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- In-House Counsel Antitrust Update American Bar Association Section of Antitrust Law Corporate Counseling Committee April 25, 2006
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- 2 Agenda Recent Developments (February April 2006): Supreme Court Department of Justice Federal Trade Commission Private Litigation European Union Hot Topic: Information Exchanges/Benchmarking
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- 3 The Supreme Court: Texaco v. Dagher Background: Gas station owners alleged Equilon (JV of Texaco and Shell) had engaged in unlawful price fixing by setting single price for different brands of gasoline marketed by JV. Ninth Circuit found this to be per se price fixing. Supreme Court reversed, 8-0 (Justice Alito not participating).
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- 4 Texaco v. Dagher (2) Once legitimate joint venture formed, joint decisions regarding pricing were not per se unlawful: [T]he pricing policy challenged here amounts to little more than price setting by a single entityalbeit within the context of a joint ventureand not a pricing agreement between competing entities with respect to their competing products. Court thus concluded it would be inconsistent with this Courts antitrust precedents to condemn the internal pricing decisions of a legitimate joint venture as per se unlawful.
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- 5 Texaco v. Dagher (3) Under Ancillary Restraints Doctrine, antitrust laws examine whether a particular restriction is a naked restraint on trade, and thus unlawful, or ancillary to the legitimate and competitive purposes of JV, and thus valid. S. Ct. found pricing policies to be clearly ancillary to sale of JV products (what could be more integral to the running of a business than setting a price for its goods and services?); thus, ancillary restraints analysis unnecessary. Hoped for guidance on joint venture analysis not forthcoming.
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- 6 The Supreme Court: Illinois Tool Works v. Independent Ink As expected, Court reversed Federal Circuit. Court held that in light of extensive scholarly commentary, congressional amendments addressing patent misuse, and changes in position of federal enforcement agencies, no longer appropriate to apply judicial presumption of market power to tying arrangements involving patents (or copyrights?). Substantial dicta explaining evolution of Courts views on tying from hostility to receptiveness. But Court stopped short of eliminating per se rule in cases involving monopoly power in tying market.
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- 7 Illinois Tool Works v. Independent Ink (2) Significance of decision: Keeps general trend in antitrust/IP law headed in the right direction away from knee-jerk hostility to possession and exercise of IP rights. Keeps tying law headed in the right direction away from per se illegality. But does not take additional step of clarifying tying law even further (e.g., permitting justifications or requiring evidence of anticompetitive effect in tied product markets even when defendant has monopoly power). Broader legal context: Supreme Court abandoning presumptions throughout antitrust law.
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- 8 DOJ: Civil Enforcement U.S. v. Watchmakers (Rolex): Good news: DOJ supported termination of 1960 consent decree restricting Rolexs conduct. Bad news: Rolex paid $750,000 penalty for violating consent decree provisions since 1996. Rolex has policy not to sell watch parts to independent watchmakers unless they agree not to use parts in any watch that has non-Rolex parts or accessories. This policy and other conduct violated a 1960 consent decree. Lesson: Consent decrees represent a separate source of potential liability unless and until it is terminated.
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- 9 DOJ: Civil Enforcement (2) Whirlpool/Maytag: Cleared by DOJ, even though combined firm has 75%+ share of top-load washers. Reflects that market shares are only the starting point of antitrust analysis. Implications: Efficiencies count? Absence of customer complaints counsels against a merger challenge? Imports accorded greater significance?
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- 10 DOJ: Civil Enforcement (3) Qualcomm/Flarion: $1.8 million penalty for gun-jumping; DOJ alleged Clayton Act Section 7A violation (but not Sherman Act Section 1). Merger agreement required Flarion to obtain Qualcomms consent for: IP licensing agreements; acquiring or disposing of IP rights. Agreements involving obligation to pay or receive > $75,000 in a year or > $200,000 in the aggregate. Proposals to customers or prospective customers. Expanding scope of pre-existing technology deployments or committing to deliver new equipment in support of those deployments after December 31, 2005.
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- 11 DOJ: Civil Enforcement (4) Qualcomm/Flarion (cont.): Parties documents unhelpful and provided evidence that Qualcomm assumed control of operational decisions: "Bascially [sic] before we sign any new contracts we seek Q consent." Flarion Flarion was "being very careful seeking our approval on even very small operational level agreements." - Qualcomm
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- 12 DOJ: Criminal Enforcement Industrial Rapid Prototyping (IRP): Japanese firm CMET pays $100,000 fine and pleads guilty to conspiracy to obstruct justice in connection with consent decree proceedings in IRP industry. CMET applied to acquire technology license offered pursuant to decree. Charged with carrying out its conspiracy by altering translations of documents to DOJ and making misrepresentations to DOJ regarding its intent to vigorously compete if offered license. Hydrogen Peroxide and Sodium Perborates: Belgian and Dutch firms Solvay S.A. and Akzo Nobel agree to plead guilty to price-fixing and pay $40.8 million and $32 million fines, respectively. Glyphosate/Anthraquinone: Former manager of Georgia chemical manufacturer Chemical Products Technologies LLC will plead guilty to filing false tax returns and conspiracy to commit fraud in connection with kickback scheme
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- 13 DOJ: Criminal Enforcement (2) E-Rate Program Former South Carolina school district official charged with mail and wire fraud. Premio Inc. guilty plea and $1.7 million fine and restitution Military Household Goods Allied Freight Forwarding bid-rigging guilty plea and $1.043 million fine. Executive Relocation International bid-rigging guilty plea and $72,600 fine. DRAM 7 Korean executives from Samsung and Hynix pled guilty $250,000 fines, 5-8 months jail time. Ready Mixed Concrete MA-RI-IL Corp., d/b/a Beaver Materials, and 3 executives charged with price-fixing. Execs also charged with making false statements to law enforcement officials. Guilty pleas from Builders Concrete & Supply and its president.
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- 14 DOJ: Patriot Act and Antitrust March 9, 2006 amendments to the Patriot Act add criminal antitrust investigations to list that permits non-consensual bugging and wiretapping. Powerful new tool for DOJ investigators. DOJ may seek court order when there is probable cause of Sherman Act violation.
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- 15 DOJ: Bugs and Wiretaps Impact may include expansion of criminal prosecutions into areas previously seen as civil violations. Sherman Act does not differentiate between civil and criminal violations. Traditionally, DOJ has saved criminal enforcement for hard core offenses such as price-fixing, bid- rigging and market allocation.
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- 16 DOJ: Bugs and Wiretaps (2) Direct evidence, e.g., of monopolization, gained through electronic measures may encourage DOJ to pursue criminal charges for offenses that are usually addressed in civil proceedings. When put on notice of an antitrust investigation, potential targets should assume electronic eavesdropping.
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- 17 Stolt-Nielsen Sent Back Stolt-Nielsen is the very public airing of the DOJs decision to revoke S-Ns conditional amnesty that had been provided in exchange for the companys disclosure of price-fixing activity in the container shipping industry. DOJ contends that S-N failed to cease its activity promptly upon learning of it, which was 8 months prior to approaching DOJ. S-N contended that the amnesty letter was not specific on when the conduct had to have ended and that it had satisfied its conditions by ceasing the conduct as of the date of the letter.
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- 18 S-N obtained an order from the District Court, permanently enjoining an indictment because the letter was not specific on the termination date and the DOJ had gotten the benefit of its bargain, i.e., the information needed to pursue co- conspirators. DOJ appealed, arguing that the court has no jurisdiction to interfere in the indictment process and that the lower court was wrong in assessing the amnesty letter. The Third Circuit reversed and remanded, agreeing with DOJ that the courts cannot interfere with the executive branchs right to pursue indictments. Stolt-Nielsen Sent Back (2)
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- 19 Post-indictment, however, S-N can again attempt to raise the letter as a bar to trial. The 3d Circuit declined to address the merits of whether the letter provided amnesty under the circumstances. In footnote 7 to the decision, the court directed the lower court to consider the Agreement anew if the indictments are brought again. The court must determine the date the activity was discovered and any subsequent anti-competitive conduct, and whether S-N had thus taken prompt and effective action. Stolt-Nielsen Sent Back (3)
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- 20 In light of those facts, the court should determine whether S-N had taken prompt and effective action
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