THE 2023 GOLDEN STATE ANTITRUST AND UNFAIR COMPETITION LAW INSTITUTE AND ANTITRUST LAWYER OF THE YEAR RECEPTION AND DINNER: VIEWS FROM THE ROOM
Antitrust and Unfair Competition Law Section of the California Lawyers Association
Furthering knowledge about antitrust, unfair competition, trade regulation and privacy issues
Recent Developments in Antitrust and Unfair Competition Law By Dennis R. Dollar
Colleen E. Huschke, with the Consumer Protection Unit of the San Diego District Attorney’s Office provided an update on statutory developments and new case law.?
Ms. Huschke highlighted recent statutory enactments of note including the newly enacted:
Ms. Huschke also discussed case law opinions under California state competition law over the past year.?
Kate Patchen, with Covington & Burling, LLP and Ryan Sandrock, with Shook, Hardy & Bacon, provided an update of case law developments under federal competition law.? Both the state and federal decisions have been the subject of prior E-Briefs.? For further analysis of the statutes and case law, you are encouraged to download the materials from the 2023 Golden State Institute and attend the upcoming 2024 UCL Institute, to be held on Jan. 18, 2024 at the City Club in Los Angeles.?
Big Stakes Trial: Federal Trade Commission v. Meta Platforms, Inc., et. al. By James Dallal
The Big Stakes Trial panel featured lawyers who faced off in a seven-day evidentiary hearing before the Northern District of California’s Judge Edward Davila in Federal Trade Commission v. Meta Platforms Inc., et al. The FTC brought suit challenging Meta’s plan to acquire Within Unlimited, the maker of leading virtual reality fitness app Supernatural. FTC Attorneys Jeanine Balbach and Timothy Singer offered their personal views from having worked on the case. Silicon Valley-based Weil Gotshal & Manges partner Bambo Obaro described his experiences defending the case for Meta and D.C.-based Hogan Lovells partner Charles Loughlin offered his views regarding defending on behalf of Within.
Jessica Leal, a DOJ Antitrust Division counsel, moderated, and began by noting that although Judge Davila dismissed the case, certain commentators summarized the outcome as “how the FTC won when it lost.”
Ms. Balbach noted that when it agreed to acquire Within, Meta already owned virtual reality assets, had invested billions in VR technology, and appeared to view fitness as an avenue for expanding its VR business beyond games through a strategy of “buying rather than building.” The FTC pursued the dual theories of actual potential competition and perceived potential competition. Mr. Singer soon added that there exists a distinct market for VR fitness offerings which is different from fitness solutions such as Peloton, and different from gaming. The VR fitness market skews older and more female, and it runs off monthly subscriptions unlike conventional apps with download fees and in-app purchases. VR systems are also portable, and subscriptions are often cheaper than physical gym equipment.
Mr. Loughlin summarized three primary defense arguments advanced by Within. ?First, Meta had no plans to enter the VR fitness space on its own. Second, Within was not concerned by competition from Meta, but rather focused its competitive efforts on fitness more generally, including Peloton. Third, it competed in a market for fitness products, not VR technology.
In discussing expert work, Mr. Obaro described how Judge Davila mostly rejected the FTC expert’s consumer survey due to flawed methodologies involving paid respondents and screening questions that denied the respondents payment if they answered that they did not use Within’s products. Ultimately the decision did not turn on the expert work, however. The panelists also shared thoughts on strategy and what they might have done differently if they had it to do again.
And they differed somewhat in their views of how influential the decision will be in the end. Mr. Obaro noted that it may not stand for very much that’s lasting given that there was no appeal, and the Court ultimately held that subjective evidence should be considered in assessing potential competition. Ms. Balbach, meanwhile, pointed to the holdings that oligopolistic or parallel conduct are not required for a merger to be found anticompetitive, and that the FTC should continue to have a role in regulating new markets, not just established ones.
Revision and Reform of California’s State Antitrust Laws By Alex Tramontano
Cheryl Johnson, formerly of the Cal. DOJ and Cal. AG’s? Office (AG) moderated a panel which included Josh Davis, of Berger Montague and UC Law San Francisco,? Kathleen Foote formerly of the Cal. DOJ and Cal. AG (Ret.), Sam Miller of Sidley Austin (Ret.) and UC Law San Francisco, and Aaron Chiu of Latham & Watkins LLP.
Prof. Miller emphasized the Cartwright Act as the main antitrust law in California, but noted it requires concerted action. (See State of California ex rel. Van de Kamp v. Texaco, Inc. (1988) 46 Cal.3d 1147 (Texaco).) Prof. Miller questioned whether it should be amended to prohibit exclusionary conduct, much like section 2 of the Sherman Act. If this language were inserted, conspiracy would be covered by the concerted action portion. It would also cover single entity conduct by a dominant firm. This type of conduct is not currently covered by the Cartwright Act. Mr. Chiu questioned what the utility would be of adding Section 2 language to the Cartwright Act. Prof. Davis responded, stating Federal law currently fails in three ways: 1) consistency, 2) efficiency, and 3) adaptation. California could lift the forum with consistent rulings under California law.? Efficiency in enforcement could help industries. He noted the market is dynamic and changing, especially with big tech, Ai, and climate change, with paralysis in congress, warning that we cannot rely on the Federal government to produce new rules.
The panelists engaged in a lively discussion regarding the European Union’s “Dominance Standard” and New York’s “21st Century Antitrust Act” (N.Y. Senate Bill 2021-S933C) that incorporates the lower thresholds (40% of Market Share versus 60-65% under current U.S. antitrust law) but which has not passed in the N.Y.’s legislature. Ms. Foote commented that if Section 2 of the Sherman Act was working properly, or if the U.S. Congress was likely to adopt its legislative reforms, California would not need to consider this change. However, California already has unique privacy rules, and competition rules. The state could also take aim at big tech. Ms. Foote reinforced that vibrancy and innovation are good things, but not at a cost of monopolization.
Ms. Johnson asked the panel about California’s role in merger and acquisition review. Texaco eliminated the Cartwright Act as an option for bringing merger challenges and review actions. (Texaco, supra, 46 Cal.3d 1147 at 1169-1170.) Ms. Foote noted most mergers and acquisitions go unchallenged. The panel discussed whether the law should allow merger challenges by the AG.? The panel also considered whether pre-merger notification to state AGs would replace the current voluntary protocol. Prof. Davis commented that these types of revisions to California’s laws could strengthen judges to uphold enforcement.
Prof. Davis emphasized that plaintiff’s lawyers need to look at the standards under California law, they are often lower than Federal precedents and to explore state court in California as an option.? Federal courts may give short shrift to state laws, and often interpret state laws to look like federal law.? Mr. Chiu commented that it appears Cartwright and UCL cases are often an afterthought.? He advised practitioners to look at cases where Sherman Act claims fail, but the Cartwright claims prevail.? Overall, the panel gave an informative view of the possible areas of revision or reform to California’s state antitrust laws.
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The Implications of Artificial Intelligence and Competition Law By Ferdeza Zekiri
The esteemed panel included Robert J. Herrington of Greenberg Traurig, LLP, John Newman, a Professor of Economics and Regulation of Digital Markets at Miami School of Law, Karen Silverman of The Cantellus Group, Joseph Saveri of Joseph Saveri Law firm, and moderator Lin Kahn of Jones Day.?
In exploring the intersection of Artificial Intelligence (“AI”) and Antitrust law, the panelists shed light on the challenges and considerations in regulating AI within the framework of antitrust legislation and whether antitrust laws are equipped to handle its implications. Ms. Silverman emphasized that while AI is indeed here to stay, it is often surrounded by hype, particularly in sales and marketing. Mr. Saveri clarified that AI is not human sentience but a set of software and programs using advanced mathematical and statistical methods, as well as computing power, to solve problems rapidly. The critical point emphasized was that regulating AI should not only center on the technology itself but also on issues such as access and utilization, framing it as a dynamic “people sport.”
Professor Newman highlighted that AI is not merely a use case but a foundational technology, posing questions similar to those raised by other foundational technologies. These questions revolve around whether AI will be used for good or bad, and if misused, whether antitrust laws are capable of addressing such issues. Regarding specific antitrust considerations, the seminar delved into different scenarios, including collusion facilitated by independently designed AI and the potential impact of AI on mergers and acquisitions, and potential unilateral conduct using AI to entrench or extend dominance.
Mr. Saveri emphasized the flexibility of antitrust laws to adapt to market changes over time. The discussion revolved around evaluating exchanges of information facilitated by AI, distinguishing between public and confidential agreements, and assessing whether AI limitations are adhered to. The challenge lies in determining whether competitors are using AI to collude or facilitate collusion, requiring a careful examination of exchanged information, reporting, and mutual understandings between competitors.
The discussion also addressed the dual nature of AI tools, acknowledging their potential for both positive and negative impacts. While some AI tools enhance business operations and decision-making, concerns were raised regarding biases and the quality of AI outputs. Ms. Silverman underscored the significance of responsible AI, advising clients to consider ethical implications in addition to antitrust concerns. Looking forward, the panelists contemplated the evolving landscape of antitrust enforcement in response to AI proliferation, the necessity for adapting to changing business models, and the role of private enforcement in addressing gaps where regulators might take time to catch up. The overarching theme was a critical examination of how antitrust laws can effectively navigate the complexities introduced by the widespread adoption of AI technologies.
Antitrust Ethics in Action By Betsy Manifold
Moderator Kenneth R. O’Rourke conducted a lively and fun panel addressing several ethical dilemmas facing antitrust and UCL practitioners.?? A troupe of practitioners (Cora Allen, Rachel Brass, Lin Chan, Qianwei Fu, Robert Gralewski, Minna Lo Naranjo, Stephen McIntrye, Adam Wolfson, and Christopher Yates) acted out scenarios raising ethical issues. After each vignette, Mr. O’Rourke directed questions to the audience for a vote and then walked through the applicable ethical rule and case law.?? It was innovative and entertaining for all!
The five scenarios included the following ethical issues.?
The first scene was a meet and confer between the parties over a so-called Apex deposition when a busy CEO “knows nothing” and does not wish to comply with the proposed notice.? The discussion included: whether the deposition was frivolous; whether the CEO possessed unique relevant knowledge; whether there was a less intrusive means to obtain the discovery; and whether particularized harm or extraordinary circumstances existed if the CEO was forced to testify.
The next scene was another meet and confer on a motion to compel litigation funding documents.?? The overriding issues were whether litigation funding itself was ethical and whether such documents were privileged (work product prepared in anticipation of litigation) or not privileged (third party documents with no attorney-client privilege protection).???
The third scene joined a team meeting of outside counsel after the Company’s GC called to inform the team that certain important e-mails that the Defendant Company should have produced to plaintiffs had been deleted.? The discussion focused on whether reasonable steps were taken to preserve the e-mail and if the lost ESI can or cannot be restored through other means.?? The team walked through their proposed strategy:? gather all facts as soon as possible; communication with client about the risks including a possible spoliation claim; develop an appropriate defense strategy to respond; and inform plaintiffs and the court about the issue.
The final two scenes focused on a series of meet and confers re: counsel’s contact with unnamed class members and plaintiffs’ contact with defendants’ former employees including an oral argument before Actor-Judge Gralewski. As to absent class members, after class certification, the ethical dilemma focuses on the power disparity between the unnamed class members and defendants in order to decide if certain prohibitions should be imposed.? As to former employees, plaintiffs generally can contact former employees but not about everything.? The “not everything” boundaries can raise difficult ethical considerations.????
Judges Panel: Managing Complex Antitrust and Unfair Competition Law By Erin Tramontano
Miss the Golden State Institute, hosted by the Antitrust and Unfair Competition Law Section of CLA? Not to worry! We've compiled the most epic moments from the fall's most exciting event.Thank you to the Speakers:
During this highly regarded panel, the speakers provided judicial insight on how the bench handles case management, case development, and discovery.
Hon. Thompson first turns to the jury instructions to get “the rub” of the case and sets the ADR deadline in conjunction with setting discovery and expert discovery cutoffs.? This allows parties an opportunity to resolve the case before incurring large costs.? If the first ADR is unsuccessful, Hon. Thompson will collaborate with counsel to identify the main issues.?
Hon. Chen agrees, starting with jury instructions at the outset assists with sequencing the stages of litigation and scope of discovery thereby allowing for early ADR.? If there is a pending Motion to Dismiss, Hon. Chen will not completely stay discovery unless there is a jurisdictional or statutory reason for the dismissal.? In the interim, if there is proposed e-discovery, he will work with the parties to identify search terms and work on other discrete issues.? He will not, however, necessarily allow for full contention interrogatories or highly voluminous discovery.
Hon. Hixson explained he resolves discovery issues after the first Case Management Conference and staging discovery must be carefully thought out.? Doing so can later limit the fights based on what stage of discovery the parties are in.? Hon. Hixson does hold hearings on discovery motions but will start with a short joint letter brief to identify key issues and then set a more formal briefing schedule, if needed.? If the issues are straight forward, then no formal hearing is required.
Hon. Chen was asked about lessons learned from the In re HIV Antitrust Litigation where there are case management challenges, especially when going to trial, due to the many classes and sub-classes.? Problems he sees are parties attempting to “pre-try” too many issues through Motions in Limine and not streamlining exhibit and witness lists.? He uses the bellwether process to obtain a sampling of document objections.? This prompts parties to try to understand how he will rule at trial.? Overall, Hon. Chen advises counsel to organize opening statements to educate a jury with a clear roadmap.
The judges ended discussing what makes an excellent advocate along with words of caution.? They agree they value an attorney who can acknowledge bad facts or lower court decisions not directly in their favor.? “Invariably your opponent has already pointed out these issues” so a lawyer that can identify and speak directly to bad facts or law is more effective and credible.? Pet peeves include citing unpublished cases or other judges without providing how these rulings are binding rather than persuasive.? Having a lack of preparation, being untimely, and lacking decorum especially in a post-covid Zoom environment were also cautioned against.? Being familiar with the local rules is also crucial to avoid procedural pitfalls.??
The judges also unanimously promote allowing younger attorneys to present oral argument, even if just on certain issues.? This gives younger attorneys valuable experience and creates better informed oral argument.? The judges stated they can tell if the ones arguing took the depositions or wrote the brief.? They echoed this into trial advocating for younger colleagues to examine witnesses.? The judges further promoted the importance of mentorship which made a significant impact on all their careers.
What a great read, Antitrust and Unfair Competition Law Section of the California Lawyers Association! Thank you for hosting an incredible event, as usual!