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Sunday, May, 2, 2010

James A. Donahue, III (Pennsylvania Office of Attorney General) reviews the current antitrust enforcement priorities of states' Attorneys General

PLI: For more than 30 years, state Attorneys General have acted as movers and enforcers of federal and state antitrust laws. What issues are they focusing on these days?

JAMES A. DONAHUE, III: Over the next several months, state antitrust enforcement will most likely focus on certain procedural and substantive issues. The procedural issues would deal with greater communication with federal enforcement agencies and with a system for dealing with confidentiality issues in multistate and federal joint investigations. The substantive focus is going to be on resale price maintenance and price fixing and bid rigging litigation involving products that state governments purchase.

The states, the Federal Trade Commission and the U.S. Department of Justice have worked together cooperatively since the late-1980s on a wide variety of cases. The vast majority of the time, the states and federal agencies have worked in concert to achieve effective antitrust enforcement. The states and federal agencies are committed to working closer on an ongoing basis. One of the opportunities for this further cooperation is the process the Department of Justice and the Federal Trade Commission have established for reviewing their horizontal merger guidelines. The states have participated in some of the workshops that have been conducted and will be preparing comments. In addition, the Department of Justice is holding a series of workshops on agriculture issues beginning in March 2010. The states have looked at a wide variety of issues in the agricultural market from bid rigging on school milk contracts to monopolization of the beef processing market, and will be sharing their expertise on these issues with the Department.

The states and federal agencies are also in constant communication involving a wide variety of cases. Some of those cases are merger cases where the states have typically focused on mergers which impact their citizens or their state governmental agencies. The states are also involved in a wide variety of conduct investigations with both the Department of Justice and the Federal Trade Commission across many industries. Interestingly, as the economy gets more sophisticated, the types of conduct that the states and federal agencies are looking at include not only antitrust matters, but matters that involve misrepresentation, deception or some other form of unfairness, combined with an underlying anticompetitive animus.

The other procedural matter the states will pursue is establishing a process whereby the confidential obligations of the states are set forth clearly. In many investigations, especially those involving merging parties, the targets or witnesses insist on a confidentiality agreement or confidentiality assurance before they turn over documents. When the merger involves multiple states or the states and the federal agencies, the inability to resolve confidentiality issues quickly can greatly slow down an investigation. In merger cases, where the Hart-Scott-Rodino Act establishes timelines for disclosure, such delays can be disruptive not only for the states' investigation, but for the parties' ultimate ability to close a transaction or resolve competitive concerns with the federal agencies.

Not all states can agree to the same confidentiality provisions, but all states can outline what confidentiality terms their laws support. Some states need to and can only insure confidentiality by issuing subpoenas. Other states, by entering into confidentiality agreements which protect any information produced. This is a process which the states hope to complete in the next couple months.

Substantively, the states intend to look at bringing many different types of cases. One area that is especially important to the states is the area of resale price fixing. Up until three years ago, resale price fixing was per se unlawful. The Supreme Court in the Leegin Creative Products v. PSKs, Inc., 551 U.S. 877 (2007), reversed 100 year old precedent and held that resale price fixings should be judged under the rule of reason. Resale price fixing involves conduct directly targeted at consumers. Specifically, resale price fixing insures that consumers pay higher prices than they and retailers might otherwise agree to accept. These higher prices theoretically insure that consumers receive services from retailers that manufacturers believe are important or insure that certain classes of retailers have the resources to exist. Whether consumers actually receive additional services or higher prices are the most efficient way to insure retailer survival is an open question. The states will look for the appropriate case to test the law on resale price maintenance.

In addition to resale price maintenance, the states will also look at conduct surrounding the products states and consumers buy. The states have been active in bringing actions alleging anticompetitive conduct resulting in overcharges for prescription drugs. They are participating in ongoing litigation involving computer memory chips. They will likely continue to investigate allegations of price fixing, bid rigging or anticompetitive conduct involving the wide array of products states buy. The states can be expected to vigorously protect their consumers and their agencies against any anticompetitive conduct.

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