Overview
One major antitrust headline this past week included the decision by a coalition of more than two dozen states to continue the monopolization litigation against Live Nation notwithstanding the surprise proposed settlement of the case with US Department of Justice Antitrust Division, which is pending judicial approval pursuant to the Tunney Act. Another antitrust headline involved the continued efforts of a coalition of states to persuade Judge Casey Pitts in the Northern District of California to reject the Antitrust Division’s settlement of Hewlett Packard Enterprise’s proposed $14 billion acquisition of Juniper Networks.
Both of these current matters are good reminders of the important role of state attorneys general in the antitrust enforcement process in the United States. There is a rich history of federal/state cooperation in antitrust enforcement – and also a rich history of state attorneys general continuing to pursue litigation following federal action that they deem to be insufficient.
California v. American Stores Co., 495 U.S. 271 (1990) is a prime example. In that case, following a Second Request investigation of American Stores’ proposed acquisition of Lucky Stores, the Federal Trade Commission (FTC) negotiated a consent order that required the divestiture of a number of Alpha Beta supermarkets in Northern California. The State of California, dissatisfied with the scope of the agreed consent remedy, filed an action seeking to enjoin the entire transaction. The Supreme Court held that not only the federal government, but state attorneys general and other private plaintiffs as well, can seek divestiture as a remedy.
The late 1990s and early 2000s monopolization litigation against Microsoft was another landmark in federal and state antitrust cooperation. Although the Justice Department and several states reached a settlement with Microsoft that resulted in changes in how Microsoft licensed its Windows software, several states continued the litigation, seeking broader remedies including forcing Microsoft to release the source code for Internet Explorer and otherwise disclosure remedies. Ultimately, the states’ efforts lead to some strengthened enforcement provisions in the final decree, including the creation of a Technical Committee to provide independent oversight of Microsoft’s business to ensure compliance.
Also in the tech industry, the FTC filed an administrative action in 2009 charging Intel Corporation with violating Section 5 of the FTC Act by engaging in exclusionary conduct in the x86 microprocessor market. Intel resolved that action with a 2010 settlement that mandated certain behavioral relief, including a prohibition on conditioning benefits on exclusivity. Intel also faced a lawsuit brought by the New York Attorney General under New York’s Donnelly Act that similarly challenged Intel’s exclusivity arrangements and other conduct. The New York challenge was resolved in 2012 with comparable relief as well as the payment of New York’s investigatory costs.
The federal and state enforcement agencies have shared enforcement responsibilities in the pharmaceutical reverse-payments area. The FTC brought an action in 2013 against Cephalon challenging alleged “pay for delay” agreements Cephalon had entered with generic drug manufacturers for the purpose of maintaining the pricing of its Provigil sleep disorder drug. The FTC settled the matter with Cephalon agreeing to injunctive relief prohibiting certain types of future reverse payment agreements, and to pay $1.2 billion into a settlement fund for private class actions and direct purchasers. A coalition of state AGs had filed their own case and entered into settlements that also including direct restitution to state agencies and consumers, as well as civil penalties.
In 2019, the Department of Justice Antitrust Division investigated T-Mobile’s proposed acquisition of Sprint and conditioned its authorization for the deal to go forward on the divestiture of Sprint’s prepaid business and certain spectrum assets to Dish Network, as well as certain other conditions. Similar to the American Stores example, certain states were dissatisfied with that result and filed an action seeking to enjoying the transaction in its entirety, although that effort was unsuccessful.
In the generic drug industry, the Antitrust Division has brought criminal price-fixing or bid-rigging charges against a number of generic pharmaceutical companies and executives in connection with specific generic drugs. A large number of states have filed broader civil suits against many more generic drug manufacturers alleging a pattern of widespread collusion across the generics industry.
There are additional examples of federal-state cooperation on antitrust prosecutions – and of state attorneys general seeking more wide-ranging or severe relief than that for which their federal antitrust enforcement colleagues have been willing to settle.
The point is that state attorneys general have been and continue to be an important force in the antitrust enforcement world. State attorneys general select and pursue cases based on criteria of their own independent choosing, which may or may not align with the objectives and policy choices of their federal antitrust enforcement colleagues. Defendants need to be aware of the enforcement threat that the states represent, and complainants should be aware that state attorneys general may at times be more receptive to their concerns. Just as they do at the federal level, businesses and their antitrust counsel should engage in meaningful efforts to develop relationships with state antitrust enforcement personnel.
Steptoe covers developments with state attorneys general – including not only with regard to antitrust but across the spectrum of their enforcement activity – through our On the AGenda podcast, providing practical takeaways on the enforcement, regulatory, and compliance issues that matter most to businesses.
