The U.S. Department of Justice and the Michigan Attorney General have filed a civil antitrust lawsuit in the Eastern District of Michigan against Blue Cross Blue Shield of Michigan, Michigan’s largest health insurance provider, alleging its agreements with hospitals cause Michigan consumers to pay higher prices for their healthcare and insurance.

In United States v. Blue Cross Blue Shield of Michigan, the DOJ and the Michigan AG allege that Blue Cross has eliminated competition from other health insurers and raised Michigan health insurance prices through the use of “most favored nation” (MFN) clauses in its contracts with hospitals. 

The agencies complain of two types of MFNs.  First is the “MFN-plus,” which requires a hospital to charge other commercial insurers more for the hosptial’s services than it charges Blue Cross. These clauses appear in at least 22 Michigan hospitals’ contracts, including some of “the most important [hospitals] in their respective areas.”  Second is the “Equal-to MFN,” which requires a hospital to charge other insurers at least as much for services as it charges Blue Cross.  Equal-to MFNs generally appear in contracts with small, local hospitals that are the only hospitals in their communities. 

MFNs or similar clauses allegedly appear in Blue Cross’ agreements with more than half of Michigan’s general acute care hospitals.  DOJ predicts that hospitals that are currently without MFNs likely will have them soon:  Those “hospitals’ contracts have not been renegotiated in recent years, but Blue Cross is likely to seek MFNs when [they are] up for renegotiation, especially if the hospital requests a price increase.”  (emphasis added)

Blue Cross allegedly established the MFNs to ameliorate the recent “erosion” of its “hospital discount advantage.”  The complaint explains that traditionally, Blue Cross enjoyed “substantially better discounts for hospital services than other commercial health insurers.”  Recently, however, this advantage has been narrowed due to competition from other insurers.  Rather than seek lower prices from the hospitals, Blue Cross instead secured the MFN clauses.  The “purpose and effect” of these clauses allegedly has been “to prevent potential competitors from obtaining hospital services at prices close to Blue Cross’ prices and thereby becoming more significant competitive constraints on Blue Cross.”

The complaint seeks  to strike the MFNs from Blue Cross’s current agreements and to enjoin Blue Cross from securing any new MFNs.

While Joseph Agnew’s complaint against the National Collegiate Athletic Association may not call the NCAA’s institutions “nattering nabobs of negativism,” Agnew in effect alleges that the association is a conspiring cabal of colleges.

Agnew, a former Rice University football player, has commenced an antitrust class action against the NCAA.  The complaint filed in Agnew v. NCAA, in the U.S. District Court for the Northern District of California, alleges that the NCAA’s rules forbidding member schools from offering student athletes multi-year scholarships, and limiting the number of athletic scholarships a school may offer, constitute an unlawful price-fixing agreement.

Agnew, who enrolled in Rice University on a full athletic scholarship in 2006, suffered injuries during his sophomore year that derailed his football career.  Prior to his junior year, Agnew was informed that he no longer had a spot on the football team and his scholarship would not be renewed.

Agnew claims that in a competitive market, he and other student athletes would have received, prior to enrollment, a multi-year scholarship sufficient to cover the entire cost of his education.  Therefore, alleges Agnew, the NCAA’s regulations forbidding multi-year scholarships has injured thousands of student athletes by causing them to pay millions of dollars more in tuition – which they would not pay in a competitive market – when their athletic scholarships are not renewed.

Similarly, Agnew alleges that the NCAA’s limit on the number of athletic scholarships member schools can offer reduces the overall supply of athletics-based discounts available to student athletes, thereby forcing them to overpay for their education by millions of dollars.

A Southern California law school is alleging that its low-cost formula for evening law school students is being jeopardized by the anticompetitive acts of its main competitor.

The Southern California Institute of Law (“SCIL”) has filed a complaint in the U.S. District Court for the Central District of California against TCS Education System, David Figuli, and Global Equities, LTD, alleging that the defendants’ have harmed competition and will increase the cost of tuition for evening law schools in the California tri-county region of San Luis Obispo, Santa Barbara and Ventura Counties.   

SCIL is a small evening law school serving the tri-county region.  The other evening law school in the area is the Santa Barbara & Ventura Colleges of Law (“COL”).  Tuition at SCIL is $350 per unit.  The unusually low price is primarily attributable to the faculty’s commitment to receive a “modest compensation.”

SCIL’s complaint in Southern California Institute of Law v. TCS Education System alleges that agents of TCS (a private, not-for-profit corporation that joins with schools to provide business and financial support) approached SCIL regarding a potential acquisition by TCS.  SCIL claims that TCS inexplicably ended negotiations with SCIL and “made a calculated decision” to use SCIL’s confidential information in negotiations with SCIL’s primary competitor, COL.  TCS and COL announced an affiliation agreement effective October 1, 2010.  The complaint alleges that the affiliated entities will use SCIL’s confidential information to “kill off competition in the region, destroy the plaintiff’s business and increase the cost of tuition.” 

SCIL brings claims grounded in contract law, misappropriation of trade secrets, and antitrust law under the Sherman Act and California’s Cartwright Act.  SCIL primarily seeks injunctive relief to cease the affiliation and protect SCIL’s existence in the market as a low-cost provider of legal education.  The complaint also asks for relief in the form of disgorgement of unfair profits and compensatory and punitive damages.  No answer has been filed yet.

SCIL recently received accreditation by the Committee of Bar Examiners for the State of California, allowing its students to sit for Bar Examination upon graduation.  However, since SCIL is not accredited by the American Bar Association or the Western Association of Schools and Colleges, its students cannot receive federal financial aid.

The landmark United States Supreme Court decision that is expected to be a death blow for class action arbitrations has apparently claimed its first victim, the case itself.

Following its loss in the Supreme Court, AnimalFeeds International has voluntarily dismissed its antitrust action – Stolt-Nielsen S.A. et al. v. AnimalFeeds International Corp. – settling its claims of price fixing for the shipment of liquid chemicals, against defendants Stolt-Nielsen, Odfjell ASA, Jo Tankers BV, and Tokyo Marine Co., Ltd.

Six months ago, the Supreme Court held in April that AnimalFeeds could not pursue class-wide arbitration against the defendants.  In that decision, Justice Alito wrote for a five-to-three majority that the Second Circuit’s decision, which would have imposed class arbitration on the defendants – despite the lack of a contractual basis for imposing class arbitration – “is fundamentally at war with the foundational FAA principle that arbitration is a matter of consent.”

As Antitrust Today commented at time of the Supreme Court decision, “the ruling may well be a death blow for class action arbitrations.”  AnimalFeeds’ action itself certainly proved unable to survive without the class claims.