Sunday, May 31, 2009

Whistleblower’s Deposition Video Permitted in Valassis v. News America Lawsuit

Deposition testimony from News America Marketing whistleblower Robert Emmel will be admitted in the Valassis v. News America Marketing trial currently being conducted in Michigan state court, reports BNET.

Over News America's objection, Judge Sapala ruled that the videotaped deposition testimony would be allowed into the trial. Mr. Emmel testified in the Floorgraphics trial that News America engaged in an anti-competitive campaign to take contracts with retailers away from competitors, and charged manufacturers for ads that were never placed. He also testified that News America's CEO threatened to fire any employees who were uncomfortable with News America's aggressive tactics.

According to one source, the deposition testimony that will be played in the Valassis trial comes from the Insignia v. News America lawsuit, in which Insignia has made similar allegations of anti-competitive tactics by News America.

News America has gone to great lengths to suppress Mr. Emmel's testimony, suggesting that News America is very concerned about its potential impact in the Valassis and Insignia litigation. As reported previously, News America sued Mr. Emmel in federal court in Atlanta for violating a non-disclosure provision of a separation agreement, and won an injunction preventing him from making any further disclosures of confidential News America information to third parties. Mr. Emmel is appealing that ruling.

Related posts.

Thursday, May 28, 2009

Airline Passengers File Putative Class Action Lawsuit Against Delta Air Lines and AirTran Airways For Alleged Collusion Regarding Checked Baggage Fees

Delta Air Lines and AirTran Airways were served yesterday with a complaint filed by Kotchen & Low LLP accusing the airlines of colluding regarding the imposition of a $15 first checked bag fee. Plaintiffs Brent Avery and David Watson are Delta and AirTran passengers who paid the fee that both airlines announced in November 2008 for flights taken on or after December 5, 2008.

Delta and AirTran both have hubs in Atlanta and are each other’s primary competitors. Plaintiffs allege that the unilateral imposition of a first bag fee on consumers would have been against each airline’s economic self-interest, as the airline would have lost customers to its competitor if it increased fees. By acting in concert, however, both airlines benefited from increased revenues without any increased expenditures.

The complaint alleges that the scheme was initiated when AirTran invited Delta to collude in an investor conference call. AirTran’s CEO stated that he wanted to impose a first bag fee, that AirTran had put the technological capability in place to implement the fee, and that AirTran would follow suit if Delta enacted a first bag fee:

We have the programming in place to initiate a first bag fee. And at this point, we have elected not to do it, primarily because our largest competitor in Atlanta [i.e., Delta], where we have 60% of our flights, hasn’t done it. . . . I think we prefer to be a follower in a situation rather than a leader right now.

Robert Fornaro, AirTran Investor Call (Oct. 23, 2008). Just over a week later, on November 5, 2008, Delta announced that it would begin charging passengers a $15 first bag fee, which Plaintiffs allege was an acceptance of AirTran’s invitation to collude. As promised in the conference call, AirTran followed Delta’s lead, and announced the following week that it would impose the same $15 fee, effective the same date as Delta’s fee.

As a result of the collusion, Plaintiffs allege that passengers have been charged tens of millions of dollars in anti-competitive fees. “Because the airline industry has so few competitors, especially in specific markets, it is highly susceptible to collusion,” stated attorney Daniel Low, a partner with Kotchen & Low LLP, a law firm representing the Plaintiffs. Low added, “several cases have been brought against airlines in recent years accusing them of conspiring to raise prices by signaling future pricing intentions, and we hope that our lawsuit will help consumers by discouraging such unlawful practices.”

In addition to Kotchen & Low LLP, Plaintiffs and the putative class are represented by Richardson, Patrick, Westbrook, & Brickman, LLC, McCulley McCluer PLLC, and Conley Griggs LLP.

Related articles: Bloomberg, Atlanta Journal-Constitution, Orlando Sentinel, Orlando Sentinel Blog, Courthouse News, CompLaw360 (subscription).

Wednesday, May 27, 2009

Valassis v. News America Marketing: Trial Begins

Trial in a lawsuit between Valassis and News America Marketing is scheduled to begin today in Michigan state court, but Judge Sapala rejected a request for a television camera in the courtroom, reports BNET.

The trial is the first of three related lawsuits by Valassis against News America that collectively seek over $1.5 billion in damages for antitrust and related violations. The Valassis trial follows on the heels of a settlement in Floorgraphics v. News America, in which an in-store advertising company made similar claims of anti-competitive conduct by News America. The Floorgraphics lawsuit settled after the first few days of testimony, including damaging testimony from former News America employee Robert Emmel. Mr. Emmel reportedly will not testify in person at the Valassis trial, after News America won an injunction against him for disclosing confidential News America information to government officials.

Both parties requested the exclusion of cameras from the courtroom, which will impede media coverage of the trial.

Related posts.

Wednesday, May 20, 2009

Price Discrimination Law Violated by Manufacturer and Distributor

A federal court in Pennsylvania recently found that Michael Foods, Inc. (a food manufacturer) engaged in price discrimination in violation of the Robinson-Patman Act by selling eggs and potatoes at higher prices to Feesers, Inc. (a food distributor) than to Sodexho, Inc., which is Feesers' primary competitor. See Feesers, Inc. v. Michael Foods, Inc., No. 1:04-cv-576, 2009 WL 1138126 (M.D. Pa. April 27, 2009) (.pdf order). The court also found that Sodexho induced the discriminatory pricing in violation of the Robinson-Patman Act. The court reasoned that Sodexho received from Michael Foods substantially lower prices over time compared to Feesers, which put Feesers at a competitive disadvantage. The court ordered Michael Foods to no longer offer discriminatory prices and ordered Sodexho to no longer induce or receive discriminatory prices.

The Michael Foods federal court decision signals that the Robinson-Patman Act is alive and well and can be a powerful tool to ensure a level playing field for retailers, wholesalers, and distributors. Before Michael Foods, many in the industry have viewed the Robinson-Patman Act as outdated and relatively unenforced. As a result, compliance with the Act has grown lax. But the Michael Foods decision demonstrates that the Act continues to have teeth and can be used to remedy instances in which retailers, wholesalers, or distributors are put at a competitive disadvantage because they are not receiving manufacturer discounts and allowances at levels commensurate with their competition. In the wake of Michael Foods, industry stakeholders should expect to see more Robinson-Patman cases in the future.

Tuesday, May 12, 2009

Senate Antitrust Subcommittee to Hold Hearings on Minimum Resale Pricing

The Senate Judiciary Committee's Subcommittee on Antitrust, Competition Policy and Consumer Rights will hold a hearing next week on proposed legislation that would bar minimum resale pricing imposed by manufacturers.

The hearing will be held May 19 at 2:30 p.m., and is entitled: "The Discount Consumer Protection Act: Do We Need to Restore the Ban on Vertical Price Fixing?"

The House Judiciary Committee's Subcommittee on Courts and Competition Policy held a similar hearing on April 28, titled "Bye Bye Bargains? Retail Price Fixing, the Leegin Decision, and Its Impact on Consumer Prices." Testimony from that hearing is available here.

Saturday, May 2, 2009

Maryland Bans Minimum Resale Pricing

In a move that could affect retailers and manufacturers across the country, Maryland recently enacted a law prohibiting resale price maintenance. (WSJ).

The law was enacted April 14 and goes into effect on October 1, 2009. The law provides:

A contract, combination, or conspiracy that establishes a minimum price below
which a retailer, wholesaler, or distributor may not sell a commodity or service
is an unreasonable restraint of trade or commerce.

Md. Code, Commercial Law, § 11-204(B).

The new pricing law essentially restores the law regarding minimum resale pricing to how it existed prior to the Supreme Court's 2007 decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc., which held that it was not inherently anti-competitive for a manufacturer to dictate minimum pricing to retailers. Rather, minimum pricing could be acceptable under the rule of reason, as the effect could be to promote inter-brand competition.

While state antitrust law does not always follow federal antitrust law, Maryland is one of a number of states with a statute providing that state court interpretations of state antitrust law should be guided by federal courts' interpretations of federal antitrust statutes. See Md. Code, Commercial Law, § 11-202.

The Maryland law only affects retailers doing business in Maryland, but this includes transactions in which Maryland consumers make internet purchasers from out-of-state retailers. Thus, the impact of the law could have repercussions for manufacturers and retailers across the country.

Moreover, the implementation of the Maryland law could be a prelude to broader legislative reform, as there has been substantial criticism of the Leegin decision. The American Antitrust Institute sponsored a conference on December 4, 2008 criticizing Leegin as harmful to consumers (reported here), and the FTC recently held workshops regarding how resale price maintenance could harm consumers (reported here and here).

There is a bill pending in Congress – the Discount Pricing Consumer Protection Act, S.148 – that is similar to the Maryland law and is likely to receive hearings next month. That bill states that its purpose is "to correct the Supreme Court's mistaken interpretation of the Sherman Act in the Leegin decision."


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