Businesses and individuals in Texas, Florida, the Southeast, Puerto Rico and the Virgin Islands are preparing for a massive recovery and reconstruction effort in the wake of Hurricanes Harvey and Irma. The Antitrust Division of the Department of Justice (DOJ) and the Federal Trade Commission (FTC) have issued antitrust guidance that reiterates key principles of permissible and impermissible competitor collaboration and provides useful examples related to disaster recovery. (more…)
On August 14, 2017, we reported on an online retailer’s guilty plea for conspiring to fix the prices of “customized promotional products” such as silicone wristbands and lanyards, and the ongoing US Department of Justice (DOJ) investigation into the online promotional products industry. On August 22, 2017, DOJ announced two more guilty pleas in the investigation, announcing that e-commerce company Custom Wristbands Inc. and its owner and CEO Christopher Angeles had pled guilty to violating the Sherman Act, 15 USC § 1.
WHAT HAPPENED:To date, the US Department of Justice Antitrust Division (DOJ) has obtained six corporate guilty pleas, three individual indictments and one individual guilty plea in its long-running investigation into price fixing of capacitors by primarily Japanese manufacturers. Capacitors are small electronic components that are found in nearly every device that is plugged in or powered by a battery.
WHAT HAPPENED
The US Department of Justice (DOJ) Antitrust Division (the Division) offers leniency to the first company to contact the Division and acknowledge participation in an antitrust conspiracy such as price-fixing, bid-rigging or market allocation. The Division’s leniency program requires the applicant to fully cooperate with the government’s investigation and to candidly acknowledge its wrongdoing, among other requirements. In return, the successful applicant receives a pass from corporate criminal exposure and also receives immunity for its officers, directors and executives.
The leniency program is the crown jewel of the Division’s enforcement regime because of its demonstrated success generating new cases. The program’s ability to attract applicants is based on its transparency and predictability. The level of trust required for companies to air their criminal wrongdoing to prosecuting authorities is not automatic. It has been earned over the years by a program that keeps its promises and works as designed. Therefore, changes to the program are closely watched by the defense bar for any perceived lessening of immunity coverage. (more…)
The Department of Justice (DOJ) reinforces the perils of competitor information exchanges by challenging alleged communications between DirecTV and other video programmers related to broadcast rights for Los Angeles (LA) Dodgers baseball.
WHAT HAPPENED:A grand jury has indicted three foreign currency exchange spot market dealers for alleged violations of the Sherman Act, 15 U.S.C. § 1, in a case brought jointly by the DOJ’s Antitrust Division and the US Attorney’s Office for the Southern District of New York (SDNY). The allegations in the case, United States v. Usher, et al., are that the three named defendants conspired to suppress and eliminate competition for the purchase and sale of Euro/US dollar (EUR/USD) currency pairs via price fixing and bid rigging.
The foreign currency exchange spot market (the “FX Spot Market”) enables participants to buy and sell currencies at set exchange rates. The FX Spot Market is an “over-the-counter” market conducted via direct customer-to-dealer trades, i.e., without an exchange. In the market, currencies are traded and priced in pairs, whereby one currency is exchanged for the other. When filling customer orders, dealers in the FX Spot Market do not serve in a broker capacity, but rather fulfill the orders via their own trading and speculation in the requested currency markets. Dealers employ traders to quote prices and engage in trades to fill customer orders. The dealers and their traders are able to access a separate virtual market, known as the interdealer virtual market, which enables currency trades amongst dealers. According to the Indictment, currency pair prices are set by a continuous auction in the interdealer virtual market, where “individual actions taken by competing traders—to bid or not bid, to offer or not offer, to trade or not to trade, at certain times, and using certain tactics—can cause or contribute to a change in the exchange rate shown in the [virtual trading] interface, and thus may benefit, harm, or be neutral to a competing trader.” The Indictment asserts that this is because the benchmarks used by the virtual market were calculated at particular times each day and were based on “real-time bidding, offering, and trading activity” on the virtual trading market.
The Indictment asserts that the defendants violated the Sherman Act by:
Defendants are alleged to have engaged in profitable EUR/USD transactions while acting to fix prices and rig bids for the EUR/USD product in the FX Spot Market. The Indictment further alleges that others were co-conspirators, suggesting that there may be cooperating witnesses and possibly further indictments to follow. Of note, however, recent Trump Administration changes to US Attorneys and DOJ Division Deputies and Chiefs may conceivably alter the course of this and any follow-on litigation. Regardless, over-the-counter markets have been a focus of antitrust lawsuits in recent years, most notably in the widely-covered Libor suits, and that trend is expected to continue.
The case follows on from the Commission’s Animal Feed Phosphates cartel decision pursuant to which fines totalling €176 million were imposed on a number of producers of animal feed for price fixing and market sharing throughout the EEA.
During the investigation into the infringement, all the companies involved engaged in settlement discussions with the Commission with a view to obtaining a 10 percent reduction in the fine that would otherwise have been imposed had they not settled with the Commission. However, during the settlement process Timab, a subsidiary of the Roullier Group, decided to withdraw from the settlement procedure. The Commission therefore followed the standard administrative infringement procedure against Timab – despite the fact that it had entered into settlements with the other companies involved in the cartel. This was the first time, therefore, that the Commission rendered a decision in a so-called ‘hybrid’ case i.e. where some parties settle but others do not.
During the initial settlement discussions, several meetings were held between the Commission and Timab, during which evidence of the infringement was discussed. On the basis of the evidence available, the Commission informed Timab that a fine in the range of €41 to €44 million would be imposed on it. However, in its final decision of 20 July 2010, the Commission levied a fine of nearly €60 million on Timab.
Timab challenged the Commission’s decision before the General Court of the European Union (GCEU) in case T-456/10, claiming that the Commission had infringed its legitimate expectations regarding the amount of the fine, on the one hand, and its right not to incriminate itself, on the other. Such challenge was unsuccessful, however.
On 11 November 2016, the Italian Competition Authority (the Authority) fined eight modelling agencies (B.M. S.r.l. – Brave, D’management Group S.r.l., Elite Model Management S.r.l., Enjoy S.r.l., Major Model Management S.r.l., Next Italy S.r.l., Why Not S.r.l. and Women Models S.p.a.) and their trade association (Assem) of € 4.5 million for alleged price collusion. According to the Authority, the modelling agencies would have agreed on the applicable prices on the market with the aim of avoiding any form of competition. In particular, the alleged price collusion would have concerned all the components of the prices applied to the major maisons and other clients (e.g., fees for models, wages for the modelling agencies and other additional costs). Furthermore, a practical role would have been played by the trade association, Assem, where the modelling agencies had held frequent meetings to develop the alleged concerted practice.
In calculating the fine, the Authority took into account that the alleged conduct took place between 2007 and 2015. Moreover, the Authority granted to Img Italy S.r.l. the full immunity from fines given that it revealed the existence of the alleged conduct. Regarding the European scenario, on 29 September 2016, the French Competition Authority fined the main trade association, SYNAM and 37 modelling agencies of €2.38 million for price fixing. In addition, there is a pending investigation of the Competition and Market Authority into alleged anti-competitive conducts in the model management services in United Kingdom.
Gabriele Giunta contributed to this blog post.
On Thursday, April 9, 2015, the Seventh Circuit affirmed the district court’s grant of summary judgment for AT&T Mobility LLC, Verizon Wireless LLC, T-Mobile USA Inc. and Sprint Corp., in a text messaging price-fixing litigation. In re Text Messaging Antitrust Litigation, case number 14-2301. Plaintiffs alleged that these wireless telephone providers and a trade association to which those companies belong, The Wireless Association, conspired to raise the price of “price per use” text messages from 2005 to 2008 in violation of Section 1 of the Sherman Act. In May 2014, the district granted defendants’ motion for summary judgment, and the plaintiffs appealed. On appeal, the plaintiffs argued that the lower court’s ruling should be reversed because 1) they uncovered “smoking gun” emails showing a defendant employee admitting to collusive behavior, 2) the risk of losing customers made it irrational for the providers to raise the price unless they agreed to all implement increases and 3) The Wireless Association orchestrated the exchange of information between defendants. The Seventh Circuit found these arguments unpersuasive.
In writing the opinion for the Seventh Circuit, Judge Richard Posner explained that “follow-the-leader” pricing, also known as “conscious parallelism” or “tacit collusion,” does not violate the Sherman Act. Instead, to survive summary judgment, plaintiffs must present sufficient evidence of “express collusion.” The plaintiffs failed to do so. First, Posner addressed the plaintiffs’ purported “smoking gun” e-mails from a T-Mobile employee. In one of these e-mails, the employee called a T-Mobile price increase “collusive [sic] and opportunistic.” Upon a review of the language in the smoking gun e-mails as well as other missives from this employee, Posner determined that nothing in the e-mails suggested that the employee was accusing T-Mobile of express collusion; the e-mails were discussing legal, follow-the-leader pricing. In fact, Posner even admonished the plaintiffs for wasting so much of the space in their briefs on these e-mails. Second, Posner explained the weaknesses in the plaintiffs’ argument that, but for an agreement with its competitors, a provider would not risk losing customers to raise the price. Mainly, this argument ignored the fact that a seller cares about total revenues, not the number of customers. Even if a seller loses a third of its customers by doubling its price, then the seller is still earning greater revenues. Third, Posner found the plaintiffs’ argument that defendants colluded at trade association meetings unconvincing. Because the plaintiffs offered no evidence regarding the content of the information exchanged at these meetings, the court had no basis to infer that the gatherings were used for collusive purposes. Overall, the plaintiffs’ evidence was equally consistent with independent behavior as it was with conspiracy and, therefore, insufficient to overturn the lower court’s summary judgment ruling.
On Wednesday, April 8, 2015, the Third Circuit Court of Appeals vacated a district court’s order certifying a class of direct purchasers of blood reagents in a price-fixing suit against Ortho-Clinical Diagnostics Inc. In re Blood Reagents, case number 12-4067. Plaintiffs allege that Ortho-Clinical Diagnostic Inc. (Ortho) and a producer of blood reagents, violated Section 1 of the Sherman Act by conspiring with the only other U.S. producer of reagents, Immucor Inc., to raise prices of blood reagents on numerous occasions throughout the 2000s. Immucor settled with plaintiffs in 2012. In September 2011, the plaintiffs moved to certify a class of direct purchasers, and the district court held a hearing in July 2012. To support their arguments for class certification, the plaintiffs relied on expert testimony to create their damages model and antitrust impact analysis. Although Ortho challenged the reliability of the expert testimony, the district court certified the class and held that the testimony “could evolve to become admissible” at trial. In re Blood Agents, 283 F.R.D. 222, 243-245 (E.D. Pa. 2012). Ortho’s arguments went to the merits and were not persuasive at the class certification stage. Id. at 240-41. In making this ruling, the court relied on the Third Circuit decision of Behrand v. Comcast Corp., 655 F.3d 182 (3d. Cir. 2011). Ortho appealed.
The Third Circuit vacated this class certification decision and remanded the case back to the lower court. Since the district court’s ruling, the Supreme Court overturned Behrand and the “could evolve” standard relied on by the lower court in this case. Comcast v. Behrand, 133 S.Ct. 1426 (2013). Instead, the Supreme Court emphasized that the class certification analysis must be rigorous. Id. at 1432. Therefore, the Third Circuit determined that this “rigorous analysis” applied to expert testimony critical to proving class certification. It held that if challenged expert testimony is critical to class certification, then plaintiffs cannot rely on this challenged testimony to show conformity with the class certification requirements unless they also establish, and the trial court finds, that the testimony satisfies the standard for expert testimony set forth in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). According to the Third Circuit’s order, on remand, the district court must first determine which, if any, of Ortho’s attacks on the expert’s reliability challenge the aspects of the expert testimony offered by the plaintiffs to satisfy class certification requirements. Then, if necessary, the lower court must perform a Daubert analysis on this testimony before deciding whether to certify the class.
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