Google’s informal motto is “Don’t be evil.”  Whether or not it has breached that principle, the internet search and advertising giant may be about to run afoul of antitrust law, according to the Senate’s head antitrust watchdog.

On Tuesday, Senator Herb Kohl, chair of the antitrust subcommittee of the Senate Judiciary Committee, asked the Federal Trade Commission to take a closer look at Google’s proposed acquisition of AdMob, which provides advertisements on mobile phones.

According to Senator Kohl’s letter, “[c]ritics of this transaction worry that this deal will allow Google to merge with one of its biggest rival mobile advertising competitors.”  While Senator Kohl states that he has not concluded that the merger will create “dominance or would cause substantial harm to competition,” he nonetheless asks the FTC to “scrutinize this deal very closely,” and to ensure that any approval of the merger “will have sufficient safeguards to protect consumers’ privacy.” 

Google and AdMob, on the other hand, have stated that “experts have called mobile advertising a ‘very fragmented’ space, in which ‘no ad network is dominant’ and ‘no one really knows what ad network is biggest.’”  For instance, Apple has launched its own advertising platform – iAd – which will serve its omnipresent iPhone and its new iPad.

Given Apple’s prominence in the market and proven ability to exploit its consumer friendly hardware to gain advantages in complementary industries, the FTC will have to consider this development in its analysis of the Google/AdMob.  Whether that will change the ultimate analysis is hard to tell at this point. In other words, as even Senator Kohl’s letter acknowledges, the market may be too “nascent” to justify blocking the merger.

The FTC has apparently already assembled a team to investigate Google’s acquisition of AdMob.  Senator Kohl’s letter at the very least adds pressure on those lawyers to take a hard look at the merger.

Travel agents whose antitrust case against major airlines was grounded by a Court of Appeals’ application of the Supreme Court’s Twombly decision are hoping the Supreme Court will clear their complaint for takeoff.

On March 22, 2010, 49 travel agencies accusing several major airlines of conspiring to fix base commission rates petitioned the United States Supreme Court to reverse the Sixth Circuit’s decision affirming the Northern District of Ohio’s dismissal of their complaint, In re: Travel Agent Commission Antitrust Litigation, 583 F.3d 896 (6^th Cir. 2009). 

The complaint, filed in 2003, alleges that the defendant airlines conspired to reduce, cap and eventually eliminate the agents’ base commission rates in an attempt to drive the agents out of business.  The base commissions, paid until 2002, were a percentage of purchased ticket prices.  Plaintiffs assert that the conspiracy began in 1995, when several airlines contemporaneously announced that they were placing the same cap on the commissions.  Plaintiffs allege a pattern stretching over seven years in which one airline would announce a cap or a reduction in the commission and then other airlines would follow.  In 2002, Delta Airlines announced it would stop paying base commissions altogether, and other carriers quickly did the same. 

Plaintiffs allege that this game of “follow the leader” resulted not from airlines’ independent decisions but from an illegal agreement to eliminate the commissions.  Plaintiffs point to several industry-wide meetings at which the airlines had the opportunity to conspire, and to the testimony of a former airline executive that he had to match the commission cuts or else “undercut the movement.” 

The airlines respond that reducing commission rates advanced each airline’s independent self-interest by yielding net revenue greater than any potential loss from disgruntled agents redirecting their business.  The airlines also contend that new methods of purchasing tickets, including through the Internet, provide an economic incentive to cut commissions and then wait and see if competitors emulate.  click here for more »

Despite a recent federal law that clamps down on class actions, the Supreme Court on Wednesday breathed new life into the viability of some such cases – and in their 70-some pages of opinions, scrambled the Court’s usual ideological lines. 

In the case, Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., No. 08-1008, a group of doctors sued an insurance company when it paid an insurance claim late, but refused to pay a $500 penalty for its delay.  The doctors sued in federal court, and they styled their suit as a class action.  New York state law prohibits class actions for penalties unless statutes explicitly allow class actions.  The district court and the Second Circuit held that the New York state law governs, even in federal court.

The Supreme Court, in a 5-4 majority opinion written by Justice Scalia, disagreed.  According to the Court, Federal Rule of Civil Procedure 23 governs all class actions in federal court.  And that rule establishes only four criteria for class actions (numerousity, commonality, typicality, and representation).  According to Justice Scalia, the federal rule therefore trumps the state law, which effectively established a new criteria.  Even if the New York Legislature might have written the law differently, Justice Scalia wrote, “what matters is the law the Legislature did enact.” Joining Justice Scalia were two traditional allies, Chief Justice Roberts and Justice Thomas, and two interesting allies, Justice Stevens and Justice Sotomayor.  (Justice Stevens separately concurred with those other four justices’ second holding that Congress acted within its power when it passed Rule 23.)

The dissent had an equally novel lineup: Justice Ginsburg, writing for the left-leaning Justice Breyer, along with right-leaning Justices Alito and Kennedy.  According to Justice Ginsburg, the majority opinion serves to “transform a $500 case into a $5,000,000 case.”  She reasoned that courts have an obligation to read the federal rules in a way that is sensitive to state substantive law.  Here, she wrote, such a reading is possible, if the New York law is viewed as a limit on remedies.  And if there is no conflict, then under the Supreme Court’s opinion in Erie R. Co. v. Tompkins (1938), the New York law acts as a substantive legal doctrine that federal courts must apply.  The majority’s conclusion, she held, contradicts Congress’s intent in passing the Class Action Fairness Act of 2005, which made it more difficult for plaintiffs to bring class actions.

This decision may or may not make it easier for plaintiffs to bring more class action cases – the opinions don’t discuss how many states have laws prohibiting class actions that, now, could still be brought in federal court.  But the case definitely does not make it easier to predict how the justices will decide cases.  When Justice Scalia tamps down state rights, and Justice Ginsburg protects them, who knows what’s possible?