Unilateral Conduct - E-Bulletins
2002 E-Bulletins
Unilateral Conduct Committee E-Bulletin
Issue 01
December 02, 2002
The Section 2 Committee's monthly E-Bulletin is intended to offer the antitrust community updates and information on the latest developments relating to monopolization law and policy. If you have any comments or suggestions on the E-Bulletin, please email Koren Stonebreaker (KStonebreaker@hewm.com) and Mark Popofsky (mpopofsky@kayescholer.com).
Court Conditionally Approves Settlement Between Microsoft, the DOJ, and Nine States
On November 1, 2002, Judge Kollar-Kotelly conditionally approved the proposed consent decree, provided that the parties amend the decree to allow the court to "take appropriate action regarding enforcement of the decree on its own volition and without prompting by the parties."
U.S. v. Microsoft State of NY et al. v. Microsoft Executive Summary Third Circuit Hears En Banc Oral Argument in LePage's v. 3M
On October 30, 2002, ten judges on the Third Circuit heard oral arguments on the issue of whether 3M's "bundled" discount programs violate Section 2. The Third Circuit granted LePage's Petition for Rehearing following the 2-1 panel decision in 3M's favor. Counsel for 3M, M. Laurence Popofsky, argued that 3M's discount programs amounted to nothing more than pro-competitive, above-cost price discounts, which are entirely lawful under the Supreme Court's decision in Brooke Group. LePage's attorney, Roy T. Englert, argued that "[t]his is not a case primarily about price," and urged the court to apply the principles used in tying cases (instead of the predatory pricing rules) since the "foreclosure effects are similar." http://www.hewm.com/aba/lepage.pdf Jury Awards $520 Million in Bundling Case A San Antonio jury returned a $173.6 million verdict ($520 million after trebling) in favor of Kinetic Concepts against a competing hospital bed-maker and its parent company finding, inter alia, that defendants attempted to monopolize the specialty bed market. The plaintiff alleged that defendants offered "bundled" proposals for the rental and purchase of specialty beds, hospital beds, and headwall units, which resulted in steep discounts on standard hospital beds for entities that committed to use only defendants' specialty beds, and that these proposals were "motivated by exclusionary and anticompetitive purposes and without legitimate business justification." Kinetic Concepts Inc. v. Hillenbrand Indus. Inc. and Hill-Rom Co. Inc., No. 95-CV-755 (W.D. Tex. Sept. 27, 2002). http://www.hewm.com/aba/verdict.pdf A Victory for Microsoft On October 28, 2002, the Fourth Circuit upheld the 12(b)(6) dismissal of plaintiff's action, which alleged, inter alia, "that Compaq's and Dell's agreements with Microsoft aided the maintenance of Microsoft's monopolies in PC operating systems, word processing and spreadsheet markets." The Court concluded that "without allegations regarding the market power or share of Compaq or Dell in the PC market, [plaintiff] is unable to show a conspiracy to monopolize under § 2." The court rejected plaintiff's argument that "Microsoft's significant market power in the software markets is sufficient to demonstrate anticompetitive effects in those markets without regard to Compaq's or Dell's power or share in the PC market." Gravity, Inc. v. Microsoft Corp. http://pacer.ca4.uscourts.gov/opinion.pdf/012458.P.pdf Plaintiff filed a Petition for Rehearing En Banc on November 12, 2002. The court denied defendants' motion to dismiss finding sufficient plaintiffs' allegations that defendants conspired to refuse to advance credit to plaintiff-customers. Dresses for Less, Inc. v. CIT Grp./Commercial Servs. Inc., No. 01-CIV-2669, 2002 WL 31164482 (S.D.N.Y. Sept. 30, 2002). Refusal-to-Deal Claim Against PG&E Fails in the Absence of a Demand for Services The court dismissed a refusal-to-deal claim where plaintiffs failed to "submit the required application materials" or even an informal letter requesting that PG&E supply gas. The court explained that "[a] demand and refusal is a prerequisite to a claim of concerted refusal to deal," and "no reasonable jury could find--on this record--that PG&E ever refused to sell to plaintiffs. At most, the record shows preliminary telephone conversations with no follow-up to request services." Tate v. Pac. Gas. & Elec. Co., No. C-01-04015, 2002 WL 31191533 (N.D. Cal. Sept. 26, 2002). 10th Circuit Panel Hears Oral Argument in Predatory Pricing Case Against American Airlines On September 23, 2002, DOJ attorney John Fonte and counsel for American Airlines, Robert Cooper, argued before 10th Circuit Judges Lucero, Murphy, and Portfilio in U.S. v. AMR Corp. et al. Fonte argued that the lower court, which dismissed the DOJ's case against American, used the wrong method of determining cost when it applied a formula for average variable cost rather than marginal cost to determine whether American had engaged in predatory pricing. Cooper argued that average variable cost, which is the method that American uses for 80% of its costs, is the best way to determine costs in the airline industry. Cooper also argued that since American merely matched (and never priced below) the low-cost carriers, its conduct should be governed by the Supreme Court's decision in Brooke Group. http://www.forbes.com/newswire/2002/09/23/rtr728975.html Koren W. Stonebreaker
Attorney
HellerEhrman
(415) 772-6869
kstonebreaker@hewm.com
