Thursday, February 01, 2007

U.S. Gives Views on Two Antitrust Cases Before Supreme Court

Federal antitrust enforcers have filed two “friend of the court” briefs with the U.S. Supreme Court, expressing their views on cases involving vertical minimum price maintenance agreements and implied antitrust immunity.

Resale Price Maintenance

The FTC and Department of Justice filed a joint amicus curiae brief in the appeal of Leegin Creative Leather Products, Inc. v. PSKS, Inc., a decision by the U.S. Court of Appeals in New Orleans (2006-1 CCH Trade Cases ¶75,166) that vertical minimum price fixing agreements are per se unlawful. The decision relied on the 1911 Supreme Court decision in Dr. Miles Med. Co. v. John D. Park & Sons Co. (230 U.S. 373) that established the per se rule against resale price fixing.

In Leegin, the government argued that the existence of a minimum pricing provision in an agreement between a supplier and its dealer should not constitute a per se violation of Sec. 1 of the Sherman Act because (1) Dr. Miles was based on reasoning and economic assumptions that predated and conflicted with modern economic theory and (2) the current presumptive standard for assessing the legality of the conduct at issue was the rule of reason, which examines the reasonableness of a given restraint in the context of a particular case.

The principle of stare decisis had less force in the antitrust context, the brief contended, because Congress expected the Court to give continuing shape to the meaning of the antitrust laws, thereby reflecting “changed circumstances and the lessons of accumulated experience. Current theory holds that the effects of resale price maintenance could be anticompetitive or procompetitive, depending on the facts in a given situation. Thus, a per se rule was “clearly inappropriate,” according to the government.

The petition is Leegin Creative Leather Products, Inc. v. PSKS, Inc., Docket 06-480, cert granted December 7, 2006. The amicus brief, filed on January 22, 2007, appears at the Department of Justice web site. Oral argument is scheduled for March 26.

Antitrust Immunity

In another joint amicus brief, the FTC, Department of Justice, and the Securities and Exchange Commission maintained that an implied antitrust immunity was applicable to collaborative underwriting activities related to the initial public offering of securities.

The Supreme Court has agreed to review a decision of the U.S. Court of Appeals in New York City (2005-2 CCH Trade Cases ¶74,943), rejecting the implied immunity defense in its entirety and vacating the dismissal of a lawsuit against underwriters and institutional investors who allegedly engaged in tying and laddering arrangements that were unlawful under the federal securities law. In Credit Suisse Securities (USA) LLC v. Billing, the high court will decide the extent to which SEC regulations impliedly repealed the antitrust laws. The government argued that the United States had a substantial interest in reconciling the two statutory schemes in a manner that gave effect to both, rather than holding one or the other completely overridden.

The government’s brief asserted that antitrust immunity extended not only to collaborative underwriting activities that was expressly or implicitly authorized under the securities laws, but also to conduct that was inextricably linked to such activity. Conduct ancillary to collaborative activity authorized under the securities laws acquired “a kind of derivative immunity,” the brief contended, because an antitrust challenge to such conduct could interfere with the regulatory scheme.

Nevertheless, the government acknowledged that conduct regulated under one statutory scheme did not enjoy a “blanket exemption” from the antitrust laws. Thus, the underwriters’ conduct was not categorically exempt from antitrust scrutiny merely because it occurred in the context of an initial public offering.

The petition is Credit Suisse Securities (USA) LLC v. Billing, Docket 05-1157, cert granted December 7, 2007. The amicus brief, filed on January 22, 2007, appears at the Department of Justice web site. Oral argument is scheduled for March 27.

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