September 27, 2012

British Competition Authorities Revise Penalty Guidelines

The Office of Fair Trading (the “OFT”) – the United Kingdom’s consumer and competition authority – has announced new guidelines for setting penalties for violations of British competition laws.

The most drastic change contained in the new guidelines increases the maximum starting point for calculating a penalty from 10 to 30 percent of a company’s relevant turnover.

The OFT indicated that it is increasing the maximum penalty because it will improve the ability of the OFT to set penalties which better reflect the gravity of different types of infringements.  The OFT noted that increased penalties could be imposed “in particular for the most serious breaches of competition law, such as hardcore cartel activity and serious abuses of a dominant position.”  The revision of the guidelines also serves the purpose of bringing the “OFT in line with the approach of the European Commission and many European competition authorities.”

In addition to the increased penalties, the new guidelines also clarify the steps used to judge the severity of an antitrust violation.

For example, leniency programs and settlement agreements will now be taken into consideration when issuing fines in order to impose lesser penalties on companies that come forward to admit wrongdoings. 

The previous guidelines had been in place since 2004.  The revised guidelines “reflect our experience in applying the guidance in a series of cases, as well as recent court judgments,” according to Jackie Holland, Senior Director of the OFT Policy Group.

According to a 2010 study by the American Antitrust Institute, revising penalty guidelines to be more specific can help deter antitrust violations.  The study indicated that from 1990 to 2008 the European Commission’s fines minimally deterred antitrust violations because vague guidelines failed to accurately assess the amount of harm a company’s actions caused, and the most harmful violations were not fined severely enough.

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Categories: Antitrust Enforcement, International Competition Issues

    September 21, 2012

    Aftermarket Autoparts Manufacturers Lose Bid To Stop Antitrust Class Action

    Taiwanese manufacturers of aftermarket auto parts will have to continue litigating an antitrust class action as a result of the denial of their motion to dismiss the second amended complaint in Fond Du Lac Bumper Exchange Inc. v. Jui Li Enterprise Co. Ltd. et al.

    Judge Lynn Adelman of the U.S. District Court for the Eastern District of Wisconsin rejected the arguments of defendants Taiwan Kai Yih Industrial Co., Ltd., Gordon Auto Body Parts, Auto Parts Industrial, Ltd., Jui Li Enterprise Company, Ltd., TYG Products, L.P. and Cornerstone Auto Parts, LLC that the plaintiffs failed to properly state a claim.

    The defendant companies are not the original manufacturer of the car parts.  Instead, they make or distribute aftermarket, or AM, auto parts, which are less expensive versions of the original.  Consumers often use AM parts for replacements and repairs.

    The defendants’ motion to dismiss argued that because the plaintiffs are indirect purchasers, and buy the parts from retailers at the least expensive price, they failed to prove antitrust injury.

    Judge Adelman disagreed, noting that “[s]ince AM parts travel down the chain of distribution substantially unchanged, the price charged by the manufacturer will largely determine the price paid by the end user.”  The court also concluded that if the plaintiffs’ allegation that the companies conspired to control 95 percent of the AM parts market is correct, that would increase the likelihood that higher prices would get passed on to the consumer.

    The court found that the second amended complaint had sufficient allegations that the companies made an agreement in 2003 to stop competing with each other and to set market prices.

    The plaintiffs’ allegations were buttressed by public comments made by the companies’ executives stating the group had created a monopoly with high profits.  For example, an executive from TYG Products said his company “does not compete with its major rivals—all from Taiwan, but has been trying to form a strategic alliance to jointly develop the world’s largest single market.”

    The court also refused to dismiss claims under antitrust and consumer protection laws in eight states: Arkansas, Florida, Minnesota, New Mexico, Tennessee, California, Massachusetts and Vermont.

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    Categories: Antitrust Law and Monopolies, Antitrust Litigation

      September 18, 2012

      Court Finds Musical Instrument Antitrust Claims Out Of Tune Under Twombly

      Judge Larry Burns of the U.S. District Court for the Southern District of California has granted the defendants’ motion to dismiss plaintiffs’ antitrust claim under Section One of the Sherman Act in In re: National Association of Music Merchants, Musical Instruments and Equipment Antitrust Litigation.

       The plaintiffs alleged that defendants conspired to fix the prices of acoustic, electric and bass guitars, and guitar amplifiers.  Plaintiffs’ theory was that certain guitar manufacturers and retailers, faced with price competition from Internet merchants and “big box” retailers, sought ways to stabilize or increase guitar and amplifier prices.  As the court explained, defendants “allegedly did this with the support and assistance of the National Association of Music Merchants (NAMM) by requiring that dealers adhere to policies setting minimum advertised prices (MAPs).”

      Last year, the court granted in part the defendants’ motion to dismiss, but allowed plaintiffs an opportunity to obtain limited discovery to find information sufficient to state their claims.  After discovery, the defendants again moved to dismiss and Judge Burns dismissed plaintiffs’ federal antitrust claim with prejudice.

      The court was not convinced that the plaintiffs’ allegations that the defendants’ representatives attended meetings where MAPs were discussed met the  pleading standard set forth in Bell Atlantic v. Twombly, 550 U.S. 544 (2007).  Based on its reading of Twombly, the court stated that “unilateral advocacy, particularly in an open and public forum, is not itself an agreement or conspiracy.  And independent responses to public advocacy without an agreement, even if consciously parallel to other entities’ activity, would simply be permissible parallel conduct.”

      Similarly, Judge Burns was not persuaded by the plaintiffs’ purported “plus factors,” and found such allegations insufficient to state a claim.

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      Categories: Antitrust and Price Fixing, Antitrust Litigation

        September 14, 2012

        Court Rejects Comcast Bid To Shuttle High-Speed Antitrust Claims Into Arbitration

        Judge Stefan Underhill of the U.S. District Court for the District of Connecticut has rejected Comcast Corp.’s bid to force antitrust claims in a putative class action into arbitration, despite the plaintiff’s signing of an arbitration clause in a subscriber agreement.

        In denying Comcast’s motion to compel arbitration in Fromer v. Comcast Corp., the court found the class action waiver clause in Comcast’s contract void because it made the costs of individual antitrust claims prohibitive.

        Plaintiff Robert Fromer, a subscriber to Comcast’s cable television and high speed internet services, filed a class action lawsuit in December 2009, accusing Comcast of illegally tying the sale of its digital voice service to modem rentals.  The complaint alleges that this bundling violates the Sherman Act and Connecticut’s Unfair Trade Practices law because customers are forced to pay a modem rental fee even if they do not want or need a modem.

        In October 2011, Comcast sought to enforce the class action waiver in the subscriber agreement signed by Fromer.  In its motion to compel arbitration, Comcast argued that the court should follow the Supreme Court’s April 2011 upholding of a class action waiver in AT&T Mobility LLC v. Concepcion.

        However, two days before argument on Comcast’s motion, the U.S. Court of Appeals for the Second Circuit addressed class action waivers in American Express III, and reinforced the Second Circuit’s doctrine of class arbitration.  In that decision, the Second Circuit found that American Express could not use arbitration clauses to avoid antitrust lawsuits by customers.  Under American Express III, if Fromer could show that the class action waiver here prevents him from pursing statutory remedies, the waiver is void.

        Comcast unsuccessfully attempted to distinguish American Express III.  Judge Underhill reasoned that the pursuit of an individual claim would be too costly for Fromer and “[t]herefore, because the class action waiver in this case effectively precludes Fromer from pursuing federal statutory remedies, the class arbitration waiver is void.”

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        Categories: Antitrust Litigation

          September 12, 2012

          U.S. Soccer Federation Scores Summary Judgment On Antitrust Claims

          Judge Harry Leinenweber of the U.S. District Court for the Northern District of Illinois has granted the United States Soccer Federation and Major League Soccer summary judgment on antitrust claims that they conspired to drive promotion company ChampionsWorld out of business.

          The U.S. Soccer Federation represents American soccer on the international scale through the U.S. Olympic Committee and the Fédération Internationale de Football Association (“FIFA”).  One of the U.S. Soccer Federation’s functions is organizing a national professional soccer league, and since 1994 it has relied on Major League Soccer to maintain the teams and ticket sales.   

          ChampionsWorld worked to promote international teams by organizing matches for an American audience.  However, the U.S. Soccer Federation only sanctioned matches between the teams if ChampionsWorld and other promoters of international soccer paid allegedly high fees and bonds.

          The U.S. Soccer Federation did offer lower sanctioning fees, but only if the international match was accompanied with an MLS match as a double header.  

          Although ChampionsWorld filed its complaint in ChampionsWorld LLC v. United States Soccer Federation Inc. et al. in 2006, the Court granted a motion to stay the case so it could be arbitrated in two different international sports organizations.

          FIFA’s Players’ Status Committee and the Switzerland based Court of Arbitration for Sport  both concluded that under FIFA’s standards, the U.S. Soccer Federation does have the right to sanction and charge fees for the international matches played in the U.S.

          In addition to confirming the arbitral award, Judge Leinenweber ruled ChampionsWorld failed to state the relevant product and geographic markets necessary for an antitrust claim.

          The court rejected the testimony of plaintiff’s expert, University of Michigan professor Rodney Fort, who suggested that the closest product substitute for the international soccer matches was Major League Baseball.  The court noted that “[s]occer has a smaller fan and financial base in the United States than, baseball. Given this differentiation, Fort should have tested substitutability from the perspective of soccer fans rather than baseball fans.”

          The court also rejected Fort’s definition of the relevant geographic market as national, not local.  The court faulted the plaintiff’s expert’s heavy reliance on the distribution of games, which is done on a nationwide basis.  The court held that a market’s geographic scope “must be studied from both supply and demand sides,” and that the “ultimate customers” are the ticket buyers, who “make their entertainment choices locally.”

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          Categories: Antitrust Litigation

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