December 20, 2012

Taxi Companies Drive By Some Antitrust Claims But Get Flagged By Others

A federal judge in Texas has dismissed several claims but denied defendants full summary judgment in Association of Taxicab Operators USA et al. v. Yellow Checker Cab Co. of Dallas/Fort Worth Inc. et al., an ongoing antitrust case in which plaintiffs allege a group of Dallas Fort-Worth area cab companies created a monopoly to fix taxi stand rates.

Judge David Godbey of the U.S. District Court for the Northern District of Texas granted partial summary judgment in favor of defendants Yellow Checker Cab Company of Dallas/Fort Worth, Inc., Jet Taxi, Inc., Irving Holdings, Inc., and MSS Transportation, Inc. doing business as Freedom Cab Company.

Citing lack of evidence, the court dismissed Sherman Act claims against Yellow Checker Cab and Jet Taxi that alleged predatory pricing and price fixing.  Not only did the plaintiffs fail to provide sufficient evidence of the antitrust violations, they also failed to rebut witnesses that testified that Jet Taxi did not set prices below their operating costs.

In its argument for summary judgment, Yellow Checker Cab also argued that plaintiffs could not prove the “conspiracy” element of a Sherman Act violation.  The court agreed, citing Computer Identics Corp. v. S. Pac. Co., 756 F.2d 200, 205 (1st Cir. 1985), which held there can be no conspiracy among companies that are so closely related that they are in fact one entity.

Irving Holdings’ request for partial summary judgment was also granted because plaintiffs lacked sufficient evidence of an antitrust injury under the Clayton Act.

The court did, however, uphold a substantial portion of the case.  The plaintiffs’ price-fixing claims against Jet Taxi and their claims against Yellow Cab and Jet Taxi alleging illegal mergers survived the summary judgment motions.  All of plaintiff’s Sherman Act claims against Irving Holdings survive, as do all of their claims against Freedom Cab and four other cab companies.

Notably, the court held that Freedom Cab failed to prove it is protected from liability for alleged antitrust violations under the state-action immunity doctrine.  Freedom Cab argued it is exempt from federal antitrust regulation because Texas grants Dallas-Fort Worth municipalities the ability to issue licenses, taxi permits, insurance, and vehicle inspections.

However, none of the municipal policies Freedom Cab cited allows the anticompetitive activity, and local governments never monitored the defendants’ mergers or pricing practices.  Thus, Freedom Cab failed to satisfy the two-part test for the application of the state-action immunity doctrine that the Supreme Court developed in California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97 (1980).

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Categories: Antitrust Litigation

    December 18, 2012

    Advocate General Urges European Court To Get Strict With Parents Of Misbehaving Subsidiaries

    The European Court of Justice is being urged to get stricter with parents of misbehaving subsidiaries in an appeal that highlights the controversial issue of to what extent parent companies should be held liable for illegal cartel activities committed by their wholly-owned subsidiaries.

    Juliane Kokott, the German Advocate General at the Court of Justice of the European Union, has submitted a brief to the European Court of Justice siding with the European Commission’s appeal of the judgment of the European General Court in European Commission v. Stichting Administratiekantoor Portielje and Gosselin Group NV.  Kokott submitted the brief under the Court of Justice’s practice of accepting analysis from one of eight impartial advocate generals appointed by EU member states for precedent setting cases.

    The Commission is appealing the General Court’s ruling that Stichting Administratiekantoor Portielje  (“Portielje”) could not be held liable for the cartel activities of its subsidiary Gosselin Group NV (“Gosselin”) because the parent company neither participated in the economic activity at issue nor was involved in the management of the subsidiary.

    The Commission had previously found that from 1984 to 2003 Gosselin and nine other Belgian companies had illegally utilized a cartel to fix prices and share the market for international moving services.  After the Commission held that Portielje, as the parent company of Gosselin, was liable for the illegal cartel activities of its subsidiary, Portielje successfully appealed that ruling to the General Court.

    The Commission is now appealing the General Court’s annulment of the Commission’s decision holding Portielje liable for the illegal cartel activities of its subsidiary.  The Commission is arguing that responsibility under antitrust law depends entirely on whether the parent company and the subsidiary together form an undertaking within the meaning of European competition law and on whether that economic unit can be accused of participating in the cartel.

    In siding with the Commission’s appeal, Kokott argues that the General Court misapplied the rebuttable presumption that a parent that owns virtually all the shares of a subsidiary exercises control of that subsidiary.  “Since the parent company’s 100% (or almost 100%) shareholding in its subsidiary prima facie allows the conclusion that decisive influence is actually being exercised, it is for the parent company to rebut precisely that conclusion, adducing cogent evidence to the contrary,” Kokott stated.

    Despite formal autonomy, Portielje owns 99 percent of Gosselin shares, and three members of Portielje’s board of directors also serve in the same capacity for Gosselin.

    Kokott criticized the General Court for relying too heavily on Gosselin’s “company law,” under which Gosselin makes business decisions independently of its parent company, Portielje.

    “It would, however, have been of decisive importance, leaving aside all the formal deliberations on company law, to examine the actual effects of the personal links between Portielje and Gosselin on everyday business,” Kokott wrote.

    Kokott’s brief claims that the General Court also misinterpreted what constitutes an “entity” under competition law.  Kokott argues that although Portielje did not participate in commercial activity, the company had a stake in the cartel’s economic goals.

     “All such parent companies have an eminently economic interest in the specific activities of their respective subsidiaries on the market.  To make a distinction between them in terms of responsibility under antitrust law would be contrary to the principle of equal treatment,” Kokott concluded.

    The Advocate General recommends using internal memos and witness statements rather than the reliance on company law to help determine responsibility for antitrust violations in the future.

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    Categories: Antitrust Enforcement, International Competition Issues

      December 11, 2012

      European General Court Shuts Down Fishing Expedition In Competition Investigation

      The European General Court has ruled that the European Commission overstepped its authority by conducting a broad reaching competition investigation in electric cable markets that amounted to a “fishing expedition.”

      The General Court annulled much of a European Commission decision that ordered an inspection of Nexans SA and its wholly-owned subsidiary Nexans France SAS – two French companies active in the electric cable sector.

      According to the Judgment of the General Court, the Commission began collecting evidence in January 2009 to determine whether or not Paris-based Nexans SA and its subsidiary acted in concert with other companies to control what the Commission broadly defined as “the supply of electric cables and material associated with such supply.”

      However, the Nexans companies argued that the Commission did not have enough evidence to cast such a wide net because first the investigators asked only to speak with employees working on high voltage underwater cables.

      Moreover, a February 2009 press release  also announced that the Commission was investigating companies making “high voltage undersea cables” rather than companies making electric cables in general terms. 

      The Court’s opinion noted that before beginning the Nexans investigation, the Commission had previously concluded low, medium, and high voltage cables warranted separate product markets.

      “A distinction between low and medium voltage on the one hand and the higher voltage ranges high and extra-high voltage on the other hand is required due to the different competitive conditions governing the supply and demand of these products,” the Commission stated in a July 2000 merger decision.

      Finding the scope of the investigation far broader than the grounds justifying the investigation, the Court overturned any part of the Nexans investigation that did not specifically pertain to high voltage underwater and underground electric cables.

      Despite keeping a significant part of the investigation intact, the Court’s opinion warns the Commission to be more careful to respect individual rights in future investigations.

      “Although the Commission is not required to communicate to the recipient of an inspection decision all the information at its disposal concerning the presumed infringements, or to make a precise legal analysis of those infringements, it must none the less clearly indicate the presumed facts which it intends to investigate,” the Judgment stated.

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      Categories: Antitrust Enforcement, International Competition Issues

        December 6, 2012

        Sky Angel Alleges It Was Shot Down By C-SPAN Boycott

        Online video distributor Sky Angel LLC has filed an antitrust complaint against C-SPAN in the U.S. District Court for the District of Columbia, accusing the news broadcaster of violating the antitrust laws by favoring traditional cable providers.

        Unlike traditional cable companies, Sky Angel provides customers with a receiver box that uses an Internet connection to deliver more than 50 channels of “programs that are encouraging, inspiring, and rooted in Godly principles.”

        According to the complaint in Sky Angel U.S. LLC v.  National Cable Satellite Corp., the National Cable Satellite Corp., doing business as C-SPAN, agreed to provide its programming through the Sky Angel service in 2009.  Sky Angel alleges that C-SPAN then reversed its decision for anticompetitive purposes and cut service to Sky Angel after only three days.  According to Sky Angel, C-SPAN’s Board of Directors, composed of executives from cable companies, caused C-SPAN to withhold its programming from Sky Angel, and to boycott Sky Angel.

        Sky Angel is seeking damages against C-SPAN for violating the antitrust laws and an injunction that would require C-SPAN to honor the terms of its contract with Sky Angel for 10 years.

        The lawsuit is Sky Angel’s second attempt at seeking antitrust remedies to increase competition in the online video distribution market.

        In 2010, Discovery Communications denied Sky Angel access to both Discovery Channel and Animal Planet programming.  Sky Angel reacted by filed an access complaint with the Federal Communications Commission.

        Although the FCC ruled against Sky Angel’s 2010 complaint, the FCC has expressed concern that traditional cable providers have a competitive advantage over alternative video distributors (such as Sky Angel).  “An entity attempting to enter the online video distribution marketplace must obtain a robust, if not comprehensive, programming library to offer consumers,” the FCC stated in a 2012 competition report.

        Sky Angel has sought access to Discovery’s and potentially other programming based on its argument that it qualifies for program access as a “Multichannel Video Programming Distributor” (“MVPD”) under the Communications Act and the FCC’s rules.  The FCC has not granted Sky Angel such status, but on March 30 of this year, citing Sky Angel’s Discovery application, issued a Public Notice (Docket No. 12-83) requesting comment as to whether an Online Video Distributor of programming, such as Sky Angel, should be considered an MVPD.

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        Categories: Antitrust Litigation


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