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December 17, 2021 Feature

II. Antitrust

James F. Herbison

Over past year, despite the world coping with a global pandemic, antitrust continued to be hot topic. The most significant antitrust developments occurred with key decisions in the cable and chip manufacturing industries, as well as a continued focus on antitrust enforcement at the federal and state level, particularly against Big Technology. In addition, the U.S. Supreme Court diminished antitrust enforcement capabilities within the Federal Trade Commission (FTC) by limiting the FTC’s ability to seek restitution and disgorgement. We examine these current trends and developments, and other noteworthy decisions in the areas of telecommunications, cable and the Internet, transportation, and oil and gas.

A. General Developments Across Regulated Industries

1. Supreme Court Finds That FTC Lacks Restitution, Disgorgement Authority

On April 22, 2021, the Supreme Court unanimously overturned the Ninth Circuit’s decision in AMG Capital Management, LLC v. FTC by finding that the FTC lacked authority under §13(b) of the FTC Act to obtain court-ordered equitable relief like restitution or disgorgement.1

a. Prior History of AMG Capital Management, LLC v. FTC

The FTC originally brought a lawsuit against defendant Scott Tucker, who was accused of issuing payday loans in violation of § 5 of the FTC Act through his company, AMG Capital Management.2 The FTC asked the court to issue an injunction against Tucker to prevent future lending violations and for court-ordered restitution and disgorgement. In doing so, the FTC relied upon § 13(b) of the FTC Act, which permits the FTC to seek a “temporary restraining order or a preliminary injunction” and “in proper cases” to obtain a “permanent injunction.”3 Although § 13(b) does not expressly provide for equitable relief, § 5(l) and § 19 of the FTC Act do authorize district courts to award civil penalties against potential respondents.4 However, such relief under § 5(l) and § 19 requires that the respondent violated a final cease and desist order from the FTC.5 Despite these statutory requirements, the FTC has brought “dozens of [§13(b)] cases every year seeking a permanent injunction and the return of illegally obtained funds,” including in multiple antitrust cases.6

The district court granted summary judgment in favor of the FTC and ordered Tucker to pay $1.27 billion in restitution and disgorgement.7 Tucker appealed the decision to the Ninth Circuit and argued that § 13(b) does not authorize the monetary relief that the district court ordered.8 However, the Ninth Circuit rejected this argument based on its prior precedent holding that § 13(b) “empowers district courts to grant any ancillary relief necessary to accomplish complete justice, including restitution.”9 Tucker subsequently appealed the decision to the Supreme Court.

b. The Supreme Court’s Reversal of the Ninth Circuit’s Decision

The Supreme Court first conducted a statutory construction analysis of § 13(b), noting that the express language of the statute did “not authorize the [FTC] directly to obtain court-ordered monetary relief.”10 Moreover, the Court held that monetary relief could not be implied by the statute because the provision as a whole “focuses on relief that is prospective, not retrospective.”11 Finally, the Court found the fact that Congress conditioned monetary penalties on certain administrative proceedings (e.g., cease and desist orders) in § 5(l) and § 19 to indicate that Congress “likely did not intend for § 13(b)’s more cabined ‘permanent injunction’ language to have a similarly broad scope.”12

Thus, the Court held that the FTC could not bypass the administrative proceeding requirements in the FTC Act to obtain monetary relief.13 With its decision, the Court also resolved a circuit split on the issue by affirming the Seventh Circuit’s ruling in FTC v. Credit Bureau Center, which also held that § 13(b) did not provide for monetary relief and which was combined with AMC Capital Management during oral argument at the Supreme Court.14

B. Developments in Telecommunications, Cable, and the Internet

1. Ninth Circuit Reverses FTC’s Win on Qualcomm’s Allegedly Anticompetitive Licensing Practices

a. History of FTC v. Qualcomm Inc. Litigation

Qualcomm Inc. has spent several years embroiled in litigation related to its “no license, no chips” policies. Qualcomm manufactures modem chips and licenses the patents related to those chips. Its customers, rivals, and the FTC have all questioned the legality of Qualcomm conditioning the purchases of its chips on the simultaneous licensing of its standard essential patents (SEPs). If chip purchasers did not agree to licensing the SEPs, they would risk a patent infringement suit.

The FTC first notified Qualcomm of its investigation in September 2014 and filed a complaint in federal court in January 2017.15 In May 2019, the U.S. District Court for the Northern District of California ruled in favor of the FTC after finding that Qualcomm used contracts with critical customers to exclude its rivals from the market. The district court issued a permanent injunction against Qualcomm that, among other things, prohibited Qualcomm from conditioning the supply of modem chips on the customer’s purchase of a license.16 Qualcomm appealed the decision to the Ninth Circuit and won a partial stay against the injunction pending the status of its appeal.17

b. The Ninth Circuit’s Reversal of the District Court’s Decision

In August 2020, the Ninth Circuit unanimously overturned the district court’s decision by rejecting the district court’s expansive interpretation of antitrust laws, vacating the judgment, and reversing the injunction against Qualcomm.18 First, the Ninth Circuit found that the FTC failed to meet its burden under the rule of reason analysis to show that Qualcomm’s licensing process at the original equipment manufacturer level constituted anticompetitive practices in violation of the Sherman Act.19

Second, the Ninth Circuit found that the district court “erred in holding that Qualcomm is under an antitrust duty to license rival chip manufacturers” based on the Aspen Skiing test, which established a general duty to deal with competitors.20 Specifically, the Ninth Circuit found that the elements of the Aspen Skiing test were not met because (1) the FTC failed to show evidence of a prior course of dealing; (2) Qualcomm’s licensing practices were more profitable in both the short and long term; and (3) no evidence existed that Qualcomm singled out any chip supplier for anticompetitive conduct.21

Next, the Ninth Circuit rejected the FTC’s claim that Qualcomm violated § 2 of the Sherman Act by virtue of its alleged breach of its contractual commitments to deal with its rivals as a part of its SSO process.22 The court found that Broadcom Corp. v. Qualcomm Inc., which established that a private breach of contract can constitute an antitrust violation, failed to apply in this case because no evidence existed that Qualcomm “intentionally deceived” SSOs.23 Furthermore, the court cited to “persuasive policy arguments” that “have expressed caution about using the antitrust laws to remedy what are essentially contractual disputes between private parties engaged in the pursuit of technological innovation.”24 Thus, the court declined to adopt an additional exception to “the general rule that ‘businesses are free to choose the parties with whom they will deal, as well as the prices, terms, and conditions of that dealing.’”25 Finally, the Ninth Circuit found that that “exclusive deals” between Qualcomm and Apple Inc. did not warrant the issuance of an injunction because, in part, “it is undisputed that these agreements do not pose any current or future threat of anticompetitive harm.”26

After the Ninth Circuit’s decision, the FTC filed for a rehearing en banc, which was subsequently denied.27 In the wake of this decision, the Acting Chairwoman of the FTC, Rebecca Kelly Slaughter, stated that the FTC was facing “significant headwinds” in this matter and would not appeal the Ninth Circuit’s ruling.28

2. Seventh Circuit Reverses District Court’s Ruling in Favor of Comcast Based on Aspen Skiing Test

a. History of the Viamedia, Inc. v. Comcast Corp. Litigation

Viamedia, Inc. v. Comcast Corp. originated after Comcast cut off access to regional “Interconnects” that form a critical component of cable companies’ ability to secure advertising revenue.29 After decades of acquiring local cable companies, Comcast became the country’s dominant cable provider and then restricted access to the Interconnects by requiring that its cable competitors (e.g., RCN, WOW!) fire their existing ad representative, Viamedia, and turn over all ad-rep services to Comcast.30

As a result, Viamedia filed suit against Comcast in the U.S. District Court for the Northern District of Illinois, alleging that Comcast’s conduct violated § 2 of the Sherman Act.31 However, in the Northern District, Judge Amy J. St. Eve dismissed Viamedia’s antitrust claims based on insufficient evidence indicating that Comcast engaged in an anticompetitive “tying arrangement”32 and that, even if anticompetitive conduct occurred, Viamedia failed to show that it sustained any injury or damages.33

b. The Seventh Circuit’s Reversal of the Northern District’s Decision

In February 2020, the Seventh Circuit reversed the Northern District’s decision granting Comcast summary judgment after finding ample evidence to suggest that Comcast’s restrictions of the Interconnects constituted sanctionable conduct under § 2 of the Sherman Act based on the Supreme Court’s framework in Aspen Skiing.34 Despite the Supreme Court’s caution that Aspen Skiing was “at or near the outer boundary of [§ 2] liability,” the Seventh Circuit determined that the facts of the case were so similar that “unless the Court meant to limit Aspen Skiing to ski resorts, we see no sound basis to distinguish Viamedia’s case as a matter of law.”35

With respect to Viamedia’s tying claims, the Seventh Circuit found that “Viamedia has offered sufficient evidence that Comcast illegally the tied purchase of its ad rep services to the Interconnect access it already controlled.”36 In response, Comcast alleged that the control of the Interconnects and ad-rep services market was a result of a “misunderstanding” between it and its competitors.37 Thus, the Seventh Circuit held that, while Comcast could offer such a misunderstanding theory at trial, it was insufficient alone to support summary judgment.38 The Seventh Circuit subsequently denied Comcast’s request for a rehearing en banc on April 7, 2020. Comcast appealed the decision to the Supreme Court which denied certiorari on June 28, 2021.39

3. Congressional Efforts to Aid Antitrust Enforcement by State Attorneys General

On May 25, 2021, Senator Mike Lee (R. Utah) and Senator Amy Klobuchar (D. Minnesota) introduced the State Antitrust Enforcement Venue Act of 2021, SIL21612.40 In conjunction with the Senate bill, Representative Ken Buck (R. Colorado) introduced an identical companion bill in the House, H.R. 3460.41 Both bills are targeted at ensuring that state attorneys general are able to keep antitrust enforcement actions in their respective states, as opposed to having them removed to a court more preferable to the defendant.42 Specifically, both bills would grant states the same exemption from the Judicial Panel on Multidistrict Litigation (JPML) that currently applies to antitrust actions brought by the United States and would ensure that antitrust enforcement actions stay in the court where they were filed.43

The Senate and House bills also come after antitrust subcommittees in both chambers received a letter on May 10, 2021, from a bipartisan coalition of forty-five state attorneys general requesting additional funding to aid antitrust enforcement at the state level.44 In the letter, the attorneys general state that “antitrust policy is at a pivotal moment” and specifically express concerns of “extreme concentrations of market power amassed by firms in technology industries.”45 Additionally, the attorneys general claim that there is precedent for Congress aiding state antitrust enforcement, citing to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the Crime Control Act of 1976.46

4. Recent Antitrust Litigation Against Big Tech Firms

a. District of Columbia’s Antitrust Suit Against Amazon

On May 25, 2021, the Attorney General for the District of Columbia filed an antitrust lawsuit against Amazon.com, Inc. in the D.C. Superior Court.47 The complaint alleges that, up until at least 2019 in the United States, Amazon’s agreements with third-party sellers (TPS) precluded TPS from selling their products on competing online retail sales platforms.48 The D.C. Attorney General also alleges that these so-called “platform most favored nation agreements” (PMFN) constituted an anticompetitive restraint of trade that “artificially raised the price of goods to consumers across the online retail sales market.”49

b. Private Antitrust Suit Against Google

On May 13, 2021, the U.S. District Court for the Northern District of California dismissed a class action antitrust lawsuit brought against Google for allegedly monopolizing the markets for search and display advertising.50 According to the court, the plaintiffs’ proposed market improperly included services for both advertisers and publishers and excluded alternative means of accessing online display advertising.51 Thus, the court dismissed the plaintiffs’ claim with leave to amend.52

C. Developments in Transportation

There are no recent developments to report in this area.

D. Developments in Oil and Gas

1. FTC Requires Fuel Asset Divestiture in Acquisition

Casey’s General Stores, Inc. sought to acquire fuel outlets and other interests from Bucky’s Intermediate Holdings within seven markets across the following three cities: Omaha, Nebraska; Papillion, Nebraska, and Council Bluffs, Iowa.53 However, according to the FTC’s complaint, these acquisitions would greatly diminish competition for gasoline and diesel fuel in those markets and would violate the Clayton Act and the FTC Act.54 Thus, the FTC ordered that Casey’s divest six retail fuel outlets (three Casey’s outlets and three Bucky’s outlets) within ten days from completion of the acquisition, to which both Casey’s and Bucky’s agreed.55

E. Developments in Electrical Power, Nuclear, and Renewable Energy

1. First Circuit Rejects Claim That Energy Companies Manipulated Pipeline Capacity and Inflated Prices Based on Filed-Rate Doctrine

On September 9, 2020, the First Circuit affirmed the dismissal by the U.S. District Court for the District of Massachusetts of plaintiff PNE Energy Supply LLC’s claim that defendants Eversource Energy and Avangrid, Inc. violated federal antitrust laws for manipulation in gas transmission markets.56 PNE Energy Supply v. Eversource Energy stemmed from a 2017 report by a group of economists working with the Environmental Defense Fund that estimated that defendants increased electricity prices in New England by about twenty percent from 2013 to 2016 by buying up and refusing to release excess transmission capacity on the Algonquin pipeline.57 PNE Energy Supply is a wholesale energy purchaser that filed the lawsuit on behalf of other similarly situated energy purchasers.58

PNE Energy Supply’s lawsuit came on the heels of a similar suit arising out of the same conduct, Breiding v. Eversource Energy, which was brought by a group of electricity-end consumers who also alleged that Eversource violated federal and state antitrust laws.59 In Breiding, the First Circuit affirmed the dismissal of the electricity consumers’ suit because defendants acted pursuant to a tariff approved by the Federal Energy Regulatory Commission (FERC).60 Specifically, the court relied upon the “filed-rate doctrine,” which defers to the “rate setting authority of an administrative agency, like FERC.”61

In PNE Energy Supply, LLC, the First Circuit found that, despite the differences between plaintiffs in both cases, the logic of Breiding still controlled.62 As such, defendants’ conduct was protected by the filed-rate doctrine, which barred PNE Energy Supply’s antitrust liability claims.63

Endnotes

1. AMG Capital Mgmt., LLC v. FTC, 141 S. Ct. 1341 (2021).

2. Id. at 1345.

3. Id. at 1346.

4. Id.

5. Id.

6. Id. at 1347.

7. FTC v. AMG Servs., No.: 2:12-cv-00536-GMN-VCF, 2016 U.S. Dist. LEXIS 135765 (D. Nev. Sept. 30, 2016).

8. FTC v. AMG Cap. Mgmt., LLC, 910 F.3d 417 (9th Cir. 2018).

9. Id. at 426 (quoting FTC v. Commerce Planet, Inc., 815 F.3d 593, 598 (9th Cir. 2016)).

10. AMG Cap. Mgmt., LLC, 141 S. Ct. at 1347.

11. Id. at 1348.

12. Id. at 1349.

13. Id. at 1352.

14. See FTC v. Credit Bureau Ctr., LLC, 937 F.3d 764 (7th Cir. 2019).

15. FTC v. Qualcomm Inc., 411 F. Supp. 3d 658, 675 (N.D. Cal. May 21, 2019).

16. Id. at 820–21.

17. FTC v. Qualcomm Inc., 935 F.3d 752, 757 (9th Cir. 2019).

18. FTC v. Qualcomm Inc., 969 F.3d 974 (9th Cir. 2020).

19. Id. at 996.

20. Id. at 995.

21. Id. at 993–95.

22. Id. at 997.

23. Id. at 996.

24. Id. at 997.

25. Id. (citing Pac. Bell Tel. Co. v. linkLine Commc’ns Inc., 555 U.S. 438, 448 (2009)).

26. Id. at 1005.

27. FTC v. Qualcomm Inc., No. 19-16122, 2020 U.S. App. LEXIS 34011 (9th Cir. Oct. 28, 2020).

28. Statement by Acting Chairwoman Rebecca Kelly Slaughter on Agency’s Decision Not to Petition Supreme Court for Review of Qualcomm Case, FTC (Mar. 29, 2021), https://www.ftc.gov/news-events/press-releases/2021/03/statement-acting-chairwoman-rebecca-kelly-slaughter-agencys.

29. Viamedia, Inc. v. Comcast Corp., 951 F.3d 443–49 (7th Cir. 2020).

30. Id. at 444–46.

31. Viamedia, Inc. v. Comcast Corp., 335 F. Supp. 3d 1036 (N.D. Ill. 2018).

32. A “tying arrangement is ‘an agreement by a party to sell one product by only on the condition that the buyer also purchases a different (or tied) product, or at least agrees that he will not purchase that product from any other supplier.’” Id. at 1057 (citing Eastman Kodak Co. v. Image Tech. Servs. Inc., 504 U.S. 451, 461–62 (1992)).

33. Viamedia, Inc., 335 F. Supp. 3d at 1057, 1069.

34. Viamedia, Inc., 951 F.3d at 434.

35. Id. at 458–59.

36. Id. at 467.

37. Id. at 474.

38. Id.

39. Comcast Corp. v. Viamedia, Inc., No. 20-319, 2021 WL 2637989 (U.S. June 28, 2021).

40. Press Release, Mike Lee U.S. Senator for Utah, Lee, Klobuchar Introduce Bill to Empower State Antitrust Enforcers (May 25, 2021), https://www.lee.senate.gov/public/index.cfm/press-releases?ID=BF817B16-7CE1-4EF6-8C8E-1EE247B625D6.

41. Id.

42. Id.

43. Id.

44. Letter from the National Association of Attorneys General to Amy Klobuchar and David N. Cicilline, Chairs of Senate Subcommittee on Competition, Policy, Antitrust, and Consumer Rights & Michael Lee and Ken Buck, Ranking Members of House Subcommittee on Competition Policy, Antitrust, and Consumer Rights (May 10, 2021), https://ag.ny.gov/sites/default/files/support_for_antitrust_federal_funding_-_final_naag_letter_final.pdf.

45. Id.

46. Id.

47. Complaint, District of Columbia v. Amazon.com, Inc., (D.C. Super. Ct. May 25, 2021), available at https://oag.dc.gov/sites/default/files/2021-05/Amazon-Complaint-.pdf.

48. Id. at 1–2.

49. Id. at 2.

50. In re Google Digital Advertising Antitrust Litigation, No. 20-cv-03556-BLF, 2021 U.S. Dist. LEXIS 98044 (N.D. Ca. May 13, 2021).

51. Id. at *8–11.

52. Id. at *21.

53. Complaint at 2–3, Casey’s General Stores, Inc., FTC No. 221-0028 (2021), available at https://www.ftc.gov/system/files/documents/cases/211-0028_complaint_final.pdf.

54. Id. at 3–4.

55. Decision and Order, Casey’s General Stores, Inc., F.T.C. No. 221-0028 (2021).

56. PNE Energy Supply LLC v. Eversource Energy, 974 F.3d 77 (1st Cir. 2020).

57. Id. at 78–79.

58. Id.

59. Id.; see Breiding v. Eversource Energy, 344 F. Supp. 3d 433, 444 (D. Mass. 2018), aff’d, 939 F.3d 47 (1st Cir. 2019).

60. Breiding, 939 F.3d at 52–56.

61. PNE Energy Supply, 974 F.3d at 81.

62. Id. at 82–87.

63. Id.

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James F. Herbison

James F. Herbison is a Partner at Winston & Strawn LLP in Chicago office. He is chair of the Antitrust Committee.