Source: http://traderegulation.blogspot.com/2012/04/
Timestamp: 2019-04-26 08:38:31+00:00

Document:
A supplement purchaser sufficiently alleged that a supplement manufacturer’s packaging of its protein drinks and bars was misleading in violation of the California Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumer Legal Remedies Act (CLRA), the federal district court in Oakland, California, has held.
The manufacturer’s “Muscle Milk Ready-to-Drink” and “Muscle Milk Bars” were advertised as “an ideal blend of protein, healthy fats, [and] good carbohydrates.” These statements on the label were allegedly false and deceptive because the products actually contained 11 grams of total fat, 8 grams of saturated fat, almost no vitamins or minerals, and some unhealthy ingredients.
A reasonable consumer was likely to believe that the product contained healthy, unsaturated fats rather than saturated fats and was more similar to a nutritional shake, according to the court.
To state California consumer protection law claims based on deceptive product labeling, the purchaser needed to allege that a reasonable consumer was likely to be deceived by the label. The claims on the packaging went beyond claiming the supplement was healthy. Although “healthy” is difficult to define, a reasonable consumer would assume that “healthy fats” and “nutritious snack” referred to unsaturated fats rather than saturated fats. The nutrient label did not negate the finding that the labeling was misleading because the packaging contained affirmative misrepresentations, and manufacturers cannot rely of the small-print nutritional label to contradict and cure that misrepresentation.
The purchaser’s claims that other statements were misleading were denied, as they were not specific enough to meet the heightened pleading standard of Federal Rule of Civil Procedure 9(b).
In order to state UCL and FAL claims, the purchaser needed to show she lost money or property as a result of the violations. The purchaser alleged that she was denied the benefit of her bargain based on paying more for the supplement than a healthier, less expensive product because of the misrepresentations.
The purchaser also needed to show that she would not have purchased the product but for the misrepresentations on the product’s label. There was sufficient evidence that the purchaser read and relied on the misleading label on the packaging and that she suffered economic harm, according to the court.
The court held that the California Supreme Court would adopt the approach to unfairness under the UCL that the consumer injury must be substantial, the injury must not be outweighed by any countervailing benefits to consumers or competition, and it must be an injury that could not have been avoided. Misleading labels may qualify as unfair business practices if found to be misleading and the injury to the consumer class was substantial.
The decision is Delacruz v. Cytosports, Inc., CCH State Unfair Trade Practices Law ¶32,442.
Cable television programming service provider Comcast Corp. could have violated Sec. 1 or Sec. 2 of the Sherman Act by entering into swap agreements with other cable providers in the Philadelphia area and undertaking a course of action to block new entrants into its service areas, the federal district court in Philadelphia has ruled.
The complaining class of subscribers could not establish that Comcast’s swap agreements were illegal per se or that the company’s attempts to restrict access to installation contractors and to a sports network it owned constituted actionable predatory conduct. However, the class did offer enough evidence to support a claim of horizontal market allocation under the rule of reason and monopolization or attempted monopolization based on targeted price discounts to prospective customers of a new entrant into an area it served, in the court’s view. Comcast’s motion for summary judgment against the claims was granted in part and denied in part.
Comcast’s swap agreements did not amount to a per se violation of the Sherman Act because the class failed to meet its summary judgment burden with respect to whether the swap transactions were naked market division agreements, rather than merely ancillary restraints on trade. The class did not create a genuine issue of material fact concerning whether the cable provider had anticompetitive intent in entering into the swap agreements.
Evidence that the company’s executives had a long-standing desire to "rationalize the cable industry" by consolidating positions in certain markets in exchange for giving up positions in other markets did not support the conclusion that the swap agreements were naked restraints of trade so plainly anticompetitive that no elaborate study of the industry was needed to establish their illegality. The ability of cable companies to provide new and advanced services, achieved through clustering their systems, required proof of facts that were substantially different from the classic horizontal price fixing and group boycott conspiracies generally found to be per se antitrust violations, the court said.
Comcast was not entitled to summary judgment on the Sec. 1 claim outright on the basis that the counterparties to the swap agreements were never actual or potential competitors. For purposes of the subscribers’ Sec. 1 claim, their certification as a class (2012-2 Trade Cases ¶77,575) hinged on whether they could demonstrate that Comcast conspired with competitors to allocate markets, the court noted. The class offered sufficient evidence to create a jury issue on whether Comcast and the counterparties to the swap agreements were actual competitors.
An argument by the company that it and the counterparties were never competitors in the Philadelphia market—even though each offered cable services to subscribers in that market—because they operated cable systems in non-overlapping franchise areas and did not offer services to the same subscribers, at the same time, anywhere in the region was rejected.
Whether or not the franchise areas were overlapping was immaterial because the relevant geographic area was not limited to the individual franchise area. The class did not need to show that the defendant actually competed with the counterparties in the same franchise area. Based upon the proposed market definitions, it was sufficient that each provided cable television programming services in the Philadelphia direct marketing area.
Comcast did not engage in unlawful monopolization or attempted monopolization by creating a Philadelphia area cluster through the use of the swap agreements to allocate the market between it and two competitors, the court found. The conduct may have been predatory, according to the court, but the class failed to show that the purportedly procompetitive justifications Comcast offered for its conduct were pretextual.
Those justifications included the realization of efficiencies in marketing, infrastructure, management, and operations, along with an ability to introduce new products such as high-speed Internet, telephone, high-definition television, and other video features and services. Evidence that it raised prices did not refute the claim of efficiency. The court rejected arguments by the class that Comcast could have achieved the same level of efficiency of clustering by overbuilding its competitors, rather than acquiring them or swapping for their assets, and that it never studied whether it was achieving its goals.
Comcast’s offering of targeted price discounts to subscribers in one county it dominated in order to convince them not to switch service to a competing cable overbuilder that was moving into the area could have violated Sec. 2 of the Act, the court decided. Because of the price freeze in areas the competitor entered, and increased prices in areas it did not, the rates paid by the company’s customers in overbuilt areas were allegedly 18 to 38 percent below the rates paid by its customers in areas where the overbuilder did not offer service. The implications of the disparate pricing policy were clear: but for the overbuilder’s failure to enter the City of Philadelphia, the defending cable provider’s customers in those areas would have enjoyed significantly lower prices.
That Comcast never offered below-cost prices to potential customers of the overbuilder did not mandate a finding that the discount program was not exclusionary conduct. Because it possessed market power, its decision to target promotional discounts to deter a new entrant could be deemed predatory and an exercise of market power to maintain its monopoly. Given that the company made no argument that the discount program had otherwise legitimate business justifications, the claim had to be submitted to a jury, the court concluded.
The decision is Behrend v. Comcast Corp., 2012-1 Trade Cases ¶77,862.
The bookkeeper and chief financial officer (CFO) of an industrial machinery supplier violated RICO by participating in a fraudulent scheme to sell overpriced equipment to a flooring company, the federal district court in Abingdon, Virginia, has ruled. More than $3.5 million in damages, after trebling under RICO, were awarded to the flooring company.
The bookkeeper-CFO participated in the conduct of an association-in-fact enterprise—which consisted of the plaintiff, her husband, the supplier, and a company that appeared to be used for the sole purpose of carrying out the fraudulent scheme—by manipulating the supplier’s books and records, creating false invoices, signing kickback checks, and obstructing access to accurate data and documents, the court explained.
These actions were integral to the operation of the enterprise. Without the manipulation of the supplier’s accounting records, the issuance of false invoices, and the cutting of the kickback checks, the enterprise would have not been able to achieve its goal of defrauding a flooring company.
The defendant and her co-conspirators engaged in a pattern of racketeering activity that consisted of mail fraud, wire fraud, commercial bribery, and obstruction of justice, even though those acts were perpetrated in furtherance of a single scheme to defraud a single customer (the flooring company), the court determined. Under RICO, a pattern of racketeering was present if a series of related predicate acts were committed over a substantial period of time.
In this case, the racketeering acts were related because they all were perpetrated to defraud the flooring company. The acts were sufficiently continuous, as well, because they were committed between September 2005 and 2008, which represented a substantial period of time for the purpose of RICO’s continuity requirement.
The court denied the plaintiff’s request for punitive damages because the plaintiff’s state law claims arose from the same set of facts, and were based on the same duties and injuries, as its RICO claims. A punitive damage award would thus be duplicative. The plaintiff’s request for nearly $713,000 in attorney fees was also denied.
Although the hourly rate charged by the plaintiff’s counsel was reasonable, the overall fee was not, according to the court. Therefore, the plaintiff’s fee request was reduced by 50 percent. The court awarded slightly more than $356,000 in attorney fees.
The decision is VFI Associates, LLC v. Lobo Machinery Corp., CCH RICO Business Disputes Guide ¶12,204.
Further information regarding CCH RICO Business Disputes Guide appears here.
Labels: Civil RICO, participation in enterprise, pattern of racketeering activity, VFI Associates LLC v. Lobo Machinery Corp.
A radiologist who was excluded from two New Jersey hospitals after the hospitals’ operator selected a new exclusive radiology provider lacked antitrust standing to pursue boycott and monopoly claims, the U.S. Court of Appeals in Philadelphia decided earlier this week.
Nearly a decade ago, the radiologist filed his antitrust claims, alleging the hospital operator, its director of radiology, and two radiology physician groups conspired to boycott him in the local radiology market and used illegal tying arrangements to link radiology services to hospital services. He also alleged that exclusive radiology provider contracts were intended to monopolize the outpatient and hospital radiology markets.
The cardiologist failed to establish a nexus between his purported exclusion from the market for radiology jobs and the anticompetitive effects of the alleged conduct, the court ruled.
Because the complaining radiologist obtained a position with a nearby hospital within two weeks of his termination the original radiology group, he could not show that he was excluded entirely from the market.
The radiologist did not demonstrate that the challenged conduct was anticompetitive. He failed to show that the behavior leading to his exclusion—the change of contractor in a long-standing practice of exclusive contracting for radiology services—was the type that might lessen competition among radiology providers for the right to practice in the market.
Finally, the complaining radiologist failed to establish that his termination stemmed directly from conduct that was illegal because of its anticompetitive effects on the price, output, or quality of radiology services available to consumers. There was no indication that the radiologist’s exclusion allowed the defendants to provide substandard radiology services and reduce consumer choice, it was noted.
The April 17 non-precedential decision in Bocobo v. Radiology Consultants of South Jersey, P.A. will appear in CCH Trade Regulation Reporter.
Fast food franchisor, Hardee’s Food Systems, Inc., did not breach the implied covenant of good faith and fair dealing in its agreement with a franchisee by airing sexually provocative television commercials, a federal district court in St. Louis has ruled.
The franchisee alleged that the franchisor’s airing of two specific “lewd” ads on television during the franchisee’s renewal period abused its discretion its discretion in a manner that denied the franchisee the expected benefit under the agreement. The franchisee argued it received repeated complaints about the ads in its “predominantly agricultural and union oriented community” and sought lost profits and other damages.
Under Missouri law, where a contract left a decision to the discretion of one party, the issue was not whether the party made an erroneous decision, but whether the decision was made in bad faith or was arbitrary or capricious so as to amount to an abuse of discretion, the court explained.
In this instance, there was no evidence from which a jury could find that the challenged conduct of Hardee’s was arbitrary and capricious, opportunistic, or evaded the spirit of the franchise agreement to deny the franchisee the expected benefit thereof, the court held.
Instead, the evidence showed that Hardee’s made a strategic marketing decision and approved the ads at issue in what it believed was in the best interests of the Hardee’s brand, which is what the agreement contemplated that Hardee’s would do.
The decision is Hardee’s Food Systems, Inc. v. Hallbeck, CCH Business Franchise Guide ¶ 14,809.
This posting was written by Pete Reap, Editor of the CCH Business Franchise Guide.
The Franchise and Business Opportunity Project Group of the North American Securities Administrators Association (NASAA) re-released for comment yesterday proposed changes to NASAA’s Model Franchise Exemptions. The proposal includes model language for states to use to promulgate exemptions from registration and disclosure provisions under current state laws.
In response to a previous solicitation for comment, NASAA received a total of six public comments regarding various provisions in the Model Exemptions.
After considering the comments, the Franchise Project Group concluded that, in general, the Model Exemptions strike the right balance between the desirability of reducing compliance burdens on franchisors and the need for prospective franchisees to review Franchise Disclosure Documents in appropriate cases in order to make informed investment decisions. The Franchise Project Group decided—in light of several comments—to propose revisions to specific Model Exemptions.
Revised Exemptions include the Fractional Franchise Exemption, the Experienced Franchisor Exemption, the Sophisticated Purchaser Exemption, and the Discretionary Exemption.
A new release, including a link to download the Revised Proposed Model Franchise Exemptions, appears here.
The FTC announced on April 13 that it has dismissed a complaint it filed against a Rockford, Illinois, healthcare system—OSF Healthcare System—seeking to block OSF's proposed acquisition of rival health care provider Rockford Health System, in light of OSF's decision to abandon the transaction.
OSF arrived at its decision to scrap the deal after the federal district court in Rockford recently granted the agency's motion to preliminarily enjoin it, pending an FTC trial (2012-1 Trade Cases ¶77,850).
The FTC issued the complaint in November 2011, alleging that OSF's proposed acquisition of Rockford Health System would reduce competition in two markets in the Rockford area: (1) general acute-care inpatient services, and (2) primary care physician services. That complaint can be found at CCH Trade Regulation Reporter ¶16,666.
In granting preliminary injunctive relief on April 5, the federal court found that the Commission had made a strong prima facie showing that the combination would have adverse competitive effects. The court rejected arguments by the companies that various competitive considerations and constraints would preclude them from being able to raise prices to supracompetitive levels following the merger, and it further noted and that the companies failed to present sufficient proof of extraordinary efficiencies that would rebut the FTC's case.
"The Federal Trade Commission is gratified by OSF Healthcare's decision to abandon its attempt to acquire rival hospital services provider Rockford Health System," said Chairman Jon Leibowitz.
"As we said in November when we filed our complaint, health care consumers and employers in Rockford would have paid a price had the deal been allowed to proceed. The FTC remains vigilant, and will not hesitate to challenge deals in the health care sector that are likely to decrease competition and lead to higher prices or fewer services."
Further information regarding In re OSF Healthcare System appears here on the FTC website. The order dismissing the FTC complaint will appear at CCH Trade Regulation Reporter ¶16,763.
Today, the Federal Trade Commission (FTC) rescinded nine regulations because the agency's rulemaking authority with respect to them has been transferred to the Consumer Financial Protection Bureau (CFPB). These rules were republished by the CFPB, effective December 30, 2011. The FTC still has authority to bring law enforcement actions to enforce these rules.
The 2010 Dodd-Frank Act transferred to the CFPB most of the FTC’s rulemaking authority under the Fair Credit Reporting Act, as well as rulemaking authority under Sec. 43 of the Federal Deposit Insurance Act and portions of the Fair Credit Reporting Act. The Dodd-Frank Act also transferred rulemaking authority for two regulations recently issued by the FTC for services related to mortgage loans under Sec. 626 of the 2009 Omnibus Appropriations Act.
appropriate proof of identity (16 CFR 614, now at 12 CFR 1022.123).
Under the Under the Fair Credit Reporting Act, the FTC continues to have rulemaking authority for its “Identity Theft Red Flag Rules” (16 CFR 681) and its rules governing “Disposal of Consumer Report Information and Records” (16 CFR 682). The FTC also retains rulemaking authority under Fair Credit Reporting Act with respect to motor vehicle dealers.
The FTC also rescinded two rules on mortgage loan practices: the Mortgage Acts and Practices-Advertising or “MAP-Ad” Rule (16 CFR 321) and the Mortgage Assistance Relief Services or MARS Rule (16 CFR 322).
The MARS rule, which prohibited mortgage relief companies from making false or misleading claims among other things, was issued in November 2010. On at least two occasions-once in 2011 and once in 2012--the FTC has filed court actions for violations of the MARS rule. The MARS rule has been recodified as Mortgage Assistance Relief Services (Regulation O, 12 CFR1015).
The MAP-Ad rule took effect in August 2011. It prohibited misrepresentations regarding terms of mortgage credit products in commercial advertising. To date, the FTC has not brought an action alleging a violation of this rule. The MAP-Ad rule was republished by the CFPB at 12 CFR 1014.
In addition, FTC rules governing disclosure requirements for depository institutions lacking federal deposit insurance under the Federal Deposit Insurance Corporation Improvement Act (16 CFR 320, now 12 CFR 1009) and procedures for state application for exemption from the provisions of the Federal Debt Collection Practices Act (16 CFR 901, now 12 CFR 1006) were rescinded.
Maryland employers would be prohibited from asking employees or applicants to hand over the passwords for their Facebook accounts or other personal social media accounts, if a bill that has passed both houses of the Maryland legislature (Senate Bill 433 and House Bill 964) is signed by the governor. The two bills were reconciled and passed on April 6, 2012. If the law is approved, Maryland would be the first state to prohibit this practice.
The proposed law provides that employers may not take, or threaten to take, disciplinary actions against an employee for refusing to disclose social media account password and related information. Employers also may not refuse to hire an applicant as a result of the applicant’s refusal to disclose that information.
The bill also contains language prohibiting employees from uploading unauthorized employer proprietary information or financial data to their personal websites or other Internet sites. Employers would be allowed to conduct investigations for the purpose of ensuring compliance with applicable securities or financial laws or regulations, based on the receipt of information about the use of a personal website by an employee for business purposes or the uploading of employer proprietary information.
The proposed law would take effect on October 1, 2012.
Publishers Penguin, Simon & Schuster, and MacMillan have conspired with Apple, Inc. to fix the sales prices of electronic books, according to an antitrust lawsuit filed by 16 state attorneys general in the federal district court in Austin.
The publishers and Apple were charged with a horizontal conspiracy to raise e-book retail prices in violation of Sec. 1 of the Sherman Act and the antitrust laws of the 16 states. The complaint, filed today, seeks injunctive relief, an award of trebled damages, civil fines, and attorneys’ fess and costs.
The lawsuit was based on a two-year investigation into allegations that the defendants conspired to raise e-book prices. The investigation—led by the Texas Attorney General’s office and coordinated by the Connecticut Attorney General and the U.S. Department of Justice—revealed that Penguin, Simon & Schuster, and MacMillan conspired with other publishers and Apple to artificially raise prices by imposing a distribution model in which the publishers set prices for bestsellers at $12.99 and $14.99, according to the Texas Attorney General.
The complaint charges that when Apple entered the e-book market, the publishers and Apple agreed to adopt an agency distribution model—rather than the traditional wholesale distribution model—to allow them to fix prices. Because the publishers agreed to charge the same prices, retail price competition was eliminated and customers paid more than $100 million in overcharges.
Prior to filing suit, the states reached an agreement in principle with publishers Harper Collins and Hachette on issues of injunctive relief and consumer restitution.
Text of a news release on the lawsuit appears here on the Texas Attorney General’s website. The 56-page complaint in State of Texas v. Penguin Group (USA) Inc. appears here.
Labels: Apple Inc., e-books, horizontal price fixing, MacMillan, Simon and Schuster, State of Texas v. Penguin Group (USA) Inc.
The federal district court in New York City should not have rejected allegations that a magazine wholesaler was driven out of business as a result of an antitrust conspiracy, the U.S. Court of Appeals in New York City has decided. The appellate court vacated the lower court’s judgment granting a motion to dismiss the wholesaler’s Sherman Act Sec. 1 claim for failure to state a claim and denying leave to file an amended complaint.
According to the appellate court, the lower court misapplied the plausibility standards set by Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 2007-1 Trade Cases ¶75,709, and Ashcroft v. Iqbal, 129 S. Ct. 1937, 2009-2 Trade Cases ¶76,785.
The lower court should not have dismissed plausible allegations of a boycott, merely because it found a different version of events more plausible. By finding the plaintiff’s view of the events implausible, or less plausible than the possibility that the defendants acted unilaterally, the lower court improperly made factual findings, it was held.
Prior to being forced into bankruptcy liquidation, Anderson News was the second largest magazine wholesaler in the United States. After ceasing operations in 2009, Anderson brought an antitrust action against five national magazine publishers and their four distribution representatives, as well as two smaller wholesalers. Anderson alleged that, along with the country’s largest magazine wholesaler—Source Interlink Distribution, LLC—it was the target of a boycott.
Anderson contended that the boycott to eliminate the nation’s two largest magazine wholesalers followed a move by Anderson to impose a surcharge on publishers for each magazine copy it distributed, regardless of whether the copy was sold by a retailer. The surcharge was an attempt to recover costs associated with retrieving unsold magazine copies from retailers and disposing of them. Shortly after Anderson announced the surcharge, Source announced that it too would impose a similar surcharge.
The defendants, in an effort to get Anderson to drop the surcharge, allegedly invited the wholesaler to join in the elimination of Source, but Anderson declined. According to Anderson, thereafter, the defendants met or communicated with each other and agreed to reject Anderson’s proposed surcharge, to refuse any other accommodation, and to stop supplying Anderson with magazines.
Anderson’s allegations of conspiracy were plausible, in the appellate court’s view. The appellate court explained what differentiated the complaint filed by Anderson from the complaint at issue in Twombly.
The appellate court went on to say that it had “difficulties with some of the court’s analytical constructs, including its application of Twombly’s plausibility test.” The lower court’s plausibility inquiry was “misdirected” when it ruled that Anderson did not state a plausible Sherman Act, Sec. 1 claim, simply because unilateral parallel conduct by the defendants was completely plausible.
The appellate court also rejected the lower court’s determinations that Anderson’s conspiracy claim was implausible because the defendants had “a variety of reactions” to Anderson’s announcement of the surcharge or because Anderson’s surcharge was a nonnegotiable demand on the publishers. There was nothing implausible about coconspirators’ starting out in disagreement as to how to deal conspiratorially with their common problem.
Moreover, the presentation of a common economic offer might lend itself to independent, parallel responses, but it did not provide antitrust immunity to the publishers if they decided to get together to boycott the offeror.
The decision is Anderson News, LLC v. American Media, Inc., 2012-1 Trade Cases ¶77,843.
With Senate confirmation of William Baer unlikely to happen any time soon, the Department of Justice has announced that Joseph Wayland will serve as the Acting Assistant Attorney General in charge of the Justice Department Antitrust Division after the departure of Sharis A. Pozen at the end of April.
Wayland is the Deputy Assistant Attorney General for Civil Enforcement at the Antitrust Division. He joined the Antitrust Division in September 2010 and has worked on a number of high-profile cases. He was the lead trial counsel in the Justice Department’s successful challenge to AT&T Inc.’s proposed acquisition of T-Mobile USA, Inc. He also headed up the trial team that stopped H&R Block, Inc.’s proposed acquisition of 2SS Holdings—the maker of “TaxACT” tax preparation software.
Prior to joining the Antitrust Division, Wayland was in private practice, as a partner with Simpson, Thacher. He joined the firm in 1988.
The FTC announced yesterday that it had closed its investigation into the proposed combination of two of the country’s three largest pharmacy benefit managers (PBMs) without taking action to challenge the transaction. On the same day, Express Scripts, Inc. announced that it had completed its acquisition of Medco Health Solutions.
The transaction was not likely to produce unilateral or coordinated anticompetitive effects in the market for the provision of full-service PBM services to health care benefit plan sponsors, including public and private employers and unions, according to the Commission.
In addition to Express Scripts and Medco, competitors in the market included CVS Caremark—the nation’s second-largest PBM—as well as PBMs owned by large national health plans and some smaller standalone PBMs.
After analyzing the market, the Commission concluded that Express Scripts and Medco were not such close competitors that the elimination of one of these firms would allow the merged entity to unilaterally impose anticompetitive price increases. Medco and CVS Caremark focused on serving the nation’s largest employers, while Express Scripts’ customer base was more heavily skewed towards health plans and mid-size plan sponsors. Changes in the industry also meant that smaller PBMs and those owned by health plans were growing competitors for employer business.
Coordinated interaction among competitors in the market also was unlikely following the merger. The PBM industry was not necessarily conducive to coordination, it was noted.
The Commission also considered the concerns of retail and specialty pharmacies and concluded that there was little risk of the merged company exercising monopsony power. According to the Commission, there was no reason to believe that the merger would lead to lower reimbursement rates to retail pharmacies. Even if the transaction enabled the merged firm to reduce the reimbursement it offers to network pharmacies, there was no evidence that this would result in reduced output or curtailment of pharmacy services generally.
Moreover, evidence did not support concerns that the merged entity would exercise market power to demand more exclusive distribution arrangements from manufacturers of specialty drugs used to treat complex and rare conditions.
Calling the transaction a “game changer,” Commissioner Julie Brill issued a dissent from the Commission’s decision to close the investigation. While Commissioner Brill expressed “some discomfort about unilateral effects” from the merger, she reserved her sharpest criticism of the transaction for the likelihood of coordinated effects. Pointing to statements of the parties, Commissioner Brill said: “[I]t is not difficult to conceive how the post-merger duopoly could pull its competitive punches when it comes to bidding for one another’s customers.” The commissioner called on the agency to conduct an analysis of the industry in three years to determine the transaction’s impact on prices to employers.
Separately, Senator Herb Kohl (Wisconsin) issued a statement on April 2, saying that he expected the FTC “to carefully monitor the market to ensure that consumers are not harmed by loss of community pharmacies.” Kohl, Chairman of the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy, and Consumer Rights, had sent a letter to FTC Chairman Jon Leibowitz on February 2, expressing his concerns about the proposed transaction.
A federal district court in Camden, New Jersey certified a class action of Sam’s Club members that brought suit against Wal-Mart under the New Jersey Consumer Fraud Act (CFA) for allegedly failing to disclose that its service agreement for “as-is” products actually excluded “as-is” products from coverage.
Sam’s Club, a membership-only retail warehouse club owned by Wal-Mart, offered its members the option of purchasing service plans. The service plans expressly excluded products sold as-is. However, employees offered the service plans on every product sold despite the “as-is” products exclusion from those plans. Members sought certification of a class of Sam’s Club members that purchased “as-is” products as well as service plans after January 26, 2004.
The proposed definition of the class enumerated by the members’ attorney at oral argument was readily ascertainable, according to the court. The class identified a particular group, specified a particular time frame and location, and enumerated a particular way that the retailer’s conduct purportedly caused the class members harm.
The class included all consumers who, from January 26, 2004 to the present, purchased from Sam's Clubs in the State of New Jersey, a Sam's Club Service Plan to cover “as-is” products. Excluded from the class are consumers whose “as-is” product was covered by a full manufacturer's warranty, was a last-one item, consumers who obtained service on their product, and consumers who have previously been reimbursed for the cost of the service plan.
Federal Rule of 23(a) required the purported class representative to show numerosity, commonality, typicality, and adequacy of representation.
The class was potentially as large as 3,500 members, which would satisfy the numerosity requirement. As with the absent class members, the class representative was sold a service plan to cover an as-is product without being informed that the service plan excluded as-is products. Finally, the class representative’s attorney was experienced with class actions and the class members and representative suffered harm from the same alleged course of conduct.
Federal Rule of 23(b)(3) states that a class action may be maintained only if questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action was the superior method of adjudication. The predominance requirement tests whether the proposed class is sufficiently cohesive to warrant adjudication by representation.
All three elements of the CFA claim could be proven by common proof since the harm alleged arose from the same company-wide conduct, according to the court.
The decision is Hayes v. Wal-Mart, D N.J., CCH State Unfair Trade Practices Law ¶32,423.

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