Thursday, July 06, 2006, 7:39 AM

Supreme Court Antitrust Activity

Certiorari Denied in Schering

The Supreme Court denied certiorari on June 26, 2006 in FTC v. Schering-Plough Corporation, 402 F.3d 1056 (11th Cir. 2005) (see case summary and holding here). The FTC had asked the Court to review the Eleventh Circuit's decision that reverse payments in a pharmaceutical patent settlement agreement did not constitute a violation of antitrust laws. As noted previously in this blog, the case has been an interesting one to follow because it involves a hot issue in antitrust law and has pitted one agency of the federal government against another.

In response to the Supreme Court's refusal to review the Schering appeal, four members of the Senate Judiciary Committee introduced legislation aimed at outlawing the practice of brand name pharmaceutical companies paying generic drug competitors to stay off of the market. Senators Charles E. Schumer (D-NY), Charles E. Grassley (R-IA), Herb Kohl (D-WI), and Patrick J. Leahy (D-VT) are sponsoring the legislation.

Although it refused to review the 11th Circuit's Schering decision, the Supreme Court has displayed its willingness to address economic issues by granting certiorari in two other antitrust cases.

Motions to Dismiss Antitrust Claims

Bell Atlantic v. Twombly, 425 F.3d 99 (2d Cir. 2005), which will be heard in the Supreme Court's next term, has gained attention because it could set the standard for motions to dismiss antitrust claims filed under Section 1 of the Sherman Act. The country's largest telephone companies have been accused of carving up local markets to preserve their monopolies. Instead of offering direct evidence of a conspiracy, the complaint alleges that the telephone companies engaged in "parallel conduct" by not moving into each other's service areas. The Second Circuit determined that the case is sufficient to proceed to discovery. Consequently, the telephone companies, supported by a host of briefs written by influential business interests, asked the Supreme Court to dismiss the case for lack of evidence.

The significance of the case revolves around how much evidence is necessary to overcome a motion to dismiss an antitrust claim for lack of evidence. Discovery is often a costly process in which defendants can be compelled to turn over large amounts of records. The telephone companies and other business interests believe that the Second Circuit has set the standard so low for what is needed to proceed to discovery that plaintiffs inevitably will be encouraged to file frivolous claims with the purpose of inducing settlements.

Predatory Bidding?

The second antitrust case the Supreme Court has agreed to review, Weyerhaeuser v. Ross-Simmons Hardware Lumber, 411 F.3d 1030 (9th Cir. 2005), concerns "predatory bidding." Predatory bidding occurs when a company buys raw goods at inflated prices with the intention of driving smaller competitors out of the market.

In Weyerhaeuser, the Ninth Circuit upheld a $78.8 million verdict for the plaintiff after the plaintiff alleged that Weyerhaeuser Corp., a leading hardwood manufacturer, paid an excessively high price for red alder logs and ordered more of the logs than was necessary to meet its business needs. A federal jury subsequently found that Weyerhaeuser monopolized the market for the logs through its purchases and violated Section 2 of the Sherman Act. The Bush Administration has filed a brief asking the Supreme Court to reverse the decision, arguing that it "threatens to chill pro-competitive conduct by companies that bid aggressively in order to ensure access to inputs or to increase their output."

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