“Antitrust and Trade Regulation Briefing May 2013”
The U.S. Supreme Court has once again used an antitrust case as a vehicle to announce a potentially significant restriction on plaintiffs' litigation, particularly class actions.
Supreme Court Rejects Antitrust Class Action
The U.S. Supreme Court has once again used an antitrust case as a vehicle to announce a potentially significant restriction on plaintiffs’ litigation, particularly class actions. In Comcast Corp. v. Behrend, the lower courts had certified a class of approximately two million Comcast subscribers in the Philadelphia area who alleged that they had paid higher prices because of Comcast’s strategy of “clustering” – i.e., working to increase its market share in some areas while ceding market share to competitors in other areas. The plaintiffs alleged that clustering had caused higher prices in four different ways, and they submitted an expert’s calculation of the overall harm their proposed class had suffered as a result. The lower court held that the plaintiffs would be allowed to pursue damages under only one of their four theories, but certified the class as to that theory. The Supreme Court reversed, holding that the lower court had not performed the required “rigorous analysis” to determine if damages under the one theory allowed could be proven on a class-wide basis. The “rigorous analysis” required in Comcast may be a serious hurdle for future class action plaintiffs to overcome.
In 2007, the Supreme Court used another antitrust case, Bell Atlantic v. Twombly, to heighten the standard that plaintiffs must meet to avoid having their cases dismissed before discovery. In Twombly, the Supreme Court held that a plaintiff’s allegations must be “plausible” in order for the case to move ahead to the discovery phase. Hardly noticed when it was first decided, Twombly has had a broad impact on civil lawsuits in the federal courts and in many states by subjecting factually unsubstantiated claims to additional scrutiny at the outset of a lawsuit.
Standard Setting Conspiracy Claim Dismissed
A recent Massachusetts federal court decision has dismissed a plaintiff’s conspiracy claims arising out of standard setting. In Advanced Technology Corporation, Inc. v. Instron, Inc., the plaintiff alleged that the dominant players in the market for mechanical testing equipment conspired to use their positions on national and international standard setting organizations to undermine a proposed standard for an innovative, competing measurement technique. Although the plaintiff alleged specific instances of its competitors acting to block the new standard, the court declined to infer an illegal agreement. Instead, the court held that the plaintiff had alleged only parallel conduct by members of an oligopoly, each of whom had its own economic incentive to independently oppose the new standard. The court also discounted the significance of the defendants’ alleged participation in various informal meetings, finding them to be ordinary standard setting activity. The court dismissed the plaintiff’s complaint on the grounds that the facts alleged were not enough to “nudge its conspiracy claim over the line from possible to plausible.”
FTC Charges Illegal Exchange of Business Information by Competitors
The Federal Trade Commission ('FTC") charged a national manager of medical/surgical hair restoration practices and provider of hair therapy products with illegally sharing competitively sensitive business information with its competitor. The FTC alleged that for at least four years, the CEOs of Bosley, Inc., and Hair Club routinely exchanged nonpublic information about future product offerings, price floors and discounts, expansion plans and business operations. According to the FTC, the information exchanges had the potential to facilitate coordination between the companies by reducing uncertainty about each other’s prices and strategic plans. Bosley agreed to enter into a consent agreement barring it from communicating competitively sensitive, nonpublic information to any hair transplantation competitor.
“Humanely Raised” Labeling Claim Allowed to Proceed
A federal court in New Jersey has ruled that a proposed consumer class action based on animal treatment claims may proceed. The plaintiffs in Hemy v. Perdue Farms alleged that Perdue Farms’ claim that its chickens were “humanely raised” was false and deceptive because the chickens were in fact subjected to numerous cruel and inhumane practices allowed by widely-followed industry guidelines. The plaintiff alleged that a reasonable consumer would believe that a humanely raised chicken would be treated humanely throughout life, including a quick and painless death. The plaintiff further alleged that she paid a premium price for Perdue’s chicken in reliance on the “humanely raised” labeling. The court found that the plaintiff adequately alleged that “humanely raised” was a false and deceptive claim for purposes of the New Jersey Consumer Fraud Act, and denied Perdue’s motion to dismiss the case.