Reversal of $340 Million Jury Award Shines Light on Evidentiary Requirements to Establish Anticompetitive Conduct
In December 2016, the Fifth Circuit Court of Appeals reversed a $340 million jury award in an antitrust, attempted monopolization case, ruling the verdict was not legally supported by the jury’s factual findings.1 In reaching this ruling, the Fifth Circuit separately analyzed the factual predicates underpinning the jury’s verdict and approached, with healthy skepticism, plaintiff’s evidence of anticompetitive conduct premised on unfair or tortious conduct. While the Fifth Circuit, given the case facts, seemingly reached the right result,2 companies should remember:
Ordinary business torts or unfair behavior can serve as the basis for treble damages antitrust liability, and
Antitrust liability can be based on aggregated tortious or other conduct, even when the individual prongs of that conduct do not, separately, violate the antitrust laws.
In the Fifth Circuit litigation, Retractable Technologies, Inc. (“RTI”), alleged, among other claims, Becton Dickinson & Co. (“BD”) attempted to monopolize the market for safety syringes in violation of Section 2 of the Sherman Act. On appeal, as it pertained to the attempt claim, the Fifth Circuit focused on whether RTI had adequately shown that BD had engaged in anticompetitive conduct.3 To prove anticompetitive conduct at trial, RTI presented four categories of facts, of which the jury found three to be sufficient to find liability: (1) BD’s infringement of certain RTI syringe patents,4 (2) BD’s persistent false advertising, and (3) BD’s practices that allegedly “tainted the market” so as to persuade customers to deal with BD.
In assessing the sufficiency of this evidence, the Fifth Circuit “separately analyzed” each factual category in “light of settled principles of antitrust law.”5 The decision, however, does not clearly identify the settled principles mandating separate analysis, and, relatedly, leaves unresolved RTI’s contention that unlawful conduct can be premised on aggregated “unfair competitive practices.”6 At most, the Fifth Circuit, citing its 1980 ruling in Page Airways and the Supreme Court’s 1993 decision in Brooke Group, states two related propositions: (1) it is highly unusual for business torts to be “so egregious as to constitute actionable” conduct under the antitrust laws, and (2) those same antitrust laws do not “purport to afford remedies for all torts committed by or against persons engaged in interstate commerce.”7
Both propositions ring true and render unusual the circumstance where tortious or unfair conduct will fuel an antitrust, Sherman Act claim. Yet, such cases can be, and successfully have been, litigated by plaintiffs.8 For instance, in Conwood, the Sixth Circuit affirmed a $1 billion award to plaintiff based on a jury finding that the defendant had violated Section 2 of the Sherman Act through a series of tortious acts that adversely affected competition in the moist snuff market.9 In finding the defendant’s conduct susceptible to claims of antitrust illegality, the Sixth Circuit stated: “merely because a particular practice might be actionable under tort law does not preclude an action under the antitrust laws as well.”10
In essence, when conduct – regardless of the “form of the combination or the particular means used” – unreasonably restrains trade or creates or maintains a monopoly, liability risks run high.11 Relatedly, it is “not of importance whether the means used to accomplish the unlawful objective are in themselves lawful or unlawful.”12 As the Supreme Court instructed in American Tobacco:
Acts done to give effect to [an unlawful undertaking such as a] conspiracy may be in themselves wholly innocent acts. Yet, if they are part of the sum of the acts which are relied upon to effectuate the conspiracy which the statute forbids, they come within its prohibition.13
Not surprisingly then, courts have announced that anticompetitive conduct can “come in too many different forms, and is too dependent on context, for any court or commentator ever to have enumerated all the varieties,”14 and that the “means of illicit exclusion, like the means of legitimate competition, are myriad.”15 By way of example, in Byars, the Sixth Circuit stated a Section 2 claim alleging a periodical distributor had unlawfully excluded a smaller rival from the market could be supported by facts showing, among other things, that the distributor removed the rival’s periodicals from retailers’ sales racks, covered up the rival’s periodicals on racks to conceal them from consumers, disparaged the rival’s financial status, and sought to intimidate customers into dealing with the distributor rather than the rival.16
Moreover, in evaluating challenged behavior, the Supreme Court and lesser federal courts have admonished parties to assess the anticompetitive effects of conduct by examining the conduct as a whole, rather than through the conduct’s individual prongs. It has long been held that the “character and effect of a conspiracy are not to be judged by dismembering it and viewing its separate parts, but only by looking at it as a whole.”17 This proposition applies equally to anticompetitive monopolistic behavior: “courts must look to the monopolist’s conduct taken as a whole rather than considering each aspect in isolation.”18 Oddly, the Fifth Circuit in RTI did not address or distinguish this principle of holistic analysis, which inaction is all the stranger since, in Page Airways, the Fifth Circuit found liability only after studying the defendant’s various improper acts “taken together”:
Probably no one of the instances of improper conduct, standing alone, would lead to section 2 [monopolization] liability. Taken together, however, they show a pattern of exclusionary behavior sufficient to support the jury’s verdict.”19
Thus companies, in developing and implementing business strategy, should be cautious in the antitrust guidance they extract from RTI. Reflecting on RTI in light of Supreme Court and other federal decisions, companies should keep in mind the following when defining business strategy:
- If acting unilaterally, does the company arguably possess monopoly power?20 Monopolists often operate with a target on their back, which can lead to potential, nascent, or frustrated competitors, rightly or wrongly, pursuing legal action against the monopolist. And like BD, the defendant in RTI, those having such power or dangerously close to possessing it must exercise that power in a disciplined fashion. A “monopolist is not free to take certain actions that a company in a competitive (or even oligopolistic) market may take.”21
- When assessing the competitive effects of the prongs of a business strategy, a company should consider those prongs collectively, rather than individually.
- Likewise, in assessing prongs, a company should look beyond whether a prong, standing alone, is lawful. In the antitrust context that prong, in conjunction with others, still can trigger antitrust issues. This is so even if all of the prongs, individually, involve lawful acts.
- The reach of the Sherman Act is long and can extend to a host of activities not ordinarily associated with antitrust wrongdoing.
These takeaways open additional windows of analysis that companies should peer through when gauging the antitrust implications of their business behavior. To accurately see what those open windows reveal, antitrust counsel can be of substantial value.
1 Retractable Techs., Inc. v. Becton Dickinson & Co., 2016 U.S. App. LEXIS 21556, at *8 (5th Cir. Dec. 2, 2016) (“RTI”). Also found at 842 F.3d 883 (5th Cir. 2016).
2 Although this article studies whether it is appropriate to isolate factual allegations when reviewing them to see if they constitute anticompetitive conduct, it does not appear the evidence in RTI, whether reviewed individually or collectively, would justify a finding that the defendant engaged in anticompetitive conduct.
3 As the Fifth Circuit noted, an attempt to monopolize claim has three elements: (1) anticompetitive or predatory conduct, (2) specific intent to monopolize, and (3) a dangerous probability of success. RTI, at *9. In the Section 2 context, anticompetitive conduct includes acts that “tend to exclude or restrict competition” in an “unnecessarily restrictive way.” Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 475 U.S. 585, 605 (1985).
4 The Fifth Circuit noted that patent infringement traditionally is not regarded as anticompetitive conduct. RTI, at *13-15. See also Eatoni Ergonomics, Inc. v. Research in Motion Corp., 826 F. Supp. 2d 705, 708-09 (S.D.N.Y. 2011). Judicial treatment of patent infringement should not be confused, however, with “sham litigation” pursued under the pretext of infringement. In limited circumstances, such litigation can constitute anticompetitive conduct. See, e.g., Professional Real Estate Investors, Inc. v. Columbia Pictures Indus., 508 U.S. 49 (1993) (defining “sham litigation” but finding copyright infringement lawsuit did not constitute a sham).
5 RTI, at *10.
6 RTI, at *10-13.
7 RTI, at *12-13 (citing Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) and Associated Radio Service Co. v. Page Airways, Inc., 624 F.2d 1342 (5th Cir. 1980)).
8 See Associated General Contractors v. Cal. State Council of Carpenters, 459 U.S. 519, 547 (1983) (Marshall, J., dissenting) (“antitrust violations are essentially ‘tortious acts’”) (citation omitted).
9 Conwood Co., L.P. v. U.S. Tobacco Co., 290 F.3d 768, 783-84 (6th Cir. 2002) (defendant’s anticompetitive conduct, among other acts, included misusing “position as a [product] category manager” to unfairly promote defendant’s product over plaintiff’s and training personnel to use “ruses” so that they could destroy plaintiff’s in-store product placement tools).
10 Id. at 783-784.
11 Hanover Shoe v. United Shoe Mach. Corp., 392 U.S. 481, 497 n.12 (1968) (quoting American Tobacco Co. v. United States, 328 U.S. 781, 809 (1946)).
13 American Tobacco, 328 U.S. at 809.
14 Caribbean Broad Sys., Ltd. v. Cable & Wireless PLC, 148 F.3d 1080, 1087 (D.C. Cir. 1998).
15 ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254, 278 (3d Cir. 2012) (quoting United States v. Microsoft, 253 F.3d 34, 58 (D.C. Cir. 2001)). See, e.g., Page Airways, at 1354 (“some unfair business practices can be exclusionary.”); N.M. Oncology & Hematology Consultants, Ltd. v. Presbyterian Healthcare Servs., 54 F. Supp. 3d 1189, 1222 (D. N.M. 2014) (“Predatory conduct comes in too many forms to enumerate.”).
16 Byars v. Bluff City News Co., 609 F.2d 843, 854 n.30 (6th Cir. 1979). See also Page Airways, at 1354-55 (evidence of unlawful market exclusion included proof of bribes used to assert improper influence on customers of plaintiff and defendant, the filing of sham suits designed to adversely impact finances of plaintiff, and gross impropriety in dealing with plaintiff’s employees, including extraction of plaintiff’s sensitive business data).
17 United States v. Patten, 226 U.S. 525, 544 (1913). See also Cont’l Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 699 (1962). This is not to say that for analytical purposes a court cannot review each alleged improper act individually to determine if it, in combination with other acts, has had anticompetitive effect. Such analysis can eliminate from consideration acts “utterly lacking” in relevance to the claim asserted. See Northeastern Tel. Co. v. Am. Tel. & Tel. Co., 651 F.2d 76, 95 n.28 (2d Cir. 1981); see also California Computer Products, Inc. v. International Business Machines Corp., 613 F.2d 727, 746 (9th Cir. 1979).
18 LePage’s Inc. v. 3M, 324 F.3d 141, 162 (3d Cir. 2003); see also City of Anaheim v. Southern California Edison Co., 955 F.2d 1373, 1378 (9th Cir. 1992) (it is improper “to focus on specific individual acts of an accused monopolist while refusing to consider their overall combined effect.”).
19 Page Airways, at 1356. Further, the Fifth Circuit stated it had not held that torts had been committed. Instead it simply identified “sufficient evidence for the jury to have found exclusionary conduct.” Id. at 1356 n.23.
20 See RTI, at *9 (RTI contended BD possessed a dangerous probability of achieving monopoly power, which was an element of RTI’s attempted monopolization claim and presumed for purposes of appeal).
21 LePage’s, 324 F.3d at 151-52. Separately, a company if acting collaboratively with others, whether horizontally (i.e., with competitors) or vertically (i.e., with those at other levels in the market), should assess whether the collaboration can be deemed anticompetitive. Such an analysis may need to consider various antitrust statutes and approaches to test the legality of conduct (per se treatment v. rule of reason), all of which is beyond the scope of this article.