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November Antitrust Bulletin

November 18, 2013

Court Denies NCAA’s Motion to Dismiss Student Athletes’ Antitrust Suit

On Oct. 25, 2013, in In re NCAA Student–Athlete Name & Likeness Licensing Litigation, No. C 09-1967 CW (N.D. Ca.) the U.S. District Court for the Northern District of California denied a motion filed by the National Collegiate Athletic Association (NCAA) to dismiss antitrust claims asserted against it by a group of 21 former Division I players. The players contend that the NCAA along with defendants Collegiate Licensing Company (CLC) and Electronic Arts, Inc. (EA) conspired to restrain competition in the market for the commercial use of their names, images and likenesses by requiring plaintiffs, as student athletes, to relinquish all rights in their images, which the defendants then used in NCAA-branded video games. CLC and EA settled with the plaintiffs, leaving only the claims against the NCAA remaining.

The NCAA argued that the plaintiffs’ claims were barred by NCAA v. Board of Regents, 468 U.S. 85, (1984), which recognized that intercollegiate athletics is “an industry in which horizontal restraints on competition are essential if the product is to be available at all.” The NCAA relied on the Supreme Court’s observation that “in order to preserve the character and quality of the [NCAA’s] ‘product,’ athletes must not be paid, must be required to attend class, and the like.”

The district court, however, disagreed, explaining that “while Board of Regents gives the NCAA ‘ample latitude’ to adopt rules preserving ‘the revered tradition of amateurism in college sports,’ it does not stand for the sweeping proposition that student-athletes must be barred, both during their college years and forever thereafter, from receiving any monetary compensation for the commercial use of their names, images and likenesses.” The court also rejected the NCAA’s arguments that the First Amendment and federal copyright law preclude the plaintiffs’ claims.

Ninth Circuit Hears Argument in Price-Fixing Case

On Oct. 18, 2013, in United States of America v. AU Optronics Corp. et al., case numbers 12-10492, 12-10493, 12-10500 and 12-10514, the U.S. Court of Appeals for the Ninth Circuit heard argument from Taiwanese LCD manufacturer AU Optronics Corp. (AUO) and two of its executives urging it to overturn their price-fixing convictions in a case of great importance in the prosecution of foreign antitrust violations in the United States. The defendants were found guilty in a 2012 jury trial for their roles in a price-fixing scheme that ran from 2001 to 2006. The two executives were sentenced to three years’ imprisonment, and the company was fined $500 million.

On appeal, citing the Ninth Circuit’s 1996 decision in Metro Industries, Inc. v. Sammi Corp., the defendants argued that because the antitrust conspiracy took place outside the United States, the court was required to apply rule of reason analysis to determine whether there was a Sherman Act violation. Because the district court rejected this argument, concluding that the per se rule governed the alleged price-fixing, it precluded the defendants from offering evidence that coordination among LCD manufacturers benefitted, rather than harmed, consumers. The defendants also argued that their indictment failed to comply with the Foreign Trade Antitrust Improvements Act (FTAIA), which limits the extraterritorial reach of the Sherman Act.

The government responded by arguing that the evidence showed that AUO had offices in California and had engaged in some of the price-fixing activity there, and that the indictment provided ample notice to the defendants concerning the basis of the indictment.

The case provides the Ninth Circuit with an opportunity to clarify its holding in Metro Industries as well as to address the requirements imposed by the FTAIA on antitrust prosecutions.

New York Enacts Legislation to Confer State Action Immunity on Public Healthcare Provider

On Oct. 24, New York Governor Andrew Cuomo signed legislation authorizing the Nassau Health Care Corporation (NuHealth) to “engage in arrangements, contracts, information sharing, and other collaborative activities with public or private entities and individuals including joint ventures and joint negotiations with physicians, hospitals and payors” that “may displace competition and might otherwise be considered violations of state or federal antitrust laws.”

The legislation attempts to confer New York’s state action immunity on NuHealth, which is engaged in efforts to partner with New York’s largest healthcare system, North Shore-LIJ Health System, to operate a number of healthcare facilities. The state action immunity doctrine exempts state and local authorities from federal antitrust laws where their actions are taken pursuant to a clearly expressed state policy. Moreover, under the U.S. Supreme Court’s decision in FTC v. Phoebe Putney Health Sys., Inc., 133 S. Ct. 1003 (2013), the state action immunity doctrine can be extended to “substate” actors — such as public healthcare providers — where their activities “are undertaken pursuant to a clearly articulated and affirmatively expressed state policy to displace competition.” The court also made clear that substate actors, unlike private actors, are not subject to the requirement of “active state oversight,” which is necessary to extend the state action immunity doctrine to private parties.

Following the court’s guidance in Phoebe Putney, the legislation contains findings that NuHealth is “at a competitive disadvantage in the current and emerging health care environment” and “cannot become part of larger system of corporate entities while maintaining its public status.”

The legislation was enacted despite vocal opposition from the New York Attorney General’s Office, which reportedly called the bill “virtually unprecedented” and criticized it as giving “NuHealth a blank check to engage in a huge swath of anticompetitive activities with no oversight.”

Antitrust Division Collects Over $1 Billion in Fines in Fiscal Year 2013

For the second straight year and only the third time in history, the U.S. Department of Justice Antitrust Division collected more than $1 billion in criminal antitrust fines. Of the $1.02 billion collected for the fiscal year ending Sept. 30, 2013, nearly 99 percent came from two enforcement actions — an investigation into manipulation of LIBOR as well as one into price-fixing and bid-rigging in the auto parts sector.

According to Attorney General Eric Holder’s office, the auto parts investigation “is the largest criminal investigation the Antitrust Division has ever pursued, both in terms of its scope and the commerce affected by the alleged illegal conduct.” The results for 2013 reflect the division’s recent focus on foreign corporations, with fines on Japanese, Korean, Taiwanese and UK companies accounting for all the corporate fines imposed this year. With both the LIBOR and auto parts investigations ongoing and consuming a large amount of the Antitrust Division’s resources, however, the division may not be able to reach the $1 billion mark for criminal fines in 2014.

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