On April 23, 2024, the Federal Trade Commission (FTC) voted 3-2 to approve a final rule banning non-competes with all workers 120 days after publication in the Federal Register, and invalidating existing non-competes with all workers except senior executives. Although the final rule abandons many aspects of the rule proposed in January 2023, the final rule represents a sea change in the law relating to non-compete clauses in the United States. Read the full Alert on the Duane Morris website.
FTC to Vote April 23 on Rule to Ban Noncompete Agreements
The Federal Trade Commission will vote at an open commission meeting to be held virtually on Tuesday, April 23, 2024, at 2:00 p.m. Eastern on its proposed rule banning employers from entering into noncompete agreements with workers. If issued, the final rule would go into effect 60 days following its publication in the Federal Register, and companies would have to be in compliance 180 days after publication. Read more on Duane Morris’ website.
SCOTUS Declines to Review Antitrust ATM Fee Dispute
On April 15, 2024, in Visa Inc., et al., v. National ATM Council, Inc., et al., No. 23-814 (Apr. 15, 2024), the U.S. Supreme Court declined a petition for review submitted by Visa Inc. (“Visa”) and Mastercard Inc. (“Mastercard”) urging the Supreme Court to resolve a circuit split over the correct standard of review courts should use when evaluating motions for class certification. Mastercard and Visa argued that the U.S. Court of Appeals for the D.C. Circuit erred by only requiring plaintiffs to show that questions common to the class predominate and allowing the fact finder to later address issues related to uninjured class members. The Supreme Court denied the petition for review.
The D.C. Circuit’s ruling in Visa v. National ATM Council is required reading for any corporate counsel handling antitrust class actions involving price-fixing allegations and underscores the importance of the standard of review used by courts when considering class certification. Read the full post on the Duane Morris Class Action Defense Blog.
FTC Bureau of Competition Director Says Companies Should Assume Agency Looking at Potential Section 5 Cases
Speaking at the American Bar Association Antitrust Section’s annual Spring Meeting on Friday, April 12, Henry Liu, Director of the Bureau of Competition at the Federal Trade Commission, said that parties that are under an antitrust investigation by the FTC should assume that the agency is looking not only at whether the conduct being investigated violates the Sherman Act, but also whether the conduct may fall into a “gray zone” and thus be subject to the FTC’s authority to police “unfair methods of competition” under Section 5 of the FTC Act.
Liu described this “gray zone” as encompassing conduct where, for technical reasons, the existing case law shows that the Sherman Act is a less attractive theory for the agency. Nonetheless, if the FTC determines that the conduct “harms the competitive process” through nefarious means such as deception or coercive tactics, bringing a Section 5 claim is a viable option. Enforcement of “gray zone” conduct under Section 5 is consistent with the FTC’s 2022 Policy Statement expanding the scope of what the FTC considers unfair methods of competition.
A potential example he cited is an invitation to collude, where there is not yet a reduction in competition. For cases involving such conduct that is “adjacent” to violations of Sections 1 and 2 of the Sherman Act, Liu said that the FTC will not hesitate to bring “standalone” cases under Section 5; however, such standalone enforcement actions remain rare.
Decertification Denied in Antitrust Home-Selling Commission Class Action
On March 26, 2024, Judge Stephen R. Bough of the U.S. District Court for the Western District of Missouri denied HomeServices of America’s (“HomeServices”) motion to decertify a class of home sellers alleging that that Defendants violated the Sherman Act by entering into a conspiracy to follow and enforce a rule adopted by the National Association of Realtors (“NAR”) that had the effect of raising commission rates in Moehrl et al. v. The National Association of Realtors et al., No. 1:19-CV-01610 (W.D. Mo. Mar. 26, 2024). HomeServices argued that the class of plaintiffs fail to satisfy Rule 23(b)(3) because trial showed that individual facts and proof predominated over common issues. The Court accepted Plaintiffs’ arguments that its expert sufficiently demonstrated a but-for world through common evidence, satisfying the predominance requirement of Rule 23(b). Moerhl is required reading for any corporate counsel handling antirust class actions involving price-fixing allegations.
Read more on the Duane Morris Class Action Defense Blog.
DOJ and 16 State Attorneys General Sue Apple for Monopolization
Continuing the government’s antitrust enforcement campaign against the tech industry, the DOJ Antitrust Division, along with 16 states, today sued Apple Inc., in federal court in New Jersey, making sweeping allegations of a widespread scheme to monopolize the market for smartphones in the United States. Specifically, the government plaintiffs allege that Apple violated Section 2 of the Sherman Act as well as Wisconsin and New Jersey state antitrust laws. With this lawsuit, the U.S. antitrust agencies now have pending monopolization actions against all four “big tech” companies: Apple, Google, Meta and Amazon.
The complaint alleges that Apple has a monopoly in two markets, the “smartphone” market and the narrower “performance smartphone” market, and that it has maintained its monopoly in both markets by anti-competitive restrictions on app developers and potential rivals. According to the complaint, these restrictions have allowed Apple to “extract higher fees, thwart innovation, offer a less secure or degraded user experience, and throttle competitive alternatives.”
Like the other government cases against the tech industry, this case promises to be a long drawn-out battle.
Supreme Court Allows Important No-Poach Antitrust Case to Proceed
A proposed class of McDonald’s employees will proceed with their case alleging that franchise agreements used by McDonald’s contained provisions that violated federal antitrust law after the Supreme Court declined McDonald’s petition to review a decision by the Seventh Circuit in Deslandes v. McDonald’s USA, LLC. The circuit court held that plaintiffs sufficiently alleged that a no-hire provision in McDonald’s franchise agreements was presumptively illegal under federal antitrust law without consideration of the provision’s procompetitive impact on other markets, including the sale of McDonald’s food and beverages.
Whether certain employment restraints, such as no-poach and no-hire provisions, violate the federal antitrust laws has been an issue of much debate over the last several years. DOJ dropped its last criminal no-poach case in November of last year after several high-profile failures to convince judges and juries to treat such provisions as per se violations of the Sherman Act. Deslandes v. McDonald’s is required reading for any corporate counsel handing antirust class action litigation involving no-poach or non-solicitation issues.
Is Increased Criminal Enforcement of State Antitrust Laws on the Horizon?
California Assistant Attorney General Paula Blizzard announced that California intends to start prosecuting criminal antitrust cases under the Cartwright Act, which makes it illegal to restrict commerce, prevent competition, or enter agreements to lessen competition. Speaking at the American Bar Association’s National Institute on White Collar Crime, California AAG Blizard noted that California has not brought a case in 25 years, but that the office intends to reinvigorate criminal antitrust prosecutions of its statute, which is more expansive than the federal Sherman Act. Individual violators of the Cartwright Act could face fines up to $250,000, or two times the loss from the anti-competitive conduct, and up to three years in county prison. Corporate violators could face a fine up to $1 million. In addition to familiarity with the federal antitrust laws, corporate counsel should be aware of applicable state antitrust statutes.
White House Announces New Strike Force on Unfair and Illegal Pricing
The federal government is taking a more aggressive approach to lowering prices and costs for American consumers. On March 5, 2024, President Joseph Biden announced a new Strike Force on Unfair and Illegal Pricing co-chaired by the Department of Justice (DOJ) and Federal Trade Commission (FTC). The strike force is yet another attempt by the federal government to implement the president’s July 2021 Executive Order on Promoting Competition in the American Economy.
FTC, DOJ and HHS Launch Cross-Government Investigation Into Healthcare Competition
The Federal Trade Commission, Department of Justice’s Antitrust Division, and U.S. Department of Health and Human Services jointly issued a Request for Information requesting public comment on transactions in the healthcare space. According to the agencies, there is increasing concern that private equity firms and other corporate owners are increasingly involved in healthcare transactions leading to greater consolidation, poorer quality of care, and less access to affordable healthcare. Continue reading “FTC, DOJ and HHS Launch Cross-Government Investigation Into Healthcare Competition”