Distribution, Competition, and Antitrust / IP Law

Archives for January 2014

Lithium Ion Batteries Court Addresses Illinois Brick Exception, Finds Standing for Certain Indirect Purchasers of Component Products

In In re: Lithium Ion Batteries Antitrust Litigation, 2014 U.S. Dist. LEXIS 7516 (N.D. Cal. Jan. 21, 2014) (Gonzalez Rogers, J.), the Northern District of California largely rejected a motion to dismiss an antitrust price-fixing complaint, but held that the plaintiffs had not adequately pled that they fell within a recognized exception to the Illinois Brick rule against indirect purchaser suits.

Lithium ion battery by Varta (Museum Autovisio...

Lithium ion battery by Varta (Museum Autovision Altlußheim, Germany) (Photo credit: Wikipedia)

Under Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), indirect purchasers lack standing to sue under the federal antitrust laws. There are several exceptions to the Illinois Brick rule, including the so-called Royal Printing exception (see Royal Printing Co. v. Kimberly Clark Corp., 621 F.2d 323 (9th Cir. 1980)). Under Royal Printing, indirect purchasers may sue when, inter alia, a conspiring seller owners or controls the direct purchaser.

In Lithium Ion Batteries, purchasers purchased batteries (not lithium ion battery cells) from “packers,” not from the defendant manufacturers. The court held that the complaint did not adequately allege that the defendants controlled the packers, and that influence over their business was insufficient.

Significantly, the court also rejected defendants’ argument that Royal Printing bars standing for an indirect purchaser who has purchased a price-fixed component (here, battery cells) as part of a finished product (here, batteries) from an entity owned or controlled by a conspirator. Otherwise, “[p]rice-fixers of components of complex goods . . . would be immunized.” In so holding, the court followed two other recent cases from the Northern District of California.  The court gave plaintiffs an opportunity to replead to establish that they satisfy the Royal Printing exception.

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Speaking at “Advanced Antitrust U.S.” Conference on February 6

I’m pleased to be speaking at the “Advanced Antitrust U.S.” Conference on February 6, 2014 in San Francisco.  I’ll be speaking on “Antitrust and Intellectual Property,” along with my co-panelists, Dean Pinkert, U.S. International Trade Commissioner, Greg Sivinski, Assistant General Counsel Antitrust for Microsoft, and John Scribner of Weil.

 

Another Example of Why You Should Follow the “New York Times” Rule — the Bazaarvoice Decision

Have you heard of the New York Times rule? The rule is: don’t write something down in a business communication unless you’re comfortable with its text appearing in the New York Times. If everyone followed this rule, lawyers would be substantially less busy than they are. Unfortunately for clients, employees and other stakeholders often seem to forget the rule.

And so in the recent decision in United States v. Bazaarvoice, Inc., Case No. 13-cv-00133-WHO (N.D. Cal. Jan. 8, 2014) (Orrick, J.), the Court agreed with the Department of Justice and held that Bazaarvoice violated the Clayton Act when it acquired its primary competitor, PowerReviews. (The two companies compete in the area of online commerce known as “Ratings and Reviews” platforms for e-retailers and others.) The court found the evidence that Bazaarvoice and PowerReviews expected the transaction to have anticompetitive effects was “overwhelming.” The court cited numerous internal Bazaarvoice communications – including:

  • that the transaction would enable the combined company to “avoid margin erosion” caused by “tactical ‘knife-fighting’ over competitive deals”;
  • that the acquisition was an opportunity to “tak[e] out [Bazaarvoice’s] only competitor, who . . . suppress[ed] [Bazaarvoice] price points . . . by as much as 15% . . . .”;
  • that there were “[l]iterally no other competitors,” and the acquisition would result in “[p]ricing accretion due to [the] combination” of the two firms;
  • that the executive team thought the transaction would improve “pricing power;”
  • that “taking out one of your biggest competitors can be game-changing;”
  • that a “pro” of the deal was “[e]limination of our primary competitor”; and
  • that the deal would “[c]reate[] significant competitive barriers to entry and protect[] [Bazaarvoice’s] flank.”

Even the Bazaarvoice court recognized that intent itself doesn’t prove a likelihood of competitive harm, but the court clearly thought the pre-merger intent was probative and persuasive.  It rejected Bazaarvoice’s argument that the premerger documents merely evinced competitive strengths and opportunities in adjacent markets.

If there had been no such hot documents in the case, the result might have been the same anyway. But why take the chance? You’re much better off following the New York Times rule.

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For Those in the Bay Area . . . David D. Friedman, Ph.D. talk on Ronald Coase — January 23

The University of Chicago Logo

The Chicago Economics Society Distinguished Alumni Speaker Series is hosting a talk by David D. Friedman, Professor of Law at Santa Clara University, on Thursday, January 23 at 6:00 pm at the University Club of San Francisco.

Dr. Friedman will discuss the work of the late Ronald Coase, Professor of Economics at the University of Chicago Law School and 1991 recipient of the Nobel Memorial Prize in Economics. Coase advanced legal and economic thought through his own seminal work and as the Editor of the University’s Law and Economics Journal. He is widely regarded as one of the founding scholars of the field of law and economics.

Dr. Friedman’s area of expertise ranges from business to economics to law. He has published economic analyses of punitive damages, trade-secret law, criminal punishment, the size of nations, and a variety of other topics, including medical care, population economics, the economics of war, historical perspectives on freedom, and criminal defense.

The reception begins at 6 pm and is to be followed by the presentation at 6:30 pm.

Cost is $15 per person.

Location is the University Club of San Francisco
800 Powell Street.

Non alums may use this link for ease of registration.  Alums can use this link.

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Antitrust Writing Awards Need Your Vote

The Institute of Competition Law has announced its annual Antitrust Writing Awards & Ranking for 2014.

As the Institute states:

The Academic Articles Awards reward the best articles published in peer-reviewed journals in 2013.

These Awards aim at promoting antitrust scholarship.  50 articles will be selected by the Editorial Committee by Dec. 31, 2013.  The Academic Steering Committee and the readers will nominate 16 of these articles.  The Board will elect the 8 winning articles on March 25, 2014.

You can peruse the already-nominated articles (the first stage of the competition is now closed) and vote by clicking on the link above.

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