February 24, 2012

Court Rejects Organ Transplant Drug Maker’s Challenge To Monopolization Claims

Judge Ryan Zobel of the U.S. District Court for the District of Massachusetts has denied the motion to dismiss filed in the consolidated class action of In re Prograf Antitrust Litigation by the defendant, organ transplant drug manufacturer Astellas Pharma US, Inc.

Plaintiffs are direct purchasers of Prograf – a brand-name immunosuppressant drug that fights organ rejection following heart, kidney and liver transplants – who allege that its manufacturer, Astellas, violated the antitrust laws by filing a citizen petition with the Food and Drug Administration (“FDA”) that was designed to stave off competition and prolong the drug’s monopoly.  The court’s denial of Astellas’ motion to dismiss means that the direct purchasers’ monopolization claims under Section 2 of the Sherman Antitrust Act will proceed

The plaintiffs claim that Astellas recognized that generic manufacturers would seek FDA approval to sell competing drugs and that Astellas’ citizen petition was “objectively baseless,” and used “to stall the approval of generic manufacturers’ Abreviated (sic) New Drug Applications.” 

In addition to filing a citizen petition with the FDA, Astellas unsuccessfully moved in the District Court for the District of Columbia in August 2009 for a temporary restraining order and preliminary injunction to prevent the FDA from approving generic competing drugs.  Astellas’ motion for injunctive relief was denied by Judge Urbina on August 12, 2009.  Astellas voluntarily dismissed that matter in November 2009. 

Plaintiffs allege that Astellas’ administrative and legal actions “unlawfully continued a monopoly in the market … for up to two years, selling well over a billion dollars of Prograf during that time.” 

Astellas moved to dismiss the class action complaint, arguing primarily that the citizen petition was protected by the Noerr-Pennington doctrine granting immunity to legitimate petitioning activity.  The plaintiffs argued that Noerr-Pennington immunity is inapplicable since the petition “was an objectively baseless ‘sham.’” 

Judge Zobel relied on Professional Real Estate Investors v. Columbia Pictures Industries, 508 U.S. 49, 61 (1993), for its two-pronged test to determine whether a plaintiff survives a motion to dismiss on Noerr-Pennington grounds by availing itself of the “sham” exception: whether “(1) defendant’s petitioning activity was ‘objectively baseless’ in the sense that no reasonable petitioner before the agency ‘could realistically expect success on the merits;’ and [whether] (2) … the baseless petitioning ‘concealed an attempt to interfere directly with the business relationship of a competitor through the use of the governmental process … as an anti-competitive weapon.’” 

With respect to the first prong, the judge held that the class plaintiffs properly alleged that the petitioning activity was objectively baseless since, among other things, plaintiffs alleged that (1) “the FDA found no merit to defendant’s petition,” and (2) “the materials provided by defendant failed to support its requested relief and, in particular, … the studies cited contained severe flaws in their methodology and design and reliance thereon was wholly unreasonable.”  The judge likewise found the second prong satisfied because, among other reasons, plaintiffs alleged that “Prograf sales were $929 million for 2009, giving Astellas an incredibly strong financial incentive to extend its position as the sole … provider” and “Astellas’ citizen petition had the actual effect of delaying generic entry.”

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Categories: Antitrust Law and Monopolies, Antitrust Litigation

    February 21, 2012

    Blowing The Whistle On Cartels

    The question of whether U.S. antitrust enforcement should emulate foreign whistleblower rewards programs as part of a crackdown on cartels is analyzed in a recent article by a Constantine Cannon attorney: Making it Easier to Whistle While You Work.

    Cartel detection and prosecution are top priorities for the Antitrust Division of the U.S. Department of Justice (“Antitrust Division”) – regardless of which political party occupies the White House.  Given the often secretive nature of cartels, however, they can be hard to detect.  The Antitrust Division relies on its Corporate Leniency Program to encourage self-reporting of cartel activity, by offering immunity and/or reduced sanctions.   

    As important as leniency programs are, however, they are limited.  Given their narrow focus on those at the heart of the cartel, corporate leniency programs fail to offer people who are aware of, but not complicit in, cartel activity with any incentive to report illegal activity.  This absence of an antitrust informant rewards program undoubtedly means that much cartel activity victimizing U.S. consumers goes unreported. 

    Over the past 10 years, four jurisdictions – South Korea, Pakistan, the United Kingdom and Hungary – have addressed the limitations of their corporate leniency programs by adding an antitrust informant, or whistleblower, rewards program.  Each jurisdiction noted that the aim of adding a rewards program was to increase reporting from those who are either uninvolved in, or on the periphery, of a cartel. 

    The article, Making it Easier to Whistle While You Work, concludes that like the foreign jurisdictions mentioned above, the U.S. would benefit from a whistleblower reward program as part of a comprehensive and modern approach to aggressive antitrust enforcement.

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    Categories: Antitrust Enforcement, International Competition Issues

      February 17, 2012

      Vitamin C Plaintiffs Ward Off Challenges To Class Rep Status

      Class representatives and their counsel in the Vitamin C Antitrust Litigation have won another initial round in their suit alleging that Chinese vitamin C manufacturers conspired to fix prices and to limit the output of vitamin C exported to the United States.

      Federal Judge Brian Cogan of the Eastern District of New York has rejected all but one of defendants’ arguments seeking disqualification of class representatives and class counsel in Animal Science Products, Inc., et al. v. Hebei Welcome Pharmaceutical Co., Ltd. et al., 2012 WL 251909 (E.D.N.Y. 2012).  Judge Cogan had previously denied defendants’ motions to dismiss on foreign sovereign compulsion and related comity grounds.

      The four main defendants are Hebei Welcome Pharmaceutical Co. Ltd.; Jiangsu Jiangshan Pharmaceutical Co. Ltd.; Northeast Pharmaceutical Co. Ltd.; and Weisheng Pharmaceutical Co. Ltd.  Plaintiffs The Ranis Company and Magno–Humphries Laboratories, Inc. (“MHL”) moved for class certification on behalf of a group of direct purchasers seeking treble damages against all defendants except Northeast Pharmaceutical Co. Ltd.  Plaintiff Animal Science Products, Inc. moved separately for certification of a class of direct and indirect purchasers seeking injunctive relief against all defendants, including Northeast.

      Judge Cogan granted class certification on behalf of a damages class represented by Ranis, but concluded that MHL could not serve as class representative because it is not a member of the class it seeks to represent.  The court also granted certification of an injunction class represented by Animal Science.

      In certifying representatives for a damage class under Federal Rule of Civil Procedure 23(b)(3) and an injunctive relief class under Rule 23(b)(2), Judge Cogan made three key rulings:  (1) the “own and control” exemption to the ban on indirect-purchaser damage claims under the rule of Illinois Brick v. Illinois, 431 U.S. 720 (1977), does not permit a plaintiff to sue a defendant based on purchases from a subsidiary; (2) a plaintiff whose claim was assigned and had no actual purchases from a defendant could serve as a class representative; and (3) a wholesale direct purchaser had no conflict of interest in representing a class containing retail direct purchasers, even though a wholesale purchaser might favor higher retail prices.

      While Judge Cogan rejected most of defendants’ challenges to the plaintiffs’ representative status, the court did deny class representative status to MHL, a purchaser from a defendant’s subsidiary.  Judge Cogan held that under Illinois Brick, MHL could not represent the direct purchaser class since MHL had only purchased from a subsidiary of a defendant.

      Judge Cogan rejected defendants’ argument that plaintiff Ranis could not be a class representative because it only had an assigned claim from a direct purchaser and had not itself purchased any vitamin C from defendants.  Defendants had claimed that there is a “rule” prohibiting assignment of a class membership.  Judge Cogan held that no such rule existed.

      Similarly, Judge Cogan rejected defendants’ argument that Ranis, as an assignee of a wholesale purchaser, had a conflict of interest with many class members who were retail purchasers, and thus should be disqualified as a class representative.  The court disagreed that there was any conflict, holding that “Ranis and the rest of the class, including the end-users, have precisely the same goal in this case: to demonstrate that the defendants’ alleged antitrust violations caused each plaintiff to purchase vitamin C at an artificially inflated price.”

      Judge Cogan also held that that inclusion of indirect purchasers in the injunctive class did not create a conflict of interest between direct and indirect purchasers.  Moreover, inclusion of indirect purchasers in the Rule 23(b)(2) injunctive class did not demonstrate that class counsel had prejudiced the state law claims of the indirect purchasers – making them inappropriate as counsel to the class – because inclusion of indirect purchasers in a Rule 23(b)(2) settlement should not extinguish their subsequent state-law claims, if any, on res judicata grounds.

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      Categories: Antitrust and Price Fixing, Antitrust Litigation

        February 10, 2012

        Nation’s Largest Seafood Company On The Hook In Fisherman Antitrust Litigation

        A federal judge in Oregon has certified a class of fishermen in an antitrust lawsuit against Pacific Seafood Group, the nation’s largest seafood company.

        The plaintiffs in Whaley et al. v. Pacific Seafood Group, et al. claim that defendants, Pacific Seafood and Ocean Gold Seafoods, Inc., used market shares of 50 to 70 percent to monopolize the Dungeness crab, Oregon coldwater shrimp, groundfish, and whiting seafood markets, and conspired to pay plaintiffs below-market prices for fish.

        U.S. District Judge Owen M. Panner’s grant of class certification is a significant victory for plaintiffs alleging that commercial fishing vessel owners and fishermen were damaged by alleged anticompetitive practices of Pacific Seafood and Ocean Gold.

        The defendants had argued that the numerosity requirement was not met and that there was insufficient harm alleged.  However, the attorneys for Pacific Seafood and Ocean Gold were unable to convince Judge Panner that the lawsuit did not merit class action status.

        Included in the certified class are commercial vessel owners as well as fishermen who do not own vessels.  But Judge Panner decided against the inclusion of a subclass of fishermen who delivered Pacific whiting for onshore processing, stating that the proposed subclass was too small to satisfy the numerosity requirement of class certification.

        The lawsuit stems from a 2006 agreement between Pacific Seafood and Ocean Gold.  Both companies claim that their partnership and practices only benefit the fleet, and that no matter how much market share they may command in the West Coast fishery, the companies are helping, not harming, the plaintiffs.

        Alleging direct evidence of price fixing, plaintiffs argued that Pacific Seafood and Ocean Gold used their collective buying power to fix prices for fish and intimidate competitors who might otherwise offer more competitive prices to the plaintiffs.

        In addition to seeking more than $500 million in damages, the plaintiffs are asking the court to break Pacific Seafood into smaller parts, sell off many of its assets in the processing industry, and nullify the contract between Pacific Seafood and Ocean Gold.

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        Categories: Antitrust and Price Fixing, Antitrust Litigation

          February 6, 2012

          European Commission Seeks Comments On A United Payments Of Europe

          The European Commission, the executive branch of the European Union, is asking for comments about how to overcome obstacles to a modern, integrated card payments system across Europe. 

          The European Commission is requesting these comments on its “green paper” assessing the current payment landscape in Europe.  This initiative covers all payments – including e-commerce and mobile payments – made with a credit or debit card across the 27-nation European market.

          The green paper takes aim at a current market situation fragmented along national borders with a small number of domestic networks and only two major international players – Visa and MasterCard.  According to the green paper, the Single Euro Payment Area or SEPA, which will replace 32 separate payment regimes with a single one to facilitate faster and cheaper cross-border payments, may further entrench this duopoly.  This is because few domestic schemes are accepted outside of their home countries, and many are shutting down.

          “Carrying a virtual train ticket or repaying a friend with your mobile phone, buying your groceries online, paying with your debit card abroad — the way European citizens shop and pay is radically changing,” the European Commission’s announcement of the consultation explains. “A secure and transparent integrated payments environment throughout the EU could create more efficient, modern and safer means of payments — for the benefits of consumers, merchants and payment providers.”

          The main issues identified in the paper are:

              * Market access and entry for existing and new service providers

              * Payment security and data protection

              * Transparent and efficient pricing of payment services

              * Technical standardization

              * Inter-operability between service providers

          The green paper is available from the EU website and comments may be submitted until April 11, 2012.  The Commission is expected to announce further action before the summer of 2012.

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          Categories: Antitrust Enforcement, International Competition Issues

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