DELVACCA Presents:
Antitrust "Change" Comes Through the
Obama Administration
Sponsored by:
Katherine M. Katchen
kkatchen@akingump.com
David T. Blonder
dblonder@akingump.com
Charles J. Reitmeyer
Reitmeyer-Charles@aramark.com
February 17, 2010
Brief Antitrust Primer
Who enforces the antitrust laws?
● Federal Trade Commission:
■ Mergers and joint ventures;
■ Consumer protection.
● Justice Department Antitrust Division:
■ All criminal price fixing;
■ Mergers and joint ventures.
● State Attorneys General:
■ Often join DOJ and FTC;
■ Enforce independently as well.
● Private Parties:
■ Can sue for injuries caused by anticompetitive effects of
antitrust violations;
■ Class action lawsuits common.
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Brief Antitrust Primer
 What Are The "Antitrust Laws"?
● Section 1 of the Sherman Act:
■ Prohibits price fixing and other cartel activities.
 Criminal prosecution for hardcore conduct (price fixing, dividing
markets/customers
 “Per se” illegal: pernicious effect on competition and lack of any redeeming
virtue.”
■ Applies to all agreements, such as joint ventures among competitors or
distribution and marketing relationships.
● Section 2 of the Sherman Act:
■ Unilateral conduct, such as exclusive dealing, bundled pricing
or tying.
■ Abuse or maintenance of monopoly; attempts to obtain a monopoly.
■ Rule of Reason: evaluates pro-competitive features of a restrictive
business practice against its anticompetitive effects to decide whether or
not the practice should be prohibited.
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Brief Antitrust Primer
What Are The "Antitrust Laws"?
● Section 7 of the Clayton Act
■ Governs lawfulness of mergers, whether horizontal
(e.g., among competitors) or vertical (e.g., supplier-customer
merger).
■ Forward Looking Test: Might the effect of the merger be to
"substantially lessen competition?”
● Hart Scott Rodino (Clayton Act 7A)
■ Procedural statute only: imposes filing and waiting period
obligations on transactions meeting certain size tests.
● Section 5 of the Federal Trade Commission Act
■ Catch-all statute for "unfair" methods of competition.
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Why Increased Concern For Antitrust?
The Agencies and Plaintiffs Haven't Changed.
The Fundamental Statutory Texts Have Not
Changed.
No Major Court Decisions Heighten Concern.
Just the opposite – recent years' decisions have
largely restricted the scope of the antitrust laws.
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But, Change Is In The Air
President Obama promised during the campaign:
"As president, I will direct
my administration to
reinvigorate antitrust
enforcement."
Change has come:
● Change in personnel;
● Change in policies; and
● Change in enforcement priorities.
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The New Political Landscape
DOJ: Christine Varney
Former GC of Democratic Nat'l Committee.
 Represented Netscape in 1990's, urging DOJ to
bring Microsoft monopoly case.
 Repudiated "laissez faire" approach of Bush
Administration ─ more aggressive enforcement is
promised, particularly against firms with market
power.
 Focusing on Technology, Pharma, Agriculture, Dairy
and Energy sectors.
 Intends “to explore vertical theories and other new
areas of civil enforcement, such as those arising in
high-tech and Internet-based markets.”
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Christine A. Varney
AAG
Antitrust Division
The New Political Landscape
FTC: Jon Leibowitz
 Appointed FTC Commissioner in 2004.
 Designated Chairman in March, 2009.
 Very aggressive and policy-oriented.
 Very focused on IP, Healthcare, and
Pharma and Technology issues.
Jon Leibowitz
FTC Chairman
 Opposes reverse payments to prevent
brand-name drug companies from
paying generics to keep products off the
market.
 Strong interest in consumer protection.
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Policy Changes by the New Enforcers:
Monopolization
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Policy Changes by the New Enforcers:
Monopolization – Immediate Change In Tone
"Single-firm conduct offers some of the greatest
challenges in antitrust enforcement today," said
Thomas O. Barnett, Assistant Attorney General in
charge of the Department's Antitrust Division.
"While we need to identify and prohibit conduct
that harms the competitive process, we also need
to avoid interfering in the rough and tumble of
beneficial competition that drives innovation and
economic growth."
● Section 2 Report announced on September 8, 2008.
● The Report survived 8 months, perhaps the shortest-lived
antitrust enforcement policy in the 100+ year history of the
Sherman Act.
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Policy Changes by the New Enforcers:
Monopolization – Immediate Change In Tone
Three weeks after assuming her new duties, AAG
Varney dramatically repudiated the Section 2
Report on May 11, 2009:
● "The report, 'Competition and Monopoly: Single-Firm conduct Under
Section 2 of the Sherman Act,' raised too many hurdles to government
antitrust enforcement and favored extreme caution and the development
of safe harbors for certain conduct within reach of Section 2. . . ."
● "Withdrawing the Section 2 Report is a shift in philosophy and the clearest
way to let everyone know that the Antitrust Division will be aggressively
pursuing cases where monopolists try to use their dominance in the
marketplace to stifle competition and harm consumers. . . ."
● Implicit in the repudiated Report's "overly cautious approach is the notion
that most unilateral conduct is driven by efficiency and that monopoly
markets are generally self-correcting. . . . [R]ecent developments in the
marketplace should make it clear that we can no longer rely upon the
marketplace alone to ensure that competition and consumers will be
protected. . . ."
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Policy Changes by the New Enforcers:
Monopolization – Immediate Change In Tone
Expect the FTC to Pile On
● Chairman Liebowitz, on September 24, 2009: "Christine
[Varney] withdrew th[e Section 2] report for some very good
reasons. As I see it, . . . notions [in the Report] are
inconsistent with the fundamental policy of the antitrust
laws that competition leads to efficiency and to consumer
gains."
● "Efficient monopoly may be better than inefficient
monopoly, but it is still a monopoly, and we are a
competition agency, not an efficient-monopoly agency. So
when a practice simultaneously hinders competition and
facilitates the efficient operations of a monopoly, I know
where I start out. You can look for more vigorous assertion
from me, at least, that competition is the better answer."
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Policy Changes by the New Enforcers:
Monopolization
No new guidance in its place. Aggressive theories
emerging: FTC's Cephalon complaint – product
innovation as an antitrust violation.
Numerous investigations opened: The agencies
are open for business under Section 2.
High profile investigations:
● Google Books (orphaned works);
● Monsanto (limiting of access to corn and soya bean traits);
● Intel (microprocessors);
● IBM (back to the future—monopolization of mainframes)
Many smaller investigations in the pipeline.
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Policy Enforcement: Mergers
 Joint FTC / DOJ workshops on the Horizontal Merger Guidelines.
● Five workshops: December 2009 – January 2010.
● "The goal of the workshops will be to determine whether the Horizontal
Merger Guidelines accurately reflect the current practice of merger review
at the Department and the FTC, as well as to take into account legal and
economic developments that have occurred since the last significant
Guidelines revision in 1992."
● Varney concedes “gaps” between guidelines and actual agency practice
that pose uncertainty for parties and courts, particularly in how agencies
use economic tools and views of competitors, customers, and industry
experts to assess unilateral effects of a merger.
● No “radical revisions”-- envisions small amendments to clarify treatment of
coordinated effects, price discrimination, market share analysis, and need
for more unified approach to concepts of expansion, entry, and
repositioning.
 Comments of Christine A. Varney at Horizontal Merger Guideline Review Project’s Final
Workshop, January 26, 2010, Washington, DC.
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Policy Enforcement: Mergers
 Consummated & Non-Reportable Merger Challenges – Continued
Emphasis?
● Dean Foods (DOJ) (sale of Milk to School Districts and Retailers in Illinois,
Michigan and Wisconsin), Jan. 2010
● Scott & White/Kings Daughters Hospital (FTC) (Temple, TX hospital
merger), Dec. 2009
● In re Lubrizol Corp. & Lockhart Co. (FTC) (Chemical rust inhibitors), Feb.
2009
● Ovation Pharmaceuticals (FTC) (drugs to treat congenital heart defects in
premature infants), Dec. 2008
● Microsemi (DOJ) (semiconductors for military applications), Dec. 2008
● Inverness/Acon (FTC) (consumer pregnancy tests), Dec. 2008
 Indicia and Potential Plus Factors
● Significant post-merger price increases in concentrated markets (e.g.,
Ovation – 1300% or select price discrimination) or other anticompetitive
behavior.
● Vocal and important customers (DoD, NASA, federal and state agencies).
● Removal of significant competitor, high barriers to entry (IP).
● Raise unique substantive and procedural issues
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Policy Enforcement: Mergers
 No recession exception.
● Shapiro speech on Competition Policy in Distressed Industries.
“We at the Antitrust Division are dedicated to vigorous
enforcement of the antitrust laws during these challenging
economic times.”
 New emphasis on vertical mergers.
● Ticketmaster / Live Nation.
■ Ticketmaster required to license its ticketing software, divest ticketing
assets and subject itself to anti-retaliation provisions in order to proceed
with its proposed merger with Live Nation.
 News from the front:
● No easy passes;
● Readiness to issue second requests; but
● Not ready to abandon basic principles.
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Policy Enforcement: Conduct
Resale price maintenance: change from defending
it to threatening it.
Amicus Brief in the Supreme Court, January 2007:
● "The per se rule against vertical minimum resale price
maintenance (RPM) established in Dr. Miles is
irreconcilable with this Court's modern antitrust
jurisprudence and cannot withstand analysis. That per se
rule should be abandoned, and Dr. Miles should be
overruled."
● "There is a widespread consensus of opinion that RPM,
like non-price vertical restraints, can have a variety of procompetitive effects that enhance consumer welfare."
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Policy Enforcement: Conduct
Advice from AAG Varney to National Association of
Attorneys General, on October 7, 2009, on "how
to" challenge RPM.
● Under DOJ's new approach, the government would be
required to make only a preliminary showing "of 'the
existence of the agreement and scope of its operation' as
well as the presence of structural conditions under which
RPM is likely to be anticompetitive . . . to establish a prima
facie case that RPM is unlawful."
● "[R]eports of potential cases that may be appropriate for
federal enforcement" are welcome.
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Policy Enforcement: Conduct
Investigations Pursued That Would Not Have Seen
the Light of Day before 2009:
● Google Books;
● Recruitment of Silicon Valley talent;
● Overlapping directors between Google and Apple; and
● Reversal of "Pay for Delay" position ─ supports the FTC in
a position rejected by the Courts.
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Policy Enforcement: "Unfair Competition" – Unbounded by the
limits of the Antitrust Laws
Speaking about losses the FTC suffered in the
1980s when it applied Section 5 beyond the
Antitrust Laws, Commissioner Leibowitz in
September made this statement:
"People have asked us, given the thumping we took
in those cases, why we would want to revisit Section 5?
The answer is simple: antitrust law is far more restrictive
than it was thirty years ago and if we want to accomplish
our mission of protecting consumers in an age of judicial
conservatism, we need to use every tool in our arsenal."
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Policy Enforcement: "Unfair Competition" –
Unbounded by the Limits of the Antitrust Laws
Nonetheless, the FTC is intent on setting sail once
again into those uncharted waters.
"[Y]ou are likely to see us try to protect consumers
by expanding the use of our authority to prohibit
unfair methods of competition."
And the Commissioner believes the business
community will support this action:
"So, ultimately, I am convinced that while the antitrust
cognoscenti may be concerned, business executives
will see some value in this approach.“`
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TRENDS IN PRIVATE
ANTITRUST LITIGATION
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TRENDS IN PRIVATE ANTITRUST LITIGATION
 Number of private antitrust cases filed is at
highest level in 25 years
● 2007 – 1,018 cases filed in federal district courts
● 2008 – 1,287 cases filed (26% increase)
 Similar increase in U.S. Government cases filed in
district courts
● 2006 – 37 cases filed
● 2007 – 36 cases filed
● 2008 – 52 cases filed (44% increase)
*Source: Princeton Economics Group, Inc.
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TRENDS IN PRIVATE ANTITRUST LITIGATION
 “Follow on” complaints after successful or highly
publicized government action
● Timing of private complaints following announcements of
government investigations/subpoenas
● Piggyback on agency discovery/investigation materials
(including e-discovery)
 Potential for treble damages in private litigation
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TRENDS IN PRIVATE ANTITRUST LITIGATION
“Should I Stay Or Should I Go?”
 Decision whether to Opt-Out of private litigation
can be critical one
 Consideration of risk/reward of opting out:
● Product/service at issue
● Business, political relationship(s)
● Cost vs potential recovery
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TRENDS IN PRIVATE ANTITRUST LITIGATION
Courts Have Not Yet Caught Up With
Aggressive Enforcement and Increase in
Private Filings
Past Few Years Have Seen Series of
“Watershed” Rulings Perceived to be
Favorable to Defendants
● Look for potential increase in state court filings
seeking to circumvent recent federal court rulings
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CURRENT LANDSCAPE OF CASE LAW - PLEADINGS
 Bell Atlantic v. Twombly (2007)
● Redefined pleading standards in antitrust suits
● To survive motion to dismiss, plaintiffs must allege sufficient
factual matter to show claim is plausible
■ “…an allegation of parallel conduct and a bare assertion of
conspiracy will not suffice.”
■ “Without more, parallel conduct does not suggest conspiracy…”
 Ashcroft v. Iqbal (May 2009)
● Twombly standard applies to all civil actions
Flood of opinions dealing with Twombly and Iqbal
 Impact still being sorted out
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CURRENT LANDSCAPE OF CASE LAW - PLEADINGS
 In re: Travel Agent Commission Antitrust Litigation
(6th Cir. Oct. 2, 2009)
● Sixth Circuit affirmed dismissal of amended complaint for
failure to allege sufficient facts to plausibly suggest a prior
illegal agreement.
 Bailey Lumber & Supply Co. v. Georgia-Pacific Corp.
(S.D. Miss. 8/10/09)
● District Court granted manufacturer defendants’ motions to
dismiss claims of conspiracy to fix plywood prices
● Pleadings insufficient to state a claim under Twombly
● Plaintiffs permitted to amend
■ Motions to dismiss filed (10/08/09) against amended complaint
alleging pleading deficiencies not cured
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CURRENT LANDSCAPE OF CASE LAW –
CLASS CERTIFICATION
 In re: Hydrogen Peroxide Antitrust Litigation
(2008)
● Third Circuit vacated grant of class certification
● District Court had not engaged in “rigorous analysis” of
Rule 23 factors as required before a class can be certified
● Class certification should not be lightly granted and “the
potential for unwarranted settlement pressure ‘is a factor
[to] weigh in [the] calculus.’”
 Shift in case management after Hydrogen
Peroxide
● More substance/discovery prior to certification proceedings
● Class v. merits discovery
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CURRENT LANDSCAPE OF CASE LAW
 Leegin Creative Leather Products v. PSKS, Inc. (U.S.
2007)
● Formal departure from century old application of per se rule to
resale price maintenance
● Vertical price restraints no longer considered “per se” illegal
● Should be evaluated under “Rule of Reason”
 McDonough v. Toys-R-Us (E.D. Pa. 7/15/09)
● Early case dealing with interplay between new Leegin and
Hydrogen Peroxide standards
● Class certified under new standards
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RECENT ATTEMPTS TO LEGISLATE AROUND CASE LAW
 Efforts to overturn Twombly/Iqbal and return to notice
pleading standard for F.R.C.P. 12(b)(6) motions
● Notice Pleading Restoration Act (S. 1504)
■ Introduced June 2009 by Senator Specter
● Open Access to Courts Act (H.R. 4115)
■ Introduced November 2009 by Rep. Jerrold Nadler (D-NY)
● Senate & House Judiciary Committees have held hearings on bills
Maryland Senate Bill 239 (signed into law 4/14/09)
■ Adds new provision to Maryland Antitrust Act that “a contract, combination, or
conspiracy that establishes a minimum price below which a retailer,
wholesaler, or distributor may not sell a commodity or service is an
unreasonable restraint on trade or commerce.”
■ State attorneys general petitioning Congress to make resale price
maintenance per se illegal
■ Congressional action (H.R. 3190, S. 148)
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RECENT ATTEMPTS TO LEGISLATE AROUND CASE LAW
 Proposed Elimination of McCarron-Ferguson Antitrust
“Exemption”
● Under McCarron-Ferguson - regulation of “business of insurance”
left to states
● Would eliminate antitrust “exemption” under McCarron-Ferguson
for certain conduct of health & medical malpractice insurers
■ Price fixing, bid rigging, market allocations
● President Obama (10/17/09) – Congress is “rightfully” reviewing
the insurers’ “privileged exception from our anti-trust laws”
 FTC (with some Congressional support) calling for
legislation prohibiting brand name drug manufacturers
from compensating generic manufacturers to delay entry
into market
● January 2010 FTC Staff Study
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FTC “Red Flags Rule” – Applicable to Lawyers?
 FTC “Red Flags Rule”
● Requires certain businesses & organizations to
implement written Identity Theft Prevention Program
■ Designed to detect warning signs of identity theft in day-to-day
operations, take steps to prevent the crime, and mitigate
damages.
● Applicable to “financial institutions” and “creditors” (banks,
federally chartered credit unions, savings & loans, etc.)
 April 2009 – FTC announced for first time its
belief that “lawyers” engaged in the practice of
law were “creditors” under Red Flags Rule
 After several delays, enforcement was scheduled
to begin November 1, 2009
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ABA v. FTC – “Red Flags Rule”
 ABA Filed Lawsuit Against FTC (D.D.C.) (8/27/09)
● Challenging application of Red Flags Rule to Lawyers
● October 30, 2009 – Summary Judgment for ABA without
opinion on Count I of Complaint
■ Alleged FTC’s application of Red Flags Rule to attorneys
violates 5 U.S.C. § 706 (2)(C) because it is “in excess of
statutory jurisdiction, authority, or limitations, or short of statutory
right.”
● December 1, 2009 – District Court opinion in support of
summary judgment
 Congress also working on legislation to limit
application of Red Flags Rule
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David T. Blonder represents clients before the Antitrust Division of the U.S. Department of Justice
and the U.S. Federal Trade Commission in connection with government antitrust investigations of
mergers and acquisitions as well as civil non-merger antitrust investigations involving allegations of
potentially anticompetitive business practices. David has provided antitrust representation to
clients involved in merger and acquisition matters in a diverse range of industries, including
banking, consumer products, mining, health care and pharmaceuticals, telecommunications and
communications equipment, and retailing and energy, among others.
David T. Blonder
Counsel
Washington, DC
Prior to joining Akin Gump Strauss Hauer & Feld LLP, Mr. Blonder was an associate at another
international law firm from 2006 to 2008. Before that, he was a trial attorney in the Media and
Telecommunications Enforcement Section of the U.S. Department of Justice: Antitrust Division,
where he investigated numerous merger transactions and civil non-merger activity in the
telecommunications, direct broadcast satellite and cable television industries. He has also
authored and co-authored numerous articles in the area of antitrust law.
dblonder@akingump.com
202.887.4023
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EDUCATION
J.D., Rutgers-Camden School of Law, 2001
B.S., University of Maryland, 1993
Katherine M. Katchen is a partner in Akin Gump’s Philadelphia office. She represents clients in a
wide range of complex class actions and other commercial litigation in both state and federal courts
nationwide involving antitrust, insurance, health care, RICO, business torts, trade secrets, and
employment law. She recently represented a building materials manufacturer in nationwide direct
and indirect purchaser antitrust class actions alleging conspiracy to restrict supply and fix prices.
She also lectures regularly on antitrust and other complex litigation issues.
Katherine M. Katchen
Partner
Philadelphia, PA
kkatchen@akingump.com
215.965.1239
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EDUCATION
J.D., University of Pittsburgh, 1997
B.A.., Villanova University, 1994