Sherman Act Archives - ANTITRUST ALERT

Sherman Act

Cartel Corner | July 2023

by Justin P. Murphy, Paul M. Thompson, Stéphane Dionnet, Han Cui, Reese Poncia, Alexandra Lewis, Graham Hyman, Nabil Lakhal, Glenna Siegel and Bailey K. Sanders | Jul 13, 2023 | Cartel Enforcement, DOJ Developments, EC Developments, EU Developments, FTC Developments, Monopolization/Abuse of Dominance

In the first half of 2023, antitrust enforcers remained remarkably busy both in the United States (US) and across the European Union (EU). The US Department of Justice’s (DOJ’s) Antitrust Division (Division) and the Federal Trade Commission (FTC) have continued their aggressive and novel effort to drag antitrust enforcement into the labor markets. The DOJ Procurement Collusion Strike Force (PCSF) has pursued its crackdown on antitrust and fraud involving government procurement with a number of recent cases. And DOJ has pushed the boundaries under Section 2 of the Sherman Act—both by revitalizing the criminal provisions of the law and by pursuing “attempts” to monopolize criminally. The European Union has also kept the pressure on those doing business overseas, imposing significant fines in recent matters and upgrading its online leniency program to make it easier for companies to report wrongdoing.

In this installment of Cartel Corner, we examine this continued aggressiveness toward antitrust enforcement. While these government enforcement efforts have not always been successful, they have nonetheless reframed the landscape for many companies and individuals. What was once thought of as a civil antitrust violation at worst—or no violation at all—is now often pursued criminally. And antitrust enforcers are speaking in more strident tones as they attempt to remake, in certain ways, the way companies do business in the United States and abroad.

Whether antitrust enforcers are ultimately successful remains to be seen. Nonetheless, the trend is real, and it is one that all companies should be prepared to address in the weeks and months to come.

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Cartel Corner | August 2022

by Justin P. Murphy, Paul M. Thompson, Han Cui, Alexandra Lewis and Reese Poncia | Aug 31, 2022 | Agriculture, Cartel Enforcement, Consumer Protection/Privacy, DOJ Developments, FTC Developments, Monopolization/Abuse of Dominance

Without question, 2022 has been a remarkably busy time for the US Department of Justice’s (DOJ’s) Antitrust Division (Division). Over just a few months, the Division rolled out meaningful revisions to its leniency policy aimed at encouraging prompt reporting of criminal violations, announced that it will (for the first time in nearly 50 years) bring criminal monopolization cases under Section 2 of the Sherman Act, continued to increase enforcement resources, and brought a number of new cases and obtained multiple guilty pleas.

However, activity does not always mean success. If there is any theme that defines the Division’s efforts over the last quarter, it is this: If at first you don’t succeed, try, try again. That is exactly what the Division has done. It tried two labor markets cases, ultimately losing both on a new and untested legal theory. And, over strong objections from a district court, the Division pursued an unprecedented third trial against those in the broiler chicken industry, resulting in a full acquittal for all defendants. None of this, however, has deterred the Division from continuing to pursue new investigations and bring new cases under novel legal theories.

In this installment of Cartel Corner, we examine recent and significant developments in antitrust criminal enforcement and profile what the Division has highlighted as its key enforcement priorities. If the past is prologue, we are bound to see more aggressive antitrust enforcement in the months to come, testing the boundaries of current antitrust law. Whether the Division can ultimately shift those boundaries, however, remains to be seen.

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DOJ Faces Setbacks in Labor Market Prosecutions but Remains Determined

by Anthony S. Ferrara | Apr 26, 2022 | Cartel Enforcement, DOJ Developments, FTC Developments, Healthcare Antitrust

WHAT HAPPENED

On back-to-back days this month, defendants charged and prosecuted by the US Department of Justice’s Antitrust Division (the DOJ) were acquitted on all Sherman Act charges in first-of-their-kind criminal antitrust trials involving labor markets.
On April 14, 2022, in United States v. Jindal, a federal jury in the US District Court for the Eastern District of Texas found two defendants not guilty of violating the Sherman Act by agreeing with competitors on wages they would pay their employees. The jury found one of the defendants guilty of obstructing a Federal Trade Commission (FTC) investigation by making false and misleading statements to the FTC and concealing information.
The following day, in United States v. DaVita, Inc., a Colorado federal jury acquitted DaVita, Inc. and its former chief executive on all counts of violating the antitrust laws by entering into non-solicit agreements with other employers.
The Jindal case was the DOJ’s first attempt to criminally prosecute so-called alleged “wage-fixing” agreements. Similarly, the DaVita case was DOJ’s first criminal trial targeting alleged no-poach or non-solicit agreements between employers.
Historically, the DOJ pursued enforcement of alleged anticompetitive labor market practices in the civil context rather than criminally. But in 2016, the DOJ did an about-face and warned employers in its 2016 Antitrust Guidance for Human Resource Professionals that it intended to proceed criminally against “naked wage-fixing or no-poach agreements” between horizontal competitors in labor markets. The DOJ’s efforts to investigate and criminally prosecute such agreements under this new policy started ramping up publicly in late 2020.
The DOJ filed an indictment against Jindal in December 2020 and a superseding indictment against Jindal and another defendant in April 2021. The DOJ alleged that the defendants participated in a conspiracy to lower the rates paid to physical therapists and physical therapist assistants in north Texas. A few months later, in July 2021, the DOJ filed an indictment against DaVita and its former CEO, alleging that they conspired with competitors in the healthcare industry not to solicit each other’s employees. The DOJ returned a superseding indictment in November 2021.
In both cases, the district courts denied the defendants’ motions to dismiss. The Jindal court held—for the first time ever—that an alleged wage-fixing conspiracy could constitute a per se criminal violation of the Sherman Act. Similarly, the DaVita court held that no-poach and non-solicit agreements could constitute per se violations—but only if the alleged naked agreements allocate the employment market. The DaVita court refused to announce a blanket rule that all no-poach or non-solicit agreements are subject to per se
Despite these rulings, the juries in both cases ultimately acquitted the defendants of all antitrust charges brought by the DOJ.

WHAT’S NEXT

The DOJ remains committed to investigating and criminally prosecuting wage-fixing and no-poach agreements despite these early setbacks. Since the Jindal indictment in December 2020, the DOJ has [...]

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Views and Lessons from the Trenches of the First Criminal No-Poach Trial

by Jeffrey Stone, Justin P. Murphy and Daniel R. Campbell | Apr 22, 2022 | DOJ Developments

In a landmark case of first impression, the US Department of Justice’s (DOJ) Antitrust Division (Division) indicted and brought to trial a federal criminal prosecution alleging agreements between DaVita, Inc., its former CEO Kent Thiry and other companies not to solicit each other’s employees. The case was the first criminal trial of its kind in the Division’s recent efforts to expand Sherman Act liability under Section 1 to include so-called no-poach and non-solicit agreements. Following an eight-day jury trial and two days of deliberation, a Denver jury acquitted Thiry and DaVita on all counts of the unprecedented “no-poach” conspiracy. As the district judge himself succinctly put it to the jury: this case was “a unique case in the field of antitrust law.”

This criminal prosecution in the labor markets reflects a novel and aggressive stance on expanding Sherman Act criminal liability. In pursuit of this policy shift, the Division is trying to jam a square peg into a round hole by characterizing non-solicit and no-poach agreements as per se market allocation agreements. The per se rule creates a judicial shortcut of sorts that makes it easier for the government to prosecute classic cartel conduct such as price-fixing and bid rigging. This case, and related cases, are the first time the per se shortcut has been used in a so-called labor market allocation case. This unprecedented litigation created a watershed moment for the Division’s views that non-solicit and no-poach agreements are per se illegal. The complete acquittal of both defendants and the rulings of the district judge before trial cast doubt on whether the per se standard is appropriate for “no-poach” agreements and whether such agreements should be prosecuted criminally at all.

WHERE DID THIS COME FROM?

Historically, the Division pursued enforcement of alleged anticompetitive labor market practices in the civil context, meaning fines for companies and individuals. In fact, that was the approach the Division took with no-poach and no cold call agreements entered into by major technology and railway companies. The Division engaged in a volte-face and declared it would criminally prosecute such labor market agreements for the first time in October 2016. Without an intervening act of Congress, executive order or ruling by any court, the Division warned that going forward it intended to proceed criminally against “naked wage-fixing or no-poach agreements” between horizontal competitors in the labor market. The Division declared that investigating alleged “naked wage-fixing or no-poach agreements” was a top priority. Ignoring concerns related to the separation of powers, the Division unilaterally cited its discretion and put the full weight of the government into labor market no-poach agreements. That momentum accelerated in December 2020 and continued throughout 2021, with the Division bringing 12 criminal cases against nine individuals and three companies. In short, aggressive and expansive antitrust enforcement from the DOJ is now the new normal.

DOJ SEEKS TO CREATE A NEW CATEGORY OF PER SE LIABILITY AND USES DAVITA AND THIRY AS A TEST CASE

The Division returned a superseding indictment against DaVita, Inc. and Kent Thiry on November 4, [...]

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Cartel Corner | March 2022

by Justin P. Murphy, Paul M. Thompson, Han Cui, Joshua W. Eastby, Anthony S. Ferrara, Alexandra Lewis and Reese Poncia | Mar 21, 2022 | Agriculture, Cartel Enforcement, Consumer Protection/Privacy, DOJ Developments, FTC Developments, Healthcare Antitrust, Monopolization/Abuse of Dominance

The US Department of Justice’s (DOJ) Antitrust Division (Division) has continued to actively investigate and pursue alleged criminal violations of antitrust laws and collusive activity in government procurement. US Attorney General Merrick Garland noted in a March 2022 speech at the ABA Institute on White Collar Crime that the Division ended last fiscal year “with 146 open grand jury investigations—the most in 30 years.” As we near the end of the first quarter of 2022, the Division has a record number of criminal cases either in trial or awaiting trial.

In this installment of Cartel Corner, we examine and review recent and significant developments in antitrust criminal enforcement and profile what the Division has highlighted as its key priorities for enforcement. For 2022 and beyond, those priorities are—and likely will remain—identifying and aggressively pursuing alleged violations involving the labor markets, consumer products, government procurement, and the generic pharmaceutical industry.

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Kanter Signals DOJ to Follow FTC Lockstep, Calls for Substantial Change to Competition Enforcement Approach

by Graham Hyman and Gregory E. Heltzer | Mar 14, 2022 | Cartel Enforcement, DOJ Developments, FTC Developments, Monopolization/Abuse of Dominance

In remarks delivered on January 18, 2022, and January 24, 2022, Jonathan Kanter, the Assistant Attorney General (AAG) for the US Department of Justice (DOJ) Antitrust Division, laid out the areas where he perceives shortcomings in antitrust enforcement. These speeches signaled that the Division, under Kanter’s direction, will take a more aggressive stance toward perceived anticompetitive conduct, echoing the changes in enforcement priorities at the Federal Trade Commission (FTC).

Overview of AAG Kanter’s Remarks

Kanter intends to shape the regulatory landscape to better reflect dynamic markets. Both speeches featured a cohesive overarching message: Kanter believes that the regulatory and jurisprudential antitrust regime does not reflect and cannot address the market realities that exist today. Kanter believes that the Supreme Court of the United States’ 1992 opinion in Eastman Kodak v. Image Technology Services supports a change in approach because “[l]egal presumptions that rest on formalistic distinctions rather than actual market realities are generally disfavored in antitrust law.”[1] To address widespread increases in market concentration as well as “the economic and transformational technological changes” that define today’s economy, Kanter intends to revise the Division’s approach for analyzing mergers and conduct.[2]
Kanter seeks to revive dormant areas of antitrust enforcement, in particular monopolization cases with a focus on tech “platform” companies. Kanter stated that the Division has failed to adequately address certain areas of antitrust enforcement. He noted that it has been almost 20 years since the Division’s last major monopolization case.[3] Dominant tech platforms have “extracted private data” and “have few, if any, realistic alternatives,” he said.[4] Shortly after Kanter’s comments about prioritizing monopolization cases, Richard Powers, the deputy for criminal enforcement, stated that the Division will now evaluate Section 2 conduct for criminal charges.[5] Powers’s comments signal a dramatic change in enforcement, reversing decades of policy in which Section 2 charges were only brought in the civil context. These statements from Division leadership mirror those of FTC Chair Lina Khan, who has repeatedly called for more robust antitrust enforcement, and indicate that Kanter intends to reshape the Division, both in terms of resource allocation and approach to anticompetitive conduct, from a civil and criminal perspective.
Kanter laid out the Division’s overarching priorities clearly in his remarks. The Division intends to take a more aggressive stance on vertical merger enforcement, reformulate the Horizontal and Vertical Merger Guidelines to better reflect market realities (in the government’s view), enter into fewer consent decrees and instead litigate cases to generate judicial opinions and advance the relevant case law, and bring more civil and criminal conduct cases.

Vertical Merger Enforcement to Become a Focal Point for Regulators

Kanter stated that agency enforcement of vertical mergers has been lacking. Kanter believes that the Division has placed too much value on the potential efficiencies of vertical mergers without identifying the relevant theories of harm presented by such transactions.
The Division intends to [...]

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DOJ Antitrust Division Signals Impending Criminal Monopolization Cases

by Andrew Lee, Katharine M. O'Connor, Justin P. Murphy, Paul M. Thompson and Claire Danberg | Mar 11, 2022 | Cartel Enforcement, DOJ Developments, FTC Developments, Monopolization/Abuse of Dominance

WHAT HAPPENED

On March 2, 2022, the US Department of Justice (DOJ) Antitrust Division Deputy Assistant Attorney General Richard Powers revealed that the DOJ intends to investigate and pursue alleged criminal violations against individuals or companies who violate Section 2 of the Sherman Act. For more than 40 years, criminal enforcement of antitrust laws have focused nearly exclusively on hardcore, per se anticompetitive agreements (i.e., price fixing, output restriction or market allocation) among two or more horizontal competitors. Section 2 of the Sherman Act, on the other hand, primarily focuses on conduct by one firm or company with significant market power and, typically, is a means to bring a civil case for monopolization or anticompetitive use of the existing monopoly power.

LEGAL BACKGROUND

This marks a radical departure from longstanding DOJ antitrust enforcement of monopolization claims. In general, the DOJ has refrained from Section 2 criminal prosecutions.

Section 2 makes it illegal to acquire or maintain monopoly power through anticompetitive means and focuses primarily on unilateral or one-sided anticompetitive behavior. Courts (including the Supreme Court of the United States) generally have analyzed Section 2 cases under the “rule of reason,” which weighs both procompetitive and anticompetitive effects of conduct.

Because the rule of reason imposes a balancing test that is akin to the preponderance of evidence standard, the higher criminal burden of proof could clash with existing jurisprudence and agency guidelines on Section 2 enforcement standards. In contrast, Section 1 of the Sherman Act prohibits anticompetitive agreements—where courts have automatically deemed certain types of agreements, such as agreements to fix prices, allocate markets or rig bids—as illegal “per se,” because they (through ample judicial and economic experience) have been deemed to produce little or no procompetitive effects.

DOJ’s HISTORY WITH SECTION 2

In the last 50 years, the vast majority of criminal cases that the Antitrust Division has brought involved per se illegal agreements under Section 1. The Antitrust Division appears to have initiated very few criminal Section 2 cases during that same period with mixed success. For instance, in United States v. Cuisinarts, the DOJ prosecuted the defendant under Section 2 for per se resale price maintenance agreements.[1] The defendant agreed to pay a $250,000 fine for a plea of nolo contendere. However, today, the per se criminal treatment of resale price maintenance is in serious doubt as the long line of Supreme Court decisions from GTE Sylvania to Leegin have firmly placed most vertical resale price restraints for Section 2 under the rule of reason standard.

WHAT’S NEXT

In 2016, the Federal Trade Commission and the DOJ released a joint publication called the “Antitrust Guidance for Human Resource Professionals” when announcing expanded criminal enforcement in labor markets for wage fixing and no-poaching agreements.[2] We expect the DOJ to release similar guidance with respect to criminal prosecution of Section 2 claims.

The policy shift raises a host of additional questions, such as what types of conduct under Section 2 the Division intends to focus [...]

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Federal Circuit Lacks Appellate Jurisdiction over Standalone Walker Process Claims

by Lisa P. Rumin and Graham Hyman | Jun 30, 2021 | Energy/Commodities, IP Antitrust, Monopolization/Abuse of Dominance

The US Court of Appeals for the Federal Circuit ordered the transfer of a case asserting standalone Walker Process antitrust claims involving an unenforceable patent to the regional circuit, in this case the US Court of Appeals for the Fifth Circuit. Chandler v. Phoenix Services LLC, Case No. 20-1848 (Fed Cir. June 10, 2021) (Hughes, J.) originated in the US District Court for the Northern District of Texas, over which the Fifth Circuit has appellate jurisdiction. The decision to transfer was based on a subject matter jurisdiction analysis for Walker Process claims. The Federal Circuit reiterated that its precedent does not mandate exclusive Federal Circuit jurisdiction over all Walker Process cases.

In 2006, Phoenix Services and Mark Fisher (collectively, Phoenix) acquired a company called Heat On-The-Fly and its patent to protect a purported proprietary fracking process. Heat-On-The-Fly, and later Phoenix, sought to enforce the patent against numerous parties. During the patent application process, however, Heat On-The-Fly had failed to disclose numerous public uses of the fracking process prior to the application filing. In 2018, in an unrelated case, Energy Heating, LLC v. Heat On-The-Fly, the Federal Circuit, held that “failure to disclose prior uses of the fracking process rendered the . . . patent unenforceable due to inequitable conduct.” The plaintiffs in the case at hand, Ronald Chandler, Chandler MFG., Newco Enterprises and Supertherm Heating Services (collectively, Chandler), alleged that Phoenix’s continued enforcement of the patent violated Walker Process pursuant to § 2 of the Sherman Act.

Walker Process monopolization claims originate from a 1965 Supreme Court decision that recognized an antitrust cause of action under the Sherman and Clayton Acts when a party fraudulently obtains a patent for the purpose of attempted monopolization. Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp. To succeed on a Walker Process claim, a plaintiff must satisfy two elements:

The plaintiff must show that the defendant obtained the patent through knowing and willful fraud on the US Patent & Trademark Office and enforced that patent with knowledge of its fraudulent procurement.
The plaintiff must be able to satisfy all other elements for a Sherman Act monopolization claim.

Pursuant to 28 U.S.C. § 1295(a)(1), the Federal Circuit retains jurisdiction over any civil case arising under any act of Congress relating to patents. In this instance, the Federal Circuit stated that Walker Process antitrust claims may relate to patents “in the colloquial use of the term,” but under 1988 Supreme Court precedent, Christianson v. Colt Indus., the Federal Circuit’s jurisdiction only extends to cases where the cause of action is created under federal patent law, or where the plaintiff’s right to relief “necessarily depends on resolution of a substantial question of federal patent law.”

Here, the Federal Circuit relied on its own 2018 precedent where it analyzed subject matter jurisdiction for Walker Process claims. Xitronix Corp v. KLA-Tencor Corp. (Xitronix I). Xitronix I involved alleged fraud by the defendants to obtain a patent. The Court acknowledged that patent law [...]

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Federal Judge Finds Qualcomm Violated the FTC Act Through Monopolistic and Exclusionary Conduct

by Lisa A. Peterson, Anthony S. Ferrara and McDermott Will & Emery | May 23, 2019 | FTC Developments, IP Antitrust, Monopolization/Abuse of Dominance

On May 21, a California federal judge ruled in favor of the Federal Trade Commission (FTC) in its suit against Qualcomm in a much-anticipated decision, concluding that Qualcomm violated the FTC Act by maintaining its monopoly position as a modem chip supplier through a number of exclusionary practices, including refusing to license standard essential patents (SEPs) on fair, reasonable and non-discriminatory (FRAND) terms. Qualcomm likely will appeal the decision to the US Court of Appeals for the Ninth Circuit, but in the meantime, the court’s sweeping decision is likely to affect the course of dealing between SEP-holders and licensees. The decision is likely to substantially affect the ways in which SEP-holders take their technology and associated components that they manufacture to market.

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THE LATEST: FTC Settles Civil Complaint for Wage-Fixing

by Mary Strimel | Aug 2, 2018 | FTC Developments, Healthcare Antitrust

A recent settlement shows that the US Federal Trade Commission (FTC) will use its enforcement authority to target employer collusion in the labor market.

WHAT HAPPENED

The FTC brought a complaint against a medical staffing agency, Your Therapy Source, LLC, and the owner of a competing staffing agency, Integrity Home Therapy, for allegedly agreeing to reduce the rates they would pay to their staff. Simultaneously, the FTC settled the case with a consent order that forbids the parties from any future attempt to exchange pay information or to agree on the wages to be paid to their staffs.
This was the first FTC wage-fixing enforcement action since the FTC and US Department of Justice (DOJ) issued their joint Antitrust Guidance for Human Resource Professionals in October 2016. That guidance stated that naked wage-fixing and no-poach agreements—e.g., agreements separate from or not reasonably necessary to a larger legitimate collaboration between the employers—are per se illegal under the Sherman Act.
The respondents in the Your Therapy Source case are staffing agencies that allegedly provided therapists such as physical therapists, speech therapists and occupational therapists to home health agencies on a contract basis. The respondents were responsible for recruiting the therapists and paying them a “pay rate” per visit or per patient.
According to the complaint, the alleged unlawful agreement began when one home health agency unilaterally notified Integrity that it was going to reduce the “bill rates” that it paid Integrity for its therapists, thus cutting into Integrity’s profit margins. Integrity’s owner then reached out through one of his therapists to the owner of Your Therapy Source and the two exchanged information about their respective rates paid to therapists. The two firms then reached an agreement via text message to reduce the rates they paid therapists.
Once the respondents had reached the agreement to reduce therapists’ pay, Integrity’s owner allegedly reached out via text to four other competing therapy-staffing agencies to solicit their participation in the agreement.
The FTC’s complaint alleged that this conduct violated Section 5 of the FTC Act, which prohibits unfair and deceptive acts and practices.

WHAT THIS MEANS

Wage-fixing cases have been notable in the health care industry, with prior DOJ enforcement against a hospital buying group and several class actions against health care providers in the 2000s that alleged the fixing of nurses’ pay.
Companies should strictly avoid colluding with other firms on wages, salaries, fringe benefits or other remuneration paid to workers. Companies should also exercise extreme caution in information exchanges regarding wages and benefits, which can lead to improper agreements or result in independent antitrust liability if not properly supervised.
Firms should be mindful of the DOJ/FTC’s joint guidance on information sharing in the health care industry (see link at p. 50), which also provides a useful template for how the US antitrust agencies will analyze information sharing more generally. The joint [...]

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