Antitrust Law Daily Wrap Up, ANTITRUST NEWS: State enforcers provide update on latest multi-state actions, (Mar 27, 2014)

By Jeffrey May, J.D.

A panel of state enforcers discussed the latest state antitrust enforcement developments today at the American Bar Association Section of Antitrust Law Spring Meeting in Washington, D.C. Panelists highlighted multi-state actions taken with the federal agencies, as well as some actions brought by individual states. Victor J. Domen, Jr., Senior Antitrust Counsel at the Tennessee Attorney General’s Office, moderated the panel.

E-books case. Connecticut Assistant Attorney General Joseph Nielsen provided an update on one of the most significant victories for state enforcers over the last year—the multi-state e-books case against Apple Inc. The Department of Justice and 33 plaintiff states jointly sued Apple for engaging in a conspiracy with the major publishers to fix retail prices for e-books. Last year, after a 12-day bench trial over the course of three weeks, the federal district court in New York City concluded that Apple violated federal and state antitrust laws. A final judgment and permanent injunction was imposed on Apple.

The states are pursuing damages against the company. Nielsen, who served as a trial attorney in that matter, said that a damages trial (which does not involve the Justice Department) will not be held in May, as previously anticipated. It is more likely that the damages trial will take place in the summer, although no new trial date has been set. After the damages trial, the court may consider the states’ requests for civil penalties.

Apple has appealed the final judgment and injunction. A response from the states and Justice Department is due at the end of May. Apple has raised a number of interesting arguments, in the case, including a challenge to the constitutionality of Section 4C of the Clayton Act, Nielsen noted. Section 4C authorizes states to sue as parens patriae on behalf of their citizens for federal antitrust violations.

US Airways/American Airlines merger. Pennsylvania Senior Deputy Attorney General Jennifer Thomson discussed the federal/state challenge to the combination of US Airways and American Airlines. Thomson was one of the lead counsel for the states in matter.

Last November, the Department of Justice and the attorneys general of six states and the District of Columbia reached a proposed settlement that would resolve their challenge to the merger that would create the world’s largest airline. Thomson explained that the settlement’s divestiture obligations will facilitate entry low cost carriers and create more network opportunities. Court approval of the consent decree is scheduled for April 3.

As part of the settlement with the states, the new American will maintain historic hubs for three years. Additionally, there was an agreement to serve small airports for five years. Because hubs have been abandoned after other airline mergers, Thomson noted that Pennsylvania made these state-specific remedies enforceable by court order.

Health care acquistions. Thomson also discussed the efforts of the State of Idaho, along with the FTC and private plaintiffs, to successfully challenge St. Luke’s Health System, Ltd.’s acquisition of Saltzer Medical Group. Earlier this year, the federal district court in Boise ordered St. Luke’s—the largest health care system in Idaho—to divest Saltzer—the state’s largest independent, multi-specialty physician practice—after concluding that the 2012 acquisition violated Section 7 of the Clayton Act and the Idaho Competition Act.

Thomson also touched on a recent health care acquisition challenge in her own state. Last year, healthcare provider Geisinger Health System Foundation agreed to settle the state’s challenge to its acquisition of Lewistown Health Care Foundation and its affiliates. The state had alleged that the transaction was “likely to substantially lessen or eliminate competition in the provision of primary care physician services and primary and secondary inpatient acute care hospital services in Mifflin and Juniata Counties.”

AU Optronics decision. Also highlighted during the panel was the state enforcement victory in the U.S. Supreme Court’s decision in Mississippi v. AU Optronics Corp. Natalie Manzo, Supervising Deputy Attorney General in the Office of the California Attorney General, explained that the case is significant because it reaffirms states’ parens patriae authority, which is an important means for obtaining consumer relief. In that price fixing action filed by the State of Mississippi, the High Court ruled that the suit was not a “mass action” under the Class Action Fairness Act, even though the state sought restitution for injuries suffered by its citizens, as the defending manufacturer argued. The Court concluded that the case had to be remanded to state court.

Other state cases. Manzo discussed some recent California-specific developments. First, California has sued eBay for entering into no-solicitation and no-hire agreements with Intuit between 2006 and 2010. Manzo explained that the case against eBay is important to California because the state has strong interest in employee mobility and in the technology sector.

Also discussed were actions against two apparel manufacturers for gaining an unfair competitive advantage over American companies by using pirated software in the production of clothing imported and sold in California. The cases, one against an Indian company and the other against a Chinese company, were filed under California’s unfair competition law as they involved unilateral conduct. The state is seeking an injunction to prevent the foreign companies from bringing goods into California until the companies are in compliance with the software licensing requirements.

Nielsen also weighed in with a discussion of Connecticut’s challenge to a group boycott and bid rigging conspiracy in the snow plowing industry. The challenged conduct took place after the Town of Southbury decided to put its snow removal work out to bid and seek competitive rates. Earlier this year, three snow removal companies agreed to settle the state’s allegations over their conduct with respect contracts for snow removal. Nielsen noted that the settlement involved unique affirmative relief because the services agreed to work at pre-bid prices. He also lauded the state’s efforts to acquire evidence of the conspiracy contained in electronic communications between the providers.

News: Antitrust