In the past year, US antitrust authorities and private plaintiffs have pursued monopolisation cases against Google, Facebook, and Apple, in litigation that will shape competition in the US for years to come. For more detail, see USA Trends & Developments.
In recent years, major court decisions have had significant impacts on the range of remedies plaintiffs can seek, curtailing the Federal Trade Commission's ability to seek monetary awards while for the first time awarding a divestiture remedy in private litigation challenging a consummated merger. For more detail, see USA Trends & Developments.
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. Sections 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) (see 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. Sections 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. Section 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. Section 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.
Pursuing Enforcement Actions
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. Section 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.
Consequences of Federal Antitrust Enforcement Actions
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. Section 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. Section 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 USA. 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 (see 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 own 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).] Plaintiffs must also have suffered an injury in the forum, although injury alone is not enough. [Bristol-Myers Squibb v Superior Court of California, San Francisco County, 137 S. Ct. 1773 (2017)]. The Supreme Court has recently reiterated that specific jurisdiction requires a "strong relationship among the defendant, the forum, and the litigation." [Ford Motor Company v Montana Eighth Judicial District Court, 141 S. Ct. 1017 (2021).]
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. Section 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. Section 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. Section 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).]
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 Department of Justice, 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). ACPERA temporarily expired in 2020, before Congress permanently reauthorised it in October of that 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. Section 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. Section 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. Section 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. Section 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. Section 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. Section 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. Section 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. Supreme Court review is discretionary, and as a practical matter, is rarely granted.
Antitrust Litigation against Big Tech
After years of government investigations and mounting public pressure to curb the dominance of Big Tech, the dam has finally broken. In the past year, Google, Facebook, and Apple have all been targeted by major monopolisation lawsuits filed by public and private plaintiffs. The suits challenge a range of business activities, from manufacturer contracts, to user policies, to long-completed acquisitions. The cases will test the boundaries of US antitrust law and could establish, for years to come, a legal framework for dynamically evolving technology markets.
Google is the company perhaps most under siege by US antitrust litigation.
The first set of claims against Google relate to its search and search advertising business. In October 2020, the Department of Justice, Antitrust Division (DOJ) and 11 state attorneys general sued Google, accusing the search engine giant of using restrictive contracts with Android phone manufacturers and with Apple to maintain monopolies in the markets for general search services and search advertising in violation of Section 2 of the Sherman Antitrust Act. [15 U.S.C. SectionSection 2.] Then, in December 2020, a coalition of 38 state attorneys general filed a complaint expanding on the DOJ's theory, including to address Google's alleged efforts to thwart competitive threats from other search portals like voice-powered search and specialised search providers like Expedia.
Enforcement agencies are also suing Google for alleged anticompetitive practices in "ad tech" markets for tools that facilitate placement of digital ads on websites. In December 2020, a group of ten state attorneys general led by Texas sued Google under state and federal law for conduct relating to ad tech markets.. Numerous reports have also indicated that a separate DOJ ad tech case against Google is expected by the end of 2021.
Finally, in July 2021, 36 states and the District of Columbia filed yet another lawsuit, accusing Google of using contractual and technical restrictions to monopolise app distribution and in-app payments on its Android operating system's Google Play Store.
Meanwhile, Google is also defending itself against a number of private class actions that allege similar conduct, in cases primarily centralised in California federal court.
In December 2020, the Federal Trade Commission (FTC) and a coalition of 48 states and territories filed parallel complaints against Facebook accusing the company of monopolising the market for "social networking services," including by acquiring nascent competitors Instagram in 2012 and WhatsApp in 2014, and by adopting policies that impose anticompetitive restrictions on competing app developers' access to software interfaces that connect to Facebook's platform (APIs). Both complaints sought equitable remedies, including divestitures. In June 2021, a federal judge in the District of Columbia threw out both complaints.
The court held that the states' claims were time-barred under the doctrine of laches, given how much time had passed since the challenged acquisitions. The court further held that both complaints had, among other things, failed to adequately define a cognisable antitrust market for social media. The judge gave only the FTC leave to amend its complaint, which the FTC filed in August 2021 with expanded detail describing Facebook's alleged monopoly in the market for "personal social networking services." The states have meanwhile appealed the dismissal of their complaint.
While government agencies are leading the charge against Apple in most of the world, private litigants are taking on Apple in the US. In August 2020, Epic games sued Apple in California, after Apple banned Epic's popular Fortnite game from its iOS App Store for violating Apple's policies for in-app payments. Epic alleged that Apple's restrictions on third-party app distribution and in-app payments in iOS monopolised both markets.
In September 2021, the Court in this matter held that Apple's in-app payment anti-steering provisions are anticompetitive under California's Unfair Competition Law. But the Court also held that Epic had not successfully proved that Apple was a monopolist or that Apple had violated federal antitrust laws or California's Cartwright Act. Epic is appealing the decision. Other private claims against Apple are ongoing. In August 2021, Apple reached a proposed settlement with a proposed class of small app developers that would include a USD100 million payout along with certain agreements to loosen Apple's restrictions over the App Store. As of September 2021, this proposed settlement has yet to be approved by the overseeing judge.
Anticompetitive Employment Practices: "No Poach"
In October 2016, the DOJ stated in its Antitrust Guidance for Human Resource Professionals that it would criminally prosecute both anticompetitive wage-fixing and so-called "no poach" agreements between competitors that are not reasonably related to any pro-competitive purpose. Following through on this policy, four years later, the DOJ brought its first criminal cases against individuals and corporations for allegedly engaging in these types of agreements. Criminal violations of Section 1 of the Sherman Act carry a penalty of imprisonment up to ten years and a USD1 million fine for individuals, and fines of USD100 million or more for corporations.
Defendants in some of these criminal cases – supported by amici, including the US Chamber of Commerce – have challenged the indictments as unconstitutional. They argue that only the courts, and not DOJ prosecutors, have the power to designate a given practice as a per se violation of the antitrust laws, unrebuttable by any showing of pro-competitive rationale supporting the practice. Per se status is a prerequisite to criminal enforcement under long-standing Antitrust Division policy
President Biden's administration appears likely to continue to criminally prosecute alleged antitrust violations in labor markets. The president has made it well-known that he opposes "no poach" agreements. And on July 9, 2021, he signed the Executive Order on Promoting Competition in the American Economy, which called for the FTC to (among other things) exercise its rulemaking authority "to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility."
Similarly, through civil cases, states have continued their pursuit of "no poach" arrangements. And in June 2021, the New York Senate passed legislation under which the presence of "no poach" clauses could be used as direct evidence of a firm having a dominant position in labor markets; for the legislation to become law, it must be passed by the assembly and signed by the governor.
Likewise, private plaintiffs continue to bring antitrust cases challenging "no poach" agreements, including in the health care sector. For example, a class action lawsuit filed in February 2021 alleged that two hospitals agreed not to recruit or "poach" each other’s health care professionals [In re: Geisinger Health and Evangelical Community Hospital Healthcare Workers Antitrust Litigation, 4:21-cv-00196-MWB (M.D. Pa.)]. This case is still in its infancy, with the Defendants' Joint Motion to Dismiss pending at the time of publication. These private suits remain subject to a number of challenges from defendants. For example, in July 2021, an Illinois federal court refused to certify a nationwide class of workers challenging a no-poach provision in McDonald's franchise agreements because labor markets are local.
Uncertainty Regarding Government Authority to Seek Monetary Penalties
In April, the Supreme Court dealt a major blow to the FTC's enforcement toolkit when the Court held that the agency lacked statutory authority to seek equitable monetary relief under Section 13(b) of the FTC Act.
Section 13(b) authorises the FTC to bypass its own administrative proceedings and go directly to federal court to seek an "injunction" for violations of the FTC Act, but is silent on the availability of equitable monetary relief (eg, restitution or disgorgement, which requires violators to give up ill-gotten proceeds from a violation). [15 U.S.C. Section 53(b).] Nevertheless, the FTC has used this statutory provision since the 1990s to obtain massive monetary payments from companies accused of antitrust violations (eg, USD1.2 billion from Teva Pharmaceuticals in 2015 to settle the Cephalon pay-for-delay case). Until recently, most appellate courts supported this interpretation.
But in 2019, an influential appeals court in Chicago disagreed, holding in FTC v. Credit Bureau Center that Section 13(b) does not empower the FTC to seek restitution for violations of the FTC Act. [937 F.3d 764 (7th Cir. 2019).] The 7th Circuit's split from its sister appellate courts helped spur the Supreme Court to address the issue.
In a unanimous opinion authored by Justice Breyer, the Court held in AMG Capital Management v. FTC that statutory language in Section 13(b) does not authorise the FTC to seek, or a court to award, equitable monetary relief. [141 S. Ct. 1341 (2021).] The Court first pointed out that the language of Section 13(b) refers only to "injunctions," which are not the same as equitable monetary relief. This focus on the statute's text aligns the Court's holding with its decision last year in Liu v. SEC, where it found that the Securities Exchange Commission could seek certain monetary payments under its authorisation to obtain "equitable relief" pursuant to the Securities Exchange Act. [140 S. Ct. 1936 (2020); 15 U.S.C. Section 78(d)(5)]. The AMG Court also explained that the language of Section 13(b) is written prospectively, which suggests that the FTC's power is limited to enjoining ongoing or future violations, rather than obtaining monetary relief for prior violations. The Court additionally considered Section 13(b) in the context of the overall structure of the FTC Act. Sections 5 and 19 already permit district courts to "impose limited monetary penalties and award monetary relief" in cases where the FTC has first issued cease and desist orders in administrative proceedings. The Court concluded that it would not make sense for Section 13(b) to act as a shortcut around those proceedings.
The decision expressly leaves it to Congress to decide whether to empower the FTC to seek civil monetary relief in court. Two days before the decision, lawmakers introduced a bill authorising the FTC to do so, in anticipation of the Court's ruling. Shortly after, FTC leaders testified to Congress asking it to pass the bill. During this hearing, then-Acting Chairwoman Rebecca Slaughter advocated that monetary penalties under Section 13(b) had historically been the agency's "primary and most effective" way of returning money to consumers, arguing that absent this authority, violators would be able to keep ill-gotten gains.
While the FTC waits for Congress to act, it may increase the use of administrative proceedings to issue cease and desist orders, with the threat of monetary penalties and other payments for companies that violate these orders. However, these proceedings are lengthy and complex, which may mean FTC enforcement actions will take more time than in the past.
Private Suits for Divestiture
In February 2021, a federal appeals court in Steves & Sons v. JELD-WEN upheld the first-ever US court decision awarding a divestiture remedy in a private lawsuit challenging the merger of two competitors under Section 7 of the Clayton Act.
The dispute arose from JELD-WEN's 2012 acquisition of competitor Craftmaster International (CMI) and the impact of this acquisition on a downstream competitor, Steves & Sons (S&S). JELD-WEN manufactures and sells doors. It was also one of three US makers of "doorskins," the front and back panels of most American doors. JELD-WEN uses these doorskins for its own doors and also sells doorskins to competing "independent" door manufacturers that do not manufacture their own doorskins, like S&S. CMI also made doorskins that it sold to independent door manufacturers. When JELD-WEN acquired CMI, it reduced the number of doorskin makers in the USA from three to two.
The DOJ investigated the transaction but did not oppose it before closing. Shortly before signing the deal, JELD-WEN had entered into long-term doorskin supply contracts with S&S and other independent door manufacturers. The supply contracts were intended to preemptively address concerns about the competitive effects of the deal.
In its suit, however, S&S argued that after the merger, JELD-WEN began raising prices on doorskins beyond what was permitted in the supply agreement, that the quality of its doorskins declined, and that JELD-WEN had threatened to terminate the supply agreement. In 2018, a jury found that JELD-WEN's acquisition of CMI violated Section 7. The jury awarded S&S more than USD12 million damages for past injury and more than USD46 million in future lost profits—after trebling, the damages award was more than USD175 million. At S&S's request, the district court ordered JELD-WEN to divest its acquisition of CMI's manufacturing plant as an alternative to the jury's damages award. Applying the balancing test for equitable relief established in eBay v. MercExchange, the court determined that divestiture was the only equitable remedy that could restore competition in the market for doorskins. [547 U.S. 388 (2006).] JELD-WEN appealed.
The appellate court affirmed, finding that the district court had properly applied the eBay balancing test. While it acknowledged that it was a "tough question" whether a different equitable remedy may have been adequate, it determined that the district court had reasonably found that alternatives such as requiring a long-term supply contract with S&S would only address the harm temporarily. It also pointed out that a conduct remedy limited to S&S conflicted with US antitrust law principles, which protect competition, not single competitors. JELD-WEN has stated that it plans to appeal to the US Supreme Court.
It remains to be seen whether the decision will motivate future private litigants to challenge mergers and seek divestures. The JELD-WEN litigation in many ways arose from a rare confluence of factors. Private litigants seldom pursue divestiture remedies because of the high cost of litigation. Plaintiffs' lawyers typically work on contingency and receive a portion of plaintiffs' monetary recovery, which is not available in a divesture setting. Many competitors lack the resources necessary to see this type of litigation to the end, and as a result they rely on federal or state antitrust agencies to challenge anticompetitive mergers. For those competitors that do have sufficient resources, defendants will often settle to avoid an adverse outcome. Indeed, defendants may now be more likely to do so in light of JELD-WEN.
Healthcare Antitrust Litigation
After an eventful year of antitrust litigation related to healthcare in 2020, all indications are that 2021 will be just as action-packed.
In October 2020, subscriber plaintiffs and defendants in the Blue Cross Blue Shield (BCBS) multi-district litigation (MDL) in Alabama reached a preliminary agreement on a USD2.67 billion settlement fund, along with sweeping reforms aimed at restoring competition in the healthcare insurance industry. The litigation is an amalgamation of claims going back to 2012 accusing dozens of local insurers (so-called "Blues") of using restrictive practices to suppress competition.
Then in January 2021, President Trump signed the Competitive Health Insurance Reform Act, eliminating certain antitrust exemptions health insurers had previously enjoyed under the McCarran Ferguson Act. While these exemptions were limited, commentators have suggested that the availability of the defense may have had a chilling effect on antitrust litigation in healthcare. The plaintiffs' success in the BCBS cases and the elimination of these antitrust protections for health insurers may result in more antitrust cases against health insurers in the next few years.
Meanwhile, the multitude of suits in the long-running generic drug price fixing matters has continued to progress. In July 2020, the federal judge overseeing the multidistrict litigation initially selected the complaint filed by a coalition of 44 state attorneys general against Teva to act as a "bellwether" case (a procedure whereby a representative action among many lawsuits proceeds first to trial to help shape subsequent litigation). But in August 2020, a grand jury indicted Teva on criminal price-fixing charges, as part of the DOJ's ongoing antitrust investigation of the generic drug industry. Concerned for the complications the civil and criminal matters could pose to one another, the court vacated its bellwether selection. In May 2021, the judge instead chose the states' complaint asserting a price fixing conspiracy affecting various dermatology treatments and other drugs. Meanwhile, the DOJ has continued to pursue its own generic drugs investigations, having criminally charged at least seven companies and a number of executives, while indicating that more indictments are expected.
The FTC also has continued to make healthcare a priority for antitrust enforcement. In the Spring of 2020, the FTC announced that it would increase resources it put towards the review of previously consummated healthcare deals, sending requests for information to a number of health insurers that had recently merged. Around the same time, the FTC initiated a challenge of Jefferson Health's proposed acquisition of Albert Einstein Healthcare Network in Philadelphia. In a rare defeat for the agency, a federal court rejected the challenge in December 2020. Seemingly undeterred, however, the FTC has continued to challenge hospital mergers, including in Memphis [In re: Methodist Le Bonheur Healthcare and Tenet Healthcare Corporation, FTC No. 9396] and New Jersey [In re: Hackensack Meridian Health, Inc. and Englewood Healthcare Foundation, FTC No. 9399].
In his 9 July 2021 Executive Order, President Biden continued his administration's focus on antitrust and healthcare issues. The order directs federal agencies to seek solutions to address anticompetitive conditions affecting the US economy, including the high cost of prescription medication and healthcare services, increasing hospital consolidation, and other areas related to healthcare.
NCAA: a Unanimous Decision for a Divided Court
On 21 June 2021, the Supreme Court unanimously held that restrictions imposed by the National Collegiate Athletic Association (NCAA) limiting the "education-related benefits" that member schools could provide to student athletes violated federal antitrust law, re-affirming the virtues of the Court's long-standing "rule of reason" analysis and making clear that the antitrust laws apply to anticompetitive agreements in labor markets. [Nat'l Collegiate Athletic Ass'n v. Alston, 141 S. Ct. 2141 (2021).] While the holding was a major blow to the NCAA, it has important implications beyond college sports—especially for its discussion of how courts could use a "quick look" form of the rule of reason analysis.
In NCAA v. Alston, former and current student-athletes sued the NCAA in class action litigation. They argued that the NCAA's rules restricting compensation were agreements between member schools that unreasonably restrained trade, in violation of Section 1 of the Sherman Act. [15 U.S.C. Section 1.]. The California district court applied a rule of reason analysis, considering:
After trial, the district court upheld the NCAA's restrictions capping undergraduate scholarships and compensation related to athletic performance, accepting that both improve consumer choice among sports enthusiasts by maintaining a distinction between amateur and professional sports. But the court held that the policy limiting "education-related benefits" did not fulfill that objective and violated the law. The Court of Appeals for the Ninth Circuit agreed.
The Supreme Court affirmed. The NCAA argued that the lower courts should have applied an "abbreviated deferential review" of its challenged restraints. Writing for a unanimous Court, Justice Gorsuch explained that the lower courts had properly applied the full rule of reason analysis, given the "complex questions" about the consumer benefits of the challenged policies. In doing so, Justice Gorsuch pointed out that the "market realities" had changed since 1984, when the Court assumed (without deciding) that different NCAA restrictions were justifiable. Justice Kavanaugh's concurrence went further, chastising the NCAA for holding themselves as "above the law" and potentially inviting future plaintiffs to again challenge the NCAA's remaining compensation restrictions (which the plaintiffs had not appealed to the Court).
The majority opinion notably recognised that the "quick look" rule of reason analysis can apply to determine that a challenged restraint is not anticompetitive. Historically, courts have used "quick look" analysis to condemn restraints, when “an observer with even a rudimentary understanding of economics could conclude that the arrangement in question would have an anticompetitive effect.” [Cal. Dental Ass'n v. Fed. Trade Comm'n, 526 U.S. 756, 770 (1999)]. The Court declined to apply the NCAA's requested quick look, but recognised that certain restraints may be "so obviously incapable of harming competition that they require little scrutiny."
While clearly a blow to the NCAA, the opinion will likely have ripple effects in other industries and contexts. It would not be surprising for more parties to advocate for "quick look" rule of reason analysis – particularly to absolve challenged restraints. And on the other end of the spectrum, the Department of Justice has already cited Justice Kavanaugh's concurrence to argue that price-fixing in labor markets should be per se unlawful. All this makes clear that attorneys and clients must be familiar with this case to be prepared when dealing with future antitrust issues.