California State Court of Appeals Reverses Award For Antitrust “Circuit Dealing” Allegations
On September 2, 2020, a three-judge panel on the California State Court of Appeals Second Appellate District reversed a jury’s award in favor of Flagship Theatres of Palm Desert, LLC (“Plaintiff”) under California’s Cartwright Act. Flagship Theatres of Palm Desert, LLC v. Century Theatres, Inc., No. B292609, 2020 WL 5229369, at *1 (Cal. Ct. App. Sept. 2, 2020). Plaintiff sued rival theaters Century Theatres, Inc. and Cinemark USA, Inc. (“Defendants”) in Coachella Valley, California in connection with their “circuit dealing” agreements with movie distributors. The court found that the elimination of a single competitor is not sufficient evidence of harm to competition to sustain a verdict under the Cartwright Act.
Ninth Circuit Delivers A Defeat To The FTC And Holds That Technology Company’s Licensing Practices Are Not Illegal
On August 11, 2020, the United States Court of Appeals for the Ninth Circuit overturned a decision by the United States District Court for the Northern District of California finding that the Federal Trade Commission had proven that the technology company’s (the “Company”) patent licensing practices violated the antitrust laws. FTC v. Qualcomm Corp., __ F.3d __, Case No. 19-16122, 2020 WL 4591476 (9th Cir. Aug. 11, 2020). The panel included Judges Rawlinson and Callahan of the Ninth Circuit, and Judge Murphy of the Eastern District of Michigan, sitting by designation. While the Ninth Circuit’s opinion involves some complex issues involving technology markets and patent law, at a higher level, this opinion’s critical antitrust findings reaffirm that businesses are free to independently choose with whom to deal, the terms upon which they will do so and that mere profit-seeking conduct is not illegal. The opinion further makes plain that to establish the element of harm to competition, plaintiff’s theory of harm, its market definition, and its proof of alleged anticompetitive effects must be consistent. Where the alleged anticompetitive effects are not established to have occurred within the properly defined, relevant market, a plaintiff’s claim should be rejected.
Important Procedural Developments In Litigation Over Two-Sided Markets
There were two developments in litigation involving the treatment of two-sided markets that, while not groundbreaking themselves, could portend significant implications for future litigation involving two-sided markets.
California District Court Partially Dismisses Constitutional Claims In Dental Antitrust Suit
On March 19, 2020, District Judge George Wu of the United States District Court for the Central District of California dismissed an Equal Protection Clause claim, and expressed skepticism about remaining claims from a dental company’s suit alleging anticompetitive practices on the part of the Dental Board of California (the “Board”) and related due process and Dormant Commerce Clause claims. Sulitzer v. Tippins, 2:19-cv-08902 (C.D.Cal. March 19, 2020).
D.C. Circuit Affirms Dismissal Of Wine Bar’s Unfair Competition Action Against Trump Hotel
On February 28, 2020, the United States Court of Appeals for the D.C. Circuit affirmed a district court’s decision to dismiss a D.C. based restaurant’s unfair competition action against President Donald J. Trump and his Washington, D.C. hotel. K&D LLC v. Trump Old Post Office LLC and Donald J. Trump, No. 18-7185 (D.C. Circuit Feb. 28, 2020). The restaurant, Cork Wine Bar (“Cork”), brought suit in the Superior Court of the District of Columbia asserting claims for violation of D.C.’s common law of unfair competition. Cork principally alleged that the Trump International Hotel exploits an unfair competitive advantage by virtue of its association with the President’s name. Cork asserted that, following the 2016 election, Trump International Hotel began attracting a significant portion of Cork’s previous customer base including lobbyists, advocacy groups, and diplomats because of the customers’ perception that patronizing Trump’s establishment would help them curry favor with the Trump Administration.
Sixth Circuit Finds Arbitration Agreement For Price-Fixing Suit Unenforceable
On February 24, 2020, the United States Court of Appeals for the Sixth Circuit affirmed a district court ruling that an arbitration provision in a warranty clause did not apply to antitrust claims brought by auto parts distributors against manufacturers of automotive shock absorbers. In re: Auto. Parts Antitrust Litig. VIP, Inc. v. KYB Corp., No. 19-1150, 2020 WL 881263 (6th Cir. Feb. 24, 2020). Defendants were seeking to use the provision to compel plaintiffs to arbitrate price-fixing claims. The district court found the provision was not enforceable in these circumstances, and the Sixth Circuit affirmed.
European Union General Court Annuls Cartel Fine Based On European Commission’s Insufficient Reasoning
On September 24, 2019, the EU General Court annulled the cartel fine the European Commission had imposed on a financial institution for alleged anticompetitive conduct in the Euro interest rate derivatives market based on the Commission’s failure to adequately explain its reasoning in determining the amount of the fine. HSBC Holdings plc et al v. European Commission, Judgment in Case T-105-17. At the same time, the Court largely upheld the Commission’s decision on the underlying infringement and provided additional clarity on other key aspects of cartel rules, namely, ‘by object’ infringements, the evidentiary requirements to establish a single and continuous infringement (SCI), and the Commission’s obligation to uphold a non-settling party’s presumption of innocence in hybrid settlement procedures.
Northern District Of Illinois Finds Hockey Club’s Shot Against Hockey League Misses The Net
On September 26, 2019, Judge Manish S. Shah of the United States District Court for the Northern District of Illinois dismissed antitrust claims by plaintiff Reapers Hockey Association, Inc., an amateur hockey club, against Amateur Hockey Association Illinois (“AHAI”), an amateur hockey league, and its four constituent clubs (the “club defendants”), finding that plaintiff failed to state a claim under Sections 1 and 2 of the Sherman Act. Reapers Hockey Association, Inc. v. Amateur Hockey Association Illinois, Inc., et al., No. 19-cv-1302 (N.D. Ill. Sept. 26, 2019). Because it decided that plaintiff’s claims failed on the merits, it also denied plaintiff’s motion for a preliminary injunction.
Companies With Effective Antitrust Compliance Programs Could Get Relief From Criminal Prosecution Under New DOJ Policy
The Antitrust Division of the U.S. Department of Justice (“Division”) finally will consider the existence of effective antirust compliance programs at the charging stage of criminal antitrust investigations, opening up the possibility that cartel participants could avoid prosecution even if they are not a first-in leniency applicant. The Division’s previous, and longstanding, approach had been not to consider compliance programs at the charging stage, on the theory that a compliance program is by definition ineffective if it failed to prevent a criminal violation of the antitrust laws.