Developments in US Antitrust Litigation—2021 Year in Review

Introduction

The pace of antitrust case filings showed little sign of slowing in 2021. According to Westlaw Analytics, 340 antitrust cases were filed in federal district courts in 2021. While this was roughly a 20% decline from 2020, when federal courts saw the most antitrust cases filed (426) in a given year since 2007, 2021 was still the third highest antitrust filing year during that fourteen-year span. And the Northern District of California continued to be the most active antitrust court with nearly 25% of all federal antitrust cases filed in 2021. The Northern District of California has been the most active antitrust court every year since 2009.

Highlights from 2021

Tech Cases Highlight Potential Challenges in Pleading Relevant Markets & Market Power

Facebook. The FTC and several state attorneys general filed lawsuits against Facebook in December 2020, alleging unlawful maintenance of a monopoly, including through the acquisitions of Instagram and WhatsApp and the imposition of certain platform policies that allegedly prevented potential competitors from integrating with Facebook’s functionality.¹

In June 2021, a court in the District Court for the District of Columbia dismissed the states’ case, ruling that the doctrine of laches, while it did not apply to federal agency plaintiffs, barred the states from challenging Facebook’s acquisitions from 2012 and 2014. The court found that “the States’ long delays were unreasonable and unjustified as a matter of law.” ² The states have appealed the dismissal, arguing that laches does not apply when a sovereign state pursues an action in the public interest.³

The same court dismissed the FTC’s complaint without prejudice in June 2021, finding that the FTC had failed to sufficiently allege that Facebook had market power in the market for Personal Social Networking (PSN) services—which the complaint had defined as the market for “online services that enable and are used by people to maintain personal relationships and share experiences with friends family and other personal connections in a shared social space.”⁴ Judge James E. Boasberg noted the burden of pleading market power in “an unusual, nonintuitive product market,”⁵ and criticized the FTC’s reliance on conclusory allegations that Facebook has “somewhere over 60% share” of the PSN services market, “the confines of which are only somewhat fleshed out and the players within which remain almost entirely unspecified.”⁶

The court also analyzed the FTC’s refusal to deal theory, concluding that Facebook’s general policy of refusing to provide competitors access to its application programming interfaces (APIs) did not itself violate Section 2 of the Sherman Act. Even if specific instances of Facebook revoking a competitor’s API permissions (after previously providing access) might violate Section 2, the FTC lacked statutory authority under Section 13(b) of the FTC Act to seek an injunction because it failed to allege that a Section 2 violation “is ongoing or about to occur”—as the last alleged instance of refusal occurred in 2013.⁷

The FTC amended its complaint in August 2021, and Facebook again moved to dismiss. On January 11, 2022, Judge Boasberg largely denied Facebook’s motion to dismiss, finding that the FTC sufficiently alleged that Facebook maintained a monopoly in the PSN services market through its acquisitions of Instagram and WhatsApp. The court found that the FTC had “add[ed] substantial new allegations about the contours of Facebook’s market share . . . includ[ing] allegations regarding Facebook’s market share of daily average users (DAUs) and monthly average users (MAUs) of PSN services in the United States, as well as its share of users’ average time spent on PSN services.”⁸ Satisfied that “the FTC [did] its homework this time around” to support its market power allegations, the court continued its Section 2 analysis, concluding that the FTC “sufficiently alleged that Facebook acquired Instagram and WhatsApp in order to neutralize actual and likely future competitors.”⁹ Importantly, the court held that the HSR review process provides no insulation from future challenges.¹⁰ However, the court narrowed the scope of the FTC’s case, reaffirming its previous holding that the FTC lacked the statutory authority to seek an injunction addressing Facebook’s platform-related conduct that last occurred in 2013. The court did not dismiss the FTC’s claim, but noted it would be sliced out at summary judgment and that the FTC would not be permitted to seek discovery of Facebook’s platform policies.

Epic v. Apple. Private antitrust challenges to major technology platforms also made headlines in 2021. Epic Games’ challenge to Apple Inc.’s App Store policies went to trial in 2021. A court in the Northern District of California issued a lengthy decision in September 2021.¹¹ Noting that, “[s]uccess is not illegal,” the court held that the plaintiff “failed in its burden to demonstrate Apple is an illegal monopolist” because the trial record ultimately reflected a market share of only 55% in digital mobile gaming transactions, and reflected no evidence of barriers to entry, reductions in output, or decreasing innovation.¹² With this holding, the court sided with Apple on the federal and state antitrust allegations. However, the court found for plaintiffs under the California unfair competition law and enjoined Apple from enforcing its prohibition on in-app payments that bypass the App Store and Apple’s commission rate.¹³ Both Apple and Epic have appealed the decision,¹⁴ and in late November 2021 Apple won a bid to stay the district court’s injunction pending appeal.¹⁵

Sports Cases Continue to Generate Significant Attention

NCAA v. Alston. On June 21, 2021, the Supreme Court unanimously held that the NCAA’s cap on educational benefits to athletes (e.g., funds for school supplies and postgraduate scholarships) violated Section 1 of the Sherman Act.¹⁶ In so doing the Court upheld in its entirety a detailed injunction entered by Judge Claudia Wilken of the District Court for the Northern District of California that applied the rule of reason and upheld certain NCAA restrictions relating to athletic scholarships while striking down others.

After outlining the different degrees of scrutiny that may apply in Section 1 cases, the Court concluded that the “rule of reason in its usual form” should apply.¹⁷ It then provided important commentary on the application of the rule, including rejecting the idea that businesses must use the least restrictive means to achieve procompetitive benefits.¹⁸ Importantly, the Court did not accept NCAA’s purported justification that the preservation of amateurism itself (i.e., the agreement not to compete in compensation provided to student athletes) was important to the NCAA’s ability to offer a unique product that is valued by consumers who desire an alternative to professional sports. By rejecting that argument, the Court rejected the concept that a defendant, by attempting to define its product as one involving less competition, could avoid the application of the antitrust laws.¹⁹

Justice Kavanaugh wrote separately to express his view that many other NCAA compensation rules might also not survive antitrust scrutiny, stating that the NCAA’s business model “would be flatly illegal in almost any other industry in America.”²⁰ The NCAA is in the process of revising many of its rules. Student athletes are now free to license their names and images, as well as in some circumstances to receive income from sponsors.²¹ It appears likely that some restrictions on student-athlete compensation will now become a conference-level issue rather than a NCAA-level issue and that different conferences (which individually lack market power) will adopt different approaches, offering a wider range of options both for consumers of college sports and student-athletes.

City of Oakland v. Oakland Raiders. On December 2, 2021 the Ninth Circuit affirmed the district court’s dismissal of the City of Oakland’s antitrust claims against the Raiders and the NFL regarding the relocation of the Raiders from Oakland to Las Vegas.²²

Under the NFL’s Constitution, the relocation of a member club and/or admission of a new club requires the approval of 75% of the members. The City of Oakland claimed that the NFL enjoyed monopoly power over a relevant market in professional football and that it had limited the number of teams, thereby increasing the bargaining power of each team in its negotiations with cities and stadium authorities. With regard to the Raiders, the City contended that this increased bargaining power allowed the Raiders to demand unduly generous public subsidies towards a new stadium in Oakland, and when those subsidies were not forthcoming, to secure a more lucrative arrangement in Las Vegas. The City also contended that the vote of the NFL member clubs permitting the Raiders to move constituted a group boycott.²³

The Ninth Circuit unanimously rejected these claims. With regard to the boycott claim, the court found that only one club—the Raiders—had ceased doing business with Oakland; there was no “group” in the purported “group boycott.”²⁴ The court explained, “[c]ollective action in support of an individual boycott is not the same as a group boycott,”²⁵ With regard to the claim based on an allegedly depressed number of clubs, the court found that the City lacked statutory antitrust standing. In particular, because the City had not paid the allegedly inflated price to host the Raiders—rather it had refused to pay it—the City was less directly affected by the alleged conduct than someone who had actually paid the allegedly inflated price.²⁶ On an issue of first impression in the circuit, the Ninth Circuit followed a decision by the Tenth Circuit, Montreal Trading Ltd. V. Amax Inc., 661 F.2d 864 (10th Cir. 1981), in holding that non-purchasers generally lack standing to complain of the inflated prices alleged caused by an antitrust violation.²⁷

Judge Patrick Bumatay concurred to explain he would have found that Oakland’s output restriction claim was “too speculative to satisfy the threshold of constitutional standing and so must be benched even before kickoff.”²⁸ Judge Bumatay explained that Oakland’s claim rested on a series of speculative steps: that a new rule would replace the 3/4 rule for admission of new clubs, that there would be new applicants, that the NFL would admit one or more such applicants, that one of those new applicants would move to Las Vegas, and that the Raiders would then not be able to find a better host city and would have no option but to continue to play in the dilapidated 50-year old Oakland Coliseum.²⁹           

Fusion Elite All Stars v. Varsity Brands. Also in 2021, Defendant Varsity Brands, founder of US All-Star Federation, the host of the annual Cheerleading Worlds competition, lost its motion to dismiss a complaint accusing it of anticompetitive conduct by allegedly monopolizing cheer competitions.³⁰ Notably, a court in the Western District of Tennessee accepted, at least for pleading purposes, plaintiffs’ allegation of narrowly-defined single-brand relevant markets—“All-Star Cheer competitions” and “All-Star Apparel.” The court found that a product market excluding other cheerleading competitions from the relevant market was reasonable because of the cost of All-Star Cheer competitions and those competitions’ role in selecting participants in the annual Cheerleading Worlds competition.³¹ Similarly, based on USASF rules and customer demand (i.e., the “strong culture in the cheer market”), the court concluded that All-Star Apparel is an appropriate single-brand market of cheer-related sports gear that excludes other cheer-related apparel and other sports apparel manufacturers.³²

Pharmaceutical Patent Settlement Cases Proceed Past Summary Judgment

Multiple litigations alleging the parties entered into unlawful reverse patent settlements (so-called “pay-for-delay” cases) survived summary judgment in 2021. In In re Glumetza Antitrust Litigation,³³ a court in the Northern District of California rejected defendants’ motion for summary judgment, which was premised in large part on unrebutted evidence (resulting from a waiver of privilege) that the generic company expected to lose the underlying patent litigation. The court nonetheless found triable issues of fact because (a) the record did not contain evidence of the subjective beliefs of the brand company, (b) the patent settlement permitted the generic to enter prior to patent expiration and contained a reverse payment, and (c) plaintiffs presented evidence of noninfringement from the underlying trial record. A number of defendants settled shortly thereafter.

In another case, In re Namenda Indirect Purchaser Antitrust Litigation,³⁴ a court in the Southern District of New York denied defendants’ motion for summary judgment, finding that there were factual issues relating to the value associated with a distribution and supply agreement negotiated at the time of the parties’ patent settlement. However, that court also rejected plaintiffs’ proposed “generic inducement test” in which the jury would be allowed to “consider only the generic’s perspective” on whether the payoff was greater than profits expected from litigation.³⁵ Finally, in In re EpiPen, the District of Kansas denied in part Mylan’s motion for summary judgment, finding sufficient evidence from which a reasonable jury could infer that Mylan “made an unlawful reverse payment in the EpiPen settlement in the form of overpaying Teva for its settlement of the Nuvigil litigation.”³⁶ However, the Court granted Mylan’s motion for summary judgment with respect to plaintiffs’ theory that Mylan’s rebate agreements with its PBMs were unlawful exclusive dealing arrangements. Trial is scheduled to begin in February 2022.

Antitrust Remedies Clarified

FTC Remedies. In April 2021, the Supreme Court held, in AMG Capital Management LLC, et al v. Federal Trade Commission, that “Section 13(b) of the Federal Trade Commission Act does not authorize the commission to seek, or a court to award, equitable monetary relief such as restitution or disgorgement.”³⁷ In many cases, the FTC proceeds through its administrative trial process for decisions on the merits, culminating in judicial review by a circuit court.³⁸ Section 13(b) provides a shortcut for the FTC to file directly in federal district court to seek a temporary restraining order, preliminary injunction, or permanent injunction.³⁹ In AMG Capital Management, the FTC filed an action under Section 13(b) against a payday lender and requested the court order a permanent injunction as well as restitution and disgorgement.⁴⁰ The district court imposed the requested remedies, and Ninth Circuit affirmed on the basis that Section 13(b) had been interpreted to empower courts to “grant any ancillary relief necessary to accomplish complete justice, including restitution,” although some circuit judges acknowledged that the precedent was mixed on this point.⁴¹ Ultimately, the Supreme Court granted AMG Capital Management’s petition for certiorari and declined to read Section 13(b) so broadly. The Court held that the FTC may not seek equitable monetary relief directly in federal court, but must first proceed through its administrative process.⁴²

Private Remedies. The Fourth Circuit validated a district court’s use of divestiture as a remedy for anticompetitive acquisitions in private litigation when it upheld a divestiture order by for a court in the Eastern District of Virginia in a private challenge to a consummated acquisition.⁴³ After Plaintiff Steves & Sons, Inc. prevailed in a 2018 jury trial, the court ordered a divestiture to resolve concerns about the loss of head-to-head competition for molded interior doors and doorskins arising from the 2012 merger of JELD-WEN and Craftmaster International.⁴⁴ Calling the underlying transaction “a poster child for divestiture,”⁴⁵ the Fourth Circuit held that district courts are empowered to craft remedies that serve the broader public purpose of protecting competition, including by requiring divestiture.⁴⁶ The Fourth Circuit declined to rehear the petition en banc in March 2021.⁴⁷

Procedural Standards Clarified

2021 saw important developments in class certification jurisprudence as well.

• In April 2021, the Ninth Circuit vacated class certification in Olean Wholesale Grocery Cooperative v. Bumble Bee Foods, holding that, under Rule 23(b)(3)’s predominance requirement, a district court must find that the proposed class contains no more than a “de minimis” number of uninjured class members.⁴⁸ The three-judge panel ruled that the district court abused its discretion when it “gloss[ed] over the number of uninjured class members,” ordering the lower court on remand to determine the number of uninjured members.⁴⁹ The court did not define a threshold for “de minimis,” but cited recent precedents for the proposition that “5% to 6% constitutes the outer limits of a de minimis number,”⁵⁰ and instructed that under “any rubric, if Plaintiffs’ model is unable to show impact for more than one-fourth of the class members, predominance has not been met.”⁵¹ This decision, however, was vacated in August when the Ninth Circuit granted a rehearing en banc.⁵² An en banc decision is now pending.
• In September 2021, the Ninth Circuit vacated another class certification order in Stromberg v. Qualcomm, the consumer class action follow on to FTC v. Qualcomm, concluding that common issues of law did not predominate over the proposed class of 250 million indirect purchasers alleging that Qualcomm’s anticompetitive licensing practices caused them to overpay for cellphones.⁵³ The Ninth Circuit held that the district court misapplied California’s choice of law rules, which required the district court to determine whether non-Illinois Brick repealer states had a strong interest in applying their own law to consumers purchasing cellphones within their borders—“[b]y applying California law to the nationwide class of indirect purchasers, the district court improperly impaired non-repealer state policy by allowing California to set antitrust enforcement policy for the entire country.”⁵⁴ Because the application of varying state laws would undermine predominance for purposes of Rule 23(b)(3), the Ninth Circuit vacated the district court’s order, instructing the district court on remand to (1) determine whether the Ninth Circuit’s conclusion in FTC v. Qualcomm that Qualcomm’s licensing practices are not anticompetitive defeats the class on Rule 23(a) grounds, and (2) if Rule 23(a)’s requirements are met, then to reconduct the choice of law analysis.⁵⁵
• In August 2021, the Fourth Circuit, in In re Zetia (Ezetimibe) Antirust Litigation, vacated an order certifying a direct purchaser class consisting of only thirty-five purchasers.⁵⁶ The appellate court held that this class did not satisfy Rule 23’s requirement that “a class be ‘so numerous that joinder of all members is impracticable.’”⁵⁷ Notably, the circuit explained that practicality should not be measured against the practicality of individual trials for each class member; rather the efficiency of proceeding as a class should be analyzed in comparison to what would occur under traditional joinder,⁵⁸ which allows plaintiffs to join actions when they share common questions of law or fact arising out of the same set series of occurrences without regard to their numerosity.⁵⁹

In addition, in TransUnion v. Ramirez, a class action alleging that TransUnion failed to use reasonable procedures to ensure the accuracy of credit files in violations of the Fair Credit Reporting Act, the Supreme Court returned to the doctrine of standing to reaffirm the principle, “No concrete harm, no standing.”⁶⁰ Whereas the Ninth Circuit had held that all members of the purported class were harmed when their privacy, reputational, and informational interests were put at risk, the Supreme Court held that only those plaintiffs who actually provided credit reports to businesses could claim concrete harm.⁶¹ Further, the Court noted that “[w]e do not here address the distinct question whether every class member must demonstrate standing before a court certifies a class.”⁶² Circuits are split on this question, but this precedent may lend support to class-specific arguments that individualized issues of standing may predominate over common questions. The Supreme Court may well take up this issue up in a future case.

Looking Forward to 2022

More Sports Cases on the Horizon

Antitrust litigation in the sports world will remain in the headlines next year. Following its victory over the City of Oakland, the National Football League faces a new antitrust challenge in Casey’s Distributing v NFL and Hastings v. NFL.⁶³ Plaintiffs, one merchant and one consumer, filed separate complaints alleging that the NFL, each NFL team, and the merchandise retailer Fanatics conspired to restrain other retailers from selling NFL merchandise on Amazon marketplace.⁶⁴ According to Plaintiffs, NFL and Fanatics have forced merchandise licensees to boycott non-licensed retailers that re-sell NFL merchandise on e-commerce platforms like Amazon Marketplace.⁶⁵ These cases implicate the power of legitimate joint ventures to control downstream distribution of their products. They will also create interesting questions about relevant markets (like those in Fusion Elite All Stars v. Varsity Brands) as plaintiffs have alleged narrow relevant markets: (1) “The relevant product market is the Amazon-based third-party online retail market for Products bearing the Intellectual Property of the NFL or any NFL team”⁶⁶ and (2) “online retail market for NFL Licensed Products in the United States.”⁶⁷

The NFL will not be the only professional sports league in the headlines. At the end of 2021, four minor league clubs challenged a Major League Baseball decision to reduce the number of affiliated minor league teams.⁶⁸ The complaint is aimed directly at the 1922 Supreme Court precedent⁶⁹ that exempted baseball from antitrust scrutiny.⁷⁰ Although the challenge raises issues of stare decisis, the Court’s decision in NCAA v. Alston might signal an openness to overturning the earlier precedent. Also, early in January 2022, a former minor league baseball player filed a class action suit against the MLB alleging that MLB and its constituent teams “openly collude to restrict and depress, at below market rates, the wages and compensation they pay their minor league players.”⁷¹

More Tech Sector Challenges Unfolding

Beyond the FTC’s renewed challenge to Facebook’s past acquisitions, antitrust observers have much to watch in 2022. These cases have the potential for broader implications beyond the tech sector on issues like antitrust standing, statute of limitations, platform competition, monopolization, most favored nation clauses, and the intersection between competition and privacy.

• Various federal and state enforcers have pending litigations against Google including (1) a October 2020 challenge by DOJ related to Google search and Google ads,⁷² (2) a December 2020 lawsuit by Texas AG related to digital advertising tools,⁷³ (3) a case brought by multiple attorneys general related to Google search in December 2020,⁷⁴ (4) and a July 2021 complaint by various attorney general related to the Google Store.⁷⁵
• The DC attorney general filed a case against Amazon in May 2021, alleging that most favored nation clauses imposed by Amazon on third party sellers violate the DC Antitrust Act.⁷⁶
• Epic Games is pursuing a challenge against Google.⁷⁷ Similar to its challenge against Apple discussed above, Epic Games also filed suit against Google relating to the Google Play Store.⁷⁸
• In re Apple iPhone Antitrust Litigation produced a notable Supreme Court decision applying the Illinois Brick doctrine in 2019.⁷⁹ In the underlying action, in which iPhone owners alleged Apple unlawfully monopolized the aftermarket for iPhone apps, a hearing on class certification was held on November 16, 2021.⁸⁰
• Private lawsuits against Facebook continue as well. In Reveal Chat v. Facebook, app developers appealed the Northern District of California’s January 2022 dismissal of monopolization claims against Facebook on statute of limitations grounds.⁸¹ In Klein v. Facebook, consumers and advertisers are proceeding with their monopolization claims after defeating a motion to dismiss in January 2022.⁸²

More Labor Cases Anticipated

Back in 2016, DOJ and FTC issued joint guidance asserting that DOJ would seek criminal enforcement against so-called “naked” (i.e., not reasonably necessary to a legitimate collaboration) wage-fixing or no-poaching agreements.⁸³ In April 2018, DOJ stated that it would decline to pursue criminal enforcement for no-poach agreements terminated before the 2016 guidance.⁸⁴ At the end of 2020, DOJ filed a criminal indictment against a therapist staffing company owner and the clinical director of a client company for a conspiracy to fix prices.⁸⁵ As our colleagues have discussed in a previous Advisory, the defendants raised three arguments in their motion to dismiss: (1) the wage-fixing is not a per se violation, (2) defendants did not have “fair warning” that their conduct could lead to criminal prosecution, and (3) the per se standard itself violates the Sixth Amendment right to a jury because it precludes the jury from deciding the defendants’ intent. However, a court in the Eastern District of Texas ruled against defendants on each argument.⁸⁶ This result validates the DOJ’s approach and may lead to further criminal enforcement proceedings regarding agreements that restrain competition for labor. Meanwhile civil litigation over labor competition is also ongoing, including three class actions filed in the District of Connecticut against Raytheon in response to reports of a DOJ criminal investigation into the defense contractor’s hiring practices.⁸⁷ As labor market competition has become a point of focus for the Biden administration, these cases may inform future enforcement and future compliance programs.

Merger Litigation Decisions

FTC has two pending challenges against vertical mergers, which have been another hot topic for antitrust practitioners in recent years. Both are proceeding in the FTC’s administrative process. In the Matter of Illumina Inc. went to trial in August 2021 and a decision from the FTC administrative law judge is pending. In the Matter of Nvidia Corporation is scheduled for trial in August 2022. DOJ also has pending challenges to horizontal mergers involving Penguin Random House/Simon & Shuster, and US Sugar/Imperial Sugar, as well as an alliance agreement between American Airlines and Jet Blue.

Remedies Available to State Attorneys General in Question

In the wake of AMG Capital Management v. FTC, defendants in In re Generics Pharmaceuticals Pricing Antitrust Litigation (MDL No. 2724) filed a notice of supplemental authority in support of their motion to dismiss. Defendants argued that disgorgement is not an available remedy to state attorneys general in light of the Supreme Court’s limitation on FTC remedies in AMG Capital Management LLC, et al v. Federal Trade Commission.⁸⁸ Plaintiff state attorneys general responded with an emphasis on the specificity of the Supreme Court’s decision and the inapplicability of any FTC Act statutory interpretation to the interpretation of remedies available under state statutes.⁸⁹ In December 2021, a court in the Eastern District of Pennsylvania granted the parties permission to brief the question.⁹⁰ Defendants’ motion to dismiss remains pending at the time of publication.

Federal Trade Commission Administrative Trials

In January 2022, the Supreme Court partially granted certiorari in Axon Enterprises v. Federal Trade Commission.⁹¹ Faced with an FTC challenge to its acquisition of fellow bodycam manufacturer Vievu,⁹² Axon filed an action in district court to challenge the constitutionality of FTC’s administrative trial venue. Axon argued that the FTC’s combined role of prosecutor and adjudicator violates due process, that disparate forums between DOJ and FTC enforcement violates equal protection, and that Administrative Law Judges are protected by “an impermissible dual-layer of insulation.”⁹³ The district court granted FTC’s motion to dismiss in April 2020.⁹⁴ In January 2021, the Ninth Circuit affirmed, holding that the district court jurisdiction over constitutional claims against the FTC administrative process was implicitly precluded by Congress when meaningful judicial review will be available when the administrative process is complete.⁹⁵ The Supreme Court agreed to hear this jurisdictional question—whether Congress implicitly precluded judicial review over these constitutional claims—but not the constitutional challenge itself.⁹⁶ This case follows on AMG Capital Management and may provide additional clarity on the bounds of FTC enforcement procedure. 

© Arnold & Porter Kaye Scholer LLP 2022 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.