Antitrust Agency Insights: Developments At The US Antitrust Enforcement Agencies—May 2019

Successfully navigating antitrust agency investigations requires a familiarity with Department of Justice and Federal Trade Commission processes, as well as insight into those agencies and their leaderships' current priorities for enforcement and competition policy. This newsletter will provide periodic updates on both, offering an analytical look at how the antitrust agencies are approaching important competition issues and what current investigations may mean for potential future enforcement. We hope our experience—both inside and outside these agencies—will provide insights that help you make more informed decisions for your business.

LETTER FROM THE EDITORS: DOJ's AMICUS INITIATIVE CONTINUES

Senior officials at DOJ's Antitrust Division have been vocal about their plans to continue to expand the Division's amicus program to "promote the use of antitrust and competition principles across the judiciary,"1 and the pace of filings reflects this effort. Deputy Assistant Attorney General Michael Murray announced that the Antitrust Division is on pace to file about 20 amicus briefs this year, up from nine in 2018 and an average of three per year during the Obama Administration and the first year of the Trump Administration.2 Many of the filings are statements of interest at the district court level, evidencing a willingness to intervene earlier in the litigation process to stake out the Division's position.

To date, during the Trump Administration, we have seen the Division use amicus filings to present the following views:

Joint Conduct

No-poach agreements between franchisees and a franchisor within the same franchise system should be evaluated under the rule of reason where they are ancillary to a legitimate and procompetitive business transaction or collaboration, whereas naked no-poach agreements between horizontal competitors in the labor market are per se unlawful.3 A plaintiff need not prove antitrust standing to seek a declaratory judgment regarding a market division agreement between competitors.4 The Illinois Brick indirect purchaser doctrine does not bar treble-damages claims by plaintiffs who are the first purchasers outside a conspiracy, even when plaintiffs may be indirect purchasers from other conspiracy participants.5 Unilateral Conduct

Refusals to deal do not violate Section 2 of the Sherman Act unless the defendant's conduct makes "no economic sense" absent its tendency to eliminate or lessen competition.6 The Illinois Brick indirect purchaser doctrine bars treble-damages claims by buyers of iPhone apps because their claims are based on a "pass-on" theory.7 (Joint brief with FTC) Mergers

The Division has a strong preference for structural relief in merger cases.8 State Action and Exemptions to Antitrust Liability

State action immunity in the context of a no-poach agreement is inappropriate where a state agency is not acting as a regulator, but rather is acting purely as a labor market participant, and Midcal is not satisfied.9 In interpreting foreign law under FRCP 44.1, federal courts should "ordinarily afford . . . substantial weight" to a foreign government's submission regarding its own law, but how much deference is due should depend on all relevant facts and available evidence; courts should not merely defer to any facially valid characterization offered by the foreign government.10 State bars controlled by active market participants must satisfy the "clear articulation" and "active supervision" prongs of the state action doctrine to obtain exemption from antitrust liability.11 The existence of Noerr-Pennington protected activity (in this case, patent litigation) does not shield nonpetitioning conduct (in this case, patent acquisition) from antitrust liability.12 (Joint brief with FTC) A state must clearly articulate its intention to displace competition with a regulatory structure in order for a municipality to invoke state action exemption from antitrust laws.13 (Joint brief with FTC) Immunity under the Foreign Sovereign Immunity Act's (FSIA) "commercial activity" exemption is limited to "organs of a foreign state" in which the foreign government has a controlling (although not necessarily majority) interest and the allegedly immune entity is serving a public (not-for-profit) purpose. However, the exemption does not apply only to "direct sales" into the United States, because even indirect sales may satisfy the statute's "direct effect" requirement.14 A health insurer's exclusivity policy that prohibits an insurance broker from selling plans offered by competing insurers should not be exempt from antitrust scrutiny under the McCarran-Ferguson Act where the exclusivity policy does not constitute the "business of insurance" and plaintiff's claim involves allegations of coercion.15 Other Topics

Dormant Commerce Clause analysis of state right-of-first-refusal laws was flawed where the lower court: (i) failed to properly assess discriminatory effects on out-of-state actors, (ii) improperly interpreted Supreme Court precedent as creating a...