Mass Law Blog

Judge Stearns: No Market Power, No Illegal Tying

U.S. District Court Judge Richard Stearns has issued a summary judgment decision dismissing AVX Corp.’s claims of an an antitrust violation by Cabot Corporation, based on allegations of illegal tying by Cabot.

A tying arrangement is where a seller says, “I’ll sell you product A, but only if you also buy product B.”  Product B is said to be “tied” to product A, the “tying product.”  A little thought and common sense would cause even an economist to conclude that if the seller doesn’t have market power in product A, rather than be forced to buy product B a rationale buyer will look around for another seller, who can sell it product A without the “tie.”  In fact, this is just the conclusion the Supreme Court reached in the Illinois Tool case in 2006.

In the AVX v. Cabot case Judge Stearns noted that “AVX offers no evidence that Cabot had a sufficiently dominant market position to ‘force’ it into a multi-year purchase agreement for a product that it did not want.”  The fact that AVX was unable to satisfy this element of an illegal tying arrangement doomed its antitrust claim.

If this wasn’t enough, Judge Stearns also found that AVX was unable to produce reliable evidence of damages, another essential element of its claim.

Based on Judge Stearns’ opinion, it appears that AVX missed the mark in this case by a large margin.  While the case doesn’t break new ground, it is a good reminder of the burden a plaintiff faces when it claims illegal tying, especially following the Supreme Court’s 2006 decision in Illinois Tool.

Here is a link to the case, AVX Corporation v. Cabot Corporation.

Rambus Files Its Opposition to Cert.; Gatehouse/New York Times Copyright Case Settles

[Update: the FTC did file a reply brief.  Link here]

All the briefs are in on the FTC petition for cert in its antitrust case against Rambus, (unless the FTC decides to file a reply brief, which is unlikely to change things much). I’ve added the Rambus opposition to the Rambus Group page on, here. Now its time for the antitrust community to hold its breath and see whether the Court takes the case. Some knowledgeable commentators have opined that FTC/Rambus case has the best chance of any antitrust case obtaining review this year, but that plus a dime will get you …. well, nothing I guess. If the petition is allowed, it will be very exciting times for antitrust and standards setting law and policy wonks.

In federal court in Boston the Gatehouse Media v. New York Times case (described in these two (1, 2) earlier posts) has settled, as I suspected it would. The settlement agreement (or a preliminary agreement which is binding in the event a “definitive agreement” is not reached), is on, here. It appears that this agreement was not intended to be made public (at least not yet), but apparently someone leaked it, so it’s public now.

As I read this, Gatehouse prevailed, hands down over the NYT/ Gatehouse will erect “technical solutions” to prevent from copying the Gatehouse original content, and will respect those “solutions.” If a “solution” proves ineffective, Gatehouse will notify, and will back off right away. Why the parties went about it in this manner (which implicates DMCA-like anti-circumvention) I’m not sure, but I appears to accomplish the same result as if the NYT/ simply said “we won’t copy your ledes.”

From what I can seek, has already dropped its ledes and links to the Gatehouse sites, at least based on a quick sampling.

[postscript: here is a link to the report of Gatehouse’s copyright expert, Douglas Lichtman, Professor of Law, UCLA. The report is an analysis of the case under copyright fair use principles, and a rebuttal of the NYT/’s unclean hands argument]

Ninth Circuit: Refusal to Allow Embedded Videos and Links in MySpace Not a Sherman Act Violation

Ninth Circuit: Refusal to Allow Embedded Videos and Links in MySpace Not a Sherman Act Violation

You would think that in a capitalist economy the right of one business to to say to another “I don’t want to deal with you” would be close to sacrosanct.  And, you would be right, with qualified exceptions in cases where the party refusing to deal has monopoly power.  Even then, the Supreme Court has narrowed the “duty to deal” to  fact situations so limited that antitrust liability can be avoided with careful planning.

The two leading Supreme Court cases in this area of the law are Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U. S. 585, 601 (1985) and Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004).  Post-Trinko, the consensus of the courts is that “refusal to deal” claims are viable only where there was no voluntary prior course of dealing between the parties, where the monopolist’s  conduct increased its short term profits, or where the refusal to deal is used to monopolize an adjacent market.

“Refusal to deal” cases involving Internet companies have been rare, but in a recent decision the 9th Circuit held that exclusionary conduct by, directed at another social networking site,, did not constitute monopolization under the federal antitrust laws.

Both and are “social networking” websites.  MySpace is very well known, Vidilife site much less so., owned by LiveUniverse, Inc., allows users to post videos on its site.  Some of those users embedded their videos in their MySpace web pages (a comon practice on social networking sites).  MySpace deleted the videos and references to LiveUniverse sued in federal district court in California, charging MySpace with attempted monopolization and monopolization under the federal antitrust laws.

The district court found that’s actions did not constitute an illegal “refusal to deal,” and the 9th Circuit upheld this ruling.  At the heart of the 9th Circuit’s ruling is the fact that LiveUniverse did not (and could not) allege a prior course of dealing between the two companies or that MySpace was forsaking short-term profits, as required by Trinko.  In addition, the court held that LiveUniverse had failed to adequately allege causal antitrust injury.

There is some back story to this case.  LiveUniverse’s CEO, Brad Greenspan, is the the former CEO of eUniverse/Intermix–the company that sold MySpace to News Corp in 2005 for a half-billion dollars.  Apparently, there is some bad blood between Greenspan and left over from that transaction, suggesting that may have been acting from personal motives.  If so, it was an expensive exercise in ego gratification for both companies.

FTC v. Rambus: the Issues in a Nutshell

I’d been planning to post a short summary of the legal issues in the FTC’s petition to the Supreme Court in the Rambus case, but I’ve noticed that Professor Michael A. Carrier of Rutgers University School of Law has done this, and done it brilliantly in a post published on the Patently-O Blog, so I stand down and defer to him:

In December 2008, the Federal Trade Commission (FTC) filed a petition for certiorari in the Rambus case. There are two central issues in the petition. First, what is the standard of causation needed to connect deceptive conduct with the acquisition of monopoly power? And second, do higher prices in standard-setting organizations (SSOs) present competitive harm? . . . [continue reading]

Amici Briefs Supporting Supreme Court Review in FTC v. Rambus

Amici Briefs Supporting Supreme Court Review in FTC v. Rambus

When old engineers (and old lawyers) sit around decades from now reminiscing about patent and antitrust law in the late 1990s and early 2000s, the name of Rambus is sure to come up.  The topic will not be the Rambus DRAM (or RDRAM) chip technologies, but rather the massive volume of litigation that Rambus set off as result of its alleged “patent hold-up” actions and its patent enforcement efforts.

Rambus, the lawyers on either side of its many cases, the courts, antitrust experts and economists, and of course investors in Rambus’ stock (a particularly loyal and attentive group), have debated the pros and cons and nuances of these lawsuits for years, and during this season (late 2008) an important and timely Rambus case is taking a run at the Supreme Court.

The FTC adminstrative action against Rambus, which bothAndy Updegrove and Ihave written about at length in the past, involves somewhat arcane issues of single-firm conduct under Section 2 of the Sherman Act. However, the case also exists at a level that doesn’t require a degree in law and economics to understand – Rambus is accused of of withholding from an important standards-setting organization (SSO)  the fact that it had pending patent applications, resulting in adoption of the Rambus technology as a standard, following which Rambus used it patents to “hold up” the industry for unreasonable royalties.

What a wonderful blend of issues for lawyers and economists to dive into: patent law, antitrust law, conspiracies to deceive, very large sums of money (in the form of royalties potentially owed to Rambus by industry players), and all of this during the technology and stock market vortex of the 1990s and 2000s. Is it any wonder that Rambus’ litigation has attracted so much attention?

In context, the Federal Trade Commission case has been just one of many fronts on which Rambus has been forced to battle.  As discussed here, the Federal Trade Commission found that Rambus’ actions toward the SSO was deceptive and violated the antitrust laws by enabling Rambus to gain monopoly power. The Court of Appeals for the D.C. Circuit reversed the FTC early this year on highly technical legal grounds that involved what some observers thought was a misapplication of the antitrust laws. However, no matter which side you’re on, it’s difficult to deny that the case raises legal issues that could benefit from clarification by the Supreme Court.  Now, the FTC has asked the Supreme Court to review the case.

Persuading the Supreme Court to review a case is harder than getting into Harvard.  In its most recent term the Court decided about 70 cases, out of over 7,000 appealed. However, like admissions at Harvard, the odds aren’t quite so bad once you eliminate the cases that had no chance of review and shouldn’t have been appealed in the first place – in effect “Hail Mary” appeals.

Many people are hopeful that the FTC/Rambus case will be accepted by the Court.  The FTC/Rambus case certainly falls within the “first in class, perfect SAT scores” category, to stretch the analogy.  This is a rare opportunity, these advocates believe, for the Court to clarify the law of “single firm” monopoly conduct. And, the standards setting industry believes that the case presents critical issues necessary to the health of standards setting, an area of domestic and international cooperation whose importance is hard to overstate.  On the opposite side of the case, Rambus advocates argue that Rambus is the victim of a government witch hunt that lacks any merit, and conclude that the D.C. Circuit was correct to reverse the FTC and set matters straight.

I’ve set up an FTC v. Rambus certiorari petition group page on to collect filings on this appeal. The first step for the FTC, of course, is to persuade the USSC to take the case. At present, the  Rambus group pageholds the D.C. Circuit decision, the FTC’s cert petition, and the amici briefs that have been filed to date.

In addition to the petition of various companies urging the Court to take the case (Hewlett Packard, Cisco, Sun and Oracle), the Rambus group page holds the petition filed by our firm last week, which was written by Andy Updegrove. The SSO petition was written on behalf of 19 standards setting organizations representing over 13,000 members, and it emphasizes the practical importance of this appeal – its importance to the “law of SSOs”, for lack of a better term.

A pdf copy of the SSO petition is here, and a copy on is embedded below.

Will the Court take this case?  We should know soon. I’ll continue to add amici petitions and, of course, Rambus’s opposition to the request for Supreme Court review, which will be forthcoming soon, to the Rambus group page, as they appear.

Advanced Media, et al., Amicus Brief in FTC v. Rambus

"Excuse Me, What Isle is the Chutzpah In?"

"Excuse Me, What Isle is the Chutzpah In?"

Whole Foods, in the wake of the D.C. Circuit’s decision reinstating (in a manner of speaking) the FTC’s challenge to the Whole Foods – Wild Oats merger, has filed a most unusual lawsuit in the federal district court in the District of Columbia. Whole Foods is seeking to terminate the FTC’s administrative proceedings investigating the merger. The stated grounds are violation of the Due Process Clause and the Administrative Procedure Act (the APA).

Here is a link to the complaint (

This lawsuit is unusual, to say the least. The essence of Whole Foods complaint seems to be that the FTC has prejudged the case and set an unreasonably aggressive discovery schedule. I’m not aware of any grounds for this legal theory at this stage of an administrative proceeding, but I’m sure that Whole Foods’ lawyers have done their homework, and that these claims have some legal merit. Stay tuned.

Federal Trade Commission Seeks Supreme Court Review of D.C. Circuit’s Decision in Rambus Case

The FTC’s decision to seek Supreme Court review in this case was widely expected, but nevertheless, it’s interesting to see that the FTC in fact did what many antitrust practitioners hoped it would do. For background on this matter, see this posting from May of this year, which discusses the background of this case in some detail. Additional posts discussing various aspects of Rambus are here, here, here and here. The D.C. Circuit decision that is the subject of the appeal is here.

Not surprisingly, the FTC’s petition for certiorari argues that standard-setting is a ubiquitous and important economic activity, and that the D.C. Circuit’s decision leaves aspects of that process in legal limbo, due to a conflict with another circuit and a misreading of Supreme Court precedent. The FTC also suggests that this case is an opportunity for the Supreme Court to address the thorny issues of causation and competitive harm under Section 2 of the Sherman Act.

The “Questions Presented” section of a cert petition is always important, since it is intended to summarize, in very few words, the key issue that the petitioner thinks will interest the Court in accepting the appeal. To be effective, the Questions Presented must be both concise and persuasive. The Questions Presented in the FTC petition are as follows:

1. Whether deceptive conduct that significantly contributes to a defendant’s acquisition of monopoly power violates Section 2 of the Sherman Act.

2. Whether deceptive conduct that distorts the competitive process in a market, with the effect of avoiding the imposition of pricing constraints that would otherwise exist because of that process, is anti-competitive under Section 2 of the Sherman Act.

This will be a very closely watched and hard fought petition, with many amicus briefs on either side of the issue. Acceptance rates by the Court are always in the single digits, but this case presents important issues of national economic policy, and therefore it’s reasonable to think that the odds in favor of Supreme Court review are much higher than average.

"Why Antitrust Is More Interesting Than Any Other Area of Law"

OK, OK, this is not my blog post title. It’s the title of a post by Professor D. Daniel Sokol over at the Antitrust & Competition Law Policy Blog. He provides ten reasons in support of this statement, but undermines his argument (which I hope is at least a bit facetious), by stating that tax law is second. (Not, not, not.)

Of course, he shows what a nerd (wonk?) he is by not only listing the ten reasons from 1 to 10 (rather than in reverse, à la David Letterman), but failing to inject even the slightest bit of humor into his post. Antitrust lawyers aren’t known for their sense of humor or for humility.

As an antitrust aficionado myself, I am inclined to agree with him. I certainly did when I was in law school.

Hmmm … I Guess Two Weeks Notice is Enough

From a Department of Justice press release, November 7, 2008 –

WASHINGTON — Attorney General Michael B. Mukasey issued the following statement on the resignation of Assistant Attorney General Thomas O. Barnett of the Antitrust Division:

“Tom Barnett has been an effective enforcer of the antitrust laws and a strong advocate for consumers. Under his leadership, the Antitrust Division has increased cartel enforcement to record levels with unprecedented fines and prison sentences, improved the efficiency and efficacy of its merger enforcement, and enhanced cooperation with our foreign counterparts.”


Barnett was confirmed by the Senate as Assistant Attorney General of the Antitrust Division on Feb. 10, 2006. He became acting Assistant Attorney General on June 25, 2005, and previously served as Deputy Assistant Attorney General since April 18, 2004.

Barnett’s resignation is scheduled to be effective Nov. 19, 2008.

Click here for full press release.

The FTC and DOJ – "So Sorry, but When it Comes to Sherman Action Section 2 Conduct, We Can’t Agree on What the Law Is, or What it Should Be"

The Federal government has two antitrust enforcement authorities – the Antitrust Division of the Department of Justice and the Federal Trade Commission. These two agencies have partially overlapping enforcement authority over civil cases, and they often collaborate in setting antitrust policy. Although the federal courts are the final arbiters of the federal antitrust laws (which are statutory, and therefore originate with Congress), the business community relies heavily on the Justice Department and the FTC to provide their views on the law. Accordingly, from time-to-time the Justice Department and FTC issue detailed joint guidelines. (Examples include: Collaborations Among Competitors, 2000; Antitrust and IP Rights, 2007; and Antitrust Licensing Guidelines, 1995).

The DOJ/FTC joint reports are a big deal – they often include lengthy hearings, prepared testimony and position papers from interested parties, proposed guidelines, revised guidelines, and so on, until (drum role ….) the big day when the final report is issued. And, as a result, these reports are given great weight by the antitrust community – and by that I mean the vast army of antitrust lawyers and economists who endeavor to understand this stuff, harmonize it with court decisions (where possible), and advise their clients on how to behave.

So, it’s no understatement to say that it is an unwelcome surprise when the federal antitrust enforcement agencies can’t agree on the law. Yet, this is what occurred when the Justice Department issued a report entitled “Competition and Monopoly: Single Firm Conduct Under Section 2 of the Sherman Act“. This mammoth, 200-plus page document followed public hearings that took 19 days stretched over a year, and included the the testimony of over 100 witnesses. The Report was finally issued in September 2008, 27 months after this process began. Broadly speaking, the Report addresses the topics of monopolization, predatory pricing, tying arrangements, refusals to deal and exclusive dealing. This is referred to as “single firm conduct” as distinguished from joint action (contracts, combinations or conspiracies) under Section 1 of the Sherman Act.

Needless to say, a Report of this magnitude and gravitas is of great interest; it provides a summary of the law to date on each topic area, discusses the hearing testimony, and then describes the federal enforcers’ views on the topic. Since the law isn’t static, these reports tell the public in which direction the enforcement authorities see the law moving and therefore where to expect enforcement activity However, although the DOJ and the FTC began this project together in June 2006, the DOJ finished alone. Why would this be?

As you may have guessed by now, the FTC disagreed with Justice, and therefore refused to join in the Report. In addition, the FTC Commissioners (those are the top folks at the FTC) issued dissenting “Statements” the same day that DOJ issued its report.

Of course, antitrust enforcement can be highly political. The Executive Branch appoints the Attorney General, who in turn implements the wishes of the President, at least most of the time. Some administrations are tough on antitrust enforcement, and others are better referred to a “anti-antitrust.” The President also appoints the five FTC commissioners, but the appointments are for seven year staggered terms, and no more than three of the commissioners may be from the same party. Traditionally, perhaps in part for these reasons, the FTC has tended to be more politically independent than DOJ. Very few Commissioners serve more than one term, and they typically fade back into academic or consulting practices when their term is up.

With Alberto Gonzalez as Attorney General, and knowing what we know now about how politicized DOJ was during the period that this report was being prepared, one can only wonder what went on behind the scenes during this process. However, law enforcement agencies don’t present their public disagreements in political terms, and here the public debate was conducted on the higher planes of economics and competition law. All four current FTC Commissioners (one seat is vacant) issued dissenting statements. Three of the Commissioners (but not the Chairman, who was more tactful than the others) argued that the DOJ had misstated the law on Section 2 conduct and had proposed legal standards that would, in their words “be a blueprint for radically weakened enforcement of Section 2 of the Sherman Act.” They disagreed on what the law is and what the law should be.

Quoting further from the Statement of the three dissenting Commissioners:

In short the Department’s Report erects a multi-layered protective screen for firms with monopoly or near-monopoly power. As an inevitable consequence, dominant firms would be able to engage in these practices with impunity, regardless of potential foreclosure effects and impact on consumers. Indeed, it appears that the Department intends for this screen to apply even when a firm uses two or more of these practices collectively, instead of just one practice individually.

Strong words from two agencies that the public expects to work out their differences behind closed doors and present a common front to the world.

This post is being published on the eve of the Presidential election. If we have a Democratic President in 2009, the law of Section 2 of the Sherman Act, as described in this Report, could soon become a footnote in American antitrust jurisprudence. However, the authors of the DOJ report, recognizing that acceptance of their views may be short-lived, might not look at the product of their labors so hopelessly. In their view, the Report may lie dormant during a Democratic administration, only to be revived at some unknown future date (perhaps as soon as four years), when its approach to antitrust enforcement returns to favor.

Google Makes the Case for its Advertising Deal With Yahoo

Here’s an interesting web page from Google entitled Facts About the Yahoo-Google Advertising Agreement. There, Google “makes the case” for its proposed deal with Yahoo, which it describes as follows:

On June 12, 2008, Yahoo! and Google announced an agreement that gives Yahoo! the ability to use Google’s search and contextual advertising technology through its AdSense™ for Search and AdSense for Content advertising programs.

Under the agreement, Yahoo! has the option to display Google ads alongside its own natural search results in the U.S. and Canada. In addition, Yahoo! can serve contextually targeted ads on its U.S. and Canadian web properties as well as on its current publisher partner sites. Yahoo! will continue to operate its own search engine, web properties and advertising services.

In addition, Yahoo! and Google agreed to enable interoperability between their respective instant messaging services bringing easier and broader communication to users.

On this web page Google presents a White Paper of sorts, in web format, with links to sections such as “what the deal means for advertisers” and “why the deal is good for competition.

It’s somewhat unusual for a company under Federal antitrust scrutiny to make a public “pitch” like this, but it’s consistent with Google’s corporate personality, which tends to be more “outward facing” than more conventional corporations.

Here’s the Powerpoint embedded on the Google page: