Seventh Circuit

Section 1 liability

Marion Healthcare, LLC v Becton Dickinson & Co

In Marion Healthcare v Becton Dickinson (Marion),[1] the Seventh Circuit twice held that the conspiracy the plaintiffs alleged was insufficient. The first time, the court remanded the case to permit the plaintiffs to try to state a claim; the second time, it affirmed dismissal of the case with prejudice. (In the first appeal, the court also addressed the application of direct purchaser requirement of Illinois Brick to an alleged multi-level conspiracy, which we address below (see Defenses section.)

Marion involved a dispute between healthcare providers and the suppliers from which they purchase devices. Providers join group purchasing organizations (GPOs) that negotiate contract terms with manufacturers on behalf of their members.[2] If the provider chooses to purchase on the terms a GPO has negotiated, it may choose a distributor that obtains the product from the manufacturer and resells it to the provider at the terms negotiated by the GPO.[3] Initially, the plaintiffs alleged that Becton Dickinson (BD), a manufacturer of medical devices, several GPOs and several distributors were part of a multi-level conspiracy.[4] The district court ruled that the providers were indirect purchasers and dismissed.[5] After finding the Illinois Brick doctrine did not apply (see discussion in the Defenses section, below), the court found that the plaintiffs had not adequately alleged an antitrust conspiracy.[6] The court focused on the role of the distributors. If the distributors were not part of the conspiracy, then the plaintiffs’ case ‘falls apart: no conspiracy, no direct purchaser status, no right to recover’.[7] To allege an antitrust conspiracy, the plaintiffs must show that all members of the conspiracy ‘had a conscious commitment to a common scheme designed to achieve an unlawful objective’.[8] The plaintiffs asserted a hub-and-spoke conspiracy, which required a coordinating party at the hub (BD), participants at the rim (distributors) and an allegation that the rim coordinated with the hub and would not have attempted to inflate prices without assurances that members at the rim were abiding by the agreement and behaving in the same way.[9] The Seventh Circuit held that the complaint failed in this regard. The complaint did not allege that distributors engaged in parallel conduct or coordinated their actions.[10] The acts the plaintiffs alleged amounted to no more than abiding by the contract the providers’ GPOs had negotiated.[11] The Court of Appeals remanded the case for further consideration of the pleadings, including allowing the plaintiffs to amend the complaint.[12]

On remand, the plaintiffs pursued a different theory. They alleged separate vertical conspiracies between BD and two of the original distributor defendants, abandoning their original hub-and-spoke theory.[13] The district court dismissed the second amended complaint with prejudice.[14] The court concluded that (1) the plaintiffs lacked standing to sue Cardinal Health, one of the distributor defendants, because they had not purchased from Cardinal or any member of that alleged, independent conspiracy, and (2) the plaintiffs’ allegations fell short of establishing plausible vertical conspiracies between BD and its distributors.[15] The plaintiffs’ allegations, including that the distributors received bonuses and incentives from BD, regularly communicated with BD, and ‘enforced’ BD’s contracts that excluded rival distributors, fell short of the ‘conscious commitment’ or ‘quid pro quo’ required to establish an anticompetitive conspiracy.[16] The distributors were not parties to the BD contracts and those contracts were negotiated before the distributors became involved in the transactions.[17]

The Seventh Circuit affirmed the second dismissal.[18] First, it affirmed the district court’s decision that the plaintiff lacked standing to sue Cardinal.[19] The plaintiffs did not purchase the products from Cardinal.[20] In addition, they alleged the two claimed conspiracies were independent – they did not accuse the distributors of agreeing with each other.[21] As a result, they lack standing to sue Cardinal.[22] The court held: ‘If Cardinal is not part of the BD–McKesson conspiracy, and Plaintiffs are not purchasing the products from Cardinal, then it does not make sense to hold Cardinal liable, either for the BD-McKesson conspiracy or for the BD-Cardinal conspiracy.’[23]

The court likewise found that the allegations of a Section 1 conspiracy were not plausible.[24] To state a claim, the plaintiffs needed to allege that two individual conspiracies between BD and the distributors influenced the prices plaintiffs paid.[25] Yet the complaint acknowledged that other distributors not alleged to be conspirators charged the same price. Thus, the plaintiffs paid the same price no matter which distributor they purchased from. The court concluded that the claim ‘is simply not plausible’,[26] and stated: ‘If other distributors receive the same benefits but are not alleged to be conspiring with BD, then there is no basis to infer the existence of a conspiracy between McKesson and BD.’[27] The court found it particularly telling that ‘the Providers have not convincingly explained why they cannot choose distributors who are not alleged to be conspiring with BD’.[28] In analyzing the complaint, the court held that ‘Twombly demonstrates that courts should dismiss antitrust conspiracy complaints for failure to state a claim when the allegations, taken as true, could just as easily reflect innocent conduct or rational self-interest’. [29] The Twombly standard was not met in the case.[30]

In re Humira (Adalimumab) Antitrust Litigation

In February 2021, the Seventh Circuit heard oral argument in a case that may have long-standing implications at the intersection of patent and antitrust law.[31] The petitioners presented the question of whether they may proceed with antitrust claims based on a novel ‘patent thicket’ theory.

The Humira Antitrust Litigation arose when a group of indirect purchasers of AbbVie’s drug Humira brought suit, claiming that AbbVie filed patents for Humira and other biosimilar products to reduce competition. According to the plaintiffs, this practice resulted in inflated prices for consumers.[32] The plaintiffs claimed that AbbVie, after obtaining its original patent for Humira in 2002, proceeded to file a ‘thicket’ of additional patent protections in the years leading up to the expiration of the underlying patent, to ‘prevent[] would-be challengers from entering the market’ with cheaper alternatives.[33] The plaintiffs asserted seven counts against AbbVie, including claims under Sections 1 and 2 of the Sherman Act. The defendants moved to dismiss the claims, arguing that (1) the Section 2 claims were barred by Noerr-Pennington, (2) the Section 1 claims failed because AbbVie’s settlements with competitors did not constitute anticompetitive behavior, and (3) the plaintiffs failed to establish the invalidity of AbbVie’s patents, and therefore failed to establish plausible antitrust injury.[34] In a 73-page opinion, US District Judge Manish S Shah agreed and dismissed the claims without prejudice.[35]

First, the district court concluded that AbbVie’s patent prosecutions and inter partes review proceedings before the US Patent and Trademark Office could not form a basis for the indirect purchasers’ Section 2 claims, as such petitioning actions did not satisfy the ‘sham’ exception to Noerr-Pennington immunity.[36] The court found AbbVie’s petitioning conduct was not objectively baseless, as is required to trigger the sham exception, where its patent applications were met with a success rate of 54.3 percent and AbbVie enjoyed an ‘even higher’ success rate in inter partes review.[37] Moreover, AbbVie’s settlement of patent infringement actions provided ‘substantial value’ that precluded a finding of ‘objective baselessness’ with respect to such settlements.[38] The court noted that AbbVie’s attempt to block its competitor, Amgen, from entering the market may have been conducted in a manner that was objectively baseless (where, for example, AbbVie failed to specify throughout ‘the patent dance’ that patents faced infringement and AbbVie largely lost on its infringement theories). Nevertheless, the district court concluded that the ‘vast majority’ of the alleged antitrust scheme was ‘immunized’ under Noerr-Pennington, and the plaintiffs’ Section 2 theory depended on ‘all the components of AbbVie’s conduct’.[39]

Second, the court rejected the plaintiffs’ Section 1 theory that AbbVie entered into anticompetitive settlements with nascent competitors. The settlements required the companies to press pause on their efforts to introduce biosimilars in the United States, provided AbbVie allowed them to introduce biosimilars in Europe. The court concluded that these agreements did not violate the rule of reason; rather than prevent competition, the agreements facilitated earlier entry into the European market while AbbVie’s patent remained in effect.[40]

Third, the district court concluded that the plaintiffs could not demonstrate antitrust injury without showing that all of AbbVie’s patents were invalid, which the plaintiffs failed to allege.[41] Without specifying that each patent was invalid, let alone which patents would have been invalidated by hypothetical litigation, the plaintiffs could not plausibly assert that AbbVie’s settlement agreements (rather than its patent rights) prevented competition. Thus, the court found lack of antitrust injury fatal to ‘all of the federal antitrust claims in the complaint’, and granted dismissal without prejudice.[42]

On direct appeal, the plaintiffs argued that Judge Shah misapplied precedent in holding that AbbVie’s settlements with competitors did not constitute unlawful pay-for-delay exchanges.[43] The plaintiffs further argued that AbbVie’s petitioning conduct is not immunized under the Noerr-Pennington doctrine, and that the plaintiffs do not need to establish the invalidity of each of AbbVie’s patents in order to show plausible antitrust injury.[44] The Seventh Circuit’s decision in this case, which has not been released as at the time of writing, could have a significant impact on antitrust claims arising from enforcement of patent rights.

Always Towing & Recovery, Inc v City of Milwaukee

In June 2021, the Seventh Circuit held that a group of auto towing and recovery companies failed to state a claim for an unreasonable restraint of trade stemming from the City of Milwaukee’s decision to allocate towing services to a single subcontractor.[45] The plaintiff companies sued in the US District Court of Eastern Wisconsin for alleged violations of Sections 1 and 2 of the Sherman Act and the Clayton Act, as well as tortious interference under Wisconsin law.

The plaintiffs alleged that the City of Milwaukee and a recycling provider, Miller Compressing, ‘conspired to improperly divert scrapped vehicles and allocate towing services through a decades-long exclusive contract’, while strengthening their market positions by regulating private tow companies at the same time.[46] They alleged that Milwaukee prevented the plaintiff companies from performing private and public tows by failing to grant or renew the licenses they required.[47]

The plaintiffs also alleged that a 2003 contract between Milwaukee and Miller Compressing resulted in anticompetitive behavior. The contract promised Miller Compressing at least 80 percent of scrap vehicle services in a calendar year, as well as 98 percent of health-nuisance towing services.[48] The contract was originally set to last until 2010, but the parties extended it through October 2023.[49] Finally, the plaintiffs alleged that this contract did not come as a result of a public solicitation of bids, which violated the City’s own procurement obligations.[50] On a motion to dismiss, the district court held that the plaintiff companies failed to allege a plausible antitrust agreement or conspiracy as required by the Twombly pleading standard.[51]

On appeal, the plaintiffs argued that their complaint should survive because it alleged that the defendants entered into a horizontal price-fixing or bid rigging, which is presumptively unlawful under Section 1 of the Sherman Act.[52] They sought to invoke the per se analysis by pointing to a contract in which the ‘nature and necessary effects that result are so plainly anticompetitive that an in-depth analysis of their illegality is unnecessary’.[53] The plaintiffs argued that the restraint on trade found in the contract was presumptively unlawful under this analysis.[54] The Seventh Circuit rejected this argument and held that the contract was not an unreasonable restraint on trade because (1) there was no horizontal price-fixing in the contract, and (2) there was no bid rigging.[55] The court held that the contract imposed a vertical, not horizontal, restraint on competition.[56] Horizontal price-fixing traditionally takes the form of agreements between competitors, whereas vertical restraints are those between entities at different levels of the distribution chain.[57] The court found that the agreement between the City and Miller Compressing was not one between competitors, but rather between a ‘seller and buyer/service provider’.[58] Therefore, the contract was not per se unreasonable on the basis of horizontal price-fixing.[59]

The court then held that there was no established claim for bid rigging for two reasons.[60] First, the defendants were not competitors, but rather were a seller and buyer.[61] Second, even if they were competitors, their actions were not bid rigging.[62] Although the definition of ‘bid rigging’ is loose, the court noted that Seventh Circuit case law treats bid rigging as a synonym for ‘bid rotation’.[63] No cases in the civil context provided support for a broader definition of ‘bid rigging’, and instead the defendants’ actions were at most an interference with the bidding process.[64]

The court did not conduct a more searching rule-of-reason analysis because it held that the plaintiffs waived any other arguments by making only a brief reference to the unreasonableness of the contract in their reply brief without citations to authority.[65] The court affirmed the dismissal with prejudice on all claims.[66]

Association of American Physicians and Surgeons, Inc v American Board of Medical Specialties

In October 2021, in a short opinion, the Seventh Circuit held that, after nearly eight years of litigation, antitrust claims by the American Association of Physicians and Surgeons (AAPS) against the American Board of Medical Specialties (the Board) must be dismissed without leave to amend.[67]

This litigation began in 2013 when the AAPS alleged that the Board ‘orchestrated a nationwide conspiracy to restrain trade in the market for medical care’.[68] The AAPS alleged that the Board conspired with hospitals and health insurers nationwide to condition the granting of staff privileges and in-network status on physicians’ continued participation in the Maintenance of Board Certification program through the Board, in violation of Section 1 of the Sherman Act.[69]

The district court granted the Board’s motion to dismiss, holding that the AAPS had not alleged a plausible claim.[70] Reasoning that ‘pleading a violation of Section 1 of the Sherman Act requires a plaintiff to allege that the defendant (1) entered into an agreement that (2) unreasonably restrains trade in the relevant market and (3) caused the plaintiff an antitrust injury’, the district court held that the complaint fell well short of satisfying the first two prongs and did not address the third prong.[71] The district court concluded that AAPS’s claims that the Board conspired with insurers and hospitals pointed only to parallel conduct and that the AAPS ‘pleaded no facts giving rise to a plausible inference of a nationwide agreement’.[72] The district court also determined that the AAPS had not ‘plausibly alleged either of its two proffered restraints – unlawful tying arrangements and unlawful agreements to require participation in the [Maintenance of Certification] program – under either the per se or rule-of-reason frameworks’.[73]

The Seventh Circuit upheld the district court’s ruling, holding that the amended complaint ‘does not plausibly allege an agreement between the Board, hospitals, and insurers’.[74] The court noted that ‘all we see are conclusory allegations – that the Board “agreed”, “conspired”, “colluded”, or “induced” agreement, conspiracy, or collusion’.[75] The amended complaint ‘does no more than point to “an allegation of parallel conduct and a bare assertion of conspiracy”’.[76]

The Board also contended that the AAPS’s disregard of the Twombly standard warranted sanctions under Rule 38 of the Federal Rules of Appellate Procedure.[77] The Seventh Circuit held that sanctions could not be imposed because the Board only requested them in their appellate brief rather than filing a separate motion, as required under Rule 38.[78] Nevertheless, the court noted, the AAPS’s appeal was frivolous.[79]

Section 2 liability

Viamedia v Comcast

With apologies to Mark Twain, reports of the death of ‘refusal to deal’ as a viable antitrust theory, as had been suggested in the wake of Verizon Communications, Inc v Law Offices of Curtis V Trinko, LLP,[80] have been greatly exaggerated – at least in the Seventh Circuit. Under the Court’s ruling in Viamedia v Comcast,[81] such claims are less amenable to resolution on a motion to dismiss.

A bit of background is necessary. Multi-channel video programming distributors (MVPD), including AT&T, WOW!, RCN and Comcast, are companies that provide cable television programming to consumers.[82] MVPDs sell two to three minutes of local advertising time per hour.[83] Because geographic markets are served by multiple MVPDs, advertisers that wish to air an advertisement in the entire market at a certain time (for instance, during a particular show) faced the prospect of having to negotiate with each MVPD. In response, MVPDs created ‘interconnects’, a cooperative arrangement that allows an advertiser to buy a time slot and its advertisement to be shown across every MVPD in that market at a specific time.[84]

The plaintiff, Viamedia, is an ‘ad rep’ company, working for MVPDs and selling the two to three minutes per hour of advertising time that they own.[85] Viamedia is not owned by an MVPD.[86] Comcast has a business unit that provides ad rep services, both for Comcast’s own MVPD operation, as well as for other MVPDs.[87] Comcast’s ad rep business competes with Viamedia. Comcast also operates the interconnects in the geographic markets at issue in the case.[88]

Viamedia alleged that, in 2012, Comcast refused to renew its contract with Viamedia, causing the MVPDs represented by Viamedia to choose Comcast as their ad rep.[89] The district court dismissed the refusal-to-deal claim, concluding Comcast had no duty to deal with a competitor.[90] The district court relied on the complaint’s allegation that Comcast had refused to deal with Viamedia to vertically integrate and eliminate a middleman, which are ‘pro-competitive’ purposes.[91] On summary judgment, the district court rejected Viamedia’s claim that Comcast’s conduct constituted ‘tying’. It found there was no evidence Comcast ‘conditioned’ access to the interconnects on Comcast serving as an MVPD’s ad rep.[92]

In a 105-page opinion, the Seventh Circuit reversed both rulings. The court held that Viamedia’s refusal-to-deal allegations fitted within the factors the Supreme Court identified in Aspen Skiing Co v Aspen Highlands Skiing Corporation.[93] The Seventh Circuit found Comcast’s asserted procompetitive rationales for its refusal to deal were insufficient to uphold dismissal of the claim. Comcast argued that ‘there is no liability under Aspen Skiing where, as here, the defendant’s alleged termination of a pre-existing course of dealing was not “irrational but for its anticompetitive effect”’.[94] The Seventh Circuit held that refusals to deal were rarely ‘amenable to resolution on the pleadings’ because whether an antitrust defendant was truly acting in a procompetitive manner was a question of fact.[95] The Seventh Circuit concluded that Comcast’s ‘irrational but for its anticompetitive effect’ test, patterned on a test articulated by the Tenth Circuit, called for balancing the anticompetitive effects versus the procompetitive effects of a refusal to deal.[96] For a refusal-to-deal claim to survive dismissal, ‘it is enough to allege plausibly that the [claim] has some of the key anticompetitive characteristics identified in Aspen Skiing’.[97] Turning to Viamedia’s tying claim, the Seventh Circuit held that Viamedia presented evidence that MVPDs view ‘interconnect services’ (a market in which Comcast is a monopolist) and ‘ad rep services’ as separate products that MVPDs purchase separately.[98]

Addressing issues that may arise on remand, the Seventh Circuit rejected Comcast’s argument that forcing Comcast to sell ‘interconnect services’ to Viamedia and its MVPD customers would position courts as ‘central planners’.[99] The court stated that courts regularly ‘undertake complicated, long-term supervision of complex cases and remedies’ and thus ‘should not adopt a posture of learned helplessness in the face of proven antitrust violations’.[100]

Although he joined the panel’s holding on the refusal-to-deal claim, Judge Brennan dissented on the tying claim. He agreed with Comcast that Viamedia had failed to present proof of any antitrust violation independent of the alleged refusal to deal.

Comcast filed a petition for a writ of certiorari to the Supreme Court in September 2020.[101] The petition requested the court to weigh in on whether the Seventh Circuit misapplied precedent by holding that a refusal-to-deal claim under Section 2 of the Sherman Act may proceed despite the presence of valid business justifications for the refusal, and whether the court erred in allowing Viamedia to avoid the limitations on a refusal-to-deal claim by reframing it as another form of anticompetitive conduct.[102] The Supreme Court called for the United States Solicitor General to file a brief expressing the views of the United States on the petition. After the Solicitor General filed a brief recommending that the court should deny cert, the court declined to review the case.[103] The case is pending on remand in the Northern District of Illinois. On remand, Viamedia informed the district court that it will no longer pursue its refusal-to-deal theory of liability.[104]

Antitrust plaintiffs will rely on this decision in opposing motions to dismiss refusal-to-deal claims in the Seventh Circuit.

Damages

The Seventh Circuit has not addressed antitrust damages in depth in recent decisions.

Defenses

Noerr-Pennington

US Futures Exchange, LLC v Board of Trade of the City of Chicago, Inc

The Seventh Circuit addressed the Noerr-Pennington doctrine in this decision[105] involving the commodities and futures marketplace. Under Noerr-Pennington, with some exceptions, private entities ordinarily enjoy immunity from antitrust liability when they join together to petition legislative, administrative and judicial bodies for actions that may entail anticompetitive effects.[106] The court’s ruling underscores a circuit split concerning ‘pattern’ and ‘non-pattern’ allegations under Noerr-Pennington’s ‘sham litigation’ exception.

The court reviewed a record developed in protracted litigation in the district court.[107] US Futures Exchange Holdings, Inc, through its subsidiary (plaintiff US Futures Exchange, LLC (USFE)), sought to produce an electronics-based futures exchange platform.[108] This digital exchange ‘posed a direct competitive threat’ to entrenched exchanges, including the Chicago Board of Trade (CBOT).[109] To launch its platform, USFE needed approval as a ‘designated contract market’ by the Commodity Futures Trading Commission (CFTC).[110] The CFTC solicited public comment on the application, and CBOT raised 54 objections to USFE’s application.[111] When the CFTC set a date for a public hearing on the application, CBOT moved for postponement, and the CFTC postponed the hearing.[112] CBOT also proposed and obtained approval of a new exchange rule, Rule 701.01, allegedly to deprive USFE of ‘startup liquidity’ for its exchange.[113] Six months into the process, USFE obtained approval from the CFTC.[114] However, because delays in the approval process discouraged potential market participants from trading on USFE’s exchange, the platform failed.[115] USFE sued the defendants, including CBOT, alleging Sherman Act and state law claims based on CBOT’s actions.[116]

The Seventh Circuit reviewed the district court’s order granting summary judgment to CBOT and affirmed, concluding that none of USFE’s theories placed the case within the ambit of Noerr-Pennington’s exceptions and CBOT possessed implied immunity for seeking adoption of Rule 701.01.[117]

First, the court rejected USFE’s argument that CBOT made ‘fraudulent misrepresentations’ in the designated contract market approval proceeding.[118] The court, despite acknowledging that the CFTC’s review process ‘involves a combination of legislative and adjudicative features’, found that the proceeding was ‘legislative instead of adjudicative’.[119] Therefore, the ‘fraudulent misrepresentations’ exception was inapplicable to CBOT’s alleged conduct.[120] The court underscored that the CFTC’s exercise of quasi-rulemaking authority, encouragement of lobbying and political influence over the process, consideration of information not proffered under oath or affirmation, and informal fact-gathering made the ‘review process a legislative one’.[121]

Second, the court adopted the First Circuit’s test for evaluating sham-lawsuit claims based on an alleged pattern of sham filings.[122] Under Noerr-Pennington, the sham-lawsuit exception applies only if a challenged litigation is ‘objectively meritless’.[123] However, as opposed to a single sham litigation, USFE cited other circuits’ decisions upholding a more generous exception whenever a plaintiff alleges a pattern of sham filings. USFE further argued that even if it could not demonstrate that any of CBOT’s individual petitions to CFTC were objectively meritless, the multiple filings and letters lodged in the CFTC proceeding collectively satisfied the sham exception to Noerr-Pennington immunity.[124]

The Seventh Circuit refused to discard the objectively meritless requirement ‘whenever more than a single petition has been made’. As articulated by the First Circuit, ‘the sham exception has never hinged on the petitioner’s subjective intent alone’,[125] and there is ‘“little logic” in concluding that a petitioner loses the right to file an objectively reasonable petition merely because it chooses to exercise that right more than once’.[126] The district court properly refused to entertain the sham exception where the ‘petitioning [at issue] was colorable’.[127] In holding that the district court properly required the same standard for non-pattern and pattern sham cases, the Seventh Circuit joined the First Circuit in a clear split from the Ninth, Second, Third and Fourth circuits – all of which construe existing law to apply a lower standard than ‘objective reasonableness’ where a pattern of sham filings is alleged.[128]

Third, the court concluded that the new exchange rule did not implicitly preclude application of the antitrust laws under the implied immunity doctrine.[129] The court underscored that in approving the rule, the CFTC possessed clear and adequate regulatory authority, exercised that authority actively (by reviewing the proposal and soliciting comment letters) and in an ongoing manner (the same concerns raised by the rule had been studied in preceding years by the CFTC), and the rule was approved ‘in spite of potential anticompetitive effects’, rendering the rule ‘clearly incompatible’ with antitrust laws.[130] Therefore, the district court properly concluded that the CFTC’s explicit approval of the rule impliedly immunized the defendants for the purposes of USFE’s claims.[131]

Illinois Brick direct purchaser rule

Marion Healthcare, LLC v Becton Dickinson & Co

In Marion Healthcare, LLC v Becton Dickinson & Co,[132] the Seventh Circuit applied the direct purchaser requirement of Illinois Brick to an alleged multi-level conspiracy. The court held that the first purchaser outside a conspiracy has standing to sue as a direct purchaser. The court separately rejected the allegations of conspiracy in two separate appeals (see Section 1 liability section, above).

The district court ruled that the providers were indirect purchasers and dismissed.[133] Any conspiratorial markup was charged on the sale from the manufacturer to the distributor. Because the distributor resold the product to the provider, the provider was an indirect purchaser.

The Seventh Circuit reversed the district court’s Illinois Brick ruling.[134] The court acknowledged the principle underlying Illinois Brick that indirect purchasers harmed by a monopoly overcharge ‘must take their lumps and hope that the market will essentially sort everything out’.[135] ‘Matters are different, however, when a monopolist enters into a conspiracy with its distributors.’[136] In that situation, the first purchaser outside the conspiracy has standing to sue.[137] The district court erred by limiting this rule to vertical price-fixing conspiracies.[138] Under Illinois Brick, the type of conspiracy makes no difference.[139]

Act of state doctrine

Mountain Crest SRL, LLC v Anheuser-Busch InBev SA/NV

In this case, an independent brewery, Mountain Crest, sued Anheuser-Busch, owner of the Canadian brewery Labatt, and Molson Coors, owner of the Canadian brewery Molson, alleging violations of Sections 1 and 2 of the Sherman Act.[140] According to the complaint, there are two places to buy beer in Ontario, Canada: liquor stores run by the Liquor Control Board of Ontario (LCBO), a government agency, and a chain known as The Beer Store, which sells 75 percent of the beer in Ontario and is jointly owned by Labatt and Molson.[141] Historically, LCBO only sold beer in six-packs; to get beer in packs of 12 or 24, consumers had to visit The Beer Store.[142] In the early 1990s, LCBO sought to add larger package sizes to its stores and entered into negotiations with Labatt and Molson to buy larger package sizes.[143] Labatt and Molson balked at providing larger package sizes to LCBO because LCBO was required, by law, to provide the same sales opportunities to all breweries.[144] If LCBO sold 12-packs or 24-packs of Labatt or Molson beer, LCBO could sell those sizes of other beer brands. The plaintiffs alleged that Labatt and Molson were concerned that if LCBO began selling larger packs of other brands, they would offer discounts that would reduce the market share of The Beer Store.[145]

Mountain Crest alleged that Labatt and Molson gained leverage in negotiations with LCBO through a group boycott in which they refused to sell beer to LCBO until LCBO agreed to not sell beer in sizes larger than six-packs or to otherwise sell beer at prices below the six-pack price.[146] Mountain Crest alleged that LCBO acceding to this demand and signing agreements to this effect constituted a conspiracy to fix prices and allocate markets in violation of Sections 1 and 2 of the Sherman Act.[147]

The District Court for the Western District of Wisconsin dismissed the lawsuit under the act of state doctrine, which is a substantive defense that ‘generally forbids an American court to question the act of a foreign sovereign that is lawful under that sovereign’s laws’.[148] The district court held that ‘the conduct that allegedly violates the Sherman Act involves a public act by the Ontario government’ and that to find for the plaintiff ‘would require the court to determine that the Ontario government violated the Sherman Act as well’.[149]

The Seventh Circuit agreed, in part. Mountain Crest conceded that the agreements between Molson, Labatt and LCBO were ‘official acts of the Province of Ontario for the purposes of the act of state doctrine’.[150] From this premise, the Seventh Circuit held that the act of state doctrine served as a defense to the claim that the six-pack rule violated the Sherman Act.[151] However, the Seventh Circuit also held that the complaint ‘sets out allegations that [Labatt] and [Molson], acting through their officers and employees, violated the . . . Sherman Act by conspiring to bring about the Ontario government’s approval of the six-pack rule’.[152] The court stated that these allegations do not implicate the act of state doctrine because Mountain Crest was not seeking to ‘undo or disregard governmental action’ but instead to ‘“obtain damages from private parties that procured [the government action]’ illegally’.[153] The Seventh Circuit remanded to consider these claims anew. The Seventh Circuit noted that even these surviving claims may be barred by other defenses, most notably the Noerr-Pennington doctrine, but that there is a division of authority on that doctrine’s applicability to lobbying foreign governments.[154]

This decision suggests that the Seventh Circuit will refuse to entertain antitrust claims that directly implicate the legality of an otherwise legal act by a foreign government. This may particularly affect claims that target industries that are highly regulated.

On remand, the district court dismissed Mountain Crest’s surviving claims.[155] The defendants moved to dismiss all three claims identified by the Seventh Circuit as related to alleged attempts to promote the six-pack rule, but because Mountain Crest discussed only the group boycott claim in its opposition, the district court assumed that Mountain Crest had abandoned the other two claims.[156] Although the district court discussed whether the Noerr-Pennington doctrine may apply to the alleged boycott, the court noted that the claim before it was ‘not simply an issue of immunity’ but rather ‘a basic question of causation’.[157] The defendants are not entitled to Noerr-Pennington immunity for a claim based on harm caused by an alleged boycott itself. However, the district court noted that Mountain Crest’s challenge to the boycott raised significant questions of causation.[158] If the parties were allowed to assert antitrust claims for private conduct that allegedly caused the government to impose a restraint of trade, courts would have to ‘deconstruct[] the decision-making process to ascertain what factors prompted the various governmental bodies to erect the anticompetitive barriers at issue’.[159] Despite noting that Noerr-Pennington ‘does not provide unequivocal support to defendants’, the district court concluded that Mountain Crest could not maintain an antitrust claim against the defendants based on group boycott.[160]

The district court also noted that its decision did not need to rest on Noerr-Pennington because other causation doctrines brought the same result.[161] The district court considered the requirement that there be a ‘direct link’ between the alleged antitrust violation and the claimed antitrust injury,[162] and also considered the requirement under the Foreign Trade Antitrust Improvement Act that the alleged anticompetitive conduct in a foreign country be the proximate cause of Mountain Crest’s alleged harm.[163] The district court concluded that Mountain Crest had not pointed to any direct harm it suffered and dismissed the claim with prejudice.[164]

Municipal antitrust liability

Paramount Media Group, Inc v Village of Bellwood

In 2005, Paramount leased a parcel of land in Bellwood, Illinois, on which to erect a billboard.[165] By 2009, Paramount had not applied for a permit or constructed a billboard and Bellwood enacted a ban on new billboard permits.[166] Not yet stymied, Paramount tried to lease a different parcel of land from the village of Bellwood itself, because the permit ban exempted village-owned property.[167] Instead, the Village leased the land to a rival billboard company.[168] Paramount sued Bellwood and the competitor under a number of legal theories, including a claim under Section 1 of the Sherman Act that they conspired to restrain trade and a claim under Section 2 of the Sherman Act that Bellwood monopolized the market for billboards in Bellwood.[169] The district court granted summary judgment for Bellwood, holding it had municipal immunity under Parker v Brown[170] and that Paramount had failed to put forth sufficient evidence that the billboard competitor engaged in anticompetitive behavior.[171] On appeal, Paramount argued that the Seventh Circuit should find a ‘market participant’ exception to municipal antitrust immunity.[172]

The Seventh Circuit agreed that Bellwood enjoyed municipal antitrust immunity and that the competitor could not be liable under Section 1 for conspiring with an immune entity.[173] The court did not consider whether a ‘market participant’ exception existed because Paramount’s Sections 1 and 2 claims failed for independent reasons.[174]

Specifically, Paramount could not succeed on its Section 1 claim because it had failed to ‘offer proof of either anticompetitive effects or a conspiracy to restrain trade’ between Bellwood and the competitor because Paramount showed only individual harm, not harm to competition more broadly.[175] Paramount’s Section 2 claim failed because Paramount offered no proof that Bellwood had market power in a relevant geographic market.[176] Paramount asserted that the geographic market was limited to Bellwood proper, but failed to provide any evidence as to why neighboring towns or cities should not be included in the same billboard market.[177]

This case once again demonstrates that the Seventh Circuit requires antitrust plaintiffs to demonstrate harm to ‘competition’ and not ‘competitors’.


Notes

[1] 952 F.3d 832 (7th Cir. 2020). Jenner & Block attorneys represented a defendant in this case.

[2] Id. at 836.

[3] Id.

[4] Id. at 836–37.

[5] Id. at 837.

[6] Id. at 843.

[7] Id. at 841.

[8] Id. at 841 (quoting Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 768 (1984)).

[9] Id. at 842.

[10] Id.

[11] Id.

[12] Id. at 843.

[13] Marion Diagnostic Ctr., LLC v. Becton, Dickinson & Co., No. 3:18-cv-1059-NJR, 2021 WL 961728, at *3 (S.D. Ill. Mar. 15, 2021) (dismissing claims with prejudice), aff’d, 29 F.4th 337 (7th Cir. 2022).

[14] Id. at *5.

[15] Id. at *2, *5.

[16] Id. at *5.

[17] Id. at *4.

[18] Marion Diagnostic Ctr., LLC v. Becton Dickinson & Co., 29 F.4th 337, 351 (7th Cir. 2022).

[19] Id. at 348.

[20] Id.

[21] Id. at 347–48.

[22] Id.

[23] Id.

[24] Id. at 351.

[25] Id. at 350.

[26] Id.

[27] Id.

[28] Id. at 351.

[29] Id. (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 554 (2007)).

[30] Id.

[31] The underlying district court opinion is reported at 465 F. Supp. 3d 811, 834 (N.D. Ill. 2020) (granting motion to dismiss without prejudice). Rather than seek leave to amend, the Humira buyers stood on their original complaint and appealed the district court’s decision to the Seventh Circuit. The Seventh Circuit heard oral argument on February 25, 2021 in UFCW Local 1500 Welfare Fund v. AbbVie Inc. (No. 20-2402).

[32] 465 F. Supp. 3d at 820.

[33] Id.

[34] Id. at 826.

[35] Id. at 834, 842, 844.

[36] Id. at 828–30.

[37] Id. at 830–31.

[38] See id. at 833.

[39] Id. at 834 (emphasis added).

[40] Id. at 841.

[41] Id. at 844–45.

[42] Id. at 846, 853.

[43] See Br. of Plaintiffs-Appellants, UFCW Local 1500 Welfare Fund v. AbbVie Inc., No. 20-2402, at *4, *16–*21 (7th Cir. Oct. 5, 2020) (citing F.T.C. v. Actavis, Inc., 570 U.S. 136 (2013)).

[44] Id. *4–*5; see also id. *29–*53.

[45] 2 F.4th at 695, 707 (7th Cir. 2021).

[46] Id. at 700.

[47] Id. at 701.

[48] Id.

[49] Id.

[50] Id. at 702.

[51] Id.

[52] Id. at 704.

[53] Id.

[54] Id.

[55] Id. at 704–06.

[56] Id. at 705.

[57] Id.

[58] Id.

[59] Id. at 706.

[60] Id.

[61] Id.

[62] Id.

[63] Id. at 706 (citing United States v. Heffernan, 43 F.3d 1144, 1146 (7th Cir. 1994).

[64] Id.

[65] Id. at 707.

[66] Id.

[67] Association of American Physicians & Surgeons, Inc. v. American Board of Medical Specialties, 15 F.4th 831, 835 (7th Cir. 2021).

[68] Id. at 832.

[69] Id. at 832–33.

[70] Id. at 833–34.

[71] Id. at 833.

[72] Id. at 833–34.

[73] Id. at 834.

[74] Id.

[75] Id.

[76] Id. (citing Twombly, 550 U.S. at 556.)

[77] Id. at 835.

[78] Id.

[79] Id.

[80] 540 U.S. 398 (2004).

[81] 951 F.3d 429 (7th Cir. 2020), cert. denied, 141 S. Ct. 2877 (2021). Attorneys at Jenner & Block represent the Comcast defendants in this case.

[82] Id. at 436.

[83] Id. at 437.

[84] Id. at 438.

[85] Id. at 442–43.

[86] Id.

[87] Id. at 443.

[88] Id.

[89] Id. at 435, 444–45.

[90] Id. at 449.

[91] Id.

[92] Id. at 450.

[93] 472 U.S. 585 (1985).

[94] 951 F.3d at 460.

[95] Id.

[96] Id. (construing Novell, Inc. v Microsoft Corp., 731 F.3d 1064 (10th Cir. 2013)).

[97] Id. at 462.

[98] Id. at 469.

[99] Id. at 480.

[100] Id.

[101] Petition for a Writ of Certiorari, Comcast Corp., et al. v. Viamedia, Inc., No. 20-319 (U.S. Sep. 10, 2020).

[102] Id.

[103] 141 S. Ct. 2877 (2021).

[104] See Plaintiff Viamedia, Inc.’s Notice Regarding Refusal-To-Deal Theory, Viamedia v. Comcast Corporation et al., No. 1:16CV05486 (N.D.Ill. Jan. 13, 2022), ECF No. 490.

[105] U.S. Futures Exch., LLC v. Bd. of Trade of the City of Chi., Inc., 953 F.3d 955 (7th Cir. 2020).

[106] Id. at 960 (noting the ‘doctrine flows from First Amendment origins: antitrust laws do not supersede the people’s right to petition their government in favor of a desired monopoly’ (citation omitted)).

[107] Id. at 958–59.

[108] Id. at 958.

[109] Id.

[110] Id.

[111] Id.

[112] Id.

[113] Id. at 959.

[114] Id.

[115] Id.

[116] Id.

[117] See id. at 966, 968–69.

[118] Id. at 963.

[119] Id. at 960, 963.

[120] Id. at 963.

[121] Id.

[122] See id. at 965 (citing Puerto Rico Tel. Co. v. San Juan Cable LLC, 874 F.3d 767 (1st Cir. 2017)).

[123] Id. at 963 (citation omitted). If a challenged litigation is objectively meritless, the court may proceed to the second prong of the ‘sham’ test, not relevant here, which ‘examine[s] the litigant’s subjective motive’. Id. (citation omitted).

[124] Id. at 964.

[125] Id.

[126] Id. at 965 (citing Puerto Rico Tel., 874 F.3d at 772).

[127] Id. at 966.

[128] See, e.g., USS-POSCO Indus. v. Contra Costa Cnty. Bldg. & Constr. Trades Council, AFL-CIO, 31 F.3d 800, 810–11 (9th Cir. 1994).

[129] U.S. Futures Exch., 953 F.3d, at 967 (citing Credit Suisse Securities (USA) LLC v. Billing, 551 U.S. 264, 270–71 (2007) (establishing ‘four-part test for implied immunity’)).

[130] Id.

[131] Id. at 967, 968–69.

[132] 952 F.3d 832 (7th Cir. 2020). Jenner & Block attorneys represented a defendant in this case.

[133] Id. at 837.

[134] Id. at 841.

[135] Id. at 836.

[136] Id.

[137] Id.

[138] Id. at 841.

[139] Id.

[140] Mountain Crest SRL, LLC v. Anheuser-Busch InBev SA/NV, 937 F.3d 1067, 1069 (7th Cir. 2019) at 1070.

[141] Id. at 1071.

[142] Id.

[143] Id. at 1072.

[144] Id.

[145] Id. at 1072–74.

[146] Id. at 1074.

[147] Id. at 1077.

[148] Id. at 1080 (quoting Nocula v. UGS Corp., 520 F.3d 719, 727 (7th Cir. 2008)).

[149] Id. at 1078.

[150] Id. at 1083.

[151] Id. at 1084.

[152] Id. at 1085.

[153] Id. (quoting, in part, W.S. Kirkpatrick & Co., Inc. v. Envtl. Tectonics Corp., 493 U.S. 400, 407 (1990) (brackets omitted)).

[154] Id. at 1086 and n.80.

[155] Mountain Crest SRL, LLC v. Anheuser-Busch InBev SA/NV, 456 F. Supp. 3d 1059, 1073–74 (W.D. Wis. 2020).

[156] Id. at 1065–66.

[157] Id. at 1068.

[158] Id.

[159] Id. at 1068 (quoting Sessions Tank Liners, Inc. v. Joor Mfg., Inc., 17 F.3d 295, 300–01 (9th Cir. 1994)).

[160] Id. at 1069.

[161] Id.

[162] Id. (citing McGarry & McGarry, LLC v. Bankr. Mgmt. Sols., Inc., 937 F.3d 1056, 1063 (7th Cir. 2019)).

[163] Id. (citing Minn-Chem, Inc. v. Agrium, Inc., 683 F.3d 845, 856–57 (7th Cir. 2012)).

[164] Id. at 1070.

[165] Paramount Media Grp., Inc. v. Village of Bellwood, 929 F.3d 914, 917 (7th Cir. 2019).

[166] Id.

[167] Id.

[168] Id.

[169] Id. at 921.

[170] 317 U.S. 341 (1943).

[171] Paramount, 929 F.3d at 919.

[172] Id. at 921.

[173] Id.

[174] Id.

[175] Id.

[176] Id. at 922.

[177] Id.

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