Texas et al. v. Penguin Group et al., No. 1:12-cv-03394-DLC (S.D.N.Y, Apr. 30, 2012)
TTexas and Connecticut led 33 state group that filed complaint charging three of the nation’s largest book publishers and Apple Inc. with colluding to fix the sales prices of electronic books. The States undertook a two-year investigation into allegations that the defendants conspired to raise e-book prices. Retailers had long sold e-books through a traditional wholesale distribution model, under which retailers, not publishers, set e-book sales prices. The states alleged that Penguin, Simon & Schuster and Macmillan conspired with other publishers and Apple to artificially raise prices by imposing a distribution model in which the publishers set the prices for bestsellers at $12.99 and $14.99. When Apple prepared to enter the e-book market, the publishers and Apple agreed to adopt an agency distribution model as a mechanism to allow them to fix prices. To enforce their price-fixing scheme, the publishers and Apple relied on contract terms that forced all e-book outlets to sell their products at the same price. Because the publishers agreed to use the same prices, retail price competition was eliminated. According to the States’ enforcement action, the coordinated agreement to fix prices resulted in e-book customers paying more than $100 million in overcharges. The States’ antitrust action seeks injunctive relief, damages for customers who paid artificially inflated prices for e-books and civil penalties. Case was filed in W.D. Tex., transferred to S.D.N.Y. as consolidated case. The States reached settlements with the five publishers, which granted E-book outlets greater freedom to reduce the prices of their E-book titles. Consumers nationwide received a total of $164 million in compensation. After entering into settlement agreement with all the Defendant publishers, DOJ and the states had a nearly 3 week trial against Apple in June 2013, during which numerous witnesses took the stand. On July 10, 2013, a decision was handed down in favor of the U.S. Department of Justice and the states against Apple. Trial of the damages phase is pending. United States et al. v. Apple, Inc., 12-CV-2826 (S.D.N.Y.).
In re DDAVP Antitrust Litigation
33 states investigated “pay for delay” allegations relating to DDAVP, a drug used to alleviate bed-wetting. States alleged that Aventis, holder of the patent for the medication, engaged in a scheme to delay the regulatory approval and sale of a generic version of DDAVP, in violation of state and federal antitrust law. States and defendants entered into a settlement under which states received $3.45 million, not as a civil penalty and defendants did not admit guilt.
In re GE Funding Capital Market Services, Inc. (Municipal Bond Derivatives)
Starting in 2008, the states investigated the municipal bond derivatives market, where tax exempt entities like governments and nonprofit organizations issue bonds and reinvest the proceeds until the funds are needed or enter into contracts to hedge interest rate risk on bonds. GE Funding is the fifth financial institution to settle with the multistate working group in the ongoing municipal bond derivatives investigation following Bank of America, UBS AG, JP Morgan and Wachovia.
The investigation revealed conspiratorial and fraudulent conduct involving individuals at financial institutions and certain brokers with whom they had working relationships. The states’ investigation developed evidence that certain traders at GE Funding, in concert with certain brokers, engaged in conduct that allowed the broker to determine in advance that GE Funding would win a bid for a guaranteed investment contract. The conduct allowed GE Funding to submit a “last look’’ bid, while the broker arranged for other financial institutions to submit purposely non-winning courtesy bids. Because of the “last look,” on many occasions GE Funding was able to lower its bid to the issuer and still win the transaction.The misconduct led state and local entities, such as municipalities, counties, school districts and other government agencies, as well as nonprofits, to enter into municipal derivatives contracts on less advantageous terms than they would have otherwise.
In re J.P. Morgan Chase (Municipal Bond Derivatives)
Starting in 2008, the states investigated the municipal bond derivatives market, where tax exempt entities like governments and nonprofit organizations issue bonds and reinvest the proceeds until the funds are needed or enter into contracts to hedge interest rate risk on bonds.
The investigation revealed conspiratorial and fraudulent conduct involving individuals at JPMC, other financial institutions, and certain brokers with whom they had working relationships. The states alleged that certain JPMC employees and their counterparts at other institutions rigged bids, submitted noncompetitive courtesy bids and fraudulent certificates of arms-length bidding to government agencies. The misconduct led state and local entities, such as municipalities, counties, school districts and other government agencies, as well as nonprofits, to enter into municipal derivatives contracts on less advantageous terms than they would have otherwise. The $66.5 million multistate settlement is one component of a coordinated settlements (totaling $92 million) between JPMC and the U.S. Department of Justice’s Antitrust Division, the Securities and Exchange Commission (SEC), the Internal Revenue Service, the Office of the Comptroller of the Currency (OCC), as well as the states.
IN the matter of Wachovia
Wachovia and its successor, Wells Fargo, settled charges by 25 states and several federal agencies (the Securities and Exchange Commission (SEC), the Office of the Comptroller of the Currency (OCC), the Internal Revenue Service (IRS) and the Federal Reserve) that it participated in a nationwide scheme to allegedly rig bids and engage in other anticompetitive conduct relating to municipal bond derivatives that defrauded state agencies, local governmental entities and not-for-profit entities. The multistate settlement is part of a $148 million settlement Bank of America entered into simultaneously with the federal agencies.
U.S. and Plaintiff States v. American Express Co. et al. No. 10-4496 (E.D.N.Y. 2010)
U.S. DOJ and plaintiff states filed suit challenging rules made by American Express, MasterCard and Visa that prevent merchants from offering consumers discounts, rewards and information about card costs, ultimately resulting in consumers paying more for their purchases. Visa and MasterCard settled with the Department of Justice and the litigating states immediately after the complaint was filed. Under the terms of the settlement, the two companies will be required to allow merchants to offer discounts, incentives and information to consumers to encourage the use of payment methods that are less costly. The proposed settlement requires MasterCard and Visa to allow their merchants to: 1) offer consumers an immediate discount or rebate or a free or discounted product or service for using a particular credit card network, low-cost card within that network or other form of payment; 2) express a preference for the use of a particular credit card network, low-cost card within that network or other form of payment; 3) promote a particular credit card network, low-cost card within that network or other form of payment through posted information or other communications to consumers; 4) communicate to consumers the cost incurred by the merchant when a consumer uses a particular credit card network, type of card within that network or other form of payment.
American Express did not agree to settle,and a trial was held, in which the court found for the plaintiffs. . The trial focused on credit card “swipe fees” which generate over $50 billion annually for credit card networks. Plaintiffs argued that price competition over merchant swipe fees has been almost non-existent and for decades the credit card networks have not competed on price because of the rules imposed by each of the networks that limit merchants’ ability to take advantage of a basic tool to keep prices competitive. That tool – commonly used elsewhere in the economy – is merchants’ freedom to “steer” transactions to a network willing to lower its price. Each network has long prohibited such steering to lower-cost cards. The court held that the American Express anti-steering rules block merchants from using competition to keep credit card swipe fees down, which means higher costs to merchants’ customers. The decision means that agreements the plaintiffs reached previously with MasterCard and Visa can be fully implemented pending the conclusion of any appeals.
After remedy submissions from the parties, the court entered an order prohibiting American Express from adopting rules or entering contracts that block merchants from encouraging their customers to use a particular credit card. Under the order, merchants must be permitted to: offer discounts for the use of particular cards; express a preference for particular cards; disclose to customers the cost merchants incur when the customer uses particular credit cards; and engage in other conduct to encourage use of favored credit cards. The order also requires American Express to: repeal any rules that block merchant steering; notify merchants of their freedom to engage in steering activities; and adopt compliance measures to ensure that its employees understand that they cannot continue to block steering by merchants that accept American Express cards.
The Second Circuit reversed the lower court decision that the restraints had an actual anticompetitive effect on interbrand competition. The Second Circuit held that plaintiffs failed to meet their burden of demonstrating an anticompetitive effect on the whole market because “without evidence of the NDPs’ net effect on both merchants and cardholders, the District Court could not have properly concluded that the NDPs unreasonably restrain trade in violation of § 1.”
Texas et al. v. Organon (Remeron), No. 04-5126 (D.N.J. 2004)
Plaintiff states settled with drug maker Organon USA, Inc. and its parent company, Akzo Nobel N.V., resolving antitrust claims involving the antidepressant drug Remeron between June 2001 and October 2004. The states’ complaint alleged that Organon unlawfully extended its monopoly by improperly listing a new “combination therapy” patent with the U.S. Federal Drug Administration. In addition, the complaint alleged that Organon delayed listing the patent with the FDA in another effort to delay the availability of lower-cost generic substitutes. The $26 million settlement resolved claims brought by state attorneys general, as well as a private class action brought on behalf of a class of end payors. Organon also agreed to make timely listings of patents and to submit accurate and truthful information to the FDA.
United States and Plaintiff States v. Election Systems and Software, Inc. No. 10-cv-00380 (D.D.C. 2010)
The U.S. Department of Justice and nine plaintiff states filed suit against Election Systems and Software, Inc.’s (“ES&S”) acquisition of Premier Election Solutions, Inc. (“Premier”). ES&S, the largest provider of voting systems in the United States, acquired Premier, a subsidiary of Diebold, Inc. and the second largest provider of voting equipment systems. The acquisition was well under the HSR reporting thresholds. After this acquisition, ES&S provided more than 70 percent of the voting equipment systems used in elections held in the United States. The complaint alleged that because ES&S’s acquisition of Premier joined the two closest competitors in the provision of voting systems, it was likely that states and local governments would have seen higher prices and a decline in quality and innovation in voting equipment systems.
The states and USDOJ reached a settlement with ES&S under which ES&S will sell Premier’s intellectual property for all past, present and in-development voting equipment systems to another competitor. The buyer will have the ability to compete for contracts to install new voting systems using the Premier product. ES&S is prohibited for 10 years from competing for new
installations using a Premier product. The buyer will also receive copies of all existing
Premier service contracts so that it can compete for contracts that are up for renewals.
In re Marsh & McLennan
Plaintiff states alleged that Marsh, an insurance broker, made collusive arrangements whereby brokers entered into agreements with insurers to receive undisclosed compensation and engaged in anticompetitive conduct in the market for commercial liability insurance. March agreed to reveal all commissions paid, and to pay the states $7 million.
Florida et al. v. Abbott Laboratories et al., No. 1:08-cv-00155-SLR (D.Del. 2007)
States alleged Abbott Laboratories; Fournier
Industrie Et Sante and Laboratoires Fournier, S.A., blocked competition from less expensive
generics by continuously making minor changes in the formulations of TriCor to prevent therapeutically equivalent generic substitutions. The states alleged that the product switches helped thwart generic competition, allowing the companies to charge monopoly prices for TriCor.
The lawsuit also allegd the companies used patents, which they obtained by deceiving the Patent and Trademark Office and improperly enforced and brought a series of patent infringement lawsuits against two generic companies. According to the complaint, Abbott and Fournier filed at least ten lawsuits against two generic companies who were attempting to obtain FDA approval for their generic versions of TriCor. Abbott and Fournier eventually lost or dismissed all of the lawsuits. As a result of the product switches and patent litigation, Abbott and Fournier have successfully thwarted generic competition and denied consumers and state agencies the choice of a lower priced therapeutically equivalent generic.
The states settled their claims for $22.5 milion, which covered governmental purchases, as well as injunctive relief to prevent “product hopping” by the defendants in the future.
