Antitrust Bulletin - June 2012

DOJ Continues Scrutiny of MFN Provisions

Recent actions by the U.S. Department of Justice's Antitrust Division involving "most favored nation" provisions (MFNs) include:

This month it was widely reported that the Antitrust Division is currently investigating alleged anticompetitive practices in the cable industry, including whether cable companies are using MFNs in agreements with television networks to quash competition from online rivals. In April 2012, the Antitrust Division filed suit against Apple and five publishers alleging in part that agency agreements between the publishers and Apple contained retail price matching MFNs "designed to protect Apple from having to compete on price at all." In October 2010, the Antitrust Division filed suit against Blue Cross Blue Shield of Michigan alleging that MFNs in the health insurance provider's agreements with hospitals raised hospital costs to competitors and "limit[ed] the ability of other health insurers to compete with Blue Cross by raising barriers to entry and expansion, discouraging entry, likely raising the price of commercial health insurance, and preserving Blue Cross' leading market position." These actions continue to reinforce the importance of exercising caution when drafting MFNs. The Antitrust Division has stated that MFNs and other contract provisions that reference rivals "deserve additional scrutiny" because they "may create a competitive problem unless the provision serves a particular pro-competitive purpose."

Court Deems Electricity a "Commodity" Under the Robinson-Patman Act

On June 4, a federal appeals court overturned a lower court decision dismissing the claims of electricity purchasers who alleged that an electricity provider had violated the Robinson-Patman Act – which makes it unlawful for sellers "to discriminate in price between different purchasers of commodities of like grade and quality" – by paying rebates to certain large customers in exchange for the withdrawal by the large customers of their objections to the provider's proposed rate-stabilization plan filed with the state utility commission. The lower court had ruled that the filed-rate doctrine, which bars challenges to the reasonableness of a rate approved by the governing regulatory agency, applied to the claims.

On appeal, the court ruled that the filed-rate doctrine did not apply because the purchasers' challenge was to payments made "outside the rate scheme" set by the utility commission, and...