In recent years, US antitrust authorities and private plaintiffs have pursued aggressive theories of action under US antitrust law relating to “no poach” agreements and monopoly refusals to deal. For more detail, see the US Trends and Developments article in this Guide.
In recent years, US federal antitrust authorities have continued to target executives responsible for cartel conduct and expanded their pursuit of monetary remedies against cartel conduct, particularly when that conduct impacts government procurement. State regulators have also increased their antitrust enforcement activity, at times even pursuing claims in opposition to their federal counterparts. For more detail, see the US Trends and Developments article in this Guide.
Section 4 of the Clayton Act authorises damages suits in federal court by “any person” – which includes corporations and other legal entities – “who shall be injured in his business or property by reason of anything forbidden in the antitrust laws.” [15 U.S.C. §§ 7; 15(a).] The federal antitrust laws underlying private damages claims include, perhaps most prominently, Section 1 of the Sherman Antitrust Act (prohibiting concerted action that unreasonably restrains trade), and Section 2 (prohibiting single-firm conduct that harms consumers by unreasonably excluding competitors from a market). State antitrust laws vary, but broadly confer private rights of action on a similar basis.
The Clayton Act allows litigants to pursue damages claims that follow on from parallel scrutiny by federal law enforcement and standalone claims. Standalone claims – brought by private litigants in the absence of any governmental action against the defendants – are common in US practice. That said, news that antitrust authorities are investigating potential anticompetitive conduct commonly prompts private litigants to quickly initiate parallel damages actions, usually while the underlying investigation remains pending.
Most federal competition matters are resolved in the US federal courts, which have exclusive jurisdiction over federal antitrust claims. An exception is the administrative adjudicatory process carried out by the Federal Trade Commission (FTC) (described in 2.3 Decisions of National Competition Authorities). The Clayton Act accords plaintiffs wide latitude in choosing a venue (that is, the US federal district court in which they file suit). Venue is proper under the Clayton Act in any federal district where the defendant “resides or is found or has an agent”, or “transacts business.” [15 U.S.C. §§ 15(a), 22.] The parties may request, or the court may on its own decide, “for the convenience of parties and witnesses” or “in the interest of justice”, to transfer a federal antitrust litigation to a different federal district where the case “might have been brought” or to any district to which “all parties have consented.” [28 U.S.C. § 1404(a).] Different claimants may file parallel antitrust complaints in differing federal districts. When this occurs, the parties may request that the Judicial Panel on Multidistrict Litigation consolidate claims – involving “common questions of fact” – into a single federal district for co-ordinated pre-trial proceedings. [28 U.S.C. § 1407(a).]
Antitrust claims made under state law may also be heard in federal court if:
The federal antitrust enforcement agencies retain discretion over their enforcement decisions, but those decisions are generally subject to judicial review in some form. The FTC, as an independent administrative agency, possesses the statutory authority to adjudicate civil claims of "unfair competition" before the agency’s own administrative law judges in trial-type proceedings. Decisions by FTC administrative judges are reviewable by the FTC commissioners, and a losing defendant may appeal the commission’s decision to the federal appeals courts.
By contrast, the US Department of Justice, Antitrust Division (the Division), as a law enforcement agency, lacks the authority to adjudicate its own disputes, and instead must pursue enforcement actions exclusively in the federal courts. The courts likewise retain oversight of Division settlements of these cases before trial. When the Division concludes a civil antitrust investigation or litigation by settlement (known as a consent decree), the Antitrust Procedures and Penalties Act obliges the Division to file a complaint and proposed settlement materials in federal court and seek judicial approval of the settlement’s terms. However, the court’s review is limited to ensuring the settlement is in the “public interest.” [15 U.S.C. § 16.] This has traditionally been interpreted as a highly deferential standard of review, but a recent decision has reaffirmed that the court’s review is not simply a “rubberstamp” for the government’s proposed resolution. By contrast, a criminal antitrust prosecution – which as a matter of policy, the Division uses to target only "hardcore" per se competition offences – is overseen in its initial stages by a federal grand jury, which decides whether there is "probable cause" to believe a crime was committed, justifying the issuance of an indictment. In general, most criminal antitrust defendants plead guilty rather than stand trial. In that circumstance, the trial court has discretion to accept or reject the Division’s recommended sentence.
A federal antitrust enforcement action can have important consequences on a parallel private litigation. For example, a final judgment or decree against a defendant in a federal antitrust enforcement action can serve as prima facie evidence against that defendant in related private litigation. [15 U.S.C. § 16(a).] In addition, the Division periodically intervenes in civil antitrust litigation to request a stay of discovery where the Division believes the exchange of evidence between the parties could undermine the Division’s ongoing criminal investigation of one or more defendants. Finally, the Division may intervene in private antitrust litigation as an amicus curiae to offer its views on the application of the antitrust laws to a given complaint.
Section 4 of the Clayton Act requires a plaintiff to prove that the defendant(s) violated the antitrust laws and that the plaintiff has been “injured in his business or property” – that is, suffered economic loss – “by reason of” that violation. [15 U.S.C. § 15.] Plaintiffs in federal antitrust cases must prove each element of their claim by a "preponderance of the evidence", meaning they must establish through direct or circumstantial evidence that a fact is more likely than not true.
The US Supreme Court has articulated important "limiting contours" on the right of private plaintiffs to recover treble damages under the Clayton Act, embodied in the requirement that plaintiffs establish the element of "antitrust standing", which tests whether a particular plaintiff is the appropriate party to recover damages for an established antitrust violation. First, antitrust plaintiffs must demonstrate that they have suffered an "antitrust injury", that is, an injury “of the type the antitrust laws were intended to prevent.” [Brunswick Corp. v Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977).] For example, a retailer that loses its distribution agreement with a manufacturer for refusing to conspire with other retailers to rig bids to sell the manufacturer’s products has not suffered antitrust injury. This is because the retailer’s harm (lost profits) does not “flow from that which makes bid-rigging unlawful” under the antitrust laws (ie, higher prices to consumers). [Gatt Communications, Inc. v PMC Assocs., L.L.C., 711 F.3d 68 (2d Cir. 2013).] Plaintiffs must also establish they are “efficient enforcers of the antitrust laws”, an inquiry that assesses (among other things) the “directness” of the link between the asserted conduct and injury, and the existence of other “more direct” victims. [Assoc. Gen. Contractors of Cal., Inc. v Cal. State Council of Carpenters, 459 U.S. 519 (1983).] These elements are not part of the government’s burden in proving an antitrust violation.
The US Supreme Court has ruled that "indirect purchasers" – consumers who do not purchase directly from defendants, but to whom the direct purchaser has passed on the overcharge caused by the defendants’ conspiracy – generally lack standing to pursue damages claims under the federal antitrust laws. [Illinois Brick Co. v Illinois, 431 U.S. 720 (1977).] This decision is rooted in concerns for judicial economy and the challenges in apportioning damages passed from direct to indirect purchasers (and the threat that those challenges could lead to duplicative recovery). That said, there are exceptions to this rule, such as when the direct purchaser is a party to the conspiracy. Further, since the Supreme Court announced the bar on federal indirect purchaser claims, most states have enacted what are known as Illinois Brick repealer statutes sanctioning those claims under state law. As a result, antitrust defendants may be forced to litigate in a single federal court against both direct purchasers under federal law and indirect purchasers under various state laws. Though there have been calls for Congress to overturn the Illinois Brick rule, it has not done so. And the US Supreme Court affirmed Illinois Brick’s bar on damages suits by indirect purchasers in 2019 – the Court’s first application of the rule to a digital market. [Apple Inc. v Pepper, 139 S. Ct. 1514 (2019).
The duration of federal antitrust litigation varies dramatically. Most cases are dismissed or resolved before trial. Cases can be dismissed at the pleadings stage with reasonable speed, though claimants may be permitted to re-plead their allegations, and may appeal dismissal. Cases that survive the dismissal stage can go on for years, as the parties exchange evidence, retain experts, dispute class certification (see 3.2 Procedure) and seek summary judgment before trial (see 4.1 Strikeout/Summary Judgment). Private antitrust litigation is not automatically suspended (or "stayed") during a parallel investigation by federal antitrust authorities. The litigants can seek stays of antitrust litigation for reasons common to most federal court litigation, including to raise "interlocutory" appeals of issues that do not finally resolve the case (see 11.1 Basis of Appeal).
Class actions are at the heart of private antitrust litigation in the US. Class litigation proceeds on an "opt-out" basis: members of a "certified" class are included in the resolution of the claim unless they affirmatively opt to be excluded.
Any plaintiff suing under the federal antitrust laws may seek to pursue their claims on behalf of a putative class of similarly-situated parties whose injuries at the hands of defendants involve the same set of concerns. To maintain a class, a plaintiff must move for "class certification", establishing by a preponderance of the evidence that the class complies with the requirements of US Federal Rule of Civil Procedure 23. This class-certification review involves a “rigorous analysis” that “will frequently entail overlap with the merits of the plaintiff’s underlying claim.” [Comcast Corp. v Behrend, 569 U.S. 27, 34 (2013).] To begin with, a plaintiff must affirmatively demonstrate that:
In addition to those “prerequisites”, a plaintiff must also establish that the putative class meets one of several enumerated bases for certification. Most antitrust class actions seek to proceed on the showing that both common questions of law or fact “predominate” over questions affecting individual members and a class action is “superior” to alternative methods of “fairly and efficiently adjudicating the controversy.” [Fed R. Civ. P. 23(b)(3).]
The federal courts encourage parties to settle their disputes rather than litigate and, outside of the class-action setting, parties may stipulate to voluntary dismissal without disclosing the terms of settlement. [Fed R. Civ. P. 41(a)(1)(A)(ii).] But because the resolution of a class action has binding effect on absent class-members who have not opted out, the courts play a significant, multi-stage role in reviewing and approving settlement (or voluntary dismissal) of class claims. This process is to ensure that the resolution fairly and adequately protects the rights of all class-members. [Fed. R. Civ. P. 23(e).] The animating concerns underlying these protections are that the lead plaintiff (and its counsel) may accept a settlement that is too small to appropriately compensate the class, and/or fail to take adequate steps to notify class members (hoping to keep whatever funds are not distributed to the class). The settling litigants – though adversaries normally – must work together to jointly pursue and defend to the court the contours of the proposed settlement.
First, the parties must obtain the court’s preliminary approval of the proposed settlement by demonstrating both that it would likely be considered fair and adequate under a full review and that it would apply to a class that would satisfy the standards for class certification (described in 3.2 Procedure). Next, the parties must provide notice “in a reasonable manner” to “all class members who would be bound” by the proposed settlement. This notice must allow class members to object to the proposed settlement (on their own or on behalf of others). The court may also require that members of previously certified classes have another chance to opt out. Finally, the court must hold a “fairness hearing” to consider whether the settlement is “fair, reasonable, and adequate,” assessing factors that include:
Most private antitrust actions in federal court do not reach trial, but instead are either dismissed or settled at pre-trial breakpoints. Early in the case, defendants can seek to have a case dismissed on the grounds of a plaintiff’s failure to plead sufficient factual allegations to support key elements of an antitrust claim. Defendants raise these challenges as a matter of course in most federal litigation, including in claims brought under the antitrust laws. Defendants can raise a number of pleading defects, including that:
Courts take these threshold challenges seriously, particularly in light of the significant costs and burdens of discovery in antitrust class actions. In 2007, the Supreme Court clarified that to survive dismissal and proceed to discovery, antitrust plaintiffs must plead a claim that is at least plausible on its face, as opposed to relying on conclusory statements suggesting an antitrust violation is merely possible. [Bell Atlantic Corp. v Twombly, 550 U.S. 544 (2007).] Because defendants generally cannot recover costs for successfully dismissing an antitrust claim, there is comparatively little disincentive for class plaintiffs to plead even a speculative claim on a contingency basis, in hopes that the complaint survives dismissal and opens the door to discovery.
At the end of discovery and before trial, plaintiffs and defendants can ask the court to grant summary judgment on all or part of the claims, which requires the moving party to show that, with the evidence gathered, “there is no genuine dispute as to any material fact” relating to a claim or defence, obviating the need to put that question to the fact-finder at trial. [Fed. R. Civ. P. 56(a).] Courts evaluate these motions by considering the evidence in the light most favourable to the opposing party and drawing all reasonable inferences in that party’s favour. To overcome summary judgment in the antitrust conspiracy context, plaintiffs must present evidence that “tends to exclude the possibility that the alleged conspirators acted independently.” [Matsushita Elec. Indus. Co. v Zenith Radio Corp., 475 U.S. 574 (1986).] For example, a court may grant summary judgment for defendants in a conspiracy case where there is no direct (or "smoking gun") evidence of a conspiracy, and the evidence suggests the alleged conspiracy would have been economically irrational. [See, eg, Anderson News, L.L.C. v American Media, Inc., 899 F.3d 87 (2d Cir. 2018).]
In addition to the venue requirements of the Clayton Act (see 2.2 Specialist Courts), plaintiffs must establish that both the defendant(s) and the conduct complained of are subject to the jurisdiction of the US courts. These requirements include both personal and subject matter jurisdiction.
Personal jurisdiction assesses the court’s power to hear cases against particular defendants. As a matter of constitutional due process, the federal courts can only impose liability on defendants that have sufficient "minimum contacts" with the forum state. Depending on the strength of a defendant’s forum contacts, personal jurisdiction can be general (all-purpose) or specific (conduct-linked). For corporations, in all but the most “exceptional” cases, general jurisdiction will exist only if the defendant is headquartered or incorporated in the forum. [Daimler AG v Bauman, 134 S. Ct. 746 (2014).] Specific jurisdiction, which is narrower, is appropriate only for claims that “arise out of or relate to” a foreign defendant’s purposeful contacts with the forum itself (and not just contacts with parties that reside in the forum). [Walden v Fiore, 134 S. Ct. 1115 (2014).] In the antitrust context, this means plaintiffs must demonstrate their claim against a foreign defendant bears a causal connection to that defendant’s forum contacts.
Subject Matter Jurisdiction
By contrast, subject matter jurisdiction is the power of the court to hear a given type of claim. In the antitrust context, as courts and litigants grapple with the practical realities of increasingly global supply chains and cross-border finance, this question is frequently considered in terms of the territorial limitations applied to the Sherman Act’s bar on conspiracies that restrain trade. The US Foreign Trade Antitrust Improvements Act of 1982 (FTAIA) limits the territorial reach of US antitrust law to domestic or import commerce, and places foreign or export conduct beyond the reach of US courts unless that conduct has a “direct, substantial, and reasonably foreseeable effect” on US commerce and that effect “gives rise to” a US antitrust claim. [15 U.S.C. § 6a.] Whether the causal nexus between foreign conduct and domestic effect is sufficiently direct will depend on the facts and circumstances, including the structure of the market and the relationships of the parties. Appeals courts presently disagree on whether the FTAIA’s directness prong requires that the US effect follow as the "immediate consequence" of the foreign antitrust conduct or whether the domestic effect must only bear a “reasonably proximate causal nexus” to that conduct. [Compare United States v Hui Hsiung, 778 F.3d 738 (9th Cir. 2015) (“immediate consequence”), with Lotes Co. v Hon Hai Precision Indus. Co., 753 F.3d 395, 398 (2d Cir. 2014) (“reasonably proximate causal nexus”).] But however the test is expressed, the appeals courts generally appear to agree that the wholly-foreign price fixing and sale of components included in goods sold to US consumers can have a direct effect on US commerce.
A private litigant may pursue a claim for damages under the federal antitrust laws within four years after the cause of action has “accrued.” [15 U.S.C. § 15b.] An antitrust claim accrues when the defendants’ offending conduct causes the claimant to suffer a non-speculative injury. In the case of an ongoing conspiracy, the limitations period runs from each new “overt act” in furtherance of the conspiracy that inflicts new and accumulating injury on the plaintiff. [Zenith Radio Corp. v Hazeltine Research, 401 U.S. 321 (1971).] In rare cases, the theory of "fraudulent concealment" may equitably "toll" (ie, pause) the limitations period where defendants have taken affirmative actions to prevent a plaintiff from learning of their cause of action. The limitations period can also be tolled for other statutory reasons, such as a pending government action for the same conduct. [15 U.S.C. § 16(i).] In addition, the statute of limitations for a plaintiff who opts out of a purported class action remains tolled during pendency of the class claim. [American Pipe & Construction Co. v Utah, 414 U.S. 538 (1974).] In 2018, the Supreme Court clarified that this rule applies only to opt-out plaintiffs who seek to pursue damages claims on their own behalf, and not to plaintiffs who seek to re-assert class claims after a prior class has failed to achieve certification for the same issues. [China Agritech v Resh, 138 S. Ct. 1800 (2018).]
Limitations periods under state antitrust laws vary from as few as one year to as many as six years, with four years being the most common. A small handful of states do not specify a limitations period for antitrust claims.
The exchange of evidence between parties in federal antitrust litigation is governed by the general rules for discovery in federal court. Those rules contain a permissive standard for what evidence parties may request: “any nonprivileged matter that is relevant to any party’s claim or defense,” whether or not that information would ultimately be admissible at trial. [Fed. R. Civ. P. 26(b)(1).] Parties may request production of documents and electronically stored information, written responses to questions and requests for admissions, as well as depositions of witnesses of fact or corporate representatives. Non-US litigants may, in some circumstances, need to provide disclosure that would not be permitted under their own country’s laws. In addition, litigants may serve subpoenas seeking discovery from non-litigants.
Under these standards, discovery in US federal litigation is, in general, more burdensome, costly, and time-consuming than in many other jurisdictions. In the antitrust context, discovery can be particularly costly and time-consuming, as large putative classes of plaintiffs raise a variety of complex issues. That said, there are important constraints on the scope of discovery. Since 2015, the federal rules have limited permissible discovery to relevant information that is “proportional to the needs of the case.” [Fed. R. Civ. P. 26(b)(1).] Parties may resist discovery requests on a variety of grounds, including that the requested materials fail the relevance standard or that compliance would be unduly burdensome under the circumstances.
In addition, the Supreme Court – recognising the practical risk that the burdens of antitrust discovery can push defendants to settle even “anaemic” cases – has instructed lower courts to take seriously their gatekeeping function at the motion to dismiss stage (see 4.1 Strikeout/Summary Judgment). In 2007, the Supreme Court clarified that to survive a motion to dismiss an antitrust claim on the pleadings, plaintiffs must set forth specific facts (accepted as true) “plausibly suggesting (not merely consistent with) agreement.” [Bell Atlantic Corp. v Twombly, 550 U.S. 544 (2007).] This decision has raised the bar on what plaintiffs must allege, frequently before being permitted to request discovery from defendants.
The attorney-client privilege protects from the discovery process confidential communications between an attorney and client made for the primary purpose of seeking or providing legal advice. In the corporate setting, the attorney-client privilege extends to communications between attorneys and those employees who “will possess the information needed by the corporation’s lawyers” in order to provide sound legal advice, as well as to those employees who “will put into effect” that advice. [Upjohn Co. v United States, 449 U.S. 383 (1981).] Importantly, in-house counsel communications may be protected by attorney-client privilege under US law. Furthermore, the privilege protects attorney-client communications made with a business purpose, so long as at least “one of the significant purposes” of the communication was obtaining or providing legal advice. [In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014).] And internal corporate communications that do not include attorneys may sometimes remain subject to the privilege, including where those communications reflect an attorney’s legal advice or where a non-attorney – such as in a compliance or internal audit role – is gathering facts at the direction of an attorney for the purpose of facilitating the attorney’s provision of legal advice to the company.
Limitations (and Exceptions to Those Limitations) to the Scope of Privilege
That said, there are some important limitations on the scope of the privilege protection. For example, only the substance of legal advice (or of a request for advice) is protected. The fact of an attorney-client communication is not protected. Nor are underlying materials or information shared between attorney and client for the purpose of giving or receiving advice protected by the privilege. In addition, a party generally waives privilege protection by failing to maintain the confidentiality of legal advice, including by sharing that advice with third parties. There is no exception to this waiver for voluntary disclosure of privileged communications to the government (though importantly, the US antitrust authorities do not demand an investigative target hand over privileged materials to be seen as co-operative in a government investigation). And the privilege does not protect attorney-client communications made for the purpose of committing or furthering a crime or fraud. [United States v Zolin, 491 U.S. 554 (1989).]
The "common interest" protection – an exception to the rule that sharing legal advice with third parties results in a privilege wavier – safeguards against the compelled disclosure of communications between parties and their respective counsel when aligned in a common legal interest. There is some disagreement among the federal appeals courts as to whether the common interest protection is limited to communications between parties when threatened by litigation; a number of appeals courts recognise it applies to the “full range of communications otherwise protected by the attorney-client privilege” without regard to whether litigation is threatened. [United States v BDO Seidman, LLP, 492 F.3d 806, 816 & n.6 (7th Cir. 2007) (agreeing with at least five sister circuits that the threat of litigation is not required for the common interest protection to apply); but see In re Santa Fe Int’l Corp., 272 F.3d 705, 712 (5th Cir. 2001) (finding that the protection only applies where there is the threat of litigation)]. In federal antitrust litigation, co-defendants regularly invoke the common interest protection to share materials and collaborate on defence strategy. Frequently, co-defendants will sign a joint defence agreement formalising that arrangement (but this step is not strictly required for the common interest protection to apply).
A related protection arises under the "work-product" doctrine, which shields from disclosure materials “prepared in anticipation of litigation.” [Fed. R. Civ. P. 26(b)(3).] It protects both “documents and tangible things” and the “mental impressions, conclusions, opinions, or legal theories of a party’s attorney.” The work product doctrine is not an absolute bar to compulsory disclosure of qualifying materials. Rather, an adversary may ask the court to compel disclosure of work product by showing that the requesting party has a “substantial need” for the materials in order to prepare its case and that the party cannot, without “undue hardship,” obtain through “other means” the “substantial equivalent” of the requested materials. [Fed. R. Civ. P. 26(b)(3)(A).] In practical terms, however, this is a very challenging standard to meet.
As described in 2.3 Decisions of National Competition Authorities, agreements to settle most forms of enforcement proceedings by the US federal antitrust authorities are typically made public in the course of a federal court’s review of the proposed resolution. One exception to this general rule is for parties who qualify for leniency pursuant to the DOJ Antitrust Division’s Corporate Leniency Policy. The Leniency Program, a centrepiece of the Division’s criminal cartel enforcement efforts for more than 25 years, accords immunity from criminal antitrust prosecution to corporations that report their role in a per se antitrust violation at an early stage and meet certain other conditions, including co-operating fully with the Division’s prosecutions of co-conspirators and making restitution to injured parties. To encourage applicants to come forward, Division policy is to treat as confidential the identity of leniency applicants and the materials they provide. The Division acknowledges it will disclose the identity of a leniency applicant if ordered to do so by a court. But such an order would be unusual. While at least one appeals court has held that the Division must disclose leniency agreements pursuant to requests under the US Freedom for Information Act (FOIA), that court also recognised that details within those materials identifying a leniency recipient could be exempt from FOIA disclosure. [Stolt-Nielsen Transp. Group Ltd. v United States, 534 F.3d 728 (D.C. Cir. 2008).]
That said, a conditional leniency recipient will likely identify itself to plaintiffs in follow-on civil litigation, in an effort to fulfil its restitution obligation under the Leniency Policy by co-operating with plaintiffs and earning the resulting de-trebling of damages available under the Antitrust Criminal Penalty Enhancement and Reform Act of 2004 (ACPERA). Note that as of August 2020, ACPERA has expired, although we expect the law to be reauthorised – with retroactive application – later this year.
In addition, public companies may face other legal obligations, such as under the securities laws, to disclose their status as the recipient of leniency.
Litigants in US federal court may rely on, and compel, testimony from witnesses of fact both before and during trial. Prior to trial, the principal tool for gathering the compulsory testimony of a witness is the deposition, in which the requesting litigant compels the witness to attend an in-person interview to provide sworn testimony in front of a judicial officer. Parties can also request that opposing parties respond to written questions, called interrogatories. In either case, the court may compel the witness to respond under threat of sanction. During trial, judges generally prefer live testimony so that the factfinder can evaluate the witness’s credibility and so that the opposing party can cross-examine the witness. That said, deposition testimony may be admitted into evidence to contradict or impeach testimony given during trial, or in some cases, if a witness is unavailable to testify in court.
The rules governing federal court litigation, including antitrust claims, permit parties to rely on expert evidence both before and during trial. In the antitrust context, the parties nearly always rely on one or more experts to establish (or challenge) key issues, including:
Expert evidence will generally take the form of a written report prepared and signed by the expert (which must be provided to the opposing party prior to trial) as well as in-person testimony. [Fed. R. Civ. P. 26(a)(2).]
An expert’s testimony is admissible as evidence only if the court determines that
This assessment requires the court to scrutinise the expert’s particular methods and their degree of acceptance in the relevant field. [See Daubert v Merrell Dow Pharm., Inc., 509 U.S. 579 (1993); Fed. R. Evid. 702.] Before or during trial, parties can challenge the admissibility of opposing expert testimony or dispute the validity of that testimony. Parties may depose opposing experts, cross-examine them at trial, and seek to introduce evidence that purports to conflict with an expert’s conclusions.
The Clayton Act does not provide for punitive damages. Instead, plaintiffs who suffer antitrust injury may recover three times their actual damages (ie, treble damages). For consumer plaintiffs injured by a price-fixing or a market-division cartel, common measures of damages include the amount of the overcharge caused by the conspiracy, measured by identifying the price they would have paid but for the restraint. For competitor plaintiffs injured by a monopolist’s exclusionary conduct, a common measure of damages is the plaintiff’s resulting lost profits. As with the other elements of a civil antitrust action, plaintiffs must establish the value of their injury by a preponderance of the evidence standard. The Clayton Act permits damages assessments to be made “in the aggregate” according to “statistical or sampling methods” accepted by the court. [15 U.S.C. § 15d.] In practice, antitrust plaintiffs nearly always rely on an expert to quantify damages according to an accepted model. Plaintiffs must also prove that the damages were not caused by separate and independent factors (ie, they are required to disaggregate the losses caused by the alleged antitrust violation).
A statutory exception to the treble damages rule exists for defendants who successfully receive leniency from prosecution under the Division’s Leniency Policy. Under ACPERA, leniency recipients who provide "satisfactory co-operation" to plaintiffs in follow-on civil litigation may have their damages limited to actual damages, rather than treble damages. Courts have not assessed with any precision what constitutes a defendant’s satisfactory co-operation, but defendants can expect that to receive what is known as ACPERA credit they will need to provide evidence to plaintiffs in support of their antitrust claims.
As set forth in 2.5 Direct and Indirect Purchasers, indirect purchasers lack "standing" to pursue damages claims under the federal antitrust laws. The corollary to this rule is the further limitation that defendants in federal antitrust litigation cannot escape liability by establishing that direct purchasers have passed on to indirect purchasers some or all of an anticompetitive overcharge. [Hanover Shoe v United Shoe Mach., 392 U.S. 481 (1968).] That said, a number of the state antitrust laws authorising antitrust claims by indirect purchasers provide that courts should take steps to avoid duplicative recovery, including by apportioning damages between direct and indirect purchasers.
Section 4 of the Clayton Act enables plaintiffs to recover interest on damages awards. Pre-judgment interest awards are discretionary: a federal district court may award interest on actual damages – but not for the full treble damages available under the antitrust laws – for any period from the date of service of the plaintiff’s pleading to the date of judgment, when just in the circumstances. That standard considers whether defendants acted intentionally to delay resolution of the proceedings. [15 U.S.C. § 15(a).] By contrast, post-judgment interest is mandatory: the court must award interest on a damages award until defendant(s) transfer the funds to the plaintiff(s). The interest – at a rate equal to the weekly average one-year constant maturity Treasury yield for the calendar week preceding the date of the judgment – is calculated from the date of the entry of judgment and is compounded annually. [28 U.S.C. § 1961.] Each state’s antitrust laws provide for post-judgment interest; the law on pre-judgment interest varies from state to state.
US antitrust law follows the common law tort principle of joint and several liability, which means each defendant can be responsible for paying the entire damage award for the conspiracy as a whole (not just for damages to purchasers with whom a given defendant transacted).
But, as discussed in 5.3 Leniency Materials/Settlement Agreements and 7.1 Assessment of Damages, successful recipients of leniency from Division antitrust prosecution that provide "satisfactory co-operation" to follow-on litigants may have their civil damages claim limited to actual damages under ACPERA. Such a defendant will not be liable to plaintiffs on a joint-and-several basis for the harm from the entire conspiracy but will, instead, be held liable only for its own harm to the plaintiffs.
The US Supreme Court has ruled that a defendant found jointly and severally liable under the federal antitrust laws for treble damages, costs, and attorneys’ fees has no right to seek contribution from co-conspirators for their share of the damages award. [Texas Ind. Inc. v Radcliffe Materials, Inc., 451 U.S. 630 (1981).] Rather, a single defendant may have to pay the entire damages award for three times the harm caused by the entire conspiracy. A court may subtract from the damages calculation any settlement other defendants have paid to resolve the litigation, but those settlement amounts are likely to reflect a discount to the settling defendants. This dynamic can create pressure on defendants to settle before trial by exposing non-settling defendants to the risk of bearing a disproportionate share of liability for their role in a multi-party conspiracy. Courts do not permit co-defendants to agree to indemnify each other for liability but have generally upheld agreements between them to pay a proportionate share of any judgment based on eg, each defendant’s market share.
The Clayton Act permits private plaintiffs to sue for injunctive relief against any “threatened loss or damage by a violation of the antitrust laws.” [15 U.S.C. § 26.] To obtain injunctive relief, a plaintiff must show that:
The Clayton Act also allows plaintiffs to seek interim relief – in the form of a preliminary injunction that can be obtained prior to trial – if the plaintiff is able to show a “likelihood of success on the merits” of its claim. [N. Am. Soccer League, LLC v U. S. Soccer Fed’n, Inc., 883 F.3d 32 (2d Cir. 2018).] A preliminary injunction requires a hearing and notice to the opposing party (although in exceptional circumstances parties can seek a temporary restraining order without such notice or a hearing). [Fed. R. Civ. P. 65.] The party seeking a preliminary injunction must post a security bond to compensate the opposing party if the injunction is found to have been unwarranted. Notably, the bar on damages claims by indirect purchasers under the federal antitrust laws does not extend to claims for injunctive relief.
Alternative dispute resolution is available in antitrust litigation on similar bases as it is in other federal court litigation. Federal judicial policy favours arbitration, as a matter of contract between parties. While courts cannot compel parties to arbitrate their disputes in the absence of an agreement between them to do so, courts will rigorously enforce arbitration agreements according to their terms. In recent years, the US Supreme Court has applied this principle to arbitration agreements in boilerplate consumer contracts, in ways that have important consequences to private antitrust litigants. The Court has held that parties may not be compelled to arbitrate on a class-wide basis, in the absence of an agreement to do so. [Stolt-Nielsen S.A. v AnimalFeeds Int’l Corp., 559 U.S. 662 (2010).] A year later, the Court invalidated state laws seeking to bar enforcement of class arbitration waivers in consumer agreements. [AT&T Mobility LLC v Concepcion, 563 U.S. 333 (2011).] These rulings could make it more challenging for consumers to pursue class-wide recovery under the antitrust laws. Indeed, most recently, the Supreme Court affirmed – in the antitrust context – that contractual waiver of class arbitration is enforceable even if the cost of individually arbitrating exceeds a claimant’s potential for recovery. [Am. Express Co. v Italian Colors Rest., 570 U.S. 228 (2013).]
Litigation funding is a developing industry in the US and is perhaps less evolved here than in other jurisdictions. Litigation funding may be available to support civil litigation under the antitrust laws. But funding arrangements may be at risk of challenge under the laws of at least some states, barring "champerty" (the practice of acquiring an interest in pursuing a third party’s cause of action, in exchange for a portion of the proceeds if litigation succeeds). [See eg, Boling v Prospect Funding Holdings LLC, 771 Fed. Appx. 562 (6th Cir. 2019).] Regardless, counsel for plaintiffs pursuing antitrust litigation under federal or state laws on a class-wide basis will likely act for plaintiffs on a contingency basis, receiving compensation only from the proceeds of any recovery to the class.
Section 4 of the Clayton Act provides that plaintiffs “shall recover” the costs associated with successfully litigating their claim, including “a reasonable attorney’s fee.” [15 U.S.C. § 15(a).] In the normal course, plaintiffs’ lawyers acting for a purported class work on contingency and seek to recover a percentage of any court-approved class settlement before trial. By contrast, defendants have no general statutory right to recover their costs of successfully defending a federal antitrust litigation. The lone means of recovering defence costs is for the court to impose monetary sanctions on plaintiffs under the federal rules, for example, based on a finding that plaintiffs (or their attorneys) have asserted frivolous claims or arguments. [Fed. R. Civ. P. 11.] Sanctions – particularly significant monetary penalties – are exceedingly rare, and an unreliable source of recovery of defence costs. The unavailability of defence costs to serve as a headwind on speculative antitrust claims is one reason the courts take seriously their gatekeeper role in assessing defendants’ threshold challenges to the sufficiency of an antitrust complaint.
In the normal course, courts will not order a litigant to post security for its opponent’s litigation costs. The exception is that parties seeking preliminary injunctive relief must provide a security in an amount sufficient to pay the costs and damages sustained if the party is found to have been wrongfully enjoined or restrained. [Fed. R. Civ. P. 65.]
A litigant adversely affected by a decision of a federal district court may seek to appeal that decision to an intermediate federal court of appeals. Parties may generally appeal a lower court’s conclusions of law according to a de novo standard, under which the appeals court will analyse the legal question without deferring to the district court’s analysis. While an appellant may also challenge a lower court’s findings of fact, the appeals court will apply a far more deferential standard of review, generally leaving fact conclusions undisturbed unless clearly erroneous.
Whether, and when, a party may challenge a district court decision can take on great significance, particularly in complex litigation such as an antitrust class action. A party generally has the right to appeal “final decisions of the district courts.” [28 U.S.C. § 1291.] A decision is “final” if it “ends the litigation on the merits.” [Caitlin v United States, 324 U.S. 229 (1945).] The policy of the "final judgment rule" is intended to promote efficiency and limit delay, by seeking to ensure that, where possible, all challenges to lower court decision are resolved in a single appeal. By contrast, only in limited circumstances will courts permit appeals of interlocutory orders that do not finally resolve the dispute. In general, interlocutory appeals are reserved for “controlling questions of law” about which there is “substantial ground for difference of opinion” and resolution of which would “materially advance the ultimate termination of the litigation.” [28 U.S.C. § 1292(b).] The federal rules authorise – but do not require – interlocutory appeal of a decision on class certification. [Fed. R. Civ. P. 23(f).] Parties who lose on appeal may petition the US Supreme Court for final review of the appellate decision, but as a practical matter, Supreme Court review is rarely granted.
DOJ Continues Aggressive Prosecution of Executives for Cartel Conduct
In recent years, the US Department of Justice (DOJ), Antitrust Division (the Division) has ramped up criminal enforcement against high-level executives of companies accused of cartel conduct. Under the Sherman Antitrust Act, individuals guilty of participating in a conspiracy – limited, by DOJ policy, to hardcore cartel conduct between competitors – can be punished by up to ten years imprisonment and fines of up to USD1 million. [15 U.S.C. § 1.]
In its FY 2019, the Division secured prison sentences for 25 individuals for cartel violations, through a mix of guilty pleas and prosecutions. And, importantly, the average prison sentence for an individual engaged in cartel conduct has more than doubled in the past twenty years, to 19 months. [Antitrust Division, Congressional Submission FY 2021 Performance Budget.]
The Division's recent targets have included the senior-most executives at companies. For years, the Division's individual prosecutions tended to focus on customer-facing middle managers who fixed prices with their counterparts at competitors. In 2018, however, the Division pursued criminal price-fixing charges against the sitting CEO of Bumble Bee Foods, one of the largest canned-tuna producers in the world. The CEO's indictment was part of a years-long investigation into cartel conduct in the canned-tuna market. This year, that now-former CEO was convicted by a jury and sentenced to 40 months in prison for his leadership role in the conspiracy. Perhaps emboldened by this conviction, the Division recently also indicted four executives of major US poultry suppliers – including a sitting CEO and a sitting president – for allegedly conspiring to fix prices and rig bids in the market for consumer chicken.
The Division has also become more aggressive in extraditing foreign executives to stand trial in the US for criminal antitrust violations. US antitrust laws reach agreements anywhere in the world that affect US consumers. The Division has long targeted non-US businesses for criminal enforcement. But until recently, the Division had only once obtained the extradition of a foreign executive living abroad, to face criminal antitrust charges here. In the past year, however, the Division successfully extradited two foreign executives charged with antitrust crimes. One was a Dutch national indicted in 2010 for her alleged role in the well-publicised Air Cargo cartel. She was detained while on vacation in Italy and extradited to the US after six months of house arrest. The second was an executive of a Korean car parts maker, indicted in 2015 for his alleged role in the auto parts cartel. He was detained in Germany and extradited to the US after five months in solitary confinement in Frankfurt.
One reason the Division has so doggedly pursued individuals is to incentivise companies to self-report their role in cartel behaviour in exchange for full immunity from criminal prosecution under the Division's Corporate Leniency Program. In recent years, observers have suggested that leniency applications to the Division have decreased in part due to the accumulating burdens of pursuing leniency – not least, the risks of costly, multilateral enforcement by antitrust agencies around the globe, and follow-on damages claim by private parties (a near-certainty in the USA). Division leaders have stated that threatening executives with aggressive prosecution is one of the "cornerstones" of its Leniency Program and a way for the Division to counterbalance the increasing costs and risks of pursuing leniency. Executives around the world, whose conduct affects the USA, must ensure that they abide by US antitrust laws or face the prospect of severe criminal consequences.
New Focus on Government Monetary Remedies
The past year has seen the Division undertake new initiatives to increase monetary recoveries, as well as new challenges to the ability of the Federal Trade Commission (FTC) to seek monetary relief.
The Division has long imposed costly monetary penalties on companies and individuals involved in cartel conduct. But recently, the Division has also begun pursuing monetary damages for injuries to the USA resulting from antitrust violations. Section 4A of the Clayton Act – which Antitrust Division head Makan Delrahim has called "a powerful yet historically underused enforcement tool" – authorises the government to seek treble damages for antitrust violations that harm the government. [15 U.S.C. § 15a.] The Division recently used this authority when prosecuting six companies that conspired to rig bids for fuel-supply contracts with the Department of Defense for military bases in South Korea. The Division secured criminal penalties against the companies totalling USD157 million. In addition, the Division recovered USD208 million under Section 4A.
This enforcement action is part of the Division's general focus on collusion that allegedly victimises the US government. Last November, the DOJ announced the Procurement Collusion Strike Force, a collaboration with the Federal Bureau of Investigation (FBI) and other government agencies, that is designed to uncover and prosecute similar conspiracies.
The Strike Force trains and collaborates with government agencies to help them spot anticompetitive practices in procurement. In recent months, the Division has said that "several" grand juries are reviewing criminal allegations of conspiracies in the procurement space, and indeed, that over a third of the Division's open investigations relate to antitrust violations that involve government procurement.
The FTC’s authority to seek monetary relief, however, is being challenged in the Supreme Court. Unlike the DOJ, the FTC cannot obtain damages for injuries to the USA. However, it has obtained equitable monetary relief (eg, disgorgement, which requires violators to give up proceeds of a violation) from antitrust defendants under Section 13(b) of the FTC Act (eg, USD1.2 billion from Teva Pharmaceuticals in the Cephalon pay-for-delay case). But although Section 13(b) explicitly authorises the FTC to seek injunctions for violations, it is silent on the availability of equitable monetary relief. [15 U.S.C. § 53(b).] Until recently, appellate courts had found that the FTC Act implicitly authorised the FTC to pursue these remedies. But in 2019, an influential appeals court in Chicago disagreed, holding that Section 13(b) does not empower the FTC to seek restitution for violations of the FTC Act. [FTC v Credit Bureau Center, LLC, 937 F.3d 764 (7th Cir. 2019).] The Supreme Court has agreed to hear the case this fall (consolidated with another case in a sister circuit finding the opposite). Its decision will have significant consequences for the FTC's enforcement authority. Earlier this year, the Supreme Court held that the SEC does have the authority to seek disgorgement from securities law violators, though the Court placed important restrictions on that authority to constrain it within the confines of "equitable" relief: for example, the Court held that these penalties could not exceed the defendant's gains and had to be distributed to victims. [Liu v SEC, 140 S. Ct. 1936 (2020).] The Court's FTC decision will likely draw from the reasoning in that case, although the Securities Exchange Act explicitly authorises “equitable relief,” unlike Section 13(b) of the FTC Act, which only authorises “injunctions.” [15 U.S.C. § 78u(d)(5).]
Increased Enforcement from State Attorneys General
In recent years, state attorneys general have increased their role as antitrust enforcers. Under the Clayton Act, state attorneys general are authorised to bring civil antitrust claims in federal court seeking injunctive relief and damages. [15 U.S.C. §§ 15, 26.] In many cases, state attorneys general co-ordinate their enforcement efforts with the federal antitrust agencies. But increasingly, states have brought challenges where their federal counterparts did not, including in high-profile lawsuits challenging mergers and alleging cartel conduct.
In June 2019, 14 states sued to block the USD26 billion T-Mobile-Sprint merger. The Division did not join the states' case, but instead approved the merger after the companies agreed to divest certain assets to resolve the agency's competitive concerns about the merger. Notwithstanding the Division's approval of the deal, the state attorneys general argued that the merger would substantially lessen competition in wireless services markets and would result in consumers collectively paying billions of dollars more for their wireless services. T-Mobile and Sprint responded that the merger would help them better compete against AT&T and Verizon, especially with respect to the ongoing rollout of 5G networks. After a ten-day bench trial, a federal judge in New York approved the merger, finding that the states' asserted anti-competitive effects were "unlikely" to occur, due to the "intensely and rapidly changing environment" in which the telecom companies operate. [New York v Deutsche Telekom AG, 439 F. Supp. 3d 179 (S.D.N.Y. 2020).] The states chose not to appeal, and the merger closed on 1 April 2020.
Another notable enforcement action by state attorneys general is litigation by 51 states and territories concerning alleged price-fixing in the generic pharmaceuticals industry. The state attorneys general began investigating these allegations in 2014 and have since filed three lawsuits in federal court. The states have named as defendants nearly every major company in the industry, and several executives.
One interesting feature of the generic drugs cartel litigation is that, in July 2020, the court selected one of the states' claims to serve as a so-called bellwether case. [In re Generic Pharm. Pricing Antitrust Litig., 2020 WL 3971420 (E.D. Pa. July 13, 2020).] This claim was filed in May 2019 by a coalition of 44 state attorneys general and alleges that the defendant manufacturers fixed the prices of over 100 generic drug brands. In multi-district litigation, in which multiple suits are organised before a single court, judges sometimes try such a bellwether case ahead of the related cases, to give parties an idea of how similar claims will fare and to encourage settlements. That said, the use of bellwether trials is more common in the "mass tort" setting than in antitrust litigation. Consequently, this development will be closely watched to determine its effect on judicial efficiency, liability, and damages. The court has explained that the generic drugs bellwether will test issues such as whether the states can establish sufficiently common issues of fact or law to merit "certification" of their claims to be tried on a class-basis, as well as probing the merits of the states' claims that alleged agreements as to disparate drugs amounted to an "overarching" conspiracy. As of August 2020, the case remains ongoing. The states' claims are parallel to criminal actions pursued by the Division, which has charged six generic drug companies and four industry executives with conspiring to fix prices. Five of these companies have admitted to antitrust violations and paid over USD426 million in criminal penalties; three executives have pleaded guilty and are awaiting sentencing.
Potentially anticompetitive employment agreements continue to hold the attention of US antitrust enforcers and private plaintiffs alike – a reminder of the need for careful consideration of labour agreements. In the 2016 Guidance for Human Resources Professionals, jointly published by the federal antitrust enforcers, the Division confirmed it will criminally prosecute both anticompetitive wage-fixing and "no-poach" agreements, in which employers agree not to hire one another's employees.
The Division has not yet announced criminal charges in this space. But in a 2018 civil settlement concerning no-poach agreements in the railway industry, the Division emphasised that it would have pursued criminal charges had the conduct continued after its 2016 guidance. And in 2020, reports have suggested the Division is criminally investigating potential no-poach agreements in the home healthcare industry, with one company reportedly seeking leniency from criminal prosecution. In light of these developments, the Division has underscored the need for antitrust training for HR professionals. In addition, in April 2020, the Division and the FTC jointly announced that they intend to target any anticompetitive behaviour during the COVID-19 pandemic, including against employers who suppress competition for labour.
As is common in the US, private plaintiffs have followed the lead of antitrust enforcers, filing class action complaints targeting alleged agreements in a variety of labour markets. The Division has filed Statements of Interest in several such private cases to advocate for its view of how the antitrust laws apply in the labour markets. For example, the Division has filed briefs reiterating its stance that no-poach agreements between competitors are generally per se illegal unless ancillary to a separate, legitimate agreement. And in Seaman v Duke University, in which a Duke University professor claimed to have been denied employment at regional rival University of North Carolina due to an alleged no-poach agreement between the schools, the Division joined the parties' settlement to enforce the injunctive relief, a step it characterised as "unprecedented."
How to treat no-poach clauses in the franchise context remains the subject of particular scrutiny. The issue has arisen most commonly in the fast food industry, where franchisees of a given brand allegedly agree not to hire each other's employees. The Division filed a Statement of Interest in Stigar v Dough Dough, Inc. stating that in the franchise context, such agreements are typically vertical agreements that should be judged under the rule of reason. [Statement of Interest, Stigar v Dough Dough, 18-cv-244 (SAB) (E.D. Wa. Mar. 8, 2019).] Washington state’s attorney general has publicly opposed the Division's stance, arguing that such agreements between franchisees should be per se illegal. In 2019, a group of state attorneys general formed a coalition to address allegedly anticompetitive employment agreements and non-compete clauses. That coalition has gone on to obtain settlements with multiple fast food chains that have agreed to end the practice. The states also requested that the FTC oppose no-poach agreements involving low-wage workers.
The federal courts are split on how to treat franchise no-poach agreements. In March 2020, a Florida district court dismissed claims against Burger King, holding that plaintiffs failed to sufficiently allege the distinction between Burger King and its franchisees, thus rendering the agreement internal within a "single, unitary firm." [Arrington v Burger King, 2020 WL 2479690 (S.D. Fl. Mar. 24, 2020).] In contrast, in 2019 a Michigan district court let claims proceed against Domino's Pizza, finding that it needed more factual development to determine which standard applied. [Blanton v Domino’s Pizza, 2019 WL 2247731 (E.D. Mich. May 24, 2019).] And a Chicago district court has twice denied motions to dismiss similar claims against McDonald's, holding that the agreement among McDonald’s franchisees not to hire each other's employees could be unlawful under a “quick-look” rule of reason analysis and that the plaintiff had standing to sue. [Turner v McDonald’s, 2020 WL 3044086 (N.D. Ill. Apr. 24, 2020); Deslandes v McDonald’s, 2018 WL 3105955 (N.D. Ill. June 25, 2018).]
Refusals to Deal
In the last year, two high-profile cases have tested the extent to which Section 2 of the Sherman Act obliges firms with monopoly power to conduct business with smaller rivals. These cases are noteworthy not only for the important precedents they set, but also for featuring divergent views from within the US agencies and the antitrust community at large.
Under US law, a firm generally has no duty to deal with its competitors. But the Supreme Court has recognised that there are some limits on this right. The 1985 Aspen Skiing decision is a prominent case in which the Court upheld a jury verdict that a defendant ski resort's decision to terminate a voluntary, and presumably profitable, course of dealing with a smaller competitor (a rival ski mountain) had been motivated by an intent to unreasonably exclude the smaller company, thus violating the Sherman Act. [472 U.S. 585 (1985).] Following Aspen Skiing, circumstances in which such a duty may arise have been heavily litigated.
In the 2004 Trinko case, the Supreme Court clarified that Aspen Skiing is "at or near the outer boundary of Section 2 liability." [540 U.S. 398 (2004).] The Trinko Court clarified that individual firms, even those with monopoly power, have no general "duty to aid competitors." Indeed, in Trinko and other decisions, the Supreme Court and numerous courts of appeal have expressed the concern that forcing competitors to deal with one another harms consumers – including by encouraging collusion, reducing efficiency by propping up less efficient rivals, and obliging courts to maintain long-term oversight of business relationships, a role for which they are ill-suited. Trinko and later decisions have cabined unlawful-refusal-to-deal cases to instances where plaintiffs can show an antitrust duty to deal by establishing that a monopolist's conduct makes no economic sense other than to drive competitors out of business. [See, eg, Pacific Bell v linkLine, 555 U.S. 438 (2009).]
One of the most high-profile cases in recent memory testing the scope of a monopolist's duty to deal is the FTC's ongoing case against Qualcomm. Qualcomm is the dominant manufacturer of modem chips, which it sells to original equipment manufacturers (OEMs) for use in mobile devices. It also holds and licenses essential patents required for US wireless connectivity. According to the FTC, Qualcomm had licensed these patents for some time to rival chip manufacturers, but by 2012 it had ended these licences. Among other claims, the FTC alleged that Qualcomm terminated those licences to stifle competition. In May 2019, a California federal judge found that Qualcomm's refusal to license patents to competitors violated the Sherman Act, citing Aspen Skiing. [FTC v Qualcomm, 411 F. Supp. 3d 658 (N.D. Cal. 2019).]
Qualcomm appealed. In a rare public divergence from its sister agency, the Division filed a brief opposing the FTC. The Division argued that the lower court had "abandoned precedent" in finding that Qualcomm had a duty to deal with rival chipmakers when, in fact, evidence established that the company was only seeking to maximise its profits. The Division argued that Qualcomm’s decision to cease licensing its patents to competitors in favour of licensing to OEMs was a rational business decision because doing so was “vastly more profitable,” and thus the action did not support the requisite inference of anticompetitive malice (ie, the desire to exclude competitors). [Brief of USA in Support of Appellant Qualcomm, FTC v Qualcomm, 19-16122 (9th Cir. Aug. 30, 2019).] On appeal, the FTC conceded that Qualcomm's conduct did not fit within the narrow parameters of Aspen Skiing (as interpreted by subsequent decisions), and instead argued that Qualcomm violated antitrust law by failing to abide by contractual commitments to license to rival chipmakers.
In August 2020, the appellate court reversed, finding that Qualcomm's actions did not satisfy the three required elements of a refusal to deal claim:
Instead, the court found that Qualcomm:
The appellate court also rejected the FTC's argument that Qualcomm's alleged breach of contractual commitments violated the antitrust laws.
Another closely watched refusal-to-deal case is Viamedia's suit against cable giant Comcast. Viamedia sells ads for cable providers who do not have their own in-house advertising sales organisations. Among other claims, Viamedia accused Comcast of illegally refusing to continue its past practice of working with Viamedia to sell regional advertising and using its cable dominance to force small cable providers to, instead, sell advertising through Comcast’s advertising subsidiary Spotlight (which competes with Viamedia).
In early 2017, a federal judge in Chicago ruled that Viamedia had not sufficiently pled that Comcast's refusal to deal was unlawful – Comcast’s actions were rational, so they could not be anticompetitive. [Viamedia v Comcast, 2017 WL 698681 (N.D. Ill. Feb. 22, 2017).] However, earlier this year, an appellate court reversed the judgment, finding that balancing a refusal to deal’s anticompetitive effects against hypothetical pro-competitive justifications is a fact-based analysis ill-suited to judgment on the pleadings. In doing so, it rejected the standard for which the Division had advocated in an amicus brief: that a refusal to deal should not be actionable under Section 2 unless it would make no economic sense but for its tendency to eliminate or lessen competition. [Viamedia v Comcast, 951 F.3d 429 (7th Cir. 2020).]
These cases illustrate the continued uncertainty regarding the full extent of a monopolist's duty to deal with competitors. Comcast has said it plans to appeal the Viamedia decision. The FTC has not publicly stated whether it plans to appeal, but has noted that it is "disappoint[ed]" with the ruling and is "considering [its] options." Meanwhile, both rulings have already been cited by litigants in other ongoing disputes, suggesting that the issue is far from settled.