2. Google Reaches Settlement in Play Store Antitrust Lawsuit
Google has reached a tentative agreement to settle a class action lawsuit brought by 30 states representing 21 million consumers claiming that its Play Store violated U.S. antitrust laws by overcharging customers. The news comes shortly after the U.S. Court of Appeals for the Ninth Circuit’s order on August 31, 2023, remanding Google’s appeal challenging class certification following the District Court’s exclusion of an expert opinion underlying that certification.
The decision marks an abrupt change for U.S. District Court Judge James Donato, who originally credited plaintiffs’ expert’s opinions when granting class certification. However, on August 28, 2023, Judge Donato concluded that the class should be decertified after a new expert for Google successfully poked holes in the plaintiffs’ expert’s accounting for how Google’s developer fees would be passed through to consumers. Details of the proposed settlement agreement have not yet been revealed.
3. Google Continues to Face Legal Challenges Over its Ad and Search Businesses
In an unsealed order on August 4, 2023, U.S. District Judge Amit P. Mehta ruled that the U.S. Department of Justice’s (“DOJ”) allegations that Google anticompetitively monopolized online search and search advertising were sufficient to overcome summary judgment and proceed to trial. Specifically, the DOJ alleges that Google’s web of contracts with phone makers like Samsung, developers like Mozilla and Apple, and wireless carriers like Verizon have given its search engine a monopoly in violation of federal antitrust laws. While Judge Mehta rejected the DOJ’s attempt to aggregate all of Google’s conduct, irrespective of whether it was anticompetitive or not, he found that there was at least a “genuine dispute of material fact as to whether Google’s browser agreements are, at least, de facto exclusive.”
The case is set to proceed to trial and coincides with other legal challenges that Google is facing over different aspects of its business model. In June 2023, Google filed an emergency motion to prevent the transfer of a case from state enforcers alleging antitrust violations regarding Google’s online advertising from the Southern District of New York to the Eastern District of Texas. The challenge had been consolidated with similar private cases in a multidistrict litigation in the SDNY, but state enforcers sought to transfer it back to the Eastern District of Texas, where the case was originally filed, in order to speed up the proceedings with an “expeditious trial date” sometime next year. Google plans to appeal the transfer at the Second Circuit Court of Appeals.
4. Apple Pauses Loss in Suit with Epic Pending Supreme Court Appeal
On July 17, 2023, the U.S. Court of Appeals for the Ninth Circuit agreed to stay their mandate, which affirmed their decision that Apple violated California’s anti-steering provisions by prohibiting app developers from steering users to alternative payment methods. The stay gives Apple 90 days to file a petition for writ of certiorari to the U.S. Supreme Court and delays enforcement of the district court’s injunction prohibiting Apple from enforcing its anti-steering rules against any developer, not just Epic. Despite granting the stay, the Ninth Circuit criticized Apple’s motion as making false and incorrect arguments regarding the scope of the injunction.
The dispute originated in August 2020, when Epic, the developer of the popular video game Fortnite, alleged that Apple monopolized distribution of apps on its devices, blocked competing app stores, and required use of Apple’s own in-app payment system. After a 10-day bench trial, a U.S. District Court rejected most of Epic’s claims, finding that Apple did not violate federal antitrust laws but that Apple’s anti-steering rules did violate California’s unfair competition law. The Ninth Circuit largely affirmed the District Court's ruling in April 2023 and denied rehearing bids from both parties in June 2023.
5. District Court Rejects FTC’s Challenge to Microsoft-Activision Merger
On July 11, 2023, the U.S. District Court for the Northern District of California refused the Federal Trade Commission’s (“FTC”) request for a preliminary injunction to block the proposed merger between Microsoft and gaming developer Activision Blizzard, rejecting nearly every aspect of the FTC’s challenge to the merger and likely doomed the FTC’s efforts to challenge the merger permanently.
A key dispute surrounding the proposed merger stemmed from the FTC’s allegations that the new combined entity would restrict the availability of Activision’s popular game—Call of Duty—to owners of Microsoft’s Xbox gaming console, harming potential users of a Sony PlayStation or Nintendo Switch. However, the court soundly rejected this argument because, while Microsoft may theoretically have the “ability” to foreclose competition, the court found no incentive and no factual evidence to support that Microsoft actually intended to do so. Further, the court found that the proposed merger may actually result in increased availability of Activision’s content on cloud-streaming services, which would “enhance, not lessen, competition in the cloud-streaming market.”
The court also rejected the FTC’s proposed burden that it only need to show the merger could harm competition, instead finding that the Clayton Act required the FTC to show that competition would be “substantially” harmed. Here, the FTC largely relied on the testimony of PlayStation CEO Jim Ryan, who opposed the merger. The court recognized that while the merger could be bad for PlayStation, who currently has an exclusive marketing agreement for Call of Duty with Activision, it would be “good for Call of Duty gamers and future gamers.”
Although the FTC could still pursue its existing in-house challenge, the FTC traditionally closes its own in-house case if it is denied an injunction. Finally, Microsoft’s commitments that it intended to make Activision products available to other gaming providers were also sufficient to satisfy antitrust concerns from the European Union and helped bring U.K. regulators back to the bargaining table after moving to block the same merger earlier this year.
B. Developments in Utilities, Electrical Power, Nuclear, and Renewable Energy
1. Supreme Court Allows Federal Courts to Hear Agency Enforcement Proceedings
In April 2023, a unanimous U.S. Supreme Court ruled that challenges to in-house agency enforcement proceedings could be heard in federal court before administrative appeals are completed. In doing so, the Supreme Court sided with plaintiffs in two cases, Axon Enterprise Inc. v. U.S. Federal Trade Commission and Michelle Cochran v. U.S. Securities and Exchange Commission. Historically, many companies have felt that enforcement by the Federal Energy Regulatory Commission could take years to appeal, deprived them of a right to a jury trial, and was designed to reach a pre-arranged outcome. Now, the Court’s ruling paves the way for parties to go straight to federal courts and avoid costly and lengthy proceedings before administrative judges at FERC.
2. Texas Court Rulings Continue in Winter Storm Fallout
In March 2023, a Texas appeals court held that the Public Utility Commission of Texas overstepped when it capped the price of energy at $9,000 per megawatt-hour in the first days of Winter Storm Uri in 2021. The panel found that “[i]n extreme circumstances under extraordinary pressure, the commission exceeded its power by eliminating competition entirely.” The court’s order directs the Commission to reprice transactions that occurred under the pricing order, which may have overcharged electric companies by $16 billion and forced some companies into debt and bankruptcy. If left standing, the court’s order would effectively mean that the Commission cannot place a market cap on electricity and must let the price be determined by market competition. The decision has been appealed to the Texas Supreme Court.
Separately, in June 2023, the Texas Supreme Court held in a split decision that the Energy Reliability Council of Texas could not be sued for alleged overpricing during Winter Storm Uri. The Court held that, despite ERCOT being a private entity, it operates like a state agency and has sovereign immunity from tort claims. The Court’s decision dismissed two lawsuits claiming ERCOT was liable for misleading investment in power plant construction and improperly keeping energy prices high.
3. Duke Energy Responds to Antitrust Allegations Against It at the Fourth Circuit
Duke Energy Corp., a North Carolina energy giant, filed its opposition brief with the U.S. Court of Appeals for the Fourth Circuit in May 2023, responding to antitrust allegations brought against it by Florida-based NTE Energy. The dispute stems from a multimillion-dollar interconnection agreement where NTE paid Duke for access to power lines to reach customers in North Carolina. However, after both parties got into a bidding war with the city of Fayetteville’s Public Works Commission and Duke won, NTE stopped making payments pursuant to their agreement and a lawsuit ensued.
In the subsequent lawsuit, the U.S. District Court for the Western District of North Carolina sent NTE’s breach of contract, unjust enrichment, and other claims to trial in June 2022, while at the same time dismissing NTE’s antitrust and unfair competition claims. The district court held that NTE appeared to be using antitrust claims to make up for its inability to compete with Duke and wrote that NTE wants to “use these laws not as the shield they are intended to be but as a sword to ensure their own success where the market hasn’t fully rewarded their labor.” NTE appealed to the Fourth Circuit, claiming, in part, that the district court failed to consider evidence of Duke’s anticompetitive conduct. However, Duke responded that abandoning a contract where NTE refused to pay and granting a price break to the Fayetteville Public Works Commission were not antitrust violations or predatory pricing but, instead, “the essence of competition.”
4. U.S. Grid Operator Settles Suit Over Power Outages During Winter Storm
On September 1, 2023, a settlement judge indicated that PJM Interconnection LLC, the largest power grid operator in the U.S., had agreed to settlements in principle with “a majority” of the 13 separate power plant owners that received fines from PJM for not operating during Winter Storm Elliott in 2022. The power plant owners originally filed complaints after PJM levied between $1 billion and $2 billion in penalties for failure to operate. According to the owners, the penalties were invalid because their lack of operations were caused by Winter Storm Elliott and outside of their control. As a result of the settlements, the settlement judge has also called for an end to settlement procedures initiated by the Federal Energy Regulatory Commission that began in early summer 2023. The final terms of the settlements are expected to be made public in late September 2023.
C. Developments in Transportation
1. Airline Merger Grounded
On May 19, 2023, a Massachusetts federal court struck down the proposed “Northeast Alliance” between American Airlines and JetBlue Airways, finding that it improperly stifled competition in an already heavily consolidated airline industry. U.S. District Judge Leo T. Sorokin issued the decision in favor of the DOJ and enforcers from six other states, finding that the proposed Alliance “is just the sort of ‘unreasonable restraint on trade’ the Sherman Act was designed to prevent.” Specifically, Judge Sorokin wrote “there is simply no credible evidence that American and JetBlue have continued to treat each other as competitors” and any claimed benefits arising from the Northeast Alliance simply come from “a naked agreement not to compete with one another.”
Although not technically a merger, the proposed Northeast Alliance entailed code-sharing, slot swaps, new international and domestic routes, and better schedules that both airlines claimed would benefit travelers in the greater Boston and New York areas. In early 2021 at the tail end of the Trump administration, the Department of Transportation (“DOT”) approved the proposed Alliance after securing commitments from both airlines to divest routes and slots at airports in New York and Washington D.C.. However, the Biden-era DOT reversed course, issuing a statement that there was “no divergence between the [DOT] and the [DOJ] when it comes to promoting competition in the airline industry” and rejecting the suggestion by the airlines that it came to a different conclusion than the DOJ regarding the Northeast Alliance as “not true.” Regardless, Judge Sorokin only addressed the DOT findings once in his opinion, mentioning in a footnote that the commitments actually “magnify[y] the competitive harms.”
After the May 19 decision, JetBlue announced it would be pulling out of the Alliance and would not appeal Judge Sorokin’s decision. American, however, announced its intent to “move forward with an appeal” based on its “belief that the [Northeast Alliance] has been highly pro-competitive and that an erroneous judicial decision disregarding the [Alliance’s] consumer benefits has led to an anticompetitive outcome.”
2. DOJ Loses Bid to Monitor Airlines
Despite successfully shutting down the proposed Northeast Alliance in May 2023, the DOJ lost its bid to monitor American Airlines and JetBlue for continued compliance for the next five years. U.S. District Judge Leo Sorokin found that, in light of the airlines’ termination of their proposed Northeast Alliance, there was no need for monitoring of their compliance by a trustee. The DOJ had argued that the five-year period was necessary because the airlines continue to relitigate the Northeast Alliance issue, but Judge Sorokin ordered that a final injunction would only require “substantial compliance” by the airlines with any future civil investigative demand by the government.
Judge Sorokin also rejected the DOJ’s proposal that would bar either airline from entering new agreements with other airlines that are similar to the Northeast Alliance and would require a notice and waiting period prior to entering any new agreements with those carriers. In doing so, Judge Sorokin appeared to side with the airlines, who argued that the government’s proposal went too far and would hinder the two airlines’ ability to compete in the industry.
3. JetBlue Continued Attempts to Appease Regulator Concerns over Spirit Acquisition
JetBlue Airways has been quite active in the past few months. Aside from its dealings with American Airlines, JetBlue recently struck yet another deal aimed at fixing concerns raised by DOJ and state enforcers over its planned $3.8 billion purchase of Spirit Airlines by agreeing to unload Spirit’s operations at airports in Boston and New Jersey to Allegiant. This deal would also transfer gates and ground facilities in Fort Lauderdale to Broward County for use by Allegiant. This transaction comes as the DOJ and several state enforcers are set for trial in October 2023 on claims that JetBlue’s merger with Spirit will hurt passengers who rely on ultra-low-cost carriers by facilitating collusion between JetBlue and its airline rivals post-merger.
Previously, in June 2023, JetBlue announced a deal to divest six gates and 22 takeoff and landing slots at New York’s LaGuardia Airport to Frontier Airlines and still another deal with the State of Florida to resolve concerns raised there through agreements to increase capacity and add more than 2,000 jobs in the state. The DOJ has dismissed JetBlue’s divestiture proposals in the past as “speculative” given the high barriers to entry for new airlines to enter a market and because divestiture plans of routes do not actually happen – which means competition lost to the merger would not be restored.
4. Gig Economy Companies’ Fight over Worker Classification Continues in California
In March 2023, a unanimous U.S. Court of Appeals for the Ninth Circuit panel revived a constitutional challenge to California’s A.B. 5 law by finding that it was rooted in “animus rather than reason” when determining whom the law applied to. A.B. 5 was signed into law in 2019 and took effect in 2020, effectively making it tougher for gig economy companies to classify their workers as independent contractors. The challenge, brought by Uber, Postmates, and individual drivers, maintained that A.B. 5 unconstitutionally targeted app-based companies, while giving exemptions to other, politically favored industries. The state of California is currently seeking an en banc review before the full Ninth Circuit.
Relatedly, the fight over A.B. 5 led to Proposition 22, which was a voter-approved November 2020 ballot measure allowing exemptions for workers of ride-hailing and food delivery platforms from A.B. 5’s requirements. A California Superior Court judge invalidated Proposition 22 as unconstitutional in August 2021, but the ballot measure was reinstated by California’s First Appellate District in March 2023 after finding that voters had the requisite lawmaking authority under the California Constitution. The dispute is now headed to the California Supreme Court, which agreed to hear the case.
5. Norfolk Southern Denied Immunity from Antitrust Claims in Railroad Dispute
On June 30, 2023, a U.S. Court of Appeals for the D.C. Circuit panel affirmed the finding of the Surface Transportation Board (“STB”) that Norfolk Southern Railway Co. was not immune from antitrust claims brought in the Eastern District of Virginia by CSX Transportation Inc. regarding a small railroad both companies own in southern Virginia. Specifically, CSX alleges that Norfolk Southern and its parent company conspired to impede CSX’s access to the railroad’s main switching terminal. Norfolk Southern moved to dismiss the case based on the Interstate Commerce Act’s corporate-family exemption, which provides antitrust immunity to companies within the same corporate family for certain transactions.
In June 2021, the STB determined that neither Norfolk Southern nor its parent company was ever granted “control authority” over the switching terminal and, thus, could not claim immunity from the suit. On appeal at the D.C. Circuit, the three-judge panel held that the STB correctly applied federal law when finding that Norfolk Southern’s parent company was never granted control authority over the railroad when it acquired a majority interest in it in 1982 and, thus, antitrust immunity was not available. Because control authority cannot be argued retroactively, Norfolk Southern is now prohibited from arguing it is immune from antitrust claims under the Interstate Commerce Act’s corporate-family exemption.
CSX’s case was dismissed by the Eastern District of Virginia on other grounds in April 2023 and is pending appeal to the U.S. Court of Appeals for the Fourth Circuit. The D.C. Circuit’s finding regarding Norfolk Southern’s antitrust immunity will likely help inform the Fourth Circuit’s ruling.
D. Developments in Oil and Gas
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