SHERMAN ACT

Illinois Tool Works, Inc. v. Independent Ink, Inc.

Issues

If an antitrust plaintiff alleges that a competitor unlawfully tied a patented product to an unpatented product, must she also prove that the defendant had sufficient power to control the price or quantity of products in the patented good's market?

 

The Sherman Antitrust Act forbids product-tying arrangements by companies that possess substantial market power in the tying-product's market. While the party alleging the violation must generally prove such market power exists, market power is assumed when a company holds a valid patent on the tying product. Illinois Tool Works ("Illinois") makes the availability of licensing agreements for its patented products contingent on the exclusive use of other, unpatented products. It urges the Court to overturn the patent-based market-power presumption. Independent Ink, an Illinois licensee, claims that the tying arrangement improperly forces it to buy Illinois' ink, despite the availability of cheaper, effective substitutes, thereby stifling beneficial competition. The direct impact of the Court's decision, whether it preserves the status quo or changes its rule, making antitrust violations harder to prove, will be felt by sellers who tie patented products to unpatented ones, firms who buy products from such companies, and the consumers who ultimately purchase products from either company. Indirectly, the case may mark the Roberts Court's first foray into the doctrine of stare decisis, which provides insight into the current Court's view on when and how to defer to its past decisions. As a result, the effects of the decision may be felt in many areas of the Court's jurisprudence which don't deal with the antitrust law.

Questions as Framed for the Court by the Parties

Whether, in an action under the Sherman Act, 15 U.S.C. ? 1, alleging that the defendant engaged in unlawful tying by conditioning a patent license on the licensee's purchase of a non-patented good, the plaintiff must prove as part of its affirmative case that the defendant possessed market power in the relevant market for the tying product, or market power instead is presumed based solely on the existence of the patent of the tying product?

Trident is a wholly owned subsidiary of Illinois Tool Works, Inc. ("Illinois"). Independent Ink, Inc. v. Illinois Tool Works, Inc.

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National Collegiate Athletic Association v. Alston

Issues

Do the National Collegiate Athletic Association’s restrictions on “non-cash education-related benefits” for college athletes violate federal antitrust law under the Sherman Act?

This case asks the Supreme Court to decide whether the National Collegiate Athletic Association (“NCAA”) eligibility rules, which limit student-athletes from receiving compensation in order to preserve “amateurism,” violate federal antitrust law under Section 1 of the Sherman Act. The Sherman Act proscribes restrictions on commerce or trade among the several states. The student-athletes assert that the NCAA’s compensation restrictions, under a “rule of reason” standard of federal antitrust law, are unlawful restraints of trade that generate anticompetitive effects. In response, the NCAA argues that the challenged compensation system passes muster under the “rule of reason” standard because it preserves a clear line of demarcation between amateur college sports and professional sports while promoting socially important non-commercial values. This case has implications for intercollegiate athletics, joint ventures, and antitrust law.

Questions as Framed for the Court by the Parties

Whether the U.S. Court of Appeals for the 9th Circuit erroneously held, in conflict with decisions of other circuits and general antitrust principles, that the National Collegiate Athletic Association eligibility rules regarding compensation of student-athletes violate federal antitrust law.

The National Collegiate Athletic Association (“NCAA”) governs intercollegiate sports by administering rules related to its member schools’ student

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North Carolina State Board of Dental Examiners v. Federal Trade Commission

Issues

Whether state-action immunity should be given to a state regulatory board that is dominated by professionals in the regulated market.

The Federal Trade Commission (“FTC”) alleges that the North Carolina Board of Dental Examiners (“Board”) has engaged in unfair methods of competition by trying to exclude non-dentists from the teeth-whitening market. The Supreme Court will now determine two legal issues: (1) whether the Board is a public actor or private actor for purposes of federal antitrust liability; and (2) if the Board is a private actor, whether the Board is subject to active supervision by the state. The Board argues that it is a public actor and thus does not need “active supervision” to be immune from federal antitrust law. The FTC argues that the Board is a private actor and is not subject to active state supervision. The Supreme Court’s resolution of this case will impact both the efficacy of future state regulatory boards and the balance of federalism.

Questions as Framed for the Court by the Parties

Whether, for purposes of the state-action exemption from federal antitrust law, an official state regulatory board created by state law may properly be treated as a “private” actor simply because, pursuant to state law, a majority of the board’s members are also market participants who are elected to their official positions by other market participants.

The North Carolina State Board of Dental Examiners (“Board”), enacted by the Dental Practice Act, N.C. Gen. Stat. § 90–48, is a state agency comprised of six licensed dentists, one licensed dental hygienist, and one consumer member. See N.C. State Bd. of Dental Examiners v.

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Acknowledgments

The authors would like to thank Professor George A. Hay for his insight into this case.

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Ohio v. American Express Co.

Issues

What is the proper antitrust analysis to apply to a two-sided market in which anticompetitive practices injuring one side of the market simultaneously benefit the other side of the market?

The Supreme Court will determine whether American Express can contractually prevent merchants from steering customers’ credit-card choice at point-of-sale. The Second Circuit reversed the lower court, deciding in favor of American Express because of insufficient proof of anticompetitive effects in light of benefits captured by assessing both the merchant and customer sides of the market. Several states, joined by the United States, argue that American Express’s anti-steering provisions burden consumers and merchants by increasing prices. American Express counters that price increases correspond to increases in product value. If the Court upholds the Second Circuit’s test that considers both sides of a two-sided market, this would significantly change the long-standing approach to assessing antitrust claims, and affect the way the credit card market operates.

Questions as Framed for the Court by the Parties

Whether, under the “rule of reason,” the government's showing that American Express' anti-steering provisions stifle price competition on the merchant side of the credit-card platform suffices to prove anti-competitive effects and thereby shifts to American Express the burden of establishing any pro-competitive benefits from the provisions.

In 2010, the three largest credit card networks in the United States—American Express (“Amex”), Visa, and MasterCard—were sued by the United States and seventeen States for violating federal antitrust laws. United States v. American Express Co., 838 F.3d 179, 192 (2d Cir.

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Pacific Bell Telephone Co. D/B/A AT&T California v. linkLine Communications, Inc.

Issues

Is there a viable claim under Section 2 of the Sherman Act for price squeeze theories?

 

This case involves price squeeze claims and whether they are viable under Section 2 of the Sherman Act. In addition, the Court will likely determine if price squeeze claims must be pled and treated in the same way as traditional predatory pricing claims. This claim arose when linkLine, an internet service provider, sued its wholesale DSL supplier, AT&T, for engaging in anticompetitive practices in order to stifle competition in the California telecommunications market. The Ninth Circuit rejected AT&T’s argument that linkLine’s claim was not viable under antitrust jurisprudence, especially in light of the recent Supreme Court decision in Verizon v. Trinko. The Supreme Court’s ruling will determine the status of price squeeze claims in antitrust jurisprudence, and could also clarify how the costs of retail production of a vertically integrated company with a wholesale monopoly should be measured when considering retail predatory pricing claims. 

Questions as Framed for the Court by the Parties

Whether a plaintiff states a claim under Section 2 of the Sherman Act by alleging that the defendant—a vertically integrated retail competitor with an alleged monopoly at the wholesale level but no antitrust duty to provide the wholesale input to competitors—engaged in a “price squeeze” by leaving insufficient margin between wholesale and retail prices to allow the plaintiff to compete.

AT&T and its affiliates (SBC at the time of filing) comprise a “vertically-integrated” monopoly in the California telecommunications market, owning both the local telephone network and the “last mile” lines that connect individual customers to the local network. See linkLine Communications, Inc. v. SBC California, 503 F.3d 876, 877–78 (9th Cir.

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Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., Inc.

Issues

Whether a business can be held to violate antitrust laws if it is shown that the business purchases too many or pays too much for materials in order to keep competitors from purchasing those materials at a fair price, or whether another standard should apply, such as the standard in Brooke Group, which requires showing that the business sustained a loss as a result of its action but was likely to make the money back once it had a monopoly.

 

Ross-Simmons Hardwood Lumber Co., Inc., a sawmill, went out of business when Weyerhaeuser, a giant in the forest industry, used its market share to drive up the price of sawlogs. The issue is in this case is whether the jury used the proper standard to find that Weyerhaeuser had violated the antitrust provisions of the Sherman Act. Weyerhaeuser argues that the Brooke Group standard should have applied, whereby a plaintiff must show that the defendant: (1) paid so much for raw materials that the price at which it sold its products did not cover its costs; and (2) had a “dangerous probability” of subsequently recouping those losses. Ross-Simmons advocates for the looser standard applied by the Ninth Circuit, whereby liability may be established by showing that the defendant purchased more raw materials “than it needed” or paid a higher price for those inputs “than necessary” so as to prevent competitors buying the materials at a “fair price.” The Court’s decision could result in a dramatic shift in either of two directions: it could either shield large corporations from suits related to the corporation’s influence on the market, or give small businesses a powerful weapon to wield against the pressures that a large corporation can exert.

Questions as Framed for the Court by the Parties

In Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993), the Court held that an antitrust plaintiff alleging predatory selling must prove that the defendant (I) sold its product at a price level too low to cover its costs and (2) had a dangerous probability of recouping its losses once the scheme of predation succeeded.

The question in this case is whether a plaintiff alleging predatory pricing may, as the Ninth Circuit held, establish liability by persuading a jury that the defendant purchased more inputs "than it needed" or paid a higher price for those inputs "than necessary," so as "to prevent the Plaintiffs from obtaining the [inputs] they needed at a fair price"; or whether the plaintiff instead must satisfy what the Ninth Circuit termed the "higher" Brooke Group standard by showing that the defendant (I) paid so much for raw materials that the price at which it sold its products did not [cover] its costs and (2) had a dangerous probability of recouping its losses.

From a bird’s eye view, a patchwork of green and hazy brown shapes weaves together much of the Pacific Northwest, especially the area surrounding the Columbia River, which serves as the border between Oregon and Washington. The logging industry has been active in the area for over a century, leaving that trademark quilt pattern as tracts of forest are harvested.

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