is a particularly large (and effective) bat when it comes to leverage.

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Why Does Antitrust Law Matter to You?

August 20, 2014 | Bona Law PC

Antitrust matters to me. It is a big part of how I make my living—as an antitrust attorney. That is why the blog is called (unimaginatively) The Antitrust Attorney Blog. You might be an antitrust lawyer too. And if so, I guess the above question is easy for you to answer.

But if you aren’t an antitrust or competition lawyer, why read about antitrust? Maybe it is interesting to you? If so, then I respect you because you have what I view as a cool interest. You’ve probably been popular your whole life.

It is more likely, however, that antitrust matters to you because it could affect you (or if you are an attorney, your clients). In fact, I receive many calls from both business owners and non-antitrust attorneys because they or their clients may have an antitrust case or want to avoid someone having a case against them.

If you fall into one of those categories, I highly recommend that you attend a webinar that I am presenting on Tuesday, August 26 for Strafford entitled “Detecting Antitrust Red Flags in Business Dealings: Avoiding Costly Pitfalls: Identifying Potential Violations in Competitor, Supplier and Customer Interactions and Business Decisions.” I am honored to have two outstanding antitrust attorneys as co-presenters: Ryan W. Marth of Robins, Kaplan, Miller & Ciresi in Minneapolis, Minnesota and Justin W. Bernick of Hogan Lovells in Washington, DC.

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We Filed a US Supreme Court Amicus Brief Supporting Antitrust Lawsuits Against Licensing Boards

August 7, 2014 | Bona Law PC

By Jarod Bona and Aaron Gott

We filed an amicus curiae brief with the U.S. Supreme Court on behalf of We All Help Patients, Inc. in North Carolina State Board of Dental Examiners v. FTC, a federal antitrust case challenging anticompetitive conduct by professional-licensing boards.

Let us tell you a little bit about this interesting case.

The Antitrust Case

The North Carolina Board of Dental Examiners is composed of six licensed dentists, one licensed dental hygienist, and one “public member.” Dentists make a lot of money by offering teeth-whitening services. So when non-dentists started providing teeth-whitening services at a far lower cost, dentists started complaining to the Board about the lower-priced competitors.

Naturally, a Board made up of self-interested private parties had an incentive to do something about it. They began sending cease-and-desist letters to non-dentist teeth whiteners and even went so far as to ask shopping malls to not lease kiosks to teeth whiteners. It wasn’t clear, of course, that North Carolina law limited teeth-whitening services to dentists.

The Board’s actions were, in fact, a conspiracy to restrain trade. The members were competitors that acted in agreement to exclude other competitors. The conspiracy question was not at issue with the US Supreme Court.

The Federal Trade Commission, which has long advocated for “free and unfettered competition as the rule of trade” to protect consumers and economic liberty, issued an administrative complaint against the State Board and ultimately held that the Board engaged in anticompetitive conduct and the state-action immunity doctrine did not apply. The case made its way up through the Fourth Circuit—which agreed with the FTC—and finally to the U.S. Supreme Court.

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The San Diego Daily Transcript Named me a 2014 Top Attorney Finalist for Corporate Litigation in San Diego

August 4, 2014 | Bona Law PC

Most of The Antitrust Attorney Blog entries focus on antitrust and competition law, which I suppose isn’t a surprise. But that hides the fact that I am a business litigator as well. While many of my matters relate to antitrust, some of them don’t.

So I thought this award would present a good opportunity for me to remind you that although I really enjoy antitrust, I can also help you with straight-up business disputes. This includes everything from basic breaches of contract to complex global disputes spanning several jurisdictions. It also includes, of course, appellate attorney work, which I write about from time-to-time.

In fact, my antitrust background gives me a leg-up in business and corporate litigation because I have spent years studying markets: I understand how companies compete in a market, which helps me to quickly grasp how an industry or company functions. This experience improves my ability to incorporate business considerations into my descriptions of various options for the client throughout the litigation process.

Many lawyers look at litigation as a game, to win at all costs, instead of understanding that litigation is just one of several tools to use—offensively or defensively—to develop a competitor’s position in the marketplace. It is important at every decision point to recognize that—unlike the litigator that probably works with a bunch of other competitive litigators that stress winning above all else—the client cares about the result relative to the cost.

Indeed, having my own business has further focused my sensitivity to the client’s perspective. I think I understand the client’s need to find someone that (1) they trust; (2) will pursue their goals, with the overall context of the business in mind; (3) will do great work. That may sound like the typical gobbledygook from a lawyer, but I think most businesses that have had to hire litigators will tell you that those three points are everything.

I started Bona Law PC in March 2014 and it is now August. Time flies. So far so good. I’ve been quite busy and I love the work. Even though people told me that I couldn’t do antitrust outside of a big firm, I have done a lot of antitrust. In fact, we are filing an Amicus Brief to the US Supreme Court this week in an antitrust case.

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The Antitrust Law Journal, Patent Assertion Entities, and Politics

July 27, 2014 | Bona Law PC

As you know, I am a big fan of the Antitrust Law Journal, which is produced by the American Bar Association’s Antitrust Law Section. It is the journal where antitrust lawyering meets antitrust economics and academics. I like to hang out at this intersection.

A couple weeks ago, another issue of the Antitrust Law Journal arrived. I haven’t had a chance to read any of the articles yet—as I’ve been fortunately quite busy—but I skimmed it and it looks like a good one. Let’s review it together.

It is a double symposium issue, which is great because symposium issues can be a bummer if you don’t like the topic. This gives you twice the odds of liking at least some of the articles. The two topics are (1) Patent Assertion Entities, and (2) Politics and Antitrust.

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Is the FTC a Libertarian Government Agency?

July 16, 2014 | Bona Law PC

Probably not. But any government agency that files an amicus brief supporting an Institute for Justice case challenging anticompetitive state action deserves some libertarian props.

If I had to name a favorite government agency, I would pick the FTC. I don’t agree with many of their positions, of course, and have gone up against them before. But they work hard to rein in anticompetitive state and local conduct and that is meaningful. In those instances, they are champions of competition. These state and local boards shouldn’t violate the antitrust laws.

Andrew Gavil, the Director of the Office of Policy Planning at the FTC, testified before the House Committee on Small Business on “Competition and the Potential Costs and Benefits of Professional Licensure.” This is an issue that I have studied for many years and the FTC has been and remains a leader in protecting competition from needless entry barriers by state and local boards.

Let’s take a quick look at Andrew Gavil’s written statement, which officially presents the views of the Federal Trade Commission by a 5-0 vote.

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The FTC Orders Ski-Equipment Companies to Start Competing Again

July 9, 2014 | Bona Law PC

Sometimes competition is a real hassle.

If your company has a loyal customer or longtime employee, you feel betrayed when a competitor swoops in to try to “steal them.”

If you are the Miami Heat, you probably don’t like that the Cleveland Cavaliers are trying to hire your best player, LeBron James. Of course, a few years ago, the Heat signed James from Cleveland. (On a side note, this Minnesota Timberwolves fan wonders whether a LeBron James move to Cleveland will lead to a Kevin Love trade for Number 1 draft pick, Andrew Wiggins).

Update: LeBron James is indeed “coming home” to Cleveland.

I just started watching Breaking Bad. (I know, what took me so long?). Anyway, it is apparent in the early episodes that drug cartels shovel heavy resources into extinguishing competition. They certainly don’t seem too happy about this Heisenberg fellow coming in to outcompete them with a superior product. Perhaps in a later season, “Better Call Saul” will help Walter White file a Sherman Act, Section 2 Antitrust lawsuit against some of these monopolists that are restraining him from competing in certain geographic markets?

The bottom line is that as great as competition is—for almost everyone—it isn’t always enjoyable to those that must compete.

It is much easier to complacently offer the same product or service for a highly-profitable price than to constantly refine your wares and cut prices to attract and keep customers.

Perhaps a couple major ski equipment manufacturers were thinking along those lines if we are to believe the FTC’s allegations that ended in settlements approved today?

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What Does the Supreme Court’s Decision in Halliburton Co. v. Erica P. John Fund, Inc. Mean for Antitrust Law?

July 3, 2014 | Bona Law PC

The defendants in Halliburton Co. v. Erica P. John Fund, Inc. failed to show the US Supreme Court the “special justification” necessary to overturn settled precedent.

As we explained in a previous post, the Supreme Court in this case agreed to reconsider its 1988 decision in Basic v. Levinson, which allowed a shareholder class in a securities fraud lawsuit to satisfy statutory “reliance” requirements by invoking a presumption that stock prices traded in “efficient” markets incorporate all material information, including alleged misrepresentations.

But between then and now, academics, economists, and commentators chipped away at the economic theory underlying this presumption, which is based upon “the efficient capital markets hypothesis.”

So if a legal precedent depends upon an economic theory that now appears less valid than it did before, do you overrule it or keep it in place because it has ingrained itself into a larger legal structure?

Here is a similar question from real estate: If part of the wood in a load-bearing wall has started to rot, do you replace it? The Supreme Court held that you do, if you can show a “special justification.”

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