Antitrust law and regulatory garning

Texas Law Review

Volumn 87, Issue 4, 2009, Pages 685-729

  Dogan, Stacey L ^a   Lemley, Mark A ^a  

^a STANFORD LAW SCHOOL   (United States)

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EID: 67249125922     PISSN: 00404411     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (210)

1. See, e.g., Otter Tail Power Co. v. United States, 410 U.S. 366, 372-75 (1973) (holding that federal regulation of the electric-power industry did not inununize Otter Tail Power Company from antitrust prosecution);
2. Ne. Tel. Co. v. AT&T Co., 651 F.2d 76, 82-84 (2d Cir. 1981) (holding that regulation by the FCC did not free telecommunications companies from antitrust scrutiny).
3. See generally Philip J. Weiser, The Relationship of Antitrust and Regulation in a Deregulatory Era, 50 ANTITRUST BULL. 549 (2005) (discussing courts' treatment of antitrust law in regulated industries).
4. Ne. Tel. Co. v. AT&T Co., 651 F.2d 76, 82-84 (2d Cir. 1981) (holding that regulation by the FCC did not free telecommunications companies from antitrust scrutiny).
5. cf Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004) (pointing to the existence of regulation as a reason not to invoke the essential.facilities doctrine);
6. NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 137-39 (1998) (holding that a per se antitrust rule did not apply in a case where the defendant bought from one seller instead of another in order to avoid regulations limiting what it could charge).
7. See generally Bruce H. Kobayashi & Joshua D. Wright, Federalism, Substantive Preemption. and Limits on Antitrust: An Application to Patent Holdup (George Mason Law & Econ. Research Paper No. 08-32), available at http://www.ssrn.com/abstract=l 143602 (arguing in favor of broad antitrust deference in regulated industries).
8. See, e.g., Credit Suisse, 127 S. Ct. at 2398 (Stevens, J., concurring) ("I⋯ would hold⋯ that the defendants' alleged conduct does not violate the antitrust laws, rather than holding that Congress has implicitly granted them immunity from those laws."). The exception is Trinko, which arguably produced anticompetitive results and which certainly misinterpreted prior law. See infra text accompanying notes 31-50.
9. See Kobayashi & Wright, supra note 3, at 10-13 (arguing that courts should use restraint in applying antitrust laws to regulated conduct).
10. No. 07-512, 2009 WL 454286 (U.S. Feb. 25, 2009).
11. See id. at *3 (characterizing a "price squeeze" as when a party "simultaneously raise[sj the price of inputs and cut[sJ the retail price of the finished good"); linkLine Commc'ns, Inc. v. SBC Cal., Inc., 503 F.3d 876, 879 (9th Cir. 2007), rev'd sub nom. Pac. Bell Tel. Co. v. linkLine Commc'ns, Inc., No. 07-512, 2009 WL 454286 (U.S. Feb. 25, 2009) (stating that the defendants "for a period" charged wholesale prices that exceeded the prices that retail affiliates charged); infra subpart IV(C).
12. Indeed, Trinko itself arguably illustrates the phenomenon of monopolists abusing their positions in the face of ineffective regulatory oversight. See generally Adam Candeub, Trinko and Re-Grounding the Refusal to Deal Doctrine, 66 U. PITT. L. REv. 821, 823 (2005) ("Trinko's implication that there can be no antitrust injury from refusing to deal, i.e., provide interconnection, so long as regulation requires access, is probably not true."); Spencer Weber Wailer, Microsoft and Trinko: A Tale of Two Courts, 2006 UTAH L. REV. 741, 753-755 (questioning the effectiveness of the regulatory regime addressed in Trinko).
13. Congress could quite reasonably have wanted the antitrust laws to enforce its access regime because, for better or worse, the FCC, structurally incapable of Olympian detachment from political influence, could be seen as a poor forum to decide such disputes. Or, at the very least, Congress could have intended the threat of antitrust action to discipline the behavior of the Baby Bells.
14. Id.
15. See, e.g., Abbott Labs. v. Teva Pharm. USA, Inc., 432 F. Supp. 2d 408, 409 (D. Del. 2006) (describing allegations that Abbott Laboratories changed the formulation of a drug to prevent a generic drug from entering the marketplace).
16. See, e.g., Union Oil Co. of Cal. (Unocal), 138 F.T.C. 1,2-8 (2004) (describing Unocal's efforts to induce the California Air Resources Board to issue regulatory standards that "conferred market power upon the firm").
17. See Id. at 18-21 (discussing the Noerr-Pennington doctrine, which states that antitrust laws cannot prohibit competitors from petitioning the govermnent for anticompetitive changes of law).
18. See generally Mark A. Lemley & Carl Shapiro, Patent Holdup and Royalty Stacking, 85 TEXAS L. REV. 1991 (2007) (discussing the effect of injunction threats and royalty stacking on the patent system's ability to enhance innovation).
19. See, e.g., Fed. Prescription Servs., Inc. v. Am. Pharm. Ass'n, 663 F.2d 253, 263 (D.C. Cir.1981) ("Attempts to influence governmental action through overtly corrupt conduct, such as bribes (in any context) and misrepresentation (in the adjudicatory process), are not normal and legitimate exercises of the right to petition, and activities of this sort have been held beyond the protection of Noerr."); id. at 262 (explaining that Noerr is inapplicable to activity that "subvert[s] the integrity of the governmental process"); cf Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 509 (1988) (finding an antitrust violation based on the wholesale capture of a private standard- setting body). See generally David McGowan & Mark A. Lemley, Antitrust Immunity: State Action and Federalism, Petitioning and the First Amendment, 17 HARV. J.L. & PUB. POL'Y 293, 299 (1994) ("The Court must draw a line between state action that in some meaningful sense represents governance and state action that more closely resembles the legislature brokering benefits from one group of constituents to another.").
20. See Standard Oil Co. v. FTC, 340 U.S. 231, 248 (1951) ("The heart of our national economic policy long has been faith in the value of competition."); see also Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962) (showing that the legislative history of the Clayton Act reflects "congressional concern with the protection of competition, not competitors").
21. See Standard Oil Co. v. FTC, 340 U.S. 231, 248 (1951) ("The heart of our national economic policy long has been faith in the value of competition."); see also Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962) (showing that the legislative history of the Clayton Act reflects "congressional concern with the protection of competition, not competitors").
22. Parkerv. Brown, 317 U.S. 341, 367-368 (1943).
23. Id. at 350-52.
24. See 1 P1-IILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW ¶ 200, at 148 (3d ed. 2006) ("[Ajntitrust's intervention into the political process is inappropriate once it is determined that the government itself rather than a private actor is the relevant decision maker."). Because this rule derives from concerns about federalism and state sovereignty, it does not necessarily apply to acts by municipalities. See Cmty. Commc'ns Co. v. City of Boulder, 455 U.S. 40, 52 (1982) ("Our precedents thus reveal that [a municipality's actionj cannot be exempt from antitrust scrutiny unless it constitutes the actions of the State⋯ itself in its sovereign capacity, see Parker, or unless it constitutes municipal action in furtherance or implementation of clearly articulated and affirmatively expressed state policy ). In the early 1980s, Congress passed a statute exempting municipalities and their employees from damages for antitrust violations, however, the statute does not limit the availability of injunctive relief, and its passage confirms that municipalities' exemption is a statutory one, rather than one based on the federalism or constitutional concerns identified in Parker. Local Government Antitrust Act, 15 U.S.C. § 34-35 (1997).
25. 499 U.S. 365 (1991).
26. Id. at 369, 384.
27. 504 U.S. 621 (1992).
28. 22. Id. at 629. Compare S. Motor Carners Rate Conference, Inc. v. United States, 471 U.S. 48, 65-66 (1985) (validating private collective-ratemaking proposals made pursuant to a state regulatory program with active government supervision), with Cal. Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 113-14 (1980) (striking down a California wine-pricing statute that merely authorized price setting by private parties, based on the lack of ongoing state involvement).
29. CaL Retail, 445 U.S. at 106, 105-06. For skepticism as to whether this public-private distinction is plausible, see McGowan & Lemley, supra note 14, at 315-22, 356-57; cf Einer Richard Ethauge, The Scope ofAntitrust Process, 104 HARV. L. REv. 668, 669-72 (1991) (rejecting the public-private distinction, and attempting to replace it with an assessment of the disinterestedness of the government actors).
30. Ticor Title, 504 U.S. at 633 ("Actual state involvement, not deference to private price-fixing arrangements under the general auspices of state law, is the precondition for immunity from federal law.").
31. Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 126 (1982);
32. John Shepard Wiley Jr., A Capture Theory ofAntitrust Federalism, 99 HARv. L. REv. 713, 713 n. 1(1986).
33. Wiley, supra note 25, at 713 (citations omitted).
34. 373 U.S. 341 (1963).
35. Id. at 357.
36. Credit Suisse Sec. (USA) LLC v. Billing, 127 S. Ct. 2383, 2390 (2007).
37. The Court's animosity to antitrust claims extends well beyond the issue of regulatory deference. It has been sixteen years since the Court has ruled for an antitrust plaintiff. See, e.g., Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 127 S. Ct. 2705, 2709 (2007) (abandoning the per se rule against vertical minimum resale-price agreements); Bell Ad. Corp. v. Twombly. 127 S. Ct. 1955, 1958 (2007) (heightening the pleading requirements for private antitrust claims). While we have some concerns about this general contraction of antitrust's scope, they are beyond the scope of this Article; our point here is that antitrust law's substantive standards-whatever they may be-should continue to play a role in regulated industries.
38. Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004).
39. Id. at 404.
40. Id. at 406.
41. see also Telecommunications Act of 1996 § 601(b)(1), 47 U.S.C. § 152 note (2000) ("Nothing in this Act⋯ shall be construed to modify, impair, or supersede the applicability of any of the antitrust laws."). To be sure, the antitrust history of the telecommunications industry is unusual, since the industry had been effectively regulated by antitrust courts since the judicially mandated breakup of AT&T in the early l980s, and after that time, courts hearing interconnection cases sometimes deferred, not to regulation, but to the antitrust consent decree that was in force. But given the pervasive role antitrust had played in structuring the industry during that period, it would be implausible to interpret this section as demanding similar deference to regulation.
42. Trinko, 540 U.S. at 411. Contra Otter Tail Power Co. v. United States, 410 U.S. 366, 372- (1973) (finding liability for monopolization in an essential-facilities situation in, ironically, a regulated-industries case). The Trinko Court offered a revisionist account of Otter Tail that ignores essential-facilities claim. Cf AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 428 (1999) (Breyer, concurring) (describing the essential-facilities doctrine as "an antitrust doctrine that this Court never adopted").
43. Trinko, 540 U.S. at 412.
44. E.g., John Thorne, A Categorical Rule Limiting Section 2 of the Sherman Act: Verizon v. Trinko, 72 U. CHI. L. REV. 289, 289 (2005) (viewing the case as a categorical rejection of refusal- to-deal claims in regulated industries).
45. See Frank X. Schoen, Exclusionary Conduct After Trinko, 80 N.Y.U. L. REV. 1625, 1644 (2005) ("Trinko's severe limitations on the [essential-facilities] doctrine make it unclear what facts, if any, could support an essential facilities claim after Trinko.").
46. Trinko, 540 U.S. at 411-416
47. See, e.g., Herbert Hovenkamp, Antitrust and the Regulatory Enterprise, 2004 C0LUM. Bus.L. REV. 335, 353 (interpreting Trinko as identifying an inverse relationship between the effectiveness of the regulatory enterprise and the need for antitrust intervention);
48. See, e.g., Herbert Hovenkamp, Antitrust and the Regulatory Enterprise, 2004 C0LUM. Bus. L. REV. 335, 353 (interpreting Trinko as identifying an inverse relationship between the effectiveness of the regulatory enterprise and the need for antitrust intervention); Weiser, supra note 1, at 562 ("[T]he extent of antitrust restraint should vary depending on whether the regulatory regime is reasonably effective at addressing the relevant anticompetitive conduct."); cf Andrew I. Gavil, Exclusionary Distribution Strategies by Dominant Firms: Striking a Better Balance, 72 ANTITRUST L.J. 3, 42 (2004) ("At its core, [Trinko] suggests little more than that courts should be reluctant to scrutinize pure, unilateral refusals to assist rivals by dominant firms in industries subject to extensive, competition-focused regulation, particularly if the government scheme regulates access to the dominant firm's facilities."); C. Scott Hemphill, Paying for Delay: Pharmaceutical Patent Settlements as a Regulatory Design Problem, 81 N.Y.U. L. Rev. 1553, 1557 (2006) ("Identifying impact of an industry-specific regulatory regime in a particular context requires careful, sustained attention to the principal features of the relevant regulatory structure.").
49. Phil Weiser, for example, has advocated a hands-on approach for antitrust courts in communications cases, based on what he sees as the FCC's "deliberate under-enforcement strategy" in the current era of deregulation. Weiser, supra note 1, at 576, 583-86; see also linkLine Commc'ns, Inc. v. SBC Cal., Inc., 503 F.3d 876,882(9th Cir. 2007), rev'd sub nom. Pac. Bell Tel. Co. v. linkLine Commc'ns, Inc., No. 07-5 12, 2009 WL 454286 (U.S. Feb. 25, 2009) ("Importantly, the Court did not say that the existence of a regulatory scheme was a per se bar to judicial enforcement of the antitrust laws, only that 'the existence of a regulatory structure' is [o]ne factor of particular importance.") (quoting Trinko, 540 U.S. at 412); Covad Commc'ns Co. v. BellSouth Corp., 374 F.3d 1044, 1051 (11th Cir. 2004) (holding that a predatory-price-squeeze claim survives Trinko when the antitrust claim depends on a specific regulatory decision "only in a circular sense"); Stand Energy Corp. v. Columbia Gas Transmission Corp., 373 F. Supp. 2d 631, 641 (S.D. W. Va. 2005) (relying upon Otter Tail to allow an essential-facilities claim in regulated industry when "FERC's authority to remedy anticompetitive behavior is decidedly less than the regulatory authority in Trinko"); In re Remeron Antitrust Litig., 335 F. Supp. 2d 522, 531 (D.N.J. 2004) (concluding that Trinko does not suggest that either the Hatch-Waxnian Act or the FDA's regulations should override the Sherman Act); Z-Tel Commc'ns, Inc. v. SBC Comsnc'ns, Inc., 331 F. Supp. 2d 513, 527 (ED. Tex. 2004) (limiting Trinko to cases involving novel antitrust claims- even in regulated industries-but finding traditional antitrust claims viable even in regulated markets, explaining that "Trinko instructs that antitrust liability is live and well" in regulated telecommunications); Hovenkamp, supra note 39, at 341 ("In general, the more extreme the deregulation⋯ the greater the role for antitrust.").
50. Trinko, 540 U.S. at 412.
51. Even where regulation doesn't serve a competition-protecting function, the Court was reluctant to endorse antitrust scrutiny, pointing to its "sometimes considerable disadvantages." Id.
52. Id. at 414 (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 594 (1986)).
53. Id.
54. 127 S. Ct. 2383 (2007).
55. Id. at 2396-2397
56. Id. at 2396.
57. Id. at 2395
58. Id. at 2396.
59. See also Justm Lacour, Unclear Repugnancy: Antitrust Immunity in Securities Markets After Credit Suisse Securities (USA) LLC v. Billing, 82 Sr. JOHN's L. REV. 1115 (2008) (arguing that Credit Suisse overstated the potential for conflict between antitrust and regulation).
60. See, e.g., STEPHEN BREYER, REGULATION AND ITS REFORM 156-57 (1982) (noting that the purpose of antitrust laws is to maintain a workably competitive marketplace by eliminating anticompetitive market conduct and market structures);
61. (asserting that antitrust and regulation are complementary and that most justifications of regulation are grounded in theories of market failure)
62. antitrust and regulation take different approaches to achieving their common goal, but both ultimately aim to maximize efficiency in markets.
63. See BREYER, supra note 51, at 156-157 ("The antitrust laws seek to create or maintain the conditions of a competitive marketplace rather than replicate the results of competition or correct for the defects of competitive markets.").
64. See 1 AREEDA & HOvENKAMP, supra note 18, ¶ lOOa, at 4. Encouraged by the current focus of antitrust law, Professors Areeda and Hovenkamp observe: Today it seems clear that the general goal of the antitrust laws is to promote "competition" as the economist understands that term. Thus we say that the principal objective of antitrust policy is to maximize consumer welfare by encouraging firms to behave competitively while yet permitting them to take advantage of every available economy that comes from internal or jointly created production efficiencies, or from innovation producing new processes or new or improved products.
65. Id.; see also Michael S. Jacobs, An Essay on the Normative Foundations of Antitrust Economics, 74 N.C. L. REv. 219, 220-22 (1995) (remarking that there is increasing consensus between Chicago school and post-Chicago school views on antitrust's appropriate goals); cf William E. Kovacic, The Intellectual DNA of Modern U.S. Competition Law for Dominant Firm Conduct: The Chicago/Harvard Double Helix, 2007 COLUM. Bus. L. REv. 1, 35, 80 (describing the influence of both the Harvard School and the Chicago School in narrowing and focusing the scope of antitrust claims in recent decades); Richard A. Posner, The Chicago School of Antitrust Analysis, 127 U. PA. L. REv. 925, 925, 948 (1979) (observing an increased convergence of scholars' views on the appropriate role of antitrust laws).
66. See 1 AREEDA & HOvENKAMP, supra note 18, ¶ 11 2d, at 135-40 (summarizing the remaining doctrinal and methodological differences between the Chicago School and the Harvard School).
67. See generally Einer Elhauge, Harvard, Not Chicago: Which Antitrust School Drives Recent Supreme Court Decisions, 3 CoMPETITIoN POL'Y INT'L 59 (2007);
68. Joshua D. Wright, The Court and the Chicago School of Antifrust: The 2006 Term and Beyond, 3 COMPETITION POL'Y INT'L 24(2007)
69. See HERBERT HOVENKAMP, THE ANTITRUST ENTERPRISE: PRINCIPLE AND ExECUTION 228 (2005) (noting the success of deregulation in recent decades in industries once viewed as natural monopolies that required regulatory oversight).
70. 486 U.S. 492 (1988).
71. See id. (noting that state and local governments routinely adopted the code with little or no change, and detailing how private interest groups prevented the inclusion of a type of electrical conduit in the code in order to hinder competition).
72. Credit Suisse Sec. (USA) LLC v. Billing, 127 S. Ct. 2383, 2396 (2007) (citing 15 U.S.C. § 77b(b), 78w(a)(2) (2006)).
73. For a discussion of the problems with relying on the FCC to police competition rules, see C. Scott Hemphill, Network Neutralily and the False Promise of Zero-Price Regulation, 25 YALE J. ON REG. 135 (2008).
74. See 1A AREEDA & HOvENKAMP, supra note 18, ¶ 240c4, at 283 ("[Ajgencies and antitrust courts have often had different attitudes toward the importance of competition in the regulated sector. Often the antitrust authorities are more skeptical than regulators about industry claims of efficiency or the social benefits of restraints on competition.").
75. Among the considerable literature on agency capture, see, for example, Id. ¶ 241b2, at 293-98;
76. JAMEs M. BUCHANAN & GORDON TULLOCK, THE CALCULUS OF CONSENT (1962);
77. DANIEL A. FARBER & PHILIP P. FRICKEY, LAW AND PUBLIC CHOICE (1991);
78. Richard A. Posner, Theories of Economic Regulation, 5 BELL J. ECON. & MGMT. SCI. 335 (1974);
79. George J. Stigler, The Theory of Economic Regulation, 2 BELL J. ECON. & MGMT. SCI. 3 (1971).
80. MANCUR OLSON, THE LOGIC OF COLLECTIVE ACTION 33-36 (1965) (demonstrating by economic analysis that the natural incentive structure of small groups enables them to be much more effective in lobbying their interests).
81. See Einer R. Elhauge, Does Interest Group Theory Justify More Intrusive Judicial Review?,101 YALE L.J. 31, 80-87 (1991) (arguing that political pressures exist in the litigation process and in the process of making judicial appointments).
82. 1A AREEDA & HOvENKAMP, supra note 18, ¶ 241b2, at 293.
83. See Frank H. Easterbrook, The Limits ofAntifrust, 63 TEXAS L. REV. 1(1984) (proposing a set of threshold filters to minimize false positives, on the grounds that the cost of condemning a beneficial practice is much higher than the harm of allowing an anticompetitive practice to continue).
84. See, e.g., Peter C. Carstensen, False Positives in Identifying Liability for Exclusionary Conduct: Conceptual Error, Business Reality, and Aspen, 2008 WISC. L. REV. 295, 295 (criticizing Trinko because it "expresses great concern about false-positive decisions," a concern that "rests on incorrect and implausible assumptions while false negatives in fact create a more serious risk to the competitive process").
85. See Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 127 S. Ct. 2705, 2725 (2007) (overruling precedent to hold that the per se rule is inapplicable to vertical agreements to fix minimum-resale prices)
86. Ill. Tool Works, Inc. v. Indep. Ink, Inc., 547 U.S. 28, 42-43 (2006) (switching the standard from a per se approach to a rule-of-reason analysis in patent-tying cases);
87. NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 135 (1998) (declining to apply the per se rule to a boycott case involving only a single buyer);
88. State Oil Co. v. Khan, 522 U.S. 3, 18 (1997) (overturning precedent to remove vertical agreements on maximum prices from the scope of the per se rule);
89. Bus. Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 735-36 (1988) (holding that the per se rule does not apply to non-price-related forms of vertical agreement).
90. See Texaco, Inc. v. Dagher, 547 U.S. 1, 5-6 (2006) (determining that ajoint venture that set the prices its members would charge was not per se illegal);
91. Nw. Wholesale Stationers, Inc. v. Pac. Stationery & Printing Co., 472 U.S. 284, 298 (1985) (holding that an act of expulsion from a wholesale cooperative does not fall under the per se rule);
92. NCAA v. Bd. of Regents, 468 U.S. 85, 100-01 (1984) (refusing to apply the per se rule to the NCAA's football-televising plan because horizontal restraints were necessary for the product to be available at all);
93. Broad. Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1, 7 (1979) (holding that the per se rule should not be used when analyzing blanket licenses issued by industry groups).
94. See Bell AtI. Corp. v. Twombly, 127 S. Ct. 1955, 1974 (2007) (imposing a heightened- pleading requirement on a plaintiff attempting to use parallel conduct as the initial basis for a claim of anticompetitive conspiracy);
95. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 595 (1986) (requiring more direct evidence for a conspiracy claim to survive summary judgment, including evidence showing a rational motive to conspire);
96. Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 764 (1984) (holding that a conspiracy case must be supported by evidence that tends to exclude the possibility of independent action and indicates a conscious commitment to an unlawful common scheme).
97. Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 222-27 (1993) (requiring proof of below-cost pricing and probability of recoupment in predatory-pricing claims);
98. Matsushita, 475 U.S. at 595 (requiring proof of a rational motive to conspire in predatory-pricing cases);
99. see also Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., 127 S. Ct. 1069, 1078 (2007) (holding that the stringent standard for predatory pricing also applies to predatory-bidding claims).
100. See Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 405- 07 (2004) (eliminating monopoly-leveraging claims and effectively eliminating essential-facilities claims).
101. See Peter J. Hammer & William M. Sage, Antitrust, Health Care Quality, and the Courts,102 COLUM. L. REV. 545, 575 (2002) (concluding that plaintiffs win only 14% of antitrust cases in the health-care industry).
102. While the health-care industry may not be representative, it is one of the largest categories of antitrust claims, and there is a general consensus that plaintiffs today rarely win antitrust suits. But see Daniel A. Crane, Rules Versus Standards in Antitrust Adjudication, 64 WASH. & LEE L. REV. 49, 65 (2008) (contending that the rule of reason has become "reinvigorated" in recent years, leading to more wins for plaintiffs).
103. SeeAtl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 341-45 (1990) (holding that antitrust plaintiffs must prove that their injury resulted from harm to the competitive process);
104. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977) ("Plaintiffs must prove antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful.").
105. See William Kolasky, Reinvigorating Antitrust Enforcement in the United States: A Proposal, 22 ANTITRUST 85, 85 (2008) (recording this streak of plaintiff losses and discussing the generally lax antitrust enforcement and pro-defendant bent of the Roberts Court).
106. See, e.g., In re Tamoxifen Citrate Antitrust Litig., 466 F.3d 187, 216 (2d Cir. 2006);
107. In re Ciprofloxacin Antitrust Litig., 544 F.3d 1323, 1333 (Fed. Cir. 2008) (both concluding that a settlement in which a patent-holding plaintiff pays a challenger to drop its validity challenge and exit the market is legal per Se);
108. Schering-Plough Corp. v. FTC, 402 F.3d 1056, 1076 (11th Cir. 2005) (vacating an FTC order forbidding these types of settlements because the court was not persuaded that they restrained trade);
109. Valley Drug Co. v. Geneva Pharm., Inc., 344 F.3d 1294, 1312-13 (11th Cir. 2003) (upholding the same type of agreement as not per se unlawful so long as it has no broader exclusionary effect than the patent would).
110. But see In re Cardizem CD Antitrust Litig., 332 F.3d 896, 908 (6th Cir. 2003) (holding these settlements to be per se antitrust violations).
111. These agreements-ones where a branded-pharmaceutical company pays a generic manufacturer to settle its patent-validity challenge and remove its generic drug from the market-are typically referred to as "reverse payment" settlements. Sheila Kadura, Note, Is an Absolute Ban on Reverse Payments the Appropriate Way to Prevent Anticompetitive Agreements Between Branded- and Generic-Pharmaceutical Companies?, 86 TEXAS L. REV. 647, 652-53 (2008).
112. See Rambus, Inc. v. FTC, 522 F.3d 456, 466-67 (D.C. Cir. 2008) (reasoning that a patentee did not violate antitrust laws when it deceived a standard-setting organization (SSO) as to patent claims on a technology that the SSO was considering as a standard);
113. cf Rambus, Inc. v. Infineon Techs. AG, 318 F.3d 1081, 1102-05 (Fed. Cir. 2003) (concluding that although Rambus engaged in "actions [that] impeach[ed] Rambus's business ethics," ultimately the company did not breach its vaguely worded duty to disclose patent claims).
114. See Press Release, U.S. Dep't of Justice, Statement of the Dep't of Justice Antitrust Div. on its Decision to Close its Investigation of XM Satellite Radio Holdings Inc.'s Merger with Sirius Satellite Radio Inc. (Mar. 24, 2008), available at http://www.usdoj.gov/opa/pr/2008/March/08..at ⋯226.html (explaining its decision not to challenge a merger of the only two satellite-radio firms in the United States);
115. see also Jonathan B. Baker & Carl Shapiro, Detecting and Reversing the Decline in Horizontal Merger Enforcement, 22 ANTITRUST 29, 32 & n. 17 (2008) (criticizing the decision for giving insufficient weight to anticompetitive concerns raised by mergers).
116. Indeed, the Justice Department went so far as to file a brief urging the Supreme Court to reject a petition for certiorari filed by its sister agency, the FTC. Brief for the United States as Amicus Curiae at 1, FTC v. Schering-Plough Corp., 548 U.S. 919 (2006) (No. 05-273), 2006 WE 1358441. More generally, the Antitrust Division has filed pro-defendant briefs in all of the major antitrust cases before the Supreme Court in the past five years. See, e.g., Brief for the United States as Amicus Curiae Supporting Petitioner, Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 127 5. Ct. 2705 (2007) (No. 06-480), 2007 WL 173650;
117. Brief of the United States as Amicus Curiae Supporting Vacatur, Credit Suisse Sec. (USA) LLC v. Billing, 127 S. Ct. 2383 (2007) (No. 05- 1157), 2007 WE 173649;
118. Brief for the United States as Amicus Curiae Supporting Petitioners, Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955 (2007) (No. 05-1126), 2006 WE 2482696; Brief of the United States as Ainicus Curiae Supporting Petitioner, Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., 549 U.S. 312 (2007) (No. 05-381), 2006 WL 2452373;
119. Brief for the United States as Amicus Curiae Supporting Petitioners, lll. Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28 (2006) (No. 04-1329), 2005 WE 1864093.
120. 127 S. Ct. at 2395-96.
121. 127 S. Ct. at 2395-96.
122. Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 414 (2004) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 594 (1986)).
123. Easterbrook, supra note 65, at 2-3.
124. See 1A AREEDA & HOvENKAMP, supra note 18, ¶J 240b1-240b2, at 274-75 (arguing that antitrust should apply where "authorized oversight is incomplete or lacking entirely," and further arguing that "oversight [is] nearly always incomplete").
125. The Trinko Court was sensitive to the first problem, though not to the second. It found antitrust inappropriate where there is "a regulatory structure designed to deter and remedy anticompetitive harm," but was at least willing to apply antitrust where there is no such structure. Trinko, 540 U.S. at 412.
126. 1 AREEDA & HOvENKAMP, supra note 18, ¶ 216a, at 345 ("[F]ederal and state policy often overlap and address precisely the same practices, often with inconsistent results."); 14 Id. ¶ 2411- 2419, at 329-62 (2d ed. 2006) (discussing inconsistencies between state and federal laws);
127. see California v. ARC Am. Corp., 490 U.S. 93, 103 (1989) (holding that federal law did not preempt state antitrust laws that allow indirect purchasers to sue for damages).
128. United States v. Nippon Paper Indus. Co., 109 F.3d 1,9(1st Cir. 1997) ("Section One of the Sherman Act applies to wholly foreign conduct which has an intended and substantial effect on the United States.");
129. cf F. Hoffinan-LaRoche Ltd. v. Empagran S.A., 542 U.S. 155, 173 (2004) (clarifying that such antitrust suits can only reach behavior that causes domestic injury and cannot address conduct that causes independent foreign harm).
130. In 2001, for example, the European Community blocked a merger between General Electric and Honeywell that U.S. antitrust authorities had allowed, raising the ire of both antitrust authorities and the business community in the United States. Commission Decision 2004/134, Case COMP/M.2220, General Electric/Honeywell, 2004 O.J. (L 48) 1, available at http://ec.europa. ummlcompetition'mergers/cases/decisions/m2220.en.pdf; Editorial, Europe to GE: Go Home, WALL ST. J., June 15, 2001, at A14 ("In the Honeywell case, novel antitrust theories have been dreamed up simply because it would be unthinkable to let a large U.S. company go about its business unmolested.");
131. see Deborah Platt Majoras, Deputy Assistant Attorney Gen., Antitrust Div., U.S. Dep't of Justice, GE-oneywell: The U.S. Decision, Remarks Before the Antitrust Law Section, State Bar of Georgia (Nov. 29, 2001), (transcript available at http://www.usdoj.gov/atr/ public/speeches/9893.htm) (describing the tensions raised by the different treatment of the GE-Honeywell merger in Europe and the United States). See generally Hemy C. Thumann, Multyurisdictional Regulation of Monopoly in a Global Market, 2008 WIsc. L. REV. 261, 262 (observing that "like the United States," other countries "have reached out and will continue to reach out to regulate conduct that directly lessens competition within their markets, regardless of where the triggering conduct occurs").
132. See, e.g., Jonathan T. Tonilin & Dale J. Giali, Federalism and the Indirect Purchaser Mess, 11 GE0. MASON L. REV 157, 177 (2002) (contending that states' recognition of antitrust claims by indirect purchasers "could lead to inconsistent determinations and potentially duplicative damages,⋯ the erosion of the effectiveness of antitrust law,⋯ arbitrary penalties and deterrence and a likelihood of overdeterrence");.
133. Bruce H. Kobayashi, Antitrust, Agency, and Amnesty: An Economic Analysis of the Criminal Enforcement of the Antitrust Laws Against Corporations, 69 GEO. WASH. L. REV 715, 732-3 (2001) (noting the risks of overdeterrence);.
134. cf Michael K. Block & Joseph Gregory Sidak, The Cost of Antitrust Deterrence: Why Not Hang a Price Fixer Now and Then?, 68 GEO. L.J. 1131, 1131 (1980) (contending that because of error risks, high antitrust sanctions may overdeter and result in suboptinial competition). It is far from clear that this overdeterrence concern is warranted in the modern world, however. See Robert H. Lande, Benefits from Private Antitrust Enforcement: An Analysis of Forty Cases, 42 U.S.F. L. REV. 879, 907 (2008) (asserting that criminal antitrust conduct "occurs far too frequently and is almost certainly significantly underdeterred-ven factoring in the effects of the present system of private litigation").
135. Robert H. Lande, Why Antitrust Damage Levels Should Be Raised, 16 Loy. CONSUMER L. REV 329, 329 (2004) ("[I]f the current antitrust damage levels are examined carefully, they do not even total treble damages, and overall are not high enough to deter antitrust violations optimally.").
136. Hart-cott-odino Antitrust Improvements Act of 1976, 15 U.S.C. § 18a (2006).
137. Indeed, because the agencies have different mandates, their merger approvals are often subject to different conditions. Compare, e.g., AT&T Corp. and MediaOne Group, Inc., 65 Fed. Reg. 38,584 (Dep't of Justice June 21, 2000) (proposed final order), available at www.justice.gov/ atr/cases/f4800/ 4841.htm (expressing DOJ approval of a merger between AT&T Corp. and MediaOne Group Inc., subject to divestiture of certain interests of MediaOne), with Applications for Consent to the Transfer of Control of Licenses and Section 214 Authorizations from MediaOne Group, Inc. to AT&T Corp., 15 F.C.C.R. 9816, 9819 (2000) (memorandum and final order) (approving the merger subject not
138. See 1 AREEDA & HOvENKAMP, supra note 18, ¶ 202b, at 166 ("Once a court recognizes the official action as authorized under a valid statute, the antitrust court must recognize that any harm to competition results from government decision rather than from the private action that may have induced official action.").
139. See Town of Concord v. Boston Edison Co., 915 F.2d 17, 28 (1st Cir. 1990) ("At best, permitting judges and juries to speculate in this area would force regulators continually to revisit prior investment-allocation rules and would discourage regulatory efforts to develop (often with a utility's help) a set of economically rational pricing practices-hich, after all, is a common objective of antitrust law and regulation."). See generally 1 AREEDA & HOVNKAMP, supra note 18, ¶ lOOc, at 7 (observing that "federal antitrust laws are not well designed to cure failures of our democratic governmental process," and concluding that when the source of a restraint on the economy "is the exercise of government policy," the "cure most ordinarily come through the political process ⋯ but almost never from the federal antitrust laws").
140. See Marina Lao, Reforming the Noerr-Pennington Antitrust Immunity Doctrine, 55 RUTGERS L. REv. 965, 966 (2003). Lao writes: As originally conceived, the Noerr doctrine stood for the principle that genuine efforts to persuade the government to adopt a particular course of action are not subject to antitrust scrutiny, no matter how anticompetitive the action sought. Immunity extended to petitioning any branch of the government: the legislature, the executive branch, administrative agencies, and the courts.Id.
141. See, e.g., Armstrong Surgical Ctr., Inc., v. Armstrong County Mem'l Hosp., 185 F.3d 154, 162-3 (1999) (finding that the defendant's false statements to the Health Facility Hearing Board were not material to the Board's or the Department's decision-making process);
142. Union Oil Co. of Cal. (Unocal), 138 F.T.C. 1, 32 (2004) ("Misrepresentation⋯ undermines this line of analysis by blurring the distinction between private and governmental conduct. Misrepresentation undermines the govermnent's ability accurately and meaningfully to assess public benefit; it vests control over the outcome in the private purveyor of false information.).
143. 138 F.T.C. 1(2004).
144. For an argument supporting that complementarity, see Dennis w. Canton & Randal C. Picker, Antitrust and Regulation (John M. Olin Law & Economics Working Paper Series, Paper No. 312, 2009), available at http://papers.ssrn.comlsol3/papers.cfin?abstract-id=93 7020.
145. This is not to say that petitioning behavior can never qualifr as gaming. As the Unocal case illustrates, parties can manipulate a regulatory process by using deception or misrepresentation to achieve exclusionary outcomes. See infra notes 147-5 and accompanying text. The law should not immunize such conduct any more than it immunizes sham litigation or the knowing attempt to enforce a patent procured by fraud. See Cal. Motor Transp. Co. v. Trucking Unlimited, 404 U.s. 508, 511-2 (1972) (allowing antitrust causes of action in instances where a party interferes with the business relationships of a competitor by tying up the competitor in sham judicial and administrative proceedings);
146. Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 174 (1965) (concluding that an antitrust violation may arise from the enforcement of a fraudulently obtained patent).
147. See, e.g., Valley Drug Co. v. Geneva Pharm., Inc., 344 F.3d 1294 (11th Cir. 2003) (rejecting a substantive antitrust challenge to a reverse-payment settlement).
148. 21 U.S.C. § 355(b)(l) (2008). The Orange Book (officially titled Approved Drug Products with Therapeutic Equivalence Evaluations but nicknamed for the color of its cover) provides a comprehensive listing of all drugs approved by the FDA. See ELECTRONIC ORANGE BOOK, http:// www.fda.gov/cder/ob. From animal testing and clinical trials, through full FDA approval, the process for new-drug approval can take up to ten years. Judy Vale, Note, Expanding Expanded Access: How the Food and Drug Administration Can Achieve Better Access to Experimental Drugs for Seriously ill Patients, 96 GEO. L.J. 2143, 2169 n.2 12 (2008).
149. Drug Price Competition and Patent Term Restoration (Hatch-axman) Act, Pub. L. No. 8-417, § 101, 98 Stat. 1585, 1585-2 (1984) (codified at 21 U.S.C. § 355(j)(5)(A)) (requiring that the approval process be completed within 180 days of the filing of the application).
150. 21 U.S.C. § 355(j)(2)(A)(iv). Because they lacked the resources to perform clinical trials, small generic-drug makers found it difficult to meet the pre-Hatch-Waxman safety and efficacy requirements. David A. Balto, Pharmaceutical Patent Settlements: The Antitrust Risks, 55 FOOD & DRUG L.J. 321, 325 (2000). Thus, very few generics were available even for drugs whose patents had expired. Id. The Hatch-axman Act improved things considerably, leading to a 150% increase in the market share of generics between 1984 and 1998. CoNG. BUDGET OFFICE, How INCREASED COMPETITION FROM GENERIC DRUGS HAS AFFECTED PRICES AND RETURNS IN THE PHRi1ACEuTICAL INDUSTRY 1 (1998), available at http://www.cbo.gov/ftpdocs/6xxIdoc65S/ pharm.pdf
151. 21 U.S.C. § 355(j)(5)(A).
152. See OFFICE OF INSPECTOR GEN., DEP'T OF HEALTH & HUMAN SERVS., THE FOOD AND DRUG ADMINISTRATION'S GENERIC DRUG REVIEW PROCESS 13 (2008), available at http://www.oig.hhs.gov/oeilreports/oei-04-07-00280.pdf (noting that the FDA review process for ANDAs often exceeds the 180-day statutory maximum).
153. As a general matter, state laws authorize such substitutions, and payers (such as insurance companies, HMOs, and government agencies) decide whether to allow or mandate substitutions for their covered patients. As the price of branded drugs continues to escalate, more and more insurers and other parties require generic substitution when it is available. See CONG. BUDGET OFFICE, supra note 101, at 7 (describing the process by which managed-care plans prevent higher costs by substituting generic drugs on their formularies).
154. 21 U.S.C. § 355(j)(2)(A)(vii). More specifically, the Hatch-axman Act requires certification that the drug falls within one of the following categories: (I) no relevant patent is listed in the Orange Booļ (II) the patent listed in the Orange Book is expired; (III) the ANDA only seeks approval after the expiration date of the patent listed in the Orange Boolc, or (IV) the ANDA does not infringe the patent listed in the Orange Book, or the patent is invalid. Id.
155. Id. § 355(jX2)(A)(vii). The Hatch-axman Act offers a special bonus to the first generic manufacturer to file a Paragraph IV certification for a branded drug. If the first filer succeeds with its Paragraph IV application-ecause of noninfringement, invalidity, or otherwise-t receives a 180-day head start before other generics can enter the market. Id. § 355(j)(5)(B)(iv)
156. 21 U.S.C. § 355(j)(5)(B)(iii). Further, the stay can be longer than thirty months, depending on when the generic files its Paragraph IV certification. Hemphill, supra note 39, at 1566 n.50. And a judge does have the power to truncate the stay if either party fails to cooperate in the litigation. 21 U.S.C. § 355(j)(5)(B)(iii).
157. 21 C.F.R. § 314.107(b)(3)(B)(ii)-iii) (2008).
158. INTELLECTUAL PROPERTY LAW § 12.4c, at 12- 43 (Supp. 2005). lll. In Apotex, Inc. v. Thompson, 347 F.3d 1335 (Fed. Cir. 2003), for example, the drug manufacturer had originally named a single patent in its Orange Book listing for a pioneer drug. In response to a generic's ANDA and Paragraph IV certification, the manufacturer sued for patent infringement, thus triggering an initial thirty-month stay. Id. at 1339. While that lawsuit was pending, the manufacturer obtained additional patents, which it added to its Orange Book listing and used as the basis for yet another lawsuit and stay. Id. Remarkably, while that lawsuit was pending, the firm listed three additional patents in its Orange Book listing for the same drug, thereby triggering yet another round of notice, lawsuit, and thirty-month stay. Id. at 1340;
159. see also In re Buspirone Patent Litig., 185 F. Supp. 2d 363 (S.D.N.Y. 2002) (describing Bristol-Myers's strategic filing of patent-infringement suits to trigger automatic stays of the FDA's approval of competing generic products). This tactic is typically referred to as "evergreening. Mark A. Lemley & Kimberly A. Moore, Ending Abuse of Patent Continuations, 84 B.U. L. REV. 63, 81-83 (2004). Congress passed legislation in 2003 to eliminate this particular form of patent evergreening. Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173, § 1 l01(a)(2)(A)(ii), 117 Stat. 2066, 2449-50 (to be codified at 21 U.S.C. § 355(j)(5)(B)(iii)). The new law limits patentees to a single, thirty-month stay for any given drug, regardless of how many patents it may list in the Orange Book. Id.;
160. see also HOVENKAJyIP, JANIS & LEMLEY, supra note 110, § 12.4c, at 12-44-45 (describing the 2003 amendments).
161. HOVENKAMP, JANIS & LEMLEY, supra note 110, § 12.5, at 12-45.
162. 432 F. Supp. 2d 408 (D. Del. 2006). Disclosure: Mark Lemley represented Impax, the antitrust plaintiff in this case.
163. Id. at 415.
164. 121. Id.
165. 122. Id.
166. 123. Id. at 415-16.
167. 124. Id. at 416.
168. 125. Id.
169. Abbott's tablet NDA claimed that the drug could increase levels of "good cholesterol." Id. In support of that claim, however, Abbott submitted data for the capsule formulation, and claimed that it was bioequivalent to the new tablets. Id. The new indication therefore did not arise from any new utility conferred by the tablets; to the contrary, Abbott's own documents suggested that the capsule form would have supported the same new indication.
170. Abbott's tablet NDA claimed that the drug could increase levels of "good cholesterol." Id. In support of that claim, however, Abbott submitted data for the capsule formulation, and claimed that it was bioequivalent to the new tablets. Id. The new indication therefore did not arise from any new utility conferred by the tablets; to the contrary, Abbott's own documents suggested that the capsule form would have supported the same new indication.
171. Abbott not only stopped selling the capsules, but also bought all existing stock from pharmacies and changed the code for TriCor capsules in the National Drug Data File (NDDF) to "obsolete." Id. "Changing the code to 'obsolete' removed the TriCor capsule drug formulation from the NDDF, which prevented pharmacies from filling TriCor prescriptions with a generic capsule formulation." Id.
172. Abbott not only stopped selling the capsules, but also bought all existing stock from pharmacies and changed the code for TriCor capsules in the National Drug Data File (NDDF) to "obsolete." Id. "Changing the code to 'obsolete' removed the TriCor capsule drug formulation from the NDDF, which prevented pharmacies from filling TriCor prescriptions with a generic capsule formulation." Id.
173. Id. Branded-drug companies, of course, view this business model as a form of free riding, because the generic gets the benefit of the branded firm's investment in marketing and promotion. Generic competition, however, does not occur until after the pioneer drug has had several years of exclusivity in the market. And the government has clearly come down on the side of generic substitution, for good reason: drugs are much cheaper and more widely available today than they were before the passage of the Hatch-Waxnian amendments encouraging generic competition. All competition is in some sense "free riding," but that does not mean it is or should be forbidden. See generally Mark A. Lemley, Property, Intellectual Property, and Free Riding, 83 TEXAS L. REV. 1031(2005) (arguing against efforts to weed out free riding). 125. Abbott Labs, 432 F. Supp. 2d at 417. This time, Teva responded with an antitrust counterclaim, contending that Abbott's product switches violated § 2 of the Sherman Act. Id. at 417-18.
174. Id. at 418. Just as it did with the capsule-to-tablet change, Abbott pulled existing stock from shelves and revised the NDDF code to make the old tablet version obsolete. Id. Abbott did identif' one arguable difference between the new and old tablets: in its NDA, it sought a label change stating that the new tablets no longer had to be taken with food. Teva alleged, however, that the change was made not to improve product efficacy, but only to prevent genetic substitution. Id. at 418. And once again, Abbott relied on its original safety and efficacy data from the pre-hop formulation, not on data from new studies, to support the "no food" designation. Second Amended Answer, Affirmative Defenses, and Counterclaims of Defendant and Counterclaim-Plaintiff at 35, Abbott Labs. v. Teva Pharm. USA, Inc., 432 F. Supp. 2d 408 (D. Del. 2006) (No. 02-15 12).
175. United States v. Microsoft Corp., 253 F.3d 34, 65 (D.C. Cu. 2001). As the D.C. Circuit explained: As a general rule, courts are properly very skeptical about claims that competition has been harmed by a dominant firm's product design changes. In a competitive market, firms routinely innovate in the hope of appealing to consumers, sometimes in the process making their products incompatible with rivals; the imposition of liability when a monopolist does the same thing will inevitably deter a certain amount of innovation. Id. (citation omitted).
176. Teva filed its first ANDA in 1999. Abbott Labs., 432 F. Supp. 2d at 415. As of this writing, the FDA does not list a generic equivalent for the most recent tablet formulation. DrugsFDA, http://www.accessdata.fda.gov/scripts/cder/ drugsatfdalindex.cfrn (enter "021656" into the search field).
177. 432 F. Supp. 2d at 422-24. A group of states also sued Abbott in connection with the TriCor product changes. Complaint for Florida v. Abbott Labs., No. l:08-CV-00155 (D. Del. Mar. 18, 2008), available at http://www.doj.state.or.us/releases/pdf/state-of-florida-complaint-tricor.pdf. And the FTC has launched an official investigation into Abbott's behavior. Shirley S. Wang, TriCor Case May illuminate Patent Limits, WALL ST. J.. June 2, 2008, at B I. In the suit filed by Teva, the court denied Abbott's motions for summary judgment, Teva Pharms. USA, Inc. v. Abbott Labs., 580 F. Supp. 2d 345, 369 (D. Del. Oct. 2, 2008), and the ease settled in the middle of trial. For an argument that any plausible claim of benefit must defeat an antitrust claim for product hopping, see Richard Gilbert, Holding Innovation to an Antitrust Standard, 3 COMPETITION POL'Y INT'L 47 (2007). For an argument that product hopping should violate antitrust laws, but using a different approach than Abbott Labs., see generally Jessie Cheng, Note, An Antitrust Analysis of Product Hopping in the Pharmaceutical Indusfry, 108 COLUM. L. REV. 1471(2008).
178. No. 05-2179,2007 WL 158746 (D.D.C. Nov. 7, 2005).
179. Id. at &z.ast;2-3.
180. Id. at &z.ast;2.
181. Id. at &z.ast;2⋯.3 (discussing a letter of intent in which Warner Chilcott would pay Barr, the generic manufacturer, 20 million in exchange for Barr's agreement not to compete in the United States for five years after receiving final FDA approval).
182. The generic in such a case might well face a patent-infringement suit, but to obtain an injunction against sale of the drug, the branded manufacturer would have to prove a substantial likeithood of success on its infringement claims. Under the current framework, the "injunction" is automatic, and bears no relation to the merits of the patent claim.
183. We are skeptical that the thirty-month automatic stay-with no judicial discretion to override it in lawsuits of questionable merits-is necessary, but our point here is that the stay may serve a legitimate function in some cases but create an opportunity for abuse in others, and such abuse should be actionable under antitrust laws.
184. See Guy V. Amoresano, Branded Drug Reformulation: The Next Brand vs. Generic Antitrust Battleground, 62 FooD & DRUG L.J. 249, 256 (2007) ("It may be that a more appropriate approach⋯ to leave it to FDA and the state legislatures to determine if some modification of FDA 'AB rating' guidelines and state [Drug Product Selection] Laws is prudent to address scenarios in which inconsequential reformulations affect the speed of generic drug market entry."). Such an approach would raise challenges of its own, such as how to treat substitutions between products with the same active ingredients but different dosages.
185. See United States v. Gnnnell Corp., 384 U.S. 563, 570-71 (1966) ("The offense of monopoly under § 2 of the Sherman Act has two elements: (1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.").
186. See id. at 571 (condemning behavior that "was done plainly and explicitly for a single purpose" of driving out competitors); see also United States v. Microsoft Corp., 253 F.3d 34, 65 (2001) ("Judicial deference to product innovation.. . does not mean that a monopolist's product design decisions are per se lawful.").
187. See, e.g., Microsoft, 253 F.3d at 65-67 (balancing the anticompetitive effect of design choices against the business justifications offered by the defendant); C.R. Bard Co. v. M3 Sys., 157 F.3d 1340, 1382 (Fed. Cir. 1998) (Bryson, J., delivering the opinion of the court on this issue, concurring in part and dissenting in part on other issues) (finding liability for a product-design change that did not improve the product, but merely excluded competing, complementary products).
188. Abbott Labs. v. Teva Pharm. USA, Inc., 432 F. Supp. 2d 408, 422 (D. Del. 2006) (citing Microsoft, 253 F.3d at 59, 66-67).
189. See id. (holding that plaintiffs need not prove the new formulations are "absolutely no better than the prior version" or intended to eliminate a rival's complementary product, but "[rlather, as in Microsoft, if Plaintiffs show anticompetitive harm from the fonnulation changes, that harm will be weighed against any benefits presented by Defendants").
190. Id. at 423, 422-23.
191. Id. at 422.
192. Id. (quoting Microsoft, 253 F.3d at 59). See generally Kolasky, supra note 74, at 88-89 (suggesting a "sliding scale" framework for weighing procompetitive and anticompetitive effects in rule-of-reason cases).
193. For some ideas on this score, see HOVENKAMP, JAMS & LEMLEY, supra note 110, ch. 12.
194. The court in Waigreen Co. v. AstraZeneca Pharmaceuticals L.P. rejected a product- hopping antitrust claim based, in part, on the fact that the defendant in that case had not pulled its earlier product from the market after it introduced a new formulation. 534 F. Supp. 2d 146, 151 (D.D.C. 2008) ("[H]ere, there is no allegation that AstraZeneca eliminated any consumer choices. Rather, AstraZeneca added choices."). Because the defendant continued to sell the old product, the generic-drug company in that case could take advantage of generic-substitution laws, so the competitive harm alleged in Abbott Labs was largely absent in Waigreen. Id.
195. The Discon case provides another example of this sort of regulatory game. The regulated party in that case engaged in a kickback scheme to deceive regulators into believing that its costs were higher than they really were. NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 13l-32 (1998). The regulators relied on the party's submissions and approved inflated regulated rates, and consumers footed the bill. Id. The Supreme Court appeared almost scornful of the idea that the regulatory fraud could form the basis for an antitrust complaint, declaring that "[tb apply the per se rule here-where the buyer's decision, though not made for competitive reasons, composes part of a regulatory fraud-would transfonn cases involving business behavior that is improper for various reasons, say, cases involving nepotism or personal pique, into treble-damages antitrust cases." Id. at 136-37. However, because Discon involved a very precise legal question-the question of whether to apply per se analysis to the alleged boycott in that case-the Court's dismissive language does not necessarily preclude a rule-of-reason claim based on the same set of facts, but with proof of market power or adverse market impact. See Id. at 135 ("[T]he specific legal question before us is whether an antitrust court considering an agreement by a buyer to purchase goods or services from one supplier rather than another should (after examining the buyer's reasons or justifications) apply the per se rule if it finds no legitimate business reason for that purchasing decision.").
196. See F. R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 140-41 (1961) (rejecting evidence that the defendants used misinformation and deceptive propaganda in an antitrust suit based on petitioning). For a discussion of the problems this causes for regulatory agencies facing misrepresentations, see Lars Noah, Sham Petitioning as a Threat to the Integrity of the Regulatory Process, 74 N.C. L. REV. 1(1995).
197. See BE&K Constr. Co. v. NLRB, 536 U.S. 516, 525-26 (2002) ("[W]hile genuine petitioning is immune from antitrust liability, sham petitioning is not.").
198. 138 F.T.C. 1, 5 (2004).
199. Id. at 5-7.
200. Id. at 5-8.
201. Id. at 5-7.
202. Id. at 7, 12.
203. Id. at 10-11. The complaint also alleges that Unocal tweaked its patent applications during prosecution to more closely match the emerging state standard. Id. at 10. Unocal ultimately settled private suits based on the same conduct for 48 million. Erin Marie Daly, Chevron to Pay 48M in Calif Unocal Patent Suit, LAw360, Aug. 11, 2008, http://competition.1aw360.comlprint article/65699.
204. Id. at 8.
205. United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966).
206. Rambus Inc. v. FTC, 522 F.3d 456, 459 (D.C. Cir. 2008); Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 303 (3d Cir. 2007).
207. Rambus, 522 F.3d at 464-65.
208. Prof'l Real Estate Investors, Inc. v. Columbia Pictures Indus., 508 U.S. 49, 56 (1993).
209. See United Mine Workers v. Penrnngton, 381 U.S. 657, 669-71 (1965) (invoking the principle to allow the petitioning of Executive Branch officials and administrative agencies);
210. E. R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 136, 140-41 (1961) (barring an antitrust claim against a raifroad consortium based on a misleading publicity campaign that was aimed to influence legislation).