By Allison F. Sheedy

The U.S. District Court for the Southern District of New York has dismissed antitrust claims against Amazon and the six largest book publishers related to the publishers’ contracts with Amazon for the distribution of e-books requiring the use of digital rights management software (“DRM”) in The Bookhouse of Stuyvesant Plaza, Inc. et al. v. Amazon.com, Inc. et al.

The Bookhouse plaintiffs are independent bookstores that sell both print books and e-books.  They alleged claims of unlawful restraints of trade under Section 1 of the Sherman Act against all defendants, and claims of monopolization and attempted monopolization under Section 2 of the Sherman Act against Amazon.

Generally speaking, DRM limits the ability to use digital content after its sale.  The plaintiffs alleged that Amazon, manufacturer of the Kindle e-reader, employed more restrictive DRM technology than required by its agreements with the six publisher defendants – Random House Inc., Penguin Group (USA) Inc., Hachette Book Group USA Inc., Simon & Schuster Inc., HarperCollins Publishers LLC and Macmillan Publishers Inc.  Plaintiffs claimed that this DRM technology effectively restricted the devices on which e-books sold and distributed by Amazon could be read, which rendered Amazon’s e-book platform a “closed ecosystem.”  click here for more »

By Jeffrey I. Shinder

The proposed P3 shipping alliance among the world’s three biggest container shipping companies encountered more rough seas this past week.

The U.S. Federal Maritime Commission (“FMC”) has requested additional information from the parties.  This request will delay the implementation of the proposed alliance because, after the parties comply with the request, a new 45-day regulatory review period will begin.  While this request should not be interpreted as indicating that the alliance will not be approved by regulators, it almost certainly reflects the significant issues that the proposed deal raises for competition.

The proposed P3 vessel-sharing alliance among Maersk, MSC and France’s CMA CGM S.A has the expressed goal of dealing with overcapacity and declining freight rates through an agreement to share ships and engage in related cooperative operating activities, under a common management, while retaining individual commercial status and control of consignments.

The issues that are raised by this plan to create the world’s largest shipping alliance came into sharp focus last week when reports surfaced that the FMC is apparently questioning “operational contradictions” and “gaps” in the duties of the liners.  See Lewis Crofts,  “P3 shipping lines face questions over alliance’s scope ahead of US, EU, China meeting,” http://www.mlex.com/US/Content.aspx?ID=479918 (MLex, Dec. 6, 2013) (subscription required).  click here for more »

By Jeffrey I. Shinder

The steady stream of cartel investigations and lawsuits on both sides of the Atlantic in recent months highlights the need for vigilant antitrust enforcement to protect consumer welfare, despite the views of those, like the Wall Street Journal editorial page, who question the wisdom of antitrust law.

These alleged cartels range from the apparently venal manipulations of the financial services industry, where pure greed and opaque markets have resulted in the Libor, Euribor, and foreign exchange market investigations, to claimed conspiracies of expedience in stagnant or depressed industries, where the protagonists are alleged to have colluded to manage supply and “maintain” price in the face of weak demand.  Given the slow growth that has plagued the industrialized world in recent years, we almost certainly will be hearing about more such cartels.  Rigorous antitrust enforcement is often the only check against consumers suffering massive overcharges in numerous, even critical, industries.

At the end of last week, European Union (“EU”) regulators disclosed yet another significant investigation with their announcement of an inquiry into whether 14 of the world’s major container shipping companies—including the two leading firms of Danish shipping group A.P. Moller-Maersk A/S and Swiss-based MSC Mediterranean Shipping Company S.A.—have been coordinating price hikes on European routes dating back to 2009.

This new investigation follows raids on some of these companies two years ago by the European Commission (the “Commission”).  According to the Commission, major shipping companies have been using press releases on their websites to signal impending price increases to each other.  While such signaling, standing alone, would be insufficient to support an antitrust violation in the United States, it could be found to violate EU law if it has resulted in higher prices and harm to competition.  However, the targets of the investigation undoubtedly will argue that their price increases were necessitated by competition in the industry and that their conduct reflected individual, and lawful, conduct that did not harm competition.

Notably, this investigation is taking place against the backdrop of separate U.S. and EU regulatory scrutiny of the planned “P3” vessel-sharing alliance among Maersk, MSC and France’s CMA CGM S.A.  The alliance would purportedly address persistent overcapacity and declining freight rates through an agreement to share ships and engage in related cooperative operating activities, under a common management, while retaining individual commercial status and control of consignments.

Last month, the three shipping companies filed their proposed agreement with the U.S. Federal Maritime Commission (“FMC”) under the U.S. Shipping Act of 1984.  The FMC is taking public comments on the agreements until November 29, 2013.  If the FMC declines to enjoin the alliance or require additional information, the agreement will become effective on December 8, 2013.  While that would confer antitrust immunity under U.S. law on the alliance, in this instance such immunity is not available under EU competition law.

Although EU law does exempt certain agreements among shipping companies from Article 101(1) of the Treaty on the Functioning of the European Union, the proposed alliance does not meet the requirements of that exemption.  Thus, even if the alliance survives FMC scrutiny, which is not a given, it may receive a rougher ride in the EU.

Moreover, while the Commission claims that its price-signaling investigation is separate from its ongoing review of the P3 alliance, the cartel investigation could conceivably influence the Commission’s willingness to approve the alliance.  It would not be surprising if the price-signaling investigation causes the Commission to impose additional restrictions on the alliance, even if it is approved.

Given the significance of the shipping industry to the global economy, the progress of these regulatory efforts in Brussels is well worth watching.

— Edited by Gary J. Malone

Vitamin C manufacturers currently on trial in federal court in Brooklyn are hoping their defense to price-fixing claims will get a boost from last week’s testimony by a former Chinese government official that China compelled them to engage in allegedly anticompetitive behavior.

Plaintiffs in the class action In re Vitamin C Antitrust Litigation are seeking to convince a jury in the U.S. District Court for the Eastern District of New York that the defendant Chinese manufacturers harmed U.S. purchasers of vitamin C by conspiring to fix prices and limit the supply of vitamin C exports to the U.S.

The defendants are relying on the foreign sovereign compulsion defense, claiming that they risked losing their right to export vitamin C if they did not adhere to minimum prices and volume restrictions set by the Chinese government.

Last week, the jury heard the testimony of Qiao Haili, a retired China Ministry of Commerce official, whom the defendants called for his testimony that the Chinese government could halt exports from Vitamin C manufacturers that failed to comply with its coordination of prices and production of the vitamin.  In cross-examination, plaintiffs challenged whether the former official actually had the authority to punish companies that did not comply with the government’s restrictions.

In re Vitamin C Antitrust Litigation is a multidistrict class action case that began in 2005.  Plaintiffs allege that the defendant Chinese manufacturers of vitamin C controlled exports to inflate prices.  Plaintiffs have alleged that the defendants, which controlled 60 percent of the global market, caused prices to rise from $2.30 per kilogram in 2001 to $15 per kilogram in 2003.

Judge Brian Cogan green-lighted the case for trial just last month, by denying a motion for summary judgment by defendant North China Pharmaceutical Group Corporation (“NCPGC”).

NCPGC argued that it never received pricing information because the company indirectly owns one of the manufacturer defendants and is not involved in production or sales.  Without knowing vitamin C prices, the company claimed it could not have participated in the price-fixing scheme.  The court, however, concluded that there was “evidence from which a jury could conclude that NCPGC participated in the conspiracy at the heart of this litigation.”

In May 2012, one of the defendants agreed to a $10.5 million settlement.

Eight of the largest drywall manufacturers in the United States are facing three antitrust complaints that allege price fixing and other anticompetitive coordination have harmed homebuilders and other direct purchasers of drywall.

Defendants include CertainTeed Corp., Georgia-Pacific LLC, USG Corp., United States Gypsum Co., New NGC, Inc., LaFarge North America Inc., American Gypsum Co. LLC, TIN Inc. and PABCO Building Products, LLC.

Sierra Drywall Systems Inc. was the first to file a class action complaint in Illinois against the drywall manufacturers.  Sierra installs drywall for commercial and residential construction projects and argues it was negatively affected by two different anticompetitive actions.  Sierra’s action was moved to the U.S. District Court for the Eastern District of Pennsylvania after both Janicki Drywall of Erie Pennsylvania and New Deal Lumber & Millwork Company Inc. of Philadelphia launched two additional cases against the defendants.

According to the complaint in Sierra Drywall Systems, Inc. v. CertainTeed Corp., the eight drywall manufacturers coordinated their prices, including in September and October 2011, when they each announced they would raise prices 35 to 37 percent.  News media at the time reported that drywall makers were blaming the poor economy for price hikes.

Sierra alleges that not only did the drywall manufacturers coordinate increasing their prices, they also eliminated job quotes, the decades-long industry practice of negotiating a flat rate for all drywall needed during the duration of a construction project.  According to Sierra, job quotes guaranteed customers the best price because several companies could make competing offers.

“Any one Defendant seeking to eliminate these competitive price terms by itself would have been met with opposition and likely defections from customers.  Only through coordination was the reversal and elimination of this long-standing practice possible,” Sierra alleges in the complaint.

A second round of price increases increased the drywall prices by 25 to 35 percent for 2013.