In summary
This article summarises recent trends and developments in US antitrust litigation concerning vertical and horizontal agreements as well as unilateral conduct and proposed mergers. This article also summarises notable court decisions and litigation shaping the current antitrust landscape and provides key takeaways for counsel to keep in mind when considering potential antitrust issues in the United States.
Discussion points
- Government and private plaintiffs have been using section 1 of the Sherman Act to challenge various platforms that allegedly facilitate improper information sharing and coordination among competitors
- Government and private plaintiffs have continued to challenge alleged monopolisation by the nation’s largest technology firms under section 2 of the Sherman Act
- Many of these recent monopolisation cases revolve around the size, structure and business models of these firms and are novel in terms of both the legal theories they present and the aggressive structural remedies they seek
- US government antitrust enforcers have also continued to challenge proposed mergers aggressively in court under section 7 of the Clayton Act. The agencies have been successful in recent challenges to horizontal mergers but have seen less success in cases concerning proposed vertical mergers
Referenced in this article
Introduction
This article provides an overview of the recent developments and trends in antitrust litigation concerning agreements among firms, unilateral conduct and merger control. It also reviews key cases that have been filed or decided in each of these areas and provides takeaways that corporate counsel should keep in mind moving forward.
With respect to horizontal and vertical agreements among firms, government and private plaintiffs have been using section 1 of the Sherman Act (section 1) to challenge various platforms that allegedly facilitate improper information sharing and coordination among competitors. For example, in US v Agri Stats, Inc, the Department of Justice (DOJ) is alleging that the defendant, a data subscription and consulting service in the meat-processing industry, is the hub in an industry-wide ‘information-exchange conspiracy’ that allows competitors to improperly coordinate pricing and output. Private plaintiffs have also pursued claims against algorithm-driven platforms that allegedly facilitate price-fixing. For instance, in In re: Real Page, Rental Software Antitrust Litigation, housing rental tenants are asserting class action claims based on allegations that defendant landlords conspired to coordinate rental pricing using RealPage’s pricing recommendation software. Companies should consider potential antitrust exposure associated with contributing data to and receiving data from such platforms.
With respect to unilateral conduct, the Federal Trade Commission (FTC), DOJ and private plaintiffs have continued to challenge alleged monopolisation by the nation’s largest technology firms under section 2 of the Sherman Act (section 2). Indeed, numerous complaints and decisions have wrestled with the size, structure and business models of these firms. Many of the most recent cases are novel in terms of both the legal theories they present and the aggressive structural remedies they seek. Several of the cases seek to break up these large, highly integrated corporations.
Finally, the FTC and DOJ have continued to challenge proposed mergers vigorously in court under section 7 of the Clayton Act (section 7). The agencies have enjoyed success in recent cases challenging horizontal mergers based on more traditional theories of antitrust harm. However, the agencies have seen less success in their challenges to horizontal mergers based on more novel or aggressive theories of competitive harm. The agencies have also had mixed success challenging proposed vertical mergers. Litigation concerning proposed mergers will warrant especially close attention as the FTC and DOJ continue to apply and test the latest iteration of their new Merger Guidelines, which were adopted in December 2023.
The key takeaways from each of these cases are discussed in more detail below.
Vertical and horizontal agreements
Under US antitrust law, section 1 prohibits agreements among separate firms that unreasonably restrain competition. Through 2023 and 2024, government regulators and private plaintiffs have been reaching beyond historically prevalent theories of collusion (such as price-fixing, bid rigging and market allocation) to challenge the structures and core business practices of companies in a variety of markets. Likewise, there has been increased scrutiny of emerging technologies, especially those that provide interconnectivity between businesses. While these types of platforms can promote collaboration and pro-competitive efficiencies, recent litigation trends show that such platforms may also risk drawing claims that they act as forums for anticompetitive information exchanges or collusive agreements. Additionally, government and private plaintiffs are also continuing to pursue section 1 claims in the labour markets.
Information sharing
Information sharing among competitors – whether directly or through an intermediary – has more frequently been viewed in the United States as possible evidence of per se anticompetitive collusion, rather than a stand-alone form of illegal conduct (subject to more forgiving review under the rule of reason). However, antitrust enforcers have been bucking this tradition in recent years by pursuing actions that centre on the anticompetitive effects of information sharing.
US v Agri Stats, Inc
In a 2023 complaint in a Minnesota federal court against Agri Stats, Inc (Agri Stats), an Indiana-based subscription and consulting service in the meat-processing industry, the DOJ and numerous state antitrust regulators challenged what they allege to be an ‘information-exchange conspiracy’ in violation of section 1. As alleged in the complaint, Agri Stats aggregates market information from its subscribers – meat and poultry processers – regarding inventories, prices, wage information, costs and other operational metrics. Agri Stats then compiles the information, anonymises it and circulates it to subscribers in regular, detailed reports. Of note, the plaintiffs criticised the company as a whole by alleging that the Agri Stats business model involves establishing and operating information exchanges among direct competitors. The complaint specifically alleges that the information published in its reports enables anticompetitive conduct, noting the sensitivity of the information, its timeliness, its level of detail, its insufficient anonymisation and the asymmetry it creates with non-processors who cannot access the data. The government plaintiffs also challenged Agri Stats’ ‘give to get’ policy, which allegedly requires subscribers to provide complete, up-to-date reports on their own performance metrics as a condition of accessing the aggregated data. In the DOJ’s view, this data allowed subscribers to learn where their prices were lower and could be raised to meet competitor rates, where they could restrict output to stay in line with competitors’ current or projected supply and where they could alter the employment conditions of their labourers.
The complaint survived Agri Stats’ motion to dismiss, as the court found sufficient the DOJ’s allegations of antitrust injury. The case is still in its early stages and will remain ongoing for some time.
Algorithmic pricing and other price setting
Antitrust regulators and private plaintiffs have also continued focusing on the role of emerging technologies in the modern marketplace. For example, the agencies have been scrutinising ‘algorithmic price fixing’, which they describe as the ‘new frontier’ of price-fixing. Algorithmic price fixing involves the use of shared software or technology by competitors to support pricing decisions, according to the agencies and plaintiffs’ counsel. The DOJ and FTC have stated: ‘Whether firms effectuate a price-fixing scheme through a software algorithm or through human-to-human interaction should be of no legal significance.’ In recent years, efforts by government and private plaintiffs to pursue claims based on algorithmic price-fixing theories against pricing software companies and their users have seen mixed results.
In re: RealPage, Rental Software Antitrust Litigation
A putative class of rental tenants pursued class action section 1 claims against RealPage, a software company whose algorithms recommend rental rates to landlords across approximately 4.5 million housing units nationwide, as well as defendant landlords who allegedly used the software to set prices and restrict the supply of available rental units. The plaintiffs alleged that the landlords conspired to avoid competing among themselves by accepting RealPage’s rental rate recommendations, which are based on an algorithmic analysis of both public and proprietary data. The defendants allegedly policed the utilisation of those rates to ensure rate prices stayed high. The DOJ filed a Statement of Interest in the private suit supporting the notion that algorithmic price-fixing is just as illegal as any handshake deal. ‘The key feature of the alleged scheme is that it eliminates separate pricing decisions by competing landlords—thus establishing a horizontal agreement.’ While some landlord defendants have settled, a federal court in Tennessee denied in large part motions to dismiss the claims and the litigation remains active. In a parallel action against RealPage and landlords in Washington, DC, the Superior Court of the District of Columbia recently dismissed conspiracy claims against one defendant. The Court found that the DC Attorney General failed to plausibly allege conspiracy claims against AvalonBay under the District of Columbia Antitrust Act, the local equivalent to section 1, because AvalonBay’s contracts with RealPage ‘plainly require that RealPage only use pricing information that is publicly available or provided directly by AvalonBay to calculate AvalonBay’s pricing recommendations’, and expressly forbid RealPage from using AvalonBay data to provide recommendations for other customers. Accordingly, the DC Attorney General failed to demonstrate that AvalonBay entered into an agreement with its competitors.
Gibson et al v Cendyn Group, LLC, et al
Other algorithmic price-fixing cases have gained less traction. For example, in May 2024, the court in Gibson et al v Cendyn Group, LLC, et al, dismissed with prejudice claims that Las Vegas Strip hotels conspired with software company, Cendyn, to set room rates and restrict supply. The court found that the plaintiffs failed to allege a tacit agreement among conspirators, stating: ‘This case remains a relatively novel antitrust theory on algorithmic pricing going in search of factual allegations that could support it.’ Of note, the court distinguished the plaintiffs’ claims from those asserted against RealPage on the grounds that the Gibson defendants adopted the software at different times over several years and were not bound or required to actually use recommended rates, and that the Cendyn pricing platform relied solely on public pricing information rather than proprietary information. The court left no doubt that ‘[t]here is nothing unreasonable about consulting public sources to determine how to price your product’. Thus, where RealPage may tend to show that illegal conduct is still illegal even if achieved through software, Gibson shows that legal conduct is not made illegal purely due to the use of software.
Burnett v National Association of Realtors
Conversely, Burnett v National Association of Realtors concerned more traditional allegations that a third party served as the hub in a price-fixing conspiracy. Uncommonly, the case proceeded to trial, where a jury found the National Association of Realtors (NAR) liable for price-fixing and awarded the plaintiffs a US$1.8 billion jury verdict, which was subsequently resolved with a US$418 million settlement. There, a class of plaintiff home sellers claimed that NAR conspired with large brokers to artificially fix the commissions of real-estate agents for residential homes. Specifically, the home sellers asserted that NAR and its members conspired to ‘adopt and implement . . . a rule that requires all sellers’ brokers to make a blanket, unilateral and effectively non-negotiable offer to buyer broker compensation . . . when listing a property on a Multiple Listing Service (“MLS”)’.
The plaintiffs stated that this, and other agreements, led to home sellers paying artificially high prices for services that should by paid by the buyer. The plaintiffs challenged not just individual agreements but NAR’s long-established functions and policies. Commentators applauded the jury for grasping complicated economic concepts on how sellers paying buyers’ agents ultimately restrained competition.
This is a blossoming area, with cases arising involving rental real estate, hotels, casinos and other products or services.
No-poach agreements
Through 2023 and 2024, US antitrust enforcers and private plaintiffs continued to focus on anticompetitive collusion in the labour markets. The DOJ has brought numerous criminal no-poach cases with little to no success in recent years. However, in October 2023, an appellate court broke new ground and effectively confirmed that agreements not to poach competitors’ employees can amount to a per se violation of section 1.
Deslandes v McDonald’s USA, LLC
In Deslandes, the US Court of Appeals for the Seventh Circuit found that no-poach or non-solicitation agreements could be condemned as per se illegal under section 1. A private class of McDonald’s fast-food workers challenged provisions in the company’s franchise agreements that prohibit the hiring or solicitation of any employee from another McDonald’s franchise or by McDonald’s itself. The plaintiffs alleged the no-poach agreements were per se illegal, but the district court disagreed and found that the provisions were ancillary to the larger franchise agreements, which were pro-competitive in nature. Accordingly, the challenged provisions could not be categorically condemned as per se illegal. In August 2023, the Seventh Circuit reversed the district court’s decision and remanded the case for further proceedings, finding the trial court ‘jettisoned the per se rule too early’. According to the Seventh Circuit, the plaintiffs plausibly alleged the franchisees’ per se liability at the pleading stage and noted three primary flaws in the district court’s reasoning. First, the district court treated benefits to consumers like increased food output as justifying reductions in competition in the labour market. Next, the court erroneously valued the pro-competitive value of increased output at the motion to dismiss phase without the benefit of evidence on its causal relationship – or lack thereof – to the no-poach provisions. Last, the Seventh Circuit found the district court erred because ‘the classification of a restraint as ancillary is a defence, and complaints need not anticipate and plead around defences’.
Crucially, however, the Seventh Circuit also explained that there are situations in which a no-poach agreement could be ancillary to a broader pro-competitive agreement and therefore permissible. For example, ‘[c]ommon job training and job classifications could in principle justify restraints on poaching’. The court reasoned that franchises with such commonality may impose limited no-poach restrictions to prevent franchises from freeriding on each other’s investments in employee training.
The litigation is ongoing, but companies should take note that the appellate opinion alone created novel precedent that no-poach agreements could plausibly establish per se liability.
Takeaways
US antitrust enforcers and private plaintiffs have continued to push the boundaries of section 1 by pursuing new and novel theories of antitrust liability and focusing on information sharing among competitors.
Companies should pay close attention to programmes they participate in that involve the aggregation and dissemination of otherwise confidential competitively sensitive information. Specifically, companies should carefully examine what types of information they are providing, whether that information is public or competitively sensitive and confidential, and whether the platforms make pricing recommendations based on gathered data. Companies should note that the use of shared technology by subscription, purchase or agreement can introduce antitrust liability when that technology provides pricing inputs or other sensitive information from competitors. Likewise, companies should pay close attention to the terms and conditions they accept to participate in information-sharing platforms or organisations, as those agreements may be used as the basis for potential antitrust claims.
Finally, companies that are considering entering business arrangements that involve no-poach or non-solicitation agreements should carefully consider the purpose and effect of those restrictions. To minimise antitrust risk, these provisions must be reasonably necessary to promote a legitimate, pro-competitive business function.
Unilateral conduct litigation
In the United States, unilateral conduct and abuse of dominance in the market are generally policed under section 2, which prohibits monopolisation, attempted monopolisation and conspiracies to create a monopoly.
Federal and state antitrust enforcers and private plaintiffs continued to press section 2 claims against big tech companies throughout 2023 and into 2024. These claims challenge an array of conduct that has allegedly entrenched these companies’ dominance in their respective markets by suppressing competition. These cases may impact the continued viability of these companies’ business models and, more drastically, may even result in structural remedies that could break up the companies.
Epic v Google: Google app store litigation
In December 2023, a jury delivered a victory to Epic Games in its suit against Google, Inc for monopolising the markets for app distribution and in-app billing services on Android devices. Epic, which develops the game Fortnite, convinced the jury that Google adopted and enforced anticompetitive restrictions on Android platforms to unlawfully maintain its app store and in-app billing monopolies, enabling Google to claim substantial transaction fees from developers for in-app purchases.
Specifically, Epic argued that Google suppressed rival app stores and in-app billing services by:
- entering into licensing agreements with device manufacturers that required the manufacturers to pre-install and display Google’s app store, Google Play, on device home screens;
- paying certain device manufacturers to refrain from pre-installing other app stores;
- implementing a Premier Device Program, which offered special financial incentives to device manufacturers in exchange for Google Play exclusivity;
- prohibiting developers that distribute apps on Google Play from offering competing app stores or routing in-app payments through competing billing services;
- offering incentives to keep top developers from distributing apps through platforms other than Google Play; and
- creating a ‘technically complex, confusing and threatening’ process that inhibits users from ‘sideloading’ apps and app stores off Google Play.
In its defence, Google argued that it had no affirmative duty to distribute rival app stores on Google Play. Google also argued that its agreements with developers were pro-competitive because they enabled Google to deliver a more attractive app store to consumers. The court, nevertheless, permitted the case to proceed to trial. Google attempted to persuade the jury that Google Play competed vigorously with Apple’s App Store, but the jury ultimately found that Google competed and possessed monopoly power in more narrowly defined markets for Android app distribution and Android in-app payment services, thus excluding Apple’s App Store from the relevant market.
In its request for a new trial, Google disputed Epic’s Android-only market, which, Google claimed, improperly ignored the competition Google faces from Apple in the app store market. The court ultimately rejected Google’s request for a new trial.
The court has yet to determine the scope of injunctive relief. In May 2024, the court held a hearing in which the parties’ economists discussed Epic’s proposed injunction. At a high level, Epic’s proposal requests that the court prohibit Google from engaging in conduct that inhibits the use of alternative app distribution channels and alternative in-app payment services and requires that Google temporarily permit the distribution of third-party app stores through the Play Store and provides third-party app stores access to the Google Play catalogue of apps.
US v Google: Google search engine and ad tech litigation
The DOJ, joined by coalitions of state attorneys general, is also pressing two monopolisation actions challenging Google’s online search and digital advertising businesses.
The DOJ’s first action alleging that Google monopolises the market for online searches was tried before a judge in the District Court for the District of Columbia in autumn 2023. At trial, the DOJ sought to prove that Google eliminated competition for online searches primarily through agreements with web browser providers, device manufacturers and cell service carriers to make Google the default search engine. Google’s payments for its default status amounted to US$26.3 billion across these various agreements in 2021. According to the DOJ, Google captured 50 per cent of general search queries through these default agreements, which suppressed competition by denying rivals the critical inputs needed to scale their own competing search engines.
In its defence, Google argued its success in the online search market is attributable to its pursuit of innovation and quality. Google asserts that consumers prefer its search engine because it is superior to competing products, not because it has suppressed competition. Google also offered evidence of pro-competitive benefits to justify its various agreements and argued that its exclusive arrangements did not foreclose competition from rival search engines. Google also denies that its agreements foreclose rival search engines from the market. For example, Google argued that its agreements did not prevent browser providers from promoting rival search engines to users and allowing users to switch their defaults to a rival search engine.
The issues of both liability and relief are yet to be decided. The DOJ has requested both injunctive relief and ‘structural relief as needed to cure any anticompetitive harm’.
In January 2023, the DOJ filed a second antitrust suit against Google in the District Court for the Eastern District of Virginia, claiming that Google monopolised the market for digital advertising services (ad tech), which connects website publishers seeking to sell advertising space on their websites with advertisers seeking to place advertisements on websites. The DOJ alleges that Google engaged in numerous anticompetitive practices, including serial acquisitions of actual and potential competitors and other tactics ‘to force more publishers and advertisers to use its products while disrupting their ability to use competing products effectively’.
According to the DOJ, Google aimed to ‘become the be-all, and end-all location for all ad serving’, and sought control of both the website publisher and advertiser sides of the digital advertising market. Google’s acquisition of DoubleClick in 2008 brought DoubleClick’s leading ad server in-house, a move that ‘complement[ed] Google’s existing tool for advertisers, Google Ads, and set the stage for Google’s later exclusionary conduct across the ad tech industry’. That alleged exclusionary conduct took multiple forms, including:
- acquisitions of potential competitors such as AdMeld, a company that allowed publishers to view offers available through different ad exchanges;
- conditioning access to Google’s advertising demand on the use of Google’s own publisher ad server and ad exchange; and
- ‘[m]anipulating auction mechanics across several of its products’ to advantage Google’s ad tech tools and stifle those offered by competitors.
The district court denied Google’s motion to dismiss, in which Google argued that its acquisitions of DoubleClick and AdMeld (which the FTC and DOJ previously allowed) were not anticompetitive and that conditioning access to Google’s advertising demand on the use of Google’s publisher advertising server and advertising exchange constituted a lawful refusal to deal.
Google filed a motion for summary judgment in April 2024 arguing that its conduct amounts to lawful refusals to deal and product improvements. Google also disputes the DOJ’s market definition, which Google asserts, by limiting the market to ‘open web display advertising’, improperly excludes display advertising on sites such as Amazon and Meta and on mobile apps. On 14 June 2024, the court denied Google’s motion, ruling that there were significant questions of disputed facts that precluded summary judgment. The DOJ’s ad tech case against Google is scheduled for trial in September 2024.
FTC v Meta: Meta’s social network
In April 2024, Meta moved for summary judgment in the FTC’s four-year bid to challenge Meta’s alleged monopolisation in the market for personal social networking services. This case is notable because the FTC is primarily using section 2 to challenge prior acquisitions by Meta. After a federal judge dismissed the FTC’s initial complaint for its failure to adequately allege that Meta possessed monopoly power in the market for personal social networking services, the FTC amended its complaint, which survived a second motion to dismiss. The court, however, narrowed the FTC’s case against Meta to only those claims relating to Meta’s previous acquisitions and prohibited the FTC from challenging Meta’s policies that allegedly deny competitors access to Facebook Platform tools. The court concluded that those policies constituted lawful refusals to deal and, even if Meta’s decisions to revoke access to specific competitors were anticompetitive, claims relating to those refusals would be barred by the applicable statute of limitations.
The case is proceeding on the FTC’s claims that Meta’s past acquisitions of Instagram and WhatsApp enabled Meta to maintain its monopoly power in personal social networking services. Specifically, the FTC claims that the acquisitions of Instagram and WhatsApp, by which Meta eliminated the companies as independent competitive threats, ‘enabled Facebook to sustain its dominance . . . not by competing on the merits, but by avoiding competition’.
In its motion for summary judgment, Meta argues that the FTC’s market definition is underinclusive because it improperly excludes companies such as TikTok and Twitter. Emphasising the ‘extraordinary consumer benefits’ from Meta’s acquisitions of Instagram and WhatsApp, Meta further argues that the FTC cannot demonstrate that consumers would have been better off in a but-for world in which the acquisitions did not occur. Last, Meta calls for a ‘presumption that the transactions were not anticompetitive’ given that the FTC reviewed and declined to challenge the acquisitions.
The court’s order on the motion for summary judgment may have implications for the DOJ’s ad tech case against Google, which, in part, challenges Google’s previous acquisitions.
The FTC, if it prevails in its suit against Meta, requests remedies, including the divestiture of Instagram and WhatsApp as well as a requirement that Meta give prior notice and obtain prior approval for future mergers and acquisitions.
FTC v Amazon: Amazon’s online retail marketplace
In September 2023, the FTC sued Amazon, Inc, alleging that the company monopolised two markets: the online superstore market and the online marketplace services market. The FTC alleged that the online superstore market represents the market for shoppers seeking the unique experience of browsing and purchasing from an online store offering a breadth and depth of products. The second alleged market, the market for online marketplace services, represents the seller side of the market; in other words, those services that enable sellers to list their products in a marketplace used by a large number of shoppers.
The FTC claims that Amazon has engaged in two types of anticompetitive conduct that stifled the growth of rivals in these two markets: Amazon imposed anti-discounting measures and required sellers to use Amazon’s fulfilment services as a condition for Prime eligibility. According to the FTC, Amazon punishes sellers that offer lower prices off Amazon by burying their products in search results and removing the ‘buy box’ from their product pages, a feature that allows customers to easily add the product to their carts. Amazon’s anti-discounting tactics, the FTC claims, impede rivals from attracting shoppers and sellers to their own platforms because they are unable to offer lower prices to shoppers or lower fees to sellers that can be passed along to shoppers in the form of lower prices. The FTC further argues that by requiring sellers to use its own fulfilment services for Prime eligibility, Amazon inhibits sellers from ‘multihoming’ on other sales channels because Amazon’s policies have the effect of hobbling independent fulfilment providers, who cannot access sufficient order volume to achieve economies of scale and would otherwise facilitate multihoming.
Amazon moved to dismiss the FTC’s case, arguing that its practices ‘benefit consumers and are the essence of competition’. Amazon maintains that its discounting practices are lawful and ‘encourage[d]’ under the antitrust laws. Amazon also asserts that its practices have pro-competitive benefits: refusing to feature products sold at a lower price elsewhere ‘builds trust with consumers’, and conditioning Prime eligibility on Amazon’s fulfilment services enables Amazon to satisfy customer demand and expectation for reliably fast delivery. The court has not yet ruled on Amazon’s motion to dismiss.
Takeaways
The US antitrust enforcers and private plaintiffs remain aggressive in bringing monopolisation actions against large technology companies. The enforcers have sought significant remedies, including requests for structural relief that, if successful, could break up the companies. As the cases against Google and Meta make clear, the enforcers are willing to bring cases challenging consummated transactions even where enforcers previously declined to challenge them pre-consummation. Courts have permitted cases to proceed to discovery on those claims, demonstrating that prior clearance does not necessarily foreclose future challenges to acquisitions.
The big tech defendants have pursued several strategies to defend against monopolisation claims. The defendants have argued for broader market definitions to minimise their own market shares. However, as shown by Epic’s case against Google, a platform (in this case, the Android operating system) may constitute its own product market. The big tech defendants have also defended their conduct as lawful refusals to deal with competitors, but with varying success. For example, Meta succeeded in arguing it had no duty to provide rivals with access to Facebook Platform tools, while Google’s refusal to deal arguments in the ad tech case were unavailing.
Merger enforcement litigation
Horizontal mergers
The antitrust enforcement agencies have been successful recently in challenging horizontal mergers based on traditional antitrust theories. Mergers that result in high market shares and increased concentration are presumed to substantially lessen competition. It is often difficult for defending parties to rebut this presumption, especially when bolstered by other evidence of anticompetitive effects such as evidence of head-to-head competition. The government has not been successful in court in pursuing less-established theories of harm without strong evidence of actual competitive harm.
Another notable development is that the agencies are often bringing cases in other cities even if they could bring the case in the District of Columbia. Historically, the agencies tended to litigate in their ‘home court’ in Washington, DC, and a substantial merger case law developed. For several years, they have litigated in many courts around the country, which in some cases is evolving the law.
US v Bertelsmann SE & Co KGaA (Penguin Random House/Simon & Shuster)
The DOJ successfully sued to block Penguin Random House’s acquisition of Simon & Shuster. The agency alleged that the transaction would have substantially lessened competition in the market for US publishing rights to anticipated top-selling books. Of note, in its November 2022 decision, the US District Court for the District of Columbia agreed with the DOJ’s proposed market definition, which was limited to books for which publishers pay authors an advance of more than US$250,000. Noting that ‘not all books are created equal’, the court explained that publishing top-selling books involves distinct requirements, including higher advances and unique services relating to publicity and marketing. The court determined that the parties’ post-transaction 49 per cent share in this market justified a strong presumption of anticompetitive effects and found that the transaction would eliminate significant head-to-head competition between the parties.
Federal Trade Commission v IQVIA Holdings Inc, et al, (IQVIA Holdings, Inc/Propel Media, Inc)
On 29 December 2023, the US District Court for the Southern District of New York granted the FTC’s bid to block IQVIA from acquiring Propel Media Inc. The FTC alleged that the combination of Propel-owned DeepIntent with IQVIA-owned Lasso would substantially lessen competition in programmatic advertising to healthcare professionals. The court rejected the parties’ attempts to expand this alleged market by including social media and website advertisements targeting healthcare professionals, finding that programmatic advertising conducted by healthcare-focused demand-side platforms such as Lasso and DeepIntent, offer distinct characteristics and industry participants recognise these differences. Notably, the court accepted the FTC’s position that post-transaction market share in excess of 30 per cent – based on the parties’ calculations – was sufficient to presume anticompetitive effect, which the court found was supported by ‘ample evidence that the transaction would eliminate substantial head-to-head competition between DeepIntent and Lasso’. Having found a violation based on a horizontal theory, the court did not reach the FTC’s vertical theory of harm, which may have been more difficult to prove (see ‘Vertical mergers’, below).
United States v JetBlue Airways Corp, et al (JetBlue/Spirit)
The DOJ blocked a proposed merger between JetBlue Airways and Spirit Airlines that it alleged would have harmed competition by increasing air fares and reducing choice on routes across the country – particularly harming cost-conscious travellers.The court accepted the DOJ’s geographical market definition of each individual origin and destination pair in which JetBlue and Spirit compete – rather than a single national market that the parties proposed. The DOJ established a prima facie case of anticompetitive harm based on the resulting increased concentration on hundreds of routes and the elimination and other evidence of anticompetitive effects. Specifically, the court emphasised Spirit’s status as a ‘uniquely disruptive competitor’ that puts pressures on other airlines to reduce prices.
FTC v Meta/Within
The FTC failed to block Meta’s acquisition of the virtual reality (VR) fitness app developer Within Unlimited. The court rejected the FTC’s theory that the transaction eliminated potential competition between the parties for VR fitness apps. The FTC’s actual potential competition theory was rejected because it was not reasonably probable that Meta would have entered the market for VR fitness apps if not for the acquisition of Within. The court explained that although Meta has substantial financial and VR engineering resources, it lacked capabilities unique to VR fitness apps, and it did not have incentives to enter because as a VR platform developer it would enjoy the benefits of growth in the VR fitness app market regardless of which companies provide the apps. The court similarly rejected the FTC’s perceived potential competition theory, due to the lack of evidence that Meta was perceived by other firms as a potential entrant for VR fitness apps.
Vertical mergers
Recent court decisions have established clear precedents for evaluating vertical mergers: (1) the government must prove that the post-merger firm will have both the incentive and the ability to foreclose competitors; (2) ‘fixes’, such as commitments to make a critical input available to rivals, are considered in determining liability; and (3) these ‘fixes’ do not need to restore 100 per cent of the pre-merger competition.
US v UnitedHealth/Change Healthcare
The DOJ failed in its attempt to block UnitedHealth’s acquisition of Change Healthcare. The DOJ’s vertical theory alleged that after acquiring Change, UnitedHealth would have the ability and the incentive to misuse competitively sensitive information that Change receives from competing insurers. The court rejected the DOJ’s vertical theory based on ‘speculation’ rather than ‘real-world evidence’. The court found it unlikely that UnitedHealth would change its entire business strategy, violate its long-standing firewall policies, risk its financial interests and damage its reputation in the industry, and thus found the acquisition unlikely to substantially lessen competition. The court also rejected the agency’s separate horizontal theory of harm, finding that the divestiture of Change’s claim-editing business resolved such competition concerns.
FTC v Microsoft/Activision
The FTC lost its battle to block Microsoft’s acquisition of Activision. The FTC alleged that by acquiring Activision, Microsoft would have the ability and incentive to withhold Activision’s popular Call of Duty game from Microsoft’s rivals in the video game console and cloud gaming services market. The court also rejected the FTC’s contention that it can demonstrate the merger would substantially lessen competition either by demonstrating that the merger firm would have either the ability or the incentive to foreclose rivals – making clear that both the ability and incentive must be demonstrated. The opinion placed significant weight on Microsoft’s commitment to make Call of Duty available on rival gaming consoles such as Sony’s PlayStation and Nintendo’s Switch and several cloud gaming services.
FTC v Illumina/Grail
The Court of Appeals for the Fifth Circuit ultimately agreed with the FTC that Illumina’s acquisition of cancer-detection company Grail would substantially lessen competition in the market for cancer detection because Illumina is the sole supplier of next-generation sequencing – a critical input for cancer-detection tests that would compete with Grail. However, the Fifth Circuit vacated the FTC’s order and remanded the case for further proceedings because the FTC applied the wrong standard to evaluate Illumina’s announcement that it would make its next-generation sequencing products available on a standardised supply contract for all customers (the Open Offer). Specifically, the FTC erred in requiring Illumina to show that the Open Offer would restore the pre-merger level of competition. According to the Fifth Circuit, Illumina was only required to show that the Open Offer mitigated the merger’s effects to the point that it no longer substantially lessened competition.
Takeaways for merging parties
Parties contemplating mergers with substantive issues should pay attention to the results of recent merger litigation and take the following steps:
- Market definition remains critical: The antitrust agencies continue to be very successful in bringing merger challenges when they have the benefit of the presumption, based on post-transaction market shares and increases in concentration in a given relevant market. Merging parties may be able to attack the market definition (eg, expand the product or geographical market) to eliminate the presumption.
- Identify acceptable structural or behavioural commitments to ‘fix’ transactions: With the antitrust agencies now rarely entering consent orders, merging parties must be prepared to ‘litigate the fix’ and explain how the commitments neutralise competitive concerns.
- Be prepared to litigate: The antitrust agencies are increasingly aggressive in bringing merger challenges based on new, untested theories of harm, but they have met resistance in court where judges look to established merger case law precedent and real-world evidence of anticompetitive harm.
