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Winston & Strawn LLP © 2009 CHARLOTTE CHICAGO GENEVA LONDON LOS ANGELES MOSCOW NEW YORK NEWARK PARIS SAN FRANCISCO WASHINGTON, D.C. Antitrust Enforcement After the Rebound November 17, 2009
Winston & Strawn LLP © Overview The Rebound Will Trigger Full Enforcement The Governments Game Plan Best Practices For Companies Press Break
Winston & Strawn LLP © The Rebound Will Trigger Full Enforcement (Get Ready For An NBA-style 4 th Quarter)
Winston & Strawn LLP © Top Bailout Recipients (11/10/09) Company All Banks AIG Fannie Mae Freddie Mac GM Chrysler Industry Banking Insurance Fin. Serv. Auto Headquarters N/A NY DC Va Mich Amount (Bil.) $204.7* $69.8 $59.9 $50.7 $50.4 $12.5 ____ *$133.9 outstanding Source:
Winston & Strawn LLP © The Governments Game Plan
Winston & Strawn LLP © The Governments 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.
Winston & Strawn LLP ©
Winston & Strawn LLP © The Governments Game Plan: Specifics 1. Full-court Press On Single-firm Conduct 2. Finals Series: Congress/Agencies v. S. Ct. 3. International Help Defense
Winston & Strawn LLP © 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
Winston & Strawn LLP © Full-court Press on Single-firm Conduct Shift In Policy/Sea Change In Philosophy 9/8/08DOJs 215-page report on single-firm conduct advised caution in interfering with markets. (Under Bush.) 9/8/083 of 4 FTC commissioners called report a blueprint for radically weakened enforcement against anticompetitive practices. 5/11/09DOJ 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 DOJs Antitrust Division, )
Winston & Strawn LLP © 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: Clinton ( ) $1,880,662,000 26,892 Source: Practicing Law Institute, Corporate Compliance 2002, Antitrust Division Workload Statistics: FY Bush ( ) $2,981,971,000 96,238 Source: /workstats.htm
Winston & Strawn LLP © 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 Madisons 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 Oct 1, [Under Obama], [m]ultilateral diplomacy has regained a central position.... Dialogue and negotiations are preferred.... Statement by the Norwegian Nobel Committee about President Obama,
Winston & Strawn LLP © 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). 1. Full-court Press on Single-Firm Conduct
Winston & Strawn LLP © 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.) les/_a/bbdp/greenspan-calls- crisis-a-credit-tsunami/ Philosophical War Over Enforcement 1. Full-court Press on Single-Firm Conduct
Winston & Strawn LLP © 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. /InnovationTechnology.pdf Balance Study Conversation 1. Full-court Press on Single-Firm Conduct
Winston & Strawn LLP © 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) Obamas Plan will prohibit large drug companies from keeping generics out of markets. The Walk: Dairy IndustryDean Foods (DOJ) MainframesIBM (DOJ) Seeds/Genetically Engineered CropsMonsanto (DOJ) InternetGoogle (FTC) Computer ChipsIntel (NY AG) ( FTC likely) TelecommunicationsAT&T and Verizon (DOJ)
Winston & Strawn LLP © More Industry Regulation: The Internet
Winston & Strawn LLP © 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. A A The Walk: MediaTicketmaster/Live Nation (DOJ) HealthcareCVS/Caremark (FTC) Oracle acquisition of Sun Microsystems (DOJ cleared)
Winston & Strawn LLP © 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.
Winston & Strawn LLP © DOJ and FTCAllocation 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 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:
Winston & Strawn LLP © 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, 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 (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 marketnot pleaded Concurrence: Would instruct C.D. Cal. to grant leave to amend.
Winston & Strawn LLP © Finals Series (Congr./Agencies v. S. Ct.) Retail Price Maintenance Agreements Pay-For-Delay Settlements
Winston & Strawn LLP © Finals Series (Congr./Agencies v. S. Ct.) Resale Price Maintenance AgreementsBefore 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.
Winston & Strawn LLP © Finals Series (Congr./Agencies v. S. Ct.) Resale Price Maintenance AgreementsAfter Leegin 2007: Leegin, 127 S. Ct (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 agreements effect on competition under rule of reasoncase-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.)
Winston & Strawn LLP © Finals Series (Congr./Agencies v. S. Ct.) Resale Price Maintenance Agreements Under Obama Admin. Undoing Leegin Discount Pricing Consumer Protection Act, S 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 Status: Read twice and referred to the Committee on the Judiciary (1/6/09). Also introduced in the House as H.R in 2009, sponsored by Rep. Henry Johnson. Status: Forwarded by Subcommittee to Full Committee by Voice Vote (7/30/09).
Winston & Strawn LLP © Finals Series (Congr./Agencies v. S. Ct.) Pay-For-Delay SettlementsAgencies FTCs 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. Thats good news for the pharmaceutical industry, which will make windfall profits on these deals. But its 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.
Winston & Strawn LLP © Finals Series (Congr./Agencies v. S. Ct.) Pay-For-Delay SettlementsCongress 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 Status : House Energy and Commerce: Forwarded by Subcommittee to Full Committee (Amended) by the Yeas and Nays: (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).
Winston & Strawn LLP © Finals Series--S. Ct. Roster Justice Stevens Ginsburg Kennedy Scalia Breyer Sotomayor Thomas Alito Roberts Age Appointing President Ford Clinton Reagan Clinton Obama G.H.W. Bush G.W. Bush Year of Appointment Source:
Winston & Strawn LLP © International Help Defense Overview Privilege and waiver issues
Winston & Strawn LLP © 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.
Winston & Strawn LLP © Help Defense: New Cartel Laws In past 2 years More than 2 years ago Cartel enforcement regimes last enacted/amended: None
Winston & Strawn LLP © International Help Defense Russia/US MOU: Ex. of Accelerating Coordination Russias Federal Antimonopoly Service/DOJ & FTC More communication re policies (including periodic meetings) Coordination re enforcement
Winston & Strawn LLP © International Help Defense Privilege and Waiver Issues
Winston & Strawn LLP © Hypothetical: Privileged or Not Privileged? EE seeks legal advice of in-house counsel regarding proposed business strategy later alleged to be anticompetitive.
Winston & Strawn LLP © 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 T125/03 and T253/03,
Winston & Strawn LLP © Privileges: US, EU and China Attorney-client Work product Joint defense No privilege
Winston & Strawn LLP © Attorney-client Privilege US EUChina 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. Writings Outside counsel (some member states such as the Netherlands hold differently) Counsel admitted to an EU member state bar. No Attorney-client privilege Attorneys required to keep client information confidential and not required to disclose all information to the court. Foreign attorneys subject to same rules.
Winston & Strawn LLP © Prior Production to U.S. Government Involuntary DisclosureOnly 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.
Winston & Strawn LLP © 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
Winston & Strawn LLP © Prior Production to Foreign Government: "Sophies 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 ECs 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.
Winston & Strawn LLP © Prior Production to Foreign Government In Re Methionine Antitrust Litig., Master file no. C , Report of Special Master (N.D. Cal. June 17, 2002). Upholding privilege (siding with ECs Amicus Brief).
Winston & Strawn LLP © 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.
Winston & Strawn LLP © Best Practices For Companies Press Break
Winston & Strawn LLP © Best Practices For Companies Press Break 1.Understand Enforcement Strategies And Strengths 2.Avoid Enforcement Strengths
Winston & Strawn LLP © 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
Winston & Strawn LLP © Avoid Enforcement Strengths Play the right way Avoid the trapping hot spots
Winston & Strawn LLP © 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
Winston & Strawn LLP © 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 Sophies Choice Fight to recover seized documents Require recitals in agreements: non-waiver no further dissemination non-dissemination promise necessary to ensure cooperation with government.
Winston & Strawn LLP © "Winning Time"
Winston & Strawn LLP ©
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