An extract from The Public Competition Enforcement Review, Edition 13

Antitrust: restrictive agreements and dominance

i Significant casesGoogle

On 20 October 2020, the DOJ and a group of states filed a complaint against Google (which was later amended) alleging the company violated Section 2 of the Sherman Act by illegally maintaining a monopoly in markets for general search services, search advertising and general search text advertising.49 The complaint cites Google's agreements that allegedly: (1) 'lock up the preset default positions for search access points on browsers, mobile devices, computers, and other devices'; (2) require the 'preinstallation and prominent placement of Google's apps'; (3) 'tie Google's search access points to Google Play and Google APIs'; and (4) implement other restrictions. The complaint seeks injunctive relief.

Later, on 16 December 2020, a separate group of states filed a monopolisation suit against Google in a federal court in Texas.50 This complaint describes a host of behaviour that has led to an alleged unlawful monopolisation in a number of advertising-related markets.

Facebook

On 9 December 2020, the FTC and a group of states filed separate but relatively similar complaints against Facebook, alleging that the company monopolised a market for 'personal social networking services' in the United States in violation of Section 2 of the Sherman Act.51 The states' complaint also alleges that Facebook violated Section 7 of Clayton Act when it acquired Instagram and WhatsApp. Both complaints seek injunctive relief in the form of changes to Facebook's offending business practices and possible divestiture of Instagram and WhatsApp. The FTC alleges that Facebook's market share is in excess of 60 per cent. The complaints focus on several examples of alleged exclusionary conduct, including: buying companies that present competitive threats to Facebook; imposing restrictive policies that unjustifiably hinder actual or potential rivals that Facebook does not or cannot acquire, such as conditioning access by third-party apps through application programming interfaces (APIs) on the apps' agreeing to not work with Facebook competitors and to not provide the same core functions that Facebook does; and placing restrictions on exporting data to competing social networks or an app that replicates a Facebook core function.

The lawsuits allege that the company's actions have decreased user choice, quality and innovation; and supressed competition for the sale of 'social advertising', resulting in higher prices to advertisers and decreased choice, quality and innovation. The states' complaint focuses on alleged degradation of privacy protections and options, and contains an allegation regarding the spread of misinformation and objectionable content.

Pharmaceuticals

The FTC and the State of New York filed suit against Vyera Pharmaceticals and Phoenixus and their former owners and executives Martin Shkreli and Kevin Mulleady for allegedly violating Sections 1 and 2 of the Sherman Act and New York state law by blocking 'lower-cost generic competition to Deraprim, an essential drug used to treat the potentially fatal parasitic infection toxoplasmosis' and maintain[ing] a monopoly on Deraprim'.52 According to the complaint, the defendants 'executed an elaborate, multi-part scheme to block generic entry', including imposing resale restrains on distributors which hamper the FDA approval process for potential competitors, cut off supply of the drug's active ingredient and prevented distributors from selling sales data to third parties.53 The complaint alleges that 'the purpose and effect' of this 'has been to thwart potential generic competition and protect the Daraprim revenues resulting from Vyera's shocking price increase'.54 Six more states joined the complaint after it was filed.

Paramount Decrees

On 22 November 2019, the DOJ announced that after 'a thorough review, including a 60-day public comment period', it filed 'a motion to terminate the Paramount Consent Decrees, which for over 70 years have regulated how certain movie studios distribute films to movie theatres'.55 According to the DOJ, the Paramount 'decrees required the movie studios to separate their distribution operations from their exhibition businesses. They also banned various motion picture distribution practices, including block booking (bundling multiple films into one theatre license), circuit dealing (entering into one license that covered all theatres in a theatre circuit), resale price maintenance (setting minimum prices on movie tickets), and granting overbroad clearances (exclusive film licenses for specific geographic areas)'. In seeking to terminate the decrees, the DOJ observed that '[n]ew technology has created many different movie platforms that did not exist when the decrees were entered into, including cable and broadcast television, DVDs, and the Internet through movie streaming and download services.' In August 2020, a federal court in New York terminated the decrees.56

Real estate broker commissions

After raising concerns that certain rules of the National Association of Realtors (NAR) – a trade association of real estate agents – violated Section 1 of the Sherman Act, the DOJ announced that it had entered into a proposed settlement requiring the repeal or modification of those rules. Specifically, the DOJ challenged rules that allegedly prohibited the disclosure of buyers' broker commissions to buyers, allowed 'buyer brokers to misrepresent to buyers that a buyer broker's services are free', limited access to homes for sale to brokers affiliated with a NAR multiple listing service, and allowed buyer brokers to filter listings based on the offered commission.57 The changes required by the settlement will, according to the DOJ, 'provide greater transparency to home buyers about the commissions of brokers representing home buyers (buyer brokers)', and will cease misrepresenting that buyer broker services are free, eliminate rules that prohibit filtering multiple listing services (MLS) listings based on the level of buyer broker commissions, and change its rules and policy which limit access to lockboxes to only NAR-affiliated real estate brokers.58

ii Trends, developments and strategies

The agencies have continued their enforcement of civil anticompetitive conduct matters with headline-grabbing suits against Google and Facebook. It remains to be seen whether or not the agencies will bring enforcement actions against other technology platforms, though 'big tech' antitrust issues are sure to be a continued source of discussion and debate in the coming year.

iii Outlook

The monopolisation cases against the technology platforms represent the first Section 2 cases brought by the agencies in a number of years and could signal a heightened vigilance in investigating and prosecuting monopolisation offences. We will watch with interest to see whether the agencies, under new leadership, will pursue additional such cases.