Source: http://antitrustcommentary.com/?cat=17
Timestamp: 2019-04-26 08:20:40+00:00

Document:
“WASHINGTON, D.C. – The District of Columbia filed a lawsuit against ExxonMobil Oil Corporation and its gasoline distributors for Washington, D.C., to stop enforcement of exclusive-supply agreements that make one group of affiliated distributors the only suppliers of Exxon-branded gasoline in D.C., Attorney General Irvin B. Nathan announced today. The complaint, filed in D.C. Superior Court, alleges that the exclusive-supply agreements violate the District’s Retail Service Station Act.
The affiliated distributors – Capitol Petroleum Group, LLC, Anacostia Realty, LLC, and Springfield Petroleum Realty, LLC – are the exclusive gasoline suppliers for about 60% of the 107 gasoline stations in D.C., including all 31 Exxon stations, 19 of 20 Shell stations, all 12 Valero stations, and 3 unbranded stations. The District’s lawsuit challenges agreements that make these affiliated distributors the exclusive suppliers of Exxon-branded gasoline for the 27 independently-operated Exxon stations in D.C., or about 25% of the gasoline stations in the city.
The exclusive-supply agreements, or earlier versions of them, were established by ExxonMobil and were transferred in 2009 to the affiliated distributors, along with ExxonMobil’s ownership of the 30 D.C. Exxon stations to which the agreements then pertained. According to the District’s complaint, these supply agreements can now be enforced either by the affiliated distributors or by ExxonMobil through its separate agreements with other area distributors.
Today, the United States District Court for the Southern District of New York held, “Plaintiffs have shown that Apple conspired to raise the retail price of e-books and that they are entitled to injunctive relief. A trial on damages will follow.” The opinion appears here: Apple decision.
On October 3, 2011, the Ninth Circuit held that parens patriae actions commenced by state attorneys general are not “class actions” under the Class Action Fairness Act (“CAFA”) and, therefore, could not be removed from federal to state court under the CAFA removal provisions. Washington v. Chimei Innolux Corp., No. 11–16862, 2011 WL 4543086 (9th Cir. Oct. 3, 2011). The California and Washington attorneys general commenced actions under state law in their respective state courts to recover damages for their citizens as a result of price fixing among LCD manufacturers. These actions are based on the same allegations in MDL No. 1827. Defendants removed them asserting jurisdiction under CAFA. CAFA creates subject matter jurisdiction and authorizes removal in a class action where there is minimal diversity of citizenship between a defendant and one named or unnamed putative class member and the amount sought by the class exceeds $5,000,000. Defendants argued that a parens patriae action is just like a class action and the CAFA removal provision should thus apply. Joining the Fourth Circuit, West Virginia ex rel. McGraw v. CVS Pharm., Inc., 646 F.3d 169 (4th Cir.2011), the Ninth Circuit held that the language of CAFA does not permit treating parens patriae actions as class actions. It then affirmed the district court’s remand orders.
On January 11, 2011, Bioelements and the California Attorney General entered into a consent decree that enjoins Bioelements from entering into any agreements with retailers and distributors concerning what price they may charge for Bioelements’ products and to send notice to all retailers and distributors that any such polices are immediately rescinded. The action was brought in California Superior Court under the Cartwright Act, which the California Attorney General has interpreted to provide per se treatment for resale price maintenance in contrast to Section 1 of the Sherman Act after Leegin. See March 12, 2010 Post. Notably, the injunction extends to all of Biolelements’ transactions even if they take place outside of California. Bioelements also had to pay $51,000 in fines and expenses. This action is a cautionary tale that companies cannot rely on Leegin that resale price maintenance will be subject to lenient rule of reason treatment. A number of state attorneys general have brought resale price maintenance actions under their state laws and Maryland amended its antitrust law expressly to prohibit resale price maintenance.
On July 3, 2010, the Justice Yates (the trial judge) overturned his decision after a bench trial convicting William Gilman and Edward McNenny of violating the Donnolly Act (New York’s antitrust statute) for rigging bids on insurance contracts. According to the New York Times, he did so based on “newly discovered contradictory statements made by witnesses who cooperated with prosecutors, and the suppression of documents that would have been ‘invaluable’ to the defense.” Gilman and McNenny are the only Marsh executives that were convicted after a trial. As reported in earlier posts, Marsh paid an $850 million civil penalty and was not prosecuted. One former Marsh executive pleaded guilty and others had their cases voluntarily dismissed by the government or were acquitted after a bench trial.
On February 23, 2010, the California Attorney General entered into a consent decree with Dermaquest, Inc., which prohibits Dermaquest from engaging in resale price maintenance. Specifically, the order enjoins Dermaquest from requiring resellers to charge a specified price or to increase their prices. The action was brought under the Cartwright Act and the Unfair Competition Law. California now joins Illinois, New York and Michigan (see March 31, 2008 Post) in treating resale price maintenance as a per se offense in violation of its state antitrust law even though such conduct is subject to rule of reason review under section 1 of the Sherman Act after Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007). This case reinforces the dangers to a manufacture when it implements a resale price maintenance program under the belief that because such conduct might be permissible under the Sherman Act, there is no genuine exposure. The California complaint and consent decree appear here:Dermaquest Complaint and Dermaquest Judgment.
On November 19, 2009, the New York Attorney General’s motion to dismiss the charges arising from alleged bid rigging of insurance policies against Thomas T. Green, Jr. and William L. Burnie (former Marsh executives) and Geri Mandel (a former Zurich executive) was granted by Justice James Yates. New York Attorney General Andrew Cuomo sought dismissal in light of the acquittals of Joseph Peiser, Greg Doherty and Kathleen Drake, former Marsh executives, after an 11-month bench trial before Justice Yates, who was to preside at the upcoming trial. These acquittals were reported in the October 26, 2009 Post. As you may recall (and discussed in the February 22, 2008 Post), two Marsh executives were convicted of Donnelly Act violations after a 10-month bench trial. These cases were brought by then New York Attorney General Elliot Spitzer. Marsh paid $850 million to settle and another Marsh executive pleaded guilty.
In letters dated October 27, 2009 (State AG Letter re HR 3190; State AG Letter re S 148), 41 state attorneys general wrote to Congress asking them to overrule Leegin Creative Leather Product, Inc. v. PSKS, Inc., 551 U.S. 877 (2007). In Leegin, the Supreme Court held that resale price maintenance — the practice in which a manufacturer requires a retailer to sell its products at a certain price — was subject to the rule of reason. In doing so, the Court overruled Dr. Miles Medical Co. v. John D. Park & Sons, Co., 220 U.S. 373 (1911), which held that resale maintenance is a per se violation of section 1 of the Sherman Act. The state attorneys general urge passage of H.R. 3190, which provides that “[a]ny contract, combination, conspiracy or agreement setting a minimum price below which a product or service cannot be sold by a retailer, wholesaler or distributor shall violate section 1 of the Sherman Act.” As reported in the May 23, 2008 Post, 35 state attorneys general wrote to Congress on May 8, 2008 asking that it enact nearly identical legislation (S. 2261).
Practitioners should know that resale price maintenance can still be a per se violation of state antitrust laws. As reported in the May 4, 2009 Post, Maryland enacted such a law. And as reported in the March 31, 2008 Post, the New York, Michigan and Illinois attorneys general brought an action against Herman Miller in which they alleged that Herman Miller’s resale price maintenance program was a per se violation of their state antitrust laws. Herman Miller entered into a consent decree.
Joseph Peiser, Greg Doherty and Kathleen Drake, former Marsh executives, were acquitted after an 11-month bench trial before Justice James Yates of violating New York’s antitrust law — the Donnelly Act. They were acquitted of bid-rigging in connection with the sale of insurance policies. As you may recall (and discussed in the February 22, 2008 Post), two Marsh executives were convicted of Donnelly Act violations after a 10-month bench trial. These cases were brought by then New York Attorney General Elliot Spitzer. Marsh paid $850 million to settle and another Marsh executive pleaded guilty.
Maryland has amended its antitrust law to make resale price maintenance agreements per se illegal, thus overruling Leegin Creative Leather Products v. PSKS, 127 S.Ct. 2705 (2007). In Leegin, the Supreme Court overruled Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U. S. 373 (1911), and held that a resale price maintenance agreement in which the manufacturer requires a reseller to sell at a certain price is no longer a per se violation of Section 1 of the Sherman Act but instead is subject to rule of reason analysis. Application of the rule of reason creates a burden on plaintiffs because they have to show that the restraint had an adverse effect on the relevant market and not just the price of the manufacturer’s goods that were subject to restraint. This abrupt change in the law has been poorly received by state antitrust authorities. As reported in the May 23, 2008 Post, 35 state attorneys general petitioned Congress to amend the Sherman Act to overrule Leegin. And as reported in the March 31, 2009 Post, the state attorneys general of New York, Illinois and Michigan obtained a consent decree against Herman Miller in the United States District Court for the Southern District of New York for resale price maintenance involving the Aeron chair. Their position was that their state antitrust law do not recognize the departure by Leegin and still provide that resale price maintenance is a per se offense.

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