CHARLOTTE
NEW YORK
CHICAGO
NEWARK
GENEVA
PARIS
LONDON
LOS ANGELES
SAN FRANCISCO
MOSCOW
WASHINGTON, D.C.
Antitrust Enforcement After the
Rebound
November 17, 2009
Winston & Strawn LLP © 2009
Overview
• The Rebound Will Trigger Full Enforcement
• The Government’s Game Plan
• Best Practices For Companies’ Press Break
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The Rebound Will Trigger Full Enforcement
(Get Ready For An NBA-style 4th Quarter)
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Top Bailout Recipients (11/10/09)
Company
All Banks
AIG
Fannie Mae
Freddie Mac
GM
Chrysler
Industry
Banking
Insurance
Fin. Serv.
Fin. Serv.
Auto
Auto
Headquarters
N/A
NY
DC
Va
Mich
Mich
Amount (Bil.)
$204.7*
$69.8
$59.9
$50.7
$50.4
$12.5
____
*$133.9 outstanding
Source: http://bailout.propublica.org/main/list/index;
http://money.cnn.com/news/specials/storysupplement/bankbailout
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The Government’s Game Plan
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The Government’s Game Plan: In General
More Vigorous Enforcement
“As President, Obama will reinvigorate antitrust
enforcement, which is how we will ensure that
capitalism works for consumers.”
www.barackobama.com/issues/technology
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The Government’s Game Plan: Specifics
1. Full-court Press On Single-firm Conduct
2. Finals Series: Congress/Agencies v. S. Ct.
3. International Help Defense
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1. Full-court Press on Single-firm Conduct
Overview
• Shift in policy/Sea change in philosophy
• More investigations/cases in targeted industries
• More scrutiny of mergers in targeted industries
• Supreme Court pick-and-roll
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1. Full-court Press on Single-firm Conduct
Shift In Policy/Sea Change In Philosophy
• 9/8/08—DOJ’s 215-page report on single-firm conduct advised
caution in interfering with markets. (Under Bush.)
• 9/8/08—3 of 4 FTC commissioners called report “a blueprint for
radically weakened enforcement” against anticompetitive practices.
• 5/11/09—DOJ under Obama withdrew report
• Withdrawal 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.”
• “[W]e can no longer rely upon the marketplace alone to ensure that
competition and consumers will be protected.”
(Speech by Christine A. Varney, Assistant Attorney General in charge of the
DOJ’s Antitrust Division, http://www.justice.gov/opa/pr/2009/May/09-at-459.html)
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1. Full-court Press on Single-firm Conduct
• Total Monopoly
Investigations
Initiated:
• Total Monopolization
Cases Filed:
• Total District Court
Civil Antitrust Cases
Filed:
• Total Fines Imposed:
• Total Jail Days
Imposed:
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Clinton (1993-2000)
Bush (2001-2008)
• 85
• 58
• 11
• 0
• 178
• 86
• $1,880,662,000
• 26,892
• $2,981,971,000
• 96,238
Source:
Practicing Law Institute, Corporate Compliance
2002, Antitrust Division Workload
Statistics: FY 1992-2001.
Source:
http://www.usdoj.gov/atr/public
/workstats.htm
1. Full-court Press on Single-firm Conduct
Sea Change In Philosophy?
• “I see democracy as a conversation to be had. According to this
conception, the genius of Madison’s design is not that it provides a
fixed blueprint for action. It provides us with a framework and rules,
but all its machinery are designed to force us into a conversation.”
The Audacity of Hope, by Barack Obama, p. 89-92 Oct 1, 2006.
• “[Under Obama], [m]ultilateral diplomacy has regained a central
position . . . . Dialogue and negotiations are preferred . . . .”
Statement by the Norwegian Nobel Committee about President Obama,
http://nobelprize.org/nobel_prizes/peace/laureates/2009/press.html.
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1. Full-court Press on Single-Firm Conduct
Philosophical War
Over Enforcement
Let Them Play
Overenforcement “might
effectively chill
procompetitive conduct
in the world at large, the
very thing that it is
designed to protect.”
Aguilar v. Atl. Richfield Co., 25
Cal. 4th 826, 852 (2001).
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1. Full-court Press on Single-Firm Conduct
Philosophical War
Over Enforcement
Call The Fouls
“Our regulators became
enablers rather than
enforcers. Their trust in
the wisdom of the
markets was infinite.”
(House Oversight Committee
Chairman Henry Waxman
lecturing Alan Greenspan re
Wall Street collapse.)
http://money.aol.com/news/artic
les/_a/bbdp/greenspan-calls14
crisis-a-credit-tsunami/217508
Winston & Strawn LLP © 2008
1. Full-court Press on Single-Firm Conduct
Philosophical Peace?
Obama
Obama “will take steps to
ensure that antitrust law
is not used as a tool to
interfere with robust
competition or undermine
efficiency to the detriment
of U.S. consumers and
businesses.”
http://www.barackobama.com/pdf
/InnovationTechnology.pdf
Balance
Study
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Conversation
1. Full-court Press on Single-Firm Conduct
More Investigations In Targeted Industries
The Talk:
• Internet (Network Neutrality)
•
•
Video clip of Senator Obama speaking about the Internet on 11/14/07 at Google in Mountain
View, CA.
Healthcare (Generic Drug Entry)
•
Obama’s Plan will “prohibit large drug companies from keeping generics out of markets.”
www.barackobama.com/issues/healthcare/
The Walk:
• Dairy Industry—Dean Foods (DOJ)
• Mainframes—IBM (DOJ)
• Seeds/Genetically Engineered Crops—Monsanto (DOJ)
• Internet—Google (FTC)
• Computer Chips—Intel (NY AG) ( FTC likely)
• Telecommunications—AT&T and Verizon (DOJ)
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More Industry Regulation: The Internet
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1. Full-court Press on Single-Firm Conduct
More Scrutiny Of Mergers In Targeted Industries
The Talk:
•
Internet
•
Healthcare
•
Media
• All media mergers should be “closely scrutinize[d] … for their
implications for competition and consumer choice” and for their impact
“on the ability of divergent communities to participate in the national
media environment.”
http://www.broadcastingcable.com/index.asp?layout=article&articleid=C
A6570325
The Walk:
•
Media—Ticketmaster/Live Nation (DOJ)
•
Healthcare—CVS/Caremark (FTC)
•
Oracle acquisition of Sun Microsystems (DOJ cleared)
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1. Full-court Press on Single-Firm Conduct
Opportunity for a Conversation?
DOJ cleared the Oracle acquisition of Sun Microsystems on
November 9, 2009:
• “The Division concluded, based on the specific facts at issue in the
transaction, that consumer harm is unlikely because customers
would continue to have choices from a variety of well established
and widely accepted database products.”
• “The Antitrust Division will continue to work constructively with the
EC and competition authorities in other jurisdictions to preserve
sound antitrust enforcement policies that benefit consumers around
the world.”
EC has objected.
•
http://www.justice.gov/atr/public/press_releases/2009/251782.htm
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DOJ and FTC—Allocation of Industries
DOJ
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
aeronautics
agriculture and associated biotechnology
avionics
beer
computer software
cosmetics and hair care
defense electronics
financial services/insurance/stock and option, bond and
commodity markets
flat glass
health insurance
industrial equipment
media and entertainment
metals, mining and minerals
missiles, tanks and armored vehicles
naval defense products
photography and film
pulp, paper, lumber and timber
telecommunications services and equipment
travel and transportation
waste
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FTC
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
airframes
autos and trucks
building materials
chemicals
computer hardware
energy
healthcare
industrial gases
munitions
operation of grocery stores and grocery manufacturing
operation of retail stores
pharmaceuticals and biotechnology (other than
associated with agriculture)
professional services
satellite manufacturing and launch vehicles
textiles
Source: http://www.ftc.gov/opa/2002/02/clearance/ftcdojagree.pdf
1. Full-court Press on Single-Firm Conduct
•
Supreme Court Pick-and-Roll: Opportunity for a Conversation
Illinois Tool Works v. Independent Ink, Inc., 547 U.S. 28 (2006) (Stevens, J.,
joined by all except Alito, J.)
• Abandoned per se presumption that patent = market power in antitrust tying
context. 547 U.S. 28 at 31, 45-46.
• Based on Congress's 1986 amendment to Patent Code eliminating per se
presumption in patent misuse context. 35 U.S.C. § 271(d)(5).
•
linkLine Communications, Inc. v. SBC California, Inc., 129 S. Ct. 1109
(2009) (Roberts, C.J., joined by Scalia, Kennedy, Thomas, and Alito; Breyer, J.,
concurring, joined by Stevens, Souter, and Ginsburg)
• No "price squeeze" claim under Sherman Act section 2 in partially-regulated
industry
• ISPs sued Pac Bell alleging unregulated retail prices to consumers were too low
in relation to regulated wholesale prices it charged competitors for DSL access
• No duty to sell to competitors in regulated wholesale market; only viable claim—
predatory pricing in retail market—not pleaded
• Concurrence: Would instruct C.D. Cal. to grant leave to amend.
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2. Finals Series (Congr./Agencies v. S. Ct.)
• Retail Price Maintenance Agreements
• Pay-For-Delay Settlements
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2. Finals Series (Congr./Agencies v. S. Ct.)
Resale Price Maintenance Agreements—Before Leegin
• 1911: Dr. Miles, 220 U.S. 373 – per se illegal.
• 1919: Colgate, 250 U.S. 300 – no agreement where
manufacturer simply announces preferred resale pricing
and refuses to deal with price-cutting distributors.
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2. Finals Series (Congr./Agencies v. S. Ct.)
•
Resale Price Maintenance Agreements—After Leegin
2007: Leegin, 127 S. Ct. 2705 (reversing Dr. Miles) – Vertical price
restraints no longer per se illegal. Two-step review of RPM policies:
• Not illegal if no pricing agreement.
• If agreement exists, court evaluates agreement’s effect on competition
under rule of reason—case-by-case analysis of factors such as:
• number of manufacturers using such agreements in a market;
• whether manufacturer or retailer is source of the restraint;
• market power of party imposing the restraint. (Id. at 2710.)
•
DOJ/FTC Safety Zones
• collaborating competitors collectively control 20 percent or less of
relevant market. (Guidelines ¶ 4.2.)
• collaborative research and development efforts. (Guidelines ¶ 4.3.)
• health care, intellectual property, and horizontal mergers. (Health Care
Statements 7 & 8; Intellectual Property Guidelines; Horizontal Merger
Guidelines.)
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2. Finals Series (Congr./Agencies v. S. Ct.)
Resale Price Maintenance Agreements Under Obama Admin.—
Undoing Leegin
• Discount Pricing Consumer Protection Act, S. 2261
• Would reinstate Dr. Miles rule and undo Leegin.
• Senator Joe Biden co-sponsored.
• Status: Read twice and referred to Committee on the Judiciary
(10/30/07). Did not become law.
• Reintroduced in 2009 as S. 148. Status: Read twice and
referred to the Committee on the Judiciary (1/6/09).
• Also introduced in the House as H.R. 3190 in 2009, sponsored
by Rep. Henry Johnson. Status: Forwarded by Subcommittee to
Full Committee by Voice Vote (7/30/09).
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Winston & Strawn LLP © 2008
2. Finals Series (Congr./Agencies v. S. Ct.)
Pay-For-Delay Settlements—Agencies
• FTC’s Attack on “Pay-for-Delay” Settlements
• Commissioner Jon Leibowitz in May 2008:
“As our report today sadly demonstrates, pay-for-delay settlements
continue to proliferate. That’s good news for the pharmaceutical
industry, which will make windfall profits on these deals. But it’s bad
news for consumers, who will be left footing the bill. These agreements
inflict special pain on the working poor and the elderly, who need
effective drugs at affordable prices.”
• Commissioner Rosch in April 2007:
Cases upholding settlements are “bad law and should be reversed,”
because settlements violate Sherman Act sections 1 and 2.
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Winston & Strawn LLP © 2008
2. Finals Series (Congr./Agencies v. S. Ct.)
Pay-For-Delay Settlements—Congress
• Preserve Access to Affordable Generics Act, S. 369
•
Would prohibit brand name drug companies from compensating generic drug
companies to delay the entry of a generic drug into the market.
•
Status: Reported by Committee; Placed on Senate Legislative Calendar under
General Orders. Calendar No. 183 (10/15/09).
•
Also introduced in the House as the Protecting Consumer Access to Generic
Drugs Act of 2009, H.R. 1706. Status : House Energy and Commerce:
Forwarded by Subcommittee to Full Committee (Amended) by the Yeas and
Nays: 16 - 10 (6/3/09).
• Fair Prescription Drug Competition Act, S. 501
•
Would amend the Federal Food, Drug, and Cosmetic Act to prohibit the
marketing of "authorized generics."
•
Status: Read twice and referred to the Committee on Health, Education, Labor,
and Pensions (2/26/09).
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2. Finals Series--S. Ct. Roster
Justice
Stevens
Ginsburg
Kennedy
Scalia
Breyer
Sotomayor
Thomas
Alito
Roberts
Age
Appointing
President
Year of
Appointment
89
76
73
73
71
55
61
59
54
Ford
Clinton
Reagan
Reagan
Clinton
Obama
G.H.W. Bush
G.W. Bush
G.W. Bush
1975
1993
1988
1986
1994
2009
1991
2006
2005
Source: http://www.supremecourtus.gov/about/biographiescurrent.pdf
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3. International Help Defense
• Overview
• Privilege and waiver issues
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3. International Help Defense
Overview
• EU tenacious
• Slow rotations elsewhere, but coordination accelerating
• Increased emphasis on leniency programs creates trap
for the unwary re waiver of privilege.
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3. Help Defense: New Cartel Laws
Cartel enforcement regimes
last enacted/amended:
In past 2 years
More than 2 years ago
None
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3. International Help Defense
Russia/US MOU: Ex. of Accelerating Coordination
• Russia’s Federal Antimonopoly Service/DOJ & FTC
• More communication re policies (including periodic
meetings)
• Coordination re enforcement
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3. International Help Defense
Privilege and Waiver Issues
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Hypothetical: Privileged or Not Privileged?
EE seeks legal advice of in-house counsel regarding
proposed business strategy later alleged to be
anticompetitive.
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Hypothetical: Privileged or Not Privileged?
• California
• Privileged. State Farm Fire & Casualty Co. v. Super. Ct., 54
Cal. App. 4th 625, 642 (1997).
• US
• Privileged. U.S. v. Rowe, 96 F.3d 1294, 1296 (9th Cir. 1996).
• EU
• Not privileged. Akzo Nobel Chemicals & Akcros Chemicals v.
Commission, ECJ Cases T’125/03 and T’253/03, 17.9.07.
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Privileges: US, EU and China
No privilege
Attorney-client
Work product
Joint defense
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Attorney-client Privilege
US
EU
China
Attorney-client Privilege
Legal Professional Privilege
Confidentiality of client
information
• Oral and written
communications made in
confidence with inside or
outside counsel for the
purpose of seeking, obtaining,
or providing legal assistance.
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• Writings
• No “Attorney-client privilege”
• Outside counsel (some member
states such as the Netherlands hold
differently)
• Attorneys required to keep
client information confidential
and not required to disclose all
information to the court.
• Counsel admitted to an EU member
state bar.
• Foreign attorneys subject to
same rules.
Prior Production to U.S. Government
Involuntary Disclosure—Only way to be sure
• General Rule: privilege preserved if party makes efforts “reasonably
designed to protect and preserve the privilege.” United States v. De La
Jara, 973 F.2d 746, 750 (9th Cir. 1992)
• Because appellant “did nothing to recover the letter or protect its
confidentiality during the six month interlude between its seizure [by
search warrant] and introduction into evidence,” privilege was waived. If
he had “immediately attempt[ed] to recover the letter, appellant could
have minimized the damage caused by the breach of confidentiality.” Id.
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Prior Production to U.S. Government
“Involuntary” Disclosure=“Coercion”
•
Disclosure pursuant to government request during criminal investigation
considered involuntary and did not constitute waiver. Regents of the Univ. of
Cal. v. Super. Ct. of San Diego County, 165 Cal. App. 4th 672 (2008)
•
“The means of coercion the government used here were, as a practical matter,
more powerful than a court order. A court order can be challenged, without
penalty, by way of extraordinary writ or appeal. In contrast here, defendants had
no means of asserting the privileges without incurring the severe consequences
threatened by the government agencies.” Id. at 683.
•
“We hasten to note the DOJ has more recently amended its policy and
significantly limited the circumstances under which disclosure of privileged
materials will be requested from corporate defendants.” Id. at 684 n.7
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Winston & Strawn LLP © 2008
Prior Production to Foreign Government:
"Sophie’s Choice"
In re Vitamins Antitrust Litig., 120 F. Supp. 2d 58 (D.D.C. 2000):
Issue: Whether disclosure to foreign enforcement agency waives privilege.
Facts:
• Private plaintiffs in U.S. alleged global antitrust conspiracy among domestic
and foreign vitamins manufacturers.
• Plaintiffs sought discovery of the leniency applications made to European
Commission.
• Letter from head of EC’s Cartel Unit and Amicus Brief by EC asking special
master to uphold privilege.
Holding:
• Defendants waived privilege as to submissions voluntarily given to EC
without expectation of confidentiality.
• Court rejected arguments that comity principles precluded disclosure and
concluded that U.S. interests outweighed potential interference with foreign
enforcement.
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Winston & Strawn LLP © 2008
Prior Production to Foreign Government
In Re Methionine Antitrust Litig., Master file no. C993491, Report of Special Master (N.D. Cal. June 17,
2002).
• Upholding privilege (siding with EC’s Amicus Brief).
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Prior Production to Foreign Government
Flat Glass MDL (W.D. Pa.)
• EC moved to intervene to assert privilege
• Plaintiffs filed opposition 10/20/09
• Court granted intervention 10/30/09.
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Best Practices For Companies’ Press Break
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Best Practices For Companies’ Press Break
1. Understand Enforcement Strategies And Strengths
2. Avoid Enforcement Strengths
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1. Understand Enforcement Strategies And
Strengths
• Force offense to play the wrong way
• Dribble too much
• Fail to exploit weak side
• Trap in vulnerable hot spots
• Corners
• Sidelines
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2. Avoid Enforcement Strengths
• Play the right way
• Avoid the trapping hot spots
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Play the right way
• No Resale Price-Maintenance Agreements
• Communicate a unilateral policy
• Refuse to deal with price cutters
• Embrace Opportunities For A Conversation
• Use Supreme Court Leverage
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Avoid the trapping hot spots
• One-team philosophy
• Coordinate with international counterparts
• Strategy/disclosure anywhere is strategy/disclosure everywhere
• Preserve privilege
• Address written communications re legal advice involving
operations/sales outside U.S. to licensed outside local counsel.
• Avoid waiver in governmental disclosures/seizures to improve
Sophie’s Choice
• Fight to recover seized documents
• Require recitals in agreements:
• non-waiver
• no further dissemination
• non-dissemination promise necessary to ensure cooperation with
government.
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"Winning Time"
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