Cartels, pharmaceuticals and class actions: insights from the antitrust experts at White & Case
Legal Trends: Cartels
Criminal and civil cartel litigations in the United States are usually brought under Section 1 of the Sherman Act (15 U.S.C. §1), which prohibits agreements between competitors on price, output, market or customer allocation, and bid-rigging. The US Department of Justice (DOJ) is charged with criminal enforcement, while private parties can bring civil actions.
The DOJ recently has intensified its investigations of possible international cartels. This is important for global businesses because companies found liable are exposed to large criminal penalties, and their executives may face prosecution.
A key, evolving issue is the extraterritorial reach of the Sherman Act, which is limited by the Foreign Trade Antitrust Improvements Act (FTAIA) (15 U.S.C. §6a). Under the FTAIA, the Sherman Act applies to conduct outside the United States only if that conduct is in US import commerce or has a direct, substantial and reasonably foreseeable effect on US domestic commerce, which proximately caused a plaintiff’s injury. The Seventh Circuit has indicated that the FTAIA may apply differently in criminal and civil cases. Motorola Mobility, LLC v. AU Optronics, 775 F.3d 816 (7th Cir. 2015).
Legal Trends: Pharmaceuticals and Health Insurance
The pharmaceutical industry has seen an onslaught of antitrust cases involving Section 1 claims that defendants agreed to restrain trade, as well as claims that defendants engaged in monopolization or attempted monopolization under Section 2 of the Sherman Act (15 U.S.C. § 2). Pharmaceutical antitrust litigation theories include “product hopping” and “reverse payments,” among others.
In “product hopping” cases, plaintiffs challenge brand manufacturers’ introduction of new versions of existing drugs and discontinuation of older versions, which plaintiffs claim thwarts generic competition. Only two appellate courts have weighed in on such claims to date, with only the Third Circuit doing so after full discovery on the merits. Mylan Pharmaceuticals Inc. v. Warner Chilcott PLC, 838 F.3d 421 (3d Cir. 2016) (affirming district court’s grant of summary judgment for defendants, holding that launch of new acne drug was not exclusionary conduct); New York v. Actavis plc, 787 F.3d 638 (2d Cir. 2015) (affirming district court preliminary injunction preventing defendants from limiting distribution of older Alzheimer’s drug).
In “reverse payment” or “pay for delay” cases, plaintiffs challenge patent infringement settlements between a brand manufacturer and a generic competitor, arguing that they constitute payments by the brand to delay generic competition. The Supreme Court established a rule of reason framework for analyzing reverse payment settlements in FTC v. Actavis, Inc., 133 S. Ct. 2223 (2013). Post-Actavis, efforts by lower courts to apply the framework have sometimes resulted in diverging holdings.
In the health insurance industry, 2016 saw two high-profile actions by the DOJ to block mergers under Section 7 of the Clayton Act (15 U.S.C. § 18). In both cases, the defendants argued that the mergers would create efficiencies outweighing any alleged harm from the loss of competition post-merger. While the defendants in the Aetna-Humana and Anthem-Cigna mergers lost at trial, the Anthem-Cigna case has been appealed, giving the DC Circuit an opportunity to clarify when the efficiencies defense applies and what evidentiary showings will establish it.
Legal Trends: Class Actions
Civil antitrust actions frequently involve class action claims by direct and indirect purchasers. Damages in private actions typically are measured by the “overcharge” resulting from the alleged anticompetitive conduct. Damages are trebled if liability is proven, meaning that damages in such cases can be substantial.
Purchasers at different levels of the distribution chain may have standing to bring claims for the same alleged behavior, which can create problems with multiple recoveries when such purchasers claim they suffered injury from the same overcharge. Direct purchasers argue that they absorbed any overcharges from the alleged anticompetitive conduct, while indirect purchasers argue that the direct purchasers passed on any overcharges.
Courts have recently weighed in on whether plaintiffs seeking class certification must show that class members are ascertainable prior to certification. In Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013), the Third Circuit held that ascertainability is a standalone, threshold requirement, meaning class plaintiffs must offer a “reliable and administratively feasible mechanism” for identifying class members. In Mullins v. Direct Digital, LLC, 795 F.3d 654 (7th Cir. 2015), the Seventh Circuit disagreed, instead finding that ascertainability is subsumed by the assessment of whether a class action is a superior means of resolving the dispute. The Ninth Circuit followed Mullins earlier this year in Briseno v. ConAgra Foods, Inc., 844 F.3d 1121 (9th Cir. 2017). The evolution of the ascertainability doctrine may affect whether civil litigants can certify large classes of consumers that allegedly purchased price-fixed goods, where plaintiffs often seek to certify the largest classes possible in order to increase potential damages and generate leverage during settlement negotiations.
What an up-and-coming lawyer in this area can expect
- Representing clients in connection with complex and often headline-grabbing investigations and litigations
- Advocating for clients at meetings with the DOJ and foreign regulators
- Advising clients on developing compliance programs and policies
- Preparing and representing witnesses in providing testimony in grand jury investigations, civil depositions, and trials
- Drafting motions to dismiss, summary judgment motions, and various substantive non-dispositive motions
- Working with experts to assess overcharge claims, class certification issues, relevant antitrust markets, and other issues
White & Case LLP’s Antitrust Practice
White & Case has experience in all aspects of civil and criminal antitrust investigations and litigation. With more than 190 antitrust lawyers in 24 offices in 15 countries, White & Case offers our clients an integrated team with deep competition law capabilities, providing a coordinated approach to global competitive issues. White & Case is recognized by Global Competition Review as one of the world’s elite competition practices. In 2017, Chambers USA also awarded White & Case in the US a Band 1 Ranking for its Antitrust: Cartel work.