Source: http://traderegulation.blogspot.com/2012/09/
Timestamp: 2019-04-26 07:53:38+00:00

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Nissan purchasers stated claims under the consumer protection statutes of New Jersey, California, Illinois, Ohio, and Pennsylvania against Nissan Motor Co. for allegedly concealing a defectively designed transmission in certain vehicle models, the federal district court in Camden, New Jersey, has held.
Certain Nissan vehicles contain transmissions that rely on a complex system that enables a smooth shift to the appropriate gear. The problems at issue allegedly result from the improper design and function of the transmission valve body, which caused delayed shift patterns, excessive heat buildup, slippage, harshness, premature internal part wear, metal debris, and catastrophic transmission failure. The purchasers alleged that the transmission failed well in advance of their expected useful life and posed significant safety risks due to an unpredictable acceleration response and sudden total transmission failure.
Federal Rule of Civil Procedure 9(b) requires a plaintiff to state the circumstances of the alleged fraud with sufficient particularity to place the defendant on notice of the precise misconduct with which it is charged.
Each purchaser’s claims met the heightened pleading standard of Rule 9(b), pleading the date, time, and place of the alleged fraud. The claims also sufficiently stated that Nissan knew and withheld material information from consumers, Nissan possessed exclusive knowledge about the problem, the information was material, and the purchasers relied on the materiality of the non-disclosed information.
The purchasers presented sufficient evidence to state New Jersey, California, Illinois, Ohio, and Pennsylvania consumer protection law claims, according to the court. Each state law was brought by a resident of that state. Although the laws require different evidence, the evidence was sufficient to state a claim under each law.
The decision is Nelson v. Nissan North America, Inc., CCH State Unfair Trade Practices ¶32,539.
Further information regarding CCH State Unfair Trade Practices appears here.
Labels: concealment of defective transmissions, consumer protection statutes, Nelson v. Nissan North America Inc.
The federal district court in San Francisco on September 20 imposed a record-tying $500 million fine on AU Optronics Corporation (AUO), a Taiwan-based liquid crystal display (LCD) producer, for its participation in a five-year conspiracy to fix the prices of thin-film transistor LCD panels.
The company and its U.S. subsidiary also were placed on probation for three years and ordered to implement antitrust compliance programs. Two high-level executives, Hsuan Bin Chen and Hui Hsiung, were sentenced to three-year prison terms and each fined $200,000.
The sentencing follows a jury’s conviction in March 2012 of AU Optronics Corporation, AU Optronics Corporation America, Hsuan Bin Chen, and Hui Hsiung. After the eight-week trial in the matter, the jury also found two lower-level AU Optronics Corporation employees not guilty. A mistrial was declared against a former senior manager within AU Optronics Corporation’s Desktop Display Business Group. The government is preparing for a retrial of that mid-level executive.
Although the Antitrust Division had sought stiffer penalties on the convicted companies and executives than those imposed, the sentences are still significant. The fine against AUO is matched only by a 1999 fine against F. Hoffmann-La Roche, Ltd. for participating in a conspiracy in the vitamins industry. The government had sought a $1 billion fine against AUO and maximum 10-year prison terms for the convicted executives. The Probation Office had recommended a $500 million fine for AUO.
Speaking at Fordham’s 39th Annual International Antitrust Law & Policy Conference in New York City on September 21, Joseph Wayland, Acting Assistant Attorney General in charge of the Department of Justice Antitrust Division, would not comment on the sentences other than to say that the $500 million fine was “substantial” and was something that corporations need to think seriously about. He cautioned that the matter could be appealed.
Further information regarding United States v. Au Optronics Corp. appears here on the Justice Department Antitrust Division website.
Labels: conspiracy to fix prices, TFT-LCD panels, United States v. Au Optronics Corp.
The producer of a two-ounce energy shot drink known as "5-Hour ENERGY" could have engaged in false advertising in violation of Sec. 43(a) of the Lanham Act by distributing a letter, entitled "Legal Notice," to retailers notifying them of a court-ordered recall of a competing "6 Hour" energy shot product, the U.S. Court of Appeals in Cincinnati has decided. Summary judgment in the producer’s favor was reversed as the false advertising claim, although it was affirmed as to a competitor’s monopolization and attempted monopolization claims.
The complaining company, which marketed one of several "6 Hour" energy shots not subject to the recall, offered sufficient evidence to create a genuine dispute as to whether the notice was misleading and tended to deceived its intended audience, the court held. The language of the recall notice "teeter[ed] on the cusp between ambiguity and literal falsity" both descriptively and grammatically. A statement in the contested letters that the 5-Hour maker "won a decision against a "6 Hour" energy shot" was not literally true, as the 5-Hour maker had actually won a decision against a particular "6 Hour" competitor’s use of an overall product image, the court explained.
Moreover, confusion could ensue from the recall notice’s uses of the prefatory words "a" and "any" to refer to a 6 Hour energy shot—incorrectly suggesting that any shot bearing the name 6 Hour was subject to recall. Also problematic was a subsequent use of "the," which implied that there was only one specific product at issue, though the statement as a whole failed to specify exactly what product.
A lower court’s exclusion, on hearsay grounds, of documentary and testimonial evidence from the complaining company, distributors, and brokers showing confusion as to whether 6 Hour POWER had been recalled was erroneous, the appellate court said. Phone calls from retailers to distributors were not relied on to show the content of the conversations, but to show that the conversations occurred and the state of mind of the declarants. That so many people called the complaining company immediately after receiving the notice at the very least raised a genuine issue of material fact as to whether a significant portion of the recipients were misled, in the appellate court’s view.
The defendant’s characterization of the calls as "non-actionable customer inquiries" could be rejected by a jury, in light of testimony that many distributors had called to stop buying the complaining company’s product after the notice was issued, that sales growth for the product dropped significantly, and that the company lost an estimated $3.4 million in sales as a result of the recall notice. All of the calls evidenced a belief that 6 Hour POWER had been recalled; had the called lacked such a mistaken belief, the calls would not have occurred, the court reasoned.
The producer of "5-Hour ENERGY" did not engage in monopolization or attempted monopolization in violation of Sec. 2 of the Sherman Act through its actions against the competitor, the court also ruled. The producer allegedly undertook a broad anticompetitive scheme that included: (1) asserting a fraudulently obtained supplemental trademark registration for its product; (2) false advertising in connection with its distribution of the Legal Notice letter to retailers; (3) offering incentives to retailers for superior product placement, (4) requesting that retailers sell its product at the exclusion of other energy shot products, and (5) registering certain Internet domain names similar to the names of a competitor’s product.
Because the complaining competitor specified damages resulting only from the recall notice, only the anticompetitive effects of the recall notice could lead to antitrust liability. However, there could be no harm to competition from the recall notice, even if the notice amounted to false advertising. The complaining competitor was able to—and did—counter that information by sending notices that its product, 6 Hour POWER, had not been recalled.
The decision is Innovation Ventures, LLC, v. N.V.E., Inc., 2012-2 Trade Cases ¶78,053.
Eleven consumers can proceed with an antitrust action against the largest U.S.casket manufacturer, Batesville Casket Company, and funeral home chain Service Corporation International, but they can not represent a class of casket purchasers, the U.S. Court of Appeals in New Orleans has ruled.
The consumers who had purchased Batesville caskets alleged that the casket maker and the nation’s largest funeral home chains conspired to prevent independent casket discounters from selling Batesville caskets directly to consumers at discounted prices.
Dismissal of the consumers’ claims seeking attorney fees and costs for lack of subject matter jurisdiction was reversed; however, the appellate court affirmed the lower court’s dismissal of claims for injunctive relief and denial of class certification.
The complaining consumers who had settled with one of the original defendants—funeral home chain Stewart Enterprises, Inc.—for an amount greater than the maximum amount of compensatory damages being sought still had standing to seek costs and reasonable attorney fees from the remaining defendants, the appellate court held. The consumers were not seeking compensatory damages beyond those agreed to in the settlement and did not recover the attorney fees and costs available to them under Sec. 4 of the Clayton Act. The Clayton Act provides a successful plaintiff a mandatory award of costs and attorney fees.
operate to preclude full recovery of fees and costs pursuant to the Clayton Act, according to the court.
The consumers lacked standing to seek injunctive relief, the court also ruled. Any harm would have been reparable by a monetary award, and the chance of one of the consumers purchasing another one of the defending manufacturer’s caskets or his or her family purchasing one of the caskets upon the consumer’s death did not create a real or immediate potential future injury. The fact that death is inevitable is not sufficient to establish a real and immediate threat of future harm.
The court also concluded that the Funeral Consumers Alliance, Inc.—a nonprofit consumer rights organization that claims 400,000 individuals as members—lacked Article III standing to pursue injunctive relief. The organization did not allege that there was a real and immediate threat that any of its members would purchase an allegedly overpriced Batesville casket from one of the funeral homes that was alleged to be part of the conspiracy.
The district court did not err by denying certification of a nationwide class of consumers, according to the appellate court. The plaintiffs failed to meet Federal Rule of Civil Procedure 23(b)(3) predominance and superiority requirements. Rule 23(b)(3) requires a party seeking class certification to demonstrate both (1) that questions common to the class members predominate over questions affecting only individual members, and (2) that class resolution is superior to alternative methods for adjudication of the controversy.
The lower court was acting within its discretion when it adopted a magistrate judge’s recommendation, concluding that individualized issues affecting each of the roughly one million purported class members nationwide would predominate over common ones, given the lack of a national market or a nationwide conspiracy. The appellate court rejected the consumers’ argument that the district court “ignored” the evidence of national market and nationwide conspiracy presented by their expert.
The September 13, 2012, decision in Funeral Consumers Alliance, Inc. v. Service Corporation International will appear at 2012-2 Trade Cases ¶ 78,048.
The National Retail Federation said it would block a proposed $7.25 billion settlement involving Visa Inc., MasterCard Inc., and major banks for their role in allegedly fixing swipe fees, or the charges paid by merchants for accepting credit cards.
“NRF will take any and all steps necessary to oppose the settlement as it is currently proposed and will work toward real reform of the swipe fee system,” said NRF President and CEO Matthew Shay.
The group, which is not a party to the lawsuit, is currently exploring what form of legal action it might take. NRF noted that U.S. District Court Judge John Gleeson has not yet fully outlined how outside groups will be able to intervene, or if the case qualifies as a class action.
NRF argues that if the case actually went to trial and the verdict favored retailers, the judgment could total hundreds of billions of dollars, compared to the settlement total of $7.25 billion. Also, the proposed settlement does nothing to block future increases in swipe fees, the group claims.
NRF said it is particularly concerned by a provision that bars all merchants – even those that currently do not exist – from ever again suing Visa and MasterCard over swipe fees.
Last month the Retail Industry Leaders Association urged class plaintiffs to reject the proposed settlement, citing concerns that it would limit their future legal options and preserve the Visa/MasterCard duopoly. Other groups expressing concern with the settlement include the National Association of Convenience Stores and the National Grocers Association.
Further details regarding In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation appears in a July 16, 2012 posting on Trade Regulation Talk.
George Mason University (GMU) Law Professor Joshua D. Wright has been picked to replace FTC Commissioner J. Thomas Rosch—a fellow Republican—when his term expires later this month. The White House announced the intended nomination on September 10.
In addition to serving as a professor at GMU School of Law and holding a courtesy appointment in the Department of Economics, Wright is the Research Director and a Member of the Board of Directors of the think tank International Center for Law & Economics. He has written extensively on antitrust law and economics and is a regular contributor to Truth on the Market blog.
Wright previously served as the inaugural Scholar in Residence at the FTC Bureau of Competition, from January 2007 to July 2008. Before joining GMU, Wright taught at the Pepperdine University School of Public Policy and clerked for Judge James V. Selna of the U.S. District Court for the Central District of California.
He received a B.A. in Economics at the University of California, San Diego and a J.D. and a Ph.D. in Economics from the University of California, Los Angeles (UCLA), where he was Managing Editor of the UCLA Law Review.
The U.S. Court of Appeals in Cincinnati has upheld dismissal of antitrust claims against Lexmark International, Inc., a major producer of laser printers and toner cartridges for its printers. Static Control Components, Inc., a company that made components for toner cartridges, lacked standing to pursue those claims. However, the appellate court ruled that Lanham Act false advertising and claims under the North Carolina Unfair Deceptive Trade Practices Act should not have been dismissed on standing grounds.
Lexmark developed toner cartridges containing microchips that communicate with printers to ensure that Lexmark printers only work with its cartridges. In addition, Lexmark acquired and repaired its used toner cartridges for resale. Static Control replicated the cartridge microchips and sold the microchips to remanufacturers. Remanufacturers refilled Lexmark cartridges and sold them to Lexmark printer owners at a lower cost.
Lexmark offered its larger customers a “Prebate” program in which it sold new toner cartridges at an upfront discount if the customer agreed to a single-use license and to return cartridges to Lexmark rather than a remanufacturer. The price of Lexmark's toner cartridges allegedly increased following the implementation of the program because of reduced competition from remanufacturers.
Static Control lacked standing to assert antitrust claims based on the “Prebate” program. The program targeted only the market for remanufactured cartridges, the court explained. Static Control was neither a competitor nor a consumer in the market for replacement toner cartridges. The implementation of the Prebate program decreased the number of remanufactured cartridges for Lexmark printers, which in turn decreased Static Control's sales; however, the intended targets of the Prebate program were the end users and the remanufacturers, not Static Control.
Moreover, Static Control’s alleged injury was not inextricably intertwined with the injuries in the market for replacement toner cartridges. The court also noted that the number of potentially more direct victims counseled against a finding of standing.
Static Control also failed to plausibly allege any antitrust injury stemming from Lexmark’s decision to use the “lock-out” microchips in its cartridges and Lexmark’s exclusive distribution agreement with its own microchip supplier. Static Control failed to allege how the existence of a microchip requirement alone caused it any injury. It was possible that, without the microchips, Static Control would have been able to sell more component parts for remanufactured cartridges, but Static Control did not make this allegation. Moreover, Static Control did not allege how the removal of one of its direct competitors from the components and microchips market following an exclusive distributorship agreement with a single customer caused any damage to the seller' position within those markets or profits. The firm did not allege that Lexmark was a former customer or that absent the exclusive agreement the printer marker would have purchased from it.
If Lexmark were able to maintain a monopoly on remanufactured toner cartridges by making cartridge parts wholly unavailable, then Static Control might have standing to pursue an antitrust violation. However, the firm did not sufficiently allege such behavior, the court noted. Static Control did not allege how the redesign decreased competition in the markets in which it competed, the market for microchips or parts.
Lexmark was immune under the Noerr-Pennington doctrine from an antitrust claim based on Lexmark's filing of an unsuccessful copyright action. Static Control did not offer any allegations upon which one could plausibly conclude that the copyright action was “objectively meritless.” Although a federal appellate court ultimately concluded that Lexmark did not have a valid copyright claim, this was not determinative of whether the suit was reasonable, according to the court.
Static Control did, however, have standing to pursue a Lanham Act false advertising claim, even though it was not a competitor of Lexmark. The court refused to impose a standing requirement, found in other federal circuits, that a Lanham Act false advertising plaintiff be a competitor of the defendant. Static Control alleged a cognizable interest in its business reputation and sales to remanufacturers and sufficiently alleged that these interests were harmed by Lexmark's statements to the remanufacturers that it infringed Lexmark's intellectual property.
Dismissal of the federal antitrust claims for lack of standing did not require dismissal of North Carolina Unfair Deceptive Trade Practices Act claims, the appellate court ruled. Generally, federal case law was persuasive and instructive in construing North Carolina’s own antitrust statutes. However, North Carolina would be more flexible in its standing analysis, in the court’s view. North Carolina would not apply the factors enunciated in U.S. Supreme Court’s 1983 decision in Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 1983-1 Trade Cases ¶65,226, to deny Static Control’s standing to pursue state law unfair competition claims.
The decision is Static Control Components, Inc. v. Lexmark International, Inc., CCH Trade Regulation Reporter ¶78,027.
Labels: antitrust injury, Lanham Act false advertising, Noerr-Pennington Doctrine, standing to sue, Static Control Components v. Lexmark International Inc.
Viewers of Internet video streaming website Hulu.com could go forward with purported class-action claims that Hulu violated the Video Privacy Protection Act (VPPA) by disclosing their video viewing selections and personal information to third-party ad networks and data-tracking companies, the federal district court in San Francisco has determined. A motion by Hulu to dismiss the lawsuit for failure to state a claim was denied.
According to the court, the VPPA could cover Hulu’s business model and data practices, and the site’s viewers could have standing to sue as “consumers” under the statute. In an earlier decision (CCH Privacy Law in Marketing ¶60,779), the court had ruled that the viewers’ allegations satisfied the requirements of Article III standing by stating an injury-in-fact.
The VPPA protects from disclosure certain personal information of individuals who rent, purchase, or otherwise receive video materials. Consumers whose “personally identifiable information” was knowingly disclosed by a “video tape service provider” to third-parties may bring a private cause of action. “Personally identifiable information” includes information that identifies a person as having requested or obtained specific video materials or services. Potential remedies include actual damages (but not less than liquidated damages of $2,500), punitive damages, attorney’s fees and litigation costs, and preliminary and equitable relief that the court determines is appropriate.
The VPPA defines “video tape service provider” as “any person, engaged in the business, in or affecting interstate or foreign commerce, of rental, sale, or delivery of prerecorded video cassette tapes or similar audio visual materials.” Although Hulu did not deal in prerecorded video cassette tapes, Hulu could be considered a “video tape service provider,” for purposes of the VPPA, the court said. Contrary to Hulu’s contention, the phrase “similar audiovisual materials” included digital content delivery.
Disclosures of personal information are not prohibited if they are “incident to the ordinary course of business” of the video tape service provider. The VPPA defines “ordinary course of business” as “debt collection activities, order fulfillment, request processing, and the transfer of ownership.” The plaintiffs alleged that Hulu’s disclosures—done for purposes including unauthorized tracking—did not fall within this “ordinary course of business” exception.
Hulu contended that disclosure of viewers’ data to online market research, ad network, and web analytics companies all involved Hulu’s use of third-party vendors providing services like internal research, advertising, and analytics that Hulu could do on its own and thus permissibly could outsource in the “ordinary course of business.” The factual issue could not be resolved on the pleadings, the court said, so the claim survived Hulu’s motion to dismiss.
Moreover, while the terms “renter” and “buyer” necessarily implied payment of money, the term “subscriber” did not, the court said. Hulu cited no authority to the contrary. If Congress wanted to limit the VPPA’s definition of “subscriber” to “paid subscriber,” it would have said so, the court reasoned.
This postisng was written by Mark Engstrom, Editor of CCH RICO Business Disputes Guide.
An artist could not pursue federal RICO claims against a sports art company and its owner, who allegedly (1) reproduced one of the artist’s drawings without permission; (2) deleted the artist’s numbering system and original signature; and (3) sold at least 349 unauthorized copies of the work, the federal district court in Atlanta has ruled. The artist could, however, pursue racketeering claims under Georgia’s RICO statute.
The company did not constitute a RICO enterprise because it was not distinct from its owner, in the court’s view. Although a corporation and its owner were generally distinct from the corporation itself (Cedric Kushner Promotions, Ltd. v. King, CCH RICO Business Disputes Guide ¶10,085), the artist attempted to pierce the corporate veil of the sports art company, and thus contradicted his assertion that the company was distinct from its owner. Because the plaintiff failed to distinguish between the company and its owner, his RICO claim could not proceed.
(2) The defendants had engaged in other similar schemes.
The plaintiff argued that a threat of future racketeering activity existed because the defendants’ acts “could have continued indefinitely.” Continued criminal activity was almost always theoretically possible, but the type of speculation that the artist advocated would undermine: (1) the purpose of limiting RICO claims to “non-sporadic racketeering activity” and (2) the purpose of requiring a heightened pleading standard for RICO claims. Because the artist failed to sufficiently plead a pattern of racketeering activity, his federal RICO claim was dismissed.
The artist’s Georgia RICO claim survived the defendants’ motion to dismiss, despite the artist’s failure to adequately plead open-ended or closed-ended continuity, because the Georgia RICO statute did not include a continuity requirement. Instead, Georgia RICO required that the alleged predicate acts share “the same or similar intents, results, accomplices, victims, or methods of commission.” The predicate acts alleged by the artist were very similar in each of these respects. In addition, the predicate activity included criminal copyright infringement, which qualified as a predicate act under Georgia RICO because criminal copyright infringement was a predicate act under the federal RICO statute.
The decision is Burchett v. Lagi, CCH RICO Business Disputes Guide ¶12,250.

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