Justia U.S. Supreme Court Opinion Summaries

The National Collegiate Athletic Association (NCAA) limits how schools may compensate college-level “amateur” student-athletes. Current and former student-athletes brought suit under Section 1 of the Sherman Act, which prohibits “contract[s], combination[s], or conspirac[ies] in restraint of trade or commerce,” 15 U.S.C. 1. The Ninth Circuit declined to disturb NCAA rules limiting undergraduate athletic scholarships and other compensation related to athletic performance but enjoined certain NCAA rules limiting the education-related benefits, such as scholarships for graduate or vocational school, payments for academic tutoring, or paid post-eligibility internships.The Supreme Court affirmed, considering only the enjoined subset of NCAA rules restricting education-related benefits. Because the NCAA enjoys monopoly control in the relevant market and is capable of depressing wages below competitive levels for student-athletes and thereby restricting the quantity of student-athlete labor, the Court applied “rule of reason” analysis. The Court rejected the NCAA’s argument for “an extremely deferential standard” because it is a joint venture among members who must collaborate to offer consumers a unique product.While a “least restrictive means” test would be erroneous, the district court nowhere expressly or effectively required the NCAA to meet that standard. Only after finding the NCAA’s restraints “patently and inexplicably stricter than is necessary” did the court find the restraints unlawful. Judges must be sensitive to the possibility that the “continuing supervision of a highly detailed decree” could wind up impairing rather than enhancing competition but the district court enjoined only certain restraints—and only after finding both that relaxing these restrictions would not blur the distinction between college and professional sports and thus impair demand, and further that this course represented a significantly (not marginally) less restrictive means of achieving the same procompetitive benefits as the current rules. The injunction preserves considerable leeway for the NCAA. View "National Collegiate Athletic Association. v. Alston" on Justia Law

Apple sells iPhone applications (apps) directly to iPhone owners through its App Store—the only place where iPhone owners may lawfully buy apps. Most apps are created by independent developers under contracts with Apple. Apple charges the developers a $99 annual membership fee, allows them to set the retail price of the apps, and charges a 30% commission on every app sale. Four iPhone owners sued, alleging that Apple has unlawfully monopolized the aftermarket for iPhone apps. The Ninth Circuit reversed the dismissal of the suit concluding that the owners were direct purchasers under the Supreme Court’s “Illinois Brick” precedent.The Supreme Court affirmed. The Clayton Act provides that “any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue,” 15 U.S.C. 15(a), and readily covers consumers who purchase goods or services at higher-than-competitive prices from an allegedly monopolistic retailer. While indirect purchasers who are two or more steps removed from the violator in a distribution chain may not sue, the iPhone owners are not consumers at the bottom of a vertical distribution chain who are attempting to sue manufacturers at the top of the chain. The absence of an intermediary in the distribution chain between Apple and the consumer is dispositive. The Court rejected an argument that Illinois Brick allows consumers to sue only the party who sets the retail price. Apple’s interpretation would contradict the long-standing goal of effective private enforcement and consumer protection in antitrust cases. Illinois Brick is not a get-out-of-court-free card for monopolistic retailers any time that a damages calculation might be complicated. View "Apple, Inc. v. Pepper" on Justia Law

The Amex credit card companies use a two-sided transaction platform to serve cardholders and merchants. Unlike traditional markets, two-sided platforms exhibit “indirect network effects,” because the value of the platform to one group depends on how many members of another group participate. Two-sided platforms must take these effects into account before making a change in price on either side, or they risk creating a feedback loop of declining demand. Visa and MasterCard have structural advantages over Amex. Amex focuses on cardholder spending rather than cardholder lending. To encourage cardholder spending, Amex provides better rewards than the other credit-card companies. Amex continually invests in its cardholder rewards program and must charge merchants higher fees than its rivals. To avoid higher fees, merchants sometimes attempt to dissuade cardholders from using Amex cards (steering). Amex places anti-steering provisions in its contracts with merchants.The Supreme Court affirmed the Second Circuit in rejecting claims that Amex violated section 1 of the Sherman Antitrust Act, which prohibits "unreasonable restraints” of trade. Applying the "rule of reason" three-step burden-shifting framework, the Court concluded the plaintiffs did not establish that Amex’s anti-steering provisions have a substantial anticompetitive effect that harms consumers in the relevant market. Evidence of a price increase on one side of a two-sided transaction platform cannot, by itself, demonstrate an anticompetitive exercise of market power; plaintiffs must prove that Amex’s anti-steering provisions increased the cost of credit-card transactions above a competitive level, reduced the number of credit-card transactions, or otherwise stifled competition. They offered no evidence that the price of credit-card transactions was higher than the price one would expect in a competitive market. Amex’s increased merchant fees reflect increases in the value of its services and the cost of its transactions, not an ability to charge above a competitive price. The Court noted that Visa and MasterCard’s merchant fees have continued to increase, even where Amex is not accepted. The market actually experienced expanding output and improved quality. View "Ohio v. American Express Co." on Justia Law

Purchasers of vitamin C filed suit, alleging that Chinese exporters had agreed to fix the price and quantity of vitamin C exported to the U.S., in violation of the Sherman Act. The exporters unsuccessfully moved to dismiss the complaint and later sought summary judgment, arguing that Chinese law required them to fix the price and quantity of exports, shielding them from liability under U.S. antitrust law. China’s Ministry of Commerce, the authority authorized to regulate foreign trade, asserted that the alleged conspiracy was actually a pricing regime mandated by the Chinese Government. The purchasers countered that the Ministry had identified no law or regulation requiring the agreement; highlighted a publication announcing that the sellers had agreed to control the quantity and rate of exports without government intervention; and noted China’s statement to the World Trade Organization that it ended its export administration of vitamin C in 2002. The Second Circuit reversed a verdict for the purchasers, stating that federal courts are “bound to defer” to the foreign government’s construction of its own law, whenever that construction is “reasonable.” The Supreme Court vacated. A federal court determining foreign law under Federal Rule of Civil Procedure 44.1 should accord respectful consideration to a foreign government’s submission, but is not bound to accord conclusive effect to such statements. Relevant considerations include the clarity, thoroughness, and support of the foreign government's statement; its context and purpose; the transparency of the foreign legal system; the role and authority of the entity or official offering the statement; and the statement’s consistency with the foreign government’s past positions. Determination of foreign law must be treated as a question of law; courts are not limited to materials submitted by the parties, but “may consider any relevant material or source.” View "Animal Science Products, Inc. v. Hebei Welcome Pharmaceutical Co." on Justia Law

Institutions that buy natural gas directly from interstate pipelines sued, claiming that the pipelines had violated state antitrust laws: that they reported false information to the natural-gas indices on which natural-gas contracts were based. The indices affected both retail and wholesale natural-gas prices. The pipelines sought summary judgment, arguing that the Natural Gas Act pre-empted state-law claims. That Act gives the Federal Energy Regulatory Commission (FERC) authority to determine whether rates charged by natural-gas companies or practices affecting such rates are unreasonable, 15 U.S.C. 717d(a). It limits FERC’s jurisdiction to the transportation of natural gas in interstate commerce, the sale in interstate commerce of natural gas for resale, and natural-gas companies engaged in such transportation or sale, leaving regulation of other portions of the industry, such as retail sales, to the states. The district court granted the motion. The Ninth Circuit reversed. Acknowledging that the pipelines’ index manipulation increased wholesale prices, it held that the state-law claims were not pre-empted because they were aimed at obtaining damages only for excessively high retail prices. The Supreme Court affirmed, emphasizing the importance of considering the target at which the state-law claims aim. Here, the claims are aimed at practices affecting retail prices, a matter “firmly on the States’ side of [the] dividing line.” State antitrust laws are not aimed at natural-gas companies in particular, but rather all businesses and states have long provided “common-law and statutory remedies against monopolies and unfair business practices.” The industries did not identify a specific FERC determination that state antitrust claims are pre-empted by the Act. View "Oneok, Inc. v. Learjet, Inc." on Justia Law

North Carolina’s Dental Practice Act does not specify that teeth whitening is “the practice of dentistry.” After dentists complained, the Board of Dental Examiners issued cease-and-desist letters to nondentist teeth whitening service providers and product manufacturers, warning that the unlicensed practice of dentistry is a crime. The FTC filed an administrative complaint, alleging that the Board’s concerted action to exclude nondentists from the market for teeth whitening services constituted an anticompetitive and unfair method of competition under the Federal Trade Commission Act. An ALJ rejected a claim of state-action immunity and ruled against the Board. The FTC, the Fourth Circuit, and the Supreme Court affirmed. Because a controlling number of the Board’s decision-makers are active market participants in the occupation being regulated, the Board could invoke immunity only if the challenged restraint was clearly articulated and affirmatively expressed as state policy, actively supervised by the state. That requirement was not met. The need for supervision turns not on the formal designation given by states to regulators but on the risk that active market participants will pursue private interests in restraining trade. States may provide for the defense and indemnification of agency members in the event of litigation, and can ensure immunity by adopting clear policies to displace competition and providing active supervision. Regardless of whether the Board exceeded its powers under North Carolina law, there is no evidence of any decision by the state to initiate or concur with the Board’s actions against the nondentists. View "North Carolina State Bd. of Dental Examiners v. FTC" on Justia Law

The Drug Price Competition and Patent Term Restoration Act of 1984 (Hatch-Waxman Act), 21 U.S.C. 355(j)(2)(A)(vii)(IV) established procedures for identifying and resolving patent disputes between brand-name and generic drug manufacturers. One procedure requires a prospective generic manufacturer to certify to the FDA that any listed, relevant patent is invalid or will not be infringed by the manufacture, use, or sale of the generic drug (paragraph IV). Generic manufacturers filed paragraph IV applications for generic drugs modeled after Solvay’s FDA-approved, patented drug AndroGel. Solvay claimed patent infringement, 35 U.S.C. 271(e)(2)(A). The FDA approved the generic product, but the generic companies entered into “reverse payment” settlements, agreeing not to bring the generic to market for a number of years and to promote AndroGel to doctors in exchange for millions of dollars. The FTC sued, alleging violation of section 5 of the Federal Trade Commission Act by agreeing to abandon patent challenges, to refrain from launching low-cost generic drugs, and to share in Solvay’s monopoly profits. The district court dismissed. The Eleventh Circuit affirmed. The Supreme Court reversed and remanded, calling for application of a “rule of reason” approach rather than a “quick look.” Although the anti-competitive effects of the reverse settlement might fall within the exclusionary potential of Solvay’s patent, the agreement is not immune from antitrust attack. It would be incongruous to determine antitrust legality by looking only at patent law policy, and not at antitrust policies. The Court noted the Hatch-Waxman Act’s general pro-competitive thrust, facilitating challenges to a patent’s validity and requiring parties to a paragraph IV dispute to report settlement terms to antitrust regulators. Payment for staying out of the market keeps prices at patentee-set levels and divides the benefit between the patentee and the challenger, while the consumer loses. That a large, unjustified reverse payment risks antitrust liability does not prevent parties from settling their lawsuits; they may settle in other ways, e.g., by allowing the generic to enter the market before the patent expires without payment to stay out prior to that point. View "Fed. Trade Comm'n v. Actavis, Inc." on Justia Law

POM, which produces and sells a pomegranate-blueberry juice blend, filed a Lanham Act suit (15 U.S.C. 1125) against Coca-Cola, alleging that the name, label, marketing, and advertising of a Coca-Cola juice blend mislead consumers into believing the product consists predominantly of pomegranate and blueberry juice when it actually consists of less expensive apple and grape juices, and that the confusion causes POM to lose sales. The district court granted Coca-Cola partial summary judgment, ruling that the Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. 321(f), 331, and its regulations preclude Lanham Act challenges to the name and label of the juice blend. The Ninth Circuit affirmed. The Supreme Court reversed, holding that competitors may bring Lanham Act claims challenging food and beverage labels regulated by the FDCA. The Court noted that the issue was preclusion, not pre-emption. Even if the Court’s task is to reconcile or harmonize the statutes instead of to determine whether one is an implied repeal in part of another, the best way to do that does not require barring POM’s Lanham Act claim. Neither the Lanham Act nor the FDCA expressly forbids or limits Lanham Act claims challenging labels that are regulated by the FDCA. The laws complement each other in major respects: both touch on food and beverage labeling, but the Lanham Act protects commercial interests against unfair competition, while the FDCA protects public health and safety. The FDCA’s enforcement is largely committed to the FDA, while the Lanham Act allows private parties to sue competitors to protect their interests on a case-by¬case basis. Allowing Lanham Act suits takes advantage of synergies among multiple methods of regulation. Because the FDA does not necessarily pursue enforcement measures regarding all objectionable labels, preclusion of Lanham Act claims could leave commercial interests, and indirectly the general public, with less effective protection in the food and beverage labeling realm than in other less regulated industries. Neither the statutory structure nor the empirical evidence indicates there will be any difficulty in fully enforcing each statute. View "POM Wonderful LLC v. Coca-Cola Co." on Justia Law

Lexmark sells the only type of toner cartridges that work with its laser printers; remanufacturers acquire and refurbish used Lexmark cartridges to sell in competition with Lexmark’s new and refurbished cartridges. Lexmark’s “Prebate” program gives customers a discount on new cartridges if they agree to return empty cartridges to the company. Every Prebate cartridge has a microchip that disables the empty cartridge unless Lexmark replaces the chip. Static Control makes and sells components for cartridge remanufacture and developed a microchip that mimicked Lexmark’s. Lexmark sued for copyright infringement. Static Control counterclaimed that Lexmark engaged in false or misleading advertising under the Lanham Act, 15 U.S.C. 1125(a), and caused Static Control lost sales and damage to its business reputation. The district court held that Static Control lacked “prudential standing,” applying a multifactor balancing test. The Sixth Circuit reversed, applying a “reasonable interest” test. A unanimous Supreme Court affirmed. The Court stated that the issue was not “prudential standing.” Whether a plaintiff comes within a statute’s zone of interests requires traditional statutory interpretation. The Lanham Act includes in its statement of purposes, “protect[ing] persons engaged in [commerce within the control of Congress] against unfair competition.” “Unfair competition” is concerned with injuries to business reputation and sales. A section 1125(a) plaintiff must show that its injury flows directly from the deception caused by the defendant’s advertising; that occurs when deception causes consumers to withhold trade from the plaintiff. The zone-of-interests test and the proximate-cause requirement identify who may sue under section 1125(a) and provide better guidance than the multi-factor balancing test, the direct-competitor test, or the reasonable-interest test. Static Control comes within the class of plaintiffs authorized to sue under section 1125(a). Its alleged injuries fall within the zone of interests protected by the Act, and it sufficiently alleged that its injuries were proximately caused by Lexmark’s misrepresentations. View "Lexmark Int’l, Inc. v. Static Control Components, Inc." on Justia Law

POM, which produces and sells a pomegranate-blueberry juice blend, filed a Lanham Act suit (15 U.S.C. 1125) against Coca-Cola, alleging that the name, label, marketing, and advertising of a Coca-Cola juice blend mislead consumers into believing the product consists predominantly of pomegranate and blueberry juice when it actually consists of less expensive apple and grape juices, and that the confusion causes POM to lose sales. The district court granted Coca-Cola partial summary judgment, ruling that the Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. 321(f), 331, and its regulations preclude Lanham Act challenges to the name and label of the juice blend. The Ninth Circuit affirmed. The Supreme Court reversed, holding that competitors may bring Lanham Act claims challenging food and beverage labels regulated by the FDCA. The Court noted that the issue was preclusion, not pre-emption. Even if the Court’s task is to reconcile or harmonize the statutes instead of to determine whether one is an implied repeal in part of another, the best way to do that does not require barring POM’s Lanham Act claim. Neither the Lanham Act nor the FDCA expressly forbids or limits Lanham Act claims challenging labels that are regulated by the FDCA. The laws complement each other in major respects: both touch on food and beverage labeling, but the Lanham Act protects commercial interests against unfair competition, while the FDCA protects public health and safety. The FDCA’s enforcement is largely committed to the FDA, while the Lanham Act allows private parties to sue competitors to protect their interests on a case-by¬case basis. Allowing Lanham Act suits takes advantage of synergies among multiple methods of regulation. Because the FDA does not necessarily pursue enforcement measures regarding all objectionable labels, preclusion of Lanham Act claims could leave commercial interests, and indirectly the general public, with less effective protection in the food and beverage labeling realm than in other less regulated industries. Neither the statutory structure nor the empirical evidence indicates there will be any difficulty in fully enforcing each statute. View "POM Wonderful LLC v. Coca-Cola Co." on Justia Law