The field of antitrust continues to see substantial enforcement efforts and notable developments in recent months. These significant developments span across multiple industries and emphasize the heightened regulatory enforcement, legislative and oversight efforts at both the state and federal levels. This article discusses these actions and their impact on the fields of telecommunications, cable and the internet; utilities, electrical power and energy; transportation; and oil and gas as well as new priorities to regulate and manage competitive effects of the rapidly growing and developing area of artificial intelligence.
In recent years, there has been a rapid development in all aspects of artificial intelligence (“AI”) that companies have leveraged for their competitive benefit. This movement has prompted antitrust concerns that have captured the attention of all government sectors.
In June 2023, the Federal Trade Commission (“FTC”) released business guidance, entitled “Generative AI Raises Competition Concerns.” The guidance emphasized the FTC’s commitment to ensuring fair and open competition amidst the ongoing development of AI. Subsequently, in December 2023, the FTC released a report summarizing insights gathered from an industry roundtable held in October 2023. A primary focus of concern for the FTC was disproportional control over essential data required for AI operations, leading to unfair competitive practices. Then again, in a recent development on January 25, 2024, the FTC hosted a virtual summit focusing on AI. The summit addressed concerns related to competition and consumer protection arising from AI technologies. Additionally, the FTC issued civil investigative demands under Section 6(b) of the FTC Act to several technology corporations, including Alphabet Inc., Amazon.com Inc., Anthropic PBS, Microsoft Corp. and Open.AI.
In October 2023, the Biden Administration issued an executive order, entitled “Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence.” The Executive Order addressed various subjects and potential risks regarding AI. Specifically, the Executive Order recognized that “irresponsible use” of AI could violate safe competition. This Order also directed the FTC to exercise the authority to govern AI space.
The U.S. Senate has also brought attention to anticompetitive concerns regarding AI. Senator Amy Klobuchar, Chair of the Senate Judiciary Subcommittee on Competition Policy, and Consumer Rights, introduced the “Preventing Algorithmic Collusions Act,” which aims to prevent companies from employing AI to engage in price fixing. The FTC, Department of Justice (“DOJ”), White House, and U.S. Senate all continue to have core regulatory and enforcement priority issues with technology companies and their use of AI.
First, price fixing has always been prohibited under the Sherman Act, but advancements in AI have made enforcement of the Act more discrete. The FTC expressed apprehension regarding algorithmic price fixing, wherein competitors may utilize AI-driven pricing algorithms to effectively reach direct and inferred agreements on pricing. This could enable companies to engage in facilitated price and data sharing, a practice prohibited by Section 1 of the Sherman Act. The DOJ has implemented interpretation of the Sherman Antitrust Act whereby algorithmic price fixing is deemed unlawful.
Second, the FTC has placed significant emphasis on labor-related matters. With plans to ban non-compete agreements and increased scrutiny of labor effects in merger reviews, the agency’s specific attention to worker protection has the potential to impact the FTC’s competition policy. A particular concern is the FTC’s worry that companies engaged in generative AI development may engage in restrictive practices and employment policies, hindering access to innovative human talent into the AI sector.
Third, the FTC has expressed apprehensions regarding AI’s implications for consumer protection. Data collection could potentially lead to unfair or deceptive practices, while data processing might render algorithms inaccurate or fraudulent. These outcomes could pave the way for anticompetitive business behaviors. The technology industry has historically been accused of attempting to become an illegal monopoly and committing unfair business practices.
Both the executive and legislative branches have already allocated resources to explore the appropriate uses of AI and ways to mitigate anticompetitive practices. Now, the judicial branch is stepping in to effectively adjudicate cases arising from advancements in AI as well.
In November 2023, the DOJ initiated an investigation into RealPage and major landlords for suspected algorithmic price fixing, allegedly breaching the Sherman Act. RealPage, a software utilized for gathering data from property owners and managers to facilitate pricing strategies, is under scrutiny. The inquiry stems from concerns surrounding the 2017 merger between RealPage and its primary competitor. Antitrust lawsuits were frequent during the Trump Administration, but have gained great momentum in a different direction under the Biden Administration.
The DOJ asserts that the algorithms, serving as conduits for data sharing, pose a heightened threat to competition. RealPage is being accused of collaborating to incorporate confidential pricing and supply data into these algorithms, influencing pricing decisions. The DOJ contends that RealPage was aware of and anticipated such practices among its competitors. RealPage refuted these allegations following the filing of the initial federal lawsuit in December 2023. This ongoing case could establish a precedent regarding instantaneous data sharing in the realm of AI.
Google has faced extensive legal challenges, particularly with respect to antitrust issues, and several ongoing lawsuits expected to continue in the near future. In December 2023, Google agreed to pay $700 million and implement modifications to its Play Store as settlement for an antitrust lawsuit. The lawsuit accused the Play Store of operating as an unlawful monopoly. A separate lawsuit filed by Epic Games, the developer of Fortnight, played a pivotal role in the resolution. The litigation from Epic Games resulted in the determination that Google violated antitrust regulations by leveraging its monopoly power in promoting Android apps and in-app billing services. This leveraging negatively impacted competition and unlawfully tied its Play Store to “Google Billing Services.” Additionally, the states involved in the lawsuit alleged that Google imposed fees of 15-30% on app purchases, resulting in annual profits significantly exceeding what would be possible in a more competitive market.
In 2024, Epic Games, DOJ, and state attorney generals all brought cases against Google signaling widespread antitrust concerns. The company now faces closing arguments in the DOJ trial challenging its default search engine contracts on various platforms. Later this year, Google has two additional trials scheduled by the DOJ and a state attorney general regarding its involvement in display advertisement. Recently, a New York federal judge rejected a number of claims, but held that Google must continue to face other claims from publishers and advertisers.
On September 26, 2023, the FTC, alongside 17 states in the Western District of Washington, filed a lawsuit against Amazon, alleging antitrust violations. These violations were purportedly linked to policies penalizing sellers for offering lower prices on other platforms and mandates allegedly coercing merchants to utilize specific logistics services. Alongside the complaint, enforcers submitted a pair of notices detailing various cases and enforcement actions that had been pending previously. These practices involve allegedly manipulating Amazon search results. Similarly, in the United Kingdom, Amazon has come under scrutiny for its method of product selection, particularly regarding how it decides which products are showcased.
The FTC also noted a lawsuit filed in November 2022 in the Southern District of New York by consumers from multiple states under state antitrust and consumer protection laws. This lawsuit also targeted a specific policy that allegedly restricted sellers from offering lower prices. This case remains pending and may set major precedent on consumer protection laws.
In February 2024, two consumers initiated legal proceedings against Amazon through a proposed class action lawsuit. The suit alleges that millions of customers were charged excessive prices for items due to Amazon’s manipulated algorithms, which favored the sales of its own retail products and those of third-party sellers engaged in its fulfillment service. Amazon has a range of lawsuits alleging unfair business practices, potentially impacting the technology industry.
The U.S. Court of Appeals for the Ninth Circuit declined to resurrect an antitrust lawsuit against Apple filed by a competitor app store developer. SaurikIT owns the Cydia app distribution that sued Apple in 2020. SaurikIT alleged that the technology giant blocked alternative app stores and required the use of its own app payment systems in order to monopolize the market for app distribution. The Ninth Circuit panel concurred with the district court decision, stating that the technology policies preventing the installation of alternative app stores on iPhones do not constitute new conduct that would reset the four-year statute of limitations. In May 2022, a federal district court dismissed portions of SauikIT’s complaint after finding the statute of limitations barred the allegations.
Apple is a corporation that constantly designs and innovates new technological products and features. This innovation was subject to a lawsuit in 2021 when AliveCor claimed that Apple was illegally blocking it from the marketplace of smartwatches. AliveCor alleged that Apple was inspired by AliveCor’s products innovation and design. AliveCor also filed a similar patent suit. In February 2024, a California federal judge sided with Apple and rejected AliveCor’s argument that the development of Apple Smart Watches was anticompetitive.
On March 20, 2024, a Californian customer proposed a class action lawsuit alleging that Apple’s restrictions on third-party cloud storage services violates anti-tying laws and contribution to price inflation through unlawful monopoly. The lawsuit contends that any storage service of baking up iPhone photos and videos should be allowed to be used for the “restricted” data that Apple prevents from being backed up elsewhere. The Californian federal judge certified the class of consumers and found that they met the requirements of a class action.
Lastly, on March 21, 2024, the DOJ completed its final prong of antitrust technology enforcement actions. Specifically, the DOJ and numerous state attorney generals recently filed an antitrust lawsuit against Apple, alleging that the company maintains an anticompetitive monopoly through its control over the iPhone. The lawsuit alleges that Apple imposes limitations on its App Store and developer agreements to stifle competitive alternatives, while also charging app developer commissions up to 30%. The States will argue that Apple hampers the functionality of non-Apple smartwatches, thereby restricting third-party digital companies and driving competitors out of the market. This case stands out because sixteen bipartisan attorney generals have united in filing the complaint, all sharing the belief that fostering open competition in the smartphone and app markets will ultimately benefit consumers by offering more affordable smartphones. Despite just being filed, this case will likely have a significant impact on technology companies and now completes the full circle of government antitrust enforcement against the largest industry players.
In January 2024, the U.S. Securities and Exchange Commission (“SEC”) filed a lawsuit against SolarWinds, a software provider, in New York federal court. The SEC invoked a provision of the often antitrust employed Foreign Corrupt Practices Act, which some view as an attempt to extend its authority over corporate governance policies. This move comes after the SEC’s previous lawsuit accusing SolarWinds of failing to disclose cybersecurity vulnerabilities to investors before the Russia-linked data breach in 2020. The Business Roundtable, representing CEOs of over 200 companies, has also urged the federal court to dismiss the SEC’s claims. SolarWinds has countered, alleging that the SEC’s prior lawsuit, which marked the first-ever SEC proceeding to address cybersecurity disclosure issues, seeks to “revictimize the victim.”
In another solar energy competition dispute, Spanish energy company, Avanzalia Solar, appealed to the U.S. Court of Appeals for the Seventh Circuit to resurrect its lawsuit against a Chicago-based wind power company named Goldwind. Avanzalia Solar accused Goldwind of impeding its access to the Panamanian grid. During oral arguments before the Seventh Circuit, counsel for Avanzalia Solar urged the panel to send the case back for trial and overturn the January 2024 decision that granted summary judgment to Goldwind Americas. Avanzalia alleged that Goldwind obstructed and delayed access to a substation owned by UEPI in order to maintain market share for Goldwind’s affiliate and its own wind turbine project. An Illinois federal judge ruled that Goldwind’s alleged wrongful conduct was already determined by decisions from a Panamanian regulatory agency known as the ASEP, applying the doctrine of collateral estoppel.
The automotive and trucking sectors are closely monitoring a series of legal disputes in the U.S. Court of Appeals for the D.C. Circuit regarding regulations aimed at curbing greenhouse gas emissions within the transportation industry. These regulations stem from both federal and California authorities. Republican-led states and industry groups representing gasoline and biofuel interests argue that the U.S. Environmental Protection Agency’s (“EPA”) 2022 decision to reinstate California’s Clean Air Act waiver authority permitting the state to establish its own emissions standards and operate a zero-emissions vehicle program was improper. Furthermore, other air quality organizations have petitioned the D.C. Circuit to overturn the EPA’s March 2023 decision granting California a waiver for its Clean Trucks regulation.
In one of the biggest railroad mergers in decades, there is an alliance with Canadian Pacific Kansas City Limited (“CPKC”), comprising various Chicago-area communities, along with Metra. Both parties submitted initial arguments in a joint legal challenge against the Surface Transportation Board’s March endorsement of CPKC’s $31 billion acquisition of Kansas City Southern Railway.
In January 2024, the DOJ successfully blocked the proposed $3.8 billion merger of JetBlue-Spirit Airlines. The DOJ contended that the merger violated antitrust laws and stifled competition. Following the U.S. District Court for the District of Massachusetts’ decision enjoining the merger after trial, JetBlue and Spirit Airlines appealed to the U.S. Court of Appeals for the First Circuit. JetBlue and Spirit argued that the merger was not anticompetitive and was good for consumers; however, the parties ended their pursuit of the merger in March 2024 because the parties said they were unlikely to meet the closing conditions required in the agreement before resolution of their appeal.
In 2023, eight of the largest shale oil producers in the country faced antitrust lawsuits in Nevada federal court, alleging that they conspired with Organization of the Petroleum Exporting Countries (OPEC) to maintain high gas prices. Consumers claim that these U.S.-based shale producers are bound by the Sherman Act. The proposed class argued in court that amidst the “economic turmoil” triggered by the pandemic, both the defendants and OPEC indicated a readiness to cease the price war and competition for market share. The case is still ongoing, but seeks to set a precedent for the gas industry.
In January 2024, the U.S. Court of Appeals for the Ninth Circuit chose to stand on its prior ruling that Berkeley, California has the right to institute a ban on installing natural gas piping for buildings. The Court previously ruled that the case is federally preempted. Berkeley has the backing of the federal government and environmental health groups that the panel’s original ruling that Berkeley’s ban was preempted by the Energy Policy and Conservation Act, which establishes federal energy efficiency standards for cases to follow.
