Antitrust Litigation: Recent Developments in Civil Business Claims
Troutman Pepper Hamilton Sanders LLP
3000 Two Logan Square
Philadelphia, PA 19103-2799
§ 1.1 Introduction
Antitrust litigation in 2020 included a number of cases addressing the National Collegiate Athletic Association’s amateurism rules, the analysis that should apply to trade restraints imposed by large or arguably dominant companies and some of the more esoteric antitrust subjects, including the filed rate doctrine, the Foreign Antitrust Trade, merger analysis and application of antitrust to digital platforms. Each of these and other significant antitrust decisions is discussed in this Chapter.
§ 1.2 The Sherman Act Developments, Section 1
The Sherman Act, under Section 1, prohibits “every contract, combination, in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce.” The main purpose of the section is to prevent conduct that unreasonably restrains competition. Accordingly, the principal issues often are whether an agreement exists or has been pled adequately, whether a restraint should be examined under the rule of reason or the per se rule, and, if subject to the rule of reason, whether the restraints there are reasonable.
§ 1.2.1 Standing – Sonterra Capital Master Fund Ltd. v. UBS AG, 954 F.3d 529 (2d Cir. 2020)
In Sonterra Capital Master Fund Ltd. v. UBS AG, the Second Circuit examined whether a group of investment funds had standing to bring Section 1 claims based on defendants’ alleged manipulation of the benchmark interest rates used to price financial derivatives in the Yen currency market. There, the court concluded that the plaintiffs had antitrust standing and reversed the district court’s dismissal in favor of the defendants.
The plaintiffs in Sonterra Capital traded in three different types of Yen-based financial derivatives that were priced based on the Yen LIBOR and Euroyen LIBOR interest rates (“LIBOR rates”). These LIBOR rates are daily rates intended to reflect the interest rates at which banks offer to lend unsecured funds in the denomination of Japanese Yen. Plaintiffs alleged that defendant banks rigged the LIBOR rates in favor of their derivatives trading positions, which, in turn, negatively impacted plaintiffs. The complaint listed specific transactions where plaintiffs traded derivatives at unfavorable rates on dates when defendants purportedly manipulated LIBOR rates.
The three types of Yen-based derivatives at issues were Yen FX forwards, interest rate swaps, and interest rate swaptions. According to the complaint, the LIBOR rates affect the value of the Yen FX forwards because it is used to take the cost of Yen for immediate delivery, and adjust it to account for the amount of interest paid or received on Yen deposits over the duration of the agreement. Interest rate swaps allow a party to exchange a fixed stream of interest rate payments for one based on a floating reference rate, such as the LIBOR rates. A Swaption gives the buyer the right to enter into an interest rate swap in the future. Plaintiffs allege that the LIBOR rates affect the value of a swaption because it determines the value of the interest rate swap underlying that swaption.
The only issue on appeal was whether the plaintiffs sufficiently pled that they suffered harm as a result of defendants’ alleged manipulation of LIBOR rates, satisfying the injury in fact requirement of Article III standing.
To satisfy Article III standing, a plaintiff “must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016). … To plead injury, in fact, a plaintiff must allege ‘that he or she suffered an invasion of a legally protected interest that is concrete and particularized and actual or imminent, not conjectural or hypothetical.’ … ‘Any monetary loss suffered by the plaintiff satisfies’ this requirement.”
To maintain a federal antitrust claim, the plaintiffs must have suffered antitrust injury. Antitrust injury is an “injury of the type the antitrust laws were intended to prevent and that flows from that which makes the defendant’s acts unlawful.” The second aspect of antitrust injury – plaintiffs’ injury must have been proximately caused by the defendants’ antitrust violation overlaps with Article III constitutional standing.
The Second Circuit pointed to the numerous instances whether the plaintiffs entered into derivatives transactions at prices that they alleged were artificial because of defendants’ alleged price fixing. The court found the allegations related to the Yen FX forwards, where plaintiffs alleged specific trades in which they had to pay higher prices because of defendants’ market manipulation. Although the court appeared more skeptical of the swap and swaption allegations because they were not as direct, the court determined that, at the motion to dismiss stage, they were adequate.
The Second Circuit held that plaintiffs plausibly pled that they suffered monetary loss from the Yen FX forwards, swap and swaption transactions as a result of defendants’ alleged manipulation of LIBOR rates and that this was sufficient to plead standing under Article III.
§ 1.2.2 Agreement – Freedom Watch, Inc. v. Google, Inc., 816 Fed. Appx. 497 (D.C. Cir. 2020)
Although the D.C. Circuit declined to publish its opinion in Freedom Watch, Inc. v. Google, Inc., given the more recent spate of antitrust cases against U.S. technology companies and asserting untraditional forms of harm it is included here.
Plaintiffs are known as a conservative public interest group and congressional candidate. Plaintiffs filed a putative class action lawsuit in the U.S. District Court of the District of Columbia in 2019. The complaint named Google, Facebook, Twitter, and Apple as defendants and alleged that the platforms conspired to suppress conservative political opinions in violation of the First Amendment, the Sherman Act, and the District of Columbia Human Rights Act. The district court dismissed the complaint as failing to state colorable legal claims.
The D.C. Circuit first addressed Freedom Watch’s standing to bring the instant case and held that it had standing based on its allegation that the platforms conspired to suppress its audience and revenues. Next, the court affirmed dismissal of Freedom Watch’s First Amendment claim because the platforms were not the “government” or otherwise a state actor.
Although a less than conventional antitrust claim, the D.C. Circuit addressed an issue frequently at the core of Section 1 motions to dismiss—whether plaintiffs alleged a plausible agreement or conspiracy among the defendants. Plaintiffs argued that the court should infer an agreement principally from the platforms’ parallel behavior. Specifically, plaintiffs asserted that each of the defendants refused to provide certain services. Citing to Bell Atlantic Corp. v. Twombly, the D.C. Circuit noted that, without more, parallel conduct is not a sufficient basis to allege an agreement. The Supreme Court addressed pleading standards in antitrust cases in Twombly. The Court held that stating an antitrust claim required a complaint with “enough factual matter” to demonstrate “plausible grounds to infer an agreement” was reached. The Court further held that “parallel conduct does not suggest conspiracy, and a conclusory allegation of agreement at some unidentified point does not supply facts adequate to show illegality.”
Freedom Watch contended that it alleged more than parallel conduct. Specifically, plaintiffs argued that the platforms are motivated by political objectives and that they are pursuing a “revenue-losing strategy.” The D.C. Circuit, however, found that those alleged facts alone did not make it more likely that the platforms’ actions were the result of an agreement among them than merely the independent conduct of each of the platforms.
Next, the court addressed plaintiffs’ Section 2 monopolization claim. The court noted that a required element of a monopolization claim is that the defendant acquired or sought to maintain their monopoly power through anticompetitive conduct. The D.C. Circuit, however, found that the only anticompetitive conduct alleged by plaintiffs was that the platforms conspired to suppress conservative content, but nowhere alleged that they conspired to achieve or maintain a collective monopoly or explained how the purported agreement to suppress conservative content enhanced their market power.
§ 1.2.3 Class Certification Predominance Element – In re: Lamictal Direct Purchaser Antitrust Litigation, 957 F.3d 184 (3d Cir. 2020).
In In re: Lamictal Direct Purchaser Antitrust Litigation, the Third Circuit examined the district court’s analysis of the putative class’s poof of antitrust injury and determined that it had impermissibly relied on average prices to demonstrate the common proof of antitrust injury necessary for satisfying the predominance requirement of class certification. The Third Circuit also puts lower courts to task—a rigorous assessment of the facts and data must be undertaken when the use of averages are in dispute.
A putative class of direct purchasers of an anti-epilepsy drug sued GlaxoSmithKline (“GSK”) and Teva Pharmaceuticals (“Teva”), alleging that the pharmaceutical manufacturers entered an impermissible reverse-payment settlement in violation of antitrust law. According to the plaintiffs, this agreement delayed the launch of multiple generic versions of the drug and resulted in purchasers paying more for the drug than they would have absent the GSK-Teva arrangement. Plaintiffs moved to certify a class of direct purchasers of the branded and generic version of the drug, and the district court granted the motion. The defendants appealed the inclusion of the generic purchasers in the class, and the Third Circuit vacated the class certification decision and remanded the case back to the lower court. The appellate court concluded that the district court had not performed the rigorous analysis required in assessing whether issues common to the putative class predominate over individualized ones.
GSK is the patent holder for Lamictal, an anti-epilepsy drug, and it has been selling the drug since 1984. GSK’s Lamictal patent was set to expire in 2009. In April 2002, Teva filed for authorization with the FDA to begin selling a generic version of Lamictal, called Iamotrigine. In response, GSK sued Teva for patent infringement. After Teva won a bench trial for one of the claims in 2005, the pharmaceutical companies settled. Under the settlement, Teva would begin selling Iamotrigine in mid-2008, which was six months prior to when Teva could sell the generic had GSK won the infringement suit. GSK, in exchange, agreed not to sell an authorized generic version (“AG”) of Lamictal. Plaintiffs alleged that, without the agreement, Teva would have launched Iamotrigine and GSK would have responded by selling an AG. With two generics in the market, the price would have decreased. Thus, plaintiffs contended that they were harmed by paying more for the generic Iamotrigine than they otherwise would have absent the settlement.
To counter this theory, defendants argued that GSK competed with Teva on price despite not launching an AG. Because doctors appeared reluctant to switch their patients’ epilepsy drugs, GSK had long been worried that selling an AG would be ineffective since doctors would not move patients from Lamictal to the lower-priced generic. Moreover, to take advantage of this particularity of the anti-epilepsy drug market, GSK developed a strategy to compete aggressively with Teva on price by offering significant discounts and rebates to targeted pharmacies if the pharmacies sold Lamictal instead of Iamotrigine (the “Contracting Strategy”). According to defendants, Teva found out about GSK’s Contracting Strategy, and in response, lowered its prices on Iamotrigine. Direct purchasers thus did not pay more for Iamotrigine than they would have without the settlement.
Under Federal Rule of Civil Procedure 23(b), common questions of law or fact of class members must predominate over ones affecting individual members. For this predominance requirement to be met, courts must perform a “rigorous analysis” of the evidence and arguments proffered to determine whether the plaintiffs’ claims are capable of common proof at trial by a preponderance of the evidence. In opposing class certification, defendants argued that plaintiffs could not show that injury to the proposed class of generic purchasers is capable of common proof at trial because plaintiffs’ evidence impermissibly relied on averages. These averages were inappropriate because up to one-third of the proposed class members likely paid no more, or even less, than they would have absent the settlement as a result of the discounting strategies employed by defendants. On appeal, defendants contended that the district court erred by accepting these averages without performing a rigorous analysis of the parties’ competing expert reports and resolving factual disputes on which the expert testimony was predicated.
The Third Circuit agreed, vacating class certification and remanding the case. First, the Third Circuit explained that the lower court failed to perform the requisite “rigorous analysis” and resolve factual disputes that underlie the competing expert reports. The determination of whether the use of average prices was acceptable depended on several disputed facts, including “1) whether the market is characterized by individual negotiations; 2) whether Teva preemptively lowered its pricing in response to the Contracting Strategy; and 3) whether and to what extent GSK, absent the settlement agreement, would or could have pursued both the Contracting Strategy and an AG.” Moreover, the district court failed to evaluate the sources of the competing experts’ pricing and discount data to decide what evidence was credible and could be used to support the expert reports. Assessing this “micro-level analysis” was required to decide whether plaintiffs could establish that common issues predominate by a preponderance of the evidence at trial, despite competing evidence and expert testimony. While the Third Circuit acknowledged that the use of averages may be acceptable when they do not hide individualized injury, that determination could not be made here given the lack of rigorous analysis.
Second, the Third Circuit further explained that the lower court confused the dispute regarding the use of averages as one involving damages, not injury. However, the Third Circuit distinguishes between the questions of whether an injury actually occurred and what the value of damages for that injury should be, and it applies a more permissive predominance standard in class certification for damages than for injury. “While every plaintiff must be able to show antitrust injury through evidence that is common to the class, damages need not be susceptible of measurement across the entire class for purposes of Rule 23(b)(3).” Because the district court applied the more lenient damages standard, remand was appropriate.
Although the Third Circuit acknowledged that injury may be shown using averages, the opinion questions whether averages are appropriate to show common issues predominate.
§ 1.2.4 Class Certification Predominance Element – In re Suboxone (Buprenorphine Hydrochlorine & Naloxone) Antitrust Litigation, 967 F.3d 264 (3d Cir. 2020)
The Third Circuit again addressed class certification in another pharmaceutical case In re Suboxone (Buprenorphine Hydrochlorine & Naloxone) Antitrust Litigation. Here, the Third Circuit focused its analysis on the totality of the conduct, as opposed to “considering each aspect” in isolation. The decision could make it more challenging for defendants to prevail and encourages plaintiffs to make as many allegations as they can substantiate to paint the full picture of the alleged misconduct. Similarly, the ability to delay the eventual need for individualized damages past the class certification phase reduces plaintiff barriers to successfully certifying a class action.
Direct purchasers of Suboxone (“Purchasers”) sued Indivior, formerly Reckitt Benckiser Pharmaceutical, Inc. (“Reckitt”), for allegedly engaging in anticompetitive conduct that impeded the entry of generic versions of Suboxone into the market, violating Section 2 of the Sherman Act. The district court granted class certification for the plaintiffs, holding that common evidence of injury and damages demonstrated that 1) “[p]urchasers paid more for brand . . . name than they would have for generic tablets due to Reckitt’s actions to . . . suppress market entry” and 2) “[i]ssues regarding allocation of individual damages [were] insufficient to defeat class certification.” On appeal, the Third Circuit affirmed the decision.
The FDA granted Reckitt a seven-year exclusivity period for the drug Suboxone, which treats opioid addiction. At the end of that period, Reckitt developed an under-the-tongue film version of the drug that also would have its own exclusivity period. Additionally, unlike the anticipated generic Suboxone tablets, the film version would not be AB-rated—meaning, pharmacists would not have to substitute a generic if a patient were prescribed Suboxone film under state substitution laws. This transition to Suboxone film was allegedly coupled with efforts to eliminate demand for tablets, coercing providers to prescribe Suboxone film over the tablet form. These actions resulted in the Purchasers bringing a class action against Reckitt for anticompetitive practices, “alleging that its efforts to suppress generic competition amounted to unlawful maintenance of monopoly power.”
The Third Circuit agreed with the district court on class certification, holding that class members satisfied both the predominance and adequacy requirements.
Regarding the question of predominance, Reckitt made two arguments. First, it contended that Purchasers had not provided common evidence of injury or damages as required by Comcast Corp. v. Behrend, because Reckitt could “lawfully raise the prices on Suboxone tablets and change its rebate program.” However, the Third Circuit wrote that the plaintiffs’ case was not just about the pricing of the brand tablets, but rather the totality of Reckitt’s actions, which also included “withdrawing tablets from the market, providing rebates only for film, disparaging the safety of tablets, and delaying the generics’ entry by filing a citizen petition and not cooperating in the REMS process.” The court concluded that common evidence would be used to prove that these actions together suppressed competition, examining the evidence in its totality. Second, Reckitt argued that since the plaintiff’s damages model only calculates aggregate damages, predominance was not satisfied. But the court also rejected this argument, noting that prior Third Circuit cases allow for models that estimate “the damages attributable to the antitrust injury, even if more individualized determinations are needed later.” Therefore, the court rejected both arguments, finding that the plaintiffs satisfied predominance under Rule 23(b).
Finally, Reckitt also challenged the adequacy of the class representative, arguing that the class representative has a risk of conflict with class counsel and lacks control over the litigation to class counsel. The Third Circuit wrote that the risk of conflict was “hypothetical” which “cannot defeat adequacy.” In addition, the Third Circuit rejected the argument that class certification should be denied because of the class representative’s lack of control. The court said that Reckitt cited no Third Circuit precedent that requires the class representative to control the litigation and reiterated that any suggestion that class counsel does not direct and manage class actions is “sheer sophistry.”
§ 1.2.5 Collaborations – In re National Collegiate Athletic Association Athletic Grant-In-Aid Cap Antitrust Litigation (9th Cir. 2020)
Over 35 years ago, the Supreme Court, in NCAA v. Board of Regents of the University of Oklahoma, suggested that rules regarding eligibility standards for college athletes would be subject to a different, less stringent standard than most trade restraints. But in May 2020, the Court of Appeals for the Ninth Circuit ruled, in a case brought by Division 1 football and basketball players, that the National Collegiate Athletic Association’s (NCAA) limits on (1)cash education related benefits below $5600 in academic or graduation awards and incentives and (2) non-cash education related benefits—such as computers, science equipment, post-graduate scholarships and internships—violated federal antitrust laws. In December, the Supreme Court granted certiorari and agreed to review that decision in National Collegiate Athletic Association v. Alston and American Athletic Conference v. Alston.
The Sherman Act prohibits agreements in restraint of interstate trade or commerce. The Ninth Circuit explained that, when examining agreements among entities involved in league sports, such as here, the court must determine whether the restriction is unreasonable under the rule of reason. The appellate court further explained the rule of reason’s “three-step framework:”
(1) Student-Athletes “bear[ ] the initial burden of showing that the restraint produces significant anticompetitive effects within a relevant market”; (2) if they carry that burden, the NCAA “must come forward with evidence of the restraint’s procompetitive effects”; and (3) Student-Athletes “must then show that any legitimate objectives can be achieved in a substantially less restrictive manner.” Throughout this analysis, we remain mindful that, although “the NCAA is not above the antitrust laws,” courts are not “free to micromanage organizational rules or to strike down largely beneficial market restraints,” Accordingly, a court must invalidate a restraint and replace it with an LRA only if the restraint is “patently and inexplicably stricter than is necessary to accomplish all of its procompetitive objectives.”
Founded in 1905, the NCAA establishes rules governing college athletics. Its mission statement is to “maintain intercollegiate athletics as an integral part of the educational program and the athlete as an integral part of the student body and, by so doing, retain a clear line of demarcation between intercollegiate athletics and professional sports.” For many years, among other things, NCAA rules have provided that student athletes may not be paid to play. Specifically, at issue in the instant case was the NCAA regulations that govern the payments student-athletes may receive in exchange for and incidental to their athletic participation as well as in connection with their academic pursuits.
The NCAA categorizes its member schools into three competitive divisions: Division 1 schools—350 of the NCAA’s approximately 1,100 member schools—sponsor the largest athletic programs and offer the most financial aid. Division 1 football has two subdivisions, one of which is the Football Bowl Subdivision (FBS). In 2014, the NCAA amended its Division 1 bylaws (the “Bylaws”) to provide the “Power Five” conferences autonomy to adopt collectively legislation in certain areas, including limits on athletic scholarships known as “grants-in-aid.” In early 2015, the Power Five increased the grant-in-aid limit to the cost of attendance (“COA”), and, since August 2015, the Bylaws have provided that a “full grant-in-aid” encompasses “tuition and fees, room and board, books and other expenses related to attendance at the institution up to the [COA],” as calculated by each institution’s financial aid office under federal law. The Bylaws also contain an “Amateurism Rule,” which strips student-athletes of eligibility for intercollegiate competition if they “[u]se[ ] [their] athletics skill (directly or indirectly) for pay in any form in [their] sport.” “[P]ay” is defined as the “receipt of funds, awards or benefits not permitted by governing legislation.”
In O’Bannon v. NCAA, a class of student athletes challenged the NCAA’s rules that prohibited payment for use of their names, images and likenesses. There, the court deemed several of the NCAA’s rules unlawful under the rule of reason’s balancing test, finding that less restrictive alternatives to the challenged rules existed. Specifically, the court found that the NCAA’s rule that capped athletic scholarships at tuition and fees and meant student-athletes were not being compensated for the full COA violated the Sherman Act and required the NCAA to allow colleges to pay athletes $5,000 above the COA and unrelated to any educational expenses.
On appeal, the Ninth Circuit held that the “rule of reason” analytical framework applies to all the NCAA rules and rejected the NCAA’s arguments that the Supreme Court’s Board of Regents decision perpetually shielded from antitrust claims the NCAA’s amateurism rules, including those barring athlete compensation. The Ninth Circuit affirmed the district court’s ruling in O’Bannon, except for the $5,000 payments, which the court said would “vitiate” athletes’ amateur status. The Ninth Circuit acknowledged the existence of “a concrete procompetitive effect in the NCAA’s commitment to amateurism: Namely the amateur nature of collegiate sports increases their appeal to consumers.”
Another set of student athletes brought a new proposed class action against the NCAA challenging its amateurism rules and seeking to bar altogether the NCAA’s prohibition of unlimited cash payments to athletes. In 2017, the NCAA entered into a $208.7 million settlement covering part of the suit and resulting in payments to approximately 40,000 football and basketball players. The litigation, however, continued over possible injunctive relief.
The district court accepted plaintiffs’ theory narrowing the relevant market to one where students sell their “labor in the form of athletic services” to schools in exchange for athletic scholarships and other payments permitted by the NCAA. The court also found significant anticompetitive effects in the relevant market. Although the NCAA granted the Power Five autonomy to establish new forms of compensation and to expand previously available compensation and benefits, the district court observed that these conferences remain constrained by “overarching NCAA limits” that cap compensation at an artificially low level.
Although the district court accepted the NCAA’s “amateurism” justification, which drives consumer interest in college sports because consumers value amateurism with respect to the NCAA’s limits on cash compensation untethered to education, it did not accept it as to the limits on non-cash education-related benefits. In fact, the court found no proof that the rules directly foster consumer demand and observed that the NCAA’s proffered connection between amateurism and its pay-for-play prohibition is riddled with exceptions. The court then reached two conclusions: (i) the challenged rules do not follow any “coherent definition” of “amateurism” or “pay” and (ii) payments (many of which post-dated O’Bannon) have not reduced the demand for college sports.
Next, the district court examined three potential alternatives to the challenged restraints and whether they were less restrictive but virtually as effective in preventing “demand-reducing unlimited compensation indistinguishable from that observed in professional sports.” The district court rejected two proposed LRAs, both of which would have permitted individual conferences to limit above-COA compensation, but would have otherwise invalidated either (i) all NCAA compensation limits or (ii) NCAA limits on education-related compensation and existing caps on benefits incidental to athletics participation, such as healthcare, pre-season expenses, and athletic participation awards. The district court rejected these alternatives on the basis that they could result in professional-style cash payments and undermine the distinction between amateur and professional sports.
The district court then identified a viable LRA:
(1) allow the NCAA to continue to limit grants-in-aid at not less than the [COA]; (2) allow the [NCAA] to continue to limit compensation and benefits unrelated to education; (3) enjoin NCAA limits on most compensation and benefits that are related to education, but allow it to limit education-related academic or graduation awards and incentives, as long as the limits are not lower than its limits on athletic performance awards now or in the future.
The court also identified a number of specific education-related benefits that, if the above, LRA applied, could not be barred by the NCAA: computers, science equipment, musical instruments and other items not currently included in the [COA] but nonetheless related to the pursuit of various academic studies; post-eligibility scholarships for undergraduate, graduate, and vocational programs at any school; tutoring; study-abroad expenses; and paid post-eligibility internships.
On appeal to the Ninth Circuit, the NCAA challenged the district court’s analysis at the rule of reason’s second step, where the NCAA bears a “heavy burden” to “competitively justify” its restraints. The NCAA advances a single procompetitive justification: The challenged rules preserve “amateurism,” which, in turn, “widen[s] consumer choice” by maintaining a distinction between college and professional sports.
The Ninth Circuit affirmed the district court’s finding that only some of the challenged NCAA rules serve that procompetitive purpose: limits on above-COA payments unrelated to education, the COA cap on athletic scholarships, and certain restrictions on cash academic or graduation awards and incentives. The Ninth Circuit also concluded that the record supported the district court’s finding that the remaining rules—those restricting “non-cash education-related benefits”—do not foster or preserve demand because the value of such benefits, like a scholarship for post-eligibility graduate school tuition, is inherently limited to its actual value, and could not be confused with a professional athlete’s salary.
The Ninth Circuit rejected the notion that prior precedent immortalized the definition of “amateurism” as excluding payment for athletic performance. The NCAA proffered a survey of 1,100 college sports fans, reflecting that 31.7 percent watch college sports because, among other things, they “like the fact that college players are amateurs and/or are not paid.” But, reliance on the survey disregards the district court’s finding that the survey results do not capture the effects, if any, that the tested compensation scenarios would have on consumer behavior. The NCAA’s continued reliance on the survey further ignores the district court’s finding that its use of the phrase “amateurs and/or not paid” made its responses unreliably ambiguous: respondents who selected “amateurs and/or not paid” may have very well equated amateurism with student status, irrespective of whether those students receive compensation for athletics.
The Ninth Circuit found reasonable the district court’s conclusion that consumer demand for college athletics is not necessarily dependent upon the NCAA’s capped education-related benefits because such benefits are easily distinguishable from professional salaries; “their value is inherently limited to their actual costs”; and “they can be provided in kind, not in cash.” The appellate court also found record support for the district court’s less restrictive alternative provision of education-related benefits. The NCAA failed to explain why the cumulative evidence, which included demand analyses regarding the growth of NCAA revenue while payments to athletes were simultaneously expanding in the form of the NCAA’s Student Assistance Fund and Academic Enhancement Fund for a variety of purposes, such as academic achievement or graduation awards, school supplies, tutoring, study-abroad expenses, post-eligibility financial aid, health and safety expenses, clothing, travel, “personal or family expenses,” loss-of-value insurance policies, car repair, personal legal services, parking tickets, and magazine subscriptions. The district court also reasonably concluded that permitting student-athletes to receive up to $5,600 in aggregate athletic participation awards amount in academic or graduation awards and incentives will not erode consumer demand.
The Supreme Court granted certiorari to determine whether the Ninth Circuit erroneously held that the NCAA’s eligibility rules regarding student-athlete compensation violate federal antitrust law. The context of the case, however, increased focus on large buyers of labor and concerns that they have historically been permitted to inhibit increased compensation through unnecessary restraints.
§ 1.3 The Sherman Act Developments, Section 2
The statutory language of Section 2 makes unlawful “monopolization,” “attempts to monopolize,” or “conspiracies to monopolize.” The statute itself, however, does not define any of these offenses or explain the importance of key issues such as “relevant market,” “market power,” or “anticompetitive conduct.” Consequently, Section 2 has in recent years been the subject of a number of high-profile antitrust cases.
Even though the Supreme Court moved the line of scrimmage for Section 2 claims, particularly in the area of certain unilateral pricing conduct, fertile ground remains for Section 2 litigation. While Congress and various state legislatures are exploring reducing the standard for proof of harm from a single firm’s conduct, the courts continue to search for the right balance.
§ 1.3.1 Multi-Sided Platforms — Federal Trade Commission v. Surescripts, LLC, 424 F. Supp.3d 92 (D.D.C. 2020)
In 2018, the United States Supreme Court ruled that American Express’s contractual “anti-steering provisions” did not violate Section 1 of the Sherman Act’s prohibition on agreements that unreasonably restrain trade. Both consumers and merchants depend on credit card networks to intermediate between them for transactions to work—they extend the cardholder credit to make a purchase and they provide merchants quick, guaranteed payment. As such, the credit card market is considered a “two-sided platform.” Moreover, the Supreme Court characterized this particular structure as a “transaction platform,” because a sale to one side of the platform can only occur with a simultaneous sale to the other side.
In a five-to-four decision split along ideological lines, the conservative justices in the majority determined that plaintiffs did not carry their burden of showing that American Express’s anti-steering provisions result in anticompetitive effects in a properly defined product market. In so doing, the Supreme Court announced that a multi-sided market cannot appropriately be analyzed without considering the effects of the restraint on both or all sides of a platform where transactions take place simultaneously.
As part of the enforcement agencies’ continuing efforts to reign in purportedly harmful restrictions in technology and healthcare markets, in 2019 the Federal Trade Commission (FTC) filed a complaint alleging that Surescripts, LLC (“Surescripts”) used anticompetitive vertical and horizontal contract restraints to monopolize two important e-prescribing markets. The FTC claims that Surescripts used loyalty pricing, exclusivity, non-competition commitments, and threats in order to block its competitors from sufficient volume to achieve the critical mass necessary to be a viable competitor in the electronic prescription routing and eligibility markets in violation of Section 2 of the Sherman Act and Section 5 of the FTC Act. In so doing, Surescripts prevented any meaningful competitors from entering either market, which caused higher prices, reduced innovation, and lowered output.
The FTC’s challenge to Surescripts’ strategies will require the federal court to apply the antitrust laws to two-sided high tech, data driven markets where network effects are prevalent. The FTC’s complaint is the latest in a series of challenges to predominantly vertical contract provisions.
Routing is the electronic transmission of prescription information from a healthcare provider to a pharmacy through a provider’s electronic health record (EHR) system. Providing routing requires building a two-sided network (or platform) linking EHRs to pharmacies. Eligibility is the electronic transmission of a patient’s formulary and insurance coverage information from a payer (typically a patient’s pharmacy benefit manager (PBM)) to the prescribing provider’s EHR. Providing eligibility requires building a two-sided network (or platform) linking EHRs to PBMs. Surescripts provides connections between EHRs and pharmacies for routing transactions and between EHRs and PBMs for eligibility transactions, both the routing and eligibility markets are considered “two-sided.”
As two-sided platforms, the value to participants on one side of the platform increases when there are more participants on the other side. Therefore, neither side will join the platform unless they believe the other side will also join—what the FTC describes as the “chicken-and-egg-problem.” In other words, for example, EHRs would be unlikely to join a routing network unless those EHRs believe a large number of pharmacies use the network, and pharmacies will only join the network if they believe they have access to a substantial number of EHRs. This chicken-and-egg-problem increases the barriers for any new entrant.
The FTC alleged that, in reaction to the threat of new competition, Surescripts maintained its near monopoly of the routing and eligibility markets by imposing anticompetitive contract provisions and threats.
First, Surescripts imposed exclusivity in its pharmacy and PBM contracts through loyalty discounts. Those pharmacies that used Surescripts for all or nearly all routing transactions received a loyalty discount. Surescripts used the same tactics in the PBM eligibility contracts. In addition, Surescripts enacted clawback obligations, which required a pharmacy or a PBM that switched from exclusive to non-exclusive to pay back the loyalty discount for past transaction volume over the term of the contract. Under Surescripts’ EHR loyalty program, if an EHR agrees to be exclusive only in routing, Surescripts pays the EHR an incentive fee equal to a portion of each routing transaction or, if an EHR agrees to be exclusive only in eligibility, for a portion of each eligibility transaction. If the EHR agrees to be exclusive in both routing and eligibility, Surescripts pays the EHR a higher incentive fee on both transactions, leading nearly all EHRs participating in the loyalty program to agree to exclusivity for both transactions.
Second, Surescripts included exclusivity and non-compete requirements with one of its largest customers and a potential rival, a health information technology company that resells Surescript’s routing transaction services to pharmacies. Surescript’s agreement with this customer provided for a discount if its customer exclusively used the Surescript network and a non-competition requirement.
Third, Surescripts used contract provisions and threats to secure a large EHR customer. To ensure that its competitor did not gain a foothold in the market through this large EHR customer, Surescripts used its purportedly “must-have” EHR platform to require the customer to end its routing connection to the competitor’s network. Surescripts also threatened to cut the customer off from important information, such as a pharmacy directory and medication history, unless it agreed to exclusivity.
According to the FTC, through these contractual provisions and a series of threats Surescripts was able to maintain at least a 95 percent share in each of the relevant e-prescribing markets. Surescripts loyalty programs covered 79 percent of pharmacy routing transaction volume and at least 78 percent of PBM eligibility transaction volume, making it substantially more expensive for any firms that wanted to make use of a platform in addition to the Surescripts platforms. By controlling, directly or indirectly, such a large portion of the transaction volume a challenger could not overcome the chicken-and-egg-problem. It would not be able to convince one side of its platform that there are a substantial number of participants on the other side as too many participants were exclusive to Surescripts. With this monopoly power, Surescripts has imposed high prices and stalled innovation, and there were no procompetitive justifications for Surescripts’s conduct that outweighed these competitive harms.
Surescripts moved to dismiss the complaint, arguing that the case was both procedurally and substantively defective. First, Surescripts argued that the court lacks subject matter jurisdiction over the FTC’s request for a permanent injunction under Section 13(b) of the FTC Act. Second, Surescripts argued that the Section 2 monopolization claim fails because the FTC does not allege that the prices offered by Surescripts were predatory or that Surescripts’s market practices violated the rule of reason.
With respect to Section 13(b), Surescripts argued the court lacks subject matter jurisdiction because is not a “proper case” under the statute to adjudicate the FTC’s request for permanent injunctive relief. Specifically, Surescripts contended that only straight forward, routine cases are proper candidates for relief under Section 13(b). This case, however, according to Surescripts, does not qualify as routine or straightforward because it involves complex and novel issues of antitrust law, such as how to understand the two-sided e-prescription markets of routing and eligibility in light of the Supreme Court’s recent decision in Ohio v. American Express Co. The FTC argued in response that the language of Section 13(b) does not clearly speak to courts’ power to adjudicate such claims. In addition, the FTC contended that this case is “proper” because that term just means any case in which a permanent injunction would be “appropriate.” The FTC posits that any case where a law enforced by the FTC has been violated and equitable remedies are needed to make harmed consumers whole is an appropriate case. The district court found the FTC’s position more persuasive, denying Surescripts’s motion to dismiss on the basis that the court lacked subject matter jurisdiction under Section 13(b).
The court noted that the relevant provision provides that “in proper cases the [FTC] may seek, and after proper proof, the court may issue, a permanent injunction.” The court found important that neither this specific provision nor Section 13(b)’s broader framework regarding equitable relief even include the word “jurisdiction,” let alone a clear statement that any of the statutory requirements are jurisdictional. Surescripts’s argument that “proper cases” is a jurisdictional requirement relied, in part, on the label of Section 13(a)—“Power of Commission; jurisdiction of courts” and that Section 13(a) is “identical” to Section 13(b) in structure. The court, however, relied on the Supreme Court’s decision in Arbaugh v. Y&H Corp., defining the proper inquiry as whether Congress “clearly states that a threshold limitation on a statute’s scope” is jurisdictional, and Surescripts’s structural argument from Section 13(a)’s label falls short of this high bar. Moreover, the court examined the title of Section 13(b) itself and its separate and distinct label (“Temporary restraining orders; preliminary injunctions”) that does not include any reference to jurisdiction.
Although the court agreed with Surescripts that “proper cases” is not synonymous with “all cases,” it noted that its task was not to define the term “proper cases” for all scenarios, but to determine whether the instant case is proper for a permanent injunction, if won by the FTC. The court took comfort in the FTC’s assurance that the primary authority governing the case was the D.C. Circuit’s precedent, United States v. Microsoft Corp., and that the court would not need to “go much beyond Microsoft.” Based on those assurances, the court concluded that the complaint adequately alleges a “proper case” under Section 13(b).
Surescripts next argued that the FTC’s monopolization claim should be dismissed for two primary reasons. Specifically, Surescripts claimed that because its loyalty program was “optional,” it could not serve as the basis for a monopolization claim unless the prices under the loyalty program were “predatory” but the FTC did not plead the necessary elements for a predatory pricing claim. Additionally, Surescripts argued that the complaint should be dismissed even if, as the FTC claimed, its loyalty programs were analyzed as exclusive dealing arrangements because the FTC did not adequately allege that Surescripts’s loyalty programs created any anticompetitive effects. Specifically, Surescripts suggests that, because the FTC concedes that both routing and eligibility are two-sided markets, “the FTC must plausibly plead foreclosure of a substantial share of each of those markets as a whole.”
The court found that Surescripts’s loyalty programs or alleged practice of charging loyal pharmacies and PBMs less, and paying loyal EHRs greater incentives, do not need to constitute predatory pricing for Surescripts’s exclusionary practice to constitute illegal maintenance of a monopoly under Section 2. The court pointed out that exclusivity provisions covering approximately 40–50 percent of the relevant market have been found to foreclose competition illegally, while Surescripts’s loyalty program allegedly locks 70–80 percent of the routing and the eligibility markets into effectively exclusive contracts. Thus, Surescripts’s criticism that the FTC failed to allege sufficient anticompetitive effects or foreclosure in each of the two-sided markets was incorrect. The court further determined that, Amex did not change the central question—whether the FTC alleged that Surescripts engaged in exclusionary conduct that “harmed competition, not just a competitor,” by blocking entrants into the market.
The FTC’s monopolization case continues, despite Surescripts’s arguments that its optional loyalty programs would have to meet quite specific and rigorous standards for pleading, including predatory pricing and anticompetitive effects in each platform. Instead, the court focused on the broader concern of foreclosure in each market and its effect on the ability of firms to enter the market.
§ 1.3.2 Exclusivity and Refusal to Deal — Federal Trade Commission v. Qualcomm, Inc., 969 F.3d 974, rehearing en banc denied, (9th Oct. 28, 2020)
The Ninth Circuit Court of Appeals reversed a high profile decision which found that Qualcomm’s patent licensing practice violated Section One and Section Two of the Sherman Act. The court aptly described the case as drawing “the line between anticompetitive behavior, which is illegal under federal antitrust law, and hypercompetitive behavior, which is not.” This distinction between aggressive competition and unlawful competition is often the subject of monopolization.
Qualcomm’s practices have been the subject of much antitrust scrutiny. In 2017, on the heels of investigations by government agencies in Japan, Korea, Taiwan, China, and the European Union, the FTC sued Qualcomm for its alleged use of anticompetitive tactics to maintain its monopoly power in the wireless cellphone chip market. Much of the FTC’s complaint centered on Qualcomm’s ownership of certain standard essential patents (SEPs), including some related to code division multiple access (CDMA) and premium long-term evolution (LTE) cellular modem chips and that are key to the development and production of compatible devices able to communicate with each other. Because an SEP is critical to other industry participants, SEP holders must commit to licensing their SEPs on fair, reasonable, and nondiscriminatory (FRAND) terms. The FTC claimed that Qualcomm’s refusal to license its SEPs to other chip suppliers violated its FRAND commitment and the antitrust laws, that Qualcomm instead used its monopoly over chip supply and threats to withhold supply to coerce device manufacturers into unfair license arrangements, and that Qualcomm tied up such a large portion of the available business through exclusive dealing arrangements that its rival chip suppliers were unable to enter or thrive in the market.
After a ten-day bench trial, the U.S. Federal Trade Commission (FTC) convinced a California federal district court that Qualcomm’s longstanding intellectual property licensing practices and volume-based discounts violated the antitrust laws. As an initial matter, the court determined that Qualcomm had market power in two relevant global product markets—CDMA modem chips and premium LTE modem chips—based primarily on ordinary course documents reflecting high market shares and higher royalty rates. Further, the court held that the FTC need not prove that the alleged anticompetitive acts caused harm to competition. Instead, the district court stated that in a government agency’s case for injunctive relief, the court need only infer causation where a defendant has market power and the defendant’s conduct “reasonably appears capable” of maintaining that power.
The trial court also granted the FTC’s far-reaching requested injunctive relief—including the renegotiation of existing patent licenses and a seven-year compliance monitoring period. In fashioning its remedy, the court was not deterred by Qualcomm’s non-dominant position in the nascent 5G chip market or the Department of Justice, Antitrust Division’s last-minute attempt to intervene in the remedies phase.
Before an examination of each of Qualcomm’s allegedly anticompetitive practices, the Ninth Circuit reset the analytical framework. The Ninth Circuit affirmed that the relevant product markets were the market for CDMA modem chips and the market for premium LTE modem chips, but criticized the district court’s focus on the impact of Qualcomm’s conduct on the much broader market of cellular services generally. Accordingly, the Ninth Circuit reframed the issues to focus on the impact of Qualcomm’s practices in only the area of effective competition—the markets for CDMA and premium LTE modem chips.
Refusal to Deal with Rivals. In advance of the trial, the district court granted the FTC’s partial summary judgment motion, holding that Qualcomm’s commitments to two standard setting organizations (SSO) required it to license its SEPs to other chip suppliers on FRAND terms and leaving the court to determine only whether Qualcomm’s failure to do so gave rise to antitrust liability. Qualcomm would only enter into licensing agreements with rivals if they agreed to sell only to cellphone manufacturers who also had separate licensing deals with Qualcomm, and to disclose customer names and sales volumes to Qualcomm. Based on the evidence at trial, the district court concluded that Qualcomm’s licensing practice constituted a refusal to license fairly and directly to its rival chip makers, and, accordingly was anticompetitive conduct without any procompetitive justification.
Additionally, the district court controversially held that Qualcomm has an antitrust duty to deal with its rivals, relying on the Supreme Court’s decision in Aspen Skiing Co. v. Aspen Highland Skiing Corp. and the Ninth Circuit’s decision in Metro-Net Services Corp. v. Qwest Corp. Specifically, the court concluded that such a duty exists when three conditions are met: (1) the defendant unilaterally terminated a voluntary and profitable course of dealing; (2) the defendant refused to deal even if compensated at market rates, which the court interpreted as proof of “anticompetitive malice”; and (3) the withheld product was already sold to other customers. Accordingly, the court found Qualcomm’s previous voluntary and profitable licensing deals with competitors particularly problematic and concluded that Qualcomm’s real justification for not licensing rivals was to prevent them from effectively competing. Finally, although Qualcomm complained that it would be difficult to engage in the multi-level licensing scheme the FTC posited, such arrangements were routine in the industry before Qualcomm began licensing only to cellphone manufacturers, and a market for chip-based licenses (as opposed to device-based licenses) undoubtedly existed.
The Ninth Circuit began its analysis of this issue by emphasizing the fundamental principle that a firm does not have a duty to deal with its competitors. Next, the Ninth Circuit rejected application of the Aspen Skiing exception to this principle. Specifically, the court found that the district court’s reliance on Aspen Skiing to impose a duty on Qualcomm to grant exhaustive SEP licenses to its rival chip suppliers was misplaced because it ignored “critical differences between Qualcomm’s business practices and the conduct at issue in Aspen Skiing. First, the Ninth Circuit determined that Qualcomm had not terminated a voluntary and profitable course of dealing in connection with licensing at the chip-manufacturer level because Qualcomm never granted exhaustive licenses to rival chip makers. Although Qualcomm previously entered into non-exhaustive, royalty agreements with chipmakers that explicitly did not grant rights to the chip supplier’s customers, it ceased this practice in response to developments in patent law’s exhaustion doctrine. Second, Qualcomm’s reason for switching to OEM-level licenses was not to sacrifice short-term benefits in order to obtain higher profits in the long run by exclusion of competition but instead was to address patent exhaustion issues and maximize its profits in the short and the long term. Third, there was no evidence that Qualcomm targeted any single chip maker for anticompetitive treatment in connection with its SEP licensing, while in Aspen Skiing the defendant sold the same lift tickets to any willing buyer with the exception of the plaintiff for the purpose of driving the plaintiff out of business.
The Ninth Circuit also rejected the FTC’s proposed alternative basis for imposition of a duty to deal with its competitors on Qualcomm. Specifically, the FTC claimed that Qualcomm’s alleged breach of its contractual commitment to deal with its rivals as part of the SSO process constituted prohibited anticompetitive conduct in violation of section 2. The FTC was required to prove harm to competition, not merely Qualcomm’s competitors, but the Ninth Circuit found that the FTC failed to identify the requisite harm. Accordingly, the FTC failed to demonstrate that Qualcomm had a duty to deal with its chip-maker rivals or that the Ninth Circuit should apply the Aspen Skiing exception or recognize a new exception based on any SEP contractual obligations.
“Taxing” Competitors’ Sales Through a “No License-No Chips” Policy. The district court held that Qualcomm engaged in anticompetitive behavior by refusing to sell chips to cellphone manufacturers who would not sign a separate license agreement that covered not only the patents in Qualcomm chips, but also Qualcomm’s SEPs in other manufacturers’ chips. Because of its strong position in the chip market, Qualcomm increased its licensing leverage by threatening to withhold (or actually withholding) chips that cellphone manufacturers needed.
The district court concluded that, through this coercive tactic, Qualcomm was able to charge royalties that exceeded the value of its IP in several ways, including by allowing it to charge a royalty on the price of the entire device, no matter the incremental value the chip added to the device, and by permitting Qualcomm to maintain a 5 percent royalty despite the fact that its role in standard setting declined over time. This no license-no chips policy gave Qualcomm an edge over competitors on whose chips Qualcomm was collecting an identical royalty, harmed consumers by driving up the price of competing chips, and, with further threats to cut off chip supply, prevented litigation that would have tested the royalty rates—all of which perpetuated Qualcomm’s chip monopoly and allowed its anticompetitive licensing techniques to continue.
The Ninth Circuit, however, rejected the district court’s anticompetitive surcharge as failing to present a cogent theory of anticompetitive harm and found that it was based on a misunderstanding of the law related to calculation of patent damages. First, the Ninth Circuit determined that the district court erroneously labeled Qualcomm’s royalty rate as unreasonable solely because the rate was based on the handset price instead of the chip price. The Ninth Circuit also rejected the district court’s conclusion that any royalty rate exceeding patent law were automatically anticompetitive. Regardless of the extent or nature of the effect of any excess royalty rate, the Ninth Circuit noted that any putative harms would have been to the OEMs, and, therefore, outside the areas of effective competition—the CDMA and premium LTE modem chips markets. Similarly, the alleged negative effects of the “no license, no chip” policy effect were not in the areas of effective competition.
De Facto Exclusive Dealing Arrangements. The district court began its analysis of Qualcomm’s agreements with Apple by defining de facto exclusivity to include the offering of contractual incentives and penalties that, in effect, coerce purchasers into buying a substantial portion of their needs from the supplier. The court then found that incentives Qualcomm provided to cellphone manufacturers amounted to this de facto exclusive dealing. Because of Apple’s substantial purchase volume and significance in the industry, the court focused on Qualcomm’s agreements with Apple. The court found that Apple received hundreds of millions in rebates if it purchased exclusively from Qualcomm—rebates that Qualcomm could clawback if Apple purchased any chips from a Qualcomm rival during the deal periods.
The court’s analysis of Apple-Qualcomm agreements concentrated on Apple’s stature and sales volume, the duration of the deal, and the presence of additional competition reducing or enhancing provisions. For example, the court noted that Qualcomm’s agreement with Apple blocked Qualcomm rivals from field testing and engineering collaboration opportunities with Apple and from the reputational boost that flows from an Apple partnership. In addition, the court took issue with the five-year duration of the rebate agreements, which, when paired with the rebate clawback provision, in effect, blocked Qualcomm’s rivals from supplying chips to Apple for the full five-year terms of the agreements.
The court also found that several Qualcomm near-exclusive deals with other cellphone manufacturers allowed Qualcomm to coerce cellphone manufacturers into favorable licensing deals by threatening to withhold the chips on which its near-exclusive dealing partners depended.
The Ninth Circuit examined the same Qualcomm agreements with Apple and the context surrounding those agreements and reversed the district court’s related rulings. On appeal, Qualcomm argued, as it had below, that its agreements with Apple were volume discount contracts, not exclusive dealing contracts. The FTC urged the Ninth Circuit that the “practical effect” of Qualcomm’s agreements was to impose exclusive dealing on Apple, making the arrangements de facto exclusive.
Despite recognizing that there is “some merit in the district court’s conclusion that the Apple agreements were structured more like exclusive dealing contracts than volume discount contracts,” the Ninth Circuit determined that those agreements did not substantially foreclose competition in the CDMA modem chip market. The basis of the Ninth Circuit decision was twofold: (1) within one year of entering into a new supply agreement with Qualcomm, Apple switch suppliers and entered into an agreement with Intel and (2) there was no evidence in the record to support Intel as a viable competitor until 2014, the same year that Apple switched from Qualcomm to Intel.
The Ninth Circuit reversed the district court’s judgment on the FTC’s exclusive dealing claims as well as all the FTC’s challenges to Qualcomm’s other practices.
§ 1.4 Robinson-Patman Act Developments
The Robinson-Patman Act was enacted in 1936 to address the perceived inadequacies of the Clayton Act, the first federal price discrimination statute. Congress’s goal in creating the statute was to ensure that equivalent businesses stood on equal competitive ground. In essence, the Robinson-Patman Act was designed to protect small, independent retailers and their independent suppliers from unfair competition from vertically integrated, multi-location chain stores.
The Robinson-Patman Act established several key provisions. Section 2(a) of the Act requires sellers to sell to everyone at the same price. Under Section 2(b), inter alia, an affirmative defense is allowed if the discrimination arises from “meeting competition.” Section 2(c) prohibits parties from granting or receiving certain commissions or brokerage fees except for services rendered. Sections 2(d) and 2(e) prohibit sellers from providing or paying for promotion or advertising in connection with a product’s resale, unless equivalent benefits are offered to all competing buyers. Section 2(f) prohibits buyers from knowingly inducing or receiving a discriminatory price. For liability to exist under the Robinson-Patman Act, plaintiffs must demonstrate several things:
- Two or more consummated sales by the same seller;
- Reasonably close in point of time;
- Of commodities of like grade and quality;
- With a difference in price;
- To two or more different purchasers;
- For consumption, or resale within the United States or any territory thereof; and
- By persons engaged “in commerce” requirement.
There are two types of possible injury, primary line and secondary line. Primary line injury is actual injury to competition between the seller granting the discriminatory pricing and other sellers. Secondary line injury is actual or threatened injury to competition between the favored customer of the seller and the seller’s disfavored customers.
Despite the continual narrowing of the Robinson-Patman Act, some plaintiffs still try to pursue price discrimination claims. Below is a discussion of the most interesting such case decided in 2020.
§ 1.4.1 H&C Animal Health, LLC v. Ceva Animal Health, LLC, ___ F.Supp.3d ___, 2020 WL 6384303 (D. Kan. Oct. 30, 2020)
The plaintiff, H & C Animal Health, LLC, is a distributor of pet products to brick-and-mortar stores and through the Internet. The defendant Ceva Animal Health, LLC. (Ceva) develops and manufactures animal pharmaceuticals and provides related services and equipment. The plaintiff distributes defendant’s products, and according to the complaint, comprise 75 to 90 percent of the domestic market for pheromone-based pet-behavior products. The complaint identifies several different lines of products that have been developed by defendant for dogs and cats. Many of these products have been patented by defendant. The defendant’s products are sold to consumers through several channels, including brick-and-mortar stores, online platforms, and veterinarians.
The parties had entered into a distribution and supply agreement under which the plaintiff held exclusive distribution rights for pet stores and their online platforms, which is referred to as the “Pet Specialty Channel” and “Independent Retail Channel.” The complaint refers to these channels as the “Pet Store Channel.” The plaintiff’s territory under the agreement specifically excluded sales through veterinarians or veterinary distributors. With respect to online platforms, which the complaint refers to as the “Ecommerce Channel,” the agreement granted the plaintiff non-exclusive authority to sell and advertise there.
The plaintiff claimed that Ceva violated the Robinson-Patman Act by engaging in two different types of discriminatory pricing. First, Ceva allegedly engaged in price discrimination by offering rebates tor products sold through the Pet Store Channel that were not available for products sold through the Ecommerce Channel. Second, the plaintiff alleged that Ceva engaged in price discrimination by selling its products directly or indirectly to its own Ecommerce Channel customers for a lower price than it charged the plaintiff for distribution to the plaintiff’s Ecommerce Channel customers.
Ceva argued that the price difference for products sold to the plaintiff for resale through the two different channels could not state a claim under the Robinson-Patman Act because the plaintiff did not allege that there were two purchasers. Instead, the allegations involved only a single purchaser—the plaintiff. The plaintiff argued, in response, that it stated an indirect price discrimination claim. The court explained that to state an indirect price discrimination claim, the seller must “`control the terms upon which a buyer once removed may purchase the seller’s product from the seller’s immediate buyer.’” Under the indirect purchaser theory, a plaintiff which purchased through a middleman is considered to be a purchaser for Robinson–Patman purposes if the supplier sets or controls the resale prices paid by the plaintiff. The court rejected plaintiff’s claim of price discrimination based on two different prices from the rebates in the Pet Store Channel because there are not two different purchasers.
Next, the court examined the plaintiff’s claim that Ceva violated the Robinson-Patman Act by charging a different price to its own customers in the Ecommerce Channel than it charged to the plaintiff. Ceva argued that this second theory failed because the Robinson-Patman Act requires that discriminatory pricing be charged to buyers in the same market and there is not an injury to competition if the purchasers are not at the same functional level. The plaintiff responded that its Ecommerce Channel customers compete on the same level as Amazon.com, Ceva’s Ecommerce Channel customer, and that the price discrimination harms competition between its customers and Amazon.com.
The court sought existing case law that addressed the same facts, but apparently was unable to locate precedent addressing the current realities of the online marketplace or the treatment of direct sales by suppliers to Amazon.com. The court analogized the facts presented to when a manufacturer sells to both a distributor and a retailer. The type of injury alleged here and addressed by the Robinson-Patman Act is often referred to as “secondary line injury,” because the actual or threatened injury is to competition between the favored customer of the seller and the seller’s disfavored customers. Although actual injury to competition must be established in order to establish primary line liability under Section 2(a) of the Robinson-Patman Act, the third clause of Section 2(a) expressly prohibits price discrimination where “the effect of the discrimination may be substantially” to “injure, destroy, or prevent competition with any person who grants or knowingly receives the benefit of the discrimination, or with the customers of either of them. . . .”
Therefore, the court concluded that “a price discriminator cannot ‘avoid the sanctions of the Act by the simple expedient of adding an additional link to the distribution chain.’” In the instant case, the plaintiff alleged that Ceva sold its product to its Ecommerce Channel customers for less than it sold the same product to the plaintiff and that there was an injury to competition because it harms the plaintiff’s customers which compete with Ceva’s customers. Based on the alleged injury to competition, the court determined that these allegations were sufficient to plausibly state a claim under the Robinson-Patman Act.
§ 1.5 Miscellaneous
§ 1.5.1 Filed-Rate Doctrine – PNE Energy Supply LLC v. Eversource Energy (1st Cir. 2020)
One of the narrow exceptions to antitrust liability is the filed-rate doctrine. The filed-rate doctrine provides that there can be no antitrust damages action for rate levels that were set with the consent of a federal or state regulatory agency. Although the Supreme Court has expressed the view that the reasoning behind the creation of the filed-rate doctrine is suspect, the Court has declined to overrule it because Congress has taken no action in over sixty years to eliminate the doctrine: “If there is to be an overruling of the [filed-rate doctrine], it must come from Congress, rather than from this Court.” In 2020, the First Circuit again examined the filed-rate doctrine and when it might bar an antitrust claim.
PNE Energy Supply LLC v. Eversource Energy was filed on the heels of the publication of a 2017 report examining “vertical market power” in the natural gas and electricity business. Plaintiff, a wholesale energy purchaser, was prompted to file the instant case shortly after the defendants challenged an earlier suit, triggered by the same 2017 report, on the basis that electricity consumers did not have standing to sue under the antitrust laws for manipulation in gas transmission markets. The electricity consumer case was Breiding, v. Eversource Energy. The District of Massachusetts dismissed Breiding, holding that the filed-rate doctrine barred the retail consumers’ claims, and in the alternative, that plaintiffs failed to plead antitrust injury or a plausible claim of monopolization. On appeal, the First Circuit affirmed that dismissal, concluding that the filed-rate doctrine precluded plaintiffs’ Sherman Act and related state claims.
Here, the wholesale electricity purchaser plaintiffs, thinking that they were better positioned to assert standing, also claimed that the defendants, by restricting the available natural gas capacity, increased electricity prices by approximately 20 percent on average and totaling billions of dollars in overcharges. The court explained the regulatory background of natural gas transmission and sales. The Federal Energy Regulatory Commission (FERC) is the agency tasked with regulating natural gas sales and transmission. This regulatory authority includes determining just and reasonable rates for the transportation of natural gas for resale, requiring no-notice contracts between pipelines and gas distribution companies for the purchase of gas capacity, and delegating the management of auctions for wholesale electricity to non-profit organizations that ensure just and reasonable rates.
The First Circuit then outlined the filed-rate doctrine, explaining that it could be “understood as a form of deference and preemption which precludes interference with the rate setting authority of an administrative authority, like FERC.” “`The filed-rate doctrine is “a set of rules that . . . revolve[s] around the notion that . . . utility filings with the regulatory agency prevail over . . . other claims seeking different rates or terms than those reflected in the filings with the agency.”’” The court noted that upstream anticompetitive conduct that indirectly affects a downstream FERC-approved tariff is not always protected under the filed-rate doctrine, which applies to the downstream activity. According to the court, FERC had exclusive authority to regulate natural gas transmission and required that companies file rate schedules for the transportation of natural gas and that pipelines offer no-notice contracts to energy distribution companies to ensure that unexpected demand is met. Pursuant to these requirements, the FERC-approved Algonquin Pipeline tariff includes a statement of rates and addresses no-notice contracts. It also allows energy distribution companies to resell excess pipeline capacity, but it does not require that these companies do so.
Although, in Breiding, the First Circuit concluded that the defendants had not engaged in any conduct other than that allowed by Algonquin’s detailed and reasonably comprehensive FERC-approved tariff, that FERC declined to require that energy companies sell their excess capacity, and that Congress granted FERC the ability to police anticompetitive conduct in the gas transmission industry, PNE Energy Supply persisted in its appeal. Specifically, PNE Energy Supply argued that the court should not be focused on the defendants’ use of no-notice contracts, but instead should focus on the fact that defendants not only failed to release excess transport capacity to the primary capacity market, but also refused to sell their extra capacity in the short-term secondary capacity market.
The First Circuit determined that PNE Energy Supply’s characterization of the defendants’ conduct as “refusing to sell” was of no moment. The court noted that the “pivotal challenged conduct” in both Breiding and here was the alleged “over-reserving of and then failure to release gas transportation rights exercised under the defendants’ contracts with the Algonquin pipeline.” The court examined the scope of FERC’s involvement in the secondary market on which PNE Energy Supply focused and found that the release of capacity into the secondary market is expressly regulated by FERC. Although a FERC order left to the market the determination of rates for short-term capacity releases, the court rejected PNE Energy Supply’s argument that this order is proof that how and under what terms a shipper should release any capacity falls outside FERC’s purview. Instead, the court pointed to FERC statements that it has continued oversight of capacity releases and that it will entertain complaints and respond to specific allegations of market power. The First Circuit determined that defendants’ challenged activities related to reselling capacity on the pipeline and refusal or failure to sell stored natural gas and that these activities are within FERC’s scope of authority.
Accordingly, the filed-rate doctrine barred PNE Energy Supply’s claims.
§ 1.5.2 Acquisitions — Federal Trade Commission v. Thomas Jefferson University, CV 20-01113, 2020 WL 7227250 (E.D. Pa. Dec. 8, 2020)
Although the U.S. antitrust enforcement agencies have an extraordinary record of success in litigation, in 2020, two district courts in the Third Circuit rejected a federal antitrust agency’s challenge to two different acquisitions between private parties.
The FTC and the Pennsylvania Attorney General sought to enjoin a merger between Thomas Jefferson University (Jefferson) and the Albert Einstein Healthcare Network (Einstein) until there was an administrative determination on whether the merger would violate Section 7 of the Clayton Act. The Eastern District of Pennsylvania rejected this motion because the government failed to properly identify the geographic market at risk of anticompetitive effects should the merger proceed.
Jefferson and Einstein are two of 13 provider systems providing general acute care (GAC) services that operate in southeastern Pennsylvania. “GAC services include a broad cluster of medical, surgical, and diagnostic services that require an overnight hospital stay.” According to economic analyses, healthcare providers face two stages of competition: (1) selection as an in-network provider by an insurer; and (2) selection by the members of an insurer’s plan for care. The health insurance market in this region is “far more consolidated” with only four major health insurance companies, and thus, insurers have stronger bargaining power. According to testimony, the largest of the four insurance companies in the region, Independence Blue Cross (IBC), has such a strong position that neither company can afford being out of IBC’s network.
As the court explained, to succeed on an injunction, the government must show that a “substantial lessening of competition’ is ‘sufficiently probable and imminent.” The government does not have to show that the proposed merger would violate Section 7, but rather that the proposed merger is likely to violate Section 7. To make a prima facie case of a Section 7 violation, the government must propose the proper relevant market and show the anticompetitive effect from the proposed acquisition. Defendants have the opportunity to rebut and then, if successfully rebutted, the burden of proof returns to the government.
While the parties agreed that GAC services were a relevant product market, the court rejected the government’s identification of various geographic regions. Properly selected markets must “correspond to the commercial realities of the industry” and must use the most relevant buyers to identify the parameters of that industry. In this case, the court explained, the insurers, not the hospital patients, are the most relevant buyers, given that patients themselves are not the direct purchasers of healthcare. In selecting this geographic area, the government must be able to show that the area is where an insurer “may rationally look for goods or services [it] seeks,” and then the government must show that a hypothetical monopolist in that area could impose a “small but significant non-transitory increase in price (SSNIP).”
The government focused on patients instead of insurers to define the geographic market, relying predominantly on diversion ratios. Although the government contended that the commercial realities and insurer’s involvement was “baked into the diversion numbers,” the court noted that diversion ratios “only capture insurer preferences . . . where . . . insurer decisions about which hospitals to include in their networks are aligned with patient decisions about where to seek care.” Additionally, the court was unable to find a correlation between patient and insurer behavior to justify using diversion ratios because the insurers’ testimony on the potential correlation was not unanimous or unequivocal and was undercut by other evidence.
In evaluating the testimony regarding whether there could be a post-transaction price increase on insurers, the court compared the evidence in this case to the evidence in Federal Trade Commission v. Penn State Hershey Medical Center (Penn State Hershey). In Penn State Hershey, the Third Circuit reversed the district court’s denial of a preliminary injunction, even though the government had mainly presented statistical evidence based on patient behavior, because the government also had presented “extensive evidence showing that the insurers would have no choice but to accept a price increase.” The extensive evidence included: (1) credible testimony from insurers that post-merger they could not market to employers without the merged hospital system; (2) evidence showing that at least one insurer was no longer viable when it excluded both of the merging hospitals; (3) testimony supporting the proposed geographic market area as distinct; and (4) testimony that other hospitals in the area were not suitable alternatives.
However, here, the government’s evidence failed to reach the high bar set out in Penn State Hershey. First, there are more hospitals in a far smaller radius in Philadelphia when compared to the area in question and number of hospitals in Penn State Hershey. Second, two of the four insurers failed to testify that the absence of both Jefferson and Einstein in their network pools would result in a price increase. Third, the largest insurer for the area was not credible because its witness was motivated, not by antitrust concerns, but by concerns that the merger would make the joined hospital groups a “competitive threat in the insurance market.” Fourth, while one of the insurance company witnesses indicated that they would pay higher rates, the court discounted his testimony because the record had already established that the company does not rely currently on these hospitals.
Finally, the court also rejected an additional product market proposed by the FTC—inpatient acute rehabilitation services. However, because these services play only a “minor role in health systems’ operations and contracts,” the court rejected the FTC’s argument that an insurer could not offer a marketable health plan without Jefferson or Einstein.
This case gives more insight into developing a prima facie case under Section 7 of the Clayton Act, with a focus on how to identify a relevant market. For healthcare-related mergers, it highlights the importance of selecting the correct relevant buyer (insurers not patients) in statistical analysis. But it also provides insights into how the proper market could still be identified through testimonial and other evidence, by comparing the record of Penn State Hershey with the record in this current case. Notably, the court, in viewing the record, considered the credibility of various third-party insurer witnesses, given the possibility of other motives underlying their testimony.
§ 1.5.3 Acquisitions — United States v. Sabre Corp., 452 F. Supp. 3d 97 (D. Del.), vacated on mootness grounds, No. 20-1767, 2020 WL 4915824 (3d Cir. July 20, 2020)
The United States Department of Justice (DOJ) filed an expedited antitrust action against Sabre Corporation and Sabre GLBL (collectively, Sabre) and related defendants to enjoin their acquisition of Farelogix, Inc. (Fairlogix), alleging that the transaction would violate Section 7 of the Clayton Act. According to the DOJ, the acquisition would harm competition because Farelogix is an “innovative disruptor in the market for booking services,” which historically had been dominated by three players (including Sabre) that had tried to “stifle innovation.” After an eight-day bench trial, the District Court of Delaware rejected the government’s arguments and refused to enjoin Sabre from acquiring Farelogix.
Sabre is a large player in the airline travel industry boasting the largest U.S. global distribution system (GDS). The GDS accounts for most of Sabre’s revenue through airline customer booking fees. Additionally, Sabre offers information technology products for airlines including a passenger service system. Farelogix, on the other hand, is a smaller company that offers information technology to airlines and other products relating to “distributing and merchandising airline content.”
The district court concluded that the DOJ failed to establish a prima facie case under Section 7 of the Clayton Act and did not prove a reasonable probability of anticompetitive harm. The court explained that the DOJ failed to establish a prima facie case because (1) Farelogix and Sabre did not compete as only Sabre was a two-sided platform and (2) the DOJ did not properly define relevant product or geographic markets. Moreover, it also failed to show a reasonable probability that the transaction would lessen competition.
To establish a prima facie case, the government must define a relevant product and geographic market and demonstrate that the effects of the merger are likely to lessen competition. Relying on a recent Second Circuit interpretation of the Supreme Court’s decision in Ohio v. American Express Co. (Amex), the District Court of Delaware determined that Sabre is not a competitor of Farelogix because Sabre is a two-sided platform that facilitates transactions between airlines and travel agencies whereas Farelogix only interacts with airlines and therefore is one-sided. The district court rejected the DOJ’s attempts to distinguish Amex by suggesting that the Supreme Court precedent only applied to the credit card industry. Similarly, the court was unpersuaded by the DOJ’s argument that limiting potential Section 7 violations to when two-sided companies acquire two-sided companies would give two-sided companies “carte blanche to buy any one-sided company.” Rather, the court explained that the Amex rule would allow challenges to acquisition of one-sided companies, so long as the government could show that the transaction will harm competition “on both sides of the two-sided market.” Here, however, the DOJ expert only looked at one side of the Sabre GDS, and the DOJ failed to produce evidence that any anticompetitive impact of the merger on the airline side of the Sabre platform would be so significant as to result in the two-sided platform becoming less competitive overall.
In addition, the DOJ also failed to identify proper relevant product and geographic markets. The DOJ argued that “booking services” was the proper product market. The court rejected this definition, opining that the DOJ improperly excluded other services that Sabre provided through its GDS. The government did not show that “booking services” generated separate demand from Sabre’s other services such that they to be their own relevant product market. The court similarly did not accept the DOJ’s proposed geographic area of “U.S. point of sale.” It explained that the relevant geographic area must be “where customers look to buy a seller’s products or services.” Farelogix’s customers are airlines located outside the United States, and it competes with foreign competitors to win bids. Sabre markets a direct connect product to airlines outside of the United States. The proposed geographic market, thus, was “at odds with commercial realities.” By not defining proper geographic and product markets, DOJ failed to establish a prima facie case.
Even if the government had properly defined markets, it failed to present evidence of a reasonable probability of anticompetitive harm. The Third Circuit has previously held that a high market concentration can establish a prima facie case or a presumption of anticompetitive harm. As such, the DOJ used the Herfindahl-Hirschman Index (HHI) market concentration measurements to support its theory of harm. However, the DOJ expert’s calculations were flawed because he excluded airline.com, despite its competitive pressure on Sabre, and he misattributed sales by Sabre to Farelogix. Once these errors were corrected, the numbers did not show a high post-acquisition market concentration, and so, the DOJ was not entitled to a presumption of anticompetitive harm.
Without that presumption, the DOJ failed to prove that anticompetitive harm was likely. The DOJ also argued that there were barriers to entry that prevent adequate competition to Sabre post-acquisition and that the acquisition will harm competition or innovation. The barriers to entry argument was quickly dismissed by the court, which pointed to “Farelogix’s vigorous competition with rival[s].” Additionally, the court found that the merger was not designed to eliminate Farelogix and its platforms from the market or to stifle innovation, but rather to “integrate” Farelogix’s capabilities into Sabre’s own platform and that there was enough competition still to constrain Sabre’s ability to raise prices. Therefore, the acquisition was not likely to harm competition or innovation.
Despite this win at the district court, Sabre and Farelogix ended up abandoning their deal after the U.K.’s Competition and Markets Authority challenged the acquisition.
In its decision, the district court carefully analyzed what constitutes a prima facie case under Section 7 of the Clayton Act. The case was particularly notable because the court found Sabre’s story—that Sabre did not view the new distribution capability (a capacity that Farelogix pioneered) as a threat, even when used for bypassing their global distribution system—as not credible. Nevertheless, the court held that the DOJ was unable to meet their burden of proof to make a prima facie case because they failed to show competition between two “two-sided” platforms, they did not properly define the relevant markets, and they presented flawed market concentration calculations.
§ 1.5.4 The Foreign Antitrust Trade Improvements Act
The Foreign Trade Antitrust Improvements Act (FTAIA), enacted to provide greater clarity on the extraterritorial reach of the Sherman Act, instead continues to generate confusion. In 2004, antitrust practitioners looked to the Supreme Court’s decision in F. Hoffman—LaRoche Ltd. v. Empagran, S.A. (Empagran I) to address the complex and confusing statutory language of the FTAIA. In pertinent part, the FTAIA provides:
[The Sherman Act] shall not apply to conduct involving trade or commerce (other than import trade or import commerce) with foreign nations unless:
(1) such conduct has a direct, substantial, and reasonably foreseeable effect;
(A) on trade or commerce which is not trade or commerce with foreign nations, or on import trade or import commerce with foreign nations; or
(B) on export trade or export commerce with foreign nations, of a person engaged in such trade or commerce in the United States; and
(2) such effect gives rise to a claim under the provisions of [the Sherman Act] …
The FTAIA establishes a general rule placing all (non-import) activity involving foreign commerce outside the Sherman Act’s reach. It then brings such conduct back within the Sherman Act’s reach provided that the conduct (1) sufficiently affects U.S. commerce (known as the “direct effect test”) and (2) gives rise to plaintiffs’ antitrust claim.
- Jurisdictional or Substantive Element?
Until recently, the FTAIA was treated as a jurisdictional statute, which needs to be satisfied for an antitrust claim to be actionable under U.S. law. This was important because it allowed litigants the opportunity to challenge plaintiffs’ ability to satisfy the FTAIA standards earlier in a case than if the FTAIA requirements were deemed an element of the substantive antitrust claim.
After the Supreme Court decision in Arbaugh v. Y&H Corp., however, the trend has shifted. The question presented in Arbaugh was whether Title VII’s definition of employer to include only those having firms with fifteen or more employees was a requirement for the exercise of subject matter jurisdiction or was simply an element of plaintiff’s case. The Court noted that courts had been imprecise in their use of the term jurisdiction and have been using it to describe a variety of doctrines that operate to bar a plaintiff’s suit. The Court further explained that “[s]ubject matter jurisdiction in federal-question cases is sometimes erroneously conflated with a plaintiff’s need and ability to prove defendant bound by the federal law asserted as the predicate for relief—a merits-related determination.” The Court held that the number of employees was not a jurisdictional requirement for a Title VII claim and expressed its desire to avoid “drive-by jurisdictional rulings” that have “no precedential effect” on the jurisdictional question.
The Court established a test for deciding whether something is jurisdictional: “If the Legislature clearly states that a threshold limitation on a statute’s scope shall count as jurisdictional, then courts and litigants will be duly instructed and will not be left to wrestle with the issue. But when Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as nonjurisdictional in character.” Following Arbaugh, a number of courts, including the Second, Third, Seventh, and Ninth Circuits, have considered the question of whether the FTAIA is a substantive element of a Sherman Act claim or jurisdictional and each has determined that it is substantive.
With respect to the extraterritorial reach of the Sherman Act, in Empagran I, the Supreme Court determined that the “domestic injury exception” of the FTAIA did not provide a right to sue under the Sherman Act, to foreign plaintiffs in circumstances where the anticompetitive conduct “significantly and adversely affects both customers outside the United States and customers within the United States, but the adverse foreign effect is independent of any adverse domestic effect.” Following that decision, the D.C. Circuit’s Empagran v. F. Hoffman-LaRoche Ltd. (Empagran II) clarified that the domestic injury exception to the FTAIA requires is not triggered by “but for” causation. Rather, in order to sue under the domestic injury exception, the foreign plaintiff must prove that it is the domestic effects of a defendant’s anticompetitive conduct rather than the anticompetitive conduct itself, which gives rise to the plaintiff’s foreign injuries.
Since the Supreme Court’s ruling and the subsequent clarification by the D.C. Circuit, there have been a number of cases dealing with the FTAIA and its “domestic injury exception.” There was a string of cases that followed the Empagran II direct cause requirement and, thereby significantly restricted the ability of a foreign plaintiff to seek redress in the United States for anticompetitive conduct where the impact is felt only abroad.
Although 2020 was a relatively quiet year with respect to the FTAIA, below is a discussion of a case that tackled the question of whether U.S. courts have jurisdiction over antitrust claims based on a global patent licensing program under the FTAIA.
- Continental Automotive Systems, Inc. v. Avanci, LLC, — F.Supp.3d —-2020 WL 5627224 (N.D. Tex. Sept. 10, 2020)
The U.S. District Court of the Northern District of Texas considered its jurisdiction over certain antitrust claims under the Foreign Trade Antitrust Improvement Act (the FTAIA). Plaintiff Continental Automotive Systems, Inc., manufactures telematics control units (TCUs) for motor vehicles. The motor vehicle manufacturers use the TCUs, including a baseboard processor in a network access device to provide their cars various functionalities, including cellular connectivity. To connect to cellular networks, the TCUs. To access second generation (2G), third generation (3G), and fourth generation (4G) cellular networks, the baseboard processors, network access devices, and TCUs must comply with standards set by standard setting organizations (SSOs). Plaintiff also alleged that Defendants Nokia Corporation, Nokia of America Corporation, Nokia Solutions and Networks US LLC, Nokia Solutions and Networks Oy, Nokia Technologies Oy (collectively, Nokia Defendants), Conversant Wireless Licensing SARL (Conversant), Optis UP Holdings, LLC, Optis Cellular Technology, LLC, Optis Wireless Technology, LLC (collectively, Optis Defendants), and Sharp Corporation (Sharp) (collectively, the Licensor Defendants) all own Standard Essential Patents (SEPs) for 2G, 3G, and 4G connectivity required in order to comply with SSOs’ established standards, and that as a result, the Licensor Defendants were obligated to license the relevant SEPs to the plaintiff on fair reasonable and non-discriminatory (FRAND) terms and conditions. Plaintiff further asserted that these FRAND terms should reflect the ex-ante value of the SEP, excluding its value obtained solely from its inclusion in the standard.
The Licensor Defendants also pooled their SEPs and used the same licensing agent, offering their patents in a pooled arrangement. Through this pooling arrangement, the plaintiff alleged, the Licensor Defendants implemented an unlawful agreement to grant OEMs license to the SEPs only on non-FRAND terms. The OEMs, in turn, could or would seek indemnification from the plaintiff. In addition to alleged harm suffered as a result of such indemnification, the plaintiff claimed that it was injured by its inability to obtain the SEP licenses needed for its TCUs from the Licensor Defendants on FRAND terms.
The court held that the FTAIA limits subject matter jurisdiction over antitrust claims involving trade or commerce with foreign nations, unless it pertains to imports or the conduct has a direct, substantial, and reasonably foreseeable effect on U.S. domestic, import, or export trade or commerce, where that effect gives rise to the antitrust claims. Because the plaintiff used the SEPs to manufacture its TCUs in the United States, the court concluded that plaintiff’s allegations related to the import of SEP licenses for foreign patents, and the FTAIA’s limitations on subject matter jurisdiction would not bar Plaintiff’s claims.
Separately, the court looked more broadly at the defendants’ SEP licensing program and found that even if it did not involve import trade, it would still satisfy the FTAIA’s jurisdictional requirements. The plaintiff alleged that the defendants had obligations to US SSOs and owed FRAND obligations to US entities seeking to license SEPs. Because these obligations are related to global licensing and product markets, which necessarily included US markets, the plaintiff alleges direct, substantial, and reasonably foreseeable effects in the U.S. that gave rise to the plaintiff’s antitrust claims. Therefore, the court denied the defendants’ motion to dismiss plaintiff’s claims on the basis of lack of subject matter jurisdiction.
§ 1.5.5 Remedies – Federal Trade Commission v. AbbVie Inc., 976 F.3d 327 (3d Cir. 2020)
The Supreme Court granted certiorari on July 9, 2020, to decide the most significant challenge to the FTC’s authority in decades. The Supreme Court must decide whether to affirm or reverse AMG Capital Management, LLC, et al. v. Federal Trade Commission, where the Ninth Circuit held that that the FTC has the authority to seek restitution under Section 13(b) of the Federal Trade Commission Act (“FTC Act”).
The AMG Capital Management case involved a series of companies controlled by Scott Tucker that offered high-interest, short term loans. In 2012, the FTC filed suit against Tucker alleging that he violated Section 5 of the FTC Act’s prohibition against “unfair or deceptive acts or practices” because his loan notes did not disclose the terms that Tucker actually enforced. The FTC asked the court to “permanently enjoin Tucker from engaging in consumer lending and to order him to disgorge ill-gotten-monies.” The district court ultimately determined that Tucker was required to pay $1.27 billion. Tucker appealed to the Ninth Circuit and argued that the district court “did not have the power to order equitable monetary relief under §13(b).” The Ninth Circuit acknowledged that “Tucker’s argument has some force,” but found that prior precedent supported the FTC’s position.
Although most circuits that have examined the issue, including the Ninth Circuit, held that the FTC has the authority to seek monetary relief under Section 13(b), in 2019 the Third and Seventh Circuits ruled against the FTC, creating a split among the circuits. The circuit decisions Federal Trade Commission v. Shire Viropharma, Inc. and Federal Trade Commission v. Credit Bureau Center, LLC specifically limited the FTC’s enforcement toolkit, leading the trend toward narrowing the implied statutory remedies available to federal agencies. Although the FTC may pursue administrative remedies that have traditionally required expending more resources and yielded smaller rewards, its preferred enforcement route—via FTC Act section 13(b)—allows the agency to bypass the administrative process. If the FTC believes anyone is violating, or is about to violate an FTC-enforced law, the FTC may immediately seek a temporary restraining order or temporary or permanent injunction in the courts. A temporary restraining order or injunction will dissolve if the FTC does not file an administrative complaint within 20 days. However, “in proper cases[,] the [FTC] may seek, and . . . the court may issue, a permanent injunction.”
Section 13(b) has been a significant tool and a mainstay of the FTC’s consumer protection program. However, until the 1980s, it was only used to bolster administrative proceedings. Since, however, the FTC has argued, and circuit courts have agreed, that by invoking the district court’s equitable jurisdiction under section 13(b), the district court has access to, and may use, a full suite of equitable remedies, including restitution. An implied restitution remedy allowed the FTC to collect over $17.5 billion through section 13(b) proceedings from 2016, 2017, and 2018 alone—far outpacing the funds obtained through administrative civil penalties.
In Shire Viropharma, issued in early 2019, the Third Circuit concluded that section 13(b) only permits the FTC to halt ongoing or imminent harms, and does not allow the FTC to sue for past conduct, even if it believes that conduct has “a reasonable likelihood” of recurring. The Third Circuit side-stepped the remedies question tackled by the Seventh Circuit in Credit Bureau Center, but its decision strongly suggested that section 13(b) permits the FTC to obtain only injunctive relief (and nothing more) to address ongoing or imminent conduct.
The Seventh Circuit’s decision in Credit Bureau Center more clearly undermines the FTC’s section 13(b) authority. In 2017, the FTC brought a suit against Credit Bureau Center and its sole operator and owner, for duping customers who believed they were receiving “free” credit-related information into subscribing to a $29.94 monthly membership. Defendants also enlisted the help of an agent who funneled unwitting consumers to defendants’ website by advertising fake rental properties and directing applicants to obtain a “free” credit report from defendants. The district court entered a permanent injunction and ordered defendants to pay more than $5 million in restitution.
On appeal, defendants conceded liability but argued section 13(b)’s reference to preliminary and permanent injunctions—and no other remedy—meant the FTC was prohibited from seeking any more relief than the statute explicitly authorized. In other words, because section 13(b) does not say a district court can require restitution, the FTC cannot seek it under section 13(b). The Seventh Circuit agreed, reversing decades of precedent and creating tension with eight sister circuits, most of whom had tacitly agreed that the FTC’s section 13(b) remedies include restitution. The Seventh Circuit explained that restitution is an inherently retrospective remedy because it orders the return of unlawful, past gains. Injunctions, on the other hand, halt ongoing or prevent imminent harms. The appellate court reasoned that if section 13(b), which only provides for injunctive relief, could be used to recoup restitution for past harms, then restitution would be conditioned on proof of ongoing or imminent conduct. According to the Seventh Circuit, such a reading was illogical.
Moreover, the court continued, Congress provided the FTC with avenues to seek equitable and civil penalties in actions pursuant to section 5 of the FTC Act. Both backward-looking enforcement provisions in section 5 explicitly authorize “the refund of money,” and when a person violates a final order, a district court can “grant mandatory injunctions and such other and further equitable relief as they deem appropriate.” If the FTC could use section 13(b) to obtain restitution without navigating section 5’s administrative process, then, the Seventh Circuit reasoned, it would have been unnecessary for Congress to enact section 5. By reading section 13(b) prospectively, the court afforded independent significance to each of the FTC’s enforcement tools.
In 2020, the Third Circuit directly addressed whether the FTC had a right to seek disgorgement under section 13(b) in Federal Trade Commission v. AbbVie Inc. The case began in 2014 when the FTC sued AbbVie Inc. and other pharmaceutical manufacturers, alleging that the patent owners for the testosterone replacement therapy AndroGel impermissibly maintained their AndroGel monopoly using sham litigations and anticompetitive reverse-payment agreements. Specifically, the FTC contended that AbbVie and Besins brought sham patent infringement lawsuits against competitors Teva Pharmaceuticals USA, Inc. (Teva) and Perrigo Company (Perrigo) that had filed FDA applications for generic testosterone gels. AbbVie settled the litigations by agreeing to license a generic version of AndroGel to Teva and Perrigo in three years (which was still six years prior to the expiration of the patent). In addition, with the Teva settlement, AbbVie also agreed to grant Teva a license to the generic version of cholesterol drug TriCor.
Pursuant to section 13(b), the FTC asked the district court to enjoin defendants from engaging in such conduct in the future and requested other equitable relief, including restitution and disgorgement. Through numerous rulings and a bench trial, the district court dismissed the FTC’s reverse-payment claim, but it ruled in favor of the FTC on the sham litigation theory. Although the district court denied the request for an injunction, it awarded the FTC $484 million in disgorgement of ill-gotten gains. Both the FTC and defendants appealed. The Third Circuit affirmed in part and reversed in part. It determined that that the district court erred in dismissing the reverse-payment theory and in concluding the litigation against Teva was a sham. It also erred in awarding disgorgement. However, the Third Circuit affirmed the conclusion that the Perrigo litigation was a sham, that defendants had monopoly power, and that injunctive relief should be denied.
Reverse-payment settlements, also known as “pay-for-delay” agreements, occur when a patent holder sues an alleged infringer and then pays the alleged infringer to end the litigation. These settlement agreements can be anticompetitive if they permit a brand name pharmaceutical company to split monopoly profits with a generic drug supplier in exchange for the generic delaying market entry. On this issue, the Third Circuit overruled the district court’s dismissal of the pay-for-delay theory and concluded that the FTC plausibly alleged an anticompetitive reverse-payment agreement.
First, the FTC plausibly alleged that AbbVie and Besins brought sham patent litigations against Perrigo and Teva, which triggered a 30-month stay to the FDA’s approval process for the generic versions of AndroGel. The FTC then alleged that both AbbVie and Teva believed that Teva would win the lawsuit, so AbbVie approached Teva to enter a settlement. Teva agreed not to sell a generic AndroGel for three years in exchange for AbbVie authorizing Teva to sell a generic version of TriCor for four years with AbbVie supplying this drug to Teva at a percentage above production cost and a royalty.
Second, the FTC alleged that the payment was “plausibly large.” Teva was struggling to get FDA approval for its generic version of TriCor, so with the authorization for and supply of the product from AbbVie, Teva could capitalize on the exclusivity window given to the first generic in the market. Teva estimated its net sales for TriCor would be $175 million over the four year window. TriCor’s estimated net sales far exceeded likely litigation costs for the patent infringement suit and the money Teva would have made marketing AndroGel. Third, the FTC plausibly alleged that the payment was “unjustified” because the TriCor deal cannot be explained as an independent business arrangement from AbbVie’s perspective. Indeed, the deal increased competition for TriCor, and the royalty terms for TriCor in the Teva deal were worse for AbbVie than royalties received through other supply agreements. According to the FTC, AbbVie expected to lose $100 million in TriCor revenue, and this loss would not be offset by the royalties from Teva. Finally, the FTC plausibly alleged that anticompetitive effects would outweigh any procompetitive results of the TriCor deal because the $100 million AbbVie would lose in TriCor sales was a small fraction of the billions of dollars in AndroGel revenues AbbVie protected by delaying generic competition for the drug for three years.
As to the sham litigation claims, the Third Circuit upheld the district court’s ruling that the Perrigo litigation was a sham, but the appellate court reversed the lower court’s decision that the Teva lawsuit was so. Pursuant to the Noerr-Pennington doctrine, “those who petition the government for redress are generally immune from antitrust liability,” including those that bring federal lawsuits. However, the immunity is not absolute, and those that bring sham lawsuits to interfere with the business relationships of competitors are not protected. For this sham exception to apply, the lawsuit first must be objectively baseless, meaning no reasonable litigant could expect success on the merits. If objectively baseless, then a court examines the litigant’s subjective motivation to determine whether the lawsuit conceals an attempt by the litigant to use the government process to interfere with a competitor.
With respect to the Teva litigation, the Third Circuit determined that the infringement suit was not objectiveless baseless as prosecution history estoppel did not apply. The defendants were not estopped from bringing the patent prosecution claim because, although the defendants’ October 2001 amendment to the AndroGel patent did not include the penetration agent in Teva’s generic formulation, the defendants drafted the amendment in response to a different penetration agent and would not have been expected to draft an amendment encompassing the agent used by Teva.
Conversely, the Third Circuit concluded that the district did not err in ruling that the Perrigo lawsuit was a sham. First, the litigation was objectively baseless because the patent’s prosecution history estopped the defendants from claiming infringement. A December 2001 amendment to the patent narrowed the list of penetration agents, removing the agent used by Perrigo. Second, the subjective motivation prong also was met. The defendants had experienced patent counsel that knew the patent litigation would not succeed, while they also knew that they would benefit financially if Perrigo’s generic application was delayed. Therefore, the district court’s conclusion that defendants’ motivation was to delay generic entry, as opposed to asserting a patent in good faith, was not in error.
The Third Circuit also concluded that the district court did not err in ruling that defendants had monopoly power for transdermal testosterone replacement therapies (“TTRT”). For the FTC to succeed on its monopolization claim, it had to show that defendants had monopoly power in a relevant market. “Monopoly power is the ability to control prices and exclude competition in a given market.” The appellate tribunal first concluded that the lower court did not err in excluding injectable therapies from the relevant product market definition because evidence showed that AndroGel was priced much higher than injectables, that defendants did not price AndroGel against injectables, and that defendants did not consider injectable products to compete with AndorGel. The district court also did not err in finding that AndroGel had a dominant share of TTRT and that there were significant barriers to entry to this market because it considered market share data, the durability of AndroGel’s share, consumer demand, the size and strength of AndroGel’s competitors, and AndroGel’s pricing trends and practices. The evidence of monopoly power included AndroGel being the most widely prescribed TTRT, AndroGel’s share being above 60 percent prior to Perrigo’s generic entering the market, AndroGel’s profit margin being 65 percent, AndroGel’s prices increasing from 2011-2014, and the three brand-name TTRT products that entered the market from 2011-2014 having a very low share.
As to remedies, the Third Circuit upheld the lower court’s ruling denying an injunction. To obtain an injunction, the FTC needed to show “a cognizable danger of recurrent violation, something more than the mere possibility which serves to keep the case alive.” The district court did not abuse its discretion in determining that defendants reengaging in sham litigation was only a mere possibility. The FTC did not establish that defendants had a pattern or practice of filing sham litigations and did not present any evidence that any other patent infringement litigations as to the AndroGel patent since 2011were shams. In addition, generics had been on the market for three years. Finally, with the proposed injunction, the FTC sought to limit defendants’ ability to file infringement suits with respect to any patent, and the lower court concluded this was too broad.
Notably, the Third Circuit reversed the district court’s $448 million disgorgement award, concluding that court’s lack the power to order disgorgement for claims brought under Section 13(b) of the FTC Act. First, the text of section 13(b) authorizes courts to enjoin violators, but it is silent on disgorgement, which is a form of restitution not injunctive relief. Second, the statute’s language states that to bring a suit the FTC must believe that an entity or individual is “violating, or is about to violate,” an antitrust law. Given this language, the Third Circuit reasoned that providing for injunctive relief made sense, given that injunctions restrict future action. On the other hand, disgorgement dispossesses a violator of past gains—not for profits from ongoing or impending conduct. Third, other sections of the FTC Act specifically list out the forms of relief that can be granted; other forms of equitable remedies are not assumed to be a part of injunctive relief.
 The chapter was prepared with the invaluable and excellent assistance of Megan Morley, Associate at Troutman Pepper Hamilton Sanders LLP.
 15 U.S.C. § 1 (2004).
 Bus. Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 723 (1988).
 954 F.3d 529 (2d Cir. 2020).
 954 F.3d 529, 531-32.
 Id. at 532.
 Id. at 532-533.
 Sonterra Capital, 954 F.3d at 534.
 Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977).
 Id. at 535.
 Freedom Watch, Inc. v. Google, Inc., 816 F.3d 619 (D.C. Cir. 2019).
 Id. at 499.
 Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955 (2007).
 Id. at 1966.
 Freedom Watch, 816 Fed. Appx. at 498.
 957 F.3d 184 (2020).
 Id. at 189.
 Id. at 187-88.
 Id. at 188-89.
 Id. at 189.
 Id. at 190. Other requirements of class certification under Federal Rule of Civil Procedure 23(a) and (b) include: “(1) the class must be so numerous that joinder of all members is impracticable (numerosity); (2) there must be questions of law or fact common to the class (commonality); (3) the claims or defenses of the representative parties must be typical of the claims or defenses of the class (typicality);  (4) the named plaintiffs must fairly and adequately protect the interests of the class (adequacy of representation, or simply adequacy)…and (ii) the class action is the superior method for adjudication (superiority).” Id.
 Id. at 190-91 (citing In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 309 (3d Cir. 2009)).
 Id. at 192-93.
 Id. at 194.
 Id. (citing Gates v. Rohm & Haas Co., 655 F.3d 255, 266 (3d Cir. 2011)).
 Id. at 194.
 Id. at 194-95.
 Id. at 195.
 967 F.3d 264 (3d Cir. 2020).
 Id. at 270.
 Id. at 267.
 15 U.S.C. § 2.
 Suboxone, 967 F.3d at 269.
 Id. at 273.
 Id. at 267-68.
 Id. at 268.
 Id. (According to the plaintiffs, Reckitt allegedly: “(1) engaged in a widespread campaign falsely disparaging Suboxone tablets as more dangerous to children and more prone to abuse; (2) publicly announced that it would withdraw Suboxone tablets from the market due to these safety concerns; (3) ended its Suboxone tablet rebate contracts with managed care organizations in favor of Suboxone film rebate contracts; (4) increased tablet prices above film prices; (5) withdrew brand Suboxone tablets from the market; and (6) impeded and delayed the market entry of generic Suboxone tablets by manipulating the FDA’s Risk Evaluation and Mitigation Strategy (“REMS”) process and filing a baseless citizen petition.”).
 Id. at 269.
 569 U.S. 27, 37-38 (2013).
 Suboxone, 967 F.3d at 270.
 Id. at 270-71.
 Id. at 271.
 Id. at 271-72 (citing In re Modafinil Antitrust Litig., 837 F.3d 238, 262 (3d Cir. 2016), as amended (Sept. 29, 2016).
 Id. at 273.
 Id. (citing Dewey v. Volkswagen Aktiengesellschaft, 681 F.3d 170, 183-84 (3d Cir. 2012)).
 Id. (citing In re Cmty. Bank of N. Va., 622 F.3d 275, 292 (3d Cir. 2010) (quoting Greenfield v. Villager Indus., Inc., 483 F.2d 824, 832 n.9 (3d Cir. 1973))).
 468 U.S. 85 (1984).
 958 F.3d 1239 (9th Cir. 2020).
 Id. at 1256 (citations omitted).
 Id. at 1243.
 7 F. Supp.3d 955, aff’d in part, rev’d in part, 802 F.3d 1049 (9th Cir. 2015).
 Id. at 1004-08.
 802 F.3d 1049, 1073.
 Id. at 1087.
 958 F.3d 1239, 1261 (quoting Alston, 375 F. Supp. 3d at 1102).
 Ohio v. American Express Co.,585 U.S. _____, 138 S. Ct. 2274 (2018).
 Id. at 2280.
 Id. at 2284-85.
 Complaint at 1, Federal Trade Commission v. Surescripts, LLC, No. 1:19-cv-01080 (D.D.C. Apr. 1, 2019) (hereinafter “Complaint”).
 Id. at 2-3.
 Id. at 3.
 See.e.g., Fed. Trade Comm’n v. Qualcomm Inc., No. 17-CV-00220, 2019 U.S. Dist. LEXIS 86219 (May 21, 2019); McWane, Inc. v. Federal Trade Commission, 783 F.3d 814 (11th Cir. 2015).
 Complaint at 6.
 Id. at 3.
 Id. at 5-6.
 Id. at 6-7.
 Id. at 8.
 Id. at 13-14.
 Id. at 14-15.
 Id. at 15.
 Id. at 16-17.
 Id. at 19-21, 32-37.
 Id. at 22-27.
 Id. at 39.
 Id. at 40.
 Id. at 43.
 Id. at 44-48, 51-52.
 See 15 U.S.C. § 53(b).
 424 F.Supp.3d 92, 96.
 Id. at 97.
 Id. (quoting 15 U.S.C. § 53(b)).
 Arbaugh v. Y&H Corp., 546 U.S. 500, 515 (2006).
 424 F.Supp.3d at 97 (quoting Arbaugh, 546 U.S. at 515).
 253 F.3d 34 (D.C. Cir. 2001) (en banc) (per curiam).
 Surescripts, 424 F.Supp.3d at 99-100.
 Id. at 102.
 Id. at 103.
 969 F.3d 974, 982 (9th Cir.), reh’g en banc denied, ____ F.3d ___ (9th Cir. Oct. 28, 2020).
 Federal Trade Commission v. Qualcomm, Inc., 411 F.Supp.3d 658, 675-66 (N.D. Ca. 2019).
 Id. at 671-673.
 Id. at 671-72.
 Id. at 685-695.
 Id. at 697.
 Id. at 820-23.
 969 F3d 974, 992.
 Id. at 993.
 472 U.S. 585 (1985).
 383 F.3d 1124 (9th Cir. 2004).
 969 F.3d at 993.
 Id.at 994.
 Id. at 994-95.
 969 F.3d at 998.
 Id. at 998-99.
 Id. at 1001-02.
 969 F.3d at 1004.
 Antitrust Law Developments Volume 1 at 483 (Jonathan M. Jacobson ed., 6th ed.).
 (Donald S. Clark Secretary FTC) Boise Cascade Corp., 107 F.T.C. 76, 210 (1986) (citing General Motors Corp., 103 F.T.C. 641, 693-96 (1984)).
 Antitrust Law Developments Volume 1 at 483 (Jonathan M. Jacobson ed., 6th ed.).
 International Tel. & Tel. Corp., 104 F.T.C. at 417 (quoting E. Kitner, A Robinson-Patman Primer 35 (2d ed. 1979)); accord. L. Sullivan, Handbook of the Law of Antitrust 679-90 (1977).
 2020 WL 6384303, at *1 (D. Kan Oct. 30, 2020).
 Id. at *7.
 Id. at *8 (quoting Purolator Prods., Inc. v. Fed. Trade Comm’n, 352 F.2d 874, 883 (7th Cir. 1965)).
 Id.at *9.
 Id. (quoting Texaco, Inc. v. Hasbrouck, 496 U.S. 543, 567 n.26 (1990)).
 Square D Co. v. Niagara Frontier Tariff Bureau, 476 U.S. 409, 415-17 (1986).
 Id. at 424.
 974 F.3d 77 (1st Cir. 2020).
 Id. at 78-79.
 939 F.3d 47, 51 (1st Cir. 2019).
 Id. at 51-52.
 Id. at 55-57.
 PNE Energy Supply, 974 F.3d at 78.
 Id. at 79.
 Id. at 81.
 Id. (quoting Breiding, 939 F.3d at 52).
 Id. (quoting Breiding, 939 F.3d at 53).
 Id. at 80.
 Id. at 82.
 Id. at 82-83.
 Id. at 83.
 Id. at 87.
 Id. at *1.
 Id. at *28.
 Id. at *2.
 Id. at *7.
 Id. at *12.
 Id. at *5 (According to a witness, insurance providers “especially the big ones, United, Aetna, IBC, of course, and Cigna, they could just say fine, we won’t [keep a provider in-network]’ and not suffer negative repercussions.”)
 Id. at *6.
 Id. at *10 (citing United States v. Marine Bancorporation, Inc., 418 U.S. 602, 622, 623 n.22 (1974)).
 Id. at *11.
 Id. at *7.
 Id. at *11. (citing Brown Shoe Co. v. United States, 370 U.S. 294, 336 (1962)).
 Id. at *12 (citing Fed. Trade Comm’n v. Advocate Health Care Network, 841 F.3d 460, 475 (7th Cir. 2016)).
 Id. (citing Fed. Trade Comm’n v. Penn State Hershey Med. Ctr., 838 F.3d 327, 338 (3d Cir. 2016)).
 Id. at *13 (“[D]iversion ratios . . . are “a measure of patient substitution patterns” to define the relevant geographic markets for GAC…”).
 Id. at *14-15. (comparing this situation to Fed. Trade Comm’n v. Advocate Health Care, No. 15-11473, 2017 WL 1022015, at *4 (N.D. Ill. Mar. 16, 2017), where the Northern Illinois District Court similarly rejected the notion that the patients (instead of the insurers) were the most relevant buyers; nevertheless the court ultimately found a prima facie case because of unequivocal testimony from insurance executives that they “had to include at least one of the merging hospitals to offer a product marketable to employers”).
 838 F.3d 327 (3d Cir. 2016).
 2020 WL 7227250 at *16.
 Id. at *16.
 One of the four insurers even testified that they had “no concerns” about the merger. Id. at *17.
 Id. at *21-22.
 Id. at *22-23.
 Id. at *25-27.
 Id. at *19-22.
 Id. at 103.
 15 U.S.C. § 18.
 Sabre, 452 F. Supp. 3d at 103.
 Id. at 105.
 Id. at 148-49.
 Id. at 136.
 Id. at 135-36, 138.
 Id. at 135-37 (citing Ohio v. Am. Express Co., 138 S. Ct. 2274, 2287 (2018)) (discussing In US Airways v. Sabre Holdings Corp., 938 F.3d 43, 48-49 (2d Cir. 2019)).
 Id. at 137.
 Id. at 138.
 Id. (citing Am. Express Co., 138 S. Ct. at 2287 (2018)).
 Id. at 139.
 Id. at 140.
 Id. at 142.
 Id. at 143.
 Id. at 143-44.
 Id. at 144.
 “The HHI is calculated by summing the squares of the individual firms’ market shares. In determining whether the HHI demonstrates a high market concentration, we consider both the post-merger HHI number and the increase in the HHI resulting from the merger. A post-merger market with a HHI above 2,500 is classified as “highly concentrated,” and a merger that increases the HHI by more than 200 points is presumed to be likely to enhance market power.” Id. (quoting FTC v. Penn State Hershey Med. Ctr., 838 F.3d 327, 346-47 (3d Cir. 2016).
 Id. at 144.
 Id. at 145.
 Id. at 146-47.
 Id. at 112, 129.
 Id. at 149.
 15 U.S.C. § 6a (1982).
 F. Hoffman—LaRoche Ltd. v. Empagran, S.A., 542 U.S. 155, 164 (2004).
 Id. at 503.
 Id. at 510 (“This Court, no less than other courts, has sometimes been profligate in its use of the term.”).
 Id. at 511 (quoting 2 J. Moore et al., Moore’s Federal Practice § 12.30, p. 12-36.1 (3d ed. 2005)).
 Id. at 511.
 Arbaugh, 546 U.S. at 515-16. The Supreme Court also applied the clear statement rule and determined that statutory requirements were substantive instead of jurisdictional. Morrison v. Nat’l Austl. Bank, Ltd., 561 U.S. 247, 254 (2010) (extraterritorial reach of § 10(b) of the Securities and Exchange Act of 1934); Reed Elsevier, Inc. v. Muchnick, 599 U.S. 154, 160-66 (2010) (requirement under Copyright Act).
 U.S. v. Hsiung, 758 F.3d 10,74 (9th Cir. 2014) (substantive); Lotes Co. v. Hon Hai Precision Industry Co., 753 F.3d 395 (2nd Cir. 2014) (substantive); Animal Sci. Prods., Inc. v. China Minmetals (3d Cir. 2011) (substantive); Minn-Chem v. Agrium, Inc., 683 F.3d 845 (7th Cir. 2012) (en banc) (substantive).
 Id. at 164.
 417 F.3d 1267, 1271 (D.C. Cir. 2005) (“Empagran II”).
 2020 WL 5627224, at *722.
 Id. at *726.
 Although the court held that the alleged harm flowing from the indemnification was too speculative to serve as a basis for the plaintiff’s antitrust claim, it concluded that the harm from the alleged refusal by four of the five defendants to license SEPs on FRAND terms was sufficiently direct harm to satisfy standing requirements. Id. at *726-27.
 Id. at 727-28.
 AMG Capital Management, LLC, et al. v. Federal Trade Commission, No. 19-508, Petition for Writ of Certiorari filed by AMG Capital Management, LLC; Black Creek Capital Corporation; Broadmoor Capital Partners, LLC; Level 5 Motorsports, LLC; Scott A. Tucker, Park 269 LLC; and Kim C. Tucker (Oct. 18, 2019), available at https://www.supremecourt.gov/DocketPDF/19/19‑508/119538/20191018161100345_Tucker%20Cert%20Petition%20PDFA.pdf.
 910 F.3d 417, 421 (9th Cir. 2018), cert. granted, 141 S.Ct. 194 (July 09, 2020).
 15 U.S.C. § 53(b).
 917 F.3d 147 (3d Cir. 2019).
 937 F.3d 764 (7th Cir. 2019).
 15 U.S.C. § 53(b).
 The Seventh Circuit’s logic was not limited to FTC-specific principles. It also relied on the Supreme Court’s refusal to find implied statutory remedies where Congress did not provide them. In Meghrig v. KFC Western, Inc., the Supreme Court held that an environmental statute in which Congress permitted private plaintiffs to obtain injunctions against toxic-waste handlers did not provide an implied restitution remedy. Similarly, the Seventh Circuit reasoned that because Congress did not list restitution among the section 13(b) remedies, the FTC was foreclosed from seeking it.
 976 F.3d 327 (2020).
 Defendants AbbVie Inc. (“AbbVie”) and Besins Healthcare, Inc. (“Besins”) own the patent relating to AndroGel. Initially, defendant Unimed Pharmaceuticals LLC (“Unimed”) and Besins jointly filed for the AndroGel patent. In 1999, Solvay acquired Unimed, and then defendant Abbot Laboratories (“Abbott”) purchased Solvay in 2010. In 2013, Abbott split into Abbott and AbbVie, with AbbVie taking the pharmaceutical business (including AndroGel). For ease of discussion, Unimed, Abbott, and AbbVie are referred to as “AbbVie.” Id. at 341.
 Id. at 342-45.
 AbbVie, 976 F.3d at 345-46.
 Id. at 338.
 FTC v. Actavis, Inc., 570 U.S. 136, 153-58 (2013).
 AbbVie, 976 F.3d at 356.
 Id. at 356-57.
 Id. at 357.
 Id. at 359-60 (citing Prof’l Real Estate Invs., Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 56 (1993)).
 Id. at 360.
 Id. at 364-66. “[P]rosecution history estoppel…applies when the patentee originally claimed the subject matter alleged to infringe but then narrowed the claim in response to a rejection…The patentee may not argue that the surrendered territory comprised unforeseen subject matter that should be deemed equivalent to the literal claims of the issued patent.” Id. at 362 (citing Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722, 733-34 (2002)).
 Id. at 364-66.
 Id. at 366-71.
 Id. at 371 (citing Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 306-07 (3d Cir. 2007)).
 Id.at 371-74.
 Id. at 379 (citing United States v. W.T. Grant Co., 345 U.S. 629, 633 (1953)).
 Id. at 379-81.
 Id. at 374-379.