October Antitrust Bulletin

October 7, 2014

O’Bannon ’s Impact on Outstanding NCAA Lawsuit

As previously reported, on August 8 the U.S. District Court for the Northern District of California issued its ruling in O’Bannon v. National Collegiate Athletic Association, No. C 09-3329 CW, 2014 WL 3899815 (N.D. Cal. Aug. 8, 2014), holding that the NCAA’s rules preventing men’s college basketball and football players from controlling the commercial rights to their names and likeness unreasonably restrained trade in violation of Section 1 of the Sherman Act. Just four weeks after the opinion issued, NCAA defendants filed a motion to dismiss in the related Northern District of California case of In re National Collegiate Athletic Association Athletic Grant-in-Aid Cap Antitrust Litigation, 14-md-2541-CW (N.D. Cal.). In the suit, plaintiffs allege that the NCAA conspired to keep scholarships below the cost of attending school. In the motion to dismiss, defendants argue that the nature of plaintiffs’ claim should be dismissed in light of O’Bannon, in which the court ruled that the NCAA could place certain limits on the amount of compensation provided to student athletes. The motion is scheduled for argument on October 9.

SMARTER Act Aims to Add Predictability to Merger Reviews

The Department of Justice and Federal Trade Commission currently share responsibility for merger review, yet face different standards in court and utilize different processes when seeking to prevent a merger or acquisition. In an attempt to bring uniformity and predictability to merger review, Rep. Blake Farenthold has presented to Congress The Standard Merger and Acquisitions Review Through Equal Rules (SMARTER) Act of 2014, H.R. 5402 . Among its provisions, the SMARTER Act would require the FTC and DOJ to adhere to the same standard when seeking preliminary injunctions against mergers and would remove the FTC’s administrative process for challenging mergers after an injunction is denied. Supporters, such as House Judiciary Committee Chairman Bob Goodlatte, believe the SMARTER Act will promote fairness and consistency by ensuring that companies face the same standards and processes regardless of whether the FTC or DOJ reviews the merger. Opponents, such as Seattle University School of Law Professor John Kirkwood, argue that Congress created and maintained the dual enforcement system for a century and that changes proposed in the Act could harm consumers. The American Antitrust Institute, in a letter to the House Judiciary, welcomed discussion on the current system, but commented that “the system of dual enforcement is not broken” and warned that “prudence compels caution in any tinkering with a system of dual enforcement.”

New York AG Accuses Pharmaceutical Companies of Product Hopping

On September 15, in New York v. Actavis PLC et al., New York State Attorney General Eric Schneiderman filed an antitrust suit against Actavis PLC and Forest Laboratories LLC, accusing the companies of discontinuing a popular dementia drug, Namenda IR, in order to switch patients to a newer version of the drug, Namenda XR, in a strategy known as “product hopping” or “forced switch.” The suit alleges that the purpose of the switch was to move patients onto a drug with a longer patent in an effort to eliminate competition. The argument is that switching patients to Namenda XR will destroy the market for the generic form of Namenda IR because of the dramatically increased burden, cost and time needed to switch patients back to the original version.

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