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Recent actions by the U.S. Department of Justice's Antitrust
Division involving "most favored nation" provisions
(MFNs) include:
This month it was widely reported that the Antitrust Division is
currently investigating alleged anticompetitive practices in the
cable industry, including whether cable companies are using MFNs in
agreements with television networks to quash competition from
online rivals.
In April 2012, the Antitrust Division filed suit against Apple and five publishers alleging
in part that agency agreements between the publishers and Apple
contained retail price matching MFNs "designed to protect
Apple from having to compete on price at all."
In October 2010, the Antitrust Division filed suit against Blue Cross Blue Shield of Michigan
alleging that MFNs in the health insurance provider's
agreements with hospitals raised hospital costs to competitors and
"limit[ed] the ability of other health insurers to compete
with Blue Cross by raising barriers to entry and expansion,
discouraging entry, likely raising the price of commercial health
insurance, and preserving Blue Cross' leading market
position."
These actions continue to reinforce the importance of exercising
caution when drafting MFNs. The Antitrust Division has stated that MFNs and other contract provisions
that reference rivals "deserve additional scrutiny"
because they "may create a competitive problem unless the
provision serves a particular pro-competitive purpose."
Court Deems Electricity a "Commodity" Under the
Robinson-Patman Act
On June 4, a federal appeals court overturned a lower court decision dismissing
the claims of electricity purchasers who alleged that an
electricity provider had violated the Robinson-Patman Act
– which makes it unlawful for sellers "to
discriminate in price between different purchasers of commodities
of like grade and quality" – by paying rebates to
certain large customers in exchange for the withdrawal by the large
customers of their objections to the provider's proposed
rate-stabilization plan filed with the state utility commission.
The lower court had ruled that the filed-rate doctrine, which bars
challenges to the reasonableness of a rate approved by the
governing regulatory agency, applied to the claims.
On appeal, the court ruled that the filed-rate doctrine did not
apply because the purchasers' challenge was to payments made
"outside the rate scheme" set by the utility commission,
and further held that the purchasers had adequately alleged their
Robinson-Patman Act claim sufficient to survive a motion to dismiss
because "electricity is a commodity under the terms of the
[statute]." The court reasoned that electricity –
unlike cellular telephone service, which "is very different
from electricity" and is not a commodity – can be
"produced, sold, stored in small quantities, transmitted, and
distributed in discrete quantities." The case is a reminder to
sellers of commodities in industries where pricing is regulated
that rebates or discounts from agency-approved rates may trigger
antitrust concerns.
DOJ, EC Issue Reports on Competition in the Agricultural
Sector
On May 16, the Antitrust Division issued a report, "Competition and Agriculture:
Voices from the Workshops on Agriculture and Antitrust Enforcement
in our 21st Century Economy and Thoughts on the Way Forward,"
on what the agency learned from the series of public workshops it
cosponsored with the U.S. Department of Agriculture in 2010. The
report includes an analysis of the concerns raised in the workshops
and details discussion points relating to anticompetitive mergers,
high market concentration, monopsony power, price levels, lack of
capital, contracting, market transparency and captive supply,
market manipulation and genetically modified seeds.
On May 24, the European Commission Network (composed of the
European Commission and the member state national competition
authorities) issued a report on antitrust enforcement in the food
sector across Europe. According to the report, European competition
authorities have investigated all levels of the supply chain, in
particular focusing on processing and manufacturing.
The two reports make clear that the agriculture and food sectors
are a high priority for competition authorities on both sides of
the Atlantic.
United Kingdom Supports Private Competition Law Actions
Following the announcement of proposed reforms to the
institutional framework for the regulation and enforcement of
competition law, the UK Government has published a
consultation on methods to promote private sector challenges to
anticompetitive practices in the UK. Additional information is
available in our
June 2012 EU/UK Competition Law Newsletter.
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An interesting and growing debate in the antitrust arena is whether most favored nation ("MFN") pricing provisions are pro-competitive or anticompetitive. For many years, MFN provisions have been considered a fairly noncontroversial contract term included by purchasers in an attempt to assure that other buyers do not receive a more favorable price.
A well-attended program on antitrust treatment of "bundled pricing" and "loyalty discounts" at the American Bar Association Antitrust Section Spring Meeting highlighted the confusion generated by the antitrust law implications.
In remarks made this week at the International Competition Network annual conference, Federal Trade Commission (FTC) Chairwoman Edith Ramirez stated that health care will continue to be a top priority for the FTC.
An EU General Court (GC) judgment has considered the difficult issue of independent parallel behaviour by competitors under EU competition law, and in particular when this strays into a "concerted practice".
The U.S. Department of Justice ("DOJ") has reached a settlement with Anheuser-Busch InBev ("ABI") and Grupo Modelo S.A.B. de C.V. ("Modelo"), requiring ABI to divest Modelo’s entire U.S. business to Constellation Brands Inc. ("Constellation").
Microsoft v. Motorola is precedential only in the Western District of Washington, but at 207 thorough and well-reasoned pages, it provides a valuable roadmap and will likely be quite influential in future RAND cases in other U.S. and foreign jurisdictions.
Nearly a year ago the Kansas Supreme Court issued a ruling that boldly separated Kansas, and its state antitrust law, from prevailing federal antitrust precedent in matters of resale price agreements.
