Antitrust Update for In-House Counsel

1. Antitrust Update forIn-House Counsel American Bar Association Section of Antitrust Law Corporate Counseling Committee June 28, 2006

2. Presented by: Merril Hirsh Edward B. Mullen III Christopher H. White Gabriela A. Richeimer Melissa M. McGuane Washington, D.C. ● Orange County ● San Diego ● Chicago

3. On Monday • The Supreme Court …

4. Granted Cert in Weyerhaeuser v. Ross-Simmons Hardwood Lumber Co., Inc.,No. 05-381 • Is predatory bidding like predatory pricing? • Ninth Circuit said “no” • Weyerhaeuser, the DOJ, business groups say “yes” • Why does it matter? • Under Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993), (1) short term loss + (2) dangerous probability of recoupment = plaintiff usually loses predatory pricing claim • Even though plaintiff might win this claim anyway • Where might this go? The sacrifice test spawns…

5. Granted Cert. in Bell Atlantic Corp. v. Twombly,No. 05-1126 • How much is a enough to plead past a motion to dismiss in a Section 1 case? • Second Circuit says “allege conspiracy, prove it later” • Bell Atlantic, DOJ, economists (represented by former Asst. AG Hewitt Pate), business groups say have to allege more… • How much more? • Is this the sacrifice standard????

6. Denied Cert. in FTC v. Schering-Plough Corp., No. 05-273 • Or perhaps FTC v. DOJ • Under what circumstances (if any?) is it unlawful for a brand drug company to settle its patent claim against a generic company by paying the generic. • Why is this a big issue? • Have we sacrificed enough? • Will it be back?

7. On the merger front …

8. Nestlē • and • Jenny Craig • ?

9. Laboratory Corp. Holdings v. Metabolite Laboratories, Inc., No. 04-607, 548 U.S. ___ (2006) • On June 22, 2006, the Supreme Court dismissed writ of certiorari as having been improvidently granted. • Issue before the Supreme Court: “whether the [respondent’s] patent claim is invalid on the ground that it improperly seeks to ‘claim a monopoly over a basic scientific relationship.’” • Justice Ginsburg joined Justices Scalia, Alito, Kennedy and Thomas in dismissing the writ (Chief Justice Roberts recused himself). • The Supreme Court had granted certiorari notwithstanding the Solicitor General’s view that the question presented was not before the Court because the petitioner had failed to reference Section 101 of the Patent Act as the statutory basis of its claim of an invalid monopoly over a scientific principal or naturally occurring phenomenon. • Justice Breyer wrote a dissent from the dismissal of certiorari, and his dissent was joined by Justices Stevens and Souter.

10. Laboratory Corp. Holdings v. Metabolite Laboratories, Inc., No. 04-607, 548 U.S. ___ (2006) • Patent case; no antitrust claim. • Plaintiff alleged that the patent created an unfair monopoly over a scientific phenomenon, i.e., all doctors who considered the natural relationship violated respondent’s patent. • Disputed whether the issue before the Court was raised below and whether the record was sufficiently developed. • Dissent argued that subject of patent was a scientific phenomenon, and thus, not patentable. • Dissent cited FTC’s 2003 Patent Report. • Likely this issue will reach the Supreme Court again, with all arguments raised below and a full record created. • Did Court signal a desire to “clarify” or “change” law in appropriate case?

11. New Case Developments/Opinions • Hillenbrand Industries, Inc. – $316.3 million settlement of antitrust class action • Reifert v. South Central Wisconsin MLS Corp., 2006 U.S. App. LEXIS 14327 (7th Cir. June 12, 2006) • Jung v. Association of American Medical Colleges, 2006 U.S. App. LEXIS 14079 (D.C. Cir. June 1, 2006) • Yangtze Optical Fibre & Cable Co. v. Ganda, LLC, 2006 U.S. Dist. LEXIS 38510 (D.R.I. June 9, 2006)

12. Hearing on Senator Leahy’s bill to repeal antitrust exemption for medical malpractice insurers and only for the most egregious cases of price fixing, bid rigging and market allocation. Bill based on perceived “abuses” of medical malpractice insurers. However, testimony was broader; over antitrust exemption generally. Only 3 witnesses for each side; real threat of passing significant repeal? ABA supports repeal and implementation of safe harbors. Insurance industry testified it is willing to exchange antitrust exemption for federal system of regulation that insurers may opt into. Consumer advocacy and law enforcement representatives support repeal. Repeal the Federal Antitrust Exemption for Insurers?

13. New FTC Director of Congressional Relations • Jeanne Bumpus • Currently Staff Director, Senate Committee on Indian Affairs • Replaces Anna Davis, who was Director for five years

14. Joint FTC/DOJ Hearings on Single-Firm Conduct • First two hearings in ongoing series held on June 20th and 22nd. • Topics include: • Loyalty and market share discounts • Predatory pricing • Product tying and bundling • Exclusive dealing/refusals to deal • Product design

15. HSR Premerger Notifications May Be E-Filed • Hart-Scott-Rodino filers may submit form and/or attachments electronically • No need to file separately with FTC and DOJ • http://www.hsr.gov

16. Merger Enforcement News • McClatchy-Knight Ridder (newspapers) • Exelon-PSEG (electricity) • Inco Limited-Falconbridge Limited (nickel)

17. Airline Price Fixing Investigation • DOJ and British authorities investigating alleged price-fixing on fuel surcharges for trans-Atlantic flights • United, American, British Airways, Virgin Atlantic acknowledge being contacted

18. ABA Law School Accreditation • DOJ and ABA stipulate that ABA violated 1996 consent decree • ABA agrees to pay $185,000 • Focus of consent decree on fixing of faculty salaries and boycotts of state-accredited and for-profit law schools • Structural and compliance violations

19. DOJ Will Not Challenge Retailers’ Plan to Share Information on Factory Conditions • Fair Factories Clearinghouse • Voluntary database with information on work conditions (wages, hours, safety, etc.) to promote labor law compliance • Unlike retailers, factories only receive aggregate data • Warned members about concerted action

20. www.amc.gov See also www.abanet.org/antitrust/at-links/at-mod.html Antitrust Modernization Commission

23. The AMC Gets Busy in June • Meeting of June 7, 2006 • International • State action doctrine • Meeting of June 16, 2006 • Substantive merger law and HSR • New economy - patents

24. Upcoming AMC Meetings • Meeting of June 22-23, moved to July 13 • Exclusionary conduct • Regulated industries • Statutory immunities and exemptions (state action doctrine)

25. Community Involvement • Antitrust Modernization Symposium held on June 8 - 9 • Supplemental requests for public comment • Criminal remedies (due June 30, 2006) • Civil remedies (due July 10, 2006) • Reforms to indirect purchaser litigation • Limit antitrust plaintiffs to single damages • Permit greater than treble damages • No private actions against federal criminal targets

26. Recent European Developments

27. MICROSOFT • Potential antitrust lawsuit against Microsoft by Adobe • European Commission is scheduled to issue a ruling finding Microsoft guilty of breaking EU competition rules

28. European Commissioner for Competition Policy’s 2005 Review and 2006 Outlook • Issued this month • Contains an overview of the main policy and legislative initiatives and decisions adopted by the European Commission in application of EU competition law in 2005 • State Aid Action Plan • Antitrust Enforcement • Merger Enforcement • Proactive Application of Competition Law • 2006 Outlook

29. European Commission’s Directorate-General for Competition’s Public Meeting Regarding the Application of Article 82 to Exclusionary Abuses • Meeting held on June 14 to give third parties the opportunity to comment on the DG’s December 2005 discussion paper on the application of Article 82 EC to exclusionary abuses • Commission will take a position by year end on whether it will publish formal guidelines on exclusionary abused under Article 82

30. Other Inquiries and Investigations • Telecom Sector • Financial Industry – Card Issuer Profits

31. Merril Hirsh • Merril Hirsh is a partner in Ross, Dixon & Bell, LLP's Washington, DC office. He joined the firm in 1989, after 7 years as a Trial Attorney in the Civil Division of the United States Department of Justice. • Mr. Hirsh litigates on behalf of plaintiffs and defendants in antitrust, intellectual property, securities, insurance, corporate, discrimination, class action, and other cases. For example, he has been part of the team representing a company and its principals in antitrust and False Claims Act litigation alleging price fixing for carbon fiber. He represents the Financial Planning Association in a challenge to the SEC’s Broker-Dealer rule before the District of Columbia Circuit. He has been the lead counsel representing primary insurers in health care and asbestos bankruptcies. • Mr. Hirsh also edits the RDB Antitrust Alert; he is a chapter editor of the ABA's Illinois Brick Monograph, in publication, and the author or co-author with other RDB attorneys of: a chapter of the ABA’s Antitrust and Telecommunications Practice Guide; “I Didn’t Say Orphan Often: The Benefits of a Bright-Line Rule Banning Brand to Generic Payments in Hatch-Waxman Payment Settlements,” ABA Antitrust Health Care Chr., V. 19, No. 2 (Summer 2005); "Are False Positives Really So Negative? A Response to Kevin McDonald," Antitrust, Vol. 17 No. 3, at 83 (Summer 2003); In re High Fructose Corn Syrup: New Form of Chicago School Education, http://articles.corporate.findlaw.com/articles/file/00295/008510.html sum. in Corporation Counsel Mag. (Dec. 2002) and Nat. L. J. (Dec. 2002). He can be reached at (202) 662-2032 or mhirsh@rdblaw.com.

32. Edward B. Mullen III • Ed Mullen is a partner in the Chicago office of Ross, Dixon & Bell, LLP. He litigates complex commercial cases in federal and state courts throughout the country, and he has litigated cases involving intellectual property, unfair competition, securities fraud, insurance coverage and bad faith, and numerous other substantive areas of law. He has also defended several major U.S. corporations in class actions alleging claims such as unfair trade practices, false advertising, fraud and misrepresentation. • For most of the past year, Mr. Mullen has been a member of the RDB team trying a cutting edge insurance coverage case with more than $1 billion at issue. In addition to his trial experience, Mr. Mullen has also drafted successful appellate briefs in the Third and Eleventh Circuit Courts of Appeal and the California Court of Appeal. • Mr. Mullen contributes to the firm’s antitrust alerts and is particularly knowledgeable about the relationship between intellectual property and antitrust law. He can be reached at (312) 759-1833 or emullen@rdblaw.com.

33. Christopher H. White • Christopher White is an associate in the Chicago office of Ross, Dixon & Bell, LLP.  He joined the firm in 2005 after completing a two-year clerkship with the United States Court of Appeals for the Seventh Circuit. • Mr. White graduated from the Northwestern University School of Law in 2003, where he was a member of the Order of the Coif and an Associate Editor of the Northwestern University Law Review.  He received a degree in Economics from Princeton University in 1999. Mr. White was previously employed in the bank mergers unit of the Antitrust Division of the United States Department of Justice. He can be reached at (312) 759-5936 or cwhite@rdblaw.com.

34. Gabriela A. Richeimer • Gabriela Richeimer is a partner in the Washington, DC office of Ross, Dixon & Bell, LLP. Ms. Richeimer graduated summa cum laude from the Washington College of Law (American University) in 1997. • Since joining RDB in 1998, Ms. Richeimer has represented corporate and association clients in many areas of the firm’s practice, including Antitrust, Insurance Coverage, Bad Faith, Intellectual Property, Professional Liability, Employment and Commercial Litigation. Ms. Richeimer has represented corporate clients as both defendants and plaintiffs, including competitive telecommunications carrier in antitrust, patent and business tort litigation with large regional incumbent. • Ms. Richeimer is a member of the Antitrust Section of the American Bar Association and has authored or co-authored books, articles and case-law updates in Antitrust field. She is admitted in Maryland and the District of Columbia and in numerous federal district and appellate courts. She can be reached at (202) 662-2075 or gricheimer@rdblaw.com.

35. Melissa M. McGuane • Melissa McGuane is an associate in Ross, Dixon & Bell, LLP’s Chicago office. She joined the firm in 2002 and works primarily on the firm's antitrust, insurance and litigation matters. Ms. McGuane has a diverse civil litigation practice in state and federal courts. As defense counsel, Ms. McGuane has represented corporate clients in a wide variety of matters, including constitutional, insurance coverage and general torts. As plaintiff's counsel, she has spent a significant part of the past two years litigating an antitrust price-fixing case. • Ms. McGuane graduated from American University’s Washington College of Law in 2002, where she was a member of the American University Law Review and Moot Court Board. Ms. McGuane is the co-author of Attorneys Talk About Representing Accountants in the Era of Enron and Other Corporate Scandals, The CPA Journal, March 2003, and contributes to the firm’s Antitrust Alert newsletters. She can be reached at (312) 759-1929 or mmcguane@rdblaw.com.