Developments in U.S. Antitrust Litigation — 2022 Year in Review

Introduction

In 2022, antitrust case filings were down almost 25 percent from the previous year. According to Westlaw Analytics, 242 cases were filed in federal district courts in 2022 compared with over 300 in 2021 and over 400 in 2020. Notably, plaintiffs continue to prefer California federal courts, with over 30 antitrust cases filed in the Northern District of California alone. While 2022 saw a number of noteworthy private antitrust litigations filed and other high-profile actions continued in discovery, there were also important decisions in government merger litigation challenges in several courts and on class certification from the US Court of Appeals for the Ninth Circuit. In the coming year, antitrust litigation is expected to become more active, following on the heels of aggressive enforcement from the antitrust agencies, and key decisions are expected from federal courts at all levels.

Highlights from 2022

Government Litigation Remained Active, but With Mixed Results

While US antitrust agency leadership has been vocal about its desire to litigate more enforcement challenges to push antitrust jurisprudence in a more progressive direction, they have faced some skepticism from both federal and administrative courts and realized mixed results. Notably, in September 2022 alone, the government suffered key losses in three high-profile merger cases.

On September 1, Chief Administrative Law Judge (ALJ) D. Michael Chappell rejected the Federal Trade Commission (FTC)’s claims that Illumina’s proposed acquisition of Grail would substantially reduce competition in the alleged market for research, development, and commercialization of multi-cancer early detection (MCED) tests.¹ The complaint alleged that there was a reasonable likelihood the vertical merger was anticompetitive because Illumina, as the sole provider of a critical input for MCED tests, could harm potential competitors to Grail.² Judge Chappell concluded that the FTC did not bring sufficient evidence to demonstrate that Grail had competitors who were close to making a MCED test commercially available for patients to purchase.³ The ALJ also rejected the FTC’s contention that a prima facie Section 7 Clayton Act violation could be established by demonstrating that Illumina would have the ability and incentive to harm Grail’s rivals post-acquisition.⁴ In doing so, the court emphasized that the established legal precedent required a court to consider a number of factors when evaluating vertical mergers, such as the nature and purpose of the acquisition. Lastly, the court concluded that Illumina’s long-term supply agreements with its US oncology testing customers who purchase next-generation sequencing (NGS) products would constrain Illumina from harming any of Grail’s potential competitors, emphasizing that case law supported applying the real-world effects of contractual commitments when determining the likelihood for anticompetitive harm.⁵ Complaint counsel appealed the ALJ’s decision and the FTC, sitting as an adjudicative body, heard oral arguments in the appeal in December 2022. The FTC decision on appeal is expected in the first quarter of 2023.

A few weeks later, a court in the US District Court for the District of Columbia rejected the Department of Justice, Antitrust Division (DOJ)’s request to block UnitedHealth’s acquisition of Change Healthcare.⁶ DOJ’s complaint set forth three theories of competitive harm—one horizontal and two vertical.⁷ Specifically, the government argued that the acquisition would lessen competition in the market for first-pass claims editing. The complaint also alleged that the merger would provide UnitedHealth with control over Change’s Electronic Data Interchanges (EDI) clearinghouse and would give UnitedHealth the ability and incentive to (1) use external customers’ competitively sensitive information for its benefit and (2) preclude innovation and raise rivals’ costs. First, the court held that UnitedHealth’s proposed divestitures would resolve any potential anticompetitive effects from a loss of competition between UnitedHealth and Change in first-pass claims editing solutions. Second, the court found that UnitedHealth would not have the ability and incentive to harm its rivals. Notably, the court concluded that DOJ’s claims were unsupported by real-world evidence of anticompetitive effects. In particular, the court noted that DOJ could not quantify the amount of new data—or its value—that would be available to UnitedHealth post-merger.⁸ The court also emphasized UnitedHealth’s incentives to protect external customers’ data and maintain its culture of trust.⁹ Additionally, the court cited UnitedHealth’s proposed firewalls and customer contracts as protections against potential foreclosure.¹⁰ When evaluating DOJ’s foreclosure theory, the court, similar to Judge Chappell, found that the government’s theory was based on the potential foreclosure of EDI-related innovations that did not yet exist.¹¹ In late November, two months after the district court’s ruling, DOJ filed a notice of appeal to the DC Circuit.¹²

In late September, the US District Court for the District of Delaware declined to block US Sugar Corp.’s proposed acquisition of Imperial Sugar, disagreeing with both DOJ’s market definition and allegations of anticompetitive effects.¹³ DOJ alleged that the proposed merger between the two refined sugar producers would harm customers in the Southeast region of the United States by increasing the price of sugar, reducing quality, and reducing service reliability.¹⁴ The complaint further alleged that the merger could incentivize the few remaining sugar producers to coordinate to raise prices and reduce quality.¹⁵ The parties challenged DOJ’s proposed relevant market as being limited to the Southeast, arguing that DOJ’s market definition ignored the reality that sales of refined sugar flow readily throughout the United States.¹⁶ After a four-day bench trial in April 2022, the court concluded that DOJ’s proposed geographical market was too narrowly defined and the US Department of Agriculture could counteract any anticompetitive effects because the supply of refined sugar in the United States is heavily regulated.¹⁷ Immediately after the district court’s decision, DOJ filed an emergency motion to prevent the parties from closing the transaction pending appeal.¹⁸ The US Court of Appeals for the Third Circuit denied DOJ’s request and heard oral arguments on January 18, 2023.

While this string of losses was significant, the antitrust agencies had successes in court as well. For example, in March 2022, the Third Circuit upheld the decision of a court in the District of New Jersey granting the FTC’s request for a preliminary injunction to pause Hackensack Meridian Health Inc.’s planned purchase of Englewood Healthcare pending an administrative trial.¹⁹ The court confirmed that a showing of price discrimination is not required for a patient-based geographic market.²⁰ Instead, the court affirmed the district court’s decision that the FTC verified the patient-based market with a valid application of the hypothetical monopolist test.²¹ Finally, the court upheld the lower court’s determination that the FTC established a prima facie case that the merger would be anticompetitive with an HHI calculation and direct evidence indicating that the hospitals viewed each other as competitors.²² The court agreed that the hospitals’ proffered procompetitive justifications did not overcome the FTC’s prima facie cases and concurred that these benefits were speculative.²³

Pending Litigation

A number of the notable court challenges launched by the FTC and DOJ remain pending, with decisions expected later this year.

In the tech space, the FTC recently challenged two transactions. First, in July 2022, the FTC challenged Meta’s acquisition of the VR app developer Within Unlimited, claiming that the acquisition would limit future competition between the parties for VR app development.²⁴ A judge in the Northern District of California presided over a seven-day evidentiary hearing on the FTC’s bid for a preliminary injunction in December 2022 and a proceeding in front of the FTC’s ALJ is scheduled to begin on February 13, 2023. Second, in December 2022, the FTC challenged Microsoft’s proposed acquisition of video game developer Activision Blizzard, Inc. (Activision).²⁵ According to the FTC, “Microsoft would have both the means and motive to harm competition by manipulating Activision’s pricing, degrading Activision’s game quality or player experience on rival consoles and gaming services, changing the terms and timing of access to Activision’s content, or withholding content from competitors entirely, resulting in harm to consumers.”²⁶ The FTC’s administrative proceeding in this matter is scheduled to begin in August 2023.

In the agriculture industry, the FTC, along with several states, filed a lawsuit against Syngenta AG and Corteva Inc., two pesticide manufacturers, alleging unlawful monopoly maintenance and exclusionary conduct that resulted in farmers paying artificially inflated prices for crop-protection products.²⁷ In September 2022, the FTC and a number of states alleged that Syngenta and Corteva paid distributors to block competitors from selling cheaper generic pesticide products to farmers.²⁸ Specifically, the plaintiffs alleged that defendants used “loyalty programs” as pay-to-block schemes.²⁹ The complaint alleged that defendants intended to suppress generic competition and maintain market share resulting in supracompetitive prices for certain active ingredients used in its products.³⁰ Corteva, in its motion to dismiss, argued that the FTC mischaracterizes the loyalty programs as exclusionary, stating that the discounts were part of a program that was widely accepted in the industry, relied upon, and voluntary.³¹ Corteva further stated that it never required exclusivity from its customers to participate in the programs or conditioned the ability to purchase its products on program participation.³² Additionally, Corteva argued that the incentive programs benefitted distributors by rewarding customer loyalty and that the FTC did not allege that Corteva failed the price-cost test.³³ Corteva also challenged the FTC’s market definition, arguing it was not supported by factual allegations and was inconsistent with market definitions the FTC had used in previous merger cases.³⁴

In the transportation industry, DOJ’s efforts to challenge an alliance between American Airlines (American) and JetBlue Airways (JetBlue) was the subject of a multiweek trial in a court in the US District Court for the District of Massachusetts.³⁵ In September 2022, American-Jet Blue headed to trial to determine the fate of a code-sharing agreement between American Airlines and Jet Blue. In 2020, American and JetBlue announced a regional alliance in the Northeast.³⁶ In September 2021, DOJ challenged the alliance as a de facto merger that eliminated head-to-head competition between the airlines.³⁷ In their trial brief, American and JetBlue argued that DOJ’s claims of anticompetitive harm were speculative and that the alliance was designed to better compete with United and Delta, as well as improve capacity.³⁸ American and JetBlue also pointed to several direct consumer benefits, including more nonstop routes, increased consumer choice through the addition of these nonstop flights, new international flights out of New York, and frequent flyer reciprocity.³⁹ A decision is expected in early 2023 and may have ramifications for joint ventures among airlines, as well as companies in other industries.

Golf Tour Dispute Attracts Significant Attention

One case that generated significant press this year arose from the dispute between the Saudi-Arabian-backed LIV Golf league and the PGA Tour.

In August, LIV Golf-affiliated golf professionals filed a lawsuit in the US District Court for the Northern District of California against the PGA Tour, arguing that the PGA Tour’s regulations are allegedly anticompetitive and have harmed the careers of various professional golfers by imposing unlawful participation restrictions.⁴⁰ Three of the plaintiffs, Talor Gooch, Hudson Swafford, and Matt Jones, also sought a temporary restraining order that would have allowed them to participate in the FedEx Cup Playoffs. The PGA Tour responded that its tour players are subject to an exclusive-services contract, where golfers enjoy the benefits of membership in exchange for exclusivity, and filed a counterclaim against LIV Golf, alleging that LIV Golf tortiously interfered with the PGA Tour players’ contracts.⁴¹ The court denied the players’ request for a temporary restraining order and found that the golfers did not establish they had been irreparably harmed because the players had been able to sign lucrative contracts with LIV Golf that purported to compensate players for income lost from leaving the PGA Tour and continued to play golf in LIV Golf’s events.⁴² The court also noted LIV Golf’s rapid success in the elite professional golf space shown by its ability to sign 48 of the world’s top golfers. The court viewed that fact as tending to negate the players’ arguments that the PGA Tour is a monopsonist.⁴³ In September 2022, four of the plaintiffs voluntarily dismissed their claims against the PGA Tour. Fact discovery is set to end on March 3, 2023, and the trial date is currently set for January 8, 2024.

Ninth Circuit Produces Key Class Certification Decision

In April 2022, the US Court of Appeals for the Ninth Circuit sitting en banc upheld class certification in a complex antitrust multi-district litigation regarding allegations to fix the prices of canned tuna.⁴⁴ Judge Ikuta, writing for the majority in Olean Wholesale Grocery Coop., Inc. v. Bumble Bee Foods LLC, noted that when considering whether there are common questions of law or fact under Rule 23(b)(3), a judge is limited to considering whether the evidence shows that a common question could be resolved and not whether the evidence would likely win at trial.⁴⁵ The majority determined that class certification is appropriate even when there are questions unique to some class members as long as these questions do not predominate over the common question.⁴⁶ And a district court satisfies its responsibility to “rigorously” scrutinize expert testimony if it considers factors that may undercut the reliability of an expert’s model and concludes that plaintiffs’ expert put forth a reliable model capable of showing class-wide impact.⁴⁷ Judge Lee, dissenting, argued that district courts must “dig into the weeds” to determine the persuasiveness of each party’s experts, especially when the experts’ dispute implicates Rule 23 requirements, because so many class actions often settle after the certification stage.⁴⁸ Judge Lee reasoned that potentially a third of the proposed class plaintiffs may not have suffered an injury at all, which would not satisfy Rule 23(b)(3)’s predominance requirement.⁴⁹ Since the Ninth Circuit continues to be a popular destination for antitrust plaintiffs, this decision may allow for grants of class certification in antitrust cases, even when there is conflicting expert testimony over the existence of more than a de minimis number of unaffected or uninjured class members.

Digital Platforms Continue to Face Scrutiny

While the parties continue to litigate an appeal of the September 2021 district court decision in Epic Games, Inc. v. Apple, Inc.,⁵⁰ other digital platforms also face antitrust litigation regarding their rules and restrictions. In May 2022, a court in the US District Court for the Western District of Washington allowed an amended antitrust complaint by game developer Wolfire Games (Wolfire) to proceed against Valve Corporation (Valve). Wolfire alleged that Valve Corporation violated the antitrust laws by forcing developers to comply with a most-favored-nation clause, allowing Valve to maintain a so-called “walled garden” around its platform. Ultimately, Wolfire asserted that these rules allegedly allowed Valve to demand higher fees from developers and consumers.⁵¹ While the court initially dismissed the initial complaint for failing to adequately plead that Valve enjoyed market power in 2021,⁵² Wolfire Games refiled its complaint and provided the “needed context” to survive Valve’s attempt to dismiss the case.⁵³ Specifically, the court held that it was plausible that Valve had the requisite market power because it had acquired a gaming platform in 2001 and later shut it down, moving numerous gamers onto its Steam platform.⁵⁴

Amazon continues to face antitrust complaints, including a class action lawsuit in which consumer plaintiffs accused the company of imposing anticompetitive restrictions on retailers on its platform.⁵⁵ In March 2022, the US District Court for the Western District of Washington partially allowed claims related to Amazon’s fair pricing policy to proceed. Plaintiffs alleged that Amazon imposes significant penalties on sellers who offer lower prices on other sites (including the seller’s own site), preventing them from offering discounted products outside of the Amazon platform.⁵⁶ In response, Amazon argued that consumers failed to allege harm to competition or antitrust injury. The court granted in part and denied in part Amazon’s motion to dismiss, allowing plaintiffs’ rule of reason claims to proceed.⁵⁷ The court stated that the plaintiffs adequately pleaded antitrust injury by alleging that Amazon’s conduct reduced competition and that members of the class, including consumers, paid more for products.⁵⁸

Meta Platforms, Inc. (Meta) continues to face antitrust allegations from various plaintiffs. First, the company continues to litigate in the US District Court for the District of Columbia against the FTC, which survived a motion to dismiss in January 2022, regarding allegations of unlawful maintenance of a monopoly through Meta’s acquisitions of Instagram and WhatsApp.⁵⁹ Second, the DC Circuit is currently considering an appeal by a group of state attorneys general pertaining to a parallel action against Meta that the district court dismissed based on the doctrine of laches. Third, in Klein v. Meta Platforms, Inc., advertisers’ amended complaint survived a motion to dismiss in December 2022 related to allegations of a so-called “monopoly broth” of anticompetitive conduct, including threats of denials of access for Facebook competitors, unlawful agreements with other digital platforms, and use of deceptively acquired data.⁶⁰

Finally, DOJ and Google filed motions for summary judgment in December 2022 in connection with DOJ’s October 2020 challenge related to Google search and Google ads, with a decision expected in 2023.

Antitrust Litigation Remained Active in the Healthcare and Life Sciences Industries

In December 2022, the US Court of Appeals for the Third Circuit affirmed the district court’s decision to reject allegations that Takeda Pharmaceuticals (Takeda) used sham patent litigation to prevent the entrance of generic competitors to its heartburn medicine, Prevacid.⁶¹ Zydus Pharmaceuticals (Zydus) alleged that Takeda filed a complaint solely to slow down the FDA’s approval of Zydus’ generic version of Prevacid.⁶² The circuit court affirmed the lower court’s summary judgment decision: “Because Takeda had an objective basis for bringing its patent infringement claims, those claims cannot provide a basis for antitrust liability.”⁶³

In March 2022, a jury ruled in favor of Sutter Health (Sutter) in Sidibe v. Sutter Health where plaintiffs alleged that the hospital used restrictive contracts with insurance companies to increase prices, harming consumers in Northern California.⁶⁴ The plaintiffs alleged that Sutter negotiated contracts with insurers that purportedly drove patients from lower-cost hospitals to Sutter’s system hospitals. The jury, however, rejected those allegations and found that Sutter did not tie inpatient hospital services to its hospital facilities and did not force health plans to agree to contracts that prevented insurers from steering patients to lower-cost options.⁶⁵

Finally, the US Court of Appeals for the First Circuit in Vázquez-Ramos v. Triple-S Salud, Inc. revived portions of an antitrust suit brought by urologists in Puerto Rico challenging exclusive agreements among insurance companies to consolidate urology services.⁶⁶ In 2019, plaintiffs sued regional insurers, Triple-S Salud and MSO of Puerto Rico LLC, after they entered into an exclusive agreement with a competing medical practice, where the competing medical practice would be the insurers’ exclusive provider of urology services in western parts of Puerto Rico. In December 2022, the First Circuit affirmed in part and reversed in part the district court’s dismissal of plaintiffs’ actions against both insurers. The First Circuit reversed the district court’s decision as to Triple-S Salud and determined that the exclusive arrangement may have harmed the plaintiff urologists by eliminating their ability to compete in the relevant market. The circuit court, however, affirmed the dismissal of the claims against MSO of Puerto Rico, agreeing that plaintiffs’ allegations of MSO of Puerto Rico’s market power were insufficient.⁶⁷

Allegations of Collective Action in the Real Estate Sector Under Focus

In the real estate sector, PLS.com (PLS), a website that contracts with real estate agents to provide home listings, filed a lawsuit against the National Association of Realtors (NAR) in 2020 challenging NAR’s alleged policy requiring members that listed properties for sale on PLS.com to list the same properties on NAR’s websites. The complaint alleged that NAR’s clear cooperation policy eliminated competition with other listing services because it prevented competitors like PLS from gaining a foothold in the market.⁶⁸ In 2021, the Central District of California ruled against PLS, stating that PLS did not adequately allege an antitrust injury because it failed to show that NAR’s policy increased prices for services used by home buyers and sellers.⁶⁹ In April 2022, however, the Ninth Circuit reversed the district court’s decision. The circuit court determined that PLS sufficiently demonstrated an antitrust injury through allegations that real estate agents who “consume” PLS’ services could have been harmed by NAR’s policy and that this policy could have weakened NAR’s competitors.⁷⁰ The Ninth Circuit also held that PLS adequately alleged a group boycott but left it to the district court to decide whether that allegation should be evaluated under the rule of reason or treated as a per se antitrust violation.⁷¹ In January 2023, the Supreme Court denied NAR’s petition for certiorari.⁷²

In the fourth quarter of 2022, a number of purported class action complaints were filed against RealPage, Inc. (RealPage), a property management software company, and other property management companies that offered rental apartments, alleging that these companies used RealPage’s software to inappropriately share data related to leases, prices, occupancy levels, and other significant rental data points, and made agreements for rental housing prices. The various actions are currently awaiting multidistrict litigation consolidation, and this series of cases is likely to be an important one to watch as private plaintiffs contemplate conspiracy actions based on allegedly inappropriate uses of software and other technological means.

Former Students Assert Antitrust Conspiracy Over Financial Aid Awards

In January 2022, a group of former students filed a complaint in the US District Court for the Northern District of Illinois, alleging that a group of colleges and universities conspired to limit financial aid awards.⁷³ In August 2022, the court denied defendants’ motion to dismiss the complaint, which argued, among other points, that their conduct was exempt from the antitrust laws under Improving America’s Schools Act of 1994.⁷⁴ The court denied defendants’ motion to dismiss, finding that plaintiffs adequately stated a claim for relief.⁷⁵

Looking Forward to 2023

In addition to decisions in the Meta/Within and Microsoft/Activision merger challenges, there are several key decisions expected in 2023. One that will have a significant impact on the FTC’s administrative processes will be the Supreme Court ruling in Axon Enterprises v. Federal Trade Commission.⁷⁶ In that case, the Court is assessing “Whether Congress impliedly stripped federal district courts of jurisdiction over constitutional challenges to the [FTC]’s structure, procedures, and existence by granting the courts of appeals jurisdiction to ‘affirm, enforce, modify, or set aside’ the [FTC]’s cease-and-desist orders.”⁷⁷ The FTC argued that the FTC Act implicitly stripped the lower courts of jurisdiction to hear challenges to an agency’s constitutionality by delineating an appeal of the final agency decision to a federal court of appeals.⁷⁸ While Chief Justice Roberts and Justice Alito appeared skeptical of that argument and asked whether it was fair for a litigant to wait years until the in-house agency decision process is completed before presenting their constitutional claims to a federal court of appeals, other justices appeared more sympathetic to the government’s argument.⁷⁹ Notably, Justices Sotomayor and Brown-Jackson expressed concern that allowing litigants to go to the district courts would superintend the agency process and possibly undermine the finality of agency action.⁸⁰

In the tech sector, the Ninth Circuit appears poised to decide on Apple, Inc.’s (Apple’s) alleged anti-steering provision in Epic Games, Inc. v. Apple, Inc.⁸¹ In September 2021, a court in the Northern District of California largely ruled in Apple’s favor, holding that Epic Games, Inc. (Epic) failed to show that Apple was “an illegal monopolist,” but found that Apple’s prohibition on in-app payments that bypass the App Store and Apple’s commission rate violated California’s unfair competition law. In November 2022, the Ninth Circuit heard oral arguments in the appeal of the district court’s decision, and the expected decision regarding a digital platform’s ability to set its own rules could potentially impact other cases in the tech area, such as the litigation regarding Valve’s Steam platform discussed above.⁸²

Finally, 2022 saw a number of follow-on private actions arising from government enforcement actions. As DOJ and FTC each continue to push aggressive enforcement agendas, it is likely that private plaintiffs will follow with lawsuits of their own. For example, DOJ and FTC have raised concerns about allegedly anticompetitive conduct directed at labor markets. This has led private plaintiffs to file their own actions related to alleged wage-fixing and no-poach agreements, including a proposed class action in the District of Connecticut alleging that Raytheon and other aerospace firms purportedly engaged in anticompetitive practices for nearly a decade by not agreeing to poach competitors’ workers.⁸³ In addition, the FTC has highlighted its enforcement related to the “right-to-repair movement.” Following an FTC Magnuson-Moss Warranty Act enforcement action, private plaintiffs sued Harley-Davidson in multiple venues, alleging that the company unlawfully tied its warranty to its own replacement parts.⁸⁴

* Jennifer Chang contributed to this Advisory. Ms. Chang is a graduate of the University of Chicago Law School and is employed at Arnold & Porter's Washington, DC office. Ms. Chang is not admitted to the practice of law in the District of Columbia.

© Arnold & Porter Kaye Scholer LLP 2023 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.