Source: http://traderegulation.blogspot.com/2013/
Timestamp: 2019-04-26 08:40:44+00:00

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The British Columbia Law Institute (BCLI) is soliciting public comments on its recently-issued consultation paper recommending that the province enact franchise legislation similar to existing franchise laws in Alberta, Manitoba, New Brunswick, Ontario, and Prince Edward Island.
The BCLI intends its “Consultation Paper on a Franchise Act for British Columbia” to be “a catalyst for an informed discussion about franchise regulation in BC.” After consideration of responses received, BCLI will produce a report with final recommendations and draft legislation.
 British Columbia should enact franchise legislation.
 Franchise legislation should be modeled generally on the Uniform Franchises Act and the Uniform Disclosure Documents Regulation.
 Franchise legislation should not provide for mandatory mediation on the demand of one party of the franchise agreement.
 Legislation should require presale disclosure of information to prospective franchisees.
 A franchisor may request and receive a fully refundable deposit before delivering a disclosure document.
 A disclosure document must state whether or not an exclusive territory is granted under the franchise.
 A disclosure document must state whether the franchisor reserves the right to directly market goods or services.
 An action for misrepresentation should extend to misleading or inaccurate financial or earnings projections.
 A franchisor should be able to use “wrap around” disclosure documents prepared in compliance with laws of another jurisdiction with additional information required by British Columbia.
 There should be a presumption of reliance by a franchisee on a disclosure document.
The institute is requesting comment from franchisors, franchises, business and consumer organizations, and the general public.
Comments, which will be accepted through September 30, 2013, may be submitted by email at gblue@bcli.org; by fax at 604-822-0144, and by mail at British Columbia Law Institute, 1822 East Mall, University of British Columbia, Vancouver, BC, Canada V6T 1Z1.
This posting was written by Jody Coultas, Contributor to Wolters Kluwer Antitrust Law Daily.
A gun dealer failed to state Sherman Act, Section 1 or Lanham Act commercial disparagement claims against the Village of Norridge, Illinois, stemming from a change in an ordinance that may force the gun dealer to close up shop, according to the federal district court in Chicago (Kole v. Village of Norridge, April 19, 2013, Durkin, T.).
The gun dealer entered into an agreement with the Village in which he agreed to sell guns only over the Internet in return for a license to operate the business in the Village. A revised ordinance terminated gun store licenses altogether and bans gun stores from the Village. Once the agreement and its three-year exemption from the revised ordinance expires, the gun dealer may be forced to close up shop, or at least relocate their business outside the Village.
The gun dealer failed to allege a conspiracy, agreement, or other concerted action to restrain trade in violation of Section 1 of the Sherman Act, according to the court. The Village and its trustees were one entity. Although a single firm’s restraints may directly affect prices and have the same economic effect as concerted action might have, there can be no liability under Section 1 in the absence of agreement.
Statements made by a Village trustee did not run afoul of the Lanham Act commercial disparagement section, according to the court. One trustee stated to a local newspaper that "the one current Village weapons dealer licensee has agreed that it will cease doing business in the village no later than April, 30, 2013." The gun dealer argued that the statement was commercial disparagement because it false and harmed business because the statement suggested to potential customers that it would soon go out of business.
The Lanham Act section prohibiting commercial disparagement applies only to statements used in commerce and made in commercial advertising or promotion. The statement also did not support the gun dealer’s Illinois Deceptive Trade Practices Act claim.
Anheuser-Busch InBev SA/NV (ABI) has resolved Department of Justice Antitrust Division concerns over its proposed acquisition of the remaining stake in Grupo Modelo S.A.B. de C.V.
A proposed final judgment was filed in the federal district court in Washington, D.C. that, if approved by the court, would resolve a civil antitrust complaint challenging the combination, which was filed on January 31, 2013.
The Justice Department had contended that the $20.1 billion transaction would substantially lessen competition in the market for beer in the United States as a whole and in 26 metropolitan areas across the United States. ABI’s global brands include Budweiser, Bud Light, Stella Artois, and Beck’s. Modelo’s Corona Extra brand is the top-selling import in the United States.
Under the proposed final judgment, the companies would be required to divest Modelo's entire U.S. business to Constellation Brands Inc. or to an alternative purchaser if for some reason the transaction with Constellation cannot be completed. It is intended to create an independent, fully integrated and economically viable competitor to ABI, according to the Justice Department.
The divestiture assets include Modelo's newest, most technologically advanced brewery (the "Piedras Negras Brewery"), which is located in Mexico near the Texas border; perpetual and exclusive U.S. licenses of the Modelo brand beers; Modelo's current interest in Crown—the joint venture established by Modelo and Constellation to import, market and sell certain Modelo beers into the United States; and other assets, rights and interests necessary to ensure that Constellation is able to compete in the U.S. beer market using the Modelo brand beers, independent of a relationship to ABI and Modelo.
Further, Constellation was added as a defendant for purposes of settlement and would be required to expand the capacity of Piedras Negras in order to meet current and future demand for the Modelo brands in the United States.
The settlement comes after initial attempts of the parties to remedy the potentially anticompetitive aspects of the transaction were rejected by the Justice Department as inadequate. An original proposal to sell Modelo's stake in Crown to Constellation and enter into a 10-year supply agreement to provide Modelo beer to Constellation to import into the United States was rejected on the ground that it would have eliminated the Modelo brands as an independent competitive force in the U.S. beer market. The federal district court stayed proceedings in the case multiple times while the parties attempted to reach a resolution.
"This is a win for the $80 billion U.S. beer market and consumers," said Bill Baer, Assistant Attorney General in charge of the Department of Justice's Antitrust Division. "If this settlement makes just a one percent difference in prices, U.S. consumers will save almost $1 billion a year."
According to an ABI statement, with this proposed resolution of the Justice Department suit, all necessary regulatory hurdles have been cleared. The Mexican Competition Commission approved the revised transaction with Constellation earlier this month. As a result, the transaction is expected to close in June 2013.
This posting was written by William Zale, contributor to Wolters Kluwer Antitrust Law Daily.
Section 5(a) of the Natural Gas Act did not preempt retail natural gas buyers’ claims under state antitrust laws in multidistrict litigation against natural gas traders for price manipulation associated with transactions falling outside of the jurisdiction of the Federal Energy Regulatory Commission (FERC), the U.S. Court of Appeals in San Francisco has ruled (In re: Western States Wholesale Natural Gas Antitrust Litigation, April 10, 2013, Bea, C.). The court reversed and remanded the district court’s preemption decision, reversed orders dismissing American Electric Power (AEP) defendants for lack of personal jurisdiction, and affirmed in other respects.
The buyers alleged that the traders manipulated the price of natural gas by reporting false information to price indices published by trade publications and by engaging in wash sales—prearranged sales in which traders agreed to execute a buy or a sell on an electronic trading platform and then to immediately reverse or offset the first trade by bilaterally executing over the telephone an equal and opposite buy or sell.
The buyers brought claims in state and federal court beginning in 2005, and all cases were eventually consolidated into the underlying multidistrict litigation proceeding. In July 2011, the district court entered summary judgment against the buyers in most of the cases, finding that their state law antitrust claims were preempted by the Natural Gas Act (NGA), 15 U.S.C. §717 et seq.
The NGA applies to: (1) transportation of natural gas in interstate commerce, (2) natural gas sales in interstate commerce for resale (i.e., wholesale sales), and (3) natural gas companies engaged in such transportation or sale. The NGA does not apply to retail sales (direct sales for consumptive use). FERC is the agency charged with the administration of the NGA.
Preemption. The court framed the question presented on appeal as follows: Does Section 5(a) of the NGA, which provides FERC with jurisdiction over any "practice" affecting jurisdictional rates, preempt state antitrust claims arising out of price manipulation associated with transactions falling outside of FERC’s jurisdiction? The court concluded that such an expansive reading of Section 5(a) conflicts with Congress’s express intent to delineate carefully the scope of federal jurisdiction through the express jurisdictional provisions of Section 1(b) of the Act.
When Congress enacted the NGA in 1938, it expressly limited federal jurisdiction over natural gas to "the sale in interstate commerce of natural gas for resale," under Section 1(b). Since passage in 1938, Congress had further demonstrated its intent to limit the scope of federal regulation by enacting statutes removing from FERC’s jurisdiction "first sales"— sales of natural gas that are not preceded by a sale to an interstate pipeline, intrastate pipeline, local distribution company, or retail customer.
The holding that the NGA does not preempt all state antitrust claims is supported, according to the court, by its decision in E. & J. Gallo Winery v. Encana Corp., 503 F.3d 1027, 1036 (9th Cir. 2007) that the filed-rate doctrine did not bar antitrust claims that were essentially the same as those in the present case. The court found that the Gallo reasoning applies in this case with equal force: federal preemption doctrines do not preclude state law claims arising out of transactions outside of FERC’s jurisdiction.
The district court read the word "practices" in Section 5(a) of the NGA to preempt impliedly the application of state laws to the same transactions (first sales and retail sales) that Congress expressly exempted from the scope of FERC’s jurisdiction in Section 1(b) of the Act. This reading ran afoul of the canon of statutory construction that statutory provisions should not be read in isolation, and the meaning of a statutory provision must be consistent with the structure of the statute of which it is a part, the court observed. While the Ninth Circuit had not had the opportunity to define the scope of Section 5(a), the Supreme Court and other circuits had read Section 5(a) narrowly to define the scope of FERC’s jurisdiction within the limitations imposed by Section 1(b).
The court also determined that the 2003 enactment of the FERC’s Code of Conduct did not affect the conclusion that the NGA does not grant FERC jurisdiction over claims arising out of false price reporting and other anticompetitive behavior associated with nonjurisdictional sales.
Personal jurisdiction. In suits brought in Wisconsin and Missouri, the district court dismissed American Electric Power and its subsidiary AEP Energy Services (AEPES), Inc. for lack of personal jurisdiction. On appeal, the court decided that personal jurisdiction could be exercised over the state antitrust claims arising out of the nonresident AEP defendants’ alleged collusive manipulation of gas price indices in the Wisconsin case, while the Missouri case would proceed only against AEPES because the plaintiffs had waived any argument for personal jurisdiction over the parent company.
Other issues. The court affirmed the dismissal of untimely motions in four cases to add federal antitrust claims and in one case to seek treble damages under the Colorado antitrust law. The court also affirmed summary judgment holding that Wisconsin plaintiffs lacked standing to have contracts determined void under Wisconsin Statutes §133.14 because the statute applies only to plaintiffs who are direct purchasers.
This posting was written by Jody Coultas, Editor of State Unfair Trade Practices Law and contributor to Antitrust Law Daily.
The federal district court in Albuquerque has denied in part fashion retailer Urban Outfitters, Inc.’s motion to dismiss trademark infringement and dilution claims brought by the Navajo Nation (The Navajo Nation v. Urban Outfitters, Inc., March 26, 2013, Hansen, C.). The court declined to dismiss the Navaho Nation’s claim under the Indian Arts and Crafts Act and stayed ruling on whether the Navajo Nation has standing to sue under the New Mexico Unfair Practices Act.
The Navajo Nation alleged that Urban Outfitters and its subsidiaries started a product line of items containing the NAVAJO trademark, which they sold on their website and retail stores, that evoked the Navajo Nation’s tribal patterns and resembled Navajo Indian-made patterned clothing, jewelry, and accessories.
Specifically, the Navajo Nation alleged that the product lines were likely to cause confusion and had created actual confusion in the market place, and constituted trademark infringement, trademark dilution by blurring, and willful trademark dilution by tarnishment in violation of the Lanham Act. Urban Outfitters also allegedly engaged in unfair competition and false advertising under the Lanham Act.
Trademark infringement. To state a trademark infringement claim under the Lanham Act, a plaintiff must allege that its mark is protectable, and the defendant’s use of an identical or similar mark in commerce is likely to cause confusion among consumers.
The fair use doctrine did not apply to the claims and did not warrant a dismissal because The Navajo Nation sufficiently stated trademark infringement claims, according to the court. A word that has acquired a secondary meaning still belongs to the public in its primary descriptive sense and any person may use it in such a way that does not convey the secondary meaning or deceive the public.
Urban Outfitters used the term "Navajo" in a trademark sense and did not accompany the term with marks such that a buyer exercising ordinary care would not be deceived into believing the product was produced by the Navajo Nation. There were no clarifying words that would clarify that a "Navajo" product was made by a member of the Navajo Nation. The inclusion of the manufacturer’s brand name did not eliminate confusion as to the source of the product.
Urban Outfitters’ argument that the term "Navajo" was a generic, descriptive term for a particular style of prints, clothing, and clothing accessories was better suited for a motion for summary judgment or trial, according to the court.
Trademark dilution. The court limited the Navajo Nation’s trademark dilution claims to those based on the relative qualities of the products at issue. An owner of a famous mark is entitled to an injunction against another person who uses a mark in commerce that is likely to cause dilution by blurring or dilution by tarnishment of the famous mark. Dilution by blurring arises from the similarity between a mark and a famous mark that impairs the distinctiveness of the famous mark. Dilution by tarnishment is association arising from the similarity between a mark and a famous mark that harms the reputation of the famous mark.
The Navajo Nation argued that Urban Outfitters’ use of "Navaho" was scandalous because the Navajo Nation Code provides that the term be spelled "Navajo," and argued that products like Urban Outfitters’ "Navajo Flask" was derogatory, scandalous, and contrary to the Navajo Nation’s principles because it banned the sale and consumption of alcohol within its borders and does not use its mark in conjunction with alcohol. There was sufficient evidence that the mark was famous. However, there was evidence that the Navajo Nation had used the mark on shot glasses, and the alleged misspelling was not sufficiently scandalous to state a dilution claim.
Indian Arts and Crafts Act. Urban Outfitter’s request to dismiss the Navajo Nation’s Indian Arts and Crafts Act (IACA) claim was denied by the court. The IACA is a truth-in-advertising law that creates a cause of action "against a person who, directly or indirectly, offers or displays for sale or sells a good, with or without a Government trademark, in a manner that falsely suggests it is Indian produced, an Indian product, or the product of a particular Indian or Indian tribe or Indian arts and crafts organization." Urban Outfitters argued that the allegations did not show that it falsely suggested that their products were made by Indians, Indian products, or the products of a particular Indian or Indian tribe, and that neither clothing nor clothing accessories constitute "arts" or "crafts" within the meaning of the IACA. The Navajo Nation sufficiently alleged that the products were in a traditional Indian style, and composed of Indian motifs and Indian designs. Also, modern apparel may fall within the definition of an "art" or "craft." The court declined to rule on Urban Outfitters’ judicial estoppel argument and declined to rely on any extra-pleading evidence to make a judicial estoppel finding at this stage of the case.
New Mexico Unfair Practices Act. The court stayed ruling on whether the Navajo Nation had standing to pursue a claim under the New Mexico Unfair Practices Act (UPA). New Mexico courts would hold that a business competitor has standing to assert UPA claims where the business competitor can show that the challenged practice significantly affects the public as actual or potential consumers of the defendant’s goods or services. The briefing on whether business competitors have standing to assert UPA claims did not directly addressed whether there is a public interest component to business competitor standing and/or whether the Navajo Nation sufficiently alleged a public interest component.
"For at least four years, Bosley’s and Hair Club’s chief executive officers repeatedly exchanged competitively sensitive, nonpublic information regarding aspects of their firms’ surgical hair transplantation business," the FTC alleged in a complaint announced today against Bosley, Inc. Bosley has agreed to settle the FTC charges that it engaged in unfair methods of competition in violation of Sec. 5 of the FTC Act (In the Matter of Bosley, Inc., FTC File No. 121 0184).
The complaint names Bosley, as well as Aderans America Holdings, Inc. and parent company Aderans Co., Ltd. HC (USA), Inc.—Hair Club—was not named as a respondent in the complaint because Aderans plans to acquire all of Hair Club’s stock from Regis Corporation.
Bosley provides medical and surgical hair restoration services. Hair Club provides nonsurgical hair restoration and hair therapy products. Hair Club manages medical/surgical hair restoration practices, including providing input on pricing, according to the FTC.
The FTC alleges that Bosley’s and Hair Club’s CEOs directly exchanged detailed information about future product offerings, surgical hair transplantation price floors, discounting, forward-looking expansion and contraction plans, and operations and performance. The conduct facilitated coordination and endangered competition and served no legitimate business purpose, the agency contends. Bosley purportedly provided competitively sensitive information to other competitors, as well.
A proposed FTC consent order would prohibit the respondents from communicating competitively sensitive, non-public information to a competitor or requesting, encouraging, or facilitating the communication of competitively sensitive, non-public information from a competitor. There are exemptions for legitimate information exchanges.
The consent order also would require the establishment of an antitrust compliance program. In addition, Bosley would be required to submit periodic compliance reports to the FTC.
The U.S. Court of Appeals in Boston affirmed verdicts of over $140 million, reached by both a jury and trial court, in favor of Kaiser Foundation Health Plan, Inc. for injuries suffered as a result of Pfizer, Inc.’s fraudulent scheme to market its epilepsy drug Neurontin for off-label uses (Kaiser Foundation Health Plan, Inc. v. Pfizer, Inc., April 3, 2013, Lynch, S.).
Neurontin was approved by the FDA as an adjunctive therapy in the treatment of partial seizures in adults with epilepsy, with a maximum dose at 1800 mg/day. Pfizer’s marketing of Neurontin for off-label uses resulted in over $2 billion in sales, with only about ten percent of Neurontin prescriptions filled for on-label uses.
Kaiser alleged that Pfizer and its subdivision Warner-Lambert Company, LLC violated the federal RICO law and the California Unfair Competition Law (UCL) by fraudulent marketing Neurontin for off-label uses. Pfizer was found to have misrepresented Neurontin's effectiveness for off-label uses directly to doctors, sponsored misleading informational supplements and continuing medical education programs, suppressed negative information about Neurontin, and published articles in medical journals that reported positive information about Neurontin's off-label effectiveness.
The court found that Kaiser presented sufficient evidence of causation to support a RICO claim. Pfizer argued that Kaiser failed to show proximate causation because there were too many steps in the causal chain connecting its misrepresentations to the injury to Kaiser because the injury was based on the actions of independent actors -- the prescribing doctors.
Courts look at three factors to determine whether proximate cause exists under RICO: the less direct an injury is, the more difficult it becomes to ascertain the amount of damages attributable to the violation; claims of the indirectly injured would force courts to adopt complicated rules apportioning damages among plaintiffs removed at different levels of injury to avoid the risk of multiple recoveries; and the societal interest in deterring illegal conduct and whether that interest would be served in a particular case.
In cases where the plaintiffs did not receive the misrepresentations at issue, courts may still find proximate causation. Pfizer’s argument that Kaiser could not show causation because its misrepresentations went to prescribing doctors was, therefore, dismissed. Kaiser was a foreseeable victim of Pfizer's scheme to defraud, and Kaiser’s injury was a natural consequence of the scheme. Pfizer was obviously aware that doctors would not be the ones paying for the drugs they prescribed, and that its revenues stemmed from payments by insurance and health care plans such as Kaiser.
Kaiser submitted sufficient evidence to demonstrate but-for causation between Pfizer’s conduct and its injury, according to the court. Pfizer argued that its evidence at trial rendered Kaiser's theories of causation false. Kaiser presented evidence that its employees directly relied on Pfizer's misrepresentations in preparing monographs and formularies, which, in turn, influenced doctors' prescribing decisions, and Pfizer's fraudulent off-label marketing directed to physicians caused PMG doctors to issue more Neurontin prescriptions than they would have absent such marketing. Pfizer's evidence did not, as a matter of law or of evidence, "falsify" Kaiser's theory of reliance upon Pfizer's misrepresentations. The testimony of some doctors who did not view Pfizer’s statements that prescribed Neurontin for off-label uses did not defeat the inference that this misinformation had a significant influence on prescribing decisions which injured Kaiser.
The statistical evidence submitted by Kaiser’s expert was sufficient and admissible, according to the court. Pfizer argued that some of the evidence Kaiser presented to prove but-for causation was inadmissible based on the methodology used. However, regression analysis, used by Kaiser’s expert, is a recognized and scientifically valid approach to understanding statistical data. Pfizer also argued that the expert failed to account for other factors that may have led doctors to prescribe Neurontin for off-label use. The court found that the district court was well within its discretion to admit Kaiser’s evidence.
Kaiser presented sufficient evidence for the jury and district court to find that Neurontin was not effective for the four off-label conditions, according to the court. Pfizer argued that the court applied an erroneous burden of proof and an erroneous medical standard in making its findings as to Neurontin's effectiveness. However, the court did not but the burden on Pfizer of proving Neurontin’s effectiveness. Kaiser presented sufficient evidence on the topic, and Pfizer was unable to overcome it.
The court also dismissed Pfizer’s challenges to the amount of damages awarded by the jury and court. The district court did not err in accepting Kaiser’s methodology for calculating damages.
Labels: California Unfair Competition Law, Civil RICO, Kaiser Foundation Health Plan v. Pfizer Inc.

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