October 28, 2010

Europeans Block Iron Giants’ Second Attempt To Combine

For the second time in as many years, antitrust enforcers have blocked a proposed deal between mining companies BHP Billiton Ltd. and Rio Tinto Ltd. to create the world’s largest iron-ore exporter.

The companies have announced that they will not proceed with a $10 billion joint venture of their ire ore operations in western Australia, due to objections from antitrust agencies in Australia, Germany, Japan, and Korea.  BHP Billiton and Rio Tinto are two of the world’s three largest producers of iron ore.  The joint venture would have combined mining and transportation assets in the Pilbara region of Australia.

Germany and Japan led the charge against the joint venture.  Both Japan and Germany, announced on Oct. 14, 2010, that they would prohibit the joint venture.  Further, the European Union was planning to begin its own investigation of the joint venture. 

In 2008, BHP sought to acquire Rio Tinto for $66 billion, but the EU blocked that deal as well.

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Categories: Antitrust Enforcement, International Competition Issues

    October 26, 2010

    Apple And AT&T Lose Bid To Dismiss Class In Ninth Circuit

    The Ninth Circuit has affirmed class certification for an antitrust action against Apple, involving the length of time that iPhone users must use AT&T’s voice and data services.

    Judges Diarmuid O’Scannlain and William Fletcher have issued a one-page summary affirmance of the certification, which Judge James Ware of the Northern District of California granted on July 8, 2010. The Ninth Circuit case is Holman v. Apple Inc., and the case in the district court is called Apple & AT&T Antitrust Litigation.

    The class encompasses “All persons who purchased or acquired an iPhone in the United States and entered into a two-year agreement with Defendant AT&T Mobility, LLC for iPhone voice and data service anytime from June 29, 2007 to the present.”

    Plaintiffs assert that Apple and AT&T violated Section 2 of the Sherman Act by agreeing to bind iPhones to AT&T’s network for five years, even though consumers who bought iPhones agreed to contracts with AT&T lasting only two years.

    In His July 8 opinion, Judge Ware held that the plaintiffs satisfied the required class criteria of numerosity, commonality, typicality, and adequacy of representation. Judge Ware also held that the class could seek injunctive relief, despite the significant monetary damages that the plaintiffs sought.

    The July 8 opinion also dismissed several of plaintiffs’ claims stemming from allegations that Apple intentionally disabled the iPhones of consumers who had installed unauthorized third-party software.

    The 9th Circuit opinion is No. 10-80145, and the District Court case is No. C-07-05152 JW (available at 2010 WL 3521965).

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    Categories: Antitrust Litigation

      October 25, 2010

      Scrap Metal Cartels Facing Global Scrutiny

      A worldwide antitrust crackdown on scrap metal cartels has landed in Korea with the Korean Fair Trade Commission’s recent imposition of a $1.45 million fine against 25 scrap metal processors for price fixing.

      Scrap metal processors purchase the scraps that are produced by the steel production process.  The processors in turn sort and clean the scrap metal and sell the final product to end users, frequently other steel mills.  Because of its enforcement action, the Korean Commission expects prices paid by end users to fall in the near future.

      The scrap metal industry has also been the focus of antitrust claims in the United States. For example, the Court of Appeals for the Sixth Circuit upheld a $23 million jury award against three scrap metal processors in 2008.  Plaintiffs in that case, In re Scrap Metal Antitrust Litigation, accused the defendants of bid rigging and market allocation, among other charges.  The U.S. Department of Justice also brought criminal charges against two scrap metal dealers for price fixing, but the companies were acquitted in 2009.

      Korea and the United States are not alone in closely scrutinizing the scrap metal industry.  Earlier this year, South Africa’s Competition Commission announced it was referring an investigation into 13 scrap metal processors to its Competition Tribunal.  The decision concerns various charges, including price fixing, market allocation, and bid rigging.  The referral followed a four-year investigation into the South African scrap metal industry.

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      Categories: Antitrust and Price Fixing, Antitrust Enforcement, Antitrust Litigation, International Competition Issues

        October 22, 2010

        Eleventh Circuit Reverses Itself To Give Eleventh Hour Reprieve To Class Action Plaintiffs With Small Individual Damages

        Class action plaintiffs are breathing a little easier with last week’s decision by the U.S. Court of Appeals for the Eleventh Circuit to reverse its July decision that would have been the death knell for many class actions.

        But the court still ruled against the individual plaintiff in the case before it.

        In July, an Eleventh Circuit panel issued a surprising decision holding that CAFA – the Class Action Fairness Act of 2005 – required that in an original federal court action, at least one named plaintiff must meet the $75,000 damages threshold or face dismissal for lack of subject matter jurisdiction.  Cappuccitti v. DirecTV, Inc., 611 F.3d 1252 (11th Cir. July 19, 2010).

        The decision was widely criticized.  One district court stayed proceedings in a CAFA matter to allow the appellate court time for rehearing, and the MDL court in the DirecTV matter declined to follow it.  See In re DirecTV Early Cancellation Litig., — F. Supp. 2d –, 2010 WL 3633079 (C.D. Cal. Sept. 7, 2010).

        And on Friday, October 15, 2010, the panel admitted its error and reversed itself.  Cappuccitti v. DirecTV, Inc.,– F.3d –, 2010 WL 4027719, No. 09-14107 (11th Cir. Oct. 15, 2010).

        The case involves a suit by a subscriber against DirecTV over a $420 cancellation fee – or rather, over the cancellation fees of an entire class of subscribers in the state of Georgia allegedly imposed in violation of state law.  The district court dismissed part of the complaint for failure to state a claim, but denied DirecTV’s motion to compel arbitration – finding the clause unconscionable because it denied a class action remedy – and allowed a claim for declaratory and injunctive relief to go forward. 

        On interlocutory appeal of the arbitration ruling, the Eleventh Circuit sua sponte (apparently without briefing or hearing) dismissed the entire action, including the declaratory relief, because the plaintiff’s individual claim failed to meet the jurisdictional threshold of $75,000, even though the class exceeded the $5 million threshold required by CAFA.  Section 1332(D)(6) provides that “[i]n any class action, the claims of the individual class members shall be aggregated to determine whether the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs,” but makes no mention of a $75,000 amount in controversy requirement.

        Many pending class actions could not meet this individual damage requirement – and indeed, it does not appear in the statute.  In fact, Congress intended to expand federal jurisdiction over class actions in CAFA, which removed the $75,000 amount in controversy and complete diversity jurisdictional requirements of Section 1332.  The Eleventh Circuit conflated the requirements of mass actions, which under the statute are required to meet the $75,000 requirement, with class actions under CAFA.  In mass actions, Section 1332(d)(11)(B)(i), combined with Section 1332(a), requires at least one plaintiff with more than $75,000 in controversy – there are no corresponding sections for class actions.

        One thing was consistent in Friday’s opinion – the panel still ruled for DirecTV.  The court granted DirecTV’s petition to compel arbitration, overturning the lower court’s finding that the arbitration clause was unconscionable under Georgia law.

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        Categories: Uncategorized

          October 20, 2010

          Britain Eyes Merging Merger Cops

          The United Kingdom’s two antitrust agencies will be merged if a proposed consolidation that seeks to streamline the British regulatory process passes its own merger review by the government.

          Currently, the U.K. employs two regulatory bodies to scrutinize competition activity, the Office of Fair Trading (“OFT”) and the Competition Commission.  The two bodies have slightly different roles, but work together in the clearance of mergers and in investigating allegedly anticompetitive conduct.

          The U.K. government is considering merging the two bodies in the interest of enhancing efficiency and accountability in the scrutiny of merger deals, which can take longer to clear in the U.K. than in other jurisdictions.

          The OFT has the authority to investigate cartels, while the Competition Commission leads investigations in alleged market dominance.  Typically, the OFT will conduct initial investigations in the scrutiny of merger deals in the U.K., and it will pass the investigation onto the Competition Commission if it has any concerns with the deal.

          Unlike in the United States, where the antitrust regulators (the Federal Trade Commission and the Department of Justice) have to convince courts of the merits of blocking a merger, the U.K. grants its regulatory agencies the final word on merger clearance.

          The U.K. has stated it will make a final decision on the proposed plan in 2011 after seeking public comments.

          The idea of merging the agencies has drawn mixed reactions.  Some applaud the increased efficiency of having one agency conducting the merger process and competition oversight, while others fear that such an agency merger may undermine the quality of the oversight process. 

          Alec Burnside, a competition partner at Linklaters LLP, cautioned that “[t]he challenge will be to make sure there is somehow still a ‘fresh pair of eyes.’”  He noted the possible danger of having one agency with all the antitrust power in that it might be “judge, jury, and executioner.”  However, he added that “the argument for a merger is compelling in its own way, and there may be other ways of ensuring the right checks and balances.”  Other competition lawyers in the U.K. have expressed the view that from cutting down the number of regulators will promote efficiency. 

          The U.K. business community appears to favor the idea.  The Confederation of British Industry believes it would expedite the merger review and investigation processes, thus “reducing the time firms are left in limbo.”

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          Categories: Antitrust Enforcement, Antitrust Policy, International Competition Issues

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