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”
NCAA Prohibited from Blocking NIL Compensation by Member Schools
A federal district court granted a preliminary injunction preventing the NCAA from enforcing one of its bedrock rules—that member institutions cannot directly compensate student athletes for name, image, and likeness (NIL). For over 100 years, NCAA bylaws prohibited payments to students representing member institutions in intercollegiate games to maintain amateurism across college sports. In recent years, due largely to mounting antitrust losses, the NCAA has allowed college athletes to earn compensation for their NIL but has prohibited compensation by schools and their boosters (so-called NIL collectives) related to the recruiting and transfer process. Believing that those prohibitions likely violate federal antitrust laws and harm students, the Tennessee federal court has preliminarily enjoined the NCAA from enforcing that restriction in State of Tennessee, et al. v. NCAA, No. 3:24-cv-00033.
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Federal and State Antitrust Enforcers Reiterate Focus on Healthcare
Federal and state antitrust enforcers are keenly focused on potential anticompetitive conduct in the healthcare space.
Federal Trade Commission Chair Lina Kahn recently noted that “the FTC is squarely focused on tackling illegal business practices that deprive Americans of access to affordable and innovative healthcare” in a speech to the American Medical Association’s national advocacy conference. According to Chair Kahn, medical professional consistently express frustration to the FTC “about how the business of healthcare today forces many [medical providers] to subordinate [their] own medical judgment to corporate decision-makers at the expense of patient health.” In response to those complaints, Chair Khan highlighted a few recent enforcement efforts, including scrutiny of group purchasing organizations, drug wholesalers, and pharmacy benefit managers; tackling unlawful consolidation in healthcare markets and roll-ups of healthcare providers. She also touted the FTC’s work protecting healthcare workers, tackling unlawful practices by pharmaceutical companies, including suits to block two major pharmaceutical mergers, and protecting patient privacy and data.
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Guidance for Controlling Drug Prices
The Federal Trade Commission (FTC) has announced its support of the federal government’s use of “march-in rights” as a mechanism to control the price of pharmaceuticals. The National Institute of Standards and Technology (NIST) late last year issued its “Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights” that would fundamentally change the use of march-in rights by allowing the government to exercise price control under the Bayh-Dole Act, which the FTC announced its support for last week. This shift is the latest effort by federal agencies to lower drug prices in the wake of President Joe Biden’s Executive Order on Promoting Competition in the American Economy.
Is Misclassification of Workers an Unfair Method of Competition?
The Federal Trade Commission (FTC) is signaling its intent to get further involved in employment practices after its activity of the last year and a half in proposing a ban on noncompete clauses in employment contracts and signing a memorandum of understanding with the U.S. Department of Labor (DOL) to bolster the FTC’s efforts to promote competitive U.S. labor markets.
New Bill Keeps Predictive Tech Under Scrutiny with Price Fixing
Several Democratic senators introduced a bill intended to stop companies from utilizing predictive technology to raise prices. Businesses are increasingly delegating important competitive decisions, including price-setting power, to artificial intelligence, algorithms, and other predictive technology software. Read more on the Duane Morris Artificial Intelligence Blog.