The coming year is poised to be a critical and exciting year for antitrust law. The U.S. Supreme Court is due to rule on no less than four antitrust cases this year. Government enforcement continues to be on the rise and private litigation is surging again. This article highlights some of the cases to watch in 2013 that will shape the antitrust landscape.
In November, the Supreme Court heard arguments in the Federal Trade Commission’s bid to block Phoebe Putney Health System’s $195 million acquisition of Palmyra Park Hospital. While the U.S. Court of Appeals for the Eleventh Circuit agreed with the FTC’s assertion that the acquisition would result in a monopoly, the court held that the acquisition was protected by the state action doctrine. The state action doctrine gives states and state agencies federal antitrust immunity under certain conditions. The FTC had argued that the transaction should not receive such immunity because the transaction involved two hospitals that were essentially privately run. The Eleventh Circuit’s decision created a circuit split regarding the state action doctrine and the Supreme Court’s decision will clarify the use (or abuse) of this increasingly used defense.
While the Supreme Court’s ultimate decision in FTC v. Phoebe Putney Health System, No. 11-1160, will center on the state action doctrine, the decision may shed light on the Supreme Court’s view of some of the monumental shifts in merger review analysis that have taken place since the Supreme Court’s last landmark ruling regarding mergers in 1974, United States v. General Dynamics, 415 U.S. 486 (1974). For example, the U.S. Department of Justice and FTC Horizontal Merger Guidelines are now in place, which instituted the use of the Herfindahl-Hirschman Index to value changes in concentration caused by mergers and acquisitions. The guidelines have been periodically revised to demonstrate the shift in focus of regulators when analyzing transactions. Regulators now consider ease of entry into the market when analyzing a merger. Regulators are arguing narrower relevant markets in their analysis. These are but a few of the dramatic changes in the merger field, none of which have ever been examined by the Supreme Court, until now.
In addition to the high-profile Phoebe Putney case, the Supreme Court recently agreed to weigh in on the extremely active and controversial issue of pay-for-delay agreements in the pharmaceutical world. In December, the Supreme Court granted certiorari in FTC v. Watson Pharmaceuticals, No. 12-416. The Supreme Court has, for years, passed on reviewing pay-for-delay settlement agreements, but with a clear circuit split resulting from recent decisions, the court decided the time had come for guidance from the court. In Watson, the Eleventh Circuit rejected the FTC’s challenge to a pay-for-delay agreement between Solvay Pharmaceuticals Inc. and Watson Pharmaceuticals regarding the drug AndroGel. The Eleventh Circuit held that such agreements are generally legal if they do not exceed the scope of the patent. Shortly after the Eleventh Circuit’s decision in Watson, the Third Circuit issued its decision in In re K-Dur Antitrust Litigation, 686 F.3d 197 (3rd Cir. July 16, 2012). The Third Circuit rejected the scope of the patent test and held that such agreements are presumptively anticompetitive. The Supreme Court has not yet ruled on the petition for certiorari in K-Dur, and may just rule in Watson to address the circuit court decision. The Supreme Court’s decision in Watson will either open the door to challenges of pay-for-delay agreements or slam it shut. Either way, the decision will have a huge impact on the billion-dollar pharmaceutical world.
In addition, the Supreme Court has the opportunity this year to further limit civil antitrust litigation and class actions, which some argue has gotten excessive to the point of being abusive. In November, the Supreme Court heard argument in Comcast v. Behrend, No. 11-864,on the limited issue of how closely judges must examine expert damages testimony before granting class certification. In recent years, the courts have raised the bar for bringing class action lawsuits, including in the area of antitrust, and this decision could raise the bar even higher. Depending on what the Supreme Court says about the issue, it could be even more difficult for plaintiffs attorneys to get classes certified. The Supreme Court is also set to rule on American Express v. Italian Colors Restaurant, No. 12-133, another case involving class action issues. Specifically, the Second Circuit ruled that American Express could not force merchants’ claims into arbitration, even though the merchants’ contracts with American Express contain class action waivers. Depending on the high court’s ruling, the decision could serve to further limit antitrust class actions.
The Supreme Court isn’t the only government body set to have a big impact on the antitrust world. Government agencies are continuing to aggressively pursue enforcement of the antitrust laws. The DOJ is in the middle of its “biggest ever” cartel investigation of the auto parts industry. A number of foreign auto parts producers have already pled guilty and paid hundreds of millions of dollars in fines and a dozen executives have already pled guilty. The DOJ is also litigating several major antitrust cases, including United States v. Apple. While the case involves one of the oldest antitrust issues — price-fixing — it also involves allegations of a hub-and-spoke conspiracy, which is a somewhat rare but increasingly common antitrust issue. The government alleges that the companies colluded to fix e-book prices through one central “hub” but did not work directly together.
With the recent closure of the Google investigation, many are wondering where the FTC will focus its efforts next. With the confirmation of Josh Wright as the newest commissioner at the FTC, many are speculating whether or not the commission will continue to push the bounds of Section 5 of the FTC Act. One thing is clear, however. The FTC will continue its aggressive pursuit of enforcement of the antitrust laws. It is simply a question of who will be its next target.
With continued increased government enforcement and four antitrust cases pending before the Supreme Court, 2013 promises to be a landmark year in antitrust. Stay tuned. •
Carl W. Hittinger is the chairman of DLA Piper’s litigation group in Philadelphia, where he concentrates his practice in complex commercial trial and appellate litigation with a particular emphasis on antitrust and unfair competition matters. He can be reached at 215-656-2449 or firstname.lastname@example.org.
Lesli C. Esposito is a partner with the firm in Philadelphia, where she focuses her litigation practice on antitrust and unfair competition matters. She was formerly a senior attorney with the Federal Trade Commission’s bureau of competition.