Recent Developments in Federal Antitrust Law

• Jurisdiction: United States,Federal
• Author: By Shana Wallace and E. Kate Patchen
• Publication year: 2021
• Citation: Vol. 31 No. 1

RECENT DEVELOPMENTS IN FEDERAL ANTITRUST LAW

By Shana Wallace¹ and E. Kate Patchen²

I. NOTABLE ANTITRUST CASES

A. FTC v. Qualcomm³

The Ninth Circuit reversed Judge Koh's decision in the district court that Qualcomm's conduct related to its cellular standard essential patents (SEPs) and its monopolies in CDMA and premium LTE chips had violated the antitrust laws.⁴ Qualcomm's SEPs are crucial to our modern day cellular existence and the manufacturers that make that existence possible. Although Qualcomm's licensing of its cellular SEPs is profitable, the Ninth Circuit explained that Qualcomm is "no one-trick pony"—which is fortunate for Qualcomm because its ability to charge supracompetitive prices on its SEPs is at least somewhat circumscribed by the fact that they are subject to licensing on fair, reasonable, and nondiscriminatory ("FRAND") terms.⁵ Qualcomm could, however, arguably shore up its dominant position in chip sales (where it arguably faced at least some competition, even if mostly prospective) by charging all customers a fee for the use of any chips (whether Qualcomm's or a competitor's chips) that incorporated its SEPs, which Qualcomm dubbed a "patent royalty."⁶

A "patent royalty," the Ninth Circuit opined, "sounds in patent law, not antitrust law."⁷ To the extent such facially neutral fees harm Qualcomm's customers was of no moment, explained the panel, as harms to mere "customers, not [Qualcomm's] competitors . . . are not 'anticompetitive' in the antitrust sense."⁸ And, according to the Ninth Circuit, customers fall outside "the area of effective competition" with which antitrust is concerned.⁹ The Federal Trade Commission recently filed a Petition for Rehearing En Banc.¹⁰ The petition was denied.

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B. Supreme Court Decision on Available Remedies in FTC Enforcement Actions

A split between the Seventh and Ninth Circuits addressing available remedies in FTC enforcement actions, as well as a recent Supreme Court decision (Liu v. SEC, 140 S. Ct. 1936 (2020)), have thrown the federal antitrust agencies' ability to seek the equitable relief of disgorgement into doubt.

The Supreme Court granted a writ of certiori¹¹ to consider FTC v. Credit Bureau Center¹² and FTC v. AMG Capital Management.¹³ The Seventh Circuit in Credit Bureau Center held that FTC Act Section 13(b)'s language authorizing the FTC to seek "a permanent injunction" does not permit a court to exercise its authority to award the further equitable relief of disgorgement.¹⁴ The Ninth Circuit in AMG Capital Management, on the other hand, held that federal courts do have authority to order disgorgement.¹⁵ After the cert petitions were filed, the Supreme Court issued a narrow ruling in the securities law context holding that federal courts only had the authority to award the equitable relief of disgorgement in SEC enforcement actions because Securities Exchange Act Section 78u(d)(5) specifically authorized the SEC to seek "equitable relief."¹⁶ (Federal courts had ordered disgorgement numerous times in SEC actions based upon their "inherent equity power" prior to the 2005 addition of the "equitable relief" statutory language; the Supreme Court's reasoning thus implied that those courts had apparently been acting ultra vires.)¹⁷

Although the Supreme Court appeals in Credit Bureau and AMG Capital Management have yet to be decided, Liu was sufficient authority for the Third Circuit to agree with the Seventh Circuit's conclusion and reverse a historic district court award of $448 million in disgorgement in the antitrust case, FTC v. AbbVie, Inc.¹⁸ The AbbVie panel reasoned that as "Section 13(b) does not explicitly empower district courts to order disgorgement," and the statutory language is only forward looking, a backward-looking remedy like disgorgement is out-of-bounds.¹⁹ If these tea leaves are accurate for the FTC, then the DOJ Antitrust Division's ability to seek disgorgement will likely fare no better. Admittedly, the Division has only rarely sought such a remedy. But when it has, the Division has appealed to the reasoning in SEC cases and to federal courts' "inherent equitable powers."²⁰

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C. T-Mobile/Sprint Merger

Federal and certain state regulators took different approaches to their challenge of T-Mobile's merger with Sprint: the Attorneys General for New York, California, Connecticut, the District of Columbia, Hawaii, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Oregon, Pennsylvania, and Virginia moved under Section 7 of the Clayton Act to enjoin the merger altogether,²¹ whereas the US Department of Justice ultimately petitioned for a final judgment that would allow the merger to proceed on the condition that the newly-merged T-Mobile would divest to DISH Network Corp. Sprint's prepaid wireless business and certain spectrum licenses.²² The Southern District of New York denied the states' Clayton Act challenge,²³ and the District of Columbia granted the US DOJ's request for a final judgment.²⁴

D. Seventh Circuit Reinstates Aspen Skiing Refusal-to-Deal and Tying Claims

In Viamedia, Inc. v. Comcast Corp.,²⁵ the Seventh Circuit reversed the district court judgments in favor of Comcast, which had dismissed Viamedia's Section 2 refusal-to-deal claim and granted summary judgment on Viamedia's tying claim.²⁶ The dispute stemmed from access to regional "interconnects" that had previously been jointly owned and operated by regional cable companies and which were crucial to cable companies' ability to appeal to regional and national advertisers.²⁷ The court outlined the industry history: (i) that Comcast had fought for decades against the entry of cable competition in the form of overbuilders and wireline telephone companies; (ii) that Comcast had simultaneously embarked on a buying spree of hundreds of local cable companies-swearing to antitrust enforcers and the FCC that it had no intention of interfering with its cable competitors' access to the cooperative interconnects; and (iii) that once Comcast had become the country's dominant cable provider, it promptly cut off access to the interconnects, claiming them as a source of its own competitive dominance.²⁸ The only way that Comcast would permit its cable competitors (e.g., RCN, WOW!) to access the cooperative interconnects and the make-or-break ad revenue streams that flowed through them, was if Comcast's cable competitors would fire their ad representative, Viamedia, and turn over their entire inventory of national, regional, and—totally unnecessary for the interconnects—local advertising inventory to Comcast.²⁹ Comcast, with one swoop, thus made itself privy to the financial inner workings of its competitors, including ensuring advance notice of their promotions and ad revenue streams, and left local advertisers with no competition for the placement of local cable ads.³⁰

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Per the Seventh Circuit, Comcast's course of conduct, and its refusal to allow Viamedia access to the Interconnects on behalf of Comcast's cable competitors, fit squarely within the framework of Aspen Skiing.³¹ The Supreme Court had expressly declined in recent years to overrule Aspen Skiing, instead deeming it to stand at the outer boundary of sanctionable conduct under Section 2.³² The Seventh Circuit explained that unless by "outer boundary" the Court meant "limited to ski slopes," there was no meaningful way to distinguish Comcast's conduct—particularly at the motion to dismiss stage.³³ As to the tying claim, Viamedia had offered up substantial factual evidence that Comcast had indeed conditioned its competitors' (and the competitors' ad representative's) access to the interconnects on the competitors' agreement to turn all of their advertising inventory and a portion of that revenue over to Comcast.³⁴ It was therefore inappropriate at the summary judgment stage for the district court to weigh Comcast's unsubstantiated claims of efficiencies and procompetitive benefits...