Sights and Sounds from the Antitrust Section’s 2023 Spring Meeting

Antitrust practitioners from around the world gathered in Washington, D.C. the week of March 27, 2023, for a series of industry meetings, centered around the American Bar Association Antitrust Law Section’s 71st Annual Spring Meeting. Antitrust enforcers and policy leaders from the around the world, including the US Department of Justice Antitrust Division (the “Division”) and Federal Trade Commission (FTC), announced new policies, and offered updates on hot topics. We provide below key highlights from the many panels and speeches.

Enforcers Speak: Updates from U.S. and Global Competition Regulators

Bringing Hard Cases: Division Leadership Comments on Litigation and Policy Priorities

The Spring Meeting kicked off with an update from the Division. The panel, featuring several of the Division’s Deputy Assistant Attorneys General (DAAGs) and its chief economist, first addressed the Division’s recent litigation strategy and track record. Panelists worried that concerns about chilling procompetitive transactions have led to underenforcement, and they made clear their belief that they have an obligation to bring cases when they see a violation of the antitrust laws. According to DAAG Michael Kades, “if you bring only cases, you know you will win it means you are underenforcing” because the failure to bring a case implies that the conduct is acceptable.

The DAAGs addressed other key issues, including:

• Merger Guidelines. On the long-awaited revisions to the merger guidelines, panelists explained that the guidelines were never intended to be lawmaking but rather a tool to help assure adherence to the law. The panelists described their review as being focused on the relevant market participants and constituencies, which DAAG Maggie Goodlander identified as the American people and, in particular, workers, small businesses, farmers, and consumers. Chief Economist Susan Athey added that the goal is to create guidelines that apply to the modern economy and account for data, platforms, and harm to competition in input or labor markets. 
• Consent Decrees. Several panelists pushed back on the moderator’s characterization that the Division is “no longer in the consent decree business.” They clarified that with a consent decree, the Division must go to court and say that it believes the proposed remedy is in the public interest. However, in light of the numerous examples of failed divestitures, it is difficult for the Division to feel comfortable that this standard has been met.
• Preservation of Ephemeral Messaging Apps. Companies should be mindful about how their employees use apps like WhatsApp and Signal and ensure that their document retention policies enable them to comply with their obligations during a government investigation.
• Democratizing Antitrust Enforcement. The Division is focused on opening channels of reporting competition violations, including a successful citizen complaint portal. 
• Executive Order on Promoting Competition. The Division fully supports the Biden administration’s whole-of-government approach to antitrust.
• Pursuing HSR Filing Violations. The Division is dedicating additional resources to investigating HSR filing violations, including failure to file, filing deficiencies, and gun-jumping.

Around the Globe with International Enforcers

Enforcement officials from Canada, Australia, the United Kingdom, the EU, Ukraine, and South Africa met to discuss global antitrust enforcement trends as well as local developments in their respective jurisdictions. 

The Digital Economy. Each panelist acknowledged heightened scrutiny of the digital economy. 

• Commissioner Liza Carver of the Australian Competition and Consumer Commission (ACCC) noted that it was currently four years into a five-year market study on digital platforms. 
• A representative of the European Commission (EC), Oliver Guersent, noted that the EC has faced challenges in adapting and responding to the ever-evolving digital economy, despite the EU’s passage of the Digital Markets Act (DMA), which regulates large online platforms. 
• Martin Coleman, representing the UK’s Competition & Markets Authority (CMA), similarly acknowledged that the CMA is prioritizing the digital economy and is preparing to implement new legislation addressing this sector.

Curbing High Prices. Panelists also highlighted efforts to mitigate increased costs of living in their respective jurisdictions.

• Commissioner Carver highlighted the ACCC’s goal of maximum price regulation in the gas sector, due to domestic supply and price gauging issues caused by the war in Ukraine.
• Director Coleman similarly acknowledged that the CMA is responding to the increased cost of living in the UK more broadly. 
• South African Competition Commissioner Doris Tshepe noted an increased enforcement focus in industries affecting consumers, including food and agro-processing, healthcare, banking and financial services, information technology, and energy. 

Enforcement Unabated in Ukraine. The chair of the Anti-Monopoly Committee of Ukraine (AMCU), Olha Pishchanska, reported that the AMCU continues to pursue its enforcement objectives despite challenges caused by the ongoing conflict with Russia. 

• In June 2022, the AMCU resumed its merger control regime, which had been previously suspended due to the war and implementation of martial law and will focus on transactions with a high likelihood of impacting Ukrainian markets. 
• Ukraine has also reformed its competition policy to focus on better aligning with EU standards and protecting competition in its domestic markets.  

Agency Update with the FTC Bureau Directors

The FTC’s Director of its Bureau of Competition, Holly Vedova, emphasized that litigation is an FTC priority.  Ms. Vedova explained that litigation can lead to favorable outcomes even when the FTC does not win on the merits, highlighting the Meta/Within trial as an example because in the agency's view it established the groundwork for other nascent competition cases. The FTC’s Director of the Office of Policy Planning, Elizabeth Wilkins, discussed several timely policy issues, including an effort to increase coordination across the agency to ensure that key market harms and their root causes are being addressed. 

Other announcements and key issues included:

• Increased HSR Scrutiny. Ms. Vedova issued several reminders related to Hart-Scott-Rodino Act filings including that the FTC does not review hypothetical transactions and that all necessary information needs to be included in the HSR form, including 4c/d documents. Penalties for failure to include 4c/d documents are steep, including fines and restarting the Second Request review process.
• Preservation of Ephemeral Messages. Ms. Vedova echoed the Division’s warning about companies needing to take steps to ensure the preservation of relevant materials on any ephemeral messaging apps. 
• Non-Compete Agreements. Ms. Wilkins encouraged interested parties to submit comments on the FTC’s proposed rule on non-competes, stating that the FTC proposed a broad ban because it is seeing harm across all income levels, specifically, lower wages, and comparable state bans have proven effective. 
• Additional FTC Priorities. Additional Bureau priorities including healthcare, increasing enforcement of unfair methods of competition (FTC Act Section 5), and pricing discrimination (Robinson-Patman Act), coordinating more closely with the DOJ on criminal conduct, and hiring more staff. 

U.S. Cartel Enforcement: Where Are We Going?

The Division’s Acting Director of Criminal Enforcement, Emma Burnham, opened the panel by recounting recent criminal successes:

• A federal jury in Georgia convicted three military contractors for submitting sham quotes for government contracts totaling over $7.8 million;
• The first sentencing in a criminal monopolization case in decades resulted in six months of home confinement, and three years of probation; and
• Two individuals pleaded guilty to conspiring with others to rig bids at a 2018 auction for hundreds of acres of farmland and a tract of timber rights. 

Ms. Burnham also noted that the Division’s criminal program remains busy, with several open cases and nearly a dozen upcoming trials.  However, as panelists pointed out, criminal enforcement efforts have faced some challenges:

• On March 22, 2023, a federal jury in Maine acquitted four defendants of alleged entering into wage-fixing agreements in the home healthcare industry. This acquittal marks the Division’s third trial loss in a labor market case. Its only victories to date are a corporate plea agreement with a company and a pretrial diversion agreement with the company’s executive. 
• Despite these challenges, Ms. Burnham noted that the Division has opened more grand jury investigations this year than in previous decades and reaffirmed the Division’s commitment to bringing difficult cases because of concerns about underenforcement.

The panel also discussed recent changes to the Division’s leniency program:

• Ms. Burnham and the former DAAG for the antitrust criminal program, Richard Powers, discussed how the changes to the leniency program were intended to produce better evidence and lead to more convictions. Panelists from the defense bar, noted lingering concerns that the changes increased the size of the penalties/stick without changing the size of the benefits/carrot. 
• Panelists also discussed best practices when deciding to apply for leniency, including the need to report violations promptly and cooperate fully. 
• Panelists also emphasized the importance of compliances policies, which not only allow companies to deter and detect violations early on but may also lead to more favorable resolutions if leniency is not available. 

State Enforcers Highlight Authority and Enforcement Priorities

On March 30, 2023, enforcers representing Attorneys General across the country highlighted the increased role of state enforcement in policing antitrust violations while also calling attention to current focus areas. Panelists identified the following industries as the focus of both current and future enforcement actions: pharmaceuticals; big tech; airlines; retail chains; and fast-food franchises. Below are some of the key takeaways:

• Panelists agreed that state antitrust enforcement has evolved from a follow-on to federal enforcement to standing at the forefront. New York Assistant Attorney General Beatriz Marques highlighted that the states must continue to “forge their own path” when pursuing antitrust enforcement. 
• The panel highlighted states’ ability to pursue conduct outside the scope of the DOJ and FTC’s enforcement efforts. William Matlack, of the Massachusetts Attorney General’s Office, stressed that state enforcers can secure their own relief when they believe remedies from the DOJ or FTC do not provide adequate restitution for their citizens.  
• The State Antitrust Enforcement Venue Act (28 U.S.C. § 1407), which grants Attorneys General their preference of venue when bringing federal antitrust claims, may influence future cases. Before passage of this law, states were constantly having their antitrust cases removed to distant federal districts through the multidistrict litigation (MDL”) process. Now, panelists indicate that states may be more willing to bring cases without the risk of getting lost among large numbers of plaintiffs in an MDL.

New Enforcement Focus and Effect on Compliance

The panel provided views from U.S. enforcers, private practice, and in-house counsel on several areas of new and renewed enforcement, including criminal enforcement of Section 2 (monopolization) of the Sherman Act, Interlocking Directorates under Section 8 of the Clayton Act, labor markets, and the leniency program. 

• Section 2 Criminal Prosecutions. The Chief of the Division’s Criminal II Section, James Fredricks, maintained that the Division will not be providing guidance about the type of conduct it will investigate and prosecute criminally, noting that these decisions will be made on a case-by-case basis. Other panelists acknowledged that criminal enforcement of Section 2 does not really change compliance policies because companies should be training their employees not to attempt to monopolize regardless of whether the penalties will be civil or criminal.  
• Interlocking Directorates (Section 8). Mr. Fredricks revealed that the Division has more than 16 ongoing investigations in this area and will continue to exercise this authority aggressively. Although the penalty for a violation is resignation rather than a monetary fine, the high-profile nature of recent enforcement activity also brings reputational risk. Additional complexities include how this rule applies to private equity firms that might have several employees serving as board members of firms in which they invest. Because these positions may well include potential competitors, companies in this position should review their policies with antitrust counsel. 
• Labor Markets. The idea that there is nothing wrong with collusion among employers is gone. Even if two companies do not compete with their product offerings, they can still compete in the market for employees, and that reality needs to be reflected in their compliance policies. Private practitioners underscored the importance of having a compliance program that addresses this risk and that targets the right people at companies, such as training the HR department, to ensure compliance with the law. 
• Compliance Policies. Finally, the panelists discussed the virtues of having a well-designed compliance policy in place before an investigation begins.  Companies looking for more favorable resolutions must be able to show that they had a robust compliance policy in place at the time of the alleged conduct and, if necessary, that the policy has been revised to address the alleged conduct being reported. Mr. Fredricks said that when evaluating these programs, the Division looks at three questions: is it well designed, it is being applied in good faith, and does it work in practice.

Reinvigoration of Criminal Monopolization Leads to Questions and Calls for Guidance

In March 2022, the Antitrust Division announced it would increase criminal enforcement of Section 2 of the Sherman Act, which prohibits monopolization, attempted monopolization, and conspiracy to monopolize. Panelists discussed the Division’s efforts to date, when future cases may arise, and compliance tips. Assistant Chief of the Division’s San Francisco field office, Jacklin Lem, highlighted past and current cases as guideposts for the type of conduct that may lead to criminal liability, while panelists from the defense bar stressed the need for additional guidance to help clients comply with an otherwise murky area of the law.

• Ms. Lem emphasized that criminal monopolization cases will generally involve:
  
  
  (1) evidence of clear anticompetitive intent, whether in the form of a failed attempt to enter into an agreement or other criminal acts intended to eliminate competition, and
  
  
  (2) conduct that is not subject to any credible claim of procompetitive benefits. 

• The panel discussed recent cases to illustrate conduct that may lead to prosecution. In September 2022, the Division charged Nathan Zito, president of a paving contractor, with one count of attempted monopolization, for allegedly proposing to allocate highway crack sealing projects to a rival company.  The rival rejected this offer and reported the phone calls to authorities. Zito pled guilty and was sentenced to six months of home confinement, probation, and a $27,000 fine. In United States v. Martinez, currently pending in the Southern District of Texas, the Division alleges that 12 defendants involved in transmigrante services engaged in price-fixing and maintained a monopoly through extortion, threats, and violence.
• Despite these recent cases, several panelists noted that the line separating criminal from civil liability is not clear, given the lack of criminal cases in the last 40 years and the broad range of unilateral conduct that falls within Section 2. 

Robinson-Patman Act Revival?

On the heels of recent enforcement actions and public statements from the FTC and the Division regarding the Robinson-Patman Act (RPA), FTC Commissioner Alvaro M. Bedoya maintained that the RPA is still good law and should be enforced despite nearly four decades of dormancy. Commissioner Bedoya described the RPA—which forbids certain forms of price discrimination, rebates, and commercial bribery—as essential protection for small businesses because there is “no competition without small competitors and new entrants.”  Other highlights include the following:

• Commissioner Bedoya responded to concerns that RPA enforcement will lead to higher prices because of the fear that offering discounts to some, but not all, buyers may be illegal, and he stated that the concerns were unsupported.
• In response to audience questions as to whether requiring small retailers to have access to the same pricing as big retailers would harm competition, Commissioner Bedoya argued that large retailers can discipline suppliers by building their own supply chains.
• Commissioner Bedoya explained that price discrimination has been illegal since before the enactment of the RPA, which was necessary because prior laws were ambiguous and unenforceable.

In light of the FTC’s interest in reviving the RPA, other panelists urged companies to revisit their antitrust compliance polices and training to reflect that the RPA is no longer an afterthought. To address these issues, companies should address some of the following issues:

• What is the typical customer profile?
• Have goods become more bespoke or custom, or have they become more commoditized and likely to fall under the RPA?
• Have new marketing strategies impacting net price via allowances been implemented?

The answers to these questions may prompt companies to revisit their antitrust compliance policies and practices in light of the agencies’ renewed focus on RPA to ensure that they do not inadvertently find themselves in the enforcement headlines.

Insights on Developing Trends and Hot Topic Issues from Leading Practitioners

Self-Preferencing: Good, Bad, and In-Between

When and how should enforcers police “self-preferencing” by a dominant company of its own products? As competition enforcers in both the U.S. and EU grapple with how to address self-preferencing by big tech companies, the compliance and enforcement landscape may become even more uncertain.

• Panelists noted that a major issue is distinguishing between benign and anti-competitive conduct. For example, farmers’ markets, retail stores, and supermarkets routinely sell their own products alongside products from other businesses – should those practices constitute antitrust violations? 
• Nikhil Shanbhag, VP & Associate General Counsel at Meta, pointed out that the proposed American Innovation and Choice Online Act (AICOA)―which would have established a “strict liability” framework without any inquiry into market power―would likely exacerbate the issue. The bill attempts to make self-preferencing per se illegal but does not provide any guidance about what conduct would violate the law. 
• Panelists feared that the outcome of AICOA and/or other regulation could be a significant chilling of innovation.  Some panelists suggested that enforcers should instead focus on consumers. 

Kathleen Foote, former Antitrust Chief at the California Department of Justice, said applying a regulatory system can start the process of determining what is “inside or outside of bounds.” 

• The regulatory dialogue in California has already started.
• The California Law Revision Commission is tasked with reviewing California law to determine any problem areas and what, if anything, needs to be rectified. 
• Foote said it is not yet clear whether the Committee’s review will form “actual proposed legislation” or “a compendium of information” that will aid in a future legislative process.

Navigating the “Green” Minefield of Claims

The recent push by companies for greater ESG initiatives is raising numerous issues and questions for consumer protection practitioners, including ESG-centric brand advertising claims, the development of supporting studies, and the assessment of potential damages for a violation. 

• The panel recommended five steps for companies to consider when making a claim:
  
  
  (1) understand the claim; (2) hire experts to evaluate and support the claim; (3) train personnel about the claim; (4) substantiate the claim and ensure this material is kept in centralized database; and (5) continuously audit the claim.
• To avoid making environmental claims that mislead consumers and trigger potential FTC enforcement, the panel advised that the most important principles to follow are “tell the truth” and “do not overstate” the claimed benefit.
• Panelists noted a trend in federal and state courts of allowing mission-driven companies such as nonprofits to have standing to act against companies engaged in allegedly deceptive advertising. Nonprofit actions may occur alongside consumer class actions and add unique challenges.
• The panel discussed that when assessing damages pertaining to an allegedly false claim, a fair market analysis using real world data to determine the price impact of the claim is the method preferred by economists. The panel shared that plaintiffs sometimes try to impose a vertical supply curve to overstate damages, but that such assessment should be considered “economically inappropriate.”

The Rise of “Dark Pattern” Designs and Increased Enforcement Efforts

Panelists, including enforcers and former enforcers, discussed the FTC’s increased interest in so-called “dark pattern” website and app design.  As FTC Bureau of Consumer Protection, Financial Practices Associate Director Malini Mithal explained, “dark patterns” refer to any digital design practice that tricks or manipulates consumers into taking actions they otherwise would not take. Panelists agreed that companies should expect increased enforcement and that companies could avoid risk by promoting transparency.

• The FTC is increasing enforcement over four types of dark patterns: (1) design elements that induce false beliefs in consumers (e.g., advertisements disguised as neutral content); (2) design elements that hide or delay the disclosure of material information; (3) design elements that lead to unauthorized charges; and (4) design elements that obscure or subvert consumers’ privacy choices.  Mary Engle of the BBB and former FTC Associate Director for Ad Practices indicated that it would follow the FTC’s general guidance on dark patterns when challenging similar practices. 
• The panel also highlighted recent FTC enforcement actions. In November 2022, the FTC reached a $100 million dollar settlement with a large communications firm for practices that allegedly made it unnecessarily difficult to cancel services, such as unexpected termination fees and extensive cancellation requirements. To discourage similar conduct in the future, on March 23, 2023, the FTC issued a new rule requiring sellers to make it as easy for consumers to cancel their enrollment as it was to sign up.
• When asked how companies could distinguish between legitimate marketing practices and dark patterns, Ms. Mithal suggested companies ask themselves whether consumers know what they are getting or whether the company looks like it is hiding the ball. If a company wants their consumers to know what they are buying, then the company is likely not engaging in dark patterns.

Antitrust Reform: Panelists Discuss Recent Legislation

Recently, the question of whether new antitrust legislation is necessary—and what it should look like—has taken center stage. Despite bipartisan support for some degree of legislation in the last Congress, however, many of the most significant antitrust bills have yet to become law.  

• Panelists highlighted recent laws that implement procedural changes to both merger filings and litigation: (1) the Merger Filing Fee Modernization Act of 2022, which made significant changes to HSR filing fees; (2) the Foreign Merger Subsidy Disclosure Act, which imposes new disclosure requirements for subsidies received by certain foreign entities; and (3) the State Antitrust Enforcement Venue Act, which, as highlighted above, exempts State Attorneys General suing under the Sherman Act from the MDL process. 
• In contrast, several bills that would have significantly changed the antitrust regime failed to become law. For example, the Augmenting Compatibility and Competition by Enabling Service Switching Act of 2021 (“ACCESS Act of 2021”) would require greater interoperability for covered platforms but has never advanced beyond committee. The American Innovation and Choice Online Act (AICO), which would prohibit anticompetitive “self-preferencing” by large tech platforms, advanced to the Senate floor last year but never came up for a vote. The same is true of the Open App Markets Act (OAMA), which would prohibit certain conduct related to the operation of “app stores” by covered companies. 
• Despite coming up short, panelists acknowledged the possibility of change, given that antitrust reform—particularly in the tech sector—has provided common ground for an otherwise bitterly partisan Congress, and also stressed that legislation can take years to pass.

Emerging Antitrust and Privacy Issues Related to Artificial Intelligence

The ABA’s Spring Meeting panel, “Artificial Intelligence, Privacy, and Competition,” addressed the privacy and antitrust issues surrounding AI both in the U.S. and internationally.  With the rise of artificial intelligence (AI), the panel addressed the complexities of regulating new and emerging technology.

• To be effective, AI systems need a large amount of quality data, which suggests that competitor collaborations may be necessary.  In this context, the privacy and antitrust laws governing AI need to be developed further to cover this type of technology.
• There have been recent attempts to regulate the use of AI, but they have only begun to scratch the surface.  In the U.S., the White House released a Blueprint for an AI Bill of Rights. The blueprint identifies five key pillars: safe and effective systems; algorithmic discrimination protections; data privacy; notice and explanation; and human alternatives, considerations, and fallbacks.
• Privacy issues may prove to be particularly challenging because the current privacy framework is not geared to address AI. For example, common concepts in privacy law, such as opt-outs, do not work for AI because every engagement teaches the AI system new things. It also is difficult to control the data that AI uses.
• Both FTC Chair Lina Khan and Assistant Attorney General for Antitrust Jonathan Kanter noted during the Enforcers Summit earlier that week that they will ensure competition in the AI market. Companies should be mindful of this focus, especially when seeking to acquire AI companies.
• The FTC and the DOJ have also been focused on privacy issues in the merger context, and therefore companies that compete by offering better privacy protections, including AI companies, may receive additional scrutiny from the agencies.
• Regarding conduct, companies should be careful when sharing data for an AI system or meeting to collaborate on technical issues. The panel noted that companies might run into antitrust issues if they agree to certain privacy standards or methods of complying with the law.

Although the legal framework governing AI is still in its infancy, the FTC and the DOJ are keenly focused on these issues, so companies should be mindful about how that might affect potential transactions, business practices, or privacy concerns.

Colluding by Algorithm: Policing Anticompetitive Pricing Practices by Computers

Pricing algorithms are gaining widespread adoption and are increasingly subject to antitrust scrutiny. On March 30, 2023, panelists discussed the extent to which algorithms can complicate enforcement and compliance efforts. How can enforcers and compliance personnel separate agreements from unilateral conduct when algorithms are involved? Can algorithms engage in anticompetitive conduct with no agreement? Is the current antitrust framework sufficient to address these issues? Below are key takeaways from the panel’s discussion:

• Division prosecutor Leslie Wulff stated that, in most circumstances, the solution to potential enforcement issues is clear—look to human decisions. She emphasized that humans are required to create the algorithm, can dictate how algorithms make decisions, and can decide whether those decisions are implemented. 
• Humans involved in creating and implementing algorithms have a duty to ensure they do not use algorithms in a manner that violates the antitrust laws.  Panelists discussed cases where defendants were accused of consciously using an algorithm as part of alleged anticompetitive conduct including:
• The Division’s 2015 case against Wall Décor sellers, where algorithms were used to carry out an illegal agreement; and
• Recent civil litigation alleging that vendors of price tools in the real estate and hotel industries acted as the hub of a hub and spoke agreement.

• Panelists highlighted that compliance programs need to account for the use of pricing algorithms. A well-structured compliance program will (1) be broad enough to train everybody with a relationship to the pricing algorithms about the antitrust risks from the use of these tools; and (2) include ongoing audits to ensure algorithms are not being used in a way that facilitates an agreement or otherwise harms competition.

Algorithms in Antitrust and Consumer Protection

The “Algorithms in the Spotlight” panel discussed potential antitrust and consumer protection issues associated with algorithms.  As the use of algorithms becomes more prevalent, companies should be careful that their algorithms do not violate antitrust, consumer protection, or privacy laws.

• The panel stressed that the algorithms themselves do not create new antitrust violations, but rather can be a tool to commit violations. The panel used a price-fixing cartel as an example. A cartel could use algorithms to monitor co-conspirators’ pricing to ensure compliance with the agreement and even adjust pricing if a co-conspirator cheats.
• The panelists also discussed other examples of how algorithms might be used for anticompetitive purposes.  Companies could use algorithms to determine and charge the maximum price a consumer is willing to pay. The panel noted that, although this may be economically efficient, such a practice might violate antitrust laws like the Robinson-Patman Act.
• Companies should also assess whether their use of algorithms might violate consumer protection laws.  The FTC’s Assistant Director of the Division of Privacy and Identity Protection, Mark Eichorn, highlighted the FTC’s guidance on algorithm use and its requirement that companies make their data training sets representative of the U.S. population, which aims to identify biases and understand how even the most complex algorithm actually arrives at a result. (See FTC Blog Posts Aiming for truth, fairness, and equity in your company’s use of AI; Using Artificial Intelligence and Algorithms.) Mr. Eichorn stressed that it is crucial that companies understand how their algorithms work and have humans overseeing the algorithms.
• Companies should also be wary of misrepresenting what their algorithms can do. The FTC recently fined investment advice company WealthPress for misrepresenting to consumers that its system could help individuals earn significant amounts of money from the recommended investments

Exploring the Effects of Apple v. Pepper on E-Commerce Platforms

As private litigation against platforms continues to grow, practitioners discussed developments since the U.S. Supreme Court’s 2019 decision in Apple v. Pepper, 139 S. Ct. 1514 (2019). There, the Court found that iPhone owners who purchased apps through Apple’s App Store could sue Apple as direct purchasers. The decision seemingly expanded the universe of potential plaintiffs for platform conduct to anybody who made purchases on the platform, and litigants have been testing its limits in the years since the Court’s ruling.

Key Takeaways from Pepper. While the universe of potential plaintiffs appears to be growing based on this decision, the practical risk and increased liability may not be.

• It has become settled that this case only applies when the platform is a retail monopolist (as was assumed at oral argument); more open platforms will not face the same risks. In addition, as another panelist noted, a key part of the majority’s holding that standing was appropriate was the low risk of duplicative recovery.
• Even when two sets of plaintiffs may have competing claims to the same alleged overcharge, panelists pointed out, that does not increase the actual risk in actual practice, given the variety of procedural mechanisms that prevent duplicative recovery.

Post-Pepper Developments. Panelists discussed post-Pepper cases involving e-commerce platforms and the extent to which courts employ a fact-intensive approach in applying old doctrine to new fact patterns. Recent examples include:

• In a recent trial challenging app store commissions brought by a developer, the judge rejected both parties’ novel market definitions and instead adopted a middle-ground submarket, based in part on the defendants’ documents.
• In series of cases where plaintiffs have challenged the use of Most Favored Nation (MFN) clauses related to e-commerce platforms, plaintiffs have argued that, rather than ensuring customers on the platform get the lowest prices, these agreements create a price floor depriving consumers of the benefits of lower prices in other forums. 

These cases and others will be fascinating to watch, as judges and juries grapple with how to apply the law to these new dynamic, and increasingly commonplace, fixtures of the U.S. and global economy.

ESG Initiatives: Curbing Emissions or Competition

On March 29, 2023, a panel of enforcers, practitioners, and academics discussed the treatment of ESG factors in evaluating conduct among competitors in both the U.S. and the EU. Companies and investment firms are increasingly considering ESG both in terms of how they do business and how to invest. Often, these initiatives involve agreements with competitors and can create antitrust risk. The panel observed the inherent tension that regulators face between wanting to promote socially valuable business practices while not providing an excuse for conduct that is inherently anticompetitive. Below are highlights from the discussion:

• Maria Jaspers of the EC explained that the EC expects to publish ESG guidance this summer. Ms. Jaspers noted that the EC is striving to be clear about both what is impermissible, to discourage anticompetitive behavior, and what is permissible, to avoid hindering socially beneficial efforts. Ms. Jaspers opined that the existing antitrust framework is still sufficient to analyze ESG agreements, and that the guidance will illustrate the flexibility of the existing framework for analyzing these issues.
• In contrast to the EC, U.S. agencies have largely been quiet on the issue, relying on recognizing anticompetitive ESG conduct when they see it without offering specific guidance on the topic. Kathleen Konopka of the D.C. Attorney General’s office noted the patchwork of positions among states, often divided along political lines. She also indicated that ESG benefits are typically not credited as efficiencies that would otherwise save an anticompetitive merger.
• The panel encouraged entities to: (1) act unilaterally where possible: (2) make any agreed parameters both optional and open to any competitor interested in joining; and (3) avoid provisions with pricing implications or other potentially anticompetitive restrictions in such agreements.