Two years ago today, the heads of Amazon, Facebook, Google and Apple appeared before lawmakers for questioning on the results of the House antitrust subcommittee’s antitrust investigation. How significant was the whole saga? It may not have provided the momentum – at least not yet – to enact legislation, but perhaps it provided US enforcers with the political support needed to bring major cases and get fierce tech critics at the helm. On Thursday, a trio of lawmakers asked the DOJ whether the bills pending before Congress raise national security concerns.
The Headlines
⇒ Spirit Airlines is getting paid regardless of whether it convinces the Department of Justice – or possibly a federal judge – to permit its acquisition by JetBlue. The ultra-low-cost carrier stands to walk away with a $470 million breakup fee if antitrust enforcers scuttle the deal, as Spirit has already warned that the Antitrust Division will probably attempt.
⇒ Federal enforcers have been stealing the headlines, but the states are still eager to play ball. New York attorney general Letitia James says CVS used an illegal tying scheme to deprive hospitals of income used to treat the state’s most vulnerable patients.
The Cases
⇒ Antitrust claims lodged by online real estate platform Compass against the Real Estate Board of New York (REBNY) continue after a federal court decided not to reconsider the defendant’s failed motion to dismiss. In an order filed on Wednesday, Judge Lorna Schofield of the US District Court for the Southern District of New York said that REBNY’s motion was an “attempt to relitigate the issue before a new audience” that contradicts the purpose of reconsiderations and fails to offer a compelling argument. REBNY tried to dismiss allegations that a provision in its universal co-brokerage agreement rules restrained Compass’s access to real estate agents in March, arguing that Compass failed to allege a relevant market or antitrust injury. Judge Alison Nathan said Compass had sufficiently shown that REBNY’s conduct harmed competition in the brokerage market by restricting access to agents. Judge Schofield reaffirmed Judge Nathan’s order on Wednesday, writing that the motion for reconsideration was a “rehash” of past motions and offered “no intervening change in law”.
⇒ As the deadline for fact discovery looms, advertiser plaintiffs suing Meta have asked a California federal court to compel the company to produce thousands of allegedly relevant missing documents hyperlinked within Facebook’s disclosed documents. On Wednesday, counsel to the plaintiffs at Bathaee Dunne said they were locked in a stalemate with Meta because the company has “refused” to produce the documents. Meta claims it turned over everything the plaintiffs asked for, namely the documents it provided to the Federal Trade Commission for the agency’s own antitrust investigation. “However, there is a huge problem with the documents Facebook has produced here, both in that first production and since,” the advertisers wrote. “Hundreds of thousands of as-produced documents across Facebook’s entire production are missing facially relevant (indeed, critical) child documents, which were embedded as hyperlinks and have never been (despite months of requests by Advertisers) reviewed and produced by Facebook.” Anything less than cooperation, the advertisers claim, is “a failure by Facebook to comply with its most basic discovery obligations”.
⇒ Marion Healthcare’s amended complaint still fails to establish it suffered antitrust injury from Blue Cross Blue Shield’s preference for Southern Illinois Hospital (SIH) as its go-to in-network hospital, SIH has said. Earlier this month, the US Court of Appeals for the Seventh Circuit found that Marion had failed to show it suffered competitive harm as a result of the allegedly anticompetitive agreement between its rival and the insurance provider. In its renewed attempt to dismiss Marion’s amended complaint on Tuesday, SIH said the plaintiff had only added a few new facts alleging that two surgeons had seen a drop in referrals since its new contract with BCBS. “This Court held already that allegations of lost referrals are insufficient standing alone to bring an antitrust case,” wrote counsel to SIH at McDermott Will & Emery. “The new allegations add nothing more than a few conclusions about antitrust injury without supporting facts, warranting dismissal on those grounds alone.”
⇒ Traders alleging they were defrauded by Chicago Board Options Exchange’s volatility index, VIX, have failed to demonstrate that the index was recklessly designed, the US Court of Appeals for the Seventh Circuit has ruled. In 2019, the US District Court for the Northern District of Illinois dismissed a complaint from investors alleging that CBOE violated the Securities Exchange Act and the Commodity Exchange Act because it ignored collusion on its platform. The plaintiffs had not shown CBOE acted in bad faith to make its index vulnerable to such manipulation, the district court said. Writing for the Seventh Circuit majority, former antitrust professor Judge Frank Easterbrook said it was difficult to find that CBOE had been anything but negligent in preventing its index from being prone to manipulation. “The Traders’ allegations do not imply bad faith under the ordinary meaning of that phrase” in either the Securities Exchange Act or the Commodity Exchange Act, the panel said. Any punishment would have to come from federal enforcers, not private litigation, Judge Easterbrook added.
News & Notes
⇒ Lawmakers questioned a DOJ official on potential national security concerns related to the American Innovation and Choice Online Act on Thursday. Representative David Cicilline said opponents of the legislation falsely claimed it raised security risks, but noted that the entire DOJ endorsed the bill – including its national security division. Matthew Olsen, assistant attorney general for that division, testified that the DOJ’s letter did reflect its views. He said the legislation included several provisions that are designed to address some national security concerns, although did not specify which ones. Regarding the Senate’s app store bill, California Representative Eric Swalwell said some are concerned that nations “hostile” to the US may seek to have their apps sideloaded to “vacuum” up US consumer data or spread disinformation. Olsen responded that the DOJ would be happy to listen to any potential issues raised by the US intelligence community. Representative Lou Correa, also a California Democrat, cited reservations from a group of former national security officials that some of the tech legislation being considered might hamper companies’ ability to curtail misinformation or cybersecurity risks. Olsen said he was willing to work with Congress’s national security committee to work out any concerns that lawmakers may have.
Mark Your Calendar
⇒ The Senate’s antitrust subcommittee is holding a hearing on antitrust remedies on 2 August. No witnesses have yet been announced.
⇒ Meta Platforms has agreed not to close its acquisition of the virtual reality company Within Unlimited until 6 April, according to a court stipulation proposed on Thursday. The FTC requested a temporary restraining order from the US District Court for the Northern District of California earlier this week because Meta could otherwise close the deal on 1 August.
⇒ Judge Kevin Castel of the US District Court for the Southern District of New York will hear Google’s motion to dismiss the digital advertising monopolisation lawsuit brought by a Texas-led coalition of states on 31 August.
